United Therapeutics Corp (UTHR) 2004 Q2 法說會逐字稿

Good morning and welcome ladies and gentlemen to the United Therapeutics' Second Quarter Earnings Release Conference Call.

At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation.

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 risks and uncertainties that may cause 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 referred 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 affecting such forward-looking statements. I would now turn the conference over to Dr. Martine Rothblatt, United Therapeutics' Corporation Chairman and CEO.

Please go ahead, Dr. Rothblatt.

Thank you, Operator and good morning everyone. Welcome to United Therapeutics' second quarter financial results conference call. I have with me today on the conference call, Roger Jeffs, our President and Chief Operating Officer and Fred Hadeed our Chief Financial Officer and Executive Vice President for Business Development. Between the three of us, we'll be pleased to answer any of your questions after some brief introductory remarks.

We're very pleased to report that United Therapeutics achieved records revenues in its first-ever quarterly profit. Our consolidated revenues for the quarter ended June 30th, 2004, totaled $18.3 million, representing a 31% increase over the same quarter of 2003. Our net income for this quarter was $4.1 million or 19 cents per basic share.

Clearly, we are very pleased with these financial results. Additionally the number of reimbursable patients on Remodulin grew by approximately 75 on the net basis during the second quarter resulting in approximately 700 reimbursable patients as of June 30th, 2004.

As we have now achieved profitability we will no longer be issuing each quarter patients specific statistics. We're pleased to have reached this milestone within under two years from having launched the drug. I'd like to touch briefly on a couple of other major programs that are moving forward that will pace our progress in the near future.

The intravenous Remodulin program is proceeding to an early 2005 launch based on the November 30th PDUFA date. Our team of regulatory and clinical experts working under Dr. Roger Jeffs are doing all the things necessary and reasonable to ensure a successful result on the PDUFA date and our marketing team is already preparing materials and detailing plans and programs to ensure a successful launch of IV Remodulin just as soon as we have FDA go ahead.

Our next major program OvaRex has just recently approached the 50% threshold in terms of enrollment in its parallel two pivotal trials. This is quite a significant benchmark. OvaRex our treatment for -- to prevent recurrence of ovarian cancer began enrolling patients a little bit over a year ago and having now reached over 50% in one of the two parallel studies, just under 50% in the other is a major milestone that we're all quite proud of. But with those introductory remarks, I'd now like to ask the operator to open the phones and to take the questions that may be addressed to either myself, Fred or Roger.

Thank you, Dr. Rothblatt. The question and answer session will begin at this time. If you're using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press "star' "one" on your push button telephone. If you wish to withdraw your question, please press "star" "two". You're questions will be taken in the order that they are received. Please stand by for your first question.

Thank you, our first question comes from Martin Auster from Wachovia Securities. Please state your question.

Good morning.

Good morning, Martin.

It would appear that the HR and UTHR stands for a homerun this morning. It was a nice quarter.

Thank you very much. We appreciate that.

I had a question if you could maybe add some granularity in terms of just overall trends in the subcu business. Is Prepsi (ph) having a big impact here, are you just seeing better patients demand or more patients dropping off Tracleer into the prostacyclin pool, what can you say to that effect?

I don't think that there really is a whole lot more granularity that can be attributed to differences between 75 patients in a quarter or 60 patients in a quarter. There is a quarter is, kind of, an arbitrary dividing line and there's a natural bumpiness to patients coming into the therapy and going out of the therapy.

We've really, Martin, seen no different trends than have existing over the past couple of years which is basically that we get newly presenting patients as to whom the doctors of which more than 200 physicians now prescribe Remodulin.

The doctors believe that for that particular patient Remodulin is the best therapy. It may be because the patient presents as being quite ill and it's not wise to put him on an oral drug. Its wise to put him right on prostacyclin. It may be because the patient presents with some contraindications to Tracleer, such as some potential liver problems or possibly the person is of child-bearing age and presents some issues in that regard, or it simply may be that the doctor is, or what I would say is, a growing few in the field that the best way to give patients the longest amount of life is to get them started on the prostacyclin therapy as soon as possible, subcu Remodulin being the least invasive and safest prostacyclin therapy.

That's why we get a healthy number of newly presenting patients every month. The second transfer patients continues to come from patients who are transitioning from Flolan and these are ordinary people who have been well stabilized on Flolan. They are doing pretty well and they see that what was once a very bleak prognosis is really, they are enjoying their life, and they are going back to work and they've heard from other patients that, or from their doctor that there is a less invasive therapy that would enable them to live a better quality of life with much less time spent on mixing intravenous medicines that are needed for Flolan and for those sorts of reasons those patients transition from Flolan to Remodulin and we get a good number of those.

There are some of those who come simply because they have a tendency to get recurrent infections from the Flolan system. Finally, there are patients who, the last third of patients, and I think that to a rough approximation it's about a third, a third, a third, are patients who have failed oral therapy and their doctors again are aware of the fact that the prostacyclin is a drug you can really want to get the patients as early as possible. You don't want to wait until they are on their last leg.

Unfortunately, we do get a lot of these Tracleer failures who have waited until they are a late class 3 patients. But, nevertheless, we take them and we bring a lot of them back to a reasonable level of health.

So, in summary, their trends are no different than historically, roughly a third, a third, a third from each of those three groups.

Thanks Martine. Can I just ask you real briefly and I'll halt back in queue. Also, could you touch upon the inhalable Remodulin program and when we might see kickoff of the Phase II trial for that?

Yes. We've got two programs for frontline prostacyclin therapy. This is therapy which is so convenient and so non invasive that it really has a reasonable chance of being a favored frontline therapy for the many thousands of people who are diagnosed with pulmonary hypertension. Thanks to the great efforts of Actelion in educating the market and potentially soon Pfizer in further expanding the market. There are literally thousands now of patients being treated for pulmonary hypertension, much different than a couple or three years ago and what we'd like to do is to have a frontline prostacyclin therapy because of the many advantages of prostacyclin.

Our oral program has just completed a Phase I oral sustained release from of prostacyclin. The first sustained release prostacyclin bill anywhere in the world has completed a good safety program in Phase I and we are now working on, sort of, basically tweaking the delivery system so that we can get to maybe a twice or at most three times a day dosing regimen and provide a nice oral release of the drug. So I think that's when you'll see moving into Phase II during the 2005 period.

In terms of the inhaled prostacyclin, here we have something that also could be used by many thousands of patients. This program is now moving into chronic dose ranging and we have chronic dose ranging of patients being accomplished at UCSD under Dr. Luis Ruben (ph) and under Dr. Verner Seega (ph) in Germany.

And those two programs are dosing patients both chronically with inhaled Remodulin alone and also trying inhaled Remodulin chronically on top of Tracleer and sildenafil. So, those very exciting results could possibly be available at the time of the American Heart Association at the end of this year but at minimum the large number of patients that we've dosed acutely, about 180 patients have been dosed acutely have inhaled Remodulin monotherapy, inhaled Remodulin on top of Tracleer and sildenafil that data will start to be presented at the European Cardiology and European Respiratory Society meetings, which occur during late August of this year. So it's just about a month away until we get the first public date on inhaled Remodulin program.

Well, the chronic dosing efforts by Dr. Seega and Dr. Ruben set up for a registration trial in '05 or are they --

Yes. Our planning, and again this is -- everything you know in drug development has to go right to proceed, but if everything goes nicely with the chronic studies that Dr. Ruben and Dr. Seega, our plan with them to do a complete registration study during 2005 and that's because the doctors all feel that enrollment will be very, very rapid in this type of a study especially because it would be targeted at patients who were not including adequately on Tracleer after three months and they are unfortunately quite a few of those.

That's great. It's all very exiting. Thank you.

Thank you, Martin.

Thank you. Our next question comes from Matt Duffy from Black Diamond Research. Please state your question.

Good morning. Thank you for taking my question. Very nice quarter. I wondered if you could give us a little color on what's coming out after ATS in terms of -- are you seeing any increased use of IV Remodulin and are people occasionally being able to get reimbursed at this point or are you just planning primarily for the launch in November-ish to say early '05?

Well, there's a lot of things going on in IV Remodulin, Matt, and nice to have you on the line. In terms of patients being enrolled into the program that will -- there will not likely be a whole lot more than above 30, 40 at very most 50 patients on IV Remodulin in a clinical study type of protocol through the end of 2004.

However, there have been a couple of commercial patients that have through the good efforts of their doctors and the open mindedness of their payers have been able to obtain reimbursement for IV Remodulin and these are patients with very particular circumstances as to whom subcu Remodulin, they were just not able to handle it because they were particularly sensitive to the side pain aspect. Yet the Flolan was really not right for them, as you know Flolan has the safety issues of a very short half-life that suggests a significant risk of rebound hypertension and acute death.

So for very particular reasons to these patients there are a couple now that are reimbursed on IV Remodulin. But overall most of our focus is keeping our head down and responding to questions from the FDA, interacting with the FDA and preparing a very nice launch effort aimed at a very successful kickoff for IV Remodulin in early '05.

Great. You mentioned the investigator-led trial. I wonder if you could give us an update on enrollment and how the patients are doing.

Sure. I would like to, perhaps, refer that question to Roger Jeffs because as many of you know Roger runs all of the clinical programs and he and his team in research triangle park have been doing especially a beautiful job of working with the investigators on the investigate initiative studies.

Hey, good morning.

Good morning.

We have -- there are 38 patients enrolled at the five centers as of this date. There are scheduled, screening the patients there's 48 that are currently "on the books." And the goal is 50 patients and it's expected that by the end of August or shortly thereafter that all 50 patients will have been enrolled at that point.

So I think enrollment is exactly on target as we had planned it to be, expected it would be and the trail is progressing nicely.

And the patients are -- can you characterize how the patients have been doing?

I think everybody was made aware of the initially results on the ATS extracts from the first 14 patients and I think that data clearly shows that inpatients new to intravenous therapy that IV Remodulin provided what appeared to be a marked improvement in their overall function both in terms of walk and hemodynamics.

And in terms of patients that were transitioned from Flolan, the data evidenced itself that patients could be nicely maintained but there Flolan status was unchanged plus their IV Remodulin status.

We are now in the process of getting additional data. What it appears to be is that that trend is proving to be true and in fact improvements may be slightly greater in the de novo group and the maintenance of things is even better in the transition group and somewhat a function of the fact that the investigators are being aggressive with the dosing of IV Remodulin, they are pushing the dose to get maximum benefit so that's exactly what's happening in these patients.

Mostly then the new patients are improved markedly and the Flolan patients, I think, in general -- some of those patients, they are -- all are maintained and some are actually improved.

Great. Then just one last thing. Going forward you said you're not going to be giving some -- as much in terms of patient counsel. What kind of metrics can we look forward to track progress with Remodulin?

Sure Matt. We can -- you can look forward to all of the standard financial metrics that would be associated with the profitable company. Our earnings, our revenue information in the 10-Qs.

We will provide all sorts of information with regard to inventory levels, discussion of results from quarter-to-quarter, all of the same sort of information that would be used to appraise other peer companies comparable to ourselves such as Antillean we will continue to make available.

Very good. Thanks very much.

Thank you. Our next question comes from Matt Kaplan with Punk, Ziegel & Company. Please state your question.

Hi guys. Good morning.

Hey, Matt. How is it going?

Doing great. Thanks for taking my question and congratulations on an impressive quarter. Just to follow up on Martin's question, could you go over some of the data presentations that are expected for the remainder of the year, upcoming five months?

Sure. We'll have data presented at the European Respiratory and European Cardiology Society meeting.

So those are basically within the 30-day period right now and we'll have additional data presented at the American Heart Association in November and then further data presented at the chest and American forensic society meetings next year.

The data is other -- the data relating to IV Remodulin is I think what everybody is most excited about, and that data is being prepared under Roger. So Roger, I wonder if you could perhaps brief people and what are Dr. Capsin (ph) and his colleagues plans in terms of publishing the IV data, presenting it and publishing it?

Yes. The study group, their intention is to wait for the total of 50 patients to complete 12 weeks and do a publication on that, both for the de novo and the transition groups and I think their initially plan is to do separate publications on each population.

In addition, for example, as of this date, we have two patients that have been on IV Remodulin for more than a year. It is also going to be some longer-term follow-up data that's going to be abstracted for meeting.

There's an organizational meeting that's going to occur later this fall, Matt, to sort of orchestrate at which meetings and authorship and things like that. Some of that is still a process ongoing but in general the plan is to in the spring hit some of the major meetings with abstract and then also submit publications on the totality of the data set both for the 12-week study and subsequently on the 12-month follow-up.

And Fred, if you could flip to the last page that we have there, not on the press release but on the stuff to give a list of the upcoming papers and publications and presentations that we have skewed up there?

Yes, I would be happy to, Martin. Some of the upcoming publication that is coming up actually this month in the journal of cardiovascular pharmacology is the article related to bio-equivalence of intravenous and subcutaneous Remodulin.

We also just recently had a couple of publications, one in the journal of chest physicians related to use of Remodulin in connective tissue disease and in other that served as an expert review of cardiovascular therapy; actually it was published in the extra review for cardiovascular therapies, (inaudible), Remodulin for permanent hypertension.

We also have in the chest meeting in October, we have a long-term exercise capacity and survival in pulmonary hypertension with use of treprostinil or Remodulin. And it's not clear yet whether this has been excepted for a podium presentation or if it will be a positive -- but that will be given by Ron who is the lead Ph clinician at Harvard, UCLA.

Great, Fred. One thing that I could add especially heartening to all of us on the commercialization team is that we actually had three papers that were selected for oral presentation between the European Cardiology and European Respiratory Society meeting, two of them dealing with inhaled Remodulin and one of them dealing with subcu Remodulin, so the fact that the scientific POs elevated these three posters up to all presentations shows that the fields things, these are going to be pretty significant results given in the next month. OK, next question please.

Just one quick follow-up.

Oh, sure. I am sorry.

Could you give detail in the European approval process? And I will jump back in the queue.

Yes. That area is moving along like a very slow train and we have I think the most exciting thing that's happened there is that we feel that we have done a 180 turnaround from last year around this time. It looked like friends approval was going down and we made an announcement that the working group of experts had opined negatively on approval. Due to some excellent interventions by Dean Bunce, our DP of regularity affairs and Roger Jeffs.

We were able to meet face to face with the French agency, that doesn't occur frequently and provided them additional data and clarifications, the long and short of it is the working group has revised their opinion and now we are supporting approval of Remodulin. So that was a very exciting data point that came out a month and a half ago or so.

From the working group it has to go to a more higher-level committee and this committee is currently of course is being August is on break but the committee will meet again in September and will cover us either in September or October. They should ordinarily just sort of salute the findings of the working group and that would move us on a schedule to have final French approval before the end of this year.

Great. Thank you.

Thank you. Our next question comes from Bob Horency (ph) with Leerink Swan. Please state your question.

Thank you very much and congratulations on the quarter.

Thanks Bob.

I have got a couple of quick questions, a few on the quarter and then on the IV trial. On the quarter -- on Q1 you ended the quarter with 740 patients worldwide. How many patients did you end the quarter worldwide in Q2?

Good question. The number is 815.

815. OK. Thank you. And the actual Remodulin revenue number for 2Q?

The actual Remodulin revenue number, those numbers are broken out but let me have Fred address them to you as our CFO to make sure we give you exactly the right numbers there. Fred.

Thank you.

Yes, Bob, the revenues from Remodulin were 16.2 million.

OK. Thank you very much. Last quarter there was some inventory draw down. Any inventory still this quarter?

No, Bob, inventory levels were very consistent at the end of June as compared to the end of March.

OK. And then last question. On the physician initiated IV trial, are you expecting to submit to the FDA that trial upon its completion? And when do you think you would submit and would that impact the PDUFA?

Right. We are -- let me answer your question from the back forward. First of all, the FDA has told us it will not affect PDUFA, it's not considered any kind of major amendment so the answer to that question is no.

The data, some of the data from that study will be submitted to the agency, the data on the number of patients who have completed the study as of the September timeframe and looks like it will be 30 patients plus or minus a few as of September, October. Those numbers of patient data will be submitted to the agency.

All right. Thank you very much.

Thanks, Bob.

Thank you. Our next question comes from Lucy Lu with First Albany. Please state your question.

Hi. Thanks for taking my question. Just a couple of financial related questions. First one is, since now you are a profitable company when do you expect to start paying taxes?

That's a good question, Lucy. At the moment the company has well over $100 million in net operating loss carry forwards and actually 10s of millions of general business credits. So I think it's going to be without forecasting when we will use up all of those carry forwards it's going to be a period of years before we actually have to pay taxes.

OK.

Fred, you're such a pessimist.

And the second one is the R&D expense actually trended down this quarter compared to 1Q. I was wondering, is that because you don't have as many programs going or how do you see R&D go for the remaining this year?

Yes, R&D expenses are kind of lumpy, as you know. Lucy, it depends a lot on which trials are enrolling patients because we accrue expenses as the patients enroll in the trials.

So in the case of this past quarter the Hep-C and over expending was a little lower in part because the Hep-C program actually completed enrollment in its phase II and will be announcing those results also by the end of this year. So it's kind of a quiet lower spend period. And in terms of OvaRex, there actually was higher spending in some previous quarters, so not so much in the past quarter.

On the other hand, as noted in the explanations, the spending on Remodulin was actually higher during the second quarter and that was because of course the IV program involves a certain level of spending. So you know when something, the R&D spending is lumpy, it kind of comes and goes, but you can by taking a look at our historical numbers you can bracket it pretty well.

Since we're talking about Hep-C program, just wondering, are you going to try to partner that program out once you have the phase III result or you are going to grow along actually, develop the target off?

We really haven't definitively answered that question although we are studying it. That question is very much being looked at by Fred in his roll as our EVP of Business Development and also Paul Mahon, who is our EVP for Strategic Planning. We realized that our forte is as a company that focuses on relatively low-end diseases like ovarian cancer and pulmonary hypertension. So, Hep-C is really a bit out of our bailiwick.

On the other hand, there are growing number of contract sales organizations that can do a real good job of turn keying a detailing effort for a company.

On the third hand, I know we only have two, but on the third hand, even the best contract sales organization can't really hold a candle to a marketing power house like a Pfizer or Glaxo or sharing what have you. So it's something that we are studying and I hope that we have good enough news in phase II and phase III to move that decision to the front burner.

Thank you very much.

Thanks Lucy.

Operator, we have time for one last question even though the time is up, we will take one last question, please.

Thank you. Our last question comes from Dan AJ with Shumway Capital. Please state your question.

Actually it's John AJ. A couple of quick questions. First of all, on changing the releasing of the patients that I have actually found those stats to be very helpful in seeing the underlying stability of your business and the underlying growth at times like last quarter when you had a negative inventory correction.

And I believe actually companies get rewarded for putting out more information than their peers even if the peers don't do it. So I was just wondering if you could just give a little bit more information as to why you have made this change and if you might actually reconsider keeping the stat because I think it would be beneficial for us to have that number.

Sure and I'll answer that question. Why don't you give me your second question too, so we can hit both of them?

Second question is, any more color beyond what you have given so far on this call in terms of your discussions with the FDA on IV Remodulin?

OK. So, on the first question it's sort of a thing that companies develop through stages and they go through kind of an elementary school stage more than like kids, when every book report and what not gets marked and penmanship and every kind of detailed subject gets marked.

As a company evolves to a stage of profitability, it's normal, natural and appropriate to begin evaluating the company on broader and more material statistics, namely earnings and revenues.

With our achievement of profitability we feel comfortable that we have basically graduated from the elementary phase and are in this more serious phase. It will still be -- we will still release, as mentioned to an earlier caller lots of financial information including information on inventories and sector breakout of revenues, so I am sure that you will be able to have a very good handle on analyzing United Therapeutics' from the financials that we do release and breakout both in our quarterly press releases and in more detail in our 10-Qs.

In a quarter like last quarter where revenues were off your trajectory because of a wholesale retail change, how would have seen the -- it was a tremendous quarter in terms of your adds, it was your best quarter before this one. How would we've known that last quarter was such a great quarter under the new disclosure?

No, actually the quarters have been - and again, to sort of gets to the point, the quarters have really been very consistent. Last quarter we hit the same target that we have been hitting for the past two years with the exception of one anomalous quarter, which is approximately 20 patients per month or 60 per quarter and it's been very consistent.

What I'm saying is it was actually 70 for the quarter, you have done 60 so it was a great quarter but your revenues were not as good as last quarter because of the wholesaler inventory adjustment. So on the surface it would have looked like a weak quarter, last quarter and it was actually in reality a great quarter.

I appreciate the input, I definitely do.

OK.

Roger, can you address the question in terms of providing a little bit more color on the IV project?

Sure. Just quickly we had a teleconference in June and we asked three basic questions, one is, do you believe that bioequivalence has been established? Do you believe that safety data submitted is sufficient for approval, and is labeling appropriate was the third question?

As to the first question, the conversation was very positive and I think there's agreement that bioequivalence has been established and that's really not that debatable, as you will see in the publication of journal of cardiovascular pharmacology. I mean we really hit a home run to use Martin's words, bioequivalence.

As to the safety, there was some discussion about the toxicology study in some of the results and I think with just more clarification, and they agreed those were supportive. And most of the discussion has been around this investigator led study of patients.

And my own personal sense that that study is more of comfort, it's not, again, in my own personal sense an absolute requirement in any way for approval. The fact that it is occurring, the agency is interested in seeing any data that may occur from that trial and particularly the data that's relevant to the route so what's happening at the central side of infusion.

And then finally, we had some preliminary discussions about labels and indicated language. So those discussions are ongoing an as Martine pointed out earlier, we are also going to provide ongoing updates about the investigator study, we are going to provide an update on the end of August about 30 patients that have been enrolled to that point and into September it's our plan, if need be, that we will submit another update for about 40 patients, so completed sort of a 12 week study period.

And as well we're going to provide additional data for example on these patients that have continued for a year. So there will be a lot of data provided to them that will give them additional comfort, which is what they are looking for. And as Martine also said, that's not going to result in a timeline extension for review.

We also asked that question directly, will submission of data within the three months of the PDUFA date result in a timeline review and the answer to that question was no. So from all indications everything is moving very, very favorably forward and we still look forward to approval by yearend.

Great. Thanks a lot Roger. Well, I'd like to thank everybody for queuing up and attending the conference call and asking the question. Obviously we appreciate the congratulations for the home run on this quarter. We look at it as the beginning of the new phase of the company, a phase of operating on a basis of profitability and building on that profitable basis.

We also have a tremendous amount of good news flow coming out, as you have heard Roger mentioned and Fred mentioned, a number of conferences, a number of publications, a number of presentation, mostly all in the IV area but also in the inhaled area and with regard to ovarian cancer as well. So it's an exciting time for an exciting company and we really appreciate all your attention to us. Thanks a lot and have a great day.

Ladies and gentlemen, if you wish to access the replay for this call you may do so by dialing 1-800-428-6051 or 973-709-2089 with an ID number of 366229.

This concludes our conference for today.

Thank you all for participating and have a nice day. All parties may now disconnect.