United Therapeutics Corp (UTHR) 2002 Q3 法說會逐字稿

Please stand by. Your conference will begin momentarily. Good morning and welcome, ladies and gentleman to the third quarter 2002 earnings conference call. At this time, I would like to inform you that this conference is being reordered and that all participants are in a listen only mode. If you wish to access the replay for this call, you may do so by dialing 1-800-428-6051 or 1-973-709-2089 with an ID number of 267343. At the request of the company we will open up the conference for questions and answers at their presentation.

At the request of management from United Therapeutics, the following statement is being read. United Therapeutics remarks today may include forward-looking statements which represent United Therapeutics expectations concerning future events. These expectations are subject to risks and uncertainties such as those described in United Therapeutics' report on Form 10-K and Form 10-Q and filed with the Securities and Exchange Commission which may cause the actual results to differ materially from anticipated results. Consequently, such forward-looking statements are qualified by the cautionary statements, cautionary language and risk factors set forth in United Therapeutics' reports and documents filed with the Securities and Exchange Commission. United Therapeutics undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or any other reason.

I will now turn the conference over to Dr Martine Rothblatt, Chairman and Chief Executive Officer. Please go ahead, Ma'am.

Good morning everybody and thank you for joining our third quarter conference call. At our last conference call, three months ago, we promised to provide four key numbers at each conference call and I would like to provide those numbers now which are within the information disseminated in the press release.

Those four numbers were. How many total patients we have on Remodulin Therapy which is our lead product? How many of those patients are reimbursable patients? What our current revenue run rate is and from that information, you can calculate the fourth number which is, average revenue per patient per year.

We currently have approximately 500 patients on therapy which is unchanged from the total 500 patients we had on therapy a quarter ago. The explanation there is that we have lost about 50 non reimbursable patients, mostly in Europe and at the same time we have gained about 50 reimbursable patients. There were no significant trends in terms of to what therapies are for what reasons. The patients were lost or gained. Small numbers were lost to either death or lost to [Iverdep] or lost to Flolan, Xyloproct, Tracleer or experimental clinical trial protocols and the patients have regained again no clear trend there. Some were gained from newly presenting patients who have the disease. Others were gained from Flolan. Others were gained from Xyloproct. Others were gained from Tracleer. So, no significant trends there.

The second key number, the number of reimbursable patients. We currently have approximately 350 reimbursable patients, that's up about 17% from the 300 reimbursable patients we had at the last quarter conference call.

The third number is our revenue run rate. Our current revenue run rate is approximately $30m per year. That's up 20% from the $25m per year that we reported at our last conference call and the reason there is due to both the increase in patients, which I mentioned just a moment ago and the fact that each patient is using more Remodulin and that really ties into the fourth data point, which we promised to provide. The average revenue per patient per year, it was about $80,000.00 per patient per year at the last conference call and it is now at just about $90,000.00 per patient per year. The reason there is that studies have been published showing that the main side effects of Remodulin, site pain at the subcutaneous infusion site does not appear to be related to the dose of the drug, so patients are now being wrapped up to therapeutic doses much more rapidly and also the rapid adoption of the Wisconsin protocol, which is a series of topical applications to alleviate the site pain has been very, very successful and that to allows patients to get onto the therapy and use more of the therapy to achieve their therapeutic result. So, those are the four data points we promised to provide at the last conference call. We are pleased to update them. The bottom-line is that while we reported sales for Remodulin at about $9.5m in the second quarter. Our third quarter Remodulin sales of $2.5m plus our October sales of $8.5m of Remodulin brings us to total Remodulin sales for the year of about $20m and that amount is growing at an annualized rate of 80% to 100% per year. So, we are of course extremely pleased about those results.

In terms of the competitive picture, Flolan remains our main competitor. Flolan is the injectable, continuous, intravenous, infusion form of Prostacyclin whereas our analogue of Prostacyclin is a subcutaneous infusion. Flolan, we believe continues to do about $150m per year in annual sales and we continue to believe that that is the minimum potential for Remodulin in pulmonary hypertension. Given that as just mentioned, we are at a revenue run rate that represents about 20% of Flolan sales and we are just scarcely four months from regulatory approval, having already captured about 20% of the market. We are extremely pleased about that data as well.

The other product in the market is Tracleer, which we look at as our greatest market grower because that product is being promoted to patients who have generally not been previously diagnosed with pulmonary hypertension and as a result. Thanks to the availability of Tracleer the pulmonary hypertension market is growing more rapidly than ever before and many of the patients who failed to improved on Tracleer, which appears to be approximately half of the patients. We believe will end up being part of the much larger Remodulin patient market.

In addition to fulfilling our quarterly promise to update everybody on Remodulin operating results, I would us not to lose site of the other exciting activities going on at United Therapeutics. Our lead activity is a Phase IV Clinical Trial of Remodulin involving transitioning patients from Flolan to Remodulin and this trail blazing study now has half of its IRB approval already in hand. And given that Flolan is the main competitive product this study directly involving transitioning patients from Flolan to Remodulin is, I think, the most exciting and significant activity going on at United Therapeutics.

In addition to that our team and Research Triangle Park who are managing our Prostacyclin study, have two prepivotal studies of Remodulin in critical limb ischemia underway and early planning for a pivotal study in critical limb ischemia to kick off next year. But, all these we need to keep in mind here that critical limbischemia is a very different disease than pulmonary hypertension. With critical limbischemia we're talking about over 300,000 patients each year who have low, adequate pharmaceutical or surgical therapy that would be the potential market and that is just in the US. There would be another 300,000 patients or so in Europe and given that the likely Prostacyclin infusion rate would translate into Remodulin sales of about $10,000.00 per patient per year. It is clear that there truly is a blockbuster potential for Remodulin in critical limbischemia.

In addition to that, staff at other offices and in Research Triangle Park are conducting Phase III and Phase I Trials respectively in ovarian cancer and Hepatitis C. With those trials either underway or IRB approvals are in the process of being achieved and our non pharmaceutical units are all now just about at break even performance which is also a very nice sight to see.

So, finally in summary before opening the call for questions, I think that the bottom line in United Therapeutics is that we have ever improving operating results with shrinkage losses over time, very steady RD spending and growing sales. So, all the sorts of things that we believe our shareholders would want to see in United Therapeutics. With that introduction, operator could you kindly open the conference call for questioning.

Yes, thank you. The question and answer session will begin at this time. If you are using any speaker phone, please pick up the handset before pressing any numbers. Should you have a question, please press '*' '1' on your push phone telephone. If you wish to withdraw your question, please press '*' '2'. Your questions will be taken in the order as received.

Please stand by for our first question. Our first question comes from Mark Seanbaum-ph. Please state your Institution followed by your question.

Hey, Martine. It's Mark Seanbaum-ph at CIBC. How are you?

Very good.

Congratulations. The numbers look good and continue to make progress. Uh, just a quick question on the Wisconsin Protocol and [gel]. Do you have any indication right now from your market research as to how many other patients on therapy are actually using the gel or how many of your new starts every quarter are using it? Do you have any sort of data like that that you can provide?

Sure Mark. Nice to speak with you and thank you for the congratulations. Let me take this opportunity to let everyone know that with me on the conference call is Fred Hadeed who is our Chief Financial Officer and also responsible for reimbursement activities and steps the kind of finance [we like best].

That's right.

And also Dr. Roger Jeffs who is our President and Chief Operating Officer and also in charge of all clinical trials activities. Given that the question on the Wisconsin Protocol is more of a clinical matter, I would like to ask Roger if you could kindly address that.

Certainly Martine. Hi Mark. We know that we've, at least in our test at the protocol, we had well over 50 patients using the therapy. In addition, in our Phase IV study every patient that is in that trial that the Wisconsin protocol will be made available to them. So, it's hard to access the numbers because they change obviously by the day, but I would predictably say, that anywhere between 75 and 100 patients are currently using the therapy. There by a third of our current patient base instead.

Any data on the new starts over the quarter?

In what sense?

What percent are actually using it?

Well, we are trying to encourage everybody to have it available and as we have said in the past, not all patients actually have infusion type pain, but if they do, we would like them to use this. So, in the start, I think it's probably running at the Centers that are using the gel, probably 50% of the set patients are on it at start and that contains by Center.

Ok.

That's the basic information. The good new is that the summary data that we have is very, very positive in the sense that of the 50 or so patients that we have had in our survey pain database, about 48 of those has reported very positive outcomes from having used the therapy in terms of the resolution of the pain and also the inflammation and erythema that is associated with the therapy. So, we are very enthused about the utility of this, and I think in the past month we certainly have not seen patients leaving Remodulin therapy due to site pain. So, we are seeing a decreased in that [law] index. So, that's very encouraging as well.

I apologize for not knowing this having not read the protocol. But, it is a gel that is actually applied to the site where the unit is actually placed or is it applied to the location? Once the unit is actually removed, is it applied to that location?

Yeah.

You understand, what I am asking? Can you actually apply the gel and then actually put in a subcutaneous unit right over the gel.

You can. Our initial test has been what we call the 'old site', the previously infused site. Since this infusion site gets change every one to three days and the old site has some residual pain and inflammation and it has been very effective in that regard. We are also now piloting using it as a prophylactic against infusion site pain at currently existing sites and that data is evolving. It can be done. We are having to perhaps use a smaller tape size so that we can get it more proximal to the injection site.

But, that's looking positive.

So far so good.

Very good. Thanks a lot for taking my question. I appreciate it.

Thanks Mark.

Thank you. Our next question comes from Martin Oster-ph. Please state your institution followed by your question.

Robinson- Humphrey . Good morning, everybody.

Good morning.

I have a couple of questions for you. First of all on the 350 reimbursable patients, would that be including the 25 patients from the [...] approval and the second question would be on if you would be kind to tell what initiatives you and priority are doing to address the hepatic sclerosis, Mark which I think represents a pretty nice opportunity for you guys.

Thank you. This is Martine. I will address the question. The 350 reimbursable patients does not include the addition of 25 reimbursable patients from Israel and that's because we have just got that a couple of days ago and until we totally are convinced that those are reimbursable patients, we don't add them to the reimbursable patient count and the second question relating to um, uh...

Hepatic sclerosis.

We've not done a whole lot in that area yet. Although, we have begun to take the first steps in that area. I can mention a couple of things in particular. We had our first presence at the America Association for the study of liver diseases meeting. In which one of our lead distributors, Priority Healthcare is in fact I think the major force in distributing pharmaceuticals to people with at least hepatitis. So they have a major presence at that meeting and have taken advance of that presence to also make the community aware of Remodulin and it's potential in the patients with pulmonary hypertension as a consequence of liver disease. So, that if you will, that kind of pre kick off event occurred. Also, our staff is working right now with some of the leading Clinicians in the area and there are at least two publications/abstracts/presentations being prepared. Based on the Clinical Trial data that we have already captured. Regarding the effort to see and safety of Remodulin in patients with compromise liver function. So, that data, will also I think, that will be widely disseminated in the scientific community within the next six to nine months. Something like that.

In addition, we have begun to work sort of as a tiger team together with our friends at Priority Healthcare as well as some of our lead Clinicians, the members of [trimoxiple] and our Advisory Board in ascertaining what is the best way to make Clinicians in this community aware of the potential for Remodulin to help patients with pulmonary hypertension incident to liver disease. So we view there to be a very exciting potential there. Several thousand patients are afflicted with this disorder and they can certainly be benefited with Remodulin because its indication does include patients who are suffering from pulmonary hypertension secondary to liver disease. So, I expect to see significantly higher visibility of Remodulin in that community during 2003 and I am taking that as a personal management priority to watch for that.

Oh. Excellent. I think you guys [...].

Thank you very much.

Thanks.

Thank you. Our next question comes from Matt [Pepletts]. Please state your institution followed by your question.

Quaker Capital Management. Very nice quarter. Just a couple of questions here. I was very encouraged by your operating expense trend this quarter and I wondered if that's sustainable listed at these aggregate levels. I have a couple of other questions. Maybe, I should do just that one first.

Right, I think it is sustainable. I think that we do our best to [seg-way] our R&D projects so that we could have a level spend rate. Of course, one can't be, you know totally precise about something, which is dependent on the patient's enrollment and stuff like that. But, the historical trend is certainly something that we are doing our best to continue in the coming quarters.

Okay, as I constantly bother a Fred with, but every $1m not spent is, I think, $0.05 per the share pre tax, so, I know you're tired of that message, but.

Actually, it's not that we are tired of it because we spend a lot of management meetings and we think again exactly along those terms all the time. We keep clearly focused on how much would the company's value be worth in scenario A and scenario B. Always comparing less spending with more spending, but also keeping in mind the time value of money both spent and received. And trying to realize that our objective is to surface shareholders interest over a reasonable time period, not very, very many years, but also not just a few weeks. So, we try to be reasonable and look out for the shareholder's best interest on the order of, you know, one, two, three years.

Much appreciated. A couple other questions. I think I understood your explanation as to why the aggregate number of patients on the drug is essentially flat with, I guess, the drop off being in your opening uptake in the US.

Yeah.

In terms of the European drop off, is there any acceleration in the trend of drop off or is the real issue there more that you've not really been adding people to protocols or to on drug in Europe prior to approval?

I think there are a few factors there at site. Again, there were no trends. There was no one factor that accounted for more than like 15% or 20% of the drop off, but let me just provide a few data points. We ended at the beginning of this quarter. At the beginning of the quarter we are talking about, we ended our official clinical trial grants for the patients in Europe. That Clinical Trial finally had to end and has been going on for a long time. So, the Centers should have not actually being paid any money to keep those, particularly European patients on therapy. That's one data point. Another data point is that Xyloproct in particular is being more and more widely accepted and known in Europe, so that there are people out there who have a vested interest to actively promote and market Xyloproct whereas without regulatory approval we, of course cannot undertake those same activities for Remodulin in Europe. So, I think that's another factor. A probably a third factor is that clinicians are getting ready for the [Sodenophyl] trial and there's more and more anecdotal use of [Sodenophyl] in selected patients. So, that properly accounts for a few. Also relevant is that Tracleer was just recently approved in Europe. So, that also could account for the fact that there is a team of people who have a mission to mark the Tracleer and our hands are still tied at least for a few more months. But, we are quite excited and optimistic about the prospect of receiving French approval within, just, you know, hopefully not more than a handful of months and we will then use that French approval as our reference data for securing approval in the remaining European countries. So, we look forward to gaining more reimburseful patients in Europe very shortly. And, again the good news is that the patients that were lost were non-reimbursable, rather than reimbursable and again trying the reimbursable side.

In terms of your European expectations, I think previously you would look for - I hope for approval by year end. It sounds like it might be slipping on a couple of months or is that ...

My staff have told me that our internal goal was certainly French approval by the end of December. And you know, my staff has given me a heads up that it might not be by the end of December, but they're optimistic that it'll be very closely to that, if not still by the end of December.

And your expectation though, is that the ultimate result though will be approval over the timing, may be a little harder to predict?

Exactly. Only by a matter of things which when you're trying to time regulatory approvals, it is impossible to be all that precise, like on a matter of weeks. But, we have had numerous discussions with the regulatory authorities in France and they have been very positive.

Good to hear. The last question. With regard to the Israeli approval, I guess you're now in discussions with them in terms of reimbursement or are you able to comment about what you reimbursement positions are relative to the US.

I am going to transfer that question to Fred.

Yes, Matt. Our distributors there in Israel and we have shortly submitted a pricing proposal to the Israeli authorities and in each year in November, the pricing authorities there review those applications and grant pricing for particular drugs. That typically takes us bag in the first of the calendar year. So, our hope is that we'll have reimbursement approvals in Israel, early next year.

That's great.

Thank you Matt.

Thank you.

Thank you. Our next question comes form Stefan Panton. Please state your institution followed by your question.

[Sector Loss and Management]. Congratulations. I was wondering if you could update us on the Remodulin IV Physician sponsor trial that I think, you'd mentioned before?

I would like to of course transfer that question to Dr. Jeffs.

This is Roger. You know we are not approved for intravenous infusion, so it's not a route that we're promoting that the drug be used by. Nonetheless, we do have physicians calling us and inquiring about whether, you know the ways in which they could infuse it, intravenously. Two of the leading physicians in the country, Dr. Robin Barres and Dr. Stewart Rich have initiated their own clinical studies which they submitted to their local [IRVs] for their own approval and testing to see [self approval] of concept. Can they take patients that are on intravenous Flolan, transition them to intravenous Remodulin as well as take a set of patients that are 'to know that they're naïve to pass the [cyclone] therapy and start them on IV Remodulin. So, sort of a chronic group of principal, we have done acute studies and showed very good acute effect in terms of [hemodynamic] response. So, I think that was the data that lead in principal, to the chronic thought process. My own believe, and again, this is my own believe is that it should be effective if given that way, at least anecdotally and its not something that we're necessarily going to pursue that from a registration stand point. But, they are going to start those patients on intravenous therapy in the coming months and I would anticipate that they could their twenty patients in the next four to six months. So they'll have some data in terms of symptomatic benefit, [hemodynamic] response and exercise responses at twelve weeks, after twelve weeks of intravenous infusion and you know, certainly it would be exciting to see what the outcome of that study is.

Okay. Thank you very much and one other question. Could Xyloproct become a factor in North America?

It could be. This is Martine. I think the action and concept, it could, but we see absolutely no indication that it is or will. We know of no Center anywhere in the United States using Xyloproct and we know of no indication that the sponsor sharing intends to come to the US.

I would also mention, it's a problematic therapy by almost anybody's definition of the concept in that it is necessary to inhale Xyloproct for ten to fifteen minutes every three to four hours, including during the night. So, it's a very, very much more of a debilitating, if you will, stigmatizing sort of therapy than Remodulin. The beauty of Remodulin which makes patients who transition from Flolan to Remodulin so happy, is that nobody can tell that you're on therapy. Their Remodulin pump is so tiny, that it slips inside your clothes and patients who either walk around with the bulky Flolan ice pack or carry around the bulky Xyloproct nebulizer all the time. These patients are now, you know invisible in terms of their disease and that's tremendously important from the standpoint of patient quality advice.

Okay, thank you very much.

Thank you. Our next question comes from Shakeera Basu-ph. Please state your institution followed by your question.

Greenville and Healthcare Partners. I wondered if you can elaborate on the question you addressed earlier about the European patients starting in large numbers of this trial, because of the Tracleer launch and so forth? I thought Tracleer was more for the early stage and less Class I and II patients, other than class III and IV. So, I was wondering why that might be having an effect on your enrollment?

Okay, thank you Shakeera. I think -- to provide some color to your question. First, one has to understand that a general statement such as this found on the label of a product is not going to be followed in every instance with regard to particular patients. So that whatever the label is for Tracleer there will be patients who are served outside of the label quite a few times because it is always ultimately up to the doctors best judgment on what therapy to give to a particular patient. Secondly, the number of patients who went from Remodulin to Tracleer, even in Europe is quite small on the order of five or six patients. So, you know the fact that five or six patients who might have been classed as II, III or IV, I don't know exactly what their class were went to Tracleer would have not much meaning, what the Tracleer label was. Hopefully, that can help you a bit in that there was no trend in terms of the European discontinuation for Tracleer and there is no real meaning to be discerned from whatever their New York Heart Association were from the Remodulin versus what their class was on Tracleer.

The following question. You just mentioned that your guidance has increased your sense of the numbers for this year. Um, and from $30m to $25m. Can you just give me an idea as to why you've raised this guidance? Is it because you are enrolling more patients or you're expecting approval from various countries in Europe and so forth?

Um. Yes, I am happy to answer that question. The reason is that we've enrolled more patients so we've increased our guidance to approximately 20% from three months ago. Because we've increased approximately, 17% our number of patients as well the average amount of Remodulin use by each patient has increased on the order of about 5%, 6%, 7% per patient. And again, the reason they're using more Remodulin is because clinicians feel more comfortable now, dosing Remodulin more aggressively, based on their experience and based on the popularity of the Wisconsin protocol. Also, we feel comfortable giving this guidance because we have now actually booked, sold and shipped $8.5m in the fourth quarter to date, just in the past thirty days, actually. So, we feel comfortable with the $30m from guidance based on that objective fact.

Great. So, it's the average price per patient is now higher than $83,000.00 or is it 5% higher?

Yes.

I see and the other question I had given that the gel is appearing to be better in terms of the pain at injection site, are you finding more patients staying on the drug, in terms of the drop out rate?

Yes, Shakeera. Another excellent question. In fact, for the past two or three weeks, there's been virtually no drop out due to site pain at all. We've seen as the Wisconsin protocol gets more widely know, the drop out has just like, you know, slashed to virtually zero and another point again, this might not really be clear to all the callers. The Wisconsin protocol, like any protocol, it can't be instantly known and adopted to all the Clinical Trial Centers, which for us, it extends from Australia, to Israel and Poland and many, many countries in between. So, there is a dissemination process in getting the Wisconsin protocol explained to everybody. We had a very good Symposium at the American College of Chest Physicians Meeting in San Diego last week and that Symposium, some fifty to sixty doctors had a briefing on the Wisconsin protocol and how it works. One of our distributors is also a compounding pharmacy, Priority Healthcare. So Priority Healthcare is now able to make the Wisconsin protocol available for patients in a more convenient way to use and we will also have survival data which will be presented at the upcoming American Heart Association. Which will give physicians, yet greater, I think, confidence in using Remodulin for their patients. So, all of these factors led them to growing patient numbers for Remodulin worldwide.

One, last question. Do you think your current run rate of patients can be modeled for another two or three quarters, or do you think it's too early to model that far out, yet?

We've given, um. It's a good question, Shakeera. We've given frankly speaking at the meetings we've talked about, we give a good sense of confidence to people that we expect to grow our reimburseful patients by an average of twenty net reimbursable patients per month, month after month. So, its fair for you to model like that.

Thank you very much, Martine.

Thank you. Our next question comes from Tim O'Reilly. Please state your institution followed by your question.

Yes. Hi. Goldman Sachs. Hi, Martine. You mentioned that you're been sort of targeting at the twenty patient nets per month and then you mentioned that with the increased use of the gel that you're keeping more patients on the drug. So, if your gross had to stay constant, but there is more use of the gel, would you expect that twenty per month could increase just from simply retaining more patients on the drug?

Well, we certainly would hope so and everything I would say, is looking quite good for Remodulin. I mentioned a moment ago that scientists are providing survival data at upcoming meetings. Drop-outs, due to site pain have screeched down to virtually zero. Patients are experiencing much more satisfaction. The drug is almost invisible in terms of you know, when a person goes to work, they don't know that anybody is on it. So, all of these factors, Tim are pointing in a very positive direction. We're going to keep with the United Therapeutics' way which is to basically be conservative in our forward-looking statements and our promises and tried to be accompanied that the street in the analyst community can feel confident in the statements that we make.

Great and if I can answer one more question. Um, I'm just curious about the status of the prepivotal [cynatrical] or where that stands in terms of discussions with the FDA and the potential enrollment, you know, when you might expect to start enrolling.

Super. That whole program is under Dr. Jeffs' guidance. So, I'd ask Roger if you could please describe the protocol and the status of activity and describe the two protocols both for the surgical and non-surgical patients.

Sure Martine. As you suggest there's two protocols? One, is a prepivotal study in patients who are not candidates for surgical procedures. So there is no alternative other than pending amputation and the second protocol is in the other patients who are candidates for surgery and we're going to use Remodulin adjunctively to see if we can improve things such as alter healing rate and longer term [patency] of the graft and that type of thing. We submitted those protocols to the FDA and the IND for that study, does [...] it approved without comment. So, we are free and clear to initiate the study. The protocols and IRB's in those approvals are just now coming through, so we'll be initiating patient enrollment this quarter. There are certain patient trials with each of the studies, so we anticipate that that will take anywhere from three to six months to get those patients enrolled and on the basis of that data we'll move into prepivotal late in 2003.

Roger, thanks a lot.

Sure, Tim.

Thank you. Once again, ladies and gentlemen, should anyone have any further questions, please press '*' '1' at this time. Once again, the next question comes from Shakeera Basu-ph. Please restate your institution followed by your question.

Um, thank you. My question has been answered.

Okay, thank you operator. We appreciate your assistance in queuing up the questions and for all of the participants on the call, thank you very much for you congratulations. We share them and we will keep doing our utmost at United Therapeutics to grow the company's value and let people appreciate the value here and keep doing the right things for the patients and the medical communities that we serve. Thank you very much.

Thank you, ladies and gentleman if you wish to access the replay for this conference, you may do so by dialling 1-800-428-6051 or 1-973-709-2089 with an ID number of 267343. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.