United Therapeutics Corp (UTHR) 2005 Q3 法說會逐字稿

Good morning, and welcome, ladies and gentlemen, to the United Therapeutics teleconference regarding its announcement of third-quarter financial results. At this time we 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 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 forward-looking statements are qualified by the cautionary language and risk factors set forth in United Therapeutics periodic and other reports filed in the SEC. There can be no assurance that the actual results, events or developments referenced in such forward-looking statements will occur or will 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 like to turn the conference over to Dr. Rothblatt. Please go ahead.

Good morning everybody, and welcome to the quarterly United Therapeutics conference call. I am here with Roger Jeffs in Montreal, off the exhibit floor of the American College of CHEST physicians' conference, the CHEST conference. One of the largest conferences of the year for doctors who prescribe drugs for pulmonary hypertension. The excitement is pretty palpable here especially regarding the presentation we have today by Dr. McLaughlin on behalf of a group of doctors reporting on some of our clinical trial results; I will mention those in a second. But let me first shift to the numbers as that is the principle purpose of this call. We are pleased to report that total revenues for the third quarter of '05 came in around $33 million. That is up significantly from $20 million at the third quarter of 2004. So we are certainly very, very pleased with that greater than 50% improvement in revenues quarter to quarter. And the net income numbers are, frankly, even more exciting. Net income rose to $15 million approximately, almost $16 million, from $6 million thereabouts in the third quarter of 2004. So a very dramatic, more than doubling of net income from the previous quarter.

And that translates to an improvement in terms of our net income per common share of -- well for the quarter we are reporting $0.69 per common share basic, $0.61 per common share diluted. Those numbers are up also rather dramatically from $0.29 and $0.27 per share respectively at the third quarter of 2004. So certainly numerically speaking a very, very nice quarter to report. As mentioned, Roger and I are here talking to you off the floor of the American College of CHEST physician's conference. Our major presentation today, which is already been printed and therefore buzzed about, so I feel free to chat about it, is reporting on the one year long-term results of our study in which patients were transitioned from Flolan to IV Remodulin or were de novo patients put initially on IV Remodulin. And this was an investigator, independent investigator initiated study. The one year data shows a truly startling for me because I've been in this field for ten years, I have never seen results this good, 125 meter improvement in six-minute walk distance score among the de novo patients, and a maintenance of six-minute walk distance for the Flolan transition patients. And equally heartening because it is pulmonary artery pressures that pace survival of the patients, the patients on IV Remodulin after a year had a drop of 10 mm of Mercury, a very significant drop, and that definitely augurs well for their survival.

I might also mention that in terms of the Flolan side the patients maintained within the statistical bounds there hemodynamics after one year on the drug. And that also is very good news for the physicians knowing that they can transition a patient from Flolan to Remodulin, maintaining their hemodynamics. Also patients in both groups overwhelmingly either maintained or improved their functional class. In fact, about more than three-fourths of the de novo patients improved their functional class, and 90% of the Flolan transitioned patients either maintained or improved their functional class. So very, very good news on the clinical side.

On the marketing and business side and I have joining me on the call Roger Jeffs, who is our President and Chief Operating Officer, also in charge of all the clinical trials at United Therapeutics and Fred Hadeed, our Executive Vice President for business development and Chief Financial Officer responsible for all distributor and customer relations at United Therapeutics. And we are happy now to take calls from those of you on the phones.

(OPERATOR INSTRUCTIONS) Matt Kaplan, Siegel & Company.

Thanks for taking my questions. Could you give us a sense in terms of an update on a couple things, first the pulmonary trials that are ongoing and also the trust trial in India and also the oral program?

All of those clinical programs, Matt, are managed by Dr. Jeffs. So I will ask Roger to review the enrollment status of all of those studies.

Let me start with the IV side of things first; with the trust trial in India we currently have about 45 patients enrolled in the study. There's a planned interim after 33 patients complete the 12-week study, those 33 patients have completed. We are now just collecting and cleaning the data and expect to do the first interim analysis later this year. And hopefully with some positive results from that even somewhat of a wish or expectation that we will win at the first interim analysis and complete that study.

As to the oral, that study is completed or that compound is completed Phase I testing. We have done both single dose and multidose multi-day studies in normal volunteers where we looked at start doses, tolerability and the kinetics of the dosing regiment. We are meeting with the regulatory agencies around the world. We've met with the EMEA about a filing strategy and we are meeting with the FDA in the coming months to also talk about our registration path regarding our Phase II, III studies.

As to the triumphant TRIUMPH study, there is approximately at the end of the quarter about 30 patients enrolled in the trial and enrollment is ongoing.

When should we expect results from the TRIUMPH study?

Because it is a clinical program and it is difficult to predict sort of when things will complete, we're really not going to make any forward-looking statements about when that would happen. We are currently at 30, we have an enrollment goal of 150. So you have to make your own expectation for that.

Thanks for your update, and nice work.

Joshua Schimmer, with SG Cowen.

Congratulations on a strong quarter, and thanks for taking my questions. Just a follow-up question on the oral Remodulin compound, what is the frequency of administration with the formulation you currently have and what disease indications do you plan on developing it for?

Good question Josh. Thank you. It looks like now we have in a set state a twice-a-day delivery platform. And if you look at the kinetics both in animals and now in normal human volunteers, you can certainly see sustained release and a fairly constant and consistent sustained release over about twelve hours. So that would predict a twice-a-day dose regiment. Our primary indication is going to be for patients with pulmonary hypertension, and I think that's an area where simply we've taken Treprostinil, we've put it in a different cell form and also put it in a dosage form for sustained release. But what we are delivering is Treprostinil just by different routes, so we're very, very, very confident that if we can deliver the drug by the oral route and it's well tolerated, that we can show success in patients with pulmonary hypertension so we are going to go there first.

We are now looking at secondary indications, and there are many. And one of them would be peripheral vascular disease. Another one would be injury prevention in ischemic heart patients, congestive heart failure is another option for left-sided heart failure. Wound healing is another option. So there are many things that we're going to explore. But a lot of that exploration will be in sort of Phase II dose ranging studies because in pulmonary hypertension we know we can start low and keep pushing the dose. In the other indications we have to determine what is a safe and effective dose before we go into pivotal studies so those will take a little bit longer to progress.

Great. Thanks very much, and can you also give us an update on where distributor inventory levels stand?

Fred, could you address Josh's question about distributors?

Of course. Distributor inventories in the U.S. were 16.3 million at the end of September. As compared to 15.5 million at the end of June. So we saw a $900,000 increase in distributor inventories consistent with our increase in sales.

Great. Thanks very much. I will jump back in the queue.

(OPERATOR INSTRUCTIONS) Jennifer Chao, Deutsche Bank.

Congratulations, Martine and team.

Thanks, Jennifer. Nice to hear you this morning.

Great to chat with you guys as well. I was wondering if we could have more color on TRIUMPH, in terms of the number of sites that now have the IRB approvals? And also whether or not there has been any changes to the dosing protocol? Roger, what would FDA require for there to be any change on the dosing regimen here midstream in the trial?

Sure, Jennifer. The TRIUMPH study is going very well, and I can also report here from the floor of the CHEST conference, these doctors are extremely enthused about that trial and about that dosage form of inhaled Treprostinil. We have now IRB approvals from, I believe, 12 out of the 14 centers. I may be off plus or minus 1, but I think we are at 12 out of the 14. And the -- we've decided to just give clinical enrollment numbers for all of our various studies at the end of each quarter. So as the end of each quarter -- because otherwise people are asking us like every day and the number changes every day and then people get confused -- that I heard it was this or that. So as Roger said, the number as of September 30th was 30, but actually as of right now it is substantially better than that and its increasing all the time. The dosage change for the drug was actually something that had been gradually implemented on the request and response to the request of a couple of investigators who found that some patients would have Prostacyclin sort of side effects, or would just have difficulty inhaling the requisite number of breaths during one time.

So we had given some waivers that allowed instead of people to take six breaths right off initially to start off at three breaths. And again, this is three breaths or six breaths within a one-minute interval, and this is a very fast kind of breathing; it is not like a long nebulization type of breath. So after a couple centers had had the relaxation to start with three breaths into the six breaths and after they had actually ramped those same patients back up to six breaths within a week or two, we went in with a routine amendment at the FDA to say can we give investigators the right to start at three instead of six and move them up to six as soon as the investigator feels it's appropriate. FDA said fine, no problem, so that has actually already been implemented and been ongoing for a couple of weeks. And the only significance of it is that some patients can breathe six breaths right off the bat and other patients need to get to six breaths after -- in some cases the same day -- in some cases a couple days, and in the worst case, a week.

So does this mean, Martine, that new patients are still coming on at the perspectively defined breaths?

Oh, yes. In fact most people are coming on at six breaths.

And then just lastly there was a lot of speculation around the dosing changes. Can you help us feel comfortable that there really is no safety concern from the standpoint of DSMB potentially haulting this trial?

Yes, I can say, Jennifer, that first let me say up front that we have a very firm policy of not commenting on rumors or speculation. So I don't want to comment on any of that; I just want to be clear on that on the record. What I can tell you is that, as I mentioned before, the investigators are all -- who are part of the trial and who are friends of the investigators in the trial -- are all extremely enthused about the drug, about its safety, about its ease-of-use for the patients. As you may know, it's now in the public domain that Dr. Rubin, (ph) Dr. Channig's (ph) team are going to present some very exciting rug (ph) results of the Phase II studies of TRIUMP at the American Heart Association. In fact, this morning at a big session here in Montreal that started at 6:30 AM, Dr. Channig noted that there was successful results from the Phase II study. So I would say that every single thing we've seen to date has been safe and effective about inhaled Remodulin or the TRIUMPH study. And that nothing that we've seen has been contrary to that whatsoever, and the change in going from in allowing some doctors to start a patient at three breaths rather than six breaths is simply because different doctors have different thresholds for making life as easy for their patients as possible, and of course every patient is different. And this is probably not the right metaphor to use but I'll say it anyway, just like some people -- back when people smoked cigarettes they would take a cigarette puff and they wouldn't cough and other people would -- and it's just kind of like that sort of thing, that different people are different. And the patients who are starting on three breaths is just because of their own nature and nothing about the drug at all.

Thanks, see you guys at AHA.

(OPERATOR INSTRUCTIONS) Martin Auster, Wachovia.

I would like to first off commend United Therapeutics' commitment to profits first.

Yes, well, that is the name of our budget actually, and we are working that. (multiple speakers)

A quick question for Roger following up on an earlier question. When do you think you might be in position to publish or present the Phase I data experience from the oral Remodulin program? And then also what would be the timeline for when you would be able to communicate what a pH registration strategy for the oral program might be, Roger?

The publication issue is a little bit difficult to comment on because we actually generated some abstracts and then decided for intellectual property reasons not to put those out yet. So we're writing the manuscripts while some of the filings get sorted from an IP standpoint. So it is hard for me to comment exactly, Martin, when you will see the data in press. As to a filing strategy, I can articulate some of that now. I think the one thing we want to do is help recover patients that are failing current background oral therapies, and that could be any endothelin antagonist they are on or any PDE5 antagonist they are on. So at the present time that would be Tracleer and Revatio. So it will be a standard type protocol that you've seen with TRIUMPH and other studies is if a patient is on a background oral therapy, they are not optimized, we will then allow addition of study drug, and that's going to be other active or placebo. And we will look at about 300 patients over twelve weeks and see what the result is in terms of six-minute walk. And if successful we will then press forward and make that a registration trial with the FDA. And that is some of the discussion that we are having with the agencies in the coming weeks or months.

Okay, and you would expect that program can kick off kind of first half of 2006, then?

Precisely. But we are also -- so that on its own would be a registration path. The other thing that we're contemplating is that we would also start a front line de novo treatment trial. Now that has a little bit more controversy to it because patients -- there are available oral therapies but there's no available oral Prostacyclin. And in our discussions with physicians and experts they are so excited about oral Remodulin that they said they would be willing to participate in a twelve week study de novo. Now the good news about that is that is probably your best chance to show a robust treatment effect; it's very similar to what we're showing with the IV study results that we presented here today by Valerie McLaughlin. So that patient study would probably be in the 150 patient range, more geared towards that number. But it may be a slower to enroll trial because patients may decline a study and say I will just take other currently available therapies. But the good thing about that is each trial, whatever finishes, its kind of like a horserace, whatever horse finishes first we will run with that one to the FDA or the EMEA. And then the other one trial will support safety as well as an expansion of the label. So we are in a way trying to do a postmarketing study in a premarket setting. And that is kind of how we're thinking about doing this now.

Thank you very much for the answer.

Jeff Meacham (ph), JPMorgan.

Good morning; congratulations on a great quarter. Just wanted to talk a little bit about the European opportunity for Remodulin. Wondering first what the breakout was for this quarter but then if you guys could just talk qualitatively about the opportunity with respect to Flolan, the potential it to -- the switching potential and the pricing hurdles, as well just overall in the European market.

We see a really robust opportunity for Remodulin in Europe. And in fact, over the past year we've built up our UT employed cardiopulmonary specialist detailing team for Europe via segmentation of the European market into a UK and Northern Europe, a Germany, a France and Benelux territory, southern European territory. And each of these territories will have dedicated UT cardiopulmonary specialists calling on the doctors in those territories. So we're ready to do a full court press in Europe, and that is of course supplemented by the efforts of our European distributors, which are pharmaceutical companies specialized in orphan drugs there.

The Flolan is very, very weakly supported in Europe, and therefore through a combination of factors we see a great opportunity to basically swoop in and Remodulize the Flolan market there. And some of those factors are, first of all, the rapid switch study, which has been led by European investigators -- in fact the two number one opinion leaders by many people's account in Europe is Dr. Semino (ph) of France and Dr. Garee (ph) of Europe. Those were the two leaders of our rapid switch study in which in an outpatient setting we switch a patient from IV Flolan to IV Remodulin very, very rapidly. And within a span of just a few hours. And that data will soon be published and given that it came from Europe, it was headed up by European investigators, we expect that that is going to be a very powerful forcing function to get people to in an outpatient type of setting shift off of Flolan onto IV Remodulin. Of course no one would want to do that unless you were very convinced of the safety and efficacy of IV Remodulin. But as mentioned one of the big buzzes around this American College of CHEST Physicians conference we are at here is the 125 meter long-term improvement in walk distance for patients, de novo patients, put on IV Remodulin and no degradation for the patients who are transitioned from Flolan.

So that is actually the first data that I am aware of, of that magnitude of improvement in six-minute walk distance of 125 meters over a period of a year. So we think that IV Remodulin will have a very warm reception in Europe. Now yet another positive factor that we see in the European market is the growing awareness of pulmonary hypertension. And in fact was reported here this morning that there is going to be some new statistics coming out. For those of you who are modeling the pulmonary hypertension market, I think this is extremely significant. We learned this morning that the age-old number of incidents of pulmonary hypertension of one to two patients per million is going to soon be increased. And we weren't told exactly what that number was, but if for example, it went to just like four per million that would be a doubling of the incidents in pulmonary hypertension with huge consequences for prevalence and for the pulmonary hypertension market. So in general the European market is a bit less developed than the U.S. market, so that augurs even better for our opportunity in Europe.

Finally, on pricing, we have been selling Remodulin in Europe almost from the very beginning if we began selling it into the U.S. under what is called a named patient basis where it is not approved, but in general it is approved on a patient by patient basis. You are not allowed to market your drug but you're allowed to make it available. And traditionally anywhere from something like a fifth or so of our revenues were attributable to these named patient sales in Europe. In general in terms of answering your question about the pricing, we are aware that the European market is different than the U.S. market. And generally what we try to do is what we feel to be a fair way of dealing with the affordability of the drug, is we generally try to price our drug such that its price is benchmarked against the U.S. price, multiplied by a ratio of the GDP per capita in the European country, divided by the GDP per capita in the U.S. So if a country in Europe had the same GDP per capita as in the U.S. then the price of Remodulin is the same in that country as in the U.S. If the GDP per capita is half the GDP per capita in the U.S. then the price of Remodulin that country is half the price that it is in the U.S. And that approach has been received very warmly in other markets around the world. And we will probably continue to go forward with that approach, Jeff.

Thanks for the color.

(OPERATOR INSTRUCTIONS) Gil Heron (ph) from Infinium Capital.

Thank you for taking my question and congratulations on a great quarter. Specifically SG&A costs for Q3 seem to be somewhat lower than Q2 but consistent with Q1. And I was wondering whether this is something that we should look forward into Q4 maybe into next year as we're modeling your expense lines.

I would like to ask because Fred is our budget szar, ask Fred if he could comment on the SG&A breakout.

Good morning, Gil. Thanks for joining us on the call. You're the first person to call in from Canada, so welcome. We, as we said in the past, we don't provide any forward-looking projections or guidance with respect to our spending or our revenues. But I can explain the fluctuations that you're referring to and very simply as we discussed in the 10-Q that we filed back in August, we did have somewhere up towards $1 million of onetime registration fees that we had to pay in order to accomplish mutual recognitions of Remodulin in Europe. So those did not reoccur. They didn't incur in the first-quarter; they didn't occur in the third, they were only unique to the second quarter. So that explains the fluctuation there.

Thank you for that, and so I guess that asking you on projections of effective tax rate going to '06, is beyond my boundaries at this time?

Fred Hadeed. It is at this time.

I see. Okay, and lastly, with respect to your patient assistance program, which I believe you amended back in June '05, can you give us a sense as to the percent of patients on your Remodulin therapy that are a part of this program at this time?

I can tell you that the number of patients in our patient assistance program has been fairly level despite the fact that we improved the program and probably now have the most generous patient assistance program of any drug or any pharmaceutical company in the U.S. It has stayed fairly level, and I speak -- I think that speaks very well to the attitude of the payors that are paying for the drug. So we've had anywhere from about 10 to 15 patients that have been covered under patient assistance since we launched the drug back in May 2002. And it's been fairly level.

Thank you very much.

Thanks a lot for that question, and operator, we have time for one more question, please.

Lucy Lu, First Albany.

Just wondering if you could give us an update on the pump (ph) immunization effort for IV Remodulin, please?

I'm glad you asked that because to me it is actually I think about the most exciting aspect because when I look at the pulmonary hypertension websites where the patients talk to each other, they are most excited of all about that miniaturized pump being used with IV, given them the best of all worlds, and I would like to ask Roger if he could please comment on exactly where we are in terms of the publications and the approvals and stuff.

Yes, it is an extremely exciting effort, and sort of the goal going into the whole program was can we provide patients with a different pump alternative for intravenous infusion? And the key start was to use the mini med pump that we currently use for the subcutaneous use. I am pleased to report now that we've completed both an adult and pediatric study. We've shown that it can be done safely and chronically. And in an essence, what we are going to try to provide to patients is options, and another option that we're trying to explore now is a third pump, or a second pump for intravenous use, our third, there is a CAD407C (ph) and now what is called the Chrono (ph) pump by Con A (ph) which should be getting approved soon. And the nice thing about these pumps is that it has taken a therapy which is delivered by sort of a cassette recorder sized pump down to a pager sized pump and it allows for 24 to 48-hour infusion for intravenous therapy. It is a bit differentiating from Flolan because Flolan you're not able to concentrate the drug for this low flow delivery. The data has -- is in the process of being written up, it will be submitted to meetings for the spring. And also to journals for publication. And again, it will show clearly that for some patients this is a very good option.

Great, and Roger, could you mention one thing about the work on the implantable pump as well?

The implantable pump, we've completed the animal testing using the 40 mil reservoir increment 2 pump from Medtronic. We are waiting from a decision from Medtronic whether or not they are willing to support that pump in terms of a human trial. There is a unique catheter that we need to use for internal tunneling and Medtronic's at the current point hasn't committed to pushing forward that new catheter. So that program is currently on hold, and we are more focused at the current time on developing the Con A (indiscernible) pump as well as moving obviously the oral program forward.

Thanks, Roger. Thanks Lucy. So in conclusion everybody, it has been a great quarter, and we appreciate your recognition of that and your congratulations. We've got some really exciting clinical data being talked about here at this conference and will be more exciting clinical data talked about at the American Heart Association.

I would like to conclude with an observation that Dr. Rubin made at the conference this morning. Lou Rubin from UCFD where he pointed out that the prevailing theory for what causes pulmonary hypertension is called the multi-hit theory, in that different people have different predispositions to pulmonary hypertension. Yet not everybody with any given predisposition gets pulmonary hypertension. The ones that do get it due to a variety of different insults or hits, whether it's going up to a high elevation or having taken a diet drug or some other factors that nobody is aware of. And what he pointed out is with there being literally dozens of different ways to get pulmonary hypertension it should not be at all surprising that no one method of treating pulmonary hypertension is going to work for all of these dozens of different ways to get it. And what he said is instead we should be pleased that there are literally dozens of different means of treating pulmonary hypertension when you consider all of the different combination possibilities available. And this gives us the opportunity to get smarter and smarter over time at matching the right treatment for each patient, and you want to do that of course in time so that the patient does not die and in fact has a minimum period of morbidity and poor quality of life.

The good news for those of us in this field is that here is an opportunity where you have a growing market, no one silver bullet works for everyone and it means that all of us in this marketplace are able to grow our sales, grow our therapy and help keep more patients healthier. And that certainly is a win-win situation for everyone.

Thank you very much for joining us on the call, and we look forward to seeing some of you at this conference, others at the American Heart or talking with you in between.

And that concludes today's conference. We do appreciate your participation. Have a great afternoon.