United Therapeutics Corp (UTHR) 2012 Q1 法說會逐字稿

Good morning. My name is Tyrone and I'll be your conference operator today. At this time, I would like to welcome everyone to the United Therapeutics Corporation first quarter earnings conference call. (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, and assumptions or changes in the factors affecting such forward-looking statements.

Thank you. Dr. Rothblatt, you may begin your conference.

Thank you, conference call operator. Good morning to everybody listening in on the United Therapeutics first quarter 2012 financial results conference call.

I have joining me on the conference call today from United Therapeutics our President and Chief Operating Officer, Dr. Roger Jeffs; our Chief Financial Officer, Mr. John Ferrari, and our Chief Strategy Officer, Mr. Andy Fisher. Any questions that you may have relating to patent or IP issues could be directed to Mr. Fisher. Questions with regard to distributor distribution, finance issues could be directed to Mr. Ferrari; and questions with regard to clinical development, sales and marketing, Company-wide operations to Dr. Jeffs and otherwise, I'm pleased to answer any questions you may have.

We've had a really great first quarter and we're announcing today revenues of $204 million for the quarter - earnings per share of $1.32 per basic shares, $1.29 per diluted share and then the main metric that we use to gauge our business operations, the earnings before noncash charges, there we're really pleased to report $2.13 per basic share, $2.08 per diluted share.

These really good financial results are an important stepping stone toward our revenue guidance, which is plus or minus 5.0%, $875 million for this calendar year of 2012 and $1.0 billion for the next calendar year of 2013. So the big picture here is that product revenues are growing, earnings are growing and we remain on track for the guidance that we've provided for 2012 and 2013.

Operator, if you could please now open up the lines for any questions that people might have?

(Operator Instructions) Wes, ISI Group

Hi. This is Wes sitting in for Mark. I had a couple questions about IP and also use of cash. My first question was around Tyvaso. Could you tell us what the earliest potential date for a potential Paragraph IV filing for that product and your expectations of any filing? And then, also, I'd like to know if you have any updates on use of cash around share buybacks, as well as business development, for the remainder of the year. Any additional details around that would be very helpful. Thanks.

Okay. Thank you very much. Let me spend most of our time on your first question and feel free to get back in the queue on the second question. Just to give us a quick answer, there's no change in our previously-announced use of cash plans. Andy, can you expand and provide some color on the IP questions asked?

Sure. Thanks, Martine. So the situation with Tyvaso is that it has orphan drug exclusivity until July of 2016 and it has a range of Orange Book listed patents expiring from 2014 until 2018. So those are the things you need to be mindful of when you consider Tyvaso's exclusivity position with respect to generic filers.

I would also remind our listeners that Tyvaso is approved as a drug/device combination, so I think the situation presents slightly differently with Tyvaso than with respect to the current pending Paragraph IV and ANDA filing for Remodulin.

Excellent observations, Andy, and hopefully that was very responsive to Mike's question. I'd like to add just a little top-up color on top of what Andy said on this concept of a drug/device combination, because it's kind of an unusual concept in the biotechnology space.

When we were originally getting Remodulin approved, what was somewhat different is that the drug was approved with sort of a generic set of infusion flow parameters that applied to the Medtronic and formerly called Minimed device that infused it. That one could, in fact, provide Remodulin with an equivalent infusion device from another manufacturer and there are, in fact, a couple - maybe even more than two - different infusion pumps that are used in combination with Remodulin. But, as Andy pointed out, it's quite a different situation with Tyvaso being approved as a drug/device combination.

We, ourselves, tried more than once to reproduce the dispersal pattern within the bronchi that is associated with our device and it was, in fact, not possible. Oftentimes other inhalation devices would provide something that was deeper than the Optimed. Perhaps some people could argue quote/unquote better than the Optimed in terms of this dispersal pattern within bronchi.

But what was incontestable is that all of the -- any other device, it was always very, very different from the Optimed and therefore it did not in any way, shape, or form come within the approval that was granted for Tyvaso and the Optimed device as a drug/device combination.

So it would be -- it's going to be a horse of another color for there to be an introduction of a substitute for Tyvaso because of this unique drug/device combination approval and of course, as many of you are aware, this is a device that we own all the rights to, we manufacture, so on and so forth.

So, thanks for the question from Mark Street [sic] and operator, if you can please take the next question?

Roz Sweeney, RBC Capital Markets

Hi. This is Roz Sweeney calling for Mike. I wanted to know if you could provide a little bit more detail on the fluctuations you're seeing in inventory levels and also specialty pharmacies? And then, in addition, just -- we have some calculations on growth and patient adds, but if you could maybe provide more detail there that would be awesome.

Okay. Thanks again for the questions. Once again, feel free to get back in queue on second questions. So we'll spend most of the time on the first question and I'm going to ask John Ferrari, our Chief Financial Officer to address it. I'll just say, very quickly that with regard to net patient adds, we continue to have net positive net patient adds across all three product lines. John, can you talk about the distribution and inventory?

Yes. I'd be happy to, Martine. Inventory levels for the quarter were actually fairly flat, but patient count days, they just increased by one patient day, so nothing unusual with inventory levels and that's across the board with both Remodulin and Tyvaso.

Great. Thank you very much, John. Operator, if you could please open up for the next question?

Joseph Schwartz, Leerink Swann

Great, thank you. I was wondering if you could give us a sense of how much IV Remodulin is used with the various diluents that are available, like the Flolan diluent or versus more generic-type options? I don't even know -- is the Flolan diluent protected by any patent or generic such as the Jeffs patent in 2029?

Yes. Let's -- because we have the Jeffs of the Jeffs patent on the line, we'll have Dr. Jeff to talk about that.

Thanks, Martine. Good morning, Joe. So, in terms of the diluent, Remodulin is stable once diluted in normal saline or water, as well as in what's called the epoprostenol diluent. About 65% of patients - roughly - use the epoprostenol diluent and the reason they do that is that's a very high PH diluent. So it's around 10.5.

What that provides is certain prophylaxis in case the patient contaminates their infusion set. So that high PH has antimicrobial properties and it's that antimicrobial property of that diluent that we have patented and that patent goes through 2029. So it provides a long-term protective property, from an intellectual standpoint, as well as a protective property for patients when they use intravenous Remodulin.

Great. Great answer, very clear. Thank you very much. Operator, if you could please welcome the next caller onto the line?

Liana Moussatos, Wedbush Securities

Congratulations on the quarter and do you expect any new products in the clinic coming up this year?

Thanks, Liana and thank you for the congratulations. The pipeline activities of United Therapeutics are focused on bringing in our second line of products, which are all prostacyclin analogs. And as you can see from the guidance that I mentioned at the beginning of the call, we believe that our current products have clear potential to take up over $1.0 billion in sales by 2013 and in fact, they've got definite legs and headspace in the market to go beyond that.

But, what gets us even more excited is the potential of our oral prostacyclin products, especially because there are no other forms of oral prostacyclin in the pulmonary hypertension space and, as a result, we are bringing the oral prostacyclins into the clinic this year in some very strong and innovative ways. So, let me provide a little bit more color on this topic, starting from, let's say, the market standpoint.

As of now, there are indisputably over 30,000 patients with pulmonary hypertension being actively treated by doctors in the United States alone and for ease of tracking things during this call, let's just focus on the U.S. markets.

So over 30,000 are being treated. Over 20,000 of those patients are being treated with PDE-5 inhibitors. It's at this point in time just about neck-in-neck Sildenafil and Tadalafil among doctors who are most experienced in treating pulmonary hypertension, such as the top third of doctors in terms of numbers of pulmonary hypertension patients per doctor.

Tadalafil is far out ahead, prescribed basically 3-to-1 and often 4-to-1 to Sildenafil and it's about neck-in-neck right now in the middle ranges and the trend lines are that Tadalafil scripts continue to grow. As I mentioned briefly in response to the previous question Sildenafil scripts are continuing to decline.

Now, with the ETRA space, there is, again, not as many patients on ETRAs that are on PDE-5s, but still very, very impressive numbers somewhere in the 15,000 to 20,000 patient range. And then you've got the more invasive therapy, the prostacyclin therapies, either parenteral or inhaled, that are down around, if you add them all up together, maybe 5,000, 6,000, 7,000 patients.

So the question is -- the most important question in the pulmonary hypertension space is why are there not 20,000 patients or 25,000 patients or even 15,000 patients on prostacyclin analogs when there's 15,000, 20,000, 25,000 patients on PDE-5s and ETRAs? And the clear answer is that there's no pill form of prostacyclin or pill forms of ETRAs and pill forms of PDE-5s.

United Therapeutics is going to change all of that and with our oral Treprostinil development and with our oral beraprost 314d single isomer development, we will be able to bring forward an oral form of prostacyclin that will have the price point comparable to the other prostacyclin therapies, but the numbers of patients that are in that 15,000, 20,000, 25,000 patient category.

So this is the enormous potential of United Therapeutics to leverage those kind of numbers once we get approval of the oral Treprostinil and beraprost 314d isomer to market in the U.S. and that is the answer to your question, Liana. During 2012 we are matching oral Treprostinil to some very exciting developments ultimately, we believe, leading to a label that shows that oral Treprostinil extends time to clinical worsening. And there are other smaller sort of not registration size, but perhaps ultimately clinical practice guidance side trials that are being conducted under Roger's group. Very, very exciting stuff.

On the beraprost 314d side, we undertook extensive computer simulations and models and determined that by dosing 314d four times a day, rather than two times a day, would be able to achieve the type of zero-order release characteristics that would be associated with a positive clinical outcome, rather than the disappointing results from the Phase II trial. So we are now very hard at work at replicating the computer simulation with actual patient practice and the patients. That will be completed during the months of June and July of this year and then immediately thereafter there will be a proof-of-concept study that follows on as well.

So the clinical activities for 2012 are about bringing two separate drugs - 314d, as well oral Treprostinil - each of which has 10,000 patients, if not much greater, and roughly $100,000 per year revenue potential flowing into the clinic.

Thank you very much.

You are welcome. You are most welcome. Operator, if you could kindly welcome the next caller onto the line?

(Operator Instructions) Mike, JP Morgan Stanley

Hi. This is actually Mike in for Geoff and thanks for taking our question. Just curious about oral Remodulin. Just wondering how you guys are thinking about, if the drug is approved, how it might be used commercially.

Yes, thanks. I didn't catch your first name, but --.

Mike.

Thanks, Mike, okay, great. Yes, thanks for the question. We are not applying a whole lot of energy into that particular question, because we want to really focus our resources in terms of the oral Treprostinil team, everything necessary to get the positive FDA decision on October 27th.

As you know, our filing has been accepted by the FDA. It is in process at the FDA, so there's the normal request for information and whatnot that we're focusing on and preparing everything necessary to have a successful outcome of that FDA decision.

Then the commercial team, on their side, they've got a really, really exciting year with the growth in Tyvaso, the continued growth in Remodulin as reported today, so we are really, right now, focusing our efforts on growing our existing product revenues. Once we get a favorable nod from the FDA to proceed and we know precisely what type of label we will have from the FDA to proceed with. At that time, we would shape our marketing activities accordingly.

Great, can I maybe ask a follow-up on Remodulin?

You definitely could, but if you could just -- because there's other people in the queue, just in fairness to them, push a button and you'll be right back in the queue and hopefully you're back in.

No problem. Thank you very much.

Sure thing. Next question, please?

(Operator Instructions)

See? I knew you'd be back in. Great. Mike?

(Operator Instructions)

Hello, this is Mike.

Yes, Mike?

Oh, sorry. Just a question on Remodulin in Europe and what's the current status of reimbursement there.

Remodulin Europe reimbursement is looking good, but there are pressure points resulting from the economic crises that are impacting upon different parts of the European Union. Fortunately, we have John Ferrari, our Chief Financial Officer, on the call and it's ultimately part of his responsibility to review distributor and reimbursement issues throughout the continent there. So, John, if you could perhaps provide some color on Mike's call or Mike's question?

Yes, sure, Martine. Mike, right now we're not actually seeing any negative impact with the I guess economic situation in Europe. As you know, most of the patients are covered by the national insurance, so we're not seeing any real changes yet on any kind of reimbursement level that's effecting our distributors, which could affect the price that we sell to the distributors.

So it is, as Martine mentioned, an area that we're definitely keeping an eye on, since for Remodulin, about 15% of our Remodulin business comes from Europe. So, right now, I mean, it's kind of status quo, but we're keeping an eye on the future and what happens out there.

Great.

Thank you, John, and Mike, one thing that I might add is it's not Europe, but it is ex-U.S., is that we are moving closer and closer to the prospect of Japanese approval for Remodulin and Chinese approval for Remodulin. And so those will be exciting additional markets coming online. We're not going to see those revenues in 2012, but I think that we could definitely see one or both of those countries coming online in the 2013-2014 timeframe.

We have our market research that tells us that already, today, Flolan does $50 million to $100 million a year in Japan and wherever Remodulin has gone up against Flolan, the lion's share of the patients end up getting put on Remodulin rather than Flolan, so that augers very favorably for us in Japan.

China is kind of a new land, with regard to U.S. pharmaceuticals, but we have a world class pharmaceutical distribution partner there in Lee's Pharma and the Chinese government is reviewing our regulatory filing.

We also have a tremendous network of the best PAH specialist physicians in China, because these physicians seem to have a lot of familiarity with United Therapeutics from enrolling our FREEDOM trial and they've gained a lot of respect for Remodulin and are soon to be able to begin prescribing Remodulin for their patients.

So, I think it's pretty exciting for the 2012-2014 timeframe to see the launch of Japanese and Chinese revenues and they will begin providing the European revenues a good run for their money in terms of the largest sorts of ex-U.S. revenue.

Great. Operator, we have time for one more question.

Liana Moussatos, Wedbush Securities

Hey guys, you just answered my follow-up question. Thanks.

Perfect, perfect. That probably means everybody has time to run and get a cup of coffee before their nine-thirty conference call. So, thank you, everybody very much for joining our conference call this morning.

Just to reiterate the top factors for those who may be listening to a playback and just coming in on the tail end, we've had a fantastic quarter with $204 million total revenues, continued growth in earnings, earnings before noncash charges. All three product lines doing very well.

We reiterated our guidance that we're on track for $875 million, plus or minus, 5.0% for this year. And continue looking a little bit longer-term to feel that we are on track to break $1.0 billion in revenues next year, plus or minus 5.0%.

And perhaps the most exciting news of all is that our pipeline with our oral Treprostinil and oral beraprost 314d looks very, very good. The market prospects for them are better than ever and they will end up having a transformative effect upon our Company once we get FDA approval for those two products.

Thank you so much for your time this morning and look forward to seeing you on the healthcare conference circuit. Operator, you may conclude the call.

Thank you for participating into today's United Therapeutics Corporation first quarter earnings conference call. This call will be available for replay beginning at eleven-thirty a.m. Eastern time today through eleven-fifty-nine p.m. Eastern time on Friday, May the 4th. The conference ID number for the replay is 66705179. The number to dial for the replay is 855-859-2056 or 404-537-3406. Thank you for your participation. You may now disconnect and have a wonderful day. 5