United Therapeutics Corp (UTHR) 2004 Q1 法說會逐字稿

Good morning and welcome ladies and gentlemen to the United Therapeutics first quarter earnings release.

[OPERATOR INSTRUCTIONS].

Remarks today concerning United Therapeutics' may include forward-looking statements, which represent United Therapeutics' expectations or beliefs regarding future events based on current assumptions. United Therapeutics cautions that such statements involve risk and uncertainties that may call actual results to differ materially from those in the forward-looking statements.

Consequently, all such forward-looking statements are qualified by the cautionary language and risk factors set forth in United Therapeutics' periodic and other reports filed with the SEC. There can be no assurance that the actual results, events or developments referenced in such forward-looking statements will occur or be realized. United Therapeutics' assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in factors effecting, such forward looking statements.

I would now like to turn the call over to Dr. Martine Rothblatt, United Therapeutics' Chairman and CEO.

Good morning, investors and analyst, I'd like to welcome you to our first quarter conference call. We have most of you have all had an opportunity to review our press release by now and you have seen that we had a great quarter.

We have deputation ads of approximately 70 and reduction of our lost to only 9 cents per share for the quarter. This quarter we were reporting approximately 625 reimbursable patients, nearly $14 million in revenues of which about 12 half are due to Remodulin sale. This quarter we are not going to report revenue run rate and revenue per patient information for a couple of reasons.

First, there is some new uncertainty demonstrating that our Remodulin drug files have a 30-day life after being punctured rather than the previous 14-day life. This is very good for payers and patients because it reduces waste.

A second reason for us not needing to continue to provide revenue run rate, revenue per patient information is that this information, at least a rough approximation of this information is always now available by dividing each quarters annualized revenues by the number of reimbursable patients for that quarter.

And many of them revenue run rate statistic was a useful metric when UT had not yet achieved a year of product sales back in say 2001, early 2002, but now that we have analyzed revenue data there is not much purpose to providing after revenue run rate when people can look at the actual revenue figures. I'd also like to take a moment to recap everybody on our short term; medium and long term plans here at United Therapeutics.

Our short term plans meaning this year are to continue hitting our growth target of 20 reimbursable new patient growth each month and that will provide us about a significant 10 to 15%, maybe a little bit greater than that, growth in annual number of reimbursable patient. So that gives us steady penetration into the Flolan market.

Our medium term goal by which I mean basically calendar year 2005 is to use an approved intravenous form of Remodulin to begin some really serious penetration of the Flolan market by using the convenient, safety and comfortable efficacy of intravenous Remodulin to be able to compete really head on with the Flolan market which is as far as we can determine worth about 2 to $300 million per year in annual sales.

And in our long term plans which here at UT are really the three to five year horizon are to introduce front line prostacyclin via oral stained release or inhaled formulations, both of which we are working on now, as well as to enter a functionally similar market in terms of its size and revenue characteristics, ovarian cancer market with our Ovarez product now 40 percent of the way through its trial.

In a nutshell we plan to capture late change Pulmonary hypertension patients with sub-Q and IV Remodulin while Akrian (ph) Fieser and other large firms such those are building up the early stage market to greater and greater number of thousands of patients.

And then within our three to 4 year time horizon to then be able to parachute into that front line market with a compelling front line prostacyclin therapy, one that is as easy as a Pier or a puff and capture the front end Pulmonary hypertension revenues to compliment our work on the back end revenues that we're doing with IV. an sub-Q Remodulin.

So with that overview of this quarter's information and our short term, medium term and long term plans I'd like to open the phones to any questions from investors and analysts.

Thank you. Dr. Rothblatt.

[OPERATOR INSTRUCTIONS].

Your first question is from Matthew Kaplan from Punk Siegel and Company. Please go ahead.

Hi, good morning.

Hi Matt.

Thanks for taking the question.

Sure.

Could you give an update in terms of the status of the IV. Remodulin trials and specifically the status of the US and European trials?

Matt, I'm glad that you asked that. I'm actually very pleased to have with me on the call Dr. Roger Jeffs who as you know is our President and Chief Operating Officer overseas all clinical development as well as Fred Hadeed, our Chief Financial Officer. But for this question Roger could you please answer Matthew's some query.

Good morning Matt.

Good morning.

In the US the investigator, I de trial every margin is that about 26 patient enrolled, there are another 10 to 12 that are basically screened an eligible for enrollment in the coming 2 to 3 weeks, it's a matter of scheduling at the centers.

Our anticipation is perhaps by the end of June that the 50 patient study will be completed. The important thing to tell everybody is at the ATS coming up on May 23rd, Dr. Vic Tapson will give data from the first 14 patients and I think everyone will be very pleased with the robust effects of IV Remodulin particularly in the Novar patients where which retreats in effects of active (inaudible) can be observed, is going to be report about a 56 meter improvement in walk and in transition patients he's going to report that the walk was unaffected after 12 weeks, the IV Remodulin after having crossed over from IV Flolan and the Flolan patients I will add were typically class two patients and these were patients that had gone from class 4 to class 2 on Flolan and now when we transition them to IV Remodulin their clinical status was essentially man tainted. I think those are very positive results and Dr. Tapson will give a broader update at the ATS heading. For Europe there are two centers that are planning to do a 30 patient.

One is Dr. Jerald Semino (ph) at Paris (ph) and the other one is Dr. Nasmini Guyiye (ph) in Italy. It locks like they will be ethics committee approval in France in May, then in June the Italian center will have approval. We would expect those studies to quickly ramp up and complete probably towards the fall.

Great. And any other presentations at the ATS coming up besides the one you mentioned?

Yes, I think there's about 6 or so presentations related to Remodulin. A couple of presentations will talk about the use of combination therapy.

One will talk about the process of using combination with prostacyclin. That's the rate bender UAB and an other one will talk about the use of prostacyclin this with via GRA. So, this will be the first reported combination - first report of that combination and that's by Dr. Maddy Stromberg from Rush Presbyterian in Chicago. There's also a couple of other abstracts, one related to the pharma co-economics of - and its cost effectiveness and I don't remember some of the others but certainly the IV one that Dr. Kathy is going to do as well. So I think it will be a very exciting meeting with regard to prostacyclin and it's uses in cost effectiveness.

Right. And just last quick question in terms of the -- Martine Rothblatt, you mentioned the programs or goals with respect to oral and pulmonary Remodulin formulations. Could you give us a sense in whether they are in development and what the next steps are?

Well, those are both on phase one programs, demonstrating proof of concept and next step will be to in terms of one, the oral program is phase one in human volunteers, the inhaled program is phase one in PH patients mostly either pros cause over patients. That work is being done at university Gieson in Germany, which actually invented the prostacyclin treatment and our next step, obviously would be to roll into phase two trials and then you know March toward approval. There is a front line prostacyclin therapy has been the holy grail of virtually everybody in the pulmonary hypertension field.

There is very natural synergy with oral therapy such as PD 5 inhabiters through TER. So it would be just you know truly awesome to be with that first physicians to have an easily administered prostacyclin therapy something like a puffer or a pill and then front line patients could be given their absolute best change of halting the diseases progression and living a long and healthy and natural life by turning PH into a chronic manageable disease through a combination of oral therapies and that's definitely our goal with the front line prostacyclin therapies.

Thanks.

Sure Matt.

Good quarter and I'll jump back in the cue.

Thanks.

Thank you. Your next question is from Matt Duffy of Black Diamond Research.

Well and thanks for taking my call.

Sure Matt.

I wonder if you could talk a little about the field force what they are hearing what do you see, what do you feel just impact from them at this point.

Great. We all have seen some really good impact and we have got some great people in the field for us. We are now up to 6 detailers here at UT who are dedicated of course just to detailing Remodulin and as you guys know, there are not a whole lot of PH doctors so these detailers are able to be face to face with the prescribing PH doctors ever month or two.

In addition there's a like number of dedicated Remodulin detailers from priority health care, about three times as many shared detailers from a category to, and all told that gives us a pretty comprehensive coverage of the PH prescribing market.

In addition to that, we have recently worked together with care mart to re-infegrated their efforts and target them at the large virtually uncapped sick EL cell primarily hypertension market which you may have viewed the recent New York Times - out calls are new England journals Nerson are called that a third of the 80,000 sick EL cell packets in this country have life threatening premier hypertension and the market that really has not been hardly touched at all.

So that's a key target for the re-infegrated care mart effort. In terms of keeping the patient that we capture we have launched the Remodulin therapy assistance program where we now have three Remodulin therapy assistants who with the consent of the patient and their doctors are in regular telephonic contact with the patient helping to ensure that that patient is benefitting from the wide range of different pain minimization from therapies that there are out there.

You know, Matt, it's a surprise to me, but it's I guess a testament to the variability and individually of us all that there are about two pages worth of Remodulin pain minimization methods and for many patients one of those is a silver bullet, they take Neurontin, the pain goes away. They take a nasal chemical steroid the pain goes away. But for another patient it has no effect at all.

So, very intensive management effort is needed to make sure that each patient finds the one out of the 20 or 30 different pain minimization methods works for that patient and the Remodulin therapy assistants are certainly a big help in that regard.

As evidence of the work that the field sales force is doing, we are now up to 184 prescribers, regular prescribers of Remodulin as point of reference that compares to only 40 when we launched the therapy. So we are certainly covering every material prescriber of Flolan at this time with Remodulin. Indeed, we now have over 50 doctors that have five or more Remodulin patients. That's about the same number of doctors that have five or more Flolan patients, so we are essentially well in stand at virtually every major Flolan center.

Can you talk a little about it about the factors of the over (inaudible) what sort of drivers in terms of patient (inaudible) and what are you looking for in terms of finalizing that?

Sure, I would like to perhaps ask Dr. Jeffs to address that because Roger in addition to managing the Remodulin program also manages the (inaudible) program.

Yes, thank you Martine. Good morning. Let me tell you what our expectation is for that trial rather than what some of the drivers are, but in essence what we're trying to do is a clinical group is enroll about 10 patients per month. We are about 40 percent enrolled now, so of the 354 patients that are required there's about 140 odd patients enrolled; a couple hundred more to go.

So if you took that 10 patients per month target that's about 20 months of additional enrollment that is required. We think we maybe able to beat that. Some of the drivers that will influence that are cooperative group trials that may compete with patient enrollment into our own trials. Some of those trials that we're competing have wound down but there may be others that are starting that would wind up and therefore compete again.

In essence, given the enrollment paradigm of the trial which is in watch for waiting there aren't necessarily many competing trials. The trials that do enroll in the front line combinations of different therapies do in essence somewhat compete. So that's why we have a fairly conservative enrollment goal. We certainly will do everything we can to beat the 10 patients per month that I think from an expectation from the street and other people that's what we would like to put out there.

OK, very good. Thank you.

Next question is from France Tutor (ph) of Variant Research. Please go ahead, sir.

Just a couple quick updates. On the phase 4 trial can we get the status there?

Sure. Dr. Jeff.

Sure. We have 12 patients enrolled in the stage 4 subpart H trial. What we're trying to do is get to the 21 patient interim. We had a conversation this week about the FDA with our progress and they seemed satisfied with that. We have been reporting enrollment progress every other month. We have a report that will go in around May 21st and we call an anticipation of that to say that this is where we are and the discussion we had was that that's good progress when we are we have been and continue your good work and let's keep going. So that's where we are with this trial.

OK, in your meetings with the FDA, are you getting any indication that the completion of the phase 4 could have an impact on the IV Remodulin filing?

None whatsoever. It didn't even come up in the conversation.

OK. And then, just an update on France.

Yeah, France is -- in fact we have been e-mailing with them this morning. We are in the absolute final stages of review. They are trying to get -- they have this working group, subcommittee working on the finer review. There's a couple of documents that they want to see, so we are providing those. We have been doing that this past week in particular. It's our hope that we'll get on the May 27th expert working group review at the agency. That's not confirmed. If not we may go then to the next month. So you know it's one of these rolling things. So I can't promise the absolute resolution date but I will say we are in the absolute final stages of the review based on the type of documents that we're providing to them at this point.

OK, and then last question on the -- I know you aren't going to give the ASPs per patient anymore but what I'm trying to assess in the quarter were most of the net new patients did they come at the end of the quarter or are we having a situation where doctors are using less drug to account for the pain or can we just sort of talk about the trends in the usage patterns right now?

Well, yeah, I'm perfectly happy to give you the monthly breakout. It was basically in round figures something like 20 in the first month, but I think we actually reported in our last conference for January.

Then we did I believe 20, 25 to 30 in February and basically the same as that a little bit 20, 25 in March. So it definitely did not come at the end of the quarter. It's the normal lumpiness and I certainly empathize with people who are following United Therapeutics that the numbers are very important and when it comes often some people see a 15, you know something wrong and people see a 25, wow, it's like, you know, a rush to Remodulin.

But the real fact of the matter and the truth of the matter is when numbers are so small as these numbers of patients this kind of lumpiness is totally normal and predictable and you really can't read anything in one way or the other. So, I will say what's definitely good and heartening to all of us is that instead of having the flat net growth that we had in the fourth quarter we have a nice robust 70 and the preliminary numbers that we have for April continue to be in line with the first quarter.

So we're very quite pleased with that. In terms of trends, in physician dosing, the only trend that we really can discern is a trend toward actually increased dosing of Remodulin. It's very hard to disconnect in people's minds the idea that for those patients who have site pain that it's not linearly related to the amount of Remodulin but it's not. We have demonstrated that down repeatedly.

On the other hand, the efficacy of Remodulin is very lineally related obviously up to dose limiting levels of the amount of Remodulin that they take and that was demonstrated in our pivotal trial where the patients who have had top core trial dose of Remodulin have a Flolan like improvement in their walk distance, mainly about a 50 meter improvement in their walk distance.

And so that message is getting out in large part to affect due to our own sales force or own detailed force is much more adroit had been able to explain you know these things on face to face to physicians. We of course have demonstrated greatly from having Dr. Stuart Rich, one of the big, big, KOLs of the field come in and help both teach us and other newer physicians to practice the importance of dosing Remodulin until the patient is doing their absolute best. And so the only trend we really see is one towards increased dosing of Remodulin.

OK. And then how is the shelf life of the packaging now that the 14 day to 30 day, how could that potentially impact revenues?

Potentially it could reduce revenues because reduce revenues per patient because the patient will not be wasting drug. There will be virtually no drug wasted because as before there was drug wastage because the patient haven't drawn up everything in the vial by the 14 day point you had to 3 it away and that was all the data that we had at the time from or filing for regulatory approval. But we've been -- really -- basically have been a proactive good citizen as far as the whole health care situation is concerned. And our own undertook studies, we showed that the vials could be once punctured could be valid for 30 days. So in general, I believe that can reduce the amount of vials per patient that is used

So, if you look at, let's say if we compare last year a patient that was on therapy for a year, how many vials would they typically go through and what does it look like now going forward?

I can't answer the one going forward because actually the publication that describes the increased vial longevity, if you will, that publication is coming out I think in May. So that information is not really all that well absorbed and permeated by the market. So I definitely can't answer the second question. But in terms of last year, I think on average across all the patients, each patient used about 20 vials per year and what it will be this year or next year it's really just too early to speculate.

OK, thank you guys.

The next question is from John AJ of (inaudible) way Capital.

Another question on just the trends in revenue per patient. Were there any channel inventory changes or other factors that brought it down on a one-time basis for this quarter?

Well, let me refer that question of the distributors at UT are fall under the authority ultimately of Fred Hadeed, who is our CFO and EVP for Business Development. So Fred could you please address that question?

Of course, Martine Rothblatt. Good morning, AJ. This quarter our distributors did rely more heavily on our inventory balances that they had going into the quarter to provide for their quarterly needs and as a result the inventory levels at the end of March were approximately $2.5 million lower than they were as compared at the end of December.

So the effect o on one way of looking at the effect of that would be to look at our total revenues on 13.7 had the inventory levels remained steady, those revenues would have broken 60 million or $64 million annually.

The reason we believe that they drew their inventory levels down really was due to lack of patient growth in the fourth quarter. It had a significant effect on the purchases in the first quarter and it caused the distributors to be a little more cautious and place more deflated orders. It actually takes these pharmacist which are quite diffuse in terms of their operations it takes them a couple of months to decipher patient trends and I think that they are just now recognizing that they may have in fact under ordered in the first quarter and the reason I believe that is because April orders have come in now and have come in quite robustly as compared to January through March orders.

So the real change in the revenue per patient run rate that we saw in this quarter was more a function of channel inventory than the vial issue and then the vial issue will be the one that comes into play for the current run rate, is that fair?

I think that's fair.

All right. I believe we have time for one more question.

Thank you. Your next question is from Chris Kenalka(ph) of Yuetres Capital(ph).

Good morning. Thanks for taking my question. I want to ask about the guidance that you gave on the growth of total patients or reimbursable patients. I was a little confused about that. It sounded to me that you said that if you continue the current growth of 20 adds a month you would reach 10 to 15% growth in the annual number of reimbursable patients but if I take 15% of 555 that only gets me to 80, not 240. What am I missing?

OK. So pretty much two things or more of an analyzed that might have got kind of lost through the phone lines here. So, say if we add 20 patients per month which has been our guidance for quite a while, so that would give us over the course of the year 240 patient adds and you compare that to our base right now, which you say, you know, 625 patients.

OK. And now was the -- could you also tell us at the end of the first quarter, what were the total number of patients, not the reimbursable patients, I'm wondering whether the growth in adds of reimbursable patients?

Yeah, I got that. That's right in the press release and the bullets under the headlines. The total patients grew to 740 worldwide, which is as basically is the case every quarter that's a new peak for the number of patients on Remodulin.

OK, great. And you had mentioned in the fourth quarter that one of the reasons that the net adds was a little slower than you had expected was based on the fact that there were clinical trials enrolling that were competing for patients. Have those went down or why do you think things picked up so nicely in the first quarter?

Well, it's a complicated question to o it's almost impossible to know the exact right answer, but I think first of all we have seen over a period of two or three years that seasonality that's playing in the fourth quarter so I would put like that reason number one for the fourth quarter. The clinical trials have I wouldn't say that they have wound down, they are more still a lot of them going, 8, 9, 10 of them going, including some of our own.

When we put a patient on IV Remodulin that's a patient not going on sub-Q Remodulin. So, I really attribute the growth in the first quarter to the excellent job being accomplished by our commercialization team with the physician involvements that they have, in terms of symposia, seminars, face-to-face meetings, grand round lunching, etc., with the good work of the Remodulin therapy infusion in terms of minimizing the patient loss.

With the absolutely extraordinary work being done by our clinical development group, continuing to spin out more and more articles in terms of the, as you heard Dr. Jeffs mention the work being shown that Remodulin can operate synergistically with both Aten, that cannot break to synergistically with South Danesfield (ph), there is going to be some additional publications at the ATF in terms of the greater longevity of patients because we now have patients on drug actually over five years. There will be a study showing estimation of what the mean survive from Remodulin patients is long term.

So the clinical development group working hand in hand with UT commercialization group has I think just done a wonderful job of getting the word out that there is a solid place for Remodulin, it's a great platform for us to build and the next stage we're going to build on top of this platform is IV Remodulin and we're going to follow that up with the front line therapies.

Very good. Could you also tell me for the what is your estimate, you said that there were around 20 vials used per patient last year. Of the total amount of drug that patients received, what is your estimate of how much they actually used and how much they discarded or wasted?

That's again a very tricky thing to know for sure. I'll tell you my estimate from the numbers that come forward to me. But I'm not saying that I know the actual number because we have never it's a virtually impossible to measure something like this.

We estimate that there may have been like wastage on the order of 20 to 30% of the drug due to the disposal. Maybe it was toward the lower end of that range. A lot of it depends if the patient was on the one-milligram concentration, the 2.5mg concentration, the 5mg concentration or the 10 milligram concentration. It depends if the patient was on a patient that was on the drug a long time or had a high infusion rate or a new by on a low infusion rate.

But the one thing I always found kind of interesting if you did the kind of straightforward arithmetic of just dividing revenues by the number of patients or what not, you would get to a figure that was maybe 10 to 20% below the actual amount of drug used, and that kind of implied that the wastage was somewhere in that 10 to 20% range.

OK. Thank you very much.

Sorry to have a vague answer but it's really the best we can do given there's some 750 patients taking this drug all over the place.

Thank you.

All right. Well, everybody, investors as well as analyzes we really appreciate the opportunity to exchange information with you on this quarterly call.

It's the real exciting time here at United Therapeutics and we're very glad to have those of you both following in the company and investing in the company.

Thank you so much for participating