United Therapeutics Corp (UTHR) 2011 Q2 法說會逐字稿

Good morning. My name is Mary, and I will be your conference operator today.

At this time, I would like to welcome everyone to the United Therapeutics Corporation second quarter 2011 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 Casandra and thank you everybody for joining our quarterly United Therapeutics conference call for the second quarter of 2011. I'm Martine Rothblatt, the chairman and CEO and I am pleased to be joined on this conference call by Dr. Roger Jeffs, our President and Chief Operating Officer and Mr. John Ferrari, our Chief Financial Officer.

I'm pleased with the successful unblinding of the FREEDOM-M study this quarter as well as the very good operating results we achieved. We remain on track to reach our 2011 forecast for revenues of $750 million with as plus/minus margin of 5%.

Before I move into the question and answer section of the conference call, let me share with you some highlights with regard to first our treprostinil franchises and then I'll review where we are in some of our non-treprostinil franchises.

So starting with treprostinil, Remodulin continues to be going very strong, roughly speaking $400 million a year revenue run-rate. A couple of interesting notes on Remodulin is that we now have over 20 patients on implantable pumps using Remodulin. That's about 18 or maybe 19 patients in Europe and a couple patients already in the US, the ones in the US using the Medtronic SynchroMed II device and the ones in Europe using a device from a company called OMT.

So the implantable pump program is going well and I think both the physicians and patients really enjoy having that option even though it's just developmental at this point.

Tyvaso, Tyvaso revenues also growing very strong. An interesting note on Tyvaso is that as the drug has reached a little bit more maturity in the market, we're seeing a steady uptick in the average number of months that patients are on therapy. I believe we're now crossing about 16 months for average patient on therapy and that's been a steady upward trend, very, very good indicator for the future.

I've mentioned our great satisfaction with unblinding FREEDOM-M for oral treprostinil with high statistical significance and everything is going so smoothly with the unblinding of FREEDOM-C2 that we're likely to have those results even a little bit earlier than previously though, probably by the end of August.

So that's the treprostinil franchise, looking very, very good. Let's talk a little bit about the non-treprostinil franchises. First of all Adcirca is now hitting about 75% market share among the top two deciles. Deciles are you divide the total number of patients in the market into -- by tenths and the -- and each tenth represents the number of doctors treating those patients.

So at the top deciles, doctors treat -- a few doctors treat a lot of patients. At the bottom deciles, many doctors treat perhaps one or two patients. So the top deciles are also where the key opinion leaders often are simply because they have the most experience with the most patients.

And it's exciting to see more than 75% of their PD5 prescriptions being for Adcirca. That's an extremely positive signal for the future of that therapy. Overall we remain on track for 50% market share in the PD5 space by the end of this year.

A second note on our non-treprostinil franchises has to deal with our second-generation prostacyclin analog BPFMR. This drug is now gearing up to start its pivotal study starting in the fourth quarter. It will be a morbidity and mortality kind of a clinical worsening type of endpoint, which hopefully will result in a very strong second-generation type of prostacyclin analog label.

And finally in the non-treprostinil franchise area, I'd like to comment on the closing in time for us being able to make our chimeric antibody against neuroblastoma available to the market. This is a drug that the NCI sponsored a large pivotal study for, showed it to be safe and effective. The results were published earlier this year in "The New England Journal of Medicine."

We won a competitive outlicensing effort by NCI and our -- so we don't have to do any further clinical development with this drug. We simply have to transition the manufacturing from a government MAB facility to our own MAB commercial facility and have that approved by the FDA.

Fortunately UT has been doing a real good job recently of getting its manufacturing and formulation facilities approved by the FDA. Just actually two days ago we got approval from the FDA for Remodulin to be formulated in our Silver Spring facility. That followed on earlier in this quarter, we got approval from the FDA for Tyvaso to be formulated in our Silver Spring facility. And this team is now hard at work at getting our MAB 1418 manufacturer to FDA standards. We hope to have that accomplished by 2012 with a filing to the FDA in 2013 and then the FDA approvals actually coming in 2014 so we can launch that product to the market.

So with that survey of our treprostinil and non-treprostinil franchises, I'd like to open the phones to any questions for Dr. Jeffs, Mr. Ferrari or myself.

(Operator Instructions) Robyn Karnauskas, Deutsche Bank.

Hi it's Navdeep Singh substituting in for Robyn. Thanks for taking my question and a great quarter. Just wondering on FREEDOM-C2, do you happen to know what percentage or have a rough idea what percentage of enrolled patients will be on -- will already be on a dual background therapy versus a monotherapy?

Dr. Jeffs, could you please field that question?

Yes. Good morning Navdeep. It's going to be roughly half will be on dual background therapy with the other patients on either Sildenafil monotherapy or ETRA monotherapy. A lot of -- I think the trend is, over time has been that Sildenafil -- PD5 has become more dominant in the markets where we were doing these trials than Tracleer.

So I think you're going to see that in terms of the monotherapy, there will be a higher proportion of PD5 background patients, but the majority will be on dual background therapy and I think dual background combination therapy is becoming the standard of care now, which is good as we start to launch into this market with oral prostacyclin. But I think in general, those is what you'll see.

Okay. Thank you so much. Is it possible if I ask another question?

What we'd like to do, if you could be so kind as to understand is actually to please get back in queue because we don't --

Sure, sure.

(Inaudible) So the next question please.

Mark Schoenebaum, ISI Group.

Hi guys, this is Samit stepping in for Mark. I just had a question on BD. I guess it's been a while since you gave us your latest thoughts on that, if you could just (inaudible)?

Could you -- your question got a little bit garbled. Could you repeat the question?

Sure. On BD, could you just give us your latest thoughts on business development?

Yes, sure. Sorry about that. Business development is a hard subject to address in just a sound bite type of answer but the Company's business development efforts involve concentrating first and foremost on line extensions for our very successful treprostinil franchise. And the core line extension activities going on there are of course the oral treprostinil root of delivery, which from all of our business modeling we feel quite confident that oral treprostinil's revenue, peak revenue potential is greater than the sum of Tyvaso plus Remodulin.

Okay, so it's beholden upon us to put that at the front and foremost of our business development agenda.

Another business development activity is being able to make the Remodulin therapy for those patients who end up near the New York Heart Association Class IV range of clinical status more enjoyable, if you will, more convenient by the implantable pump. And that implantable pump will hopefully allow more patients to say, 'Yes, I realize I'm at the end stage of pulmonary hypertension but I'd like to continue and hope for a really good outcome by having the implantable pump,' because for many people, the ex vivo pump is just too much for them to put up with.

So that's a couple of line extension areas just in pulmonary hypertension. Now in addition to that, Dr. Jeffs and his team are doing some very exciting line extension work in terms of, first of all, combination therapy regimens combining treprostinil with other drugs and even with treprostinil itself in a way I'll mention in a second, to further expand the market potential. And they're also developing it for indications other than pulmonary hypertension, such as critical limb ischemia.

So with regard to the combination, we have studies that are in planning or early stages of execution combining a PD5 together with prostacyclin as front line therapy in comparing that to the PD5 alone to be really the first company to provide clinical data to support our belief that pulmonary hypertension should be hit hard and hit early with a combination therapy regimen rather than the sequential treatment paradigm which is prevalent today.

And another very novel therapy that was actually conceptualized by Dr. [Louis Rubin], the lead key opinion leader in the country, is to combine lower level oral treprostinil with Tyvaso inhaled treprostinil to be able to get both the systemic benefits of treprostinil as well as the pulmonary selective benefits that come along with Tyvaso.

So those are just a quick sketching of the wide range of BD activities that we have just within the treprostinil franchise.

Now outside of the treprostinil franchise we've got some very exciting business development activities going on. We believe that this successful work that had been achieved with the antibody for neuroblastoma is in fact extensible -- extendable to cover areas such as metastatic brain cancer, which is a much larger indication. And the IP that we're working together on with NCI, while it's a different antibody, it's in the same group that were studied by them that we'll be able to, once we get our manufacturing capability underway for the 1418, we will expand that franchise into a clinical study for metastatic brain cancer and that will allow UT to branch out beyond just the cardiopulmonary space into the oncology space.

Finally, in the antiviral space, we've been really blessed to have exclusive rights to a very broad platform of amino sugars, which are small sugar-like molecules that have the ability to achieve excellent cellular penetration and interfere with viral replication within the endoplasmic reticulum.

One thing which I really love about this platform is that it's already been proven safe because a member of this family of drugs that we own the IP to has already been approved for Gaucher's disease. That's miglustat. And it's in a large number of Gaucher's patients with no untoward safety effects since it's been approved. So that gives me a lot of comfort right off the bat.

And what we're now doing is improving its profile through some liposomal encapsulation of a proprietary method to achieve really peak concentrations of this drug within the endoplasmic reticulum. In vitro studies which we've completed over the past year have shown a striking efficacy against a wide range of glycosylated viruses, which are actually most viruses, and work has been funded by the NIH and a couple of other government bodies have independently confirmed this work.

So the entire antiviral area is another area of great promise for us in the business development radar.

Great. Thank you.

You're welcome.

Joseph Schwartz, Leerink.

Good morning. It's Mike Schmidt for Joseph Schwartz this morning. One question on Remodulin, so a lot of us are wondering how much higher the background hurdle is in FREEDOM-C2 versus FREEDOM-M since there are not a lot combination studies for prostacyclin to compare against monotherapy prostacyclin studies. And so the 6-minute walk distances for ETRAs and PD5 inhibitors are low or in combo are pretty high so all is equal. We were wondering how much the 6-minute walk would come down for Remodulin in combination versus monotherapy.

Thanks. I think we'll all be best served by having Dr. Jeffs address that question.

Yes, I appreciate the question. I think maybe if I could rephrase your question, I think you're sort of asking what you believe the effect size will be and what are the chances of success based on the fact that it's a combination instead of a standalone AE patient trial.

Right.

Yes, so let me just revisit some of the comments we made in the previous call, which was there are four things that we think bode well for C2 based on the results of FREEDOM-M which was, as Martine articulated, highly significant and clinically significant results.

So firstly, it's a larger trial, so 313 in the primary analysis population versus 228, so a larger and to predict a statistical value of less than 05. The other thing is drop outs, so one of the things that hurt us in the original trial was the dosing tolerance to the 1mg tablet strength, which we showed in the FREEDOM-M trial, the tablet at 0.25 both as a start and an incremental dose, was favorably tolerated.

So now when we look -- so all of the patients have finished the FREEDOM-C2 trial and have exited the trial, so we can actually look at patient disposition at this point in time. An what we're seeing is that we are finding a very analogous situation to what we observed before in terms of drop outs with FREEDOM-M.

So with FREEDOM-M 37 of the 228 patients did not complete the study either for expected reasons such as clinical worsening and death or for reasons due to intolerance such as AE, so there were 16% of patients in M. In FREEDOM-C2, the total discontinuation that we're aware of to date is 41, which is at 13% total discontinuation rate, which is below what was observed in FREEDOM-M.

And then the controllable drop outs are the ones that we were very keen to manage was the AE drop outs, is only 19 of those, so 6% whereas that was 6 or 3% in the FREEDOM-M.

So again, we've proven that the hypothesis that the 1mg tablet strength is too high I the original trial. We've now done a second trial to show that that 0.25mg trial appears to be very well tolerated and that we're achieving therapeutic doses throughout the course of the trial. So that meant some very good results and we're very pleased to see that disposition [rank.]

I think the other -- two things that we talked about, and I'll just be quick here, is in FREEDOM-M there's an extra month of study so there's a chance to increase the dose even higher than what was observed in FREEDOM-C2. And then in FREEDOM-M I'll remind everybody on the call that the effect that was observed at 23 meters was an active group effect. Basically the placebo group had no change. That's very much what you're going to see in a combination trial and I think this in particular addresses the question.

Typically in trials in the past in monotherapy, treatment effect had been slighted because it's not only the effect in the active group but it's been the observed decline in the placebo group. In our monotherapy trial, the more stable patient population in there with no decline in the placebo group and the active group improved.

So I would predict that we'll see a very analogous result in FREEDOM-C2 where because patients are on effective background therapy, though not improving, they are not going to change over the course of 16 weeks or change very little, whereas the drug should add incremental benefit in the active group.

So given those four points - larger trial, analogous or comparable drop out rate, extra months of dosing to improve the exit dose and then the observed active effect in FREEDOM-M, I think those four things speak positively and favorably for a positive outcome in C2.

Thank you.

Beautiful answer. Thank you Roger. Good education for us all. Next question please.

Phil Nadeau, Cowen and Company.

Oh hi Phil. Nice to hear -- I hope it's Phil.

Hi, yes, it is.

Wow!

Thanks for taking my question. My question is actually on the quarter, the trends -- the sales trends were very strong. Could you discuss whether there are any inventory changes in the quarter and also for Tyvaso, what you're seeing in terms of patient additions? Has it been a consistent rate? Was there any acceleration during Q2?

Thanks Phil. I'm going to ask John Ferrari, our CFO to talk about the inventory.

Inventory for Remodulin and Tyvaso based on patient days were flat. There was really no change during the quarter.

Okay.

And I'll turn it back over to Martine for Adcirca.

Okay. Can you repeat the second -- what was the part on Adcirca?

Patient growth. It was also on Tyvaso too, just trends that you're seeing.

Trends are upward, trends are upward. I think we've talked before and I'd like to reiterate now that we're seeing triple digit, meaning over 100 patient starts each month on Tyvaso. Some people say Tyvaso, so that's really, really positive. The growth in revenues is because, as I mentioned in my introductory remarks, the drop offs from therapy, which are generally due to death, are less. And as a result the average duration on therapy has now [kicked up] 16 months, which is actually the highest figure since we launched the drug, so that's a very, very positive sign on patient growth for Tyvaso.

With regard to Adcirca, there is a strong growth. It's coming from -- first of all, newly diagnosed patients are overwhelmingly be placed on Adcirca compared to Sildenafil there, but there's always a kind of a first mover advantage and Sildenafil was on the market for three years or so before us so there are a lot of physicians who sort of automatically prescribe Sildenafil.

But we've got a fantastic group of field sales reps that are detailing upwards of 4,000 or 5,000 physicians and making sure that all the physicians are aware that with Adcirca you only have to take your medicine once a day whereas with Sildenafil or Revatio, you have to take it three times a day.

And because rebound hypertension is the feared black dragon of pulmonary hypertension, that when the blood vessels and the pulmonary arteries are not forcibly relaxed through pharmacotherapy, then they tend to quickly constrict like a closing fist. And that's very dangerous for the patients.

And there -- patients are just normal people like you and me. Anyone's going to forget to take their medicines or their vitamins or whatever and so forgetting to take a one or two Revatio doses is a serious matter. It's nothing to joke about.

So I think this is leading to the growth that I mentioned and we're now over 80% of total patients, or over 75% of total patients. In some KOL centers we're at -- we're over 80%. We're actually over 90% of all of their patients and these people have like 200 patients or more on PD5s. They've switched them all to Adcirca.

You're probably aware that during the past quarter there was some data presented at one of the major healthcare conferences that showed that it is very safe and effective to switch a patient from Revatio to Adcirca. So as physicians, for example, ask us for copies of those publications or posters, we're able to send that information to them. At the moment it's mostly in poster form. It'll soon be in publication form which has even better and stronger weight on the physicians' prescribing practices.

So beyond a doubt, Adcirca is the place to be in terms of PD5 therapy.

Great. That's very helpful. Thank you.

Terence Flynn, Goldman Sachs.

Hi. Thanks for taking the question. I'm just wondering if you can tell us if the last patient in FREEDOM-C2 has passed week 16 yet and what you expect for the turnaround time on getting us the data relative to M, which I think was a five-week turnaround. I know you kind of mentioned end of August, but can you give us a little more detail there? Thanks.

Thanks Terence. Dr. Jeffs will talk about those questions.

Yes. Thanks for the question Terence. So the last patient exited the FREEDOM-C2 trial in mid-July. We expect the final case load to be completed in early August. Once that's done, we then have to do -- we query the database, all of the data that's entered through all of the electronic case forms, and we generate queries based on things that are maybe inconsistent. Maybe there's an AE listed on the dosing page, not on the adverse page for example, so we clarify with the site that the AE occurred and should it be listed on the AE page so that the data set is pristine.

That query process will -- is dictated -- the timing of that is dictated based on the number of queries that are generated and then the response of the site who is turning those queries back around to us, and sometimes the responses themselves can rate additional queries.

We think we can complete that query process in two to three weeks. One of the things though that's hanging over our head is that these sites, there were sort of an equal share of centers in the US, Europe and China, and one of the difficulties in Europe, for example, is the month of August is a holiday month, so we need to make sure that that the sites are attentive to these queries.

Now we've obviously put all the sites on alert that we need this and we need this in a two to three week turnaround time but then the final process is every query must be signed off by the investigator to say that they've looked at the data and the data is accurate as reflected in the actual patient course of the trial.

So those are the nitty-grittys of what we need to do. We think we can do that in two to three weeks but it may take longer based on the ability to get every single query and every single signature, so we're confident it will be no later than September, as we previously articulated. And as Martine said, it's likely to be late August.

Okay, and then one quick followup, just wondering let's say in the event that C2 does not hit the primary endpoint, just wondering if you guys still would plan to file on that -- the FREEDOM-M results alone and if you've discussed that with FDA at all and any impact to the commercial outlook for oral Remodulin under that scenario. Thank you.

So we haven't discussed that with the FDA because it would be premature to do so. We also would file FREEDOM-M based on the results we have. We're only waiting now -- we're building the NDA. Make no mistake, the NDA is underway. We're just waiting to add in the data because regardless of the outcome of the FREEDOM-C2, we're going to have to integrate that into both the -- particularly the safety summary if not the efficacy summary.

So it's really just an issue of the coincidence and the timing of the two trials and we fully expect to be successful and seek labeling from both upfront use and combination use. As to the market outcome, I think we'll save that question for the next quarter when we have the C2 data.

Okay, thanks a lot.

Thank you.

Thank you Terence and thank you everybody for participating in the conference call. Just as a quick recap, we have been real happy to report very good financial results this quarter. The treprostinil franchise continues to be growing very strong in every way. The Remodulin activity was discussed very well.

I'd like to also mention, simply because it didn't come up in any questions, that we're looking forward to significant upside on Remodulin coming from Europe with approval of IV Remodulin and from Japan with approval of Remodulin. Whenever we have in the past introduced IV Remodulin, we've seen that it doubles the market size for Remodulin compared to subcu only. And in Europe, all these years there's only been subcu Remodulin available so IV Remodulin is very likely to double the revenues coming from Europe.

Japan, we've worked on quietly and carefully over the past several years and we feel very optimistic that Remodulin will be able to come in and supplant Flolan which to the best of our knowledge is doing approximately $100 million a year in Japan.

With regard to Tyvaso, I think that not only was I happy to say on the last conference call that April was our best month ever, I can now report that June was even better than April. June has been the best month ever in terms of patient starts and that in turn augers very well for the third quarter result.

And we spent most of this call talking about the unblinding of FREEDOM-M and FREEDOM-C2, all of which is looking very well. And with there being 10,000 or so patients in Class 2, 10,000 or so patients in Class 3, Remodulin and Tyvaso being used by a minority of all of those patients, the prospects for oral treprostinil are transformational for our Company.

Everything is also going very well in the non-treprostinil franchises and as the last couple of questions indicated, Adcirca in particular is quickly on its way to becoming the single, most prescribed drug in the pulmonary hypertension space.

So thanks to all of you for participating in the call and we look forward to seeing you at upcoming healthcare conferences right after the summer break. Thank you very much.

Thank you for participating in today's United Therapeutic Corporation's second quarter earnings conference call. This call will be available for replay beginning at 11:35 AM Eastern today through 11:59 PM Eastern time on August 12, 2011. The conference ID number for the replay is 80689472. The number to dial for the replay is 1-800-642-1687 or 706-645-9291.

Thank you and have a great day.