United Therapeutics Corp (UTHR) 2004 Q3 法說會逐字稿

Good morning. Welcome ladies and gentlemen to United Therapeutics teleconference regarding third quarter 2004 financial results. At this time I'd 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 the conference for question and answers after the presentation.

Remarks today concerning United Therapeutics will contain 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 and 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 the 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.

Now I'd like to turn the call over to Dr. Rothblatt.

Thank you. Good morning everyone. Appreciate everybody making time for this conference call on what is of course, one of the most busy news days that we'll have for the next four years or so.

I'd like to open the conference call with a couple of remarks and then entertain questions from the people on the phones. We're very pleased to report that United Therapeutics has had a good quarter. That helps us to enable our continued spending on developing new medicines. By a good quarter I mean specifically that revenues grew to $20 million in the third quarter of 2004. That is up from $15 million in the comparable third quarter of 2003. In addition, we earned a quarterly net income of $6.3 million, or 29 cents per basic share in the last quarter as compared to a loss of $1.3 million in the third quarter of 2003.

So clearly it has been a very exciting quarter of positive financial results for us. That allows us, as mentioned, to continue our quite exciting drug development program including spending on programs such as - our intravenous Remodulin effort, our pump miniaturization effort, which will eventually lead, we hope, to actual implantation of a miniaturization pump; the construction of our monoclonal antibody production for ovarian cancer - that is for OvaRex, our drug for ovarian cancer - we are looking forward to that effort beginning this quarter; and an effort to develop some new glycobiology candidates based on a rational drug design approach guided by our partner, Oxford University's Glycobiology Institute and Biochemistry Department. These are just a few of the very many exciting drug development programs we have here at United Therapeutics. I'm glad that we're able to pursue this exciting drug development work while at the same time reporting growing profits and growing revenues quarter-to-quarter. Indeed, that is going to be our mantra going forward.

With those introductory remarks I'd appreciate if the Operator could please begin taking questions. I have with me on the phones here Fred Hadeed, who is our Chief Financial Officer and also our Executive Vice-President for Business Development; and Dr. Roger Jeffs, who is the President of the Company and also its Chief Operating Officer.

Thank you ma'am. We will begin at this time. (OPERATOR INSTRUCTIONS). Navdeep Jaikaria, Rodman & Renshaw.

Good morning everyone. Congratulations. Good morning, Martine. It's nice to hear your voice. A couple of questions, if I may kick off. The first would be, can you give us a breakdown about the revenues of $20. How much came from Remodulin?

Sure. Let me refer the details of that question to Fred as Chief Financial Officer. He can walk you through the different sectors-segments that the revenues came from. Fred.

Good morning. In the quarter we had $18.4 million of sales of Remodulin. We had 1.2 million in sales of telemedicine products and services. The balance of our revenues related to pump supplies and arginine products. That total is around 400,000.

And revenues per patient on Remodulin per year are close to 95,000 a year? Or is it a higher run rate?

Navdeep, we stopped last quarter with the releasing of revenue run rate or revenue per patient sorts of statistics. We stopped that when we really shifted to becoming profitable and are really seeing that the best way to understand the Company is by looking at the overall financial figures. So we can't break out the numbers for you in terms of revenues per patient. However I can say that nothing significant has changed in the marketplace over, even I would say, the entire past year in terms of just the availability of Remodulin. Since the price of Remodulin increased at the early part of this year there have been no other further changes in the price of Remodulin.

Okay, Thank you. I'll get back in the queue.

Thanks so much Navdeep. Nice talking with you.

Martin Auster, Wachovia Securities.

Congratulations on another fine quarter.

Thanks Dr. Auster. Very happy to be delivering it.

Dr. Rothblatt, I was wondering if you could comment on whether there is any update in your visibility on what is going on in France with Remodulin. Also, could somebody address - maybe just walk us through a timeline and the process that needs to be done to complete your pump miniaturization efforts. I think that is going to be a very important part of the commercial uptake of IV Remodulin ultimately.

I definitely agree Dr. Auster. I'd really like to ask if Roger could perhaps field both of your questions. Dr. Jeffs has made many trips back and forth to France. I know that you are aware, we have been applying all of our attention to successfully get the French approval. It's been the most difficult one that we've been able to try to wrestle with - more difficult than the US, Canada, Switzerland, Israel - you name it. Dr. Jeffs really deserves the credit for the great amount of progress that we've achieved there. I am sure he will be able to share that with you.

Dr. Jeffs is also in charge of the pump miniaturization program, both its near-term and its longer-term extension. Dr. Jeffs, if you could please address both those questions, we'd appreciate it.

Sure, Martine. France is coming to its ultimate conclusion. It will be a successful one, is what we've heard. There was a recommendation for approval of the clinical package by the expert working group. There is a meeting tomorrow of the general commission in which our assumption is they will ratify that approval recommendation. It will then go up through the Agence for formal sponsor notification. In the coming weeks, up through the end of the year we will-we are awaiting the formal notification. I think for all intents and purposes France is marching quickly towards approval. Then we are going to move that into major recognition so that we extend the approval to the broader European countries.

So that is it for France, unless you have additional questions about that.

No. That sounds magnifique.

Très bon. In terms of pump miniaturization, that is a tremendously exciting program. I share your enthusiasm about what it can do for Remodulin's penetrance (ph) into the intravenous market. Let me explain it just briefly. It's a two-pronged program. One is trying to apply our current subcutaneous infusion device, the 407-C, which is used for Remodulin currently and use that low-flow characteristic to pump Remodulin intravenous at about 0.1 mls per hour. The advantage of that is currently the CAD (ph) legacy is used for both Flolan and our current Remodulin patients on chronic therapy. That pump is about the size of an old tape recorder. Obviously the 407-C is about the size of a cell phone. It is somewhat landmark in terms of what we're doing. It's moving infusion flows for IV use from one to two mls per hour down to 0.1 mls per hour. The reason that we can do that with Remodulin is that it is so chemically stable and it also we're able to make it in a concentrated solution. Obviously that is not the case with Flolan. So miniaturization seems to be a unique property that we'll be able to achieve with Remodulin. I think it will further distinguish our product from Flolan.

We are working closely with Medtronic. They are going to have Q1 approval of the 407-C for intravascular use. At least, that is their intent. They are going to submit their filing late this month or early December. So Q1 we'll have both US and European approval of the 407-C for intravascular use. To that end, we're also going to support that with pre-clinical and clinical data. We've taken dogs and carried them out at low flow with a 0.1 ml per hour rate for several months without incident. So we know, at least conceptually that it's possible. As soon as we have IV approval, we're then going to apply the miniaturization paradigm to certain patients so that we can get some early clinical experience with that pre-pump approval. So that is stage I of the miniaturization program.

Stage II is even more exciting. That is using this implantable device. It's also a Medtronic delivery device. It's call the synchromet (ph) II. It's actually approved currently for intravascular use. But there is a catheter that Medtronic is interested in getting approved. We are going to work with them to do that. So starting in January we are going to do implanted pump delivery in dogs again, so start with the pre-clinical model. We'll show that it works. The advantage of the implanted pump, for example, is that you can fill the 40- ml reservoir. That would last the patient about a month or more. It's our hope longer term that patients will come in, get an implanted pump much like they would get a pacemaker. The reservoir would be filled while they are in the hospital with 40 mls. Then the pump settings could be set externally with a computerized telemedicine-type device. Then they are off and running for a month or more. Then they come back and get a refill. That is where we are headed with intravenous therapy - taking it to a small pump and then further to a pump that will not even be visible to anybody externally.

Thanks Roger. It sounds. I'll hop back in queue.

Matt Dumpio, (inaudible) Martin Lehman (inaudible) Research.

Good morning everybody. Nice quarter. Thanks for taking my call. Could you give us an update on the IV Remodulin SNDA status and where things are going after, hopefully, a positive outcome at the end of this month.

Great. Be glad to do that. As I think you know, Roger's team of both clinical and regulatory people in Research Triangle Park have been our lead group responsible for that effort. Once again, I'd like to forward the question to Roger and see if he could update everybody on the call on the progress towards padufa (ph) date.

Certainly. The current stage of the program is that it is obviously in terminal part of the review. It's our understanding, at least, that the FDA is reviewing the labeling. There have been no further requests for information. It's our goal - at least internally we're working towards obtaining an approval letter by the padufa date of November 30. That is our goal. It is also possible that we could get an approvable letter with certain acceptance of labeling changes. Or it could be other things. Our expectation, at least, is that it will be an approval letter or an approvable letter with very little commitment to do things such as agree to labeling changes or not. We're optimistic that it will be a positive outcome. Again, it's our goal to work internally to make than an approval versus an approvable letter as best as we can.

Okay, great. Can you talk a little bit about your activities following an approval whenever that happens in terms of promotion and getting the word out.

I'd be glad to talk about that. Just one quick coda to what Roger said. Tremendous credit deserves to be given to our Vice-President for Regulatory Affairs, Dean Bunce. (ph) As you know, this was a case of first impression for going forward with an SNDA-type of process on a bio equivalency basis via a different route of delivery. There were many nay-sayers. We stuck to our knitting. I am so happy that we are getting within the 30-day mark here and making such great progress. The whole team there in RTP has done a fantastic job.

The rest of our team - one of the great things about United Therapeutics is we're very much a cross-matrixed with the clinical-regulatory on one hand and commercial development on the other hand. We're very advanced at this point in planning for a launch meeting for the intravenous Remodulin to occur in January. That meeting would be attended by the leading clinicians and opinion-leaders in the field of treprostinil subcutaneous therapy, the ones who've had a lot of experience with that drug as well as ones active in intravenous treprostinil delivery. Those leading key opinion leaders and clinicians will be at the meeting together with our commercial and cardiopulmonary specialist team. We'll have a whole new set of materials that are specific to the intravenous delivery route to help make both patients, nurses, and clinicians comfortable with that. All sorts of ancillary materials that we have to one-by-one get approved through the FDA's Dee Dee Mac (ph). We've been working on that process all year.

One of the pivot points for our commercialization launch is the leadership of a Company-wide effort by Stewart Rich, (ph) who is our Chief Medical Officer, and as I'm sure you know one of the leading opinion leaders in the whole world on pulmonary hypertension. So for the past several months we've been meeting every month or two to make sure that all the different parts of the effort - clinical, regulatory, commercialization, marketing, reimbursement, distributors are all working together closely to have a picture-perfect launch of IV Remodulin come January.

Okay, very good. Thanks.

Matt Kaplan, Punk, Ziegel & Co.

Thank you for taking my question. Great job. A number of questions. Could you give us an update with respect to the status of and the strategy for the pulmonary Remodulin program and also provide any update with respect to the investigator-sponsored IV Remodulin trials as well.

Okay, let's see. Why don't - Roger, why don't you talk about the - because we've been in a stream on IV Remodulin for awhile. Why don't you talk about the IV study. Then when you're done with that, I can talk about the inhaled work going on. Roger.

Yes, Martine. Can you hear me? As to the IV trial, the enrolment is completed at 47 patients. The last patient will complete the 12-week study in the end of December. Currently there are approximately 30 patients through week 12. We know that the efficacy results that we're seeing in this open-label study are quite robust. In 12 weeks, we're averaging about an 85 meter improvement. That improvement - de novo patients - that improvement is maintained at six months and at nine months. Although there are few patients there, the improvement seems to be in the 100 meter plus range. Extraordinary clinical effects with IV Remodulin in this patient sample. The additional patients are the patients that have been crossed over or transitioned from Flolan therapy. Those patients are also doing very, very well. They are maintaining their walk status and other functional indices perfectly as they were on Flolan. These are patients that had been on Flolan two, three, or more years and now are transitioned to IV Remodulin and are maintaining clinical status months and months out. So that is the current status of that.

The other effort on the IV now is to work towards a publication strategy. In that regard I am pleased to report that at the ACC in March, there will be a full description of the de novo experience. At the ATS (ph) in May. There will be a full description of the transition experience as well as a description of the longer-term results particularly the one-year results. I think in the future one-year type of data will become increasingly more important in the clinical community as more therapies become available and people look for durability of responses. That is the latest and greatest on the intravenous program.

Great Roger. The real latest news for the inhaled developments will actually be provided at the upcoming American Heart Association meeting in New Orleans. There will be a presentation, or an abstract, provided by the group in Giessen, Germany, which are the independent investigators that we've provided grant support to for development of inhaled treprostinil. I probably would be - I don't want to steel their thunder too much. I would encourage you to look up for a presentation at New Orleans at the Heart Association meetings titled inhaled treprostinil for the treatment of pulmonary arterial hypertension. In addition to that, I can point out that another independent investigator here in the United States, one of the true giants in the field of pulmonary hypertension, Dr. Lewis Rubin (ph) at UCSD, has commenced chronic dosing of a number of his patients who were on prozanthin (ph) and perhaps had not been necessarily optimally responding on prozanthin. I think, while it's very, very early and it's a study conducted by Dr. Rubin so there is a limited extent to which we can comment on it. However from what I understand, the initial results are quite encouraging. In every patient that six-week data has been collected so far, there has been quite a significant increase in exercise ability by adding the inhaled treprostinil on top of prozanthin. That is really exciting. That is the logic for that entire program. Between the Giessen, Germany group and the UC San Diego group, that program is off to a good start.

Great. Just one other quick follow-up question with respect to - could you comment on the announcement with respect to the CMS ruling yesterday.

I am glad that somebody asked because believe me, that has been at the absolute forefront of a lot of our minds here at United Therapeutics. It's obviously a touchstone matter for the Company. I've been holding my breath because, as several of you recall at our last conference call, people - and since then at meetings I've attended - people have asked me when will we have a resolution at the CMS. I said that it's very dangerous to try to predict when the government will do anything. My hope would be that at the time of the next conference call, I would have positive news to report regarding resolution of the CMS matter. For those of you who may be new to this, this means the issue of the under-reimbursement of Remodulin accidentally by the DMERCs, their regional implementers of Medicare. This had been impacting on our distributors and therefore causing concern to us. I had told several people that I really hoped and doing our best to get this resolved by the time of our next conference call. Thanks overwhelmingly to the efforts of our fantastic CFO, Fred Hadeed, this matter actually has been resolved within the past couple of days. I'd like to now turn the phones over to Fred so that you can give us the details of that resolution, Fred.

Thank you Martine. We're very fortunate - in fact, we received word of the resolution just yesterday. The timing couldn't have been better so that we could have this behind us at this point. The problem was, as Martine described, it was a situation of less-than-full reimbursement by Medicare for certain patients that were using Remodulin. It actually encompassed about half of the Medicare patients that were using Remodulin. The good news is not just that we have resolved the issue, but we have resolved it completely in that the pharmacies providing Remodulin will be able to now retroactively correct their billings all the way to January 1, 2004, which is when the problem initiated. It's a complete resolution. Our pharmacy distributors are very happy. Of course, our patients are very happy that access to Remodulin will not be threatened. We're pleased that CMS was able to provide a solution as quickly as they did.

I'd also like to add that a couple of universities in the Washington, D.C. area are competing to give Fred an honorary juris doctorate degree for his handling of the Medicare regulations so well.

Jennifer Chao of Deutsche Bank.

Great. Thanks for taking the call. I certainly do want to congratulate you on resolving the CMS under-reimbursement in what seemingly was record time. Does this mean that we should expect any kind of retrospective impact for United Therapeutics?

Good question. Our understanding is that there will be retroactive application of the corrected advice from CMS. However that would not really be something that impacted United Therapeutics. It would be something that impacted our distributors because we-thanks to the nature of our business relationships with the distributors and the structure of how we market our drug, we always received our full payment for the drug, even while Medicare was under-reimbursing it. But we felt the pain of our distributor partners who were being under-reimbursed. My understanding is that the decision of the CMS will be retroactive to the beginning of '04. That would be good news for ACREDO and for Priority Health Care.

How about from an inventory standpoint specifically for example, on the part of ACREDO. Could this mean that any other reimbursement they faced might have, in a way, impacted their inventory and that that might imply greater demand than your $18 million sales figure? Or is there nothing material there?

I would think I really would want to defer those questions to the folks over at ACREDO and not get too much in their business answering those questions.

Okay, fair enough. On the pricing for IV Remodulin, certainly you're going into a critical inflection point in November. Just in terms of how your team is thinking about pricing and given the higher dosing per patient as compared to the subcu (ph) formulation. How do we think about that?

Right. It's another great question. The assumption is not quite accurate. We don't believe that there will be higher dosing per patient. We think that the dosing per patients will be quite comparable to subcutaneous Remodulin. We think that for a couple of reasons. First of all we proved to the point of an indisputable scientific fact that the IV Remodulin and the subcu Remodulin are bio equivalent. Therefore, in any normal situation of comparing apples-to-apples, the dosing of IV Remodulin should be no different than the dosing of subcu Remodulin. Patients should get just the same amount if they are dosed by their doctors to the point of optimum clinical benefit, which is how they've always been dosed.

The second data point is that in the study that Roger was describing earlier, the investigator and the shaded study with roughly 50 patients, in that study the investigators chose - and again, this was really their study design, not ours - chose to adopt a number of protocol rules to maximize the IV dose. I think they really wanted to see, again somewhat out of medical and scientific curiosity, just what was the maximum potential improvement in clinical parameters that one could have with IV and also what would be any possible side-effects that would come out of really pushing the IV dose. So there were a lot of artificial aspects to that study that involved dosing more aggressively than one would ordinarily see in the clinic. That is why the average patients in that study received a higher dose than the average subcutaneous patients received.

There are a couple of other smaller points that help explain the differences. I think that the real fact is that we expect that the patients will be dosed comparably, which means on the average of about 50 nanograms (ph) per kilogram per minute for patients whether they are IV or subcu. Therefore, there really is no reason to dicker with any differential pricing for IV or subcu. We expect both products to be priced the same.

That's helpful. Just a last question for you. Can you give us a sense of how many patients from the tapsin (ph) study have crossed the 12-week turning point. How current do you expect FDA to be on the tapsin dataset by mid November?

Roger would know that better than I. Roger.

47 were enrolled. I think around 30 or 31 - point in times change everyday on this one. About 30 or 31 have been through. We've given the FDA an update on 38 patients. At that time 21 had been through week 12. There is really not much more information in the full 47 than what they got in the end of August. They haven't asked for additional information. I think what we gave them in August is sufficient for what they needed. Certainly I think the real issue for them is, is the drug safe. They are not looking for this open-label trial to demonstrate efficacy. The data clearly show that the drug can be delivered chronically and safely by the central route. There is nothing going on at the central infusion, which is a good primary concern because, as Martine said, one of the things that bio equivalence demonstrates is that systemically the exposure to the drug IV or subcu is the same. The systemic safety issues are addressed by all of the subcutaneous data that we have today. The only issue really is, can you give the drug centrally? Does it do anything at the central site of the infusion? The answer to that is, yes you can give it chronically and safely. And no, it doesn't do anything at the central site of infusion. I don't see any issue with the dataset or the need to provide any further information to the FDA.

Okay, Thank you. Very productive quarter.

Thank you very much Jennifer. That will have to be our last question. We've used our half hour block. I would like to give a few-point summary to everyone. It's been a great quarter for us here at United Therapeutics. It's our second quarter in a row of profitability with growing profitability and growing revenues quarter-to-quarter. Our overall top strategic goals remain quite constant. They are to operate with profitability rates, in terms of growth, that are near the top of our peer group; to continue developing the best medicines that our intellectual property platform can support, especially in the field of prostacyclin analogs and glycobiology products and monoclonal antibody products. We are really a science and medicine company. Therefore we focus most of our energy on conducting the most insightful type of clinical trials possible. So it's in the field of clinical trial design that we add, we believe, the greatest amount of value to the intellectual property platform that we've developed. Then we focus on communicating that clinical trial data as effectively and meaningfully as possible to the user community. That is where our commercialization group comes in. Their next big event will be as mentioned, the IV launch effort commencing in January with additional launch activities going on in February and March.

Finally, whether we are in the R&D activities or commercialization activities or our reimbursement activities, we always endeavor to operate with maximum respect for ethics, maximum respect for our patients and our doctors.

I've really appreciated this quarterly opportunity to showcase to everyone our progress on these five different strategic fronts. I know Roger, Fred, and I look forward to seeing many of you in person at upcoming conferences, be they medical or investment oriented during the quarter and then to talk with everybody again at our next quarterly conference call.

Thanks again for taking time for United Therapeutics on a very, very busy news morning. We appreciate your interest and support and your great questions. Have a great day.

I thank you Dr. Rothblatt. Ladies and gentlemen, if you wish to access the replay for this call you may do so by dialing toll free 888/203-1112 or 719/457-0820 and using the access code of 962873. Again those numbers are toll free 888/203-1112 and 719/457-0820 with a pass code of 962873. A replay will begin at 12:00 noon today and run through November 10.

That concludes today's call. We thank you for your participation. You may disconnect at this time.