United Therapeutics Corp (UTHR) 2006 Q4 法說會逐字稿

Good morning. My name is Matthew, and I will be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 risk 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 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 very much, operator. And good morning, everyone. I'm pleased to be joined this morning by Dr. Roger Jeffs, who is our President and Chief Operating Officer, and also John Ferrari, who is our Chief Financial Officer. We're pleased to report that United Therapeutics revenues for the year ended December 31st, 2006, totaled $159.6 million, and we're especially proud to have achieved our goal of approximately 40% or greater revenue growth for the fourth straight year. Our net income for the year was was $74 million or $3.23 per basic share. Now, today, we're announcing not only our fiscal year 2006 results but also our fourth quarter 2006 results. So on that point, I'd like to mention that for the fourth quarter, revenues grew to $45.8 million as compared to $29.6 million in the fourth quarter of 2005. This represents an increase of 55%, and these strong fourth quarter Remodulin results demonstrate convincingly the growing confidence of doctors, patients and payers in the safety and efficacy of our therapy.

I'd like to give special recognition to the team of individuals both leading physicians such as Dr. Rubin and Dr. [Barth], as well as leading members of our clinical, development and statistics team, such as Carl Arneson, for their contribution to the publication that came out at the beginning of the fourth quarter reporting on four year survival with Remodulin, showing that Remodulin made a very significant improvement in survival of patients with pulmonary hypertension compared to the NIH Registry. And surely I believe that that four year survival data is the single biggest factor behind the very nice level of growth that we see in Remodulin in the fourth quarter, up 55% from the matching quarter last year.

We've often said that in order to really achieve our goals robustly, we need to really fire on two key thrusters, which are important for a growing biotechnology Company, such as ourselves. One of them is to demonstrate continued and robust growth in our core business, Remodulin, and we've surely done that with the fourth straight year of 40% revenue growth. And the second thruster to show robust growth in our clinical trial enrollment. And on that note, I'm pleased to report that as of now, we have 175 patients enrolled in the TRIUMPH Study, treprostinil inhalation use in the management of pulmonary hypertension. And we have 70 patients enrolled in the FREEDOM Trial of oral Remodulin. 52 patients in the portion of FREEDOM, which is a combination therapy, in the trial that's a combination therapy. And then in the very innovative oral Remodulin monotherapy trial, we have 20 patients enrolled. And both of those enrollment figures are significant percentages of the way toward the interim checkpoints.

So we have indeed ended this quarter and this year firing on both of our thrusters; Robust revenue growth, robust clinical trial enrollment. And I'd now like to open up the conference call to your questions, which could be addressed to either myself, Dr. Jeffs, or John Ferrari. Operator? Could you please open the line to any questions?

Navdeep Jaikaria, Rodman & Renshaw.

Martine, can you tell us when was the last price increase you took?

I'd like to -- thanks for the question. And John Ferrari is the person at United Therapeutics who is in charge of managing distributor and payment matters. So I'd like John to give you a nice precise question to that -- answer to that.

Our only price increase since we've launched, occurred on July 1st of this year, of 2006. And it was, well, approximately 3.5%, which represented a cost of living increase.

Great. And can you also tell me the exact Remodulin sales for the quarter, please? For the fourth quarter?

Exact Remodulin sales were approximately $153 million.

For the year. But for the quarter?

For the quarter, they were about 44.

Thanks. Thank you. I'll get back in the queue.

Martin Auster, GLG Partners.

Thanks for coming on the call, and nice to have a question from GLG.

Sure thing. We're always blown away by the strength and progress you guys make on a quarterly basis. I was wondering if you could just update us on any plans to seek partners to access kind of the rest of the world beyond the U.S. and E.U. with Remodulin? And also any updates about reimbursement decisions coming through in Europe on Remodulin in the last quarter? Thanks.

Sure. Dr. Jeffs is the person at United Therapeutics who is in charge of international development of partnerships for Remodulin. And so Martin, if it's okay with you, I'd like to ask Roger to address your question.

Sure, Martine. Good morning, Martin. Well, actually, just this morning, we've signed a letter of intent with a company in Japan to be our Japanese distribution partner with full distribution rights in Japan. So, that is an area in a country in which we are going to actively seek both approval and commercialization of Remodulin in its Parenteral forms. As far as Europe goes, I think, Martin, most of it is what we've done historically [inaudible] remains the same, and -- I'll wait. Sorry about the call here. What we've done historically remains the same. That is, that we still use a series of distribution partners in various countries to distribute the product throughout Europe and rest of world, and Japan is now a further extension of that. The important thing in Europe, I think, is the status of the type II variation for intravenous approval. That remains under active review with France, and we can't predict when that would be approved. But we certainly would hope that we would have intravenous Remodulin approved for sale in Europe some time this year. But then again, we would have to go through both local license and pricing approvals before formal launch of intravenous Remodulin. I think the fact that it's the same vialed product will help speed that once we have approval. But again, there still will be a significant lagging time before intravenous is fully available in a promotional sense. Having said that, certainly where subcutaneous Remodulin is available, patients can get intravenous Remodulin on a named patient basis. And we do have countries that are prescribing both subcutaneous and intravenous Remodulin on named patient basis currently. Hopefully that answers your question, Martin.

Yes. Thanks, Roger, and congratulations again.

Jennifer Chao, Deutsche Bank.

Great. Thanks for taking the question, and congratulations on a great quarter and progress throughout the year. First question is just with respect to the sales this quarter, Martine, I was wondering if you could maybe just give us a little granularity as to the breakdown between subcutaneous and intravenous Remodulin. Also, whether or not the strength this quarter was coming more from new patient starts, or if we're seeing this also from Flolan transition patients. And then the second question wanted to ask was just with respect to the CDC report, obviously, much anticipated by the Street. We understand that that report looked like it was about ready to publish last week, and for whatever reason, we did not see it. Can you just help us understand, are more sites being considered for the final first publication of that report? Or is it just really a matter of logistics, in terms of getting that first report out there?

Well, thanks so much, Jenn. It's always good to hear you on the phone. And I'm going to thank you again for the outstanding coverage that you provide of this space. With regard to your first question, we can say that to a rough order of approximation, about half of our revenues are from [subcu] and about half are from IV. And also to a rough order of approximation, about half of the patients are transition, Flolan transition patients, and about half of them are ones who are unable to manage their disease on Iloprost or oral drugs. So it's really a very nicely balanced mix. And as mentioned, the strong revenue growth, I think was really mostly attributable to the awareness throughout the quarter done by our excellent commercialization team of the peer-reviewed publication, the European Respiratory Journal, on long-term outcomes, four year survival data for Remodulin, which was a first.

With regard to the second question, I'm sure that you'll appreciate that it would be not appropriate for us to comment in any way, shape, or form, on the internal deliberations of the CDC or any government agency. And we just want to be not only a great corporate citizen, but a great biotech citizen. So we just basically continue to focus on promoting best home use and best clinical practices, with regard to the use of Remodulin, best sterile control procedures, and we await the government to do whatever they decide to do.

Okay, thanks a lot.

Kia Khaleghpour, Leerink Swann.

Thank you for taking the questions. I just wanted to know if you could provide more color on the tax benefit going forward?

Sure. That's a very good good question, and one that I'm sure many of our other listeners are interested in, as well. The individual at United Therapeutics responsible for managing our Ernst & Young relationship, which ultimately determines what level of taxes are to be accounted for, is John Ferrari, our Chief Financial Officer. And so John, could I ask you to kindly respond to the Leerink question?

I'd be more than happy to. The tax benefit that we recognized in the last two years was a result of our reduction of our valuation reserve that we have against our deferred tax assets. The majority of our tax assets that we have are NOL and business credit-related. And we released the majority of our valuation allowance that was remaining this year, based on our past growth and taking a look at a projection of taxable income and book income for the future. So we still have about $6.5 million of assets that are reserved, but those are of a special nature which we need a special type of income, like capital gains, in order to offset some capital losses. And we keep those reserved right now, because we don't think we would be able to -- they may not be easily recognized -- realized in the future. Going forward, since we reduced our valuation allowance for all our NOL s and business credits, I don't anticipate that we'll have very much in the way of releasing any future valuation reserves. So what I would expect that you'll see, is we'll recognize some tax expense with a reduction, of course, upon reduction for most part of our deferred tax assets.

Thank you very much.

Matt Kaplan, Punk, Ziegel.

Thanks for taking my call and congratulations on a great quarter.

Sure, Matt. Thanks for calling in, and congratulations on Punk's continued coverage of this space with your specialty conferences.

Thanks. Could you give us a heads -- give us some more information on the inventory levels at distributors, and how that played out during the quarter? And then also give us some additional color on data that we're expecting at upcoming scientific meetings during 2007?

Great. Well let's -- how about if we split that question into two parts, Matt, and have John Ferrari, who manages distributor relations, provide some comment on the inventory level question. And then have Dr. Jeffs, who is also in charge of clinical operations at United Therapeutics, to provide you some insight in terms of what new publications may be coming up over the next 12 months or so at major medical conferences. John, could you go first?

Yes, be happy to. We did -- the inventory levels reported to us by our distributors did increase during the quarter. However, when we take a look at inventory levels in terms of patient days, that number is well within expectations on current patient demand and anticipated future use.

Thanks, John. Roger, could you give us kind of a heads up in terms of what new papers might be forthcoming?

Yes, I'd be happy to, Martine. Good morning, Matt.

Good morning.

I think , and Martine touched on one of the biggest things in 2006 for the Company, which was the European Respiratory Journal's publication of the long-term outcome data showing very handsome four year survival dates with Remodulin. I think two other papers that were recently published that are important to the commercialization aspects of the therapy, as well as the clinical aspects, are one, in the Journal of Cardiovascular Pharmacology earlier this year, we've recently published the rapid switch data, that shows rapid switching from Intravenous Epoprostenol to Intravenous Treprostinil, and it shows this with instantaneous switching at the cassette. So that study reports for the first time on 12 patients that were simply and conveniently switched nearly in an outpatient setting by just a medication cassette switch from Flolan to Remodulin, and then with subsequent dose titration every 12 week period.

The other study that came out in the Fall of '06 was published in the Journal of Vascular Access, and that showed intravenous Treprostinil could be infused at very low infusion rates via a miniaturized pump. And again, that's one of the benefits of Treprostinil, is its physical chemical properties allow it to be concentrated significantly, so that it can be given in very, very slow infusion rates via miniaturized pump. So I think this data in aggregate shows that you can give the drug by small pump, so it's a convenient way to give the drug, and without ice pack. You can rapidly switch patients from Flolan therapy to Remodulin therapy, if patients and clinicians so desire, And then if done, if patients remain on Treprostinil, their long-term outcome looks to be as good as any drug in the class. So I think those three things are the things that we move into 2007 with such good footing on.

As far as what we're going to do in 2007 that hasn't been published, sort of the final piece in the cog is the Phase IV data that showed the successful prevention of clinical deterioration in patients switched from Epoprostenol to Treprostinil. That's going to be published in Chest very soon, and obviously it's in our package insert already. The other things that will happen now as we begin to focus our research attention to oral Remodulin, as well as inhaled Remodulin, is publications and abstracts related to those two therapies. There's been recent publications for inhaled Remodulin in JACC that are very impressive and I think everybody is aware of that data. At ATS for oral Remodulin, we will have three abstracts. Two that show an absence of drug interaction with the two main oral therapies, one being Revatio and the other being Tracleer. So I think we've established an absence of drug interaction, which is an important component of a combination therapy.

The other thing that we will show for the first time that I think there will be a lot of excitement around, is this Phase I human volunteer pharmacokinetic data, which really shows the pharmacokinetic profile of the sustained release construct that we formulated. And it will show you basically zero order release rates over an extended period of time, six to ten hours depending on if it's with food or without food, and it will make comparisons back to immediate release formulation. So that data is exciting. We're very happy to be publish -- showing that at ATS for the first time. And I think it will give a lot of fundamental foundation to the clinical trials that we're doing in terms of twice a day dosing with oral Remodulin. So I think, Matt, those are the -- what I'd call the highlights of where we've been and where we're headed.

And any additional data expected on the inhaled?

I don't have any other abstracts to report to you at this time. But the big, I think, news item that everybody is looking forward to, would be the unblinding of the inhaled trial. And with 175 patients enrolled and enrollment continuing to accelerate, we're very, very close to the point of being able to unblind that trial and announce the results map.

Great. Thank you.

Geoff Meacham, JPMorgan.

I also want to offer my congratulations, as well, for the quarter.

Thanks, Jeff. Good to hear you this morning. How is it going?

Good, thanks. Two questions for you. One, on the sepsis issue. Since it first came to light this fall, just wanted to sort of ask what you guys are seeing qualitatively, in terms of new starts for maybe high volume centers, and those who are not as experienced with Remodulin. And then the second question is on TRIUMPH enrollment. And also wanted to confirm that all the IRBs globally have been activated, and where you saw the majority of the enrollment growth since you reported in mid December.

Sure. Well, with regard to the first question, Geoff, we've seen continued growth in Remodulin across all centers, and across both the U.S. And Europe, across both expert centers and the ones which are newer to treating patients with pulmonary arterial hypertension. And I think that the forest here that everybody sees is that for a patient that needs infused prostacyclin, the most obvious sort of first choice that you or I or most anybody would want to go for, would be subcutaneous Remodulin, because it's less invasive. It's not a permanent indwelling catheter. It's something that you could take in and out. It's something that takes the least amount of time to prepare and what not. But of course, for the patients who have site pain as a result of that, which is a significant number of patients, but far from all the patients, then their next choices in terms of a parenteral drug are the intravenous Remodulin or the intravenous Flolan.

But there again, I think most patients, they are aware that they have a life threatening illness. They are aware that they are looking at single-digit years of mean expected survival. And most people very naturally, again, like you and I, they would want the therapy that is the one that gives them the best quality of life, something that doesn't take an undue amount of their time, something which involves a less observable medicalization of themselves than a more observable one. And IV Remodulin is great for all of those reasons. So of course, one has to be very concerned about avoiding anything that can give rise to septicemia. And we continue to make the extra effort to educate everybody involved with the parenteral prostacyclin process, about the importance of adhering to the best possible procedures. And we're continuing to work with all of the people in the PAH community to improve those procedures to do everything we can to minimize the risk. But as with many things in life, there's almost nothing without risk. And when one is managing a very serious illness like pulmonary hypertension, people value being as free as they can be, and as demedicalized as they can be each and every day. And that's really why we look at Remodulin as giving so much freedom to patients, requiring parenteral prostacyclin.

With regard to the question that you had on TRIUMPH, I can't say off the top of my head if we have every single IRB in or not, because we're now up to about 36 or so centers who are participating in the inhaled Treprostinil trial in a number of European countries and throughout the United States. So I can't say if we've got every single IRB in. But I can say this, that we continued to get patients enrolled in TRIUMPH from the very first centers, when we're only at 12 centers, to the most recent centers, places for example, like Israel, which is a recently -- a country with recently enrolled centers. So we're getting enrollment in TRIUMPH across-the-board. And we're actually going the extra mile to try to wrap up the enrollment in TRIUMPH as rapidly as possible, because of course, we'd really like to report the results before we enter into the fall season, when there's so many important medical conferences, including the biggest one, the American Heart Association. So we're doing some extra incentives to wrap up the enrollment on that. But I would say that everybody from Europe to the U.S., from the old to the new, are all right now adding new patients into inhaled Treprostinil.

Thanks a lot, Martine. Very helpful.

Operator, I think we have time for two more questions.

Liana Moussatos, Pacific Growth Equities.

The sepsis issue with IV Remodulin, are you anticipating any impact in Q1 and going forward on sales? Or -- and do you think that it's really a matter of patient hygiene with the sepsis issue?

We are not anticipating any impact. The concern with sepsis arose during, October -- I think September, even August-September time frame. And as you see, we did not see any effect in the fourth quarter and we're not expecting to see any effect from that. And the reason for that, is because the issue is already something which is described in our package insert, in terms of there being a risk of sepsis with this illness -- with this treatment. So it's nothing which is at all unknown. And we do believe that while the risk of sepsis is never going to go to zero, so long as you have any therapy that involves an indwelling catheter, we can -- everybody, go the extra mile to drive the risk as absolutely as low as possible by being vigilant in maintaining the best sterile control procedures. And that's not a small thing. That's actually a big thing. I mean, for all of us on the phone who, thank God, are healthy and not requiring an indwelling catheter, it's almost impossible to imagine what it would be like to have to maintain sterile control procedures in a portions of one's own household, and sterilely refill a vial and clean a catheter, and do all of these things day in, day out, week in, week out, when there's dogs, cats, kids and visitors, and then go on the road. It's a huge burden. And we all owe like a huge debt of admiration to the patients and the patient's families who put up with this burden. And we're committed at United Therapeutics to doing everything we can to make Remodulin ever more safer and easier to use for all the patients.

Thank you very much.

Sure, thank you. Next question, please?

Kia Khaleghpour, Leerink Swann.

Just wanted to know if you could provide us with any financial guidance for 2007?

Great question. Everybody is always interested financial guidance. We have established a long track record of not providing financial guidance, because of the dynamism that there is in the pulmonary hypertension market, with multiple players and multiple treatments and a rapidly growing market. So things are growing so rapidly, it's just really not possible for us to provide guidance that we would feel comfortable having people make investment decisions on. While past performance is no guarantee of future performance, we can, nevertheless, draw your attention to the fact that I'm really proud of the fact that our team has produced 40% revenue growth in four straight years. And we do our best to provide a predictable financial basis for investors to invest in UT. We can never guarantee or even predict what the future will be. But we've shown a tremendous great track record. And along with that revenue growth, there has been now over 12 quarters of profitability. So we try to run a tight ship, tight budget discipline. But we also -- expenses grow as revenues grow. And revenues have been growing very nicely. And that's the best kind of boundary and color I can give to you on the guidance question. Hopefully that will be real helpful.

Thank you very much.

Sure. Well, I'd like to thank everybody for participating in our fourth quarter and year-end 2006 conference call. I want to thank all the people who called in. You guys covered every single topic on our checklist that we thought would be covered. So it's great to be -- have a group of investors and analysts that are so aware of the Company. It makes us feel that we're really talking with people that share our same passion for developing the best possible results for our patients, for our caregivers, and for our shareholders. So thank you very much for being part of the extended UniTher family, and have a great week.

Thank you for participating in today's United Therapeutics Corporation fourth quarter earnings conference call. This call will be available for replay beginning at 11:35 a.m. Eastern today, through 11:59 p.m. Eastern on Tuesday, February 27th, 2007. The conference ID number for the replay is 8783337. Again, the conference ID number for the replay is 8783337. The number to dial for the replay is 1-800-642-1687 or 706-645-9291.