United Therapeutics Corp (UTHR) 2011 Q1 法說會逐字稿

Good morning, my name is Tyrone, I'll be your conference operator today. At this time I would like to welcome everyone to United Therapeutics Corporation First Quarter 2011 Earnings Conference Call. All lines have been placed on mute, to prevent any background noise. After the speaker remarks, there will be a question and answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference is being recorded. Remarks today concerning United Therapeutics will include forward-looking statements, which represent United Therapeutics expectations or belief 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. Hope all of you are starting off to a nice chill day. I'm pleased to be joined this morning by two of our top colleagues here at United Therapeutics.

Roger Jeffs, our President and Chief Operating Officer is also responsible for all of our Treprostinil clinical development programs, as well as our oncology and our regenerative medicine programs, and will be happy to answer any questions in those areas.

And John Ferrari, our Chief Financial Officer is also responsible for all of our business operations, and will be pleased to answer any questions relating to activities with our distributors and our revenue collection processes.

As noted in the printed press release, I'm really pleased that we are now cruising at two thirds of $1 billion a year revenue run rate, up almost 30% from a year ago. I got to tell you, we pinch ourselves on that, just being a little bit more than 10 years old, and already up at two-thirds of a billion dollars a year.

Several of you that I've met with over the past year or two, three, have asked us, why can't you guys provide us some guidance like most other companies do? And we hesitated for the reason as we explained to everybody that we were just launching two new products.

And it was really so unclear what the revenue arc would be of those products, that if we gave you guidance we would feel bad because you'd be relying on something that we didn't feel was very stable or solid. But now, we're over a year into the launch of Tyvaso and Adcirca, and we've got a really good handle on the product mix of Remodulin, Tyvaso and Adcirca.

So keeping to our word, we've now got that comfort and we're able to provide top line guidance for our products for three years going out -- basically, all the way up until the point in time when we feel relatively confident that oral Treprostinil will then be added into the mix. So our guidance is $750 million for 2011, $875 million for 2012, and $1 billion in revenues for 2013. In each case, plus or minus a margin of 5%.

Again, let me emphasize, while we are as excited and positive as one could be in a blinded trial, that is a fourth method of delivery and an extremely well constructed pair of clinical trials, as positive and excited as could be about oral Treprostinil. Just to be solid and conservative, as is our nature, that $1 billion revenue forecast for 2013 does not even include any oral Treprostinil revenues, although we certainly could have some by 2013.

So, hopefully this is responsive to what a lot of you have been asking about. We've never providence in our entire history, so we are -- clearly put a lot of -- did a lot of pencil sharpening and care into issuing this guidance. We feel confident about it.

And let me now open up the telephone lines for any questions.

(Operator Instructions)

Our first question is from Phil Nadeau of Cowen and Company. Your line is open.

Good morning. Thanks for taking my question.

Good morning, Phil.

My questions on Tyvaso, this is the second quarter in a row in which sales have been relatively flat. I was wondering if you could give us some additional information on why that was the case in particular, are you still adding patients and I guess what kind of acceleration do you see in that next few quarters?

Sure, Phil. We see a rate of acceleration that's going to definitely allow us to hit that $750 million target for 2011, the -- you can understand the numbers a bit more by taking a couple of things into mind. First of all, the rate of the patients coming on and off Tyvaso is lumpy. It's just too small of an overall patient population to have a predictable run rate of patients coming on it on a quarter to quarter basis, although annually we can see the forest.

So, if I zoom in and say well, let's say what really happened quarter to quarter. Third quarter was a -- was an off the charts jump in revenues from the second quarter and it wasn't anything magical that we did. In fact, we did nothing different than we were doing in the second quarter.

It's just that's sort of like the normal lumpiness of it by random chance a lot of patients were put on drugs, and the distributors saw that [company] coming and loaded up their orders.

In the fourth quarter, ordinarily we might have expected a sequential decline in our revenues because of the out of the normal realm leap from the third quarter -- second quarter to the third quarter, but instead what we saw in the fourth quarter was basically a leveling off. And this was actually in our view because there was an increased level of purchases on the part of the distributors in anticipation of price increase in the fourth quarter.

Then, in the fourth -- in the first quarter of this year, the -- what our distributors are telling us and what the doctors are telling us and what the reps are telling me, is that we have had probably one of the worst winters in recent memory during the first quarter.

And a lot of people that were thinking about making what is oftentimes a overnight trip to the hospital where they can get Tyvaso have deferred it, and remained a little bit longer on their oral medications -- most of them being on a combination PD5 and ETRA and decided to push off their doctor visits until the spring.

Well, lo and behold the early results until April are very confirmatory. And, in fact, I can share with you that the number of prescription referrals for April is the highest we have ever had in any month since the launch of Tyvaso.

So again, it's a little bit annoying, of course, for me as CEO to have the lumpiness of revenues, but really it's sort of a high class problems because the overall revenues just continue to grow and if it's going to grow lumpy, well, I'll take lumpy growth over no growth.

So we remain really confident, Phil, that we will be able to round out the revenues on Tyvaso for the balance of the three quarters and end up hitting the $750 million total product mix with Adcirca, Tyvaso and Remodulin by the end of the year.

Okay, that's very helpful. Thank you.

Sure, Phil.

Thank you, sir. Our next question is from Eun Yang of Jefferies. Your line is open, sir.

Thank you, very much. Martine, could you give us an update on Tyvaso's strategy in Europe? I think you guys were talking about additional trial there and could you give us an update on that?

Yes, thanks a lot. What I can tell you is that the trial won't start this year. So the soonest the trial would be able to start would be 2012.

At the moment, we're not able to reach a consensus with the European authorities in terms of what would be the trial design that would make them optimally happy, but would also make the most sense for us given that the lion's share -- even I would say the elephant's share, of revenues for the next few years on Tyvaso are going to come from the United States.

So, what we've done is done sort of a compromised strategy. We very much like to make our medicines available to people. Its -- just amazingly heartwarming when we get these emails from patients saying that Tyvaso has transformed their life, given them the energy to do everything, moved them from bedridden to work or to school. So, we want to make that available in Europe as well.

So what we've done is we've reached agreement with our largest European distributor, [Fairair] who operates in a number of countries in Europe, that they would be allowed to make Tyvaso available on what's called a named patient basis.

This named patient basis is an avenue to a drug being reimbursed before its approved that's possible in Europe but impossible in the united states, so it just exists in Europe. And it means that you cannot promote your drug, you cannot market your drug. You only have to respond to doctor requests for your drug.

But that is not as bad a thing as it might sound like, because again of a uniqueness in the European pulmonary hypertension networks compared to the US.

In Europe, in almost all countries, certainly in all the most important countries the governments have probably very wisely set up what they call PAH expert referral centers. And if you're a patient in the rural area or anywhere in the country and you have PAH, your local doctor cannot prescribe even an ETRA or a PD5 for you.

Based on your diagnosis, you have to be referred to an expert PAH center and have them prescribe it for you, of which there are basically just a handful. I think there's like maybe five in France, maybe 10 in Spain, half dozen or so in England, something like that.

So that's totally different in the US where any doctor fresh out of medical school who had a patient that he thought -- or she thought, had PAH could even prescribe Flolan to that patient. A totally different situation in Europe.

So there's a handful of doctors in each country who are the PAH prescribers. Those handful of doctors are of course also key opinion leaders, they are attendees at all of the big medical conferences. They're participants in the world symposia on PAH. They know all about Tyvaso. So, we expect that those doctors will request Tyvaso of Fairair on the named patient basis, and in that way, our revenues in the EU from Tyvaso can commit.

Great, thank you.

You're welcome.

Thank you. Our next question is from Lucy Lu of Citigroup. Your line is open.

Great, thank you very much. Good morning.

Hi, Lucy. Haven't talked to you for a while, nice to hear your voice.

Hi, Martine. I was wondering if you could just give a little bit more color behind the revenue guidance that you gave for the next three years. I assume these are just for the United States. Can you just talk about what kind of growth rate you actually expect for IV subcu versus Tyvaso? And I --

Yes, very good question, Lucy. So first, to clarify these are actually worldwide revenue guidance, they're not just for the US. They are only guidance figures with regard to our pharmaceutical segment. They don't include any revenue from Medicomp and -- or just for anybody that may not be aware, we sold our telemedicine segment during the first quarter of this year.

So going forward we are -- a pure play in pharmaceuticals and basically in pulmonary hypertension for the next few years. So, just a little bit of upfront clarification on that.

In terms of the product mix, what we did, Lucy, is we took a careful look at the foundation or the floor levels of revenues for the products that we have, Adcirca, Tyvaso, and Remodulin, and as you could see from the past several quarters, this floor level is strong and solid.

There is nobody, as I mentioned -- there is nobody that is coming in with a silver bullet that's going to take away these revenues. We're losing virtually no Remodulin revenues to generic forms of epoprostenol. There's no near term prospect of generic Treprostinil.

We're losing no meaningful or even measurable Tyvaso patients to [Fantavis]. Now are we seeing any losses of Adcirca to Revatio. So, the base revenues are really rock solid.

Then we took a look at the growth that would be experienced for 2011, 2012, and 2013. And, in each case, unfortunately pulmonary hypertension remains a generally progressive, generally fatal condition and unfortunately overall mean survival is probably about five years right now from diagnosis.

If one is at one of the expert centers with more experience I think you would probably count on a mean survival staff of around 10 years, but those expert centers represent just a couple deciles of the prescribers so there are a lot of patients that are going to be realistically looking at more of a five year mean survival.

So we have to take a look at the number of patients that are terrific sales and marketing sources are able to cooperatively work with physicians and nurses to bring onto our drug, minus the losses of patients which are inevitable to the progressive nature of the disease.

And then, we have a delta which is our net gain and what's really exciting here and why we are able to give such positive forward looking guidance here is that the net positives, the gains in patients are positive month after month after month, for Remodulin, for Tyvaso, for Adcirca. All of the trends are positive for all three products and they have been positive since the day we launched the drug.

So, based on those increments that we have in Adcirca, in Tyvaso and Remodulin, we add them together, we multiply them by a conservative estimate for the annual revenue that we get from each of these drugs. As I think most of you guys know it's around $120,000 a year for Remodulin and Tyvaso and around $10,000 a year for Adcirca. I'm just giving you very rounded figures to make the call not (inaudible) of weird numbers. And average it out over the year and that gives you these growth figures of $750 million, $875 million and $1 billion.

Okay, thank you.

Thank you, Lucy.

Thank you. Our next question is from Michael Yee of RBC Capital. Your line is open.

Hi, this is Charmaine for Michael. Can I - can we quantify the inventory levels in the quarter for different products please? Thank you.

Great question, and very important in understanding the quarterly changes. And John Ferrari, our Chief Financial Officer manages that portion of our business. John?

Thank you, Martine. Inventory levels for Remodulin were flat for the quarter and for Tyvaso the (XB) went down, patient counts went from mid to high 30s down to about 30 days.

What about for Adcirca?

We do not track inventory levels for Adcirca because Adcirca's sold to wholesalers so we do not -- we're not able to get that information, but sales teams to be tracking prescriptions. So, I don't think there's any undue stocking or anything weird with inventory levels for Adcirca.

Okay, great. Thank you.

Just because you mentioned Adcirca and inventory levels, and again, somebody could I think get the wrong impression from the quarterly drop in Adcirca, let me give you a little bit more color. I'm a big fan of goals, milestones and round numbers and I wish I could give a gong in every office, because just this past month we passed a 5000 patient Adcirca which is a milestone, a goal, and a big round number. So, we're really excited about that.

That takes us to having probably more patients on Adcirca than there are on Letairis, even though we're -- it's not a competitive drug with Letairis, but it's a nice benchmark that we were able to achieve that in much less than the amount of time that Letairis had been on the market.

But what's may be more salient is that it takes us -- gives us over one third market share against Revatio, and as I believe many of you have heard from our presentations at healthcare conferences, our goal is to have 50% share against Revatio by the end of the year. In other words, to have basically every one out of ever two PD5 patients on Adcirca, and we're marching steadily right toward that goal.

Next question, operator?

Thank you. Our next question is from Robyn Karnauskas of Deutsche Bank. Your line is open.

Thanks, this is Navdeep substituting in for Robyn. I just want to thank you for providing guidance for the first time, its super helpful. And I just had two quick questions.

So you've guided revenues for (inaudible) about $750 million, with the weaker than expected Q1, I'm wondering if guidance factors in any price increases. And the second question is when do you expect to recognize Tyvaso revs from the name basis implementation in the yield?

Yes, two very pointed questions. With regard to the first one, we kind of maintain a cone of silence -- also a zone of silence on the subject of price increases, so I just cannot comment on that. With regard to the second question, its -- I think that there's going to be the first shekels dropping into the drawer this calendar year on the main patient in EU on Tyvaso.

Okay, great. Thanks.

Thank you. Our next question is from Liana Moussatos from Wedbush Securities. Your line is open.

Thank you. Can you give us the geographic breakdown of Remodulin sales in Q1?

The geographic with regard to --

Europe.

US and rest of world. John, can you do that for me?

There hasn't been any historical change. So, we'll still get about 15% of Remodulin revenues from Europe. So, Europe has been growing pretty nicely and keeping pace with the growth in the US, so --.

One data point I can give you on rest of world as well, because this subject has come up every so often at healthcare conferences is that we were really hopeful that we would be able to have Japanese approval in 2012 and begin to sell Treprostinil there.

We have a terrific national partner in Japan, Machida Industries. Flolan has established quite a juicy footprint there, and I think it's quite realistic that we have $100 million revenue potential for Treprostinil in Japan.

Unfortunately, we have about a one year delay in our schedule there. There are a lot of particular requirements for the Japanese market that are different from the US market and even from the EU market. We've incurred a reasonable amount of costs in manufacturing to make those particular changes and in clinical development.

But the good news is that we're basically more certain than ever that we will have approval in Japan and that they'll be added to our product mix and to our revenue mix. But instead of it being 2012, it's now I think going to be late 2013

Thank you.

Thank you. Our next question is from Terence Flynn of Goldman Sachs. Your line is open.

Thank you for taking the question. Just wondering if you can give us any update on the [distal one] trial of oral Remodulin for digital ulcers. Wondering -- number one, on timing, and then number two anything in terms of the tolerability profile that you're seeing. Thanks.

Thanks, Terence. I was wondering when we were going to get a clinical trial question, like the giant FREEDOM-M just about come around the corner, but let's pivot that question over to Roger to talk about distal.

Yes, thanks, Martine and thanks for the question, Terence. And I'll also refer you to our queue which will have some information about the distal study in it, but to give you the top line -- just to remind all the callers, distal one was the study with oral Treprostinil in patients with sclera derma looking to see what the reduction in net ulcer burden versus placebo would be. And it's measured by a net ulcer burden in that its measured after 20 weeks therapy.

There were a host of secondary endpoints including time to healing of the cardinal ulcer, time to healing of all ulcers, formation of new ulcers, and then a series of both patient and physician assessed quality of life measures that looked at both hand function and then overall quality of life.

We have just unblended that study and what we saw from preliminary analysis -- and I must stress that it's preliminary and subject to slight change, but we think most of what we're going to tell you now would not be subject to change.

The results indicate that there is a trend to reduce net ulcer burden with about a 0.33 reduction in the active versus placebo. So that's placebo corrected at week 20, but this result did not achieve statistical significance to devalue this 0.20.

Having said that, there were a number of significant findings in that P less that 0.5 for several secondary end points, most of which were related to physician -- patient assessment of quality life and physician assessment of hand function. And these were questionnaires that are commonly used in these scleroderma patients.

And then finally, about half of the patients were what's termed anti-centromere antibody negative. So, that antibody is used as a biomarker to determine if the patient is diffuse or of limited scleroderma etiology. And so, being ACA negative would suggest you would have diffuse disease, which is commonly thought to be more severe in the sense that you could also have internal organ involvement.

And in that subset of patients, which was -- is roughly half of the sample, it was a significant reduction in mean net ulcer burden, with a reduction of minus 1.01 ulcers compared to placebo with a P of 0.01 at week 20.

So where we are now is we've had an investigator meeting this week. We've met with our scientific advisory board. We're trying to determine what the full data set means, what a development strategy would be going forward for this indication, and whether or not this select biomarker identified enriched population would make sense to conduct a confirmatory trial.

So, it's very early days. We've literally just had this data in our hands for several days. We have not even articulated this to our greater investigator subset, just the steering committee. So, we'll be doing that. We'll be hosting meetings with them. And then, we'll be considering what to do with this indication as we move forward.

So, that's all I can tell you today. We really won't speak about dosing, drop outs, intolerability and things like that at this point. That'll be the subject of an abstract in the publication at a later date.

Okay. Can you at least give us some color in terms of this -- with what you're seeing with respect to the tolerability and discontinuation rate at the 0.25 mg dose was consistent with what you saw in the FREEDOM-C study?

As I said, Terence, I won't comment on that. I can tell you in the FREEDOM study -- I think that that's more specifically what you're suggesting. Just let me give you a little color on that. That the last patient will exit the FREEDOM-M study this week. And as Martine said, these are tremendously exciting time for us at United Therapeutics.

I think we've been very pleased with our ability to complete enrollment. We're very pleased with the study conducts and quality, and we've been extremely pleased with the patient management within these studies, particularly as it relates to dosing and the management of the drop outs, which we have said in previously in FREEDOM-M drop outs due to (inaudible) related events is in the low single digits. And as we come to the conclusion with last patient out this week, that remains true.

So, that's a very good sign is that we've managed the dosing strategy as appropriate. And we're also confident that we've hit therapeutic levels of dosing, although I will not be specific about what the exit dose is because I'm blinded. We also remain highly confident that we will provide this data in June, as well as the FREEDOM-C squared in September.

So this is a full court press, this is the highest priority of this Company. we have all available clinical resources focused on this closure of this study so that we can collect the data, query the data, and then lock the database in unblended study, and provide what we think will be the most seminal study in the history of pulmonary hypertension.

Okay, thanks a lot.

Thank you very much, Terry. We've got time for one last question, operator.

Thank you. Our last final question is from Geoff Meacham of JPMorgan. Your line is open.

Geoff, that guys is lucky.

Well, I'm the lucky one, my name is [Onu Palm], I work for Geoff Meacham. Just a quick question. On the implantable pump for Remodulin, in the US I think the schedule -- the study was scheduled to start in April. Right? And I'm just wondering if we could just get an update on the pump.

Yes, thanks for -- thanks for asking about hat. You know I am actually -- while I know the answer, and the answer is really good, I was so disappointed when I spoke with [Dr. Borges] who's the principal investigator at our scientific advisory board at our meeting on Tuesday, when he told me about yet another one or maybe two month delay -- that I said to him and I'll say to you, that I'm not going to give any more forecasts in terms of when the study will commence.

Its -- there are -- people are just being more careful than careful about the start of the trial. Although nothing whatsoever has changed, and everything is actually reaffirmed, reaffirmed, reaffirmed that it's simply a safety trial. Its 50 patient years that can be satisfied with 50 patients per year, 100 patients per half year, et cetera to go forward with that program.

There's about 10 centers that are all lined up, ready to go. Doctors have easily obtained patients willingness to participate in the study. So, it is what it is.

Let me also provide a little bit of color on the program, because I think that there may be some view that we think that the implantable pump would somehow cause a surge in Remodulin revenues, which is not really the intention here.

In fact, this forecast that we gave today of $750 million, $875 million and $1 billion, doesn't -- is completely agnostic, whether there is an implantable pump or not. That's our forecast. We don't really see the implantable pump as moving the top line revenue forecast for the next three years.

The implantable pump is something that this company is doing as part of its overall hearts and minds strategy of doing the right thing to help patients manage what is really if we stop and think about it, a very, very challenging drug delivery situation. If you're a class IV patient, you're talking about a 24 hour a day, seven day a week, 365 day a year catheter sticking out of your body and a little pump chug, chug, chugging away.

And every time I explain this to a person who doesn't know anything about pulmonary hypertension, they always think, well oh yeah, you mean like an injection once a day. No. You mean, infusion 15 minutes a day. No. This is 24 hours a day for the rest of your life, and it's burdensome. Despite that, patients snowboard with it. A lady ran for mayor with it. People do all kind of amazing things, but its debilitating and its awkward and uncomfortable for people.

So we move forward with this implantable pump, but just really to do the right thing for the patient and go the extra mile to give them yet an additional avenue by which they can have a lifelong perennial therapy without the awkwardness of an ex vivo pump and a catheter.

So I'm really, really hopeful that the patients will start enrolling soon, but whether they do or don't has not impact on the revenue forecast.

Great. Thanks for taking our question.

Well, everybody, thank you so much for joining us at this call. I'm sure you will be joined by many others. Our next call that we would expect would be as Roger said, in the middle of June to announce the unblinding results for oral Treprostinil.

So have a terrific day, and I also look forward to seeing you at any healthcare conferences in between. Thank you, operator.

Ladies and gentlemen, thank you for participating in today's United Therapeutic Corporation's Quarter Earnings Conference Call. This call will be available for replay beginning at 12 PM Eastern today through 11:59 PM Eastern on May 12, 2011. The conference ID number for the replay is 56250172. The number to dial for the replay is 1-800-642-1687 or 706 645-9291.

Thank you for your participation in today's conference, this concludes the program. You may now disconnect, and have a wonderful day.