United Therapeutics Corp (UTHR) 2005 Q1 法說會逐字稿

Good morning and welcome, ladies and gentlemen to United Therapeutics' teleconference regarding its announcement of first quarter financial results. [OPERATOR INSTRUCTIONS] At the request of the company, we will open the conference up for questions and answers after the presentation.

Remarks today concerning United Therapeutics will 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 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 affecting such forward-looking statements. I will now turn the conference over to Dr. Rothblatt. Please go ahead Dr. Rothblatt.

That you and good morning everybody. Thank you for joining our conference call first thing in the morning. We are pleased to report that United Therapeutics' revenues for the quarter ended March 31, 2005, totaled $23.2 million, representing a 70% increase over the same quarter in 2004. Also, exciting was that our net income for the quarter was $7.7 million, or $0.34 per basic share, exactly the type of growth in operating results that we've also been looking forward to seeing.

In addition to these solid operating results, our financial position is strong. Cash flows from operating activities were $5.2 million for the quarter, which we ended with $146.4 million of cash and investments.

On the scientific and medical side, one of the more exciting things to occur during the past quarter was the first presentation by some of the leading opinion leaders in the field. I'm thinking specifically of Dr. Milton Packer, of his -- neurohormonal theory for right-heart failure, for the first time really setting forth a new paradigm that the way to treat right-heart failure, such as pulmonary hypertension, is with a combination therapy approach addressing all of the neurohormonal factors, specifically, prostacyclin, endothelin, nitric oxide issues, with a combination treatment / therapy regimen of a prostacyclin analog and endothelin receptor antagonist and a PD5 inhibitor.

This is a major scientific development in the field which up until now has really been based on -- almost wholly on -- a mono-therapy paradigm. And, as one of the leading companies in the field of. prostacyclin therapy, we are tremendously excited by this key opinion leader setting forth the new paradigm that includes prostacyclin as a fundamental leg in the triad of treating all pulmonary hypertension patients at all stages and levels of diagnosis.

We have also got a lot of exciting clinical work that's been accomplished during this quarter. But, I think it is most interesting to have some of those clinical developments ferreted out in Q&As.

I have with me Dr. Roger Jeffs, who is the President and Chief Operating Officer of the Company, and Fred Hadeed, who is our Chief Financial Officer and also our Executive Vice President, Business Development. Between the three of us we'll do the best job we can of handling your questions and answers.

Thank you. [OPERATOR INSTRUCTIONS]

Please stand by for your first question, Dr. Rothblatt. Our first question comes from Martin Auster of Wachovia Securities.

Dr. Rothblatt, congratulations on another fine quarter.

Thank you , Martin. Thank you very much.

Good to talk to you guys again. I wonder if Fred could us with a little bit of detail on inventory levels at the distributor level. And then, I was wondering Martine if you could comment, maybe provide a little incremental detail on where the new IV Remodulin starts are coming from, in terms of what are you seeing in terms of naive prostacyclin patients relative to subcu or Flolan switches.

Good morning Martin. Good question. While the actual number of vials held by our distributors in the U.S. was virtually unchanged from December to March -- almost the exact number of vials were held in the channels -- the dollar value fluctuated by about $1.2 million, so we ended March with 12.7.

And, as you know at the end of December, there was approximately 14 million of inventory. So really, no significant fluctuation in inventories during the quarter.

With regard to the mix of IV and subcu starts, basically it's been pretty much an even-steven game there, Martin, that we have about as many subcu as IV starts. It is hard to really tell now-a-days just how naive any patient is, of course, because of HPPA regulations -- we can't know specifically what drugs patients are on.

So we really don't know if these are Bozantin failures or people who have just walked into the doctor's office and are starting on prostacyclin therapy for the first time.

I suspect, in line with Dr. Packer's neurohormonal hypothesis that I mentioned at the beginning of the call, that more and more frequently, physicians are going to begin starting patients on both an endothelin receptor antagonist as well as either IV or subcu prostacyclin.

Keeping with the label, I am sure that the majority of the IV patients, if not almost all of them, are patients who have first tried subcu and were intolerable to the subcu side effects, and therefore moved over to the IV therapy.

Another interesting data point, or color if you will, on the question about naive versus non-naive patients is that, in our study of taking patients who were previously on Flolan, or were naive to any therapy at all, and putting half of them on IV Remodulin -- putting all of them on IV Remodulin -- we have continued to see that the IV Flolan patients who transitioned to IV Remodulin have maintained their walk distances, have maintained very good pulmonary hemodynamic status. Basically, doing just as well on IV Remodulin as IV Flolan.

What is dramatic though, Martin, is that the patients who are naive to any therapy and have gone on to and in our trial, into the IV Remodulin arm, have had dramatic increases in walk distance. And I believe you saw some of those at the American Thoracic Society last year.

I think there are going to be additional presentations coming up later this month at the American Thoracic Society in San Diego. And, certainly I am sure in your discussions with physicians, you will hear many praises sung of the change that IV Remodulin achieves for patients who are just -- I can't even say really, walking into their door, because these naive patients are usually pretty sick, and can barely make it into the door, after three, six, months, and now, a year and longer on IV Remodulin -- significant walk improvements are being maintained, and people are just really excited about that.

Thanks Martine. Could you expand on what you are seeing in terms of physician and patient appetite for switching off Flolan and, considering the convenience advantages they might be able to get with IV Remodulin and what you think might trigger that process, and I'll hop back in queue. Thanks.

Sure. The main issue that patients have with IV Flolan is that it is a tremendous inconvenience, because IV Flolan, as many of the people on the call may know, is not stable at room temperature and has a very, very short half-life.

This means that the patient --

( A) has to reconstitute the drug from stable constituent, each day, in a sterile area of their house,

(B) once it is reconstituted and the instability sets in, they have to keep it surrounded by an ice pack that they have to walk around with at all times, and

(C) they are always very nervous and anxious, as any of us would be, with the knowledge that, should that line become interrupted at any moment, they've only got about two minutes of drug left in them before they are at risk of rebound hypertension and potential rapid de-compensation of the right heart. So, those are all scary things about IV Flolan.

IV Remodulin is stable at room temperature, so it can be shipped to patients, for that matter, already in a syringe, or they can fill their syringes with it. Because it is stable at room temperature, there is no need for an ice pack, so the pump system that the patients walk around with is dramatically smaller.

And that is what I hear most frequently from patients and physicians, " you've changed me from being a pack mule to being a person again", by having the very long -- very, very small system with no dripping, cold ice to walk around with.

And finally, the half-life of the drug is so long, four hours, that the patient has significant amounts of the drug left in their blood, even after a much longer period.

And so that, in and of itself, is a tremendous safety advantage to the patients, that they don't have to feel, if the line is interrupted or pulled out -- and this actually occurs quite frequently, for lots of patients -- that they need to do a mad rush to the hospital. Instead, that they can gradually get to the hospital in an appropriate period of time.

All right. Thank you.

Thank you. We'll now move to Matt Jacobson of Black Diamond Research.

Hi, it is actually Matt Duffy. Thanks for taking the call. Just a couple of quick things. I wonder if you might fill us in what you are hearing from the field in terms of the key hurdles that you are seeing for starting patients on IV Remodulin. Is it reimbursement, or is it education and physicians, that sort of thing? And then, if you could run us through the things going on in support of Remodulin at ATS, please.

The key things that we are hearing are really in the field of educating the physicians, and physicians wait ing to learn more and more data, and waiting to see some data published in the peer review journals.

There is a lot of differences between IV Flolan and IV Remodulin, that people have to get accustomed to. Let me mention one practical difference.

Because of the short half life of IV Flolan, patients have to do this reconstitution game, that I mentioned a moment ago, at least once a day, and sometimes even two or three times a day, depending on what dose that they are on.

On the other hand, with IV Remodulin, a patient needs to fill their syringe only once every two days, so they have a day off, in between, when they don't have to really think about their drug system at all.

These are the type of educational points that our detailing team is getting across to the leading prescribers. Now, let's talk about the practical thing. How do you transition somebody from IV Flolan to subcu Remodulin and then onward to IV Remodulin?

At first, it was thought that this has to be something that is done very, very gradually. But, there is growing clinical experience with what are called rapid-switch techniques where, literally, because of the very short half life of Flolan, you can pop Flolan out and put Remodulin in, and Remodulin is taken up by the body just as quickly as Flolan is taken up, but it lasts a lot, lot longer.

So, it makes a huge practical difference in the uptake of Remodulin. Because, if you are going to transition patients over three or four days, which was what people originally thought when they were very cautious -- and everyone should be cautious -- that means the patient has to check in as an inpatient, scheduling an inpatient situation. You are always looking at a multi-month issue, to get a convenient time for the doctor and the patient and everybody and bring them in.

On the other hand, if it can be switched from Flolan to Remodulin as what we call a rapid switch, you can literally do it in the outpatient setting. For example, most Flolan patients visit their doctors anywhere from two to four times a year, for just a regular checkup, how are you doing?

So when they come in for their regular checkup, the doctor can say, you are doing well, there's something new that's been approved by the FDA -- Remodulin -- we've got the subcutaneous form. We could try that.

If it causes site pain, we've got the IV form, and that won't have the site pain issue with the subcutaneous form, and this can be done very quickly, just as an outpatient. In fact, you can go home with the system today. And that, of course, lowers the hurdle very much.

So these are the type of practical and patient-oriented points that our teams are communicating to the leading prescribers.

Okay. Great. Thanks. And can you also talk about ATS?

With regard to ATS, we have a booth at the ATS which -- and any of you who are on the call and planning to attend the ATS are most welcome to visit -- and at that booth, we will have experts on the therapy available, to talk about the therapy.

We'll also like to draw your attention to a mini-symposium that we will be supporting at the ATS. It is a mini-symposium on advances in the management of pulmonary arterial hypertension -- 8:15 to 10:45 a.m. And, that is on Monday, that is, I'm sorry, on Tuesday, May 24th.

There will be presentations in the mini-symposium that are directly relevant to your question, namely, transition from intravenous epoprostinol, which is the scientific name for Flolan, to intravenous treprostenol, the scientific name for Remodulin, for the treatment of pulmonary-arterial hypertension. So that will be an exciting topic at the mini-symposium.

As well, there will be other presentations relating to Remodulin at poster sessions and other parts of the meeting.

Let me just share a couple of the titles with you, so you get a feel for what's being talked about there.

Long term safety and efficacy of intravenous treprostenol for pulmonary-arterial hypertension.

That will show you some of those long-term walk results in the naive patients which, to me, are the best I've ever seen in the entire field, to tell you the truth.

Long term effects of continuous subcutaneous infusion of treprostenol in pulmonary hypertension. Again, really getting to the facts that these people who are on subcutaneous treprostenol are living a whole lot longer than the NIH registry data would indicate that they would otherwise live.

Pharmacological testing with inhaled treprostenol for pulmonary hypertension -- nine months treatment experience -- that is the longest-out results that have been ever shared before, of inhaled treprostenol -- pharmacokinetics and safety of treprostenol for oral delivery.

This is the first public presentation of our very rapidly accelerating oral treprostenol program which is, of course, designed to be totally in sync with Milt Packer's recommendation for combination therapy for all pulmonary hypertension patients.

And finally, there will be a major presentation at 8:15 simply on the treatment of pulmonary hypertension with treprostenol.

So, I think you'll see a very significant presence for Remodulin, treprostenol, United Therapeutics with our own booth as well as the booths of our marketing arms of Priority Healthcare, Caremark and Accredo.

Very good. Thanks.

Thank you. [OPERATOR INSTRUCTIONS] We will now take our next question from Lucy Lu of First Albany.

Thank you. Actually, Martine, I was wondering if you could go into a little bit more detail on the recent initiated Phase II, III study on inhaled Remodulin just in terms of number of patients and your criteria and the those things of the trial. Thanks.

Okay. Thanks, Lucy. Nice to hear from you, and thanks for that question.

The inhaled trial is a trial of about 120 patients. And looks like it's going to be about -- about 12 centers, half in the U.S. and half in Europe. The dosing is based on puffs of treprostenol, brief little puffs of treprostenol, from this inhaler device called the NebuTech. It is a portable nebulizer.

And it looks like the patients will be starting with about six puffs of inhaled treprostenol for the first week or two, and that is really so they can get used to the system, and then having nine puffs for the remainder of the twelve week study.

Of course it's a randomized, placebo-controlled double-blinded study, so half the patients will be puffing nothing of pharmacological significance and half will be puffing real treprostenol.

It is also interesting that all of the patients will be on background Bozantin therapy, again very much in sync with Dr. Packer's recommendations. However, those would be patients who have -- really would be considered to be non-optimal responders to Bozantin. Bozantin has helped them.

They are doing good on it, but they are really not doing as well as they could be doing, because their walk distances are, basically, not greater than, oh, around 425, 450 meters. And, we would really like to get those patients up above 500 meters in their six minutes' walk, or at least close to that.

So those are the -- those are the basic parameters of the study. And it'll be -- it'll be the first ever randomized placebo-controlled double-blinded study of inhaled treprostenol, which is going to be, I think, of considerable scientific interest, because the inhaled treprostenol is the only prostacyclin analog that is highly pulmonary selective, and, as a result, can be dosed-hydrated upwards over a very wide therapeutic index -- or therapeutic window -- without risk of causing systemic hypotension.

That's a tremendously -- makes it a tremendously valuable tool in the hands of the physician, because he can -- he or she can dose the drug based on the patient's symptoms. Of course, that would all be occurring once the drug was approved, and one thing we're going to do in this study, which frankly we didn't do all that great in our original subcutaneous study, is to keep the dosing regimen very standard and rigorous across all of the centers. And, that is the dosing that I just mentioned at the beginning of my answer. Thanks, Lucy, for the question and good talking to you again.

Thank you. We'll. Thank you. We'll take our next question from Matt Kaplan of Punk Ziegel.

Great quarter, guys.

Hey, Matt, nice to hear your voice.

Give us an update in terms of the oral delivery program and also, you got -- you received approval in France during the quarter. Could you give us a sense, in terms of how the European reimbursement discussions are going, and where that stands?

Sure, Matt. I'm going to ask -- Roger has been spearheading the oral program -- so, I'm going to ask him to address that. And Roger is also manager of our regulatory affairs group that has done a super job of finally getting the approval out of France and is spearheading the reimbursement area -- those discussions as well. So Roger, if you could address them.

Sure. Good morning Matt.

Good morning.

We filed in January, the I&D for the oral formulation of Remodulin, and I think that what's unique about it, it's a sustained release oral formulation, so in addition to being oral, orally bioavailable, it's also a sustained relief construct.

What we did last year was test the bioavailability and the kinetics of some original sustained-release constructs . And, in essence, we showed that we could get orally bioavailable treprostenol and get therapeutic levels of exposure in human volunteers. And, we also had a sustained-release profile, but the profile was for a three-times-a-day dosing regimen.

We decided, at that time, that we would try to improve upon that and perfect it a little bit. So we now, in fact have just completed dosing 30 patients with three, what we hope to be twice-a-day, sustained-release oral constructs. And we'll have that data in the coming months.

At this point, we are not convinced yet that we have a twice-a-day formulation. But, we're hopeful that we do, based on dissolution studies and dog studies. But that will be evolving rapidly throughout the year.

We will probably be in Phase I for most of 2005, with the goal to start randomized control studies in 2006. So, that's it for the oral, unless you have other questions on that.

No, sounds good.

And then regarding France, we were happy in the quarter to get approval in France for class 3 PPH patients with subcu Remodulin. We have filed the mutual recognition package with a mutual recognition facilitation group. We are waiting on validation of that filing.

The kick-off date is tentatively May 12th and if everything went perfectly, it would be a 90-day review process. We're looking at the third quarter for, in essence, pan-European approvals of subcu Remodulin in class 3 PPH.

Following that, we would then file a variation, which would then expand the label to include intravenous Remodulin. And that would be yet another year of review again. But, the nice thing is that would go concurrently in all of the European nations. So that is, sort of, the regulatory landscape.

Great. One follow-up question, regarding the status of your Phase IV committment?

Good question. Appreciate you asking that. The Phase IV study is going very well. This quarter has probably been our most active quarter for enrollment. We are standing at 19 patients enrolled, of the 39 that are required. The 20th patient, in fact, is being screened today. It's a possibility they'll go in today, and we have a 21st patient that's scheduled for next week.

So, that is very exciting in the sense that we have an interim efficacy now, after the 21st patient completes the eight week study.

So we are hoping that, after the 21st patient completes the eight week study, that when we do the interim analysis, we have a potential chance to complete the Phase IV requirement, which, would then remove the Subpart H status of the drug.

So, that is the current status of the study in real time, and if those patients go in, then we will be doing the interim analysis, it looks like probably in July. And then, we'll either proceed or stop the study for efficacy.

Thanks, Roger.

You are welcome Matt.

We'll now move on to William Slattery of Deerfield Partners.

Thanks very much for taking the question, and congratulations on a solid quarter. A question in reference to the DDMAC response as of April 27th. Can you outline what the response was, and how you're going to communicate to the interested parties, the questions raised in the DDMAC letter? Thanks.

Sure, Bill. Martine Rothblatt here. The response to the DDMAC letter, from our part is, corrective action across the board. Corrective advertisements will run in the journal that the inappropriate advertisement ran in.

Corrective "Dear Doctor" letters go out to the prescribing physician database. And basically, across the board, full corrective action in concert with what DDMAC requests of us.

Okay. And has that been submitted?

Yes.

Okay. Great. Thank you very much.

Thank you. We'll now move on to [ ChrisTzankov]

Great. Thanks for taking my call. I apologize if you addressed this earlier. I was about five minutes late. What percentage of your patients are currently on the IV form of Remodulin and then, how do you expect that to change in the long term?

We don't keep statistics of what percentage of the patients are on IV Remodulin, and long term, I think that there is a set of patients for whom IV Remodulin is ideal because they have a pharmacode-genomic genotype which makes their skin acutely sensitive to prostacyclin and gives rise to site pain.

There are another set of patients who were blessed with less sensitive skin, and those patients are able to have a much more convenient subcutaneous delivery form of Remodulin, and a bit safer, because it involves no central venous access. Other patients, in time, will go on to -- will have milder forms of the disease that could be adequately treated with either inhaled or oral prostacyclin.

So, I think, over time, you are going to see varieties of patients on all of these different types of therapy. There's been an often quoted statistic that approximately 50,000 patients in the United States suffer from pulmonary-arterial hypertension.

I find it interesting that, despite some of the best, if not the best, marketing efforts that have ever been deployed in pulmonary hypertension -- which have been deployed by our colleague in the field, Achillion -- there are only approximately 7,000 patients in the United States currently being diagnosed and treated with the disease, leaving the vast majority of the patients still under-diagnosed.

Fortunately, there are exciting new diagnostic measures coming available. Some of them being partially validated for our own clinical studies, such as serum biomarkers of pulmonary hypertension, which will make it much more easy to diagnose the disease than the current situation, which involves a cardiac catheterization, certainly not something that's going to be done in your neighborhood drug store where you get your blood pressure checked.

So, I suspect with the new age of biomarkers, of more precise echocardiography techniques, that allow more precise determination of pulmonary artery pressure, that the number of -- and not to mention the fact that the entry into the field of Phizer, hopefully with the approval of sildenafil in its Revatio form for pulmonary hypertension -- that there will be a tremendous upswing of awareness and that we will start to diagnosing the full 50,000 patients who are estimated to have the illness. And within that large population, there will be some that IV, subcu, oral and inhaled will all be the right drug for the right patient.

And then, just as a follow-up on the Phase II, III inhaled trial, what background therapies will be allowed?

That question was already addressed as well. But, the short answer is Bozantin.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS] There appear to be no other questions. I will turn the conference back over to Dr. Rothblatt.

Thank you very much. I've enjoyed the opportunity to speak with each of you, as have Fred and Roger who are sitting here with me. We thank you for your continued interest in supporting United Therapeutics.

We are actually going to be heading to the car, driving up to the Deutsche Bank Healthcare conference in Baltimore this afternoon, where we'll give a presentation on the floor, as well as be available in the corridors, both today and tomorrow. So, I look forward to seeing many of you at the Deutsche Bank Healthcare conference. Thank you very much.

Thank you ladies and gentlemen. If you wish to access the replay for this call, you may do so by dialing 888-203-1112 or 719-457-0820 with an ID number of 5466656. This concludes our conference for today. Thank you all for participating and have a great day.