United Therapeutics Corp (UTHR) 2006 Q3 法說會逐字稿

Good morning; my name is [Darlene] and I will be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation's Third Quarter Earnings Conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [OPERATOR INSTRUCTIONS].

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.

Thank you.

Dr. Rothblatt, you may begin your conference.

Thank you Operator, good morning everybody, and welcome to the Third Quarter 2006 United Therapeutics Conference Call. My name is Martine Rothblatt. I'm the Chairman and CEO. I'm joined on the call this morning by John Ferrari, our Chief Financial Officer, by Dr. Roger Jeffs, our President and Chief Operating Officer.

After a few introductory remarks, I'll open up the lines to questions.

We're pleased to report this morning that United Therapeutics' revenues for the quarter ended September 30, 2006 totaled $40.4. This is a 22% increase over the same quarter in 2005. Net income for the quarter was $8.5 million, or $0.37 per basic share. Excluding stock option expenses of $4.3 million and income tax expense of $5.6 million, our net income would have been $18.4 million, or $0.79 per basic share.

In addition, our financial position at September 30 remains very strong with $56.4 million in cash generated from operating activities just for the year so far. I'd also like to mention that on October 30, just yesterday, we closed definitively on the sale of $250 million principal amount, giving effect to the exercise in full by Deutsche Bank of it over [overlapping] option of convertible senior notes due 2011. We've used approximately $112 million of the net proceeds of that offering to repurchase concurrently with the closing of the offering, about 1.8 million outstanding shares of our common stock and privately-negotiated transactions at the closing price of the stock on October 24, 2006 of $62.17.

An additional 2.2 million shares of our outstanding common stock may be repurchased within the next 2 years under our existing stock repurchase program announced on October 23. As of October 30, following the repurchase of the 1.8 million shares I just mentioned, we had approximately 21.4 million shares of stock outstanding.

Finally, by way of prefatory remarks, while it is our policy not to comment on intra-trial clinical development matters, we do update our Triumph enrollment numbers because we've set a pattern of doing so since the inception of that clinical trial. The enrollment in the Triumph program, which stands for Treprostinil inhalation used in the management of hypertension so it's the inhaled Treprostinil program, the clinical trial enrollment has now approximately 135 patients; that's up from about 90 patients at the last conference call, and just to give you a statistical sense for that, it means we've added 50% as many patients in the last quarter as in the entire one year previous to the last quarter. So that trial is enrolling very nicely indeed.

With those prefatory remarks, I would now like to ask the operator kindly open the lines so that we could take questions from the participants.

[OPERATOR INSTRUCTIONS]. Jeff Meacham.

Hi actually this is Chris [Dematropolis]. I just wanted to offer my congratulations on a strong quarter.

Thank you Chris.

You're welcome; 1 question regarding the timing of any publications that may come from the CDC regarding the [staph] inquiry. Do you have any color on that?

Well, what we can clearly say is that we thought that we might be able to have provided an update at the time of the [Chest] Conference last week when many of the thoracic physicians get together. But with only about 40 reported cases over the past 2 years of all kinds of infections, the data set was quite limited and there was nothing conclusive that has of yet been determined that we could have announced.

The CDC is continuing its investigation in ground-negative infection in all earlier administered Prostacyclin, and definitely as soon as we get their results, we will share them as widely as appropriate to do so. But they've not committed to a specific date, and they've not told us when, if they do provide information, whether it be an interim report or a final report, so we're just going to all have to stand by on that with regards to something definitive from the CDC.

Great, and just this far in the marketplace, have you seen an impact on Remodulin prescriptions, either a patient being pulled off or it being an issue as far as putting new patients on?

We certainly, as the quarter's results show, we've seen no results through the third quarter results. We don't have anything to report with regard to the fourth quarter until we report those fourth quarter results after the beginning of the year. I can report that there is fairly wide awareness of the issue among prescribers. The great preponderance of the prescribers say it has no effect on their decision making process. This is something that they were always aware of, and finally I think that there are some prescribers that are going to be more cautious in putting a patient on a parenteral Remodulin until the air is fully cleared with the CDC report.

But I think to put everything in the proper context, patients who are being put on parenteral Remodulin are patients ordinarily in class 3 or class 4 of pulmonary hypertension, and the many benefits of Remodulin are available in the subcutaneous form of Remodulin as well, and indeed we continue to have growth quarter after quarter in subcutaneous Remodulin about as many patients growing on subcutaneous as on intravenous. And of course, the substance is not an issue with the subcutaneous Remodulin.

So first of all, that route is universally available. While it is true that there is the side effect of site pain that affects the large majority of the patients put on subcutaneous Remodulin, for many of those patients, that side effect goes away or greatly ameliorates over the course of 1 or 2 months as different pain amelioration procedures are put into play, or based on that patient's particular nature, they're just not so susceptible to the pain.

So many patients remain quite happy on subcutaneous Remodulin, and for the patients who then want to go on to intravenous Remodulin because of the site pain issue or perhaps their doctor thinks it's better to transition them from Flolan directly to IV Remodulin, I think everybody is just spending a little bit more time reminding patients of the importance of adhering to sterile control procedures with any parenteral drug and with regard to the reports of a ground-negative substance, you want to be especially careful with Remodulin. But I would hasten to add you're supposed to be careful with Flolan as well.

That's helpful; and then just 1 last question for Roger; how long would expect to be able to get data after you hit 220 patients in the Triumph study, to clean up the data and just be able to --.

I don't want to be impolite, but just because you've got a limited time, you've already asked 2 questions. We need to go on to the next question.

Sure.

Operator, the next question please.

Navdeep Jaikaria.

Hi, good morning Martine.

Good morning Navdeep.

Congratulations as well.

Thank you very much Navdeep.

I just wanted to quickly get the breakdown of revenue numbers, and also any changes in the inventory that we have seen regarding the Remodulin?

Great, I'm going to forward that question to John Ferrari, our CFO.

Morning; revenues were pretty consistent to second quarter, both on the Remodulin and on the [inaudible] medicine side. Inventories, the [inaudible] inventory was pretty minor and well within what we've seen in the previous 8 or 9 quarters.

What was the Remodulin sale?

It was 38.9.

Okay great, thanks.

Lucy Lu.

Hi, thank you. I have a question for John for improved margin; my understanding is for any sales beyond $25 million, you have to pay GSK 10% royalty. Looking at the cost of goods sold for this quarter is only 9.3%; I'm just wondering is that going to hold up going forward?

There are other things that we have to charge to the cost of goods. I mean one is it's not our cost of manufacturing, but if there are any changes in reserves for inventory and things along that nature, that has to go up to the cost of goods line.

We had a reduction in some of our reserves during the quarter; we had to have them just to reduce the amount slightly. So it's not an ongoing trend.

Okay, all right, thank you.

Matt Kaplan.

Hi good morning and congratulations on a good quarter.

Thanks so much.

Couple of questions; I got disconnected earlier with respect to, give us an update in terms of the Triumph study, and also give us an update if Roger could in terms of the oral program in oral Remodulin program that's ongoing now.

Sure, well the Triumph study is now set for 200 evaluable patients which we expect to enroll up to 220 patients to achieve the 200 evaluable patients providing a margin of 10% for drop out. It's the inclusion criteria for the patient to be on either Sildenafil or Bosantin monotherapy, and so that's another change from before.

And there are now 36 clinical trial centers involved in the program from Israel to California and all kinds of places in between. As mentioned during my introductory remarks, for now there are approximately 135 patients, and the level of excitement is quite high.

Roger, would you like to give an update on the oral?

Sure Martine, morning Matt. The oral study, there are 2 studies that we're conducting; 1 is a combination trial where we add on to [inaudible] ground therapy. That's a 16-week trial, 300 patients, randomized one-to-one with an interim efficacy plan of 150 patients.

The second set is the front-line monotherapy trial. It's a 12-week duration study, 150 patients, randomized two-to-one so the patients have a greater chance of getting active, and an interim at 90 patients. That study is run by Dr. David [Matola] and his team, and they've done a fabulous job; we have 50 centers that are planned; we have about 30 centers now that are currently active. In both trials, I can say they're enrolling; I'm going to hesitate to give numbers and just say that we have started both studies, and we are going to start those globally with Australian centers, as well as Mexican centers, coming on board shortly.

Thanks Roger.

Geoff Meacham:

Actually this is Chris again. I was just wondering if I could ask Roger than same question I asked earlier regarding you said 220 patients in the Triumph study; approximately how long after that could we see data.

Sure I'd be glad to answer that; it's hard to predict. It depends on when the last, where we are with database log. Sometimes that can be influenced by how rapidly we're putting in patients, and obviously, we're putting in a lot of patients at the current time, so it may be that we have a lot of data to close at the end of the study.

I think typically to lock the database from the last patient to finish the 12-week study would be 4 to 8 weeks before we'd announce the results, so it would be something in that time frame just generally speaking.

Okay thanks.

Joshua Schimmer.

Good morning, thanks for taking my questions. Can you give us an update on the number of inhaled Remodulin Triumph trial study sites that have yet to come on line or are in the process of either coming on line or still expanding their enrollment criteria to include Sildenafil patients?

Then can you also comment on the, whatever potential there may be for the oral Remodulin clinical trial to potentially cannibalize patients from the Triumph study? Thanks.

Hi Joshua; there's a, we're trying to veer away from getting into intra-trial details such as number of sites that are coming on line, but I can say that as mentioned before there will be 36 total centers, and one after another, they're kind of rolling into place with their approvals, and everyone wants to get some patients in the trial before the 220 patient count is reached. So I can't really give you any assurance that all 36 centers will actually even get all of their approvals done before we get to 220 patients, but hopefully they will, and in the worst case, if they don't, there will definitely be room for them to enroll patients in some sort of a follow-on open-label extension.

With regard to the oral study, there certainly is always the prospect of a patient that might otherwise go into the Triumph study, go into the oral study, or a patient that might otherwise go into the oral study, go into the Triumph study, but around here, we consider that a high-class problem because whether they come into our inhaled study or they come into the oral study, either way, they're enrolled to having a more convenient and hopefully more appropriate means of taking Prostacyclin and thereby affecting the progression of their disease.

Okay thanks.

[OPERATOR INSTRUCTIONS].

Matt Duffy.

Thanks for taking my question; given all the trials that are going on in PAH right now, it seems like it may be having some impact on patients [inaudible] on commercial drug. What are, as you look forward as Triumph and the oral trial is finishing the Company's trial is finished, when do you start to see that opening up again for more commercial drug?

That's a great question Matt. It's kind of my impression actually that the busiest period for competing oral, competing PAH studies is actually kind of fading a bit. For all, from all appearances, 2005 and 2006 was one of the busiest time periods that any of us have ever seen in terms of multiple overlapping studies, and it actually seems to be winding down a bit, with our studies being sort of kind of the peaks now that rise above the valley and all the other studies kind of moving on toward their completion.

There is, there's not a lot of wholly new ideas coming out there for large studies, so I think in answering your questions, there probably would be more of an open field in the 2007/2008 time period for more patients to go right onto commercial drug. But I would caution that by also pointing out that I know a lot of physicians are really interested in doing different types of combination studies, and now that this field is so mature, or it's getting more mature, it certainly would be possible to conceive that there could even be some kind of publicly-funded study in the coming years for a combination study.

But I think that the big picture here Matt, the forest, is that never before have there been so many patients treated for pulmonary hypertension, and I mean we're talking about clearly north of 10,000 patients being treated for pulmonary hypertension, and the vast majority of those patients, the disease, if it's not adequately halted by Tracleer, Sildenafil, or a combination of the 2, then the disease progresses and the patient needs to go on to a continuous form of Prostacyclin. And therefore, regardless of how many studies are going on, the prospects are extremely bright for parenteral Remodulin to continue to be able to grow its sales because of the large number of patients whose disease is progressing.

Very good, thank you for the update.

[OPERATOR INSTRUCTIONS].

And there are no questions at this time.

Well thank you very much operator, I'd like to thank everybody for joining us on this conference call. I hope everybody viewed this to be an early treat for Halloween, and whether you're going back to young ones or staying at home and giving out candy, I hope everybody has a really enjoyable evening tonight, and we look forward to seeing you at upcoming Healthcare conferences during the next 3 months.

Have a nice day.

Thank you for participating in today's United Therapeutic Corporation's Third Quarter Earnings Conference Call. This call will be available for replay beginning at 11:35 a.m. Eastern Standard Time today through 11:59 p.m. EST on Tuesday, November 7, 2006. The conference ID number for the replay is 8999020; again the conference ID number for the replay is 8999020. The number to dial for the replay is 1-800-642-1687, or 706-645-9291.

This concludes today's conference call. You may now disconnect.