United Therapeutics Corp (UTHR) 2008 Q3 法說會逐字稿

Good morning. My name is Whitney and I will be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation 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 represents 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 represent 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, Whitney, and good morning, everybody, to the United Therapeutics third-quarter 2008 quarterly conference call. It's nice to be with everybody on the phone this morning. I have joining me Dr. Roger Jeffs, our President and Chief Operating Officer, and Mr. John Ferrari, our Chief Financial Officer.

I am very pleased to report this morning that we have had another terrific quarter with revenues now running at a $300 million per year revenue run rate based on the quarter's $75 million in sales, and cash profits up nearly 40% from last year. It would be great to present these fantastic results in a better market environment, but I think what they do mean is that United will get a much larger bounce than most others as the market conditions normalize.

Like the saying goes, a rising tide lifts all boats, but I think we all would agree that the best boats benefit the most. And UT is looking like a really good boat indeed after this quarter's results. In fact, the good news maps over from the financial space into the clinical space. We are making tremendous progress with our TRIUMPH and FREEDOM clinical development projects.

Let's start with FREEDOM. The FREEDOM-M study fully enrolled during the past quarter and those results will be available early next year. The FREEDOM-C study, which had already fully enrolled will unblind in just about another couple of weeks. We're looking at the middle of November, November 15 plus or minus a couple of days or so either side of that.

And the TRIUMPH long-term results were just presented this week at the [Chess] conference showing absolutely stunning data in terms of one-year survival and lack of a need for additional medications after people have been on TRIUMPH inhaled Trepostinil for a year. I was just extremely pleased to see those results, them being about the best that I recall seeing for any therapy's long-term results.

I'd like to also remind everybody, especially in this economic environment that United Therapeutics has over [a third of $1 billion] in cash in the bank, no debt other than our convertible debentures that mature in 2011. And plus, we are throwing off as indicated by this quarter's financial results over $30 million of cash per quarter in what is really a recession proof business. So excellent news on the financial side, the clinical side, and the balance sheet.

In a nutshell, in terms of my introductory remarks, I'd like to say that I really think there is no mid-cap biotech stock but is in better shape for a larger rebound with the market than United. I'm sure that taking a look at these results you guys would feel the same way. And now Roger, John, and I are happy to take each of your individual questions.

Whitney, could you please open the lines up to investor questions?

(Operator Instructions) Eun Yang.

Thanks very much. You know, in the real world, we are told by some physicians that patients PAH patients who are taking combination oral drugs such as sildenafil with ERA, it's about 10% to 15%. But also, we are told that -- some of the physicians told us that they are not so sure if the combination therapy would be better than either one of the drugs. Could you comment on you -- what you are hearing and your experience?

Sure. Thank you very much for the question. What we are hearing is that the trend of the future is toward combination therapy and the other thing that we are hearing is that there is a tremendous diversity of both pathogenesis and course of disease among the PAH patients. When you take a look at the World Health Organization, categorization of PAH, you will see that there are well over a dozen different flavors of pulmonary arterial hypertension and when we hear about primary pulmonary hypertension and secondary to congenital heart disease and secondary to scleroderma, and those are just the big macro categories.

Then it gets PAH related to HIV and so on and so forth. So there are so many different aspects of pulmonary hypertension. We wish that we could really understand the pharmacogenomics of the disease and thereby be able to really identify, okay, this patient could use just a particular monotherapy or this patient needs such and such combo therapy. But frankly speaking, we are some decades away from that level of knowledge. And what we have right now is the results of studies such as the TRIUMPH study where when a patient was on a single oral drug and added the inhaled Trepostinil, they did a lot better. And now we see that those with the long-term TRIUMPH results that those benefits persist over time.

So the bottom line answer to your very good question is that PAH is too diverse of an indication to have a one-size-fits-all solution such as some people might like to have. And the fact of the matter is that with PAH there will be some patients who respond very well to a PD5 such as sildenafil or tadalafil There will be others who respond very well to an ETRA. There will be some who require both, some may respond very well to prostacyclin monotherapy. Others will need the prostacyclin together with the other drug.

There will be no one-size-fits-all solution. I can be very confident in predicting that to you.

Can I ask you a follow-up question on your comment?

Just one follow-up for each questioner, yes, please.

Sure. The reason why I was asking the question is that in the FREEDOM-C study, we are hearing that about 10% to 15% around that range of patients in the study actually had two drugs, the sildenafil and Tracleer in the background therapy. So the question is in your assumption, the patients who were on both background therapies, do you expect their improvement by adding oral modulin, do you think that that improvement, the magnitude of the improvement would be less than patients who are on one single background therapy?

It's a very interesting observation, but the fact is that we will be reporting our results pretty soon and we will see what statistically significant relations there are. I can tell you that from the overall view of most of the experts in the field, if a patient needs to be on two drugs -- in other words, their doctor found that they were not responding well to one and then they added a second drug, that that patient based on their six-minute walk distance is not in any different situation than a patient who is on just a single drug with the same six-minute walk distance.

Then finally, you can see the power of this argument when you take a look at the unfortunate survival situation with PAH. Despite the fact that there are multiple oral drugs available, the most quoted mean survival statistic for PAH from time of diagnosis is just over five years. So whether the patient is on one drug or two drugs does not really seem to make very much difference in terms of how they are going to do and I would not expect it to make much difference in our study.

Okay, thanks very much.

Martin Auster.

If there's one thing investors can count on, it's a Halloween treat from UT. So thanks again.

It is a great treat and thanks for that recognition, Martin.

I just had a quick question on -- going away from FREEDOM onto Trepostinil. Thinking about prelaunch activities, I was wondering if you could just refresh us again on the number of patients that have continued open label and TRIUMPH? And then also if you could talk a little bit about the early days of the Ventavis to Trepostinil switch study and kind of what size you think you can reach in there by the time of the PDUFA date?

Great, great. You know I'm going to ask Roger to address your questions, Martin, because he is responsible for the TRIUMPH program. Roger, could you address Martin's question?

Sure, I'm happy to. For the open label study, there were 206 patients that completed the double-blind study and chose to enter the open label study and we've actually just had a patient cross the three-year exposure period. So that's very encouraging. Given that exposure is up to three years, we now still have about 130 or so patients that remain in that study. As Martine mentioned in her opening, we've just presented the one-year data that showed very, very good results with 90% of patients that had reached a one-year time point, [meeting] no intensification of therapy.

So inhaled Trepostinil plus whatever the background therapy was at the time of entry into the double-blind study was sufficient to manage that patient clinically for one year, which I think is very encouraging in two ways. One, it is somewhat therapy-separating from our competitive inhaled product where the turnover rate is much higher than that. Secondly, it certainly speaks to a much more durable revenue stream for patients started on inhaled Trepostinil. So hopefully that answers that question.

With regard to the Ventavis switch study, we are in the very late stages of getting all of our centers IRB approved, budgets negotiated and finalized, and then delivering clinical trial material and devices to those centers. And it is our expectation that that study will start in the next month or so enrolling patients.

We are currently in the 20 or so centers that are interested in the study. We've negotiated budgets for that and I think we will try to enroll some more centers. There are many, many centers that are interested. It's just a matter of we've got a lot going on with the FREEDOM studies and other things. Just trying to accurately gauge who can best do this study, but certainly there is a great interest in terms of patient at these centers.

I think the other thing we've tried to do is target patients with a high number of Ventavis patients and then really turn those over very quickly to inhaled Trepostinil patients, so that at launch we have a commercial base of patients. And as well, it will produce data that I think will be meaningful.

We are doing quality-of-life measures. We are also doing six-minute walk investment outcomes and other efficacy outcome. It's our hope or expectation that patients not only will have an improved quality of life, but they will also have an improved outcome once they make the switch. Because we feel strongly that they can be more compliant with inhaled Trepostinil than they can even with the alternative therapies. So that's the status of those. Did you have any other questions?

Yes, could you indulge one quick follow-up?

Sure.

Just at the 20 or so centers that you've recruited for the switch study, what proportion of the Ventavis stations are you expecting roughly to participate?

Yes, that's a hard question to gauge. We have to wait for those patients to come back in for their assessment, which could be at three months or six months. They have to be counseled on the switching study. A lot of that is going on now, but I would say it would be reasonable to expect that we could try to get 50% of the patients at those centers. And these are the higher enrolled -- these are the centers with the higher numbers of Ventavis patients in the country.

Okay, I know we can count on you to do your best work, so thanks a lot.

Bret Holley.

Yes, thanks for taking the question. I just -- I wanted -- now that FREEDOM-C has wrapped up, I just wanted to know if you continued to expect approximately a 15% drop out rate? And can you review for us exactly how the last observation period forward analysis is going to work for those drop outs?

Roger?

Certainly, Brad. So we remain confident that the dropout rates will approximate 15%. We actually know what it is and it's very close to 15%. We are using very standard methodology for imputation of patients that dropped out prior to the end of the 16-week study. So for patients that dropped out either due to death, clinical worsening by the protocol definition, or transplant they are last rank carried forward.

Than any other patients that dropped out either due to an adverse event unrelated to worsening, death, or transplant, or from -- withdrew consent for other reasons is last ranked carried forward. So that is last observed outcome as a rank measure carried forward. So it's either worst rank for death, transplant, or worsening, or last rank for anything else in essence.

What we like about that is that let's say there is a disproportionate number of patients that dropped out early in the trial due to adverse events related to the one milligram dosage form. The net effect of that is they will have their last rank carried forward. They typically dropped out before the four-week assessment, so they're basically having no change carried forward. So it's a fairly small impact I think on the overall outcome, since the number of patients that dropped out due to adverse events turned out to be as low as it did.

So I think that's one thing to consider. The other thing to consider, we certainly have over enrolled the study. We have enrolled 354 patients with a sample size based on the 90% at (inaudible) was predicted to be -- 300 patients and then really to further from a statistical standard, to further provide emphasis and strength is the fact that given that we are going to file in these two studies, both the combination study and the monotherapy study together, the real statistical hurdle is '05. So if you consider the power at the '05 level, I think we would all agree that we are massively overpowered.

So in my opinion, any observed last rank effect from dropouts due to prostacyclin side effects, which certainly should occur more commonly in the active group, should have a de minimis impact on the overall outcome.

Great. Thanks, Roger.

Joseph Schwartz.

Thanks, actually I wanted to follow up on that question. It is encouraging that you said that it would be a de minimis impact because I was wondering given that there will be so much focus on topline summary, six-minute walk number, given that I thought that that might be understated due to dropouts who are scored less, does it then not make sense to break out the six-minute walk by those who were enrolled after the smaller pill size was available?

Yes, I think you are asking about how will we tease apart the data once we have it? So we won't have it as Martine said until mid-November plus or minus few days. So I think once we have the data, we will look at all kinds of things. We will look at subgroups, either what was their choice of background therapy is the first question they are asked about. If they were on Tracleer monotherapy or sildenafil monotherapy or on dual background therapy, how did those groups fare?

How did the result look based on baseline walk? How does the result look based on ideology? Then I think we would also look based on how does the result look based on dose achieved at the end of the 16-week study. And then we could even go further to say within patients that only got the lower dose tablets, were they able to achieve higher doses and achieve a better effect?

So those are all things we will look at. Again, given the fact that the average dropout was 15%, then some of those are going to be placebo patients as well, don't forget, and monthly clinical worsening, and you are showing no change. Somebody who's on background therapy and gets placebo, the net expectation would be that they also have no change. So you are basically getting a placebo-like effect, a very small number of patients which should be overwhelmed by a very good effect in patients that receive active drug and achieve an appreciable dose.

We will know in a few weeks. I think when we do report the data, however, we are only going to report the topline results and maybe some assessment of how we achieved on the secondary endpoints. We will try to tease apart things, but given the quickness which will bring the topline result to the market, we may not have it all teased out and certainly our investigators will want us to save some of the excitement for themselves when we present the data at next spring's ATS meeting.

So we will do what we can. We certainly will look at things, but again, we will know in a few weeks here.

Is it likely to be like last year, where we heard the results of some secondary endpoints but not others?

Yes, I think that's true. It would depend on when we lock the database, what we have in terms of -- the ability to lock on secondary endpoints.

How about the secondary endpoint of clinical worsening, patients who may have been on one of the orals but perhaps in a placebo arm needed to get another oral therapy?

Yes, we will report on clinical worsening. What we will probably say for that is whether or not for secondary endpoints were results less than '05 or not. We won't give a specific p value. I would say very similar to TRIUMPH, if you look back and see what we reported for TRIUMPH, it would be very similar to that.

All right, thank you.

Biren Amin.

Yes, thanks for taking my question. If I heard you correctly, you stated that the FREEDOM-C trials will be presented at ATS next year and I believe the deadline is today. So was there a placeholder to reserve a spot for the FREEDOM-C data?

That's correct, Biren, so it's just a simple placeholder abstract without any data in it.

Okay, if I could have one follow-up, I noticed in your Q for the FREEDOM-M trail you have enrolled 170 patients. Where will you top off that considering you will stop the study tomorrow?

I think we have enrolled 169 as of yesterday. Enrollment closes Friday, so we will be very close to 170. We may have a couple more patients come in. But I think again, that's also very good news in terms of the robustness of that enrollment. The target enrollment for that study with 90% power at the '05 level was 150 patients and the fact that we put in 20 more patients is a good thing. So we will finish tomorrow in terms of shutting enrollment down at the centers, which predicts that we will have the -- be able to announce the monotherapy results at the end of March.

Geoffrey Meacham.

Thanks for the question. Now that you guys are nearing the end of FREEDOM-C to the extent you can comment, I'm wondering if you can share any baseline characteristics just with respect to class two patients or six-minute walk or any kind of generalizations regarding the background therapy breakout? And then I have a follow-up.

We can't really get into any details this close to the un-blinding, but what I can tell you because it is spoken about by physicians is that the overwhelming vast majority of the patients who exit the study decide to remain on the oral Trepostinil drug or to go on it if they were on placebo previously. So all we know is that the study is going extremely well and hopes are high because as I mentioned at the earlier part of the call, patients decline pretty rapidly and the number one cause of us losing patients is due to patient demise.

Patients rarely leave Remodulin for other therapies, but more frequently they unfortunately pass away on our therapy and the fact of the matter is that with five-year mean survival, this condition is a rapidly progressing condition. We do better than we have done in the past because of the multiple oral drugs and because of Trepostinil and stuff like that.

But it's a bad condition and the fact of the matter is that the overwhelming majority of the patients in our studies have opted to continue to go into the open label drug staying on the same drug. That's a good sign that they or their physician feel that it's both tolerable and working well for them.

But one other thing I'd like to mention in answer to your question and the details will come in just a couple weeks or so time, so I'm sure you can hold out till then. But one thing I'd like to -- that your question brings to mind, Geoff, is that people I think sometimes lose sight of the fact that the oral drug is not necessary for the continued growth of our revenues. The oral drug is something which is transformative for the company from a company which can knock out several hundred million dollars a year on revenue, which is something we can do with Remodulin and inhaled Trepostinil to a company that can crest through a blockbuster level of revenues, which is something which is possible with oral Trepostinil in light of the 20,000 patients who have pulmonary hypertension, the vast majority of whom are not on prostacyclin therapy because they are not yet sick enough and it is complicated to give.

So the way that we look at the un-blinding is really as very much of an upside event and in fact everything that we've heard from the physicians involved in the trial and from the patients is that they expect it to be an upside event. It's a great drug. You know the data on the pharmacokinetics matches the parenteral very well.

So everything is looking very positive on the oral, but the main thing to keep in mind is that the business success of United Therapeutics at prices even higher than today are fully justified just with the parenteral and the inhaled drug. And the oral is just kind of the ultimate sweet icing on the cake.

Thanks for that, Martine. Just a quick follow-up on TRIUMPH. For the extension studies, can you comment on your plans for filing this with FDA to supplement your current filing for inhaled? Thanks.

I'm going to have to defer that question to Roger. I'm not sure what the regulatory strategy would be on that project.

Yes, sure. Thanks for the question, Jeff. So what happens with the extension studies it really principally for filing support, it provides long-term safety. So we have in fact -- are just submitting our 120-day safety update which has to be provided 120 days in advance of the action date. So that's going in I think tomorrow. So the FDA doesn't really provide a lot of support for open label data. They feel there's a bias in terms of what that data can provide and there's no comparator groups, so it doesn't really speak to what the long-term benefits are in their mind versus nothing.

So what it does show I think is the drug is very durable in its benefits and it does provide a benefit in patients. I think in one year it was 90% of patients where alive and then 90% of patients required no other therapy. The other abstract that we are putting together right now is actually the two-year exposure data for next year's ATS meeting as well.

So we will have -- we will continue these studies which we will continue to provide market support for the long-term use of inhaled Trepostinil.

Jim Birchenough.

Thanks for slipping me in. I had a question on the TRIUMPH data and the ongoing regulatory review. We just saw at the (inaudible) panel there was interest on the part of FDA imbedding the six-minute walk and there was a cardio renal member that was particularly active in his opinion around the six-minute walk as an endpoint. So just going forward, in the past you have said you don't think you're going to need a panel. Do you still feel confident in that? And just as a contingency, are you planning for going to a panel, just to be prepared? And if not, why not?

We don't feel we are going to need a panel. We're not planning to go to a panel. In this particular indication, six-minute walk distance is a clear gold standard endpoint measurement. This is the third formulation of a drug that has an outstanding safety and efficacy record and so for all of these reasons, I think the odds for a panel are vanishingly small.

Just a follow-up, Martine, is that to say -- that's the feedback you're getting from FDA as well?

I don't -- we have never gotten any contrary feedback from the FDA at all. So everything that I said is 100% consistent with everything from the FDA.

Okay, thanks for taking questions.

Sure thing. Thank you, everybody, for participating in our third-quarter conference call. And as I think you could tell from the tenor of the questions, it's been a great quarter. Everybody is pleased and revenues and cash profits are up markedly from a year previously. The clinical data is tremendously exciting.

Naturally enough, people are always nervous when you get within two weeks of an unblinding, but the unblinding is for the drug after the drug that we will next have approved and that unblinding is one of two studies and that unblinding -- the data that we do know, namely the percentage of the patients who've gone into the open label continuation is extremely high.

And also speaking of extremely high statistics, the percentage of the patients who have done well long-term on TRIUMPH in terms of six-minute walk, in terms of survival, in terms of not needing additional drugs also extremely high.

With regard to finances, we just had one question kind of hit on that, the company's cash balances are extremely strong and we are busy. We like being busy. We've got a fantastic company and it's a great honor for us to have the opportunity to develop these medications for people in the pulmonary hypertension community. We look forward to all of your support in the months ahead, continuing to -- the growth trajectory of United Therapeutics is a fantastic company and the growth trajectory of our prostacyclin franchise as the leading sequence of drugs from parenteral both sub queue and IV, inhaled.

And ultimately the Holy Grail, oral prostacyclin as the preferred path of treatment for patients with pulmonary hypertension. Thanks so much and have a great day.

Thank you for participating in today's United Therapeutics Corporation third-quarter earnings conference call. This call will be available for replay beginning at 11.30 a.m. Eastern Standard Time today through 11.59 p.m. Eastern Standard Time on Thursday, November 6, 2008. The conference ID number for the replay is 67213939. The number to dial for the replay is 1-800-642-1687 or 706-645-9291. You may now disconnect.