United Therapeutics Corp (UTHR) 2012 Q3 法說會逐字稿

Good morning, ladies and gentlemen. My name is Tyrone. I will be your conference operator today. At this time, I would like to welcome everybody to the United Therapeutics Corporation Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent 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 could cause 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 Thereapeutics' 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. Martine Rothblatt, you may begin your conference.

Thank you very much, Tyrone. Good morning, everybody. I am pleased to welcome everyone to our third quarter 2012 financial results conference call.

Joining me on the call this morning is Dr. Roger Jeffs, our President and Chief Operating Officer; Mr. John Ferrari, our Chief Financial Officer; and Mr. Andrew Fisher, our Chief Strategy Officer. I'll provide a couple of introductory remarks and then I'll ask Tyrone to please open up the phone to any questions.

It is certainly gratifying to see us closely approach, for the first time, a revenue run rate of $1 billion per year. Our free cash flow enables us to continue investing in new therapies such as once-daily injectable treprostinil and once-monthly refillable implantable treprostinil that holds great promise for positively transforming the lives of patients with pulmonary arterial hypertension. I am also very pleased to share that our earnings per share have risen to $1.52 per basic share.

And perhaps even more meaningfully, our earnings before non-cash charges have risen to $2.93 per basic share. I'd like to emphasize that the earnings before non-cash charges metric is, I think, the more useful and helpful metric because it excludes things such as our share tracking award program expenses, which in fact, vary as a function of our stock price and have no bearing on the fundamentals of our core business.

Speaking of the fundamentals of the core business -- it has been a terrific quarter. Each of our three products have shown significant growth; Remodulin, Tyvaso, and Adcirca.

For those who may be new to the story, I am happy to mention that Remodulin is the number one market leader in the market segment of parenteral, prostacyclin and prostacyclin analogs. There are about four different competing drugs in the parenteral segment. For us to be not only be number one, but have in fact -- be the most preferred by a significant factor, by a factor of about three or four over any other drug, demonstrates the striking efficacy that physicians and patients have experienced with Remodulin.

Our second drug, Tyvaso, also showed significant growth of 33% quarter-over-quarter from previously. This drug also is the market leader in the segment of inhaled treatments for pulmonary hypertension. We have one other competitor in that inhaled market segment and the patients and physicians are preferring Tyvaso to that competitor by even a larger margin than Remodulin is preferred.

The reason why is that this drug has really transformed patients' lives,enabling them to treat their pulmonary hypertension with just a brief one to two-minute inhalation session four times a day. There are a great many significant patient testimonials that can be seen on things like the Pulmonary Hypertension Association's meetings and conferences to the positive affect of this therapy.

And then we have Adcirca, which grew 61% from last quarter to this quarter. It now appears to be the most prescribed drug for pulmonary hypertension in the United States. That too is a pretty rapid climb, having reached that stage in just about three years, despite the fact that the world's largest pharmaceutical company, Pfizer, had been very aggressively promoting the competitive drug, sildenafil, for more than four years before Adcirca was even launched.

So we've got a terrific ability here to progress patient care in the field of pulmonary hypertension. All signs appear that it will continue to get better and better.

I would like to mention that in order to address patient care in this field, one has to take a 360 degree approach. It is not enough to simply have an FDA approval. It is necessary to have an excellent team of individuals that are able to help physicians understand the details of the positive information as well as side effects associated with our medicines compared to what are now almost a dozen different medicines that have been approved for pulmonary hypertension.

So for a busy physician and for most of whom pulmonary hypertension is a fraction of their case load,they are cardiologists and pulminologists, and this is a rare disease,it takes the best of the best to be able to elevate Remodulin, Tyvaso and Adcirca to their leadership positions, which they enjoy. I am very pleased with oursales and marketing organizations being able to do that.

The sales and marketing organization is in fact just maybe 90 degrees of this 360 degree approach which is necessary. You then have the very important effort of medical affairs and medical science liaisons who are actively engaging with the key opinion leaders in the field on the science and the medicine behind pulmonary hypertension therapy. I think I am not exaggerating to say there is no orphan disease in cardiology or pulminology which is undergoing more rapid development in terms of figuring out the optimal treatment algorithm that is pulmonary hypertension. It is a little bit like HIV before there was combination therapy. Physicians knew that some type of combination therapy was necessary, but people were not exactly sure on when to start the combination therapy and what were the -- what was the right initial combination, and what was the next combination to segue to ,and how was all of this different depending on the particular genotype of HIV the individual has.

Here with pulmonary hypertension, you've got idiopathic pulmonary hypertension, you've got pulmonary hypertension associated with scleroderma, pulmonary hypertension associated with lupus, pulmonary hypertension associated with HIV -- and I just listed four of over two dozen different flavors of pulmonary hypertension which our drugs test. It is the job of our medical affairs and medical science liaisons department to help parse the science of protacyclin therapy in pulmonary hypertension. Again, I think evidence of these people being the best of the best, is the fact that our medicines have top leadership positions in each of their market segments.

Last but not least, all of these medicines have to get paid for. It is obviously front page news everywhere that the payment of medicines and health care expenses is one of the most complex and dynamic aspects of economic policy in this country. So on this front, United Therapeutics takes you to the next two 90 degree segments of activity.

We have one group that works the entire payment issue from the top down, called Strategic Operations. This team is responsible for working with the payers to understand the efficacy of the different types of pulmonary hypertension treatments and help payers see the unique cost effectiveness of the United Therapeutics therapy over the much more costly route of patient deterioration and clinical worsening.

It would be delightful if there was just a single payer that our team had to approach. We would probably only need one employee in that department. It is actually astonishing that there are thousands of different payers of health care in the United States. So we have a very substantially staffed department of experts in dealing with payers from a top down perspective and explaining the pharmacal economic benefits of Remodulin, Tyvaso and Adcirca. It's taken years to build up that department and that expertise.

And then taking you the last 90 degrees of the 360, there is the issue of a patient receives a prescription, takes a prescription to be filled and is told there that is a $200 co-pay. For Americans who have done quite well in the -- in these recent economic years, that may not be an issue. But actually, the majority of Americans, a $200 co-pay is a show stopper.

It is necessary to address issues like that. For that we have staffed up over the past several years a large multi-lingual, multi-talented Patient Assistance Department that helps the patient achieve the goal that within one day of getting their prescription, they should be able to get it filled and insurance matters taken care of without any obstacles. Can't always occur in a day, but that's the goal. It's a goal this team achieves and we are very proud that we now achieve it more than 50% of the instances.

I hope these introductory remarks gives everybody a flavor thatthe core business of United Therapeutics is extremely strong. As I briefly mentioned, we have exciting pipeline opportunities with implantable and injectable forms of Remodulin that promise to take our platform yet higher and to reach ever larger numbers of the patients with the pulmonary hypertension.

With those introductory remarks behind me, I would like to open the phone to any questions. Tyrone?

Thank you, ladies and gentlemen. (Operator Instructions). First question is from Liana Moussatos of Wedbush Securities. Your line is open.

Thanks for taking my question. Congratulations on a fantastic quarter. Can you talk about growth drivers for Remodulin? And specifically, what should we expect to hear about the injectable and implantable pump? I think in the past you had mentioned that you could potentially launch implantable pump in 2014? Can you give us a time line and some kind of data points that we could monitor?

Thank you, Liana. Thanks for the compliments in us and thank you for being steadfast with the story, here. The Remodulin implantable pump reached a very important milestone since our last quarterly conference call. It is now a completely enrolled study. Terrific credit for that goes to the clinical investigators throughout the United States, but probably the biggest shout-out goes to Dr. Bourge, who has probably the largest pulmonary hypertension practice at the University of Alabama, Birmingham, and has been a leader in the implantable pump effort.

So the study is fully enrolled. Now what has to happen is that a specified number of hours of cumulative clinical time with the implantable pump has to be aggregated. The Clinical Development team has forwarded to me that now that the study is fully enrolled, they can say that that clinical number of hours is going to be reached in the third quarter of 2013. So in the third quarter of 2013, the study would be completed.

At that point in time, it is necessary to compile the information, which we would do together with our partner Medtronic, and submit it to the FDA for a label expansion of the synchroment to a pump that it may also be used for pulmonary hypertension. Exactly how many months it will take working with Medtronic to do that, I am not really sure. I would love for it to be done before Christmas of 2013. But I can only command United Therapeutics, and it is ultimately -- the submission will have to come from Medtronic.

Let's say it did happen by Christmas of 2013, then the FDA's decision could come during 2014 and it could be launched before Christmas of 2014. If there was a little slip, then it would be launched in early 2015.

I will say, Liana, it would be an amazing Christmas present for the pulmonary hypertension community to have it launched before 2014 Christmas. I have had the privilege of watching a couple of patient videos, that patients did on their own with their cell phone, who were transitioned from the external pump onto the implantable pump, and they are ecstatic. You can well understand why. Imagine if you were living with a plastic tube extending out of your body. That alone is, just to me, its almost -- the bravery of the patients, I don't have enough positive words to say about.

But aside from the plastic tube going outside your body, there is the heavy time demands associated with preparing your medicine in a sterile portion of your house, making sure no kids or cats or anything else gets anywhere near the medicine prep area. It is a lot. And then to have all of that thrown away -- it is like dump all of that stuff out because now the pump is completely implanted inside you. You don't look any different from anybody else. You can go swimming.

It is nothing short of revolutionary. And so when physicians tell me, as physicians always do if I go around the country meeting them, that the implantable pump will double the number of patients that they can put on Remodulin, I fully believe them.

That's great. And what about the injectable that you recently announced you are starting work on?

Yes, let me ask -- the injectable is a project that Dr. Jeffs has initiated and will be managing. Roger, can you sketch out for Liana a sketch along the injectable pump -- the injectable Remodulin?

Sure, maybe a little bit of background for those who may not be aware of the program. The TransCon approach, which is a deal we announced with Ascendis, it converts Remodulin to a unique pro-drug that is injected in an inert way through a carrier bound compound. The hope there is that it will be a pain-free injection, and then once released into the plasma it will cleave and will release treprostinil, which will then have its known activity.

We are in the initial stages. It is a pre-clinical development program. We are doing some formulation development, some synthesis, metabolic identification -- the whole host of things that one has to do. We think that will take us between one to two years to get into a [pre IND] study.

The good news is that, at least in animals, the bioavailability given through this pro-drug approach is very, very good. We think we can tackle the regulatory hurdle through a bioequivalence approach, much as we did intravenous Remodulin, when we showed that equivalence to subcu. So that will truncate the development timeline significantly. If that's true, if we can show the PK has a similar profile through a pro-drug approach as it would through a subcutaneous approach, we can shorten the development timeline.

We think, within a three to four year timeframe, we could make this new once-daily self-injection of treprostinil available to patients. What is nice about that, it has its own IP and it would pour a significant proprietary position for a once-daily injection well into the early 2030s.

Thank you, Roger. Thanks, Liana. Tyrone, next question.

Next question is from Michael Yee of RBC Capital Markets. Your line is open.

Thanks, Martine. Two questions. One is on your cash balance. You have an impressive $752 million in cash, $14 in share. The question is how are you thinking about using this? Is that increasing your share buy backs? Is that maybe even a dividend? How do you think about that? Maybe it is in licensing things. How do you think about that?

A great question. Let me go through the checklist you mentioned there . We are definitely a company that is committed to returning value to our shareholders through all reasonable means. And our favorite mean is growth in the company stock price. We try to support that with growth in revenues, growth in profits and an exciting pipeline.

We were, of course, disappointed with the FDA's complete response letter. But as mentioned in our conference call on that, we are doing our absolute best to turn that around, since it seems there were definitely some misunderstandings involved in the issuance of that letter.

The second nice way to return value to shareholders is to also help the stock price. But this time, instead of dealing with the numerator, address the de denominator by reducing the number of outstanding shares. And in that regard, we have been continually in the market repurchasing our shares.

And one statistic that shows the measure of our commitment to ongoing stock buybacks iswe have repurchased just about 20% of our outstanding shares over the past few years of stock buybacks. So really we are continually in there. With the recent drop in our stock price, you can be sure we are going to complete the current traunch of buyback that we initiated a few months ago.

And then the next item is with regard to dividends. There are all kind of dividends. There are one-time big cash dividends, there is recurring dividends. This is something that you can't really just decide on sort of a more of a simplistic gut feel, like a stock buyback, for example. It is something that has to be financially analyzed and in a more complex way.

We have -- I enjoy hearing the viewpoints of our holders at health care conferences, because I have experienced the diversity of opinions from our major holders in terms of dividending strategy. That's then something that our John Ferrari, our CFO, as well as Dr. Oster and Fisher in the IR group discuss with our major banking advisors, such as Bank of America and Deutsche Bank and other firms which have been advising us. So we discussed that.

And then of course, ultimately, it is an important decision that has to be made by the Board of Directors. And there is a -- again, there is a diversity of opinion in terms of one-time cash dividend, continual dividend. Are we a company that is at the right stage for that? Is that something that would be appreciated by the holders? I can assure you that we are assiduously analyzing that and looking at that question on an ongoing basis.

And then there is the area of returning value to shareholders through making a significant acquisition with a significant portion of that cash balance. There too, we are very much committed to that. Roger Jeffs just gave a nice accounting on how we were able to use some of the cash balance with the recent Ascendis deal, and create a pipeline which, as Dr. Jeffs indicated, could evolve, if the pre-clinical and accelerated clinical program works out, have a revenue producing new product in about four years. That would be truly amazing in allowing patients, even at their earliest stages of pulmonary hypertension, Class 2 patients, to give themselves a simple diabetic-like subcu injection once a day and have a zero order release of a potent protacyclin analog throughout their system for 24 hours.

This would bring prostacyclin therapy to the very forefront of pulmonary hypertension, natural history. And in fact, provide a very direct means of bringing all 30,000 patients diagnosed with pulmonary hypertension within the catchable market for a zero order released formulation of treprostinil. So truly very exciting. We constantly enjoy engaging with all of the major health care banking organizations to have them present to us acquisition opportunities, in-licensing opportunities that are in fields that we have strong core competency, so that we can leverage our core competency and exploit synergies. And certainly we use our working capital balance -- we will use our working capital balance for in-licenses or acquisitions.

That was fantastic. One question for John. Any changes in inventory level in any of the products?

For the third quarter, there was a slight increase in both on dollar value and the inventory and in patient count, days on hand. But that slight inventory increase is consistent with the prior three -- Q3 quarter inventory changes. So nothing significant, nothing major, nothing noteworthy.

Thanks, John. Thanks for your question. Tyrone, next question please.

The next question is from Mark Schoenebaum of ISI Group. Your line is open.

Thanks for the question. On the Medtronic device, to be clear, is there any new IP that would surround that device or that delivery method?

And then the second question I had was on commercialI know sometimes historically you have had sequential revenue declines in 4Q, due to seasonality. I know you are not -- I know your guidance is your guidance, but maybe you can just speak to that observation, whether or not we should be thinking about that way this year?

Can you just remind me of the structure of your sales force, please? Do you have the same people detailing Tyvaso as well as IV subcu Remodulin? Or are they somehow different? Thank you.

Thanks. So there are three questions. I am going to address questions three and two, and Andy Fisher, our Chief Strategy Officer, will talk about the Medtronic IP situation.

First we have two sales forces. One sales force focuses on treprostinil products and the other does non- treprostinil product. So the selling force selling Tyvaso also is responsible for Remodulin, since both of those are treprostinil products. And then a separate sales force handles Adcirca, that being a PD5 inhibitor.

The middle question -- what was the middle question again?

Seasonality.

As you can see, we are doing pretty well, in terms of being on track for hitting our forecast for 2013 -- for 2012 of $875 million, plus or minus 5%. So yes, I do think we are on track to hit that forecast. As you can see from the press release, we are noting that we are on a revenue run ratethat would be very consistent with hitting our 2013 guidance of $1 billion, plus or minus 5%.

Andy, can you address the IP thing?

Sure. Thanks for the question, Mark.

Hi, Andy.

Hi, how are you? The Medtronic relationship, as you know, is an exclusive one for us, in terms of our right to use the Synchromed II for the delivery of treprostinil intravenously. The delivery of treprostinil intravenously itself is already obviously covered and contemplated by existing IP. The use of this particular pump and our exclusive relationship with Medtronic is really part of the value of that relationship. As far as new additional new IP goes, we will refrain from comment on the existence of such IP. For the time being, we are most focused on our exclusive right to use that pump.

Thanks, Andy. Thanks, Mark. Tyrone, next question, please.

The next question is from Robin Karnauskas of Deutsche Bank. Your line is open.

Hi, Robin.

Good morning. Given the delay with --

Robin, it is like almost impossible to hear you. It sounds like you are underwater.

Sorry. Hopefully you can hear me. I am stranded in a hotel. So can you comment on Tyvaso? And any updated thoughts on doing another trial to get approval in Europe, given the delay with the oral?

Thanks, Robin. Tyvaso is doing very, very well. I don't know if you have ever seen this chart that we have, but it is one that kind of captures the situation in a snap shot. If you take a picture of what you need for one week worth of Tyvaso, it is seven plastic ampules. That's it. One a day. You put it in in the morning and that's it.

By the way, we formulate the ampules in our own facility, which just recently passed FDA inspection with no 483s. 483 is just the FDA logo -- verbiage and form for if they find any deficincies that need to be rectified. So we are like right on track on Tyvaso.

If you looked on the right side of the page, what would be needed for the competitive product is actually 63 glass vials. That is seven days worth of nine glass vials. Every inhalation session, the patient has to break open another glass vial and pour it in. It is just such a night and day difference, that I think Tyvaso will continue to soar in its market capture as it has been and as you see it is doing right now.

With regard to Europe, it is a very unfortunate situation that the EMEA did not agree to allow Tyvaso to move forward in Europe. We had to carefully decide whether or not we would do another trial just for Europe or instead try to address that the need for a non-parenteral form of treprostinil with another delivery modality.

And there are so many moving pieces and pieces which are moving forward in our pipeline it seemed to be best in fact to address the European patient's needs with some of the additional modalities. Let me touch briefly on three of them, which will be available -- all within a short period of time.

First and foremost there is the oral treprostinil. We did not file the results of the FREEDOM M study in Europe. because while we have a pre-set understanding with the FDA with regard to a six-minute walk distance as being assessed at the end point for the USstudy,the Europeans had already moved to a time of clinical worsening domain. And hence the FREEDOM EV study is in fact a study which is something that could support, once successfully completed, European approval. Before there would be a Tyvaso study completed for Europe of a time to clinical worsening,we would already have the FREEDOM EV study completed. And that would be used as a basis for European approval and making all treprostinil available in Europe.

Secondly we have the implantable, which while it is, strictly speaking, a parenteral delivery system,as mentioned in my introductory remarks, it is something much, much more acceptable in the European environment then walking around with a catheter and a pump. In fact, through the superb efforts of our German distributor for Remodulin OMT, they have developed a technology with a German implantable cardiovascular pump maker and have proven out the ability of Remodulin to be delivered with this alternative German implantable pump. It is notable that already more than 10% of all Remodulin patients in Europe are taking their Remodulin through this German implantable pump that is completely different from the Medtronic pump that we are doing the study with in the US.

If you look in the trend lines, we would see that before we would have Tyvaso time to clinical worsening study done in Europe, in fact, it is likely that all of the Remodulin patients in Europe would in fact be transitioned to the German OM[ implantable pump and many more patients as well. That's a way of helping the patients in Europe without doing the Tyvaso time to clinical worsening study.

And then finally the excellent once-daily injectable program that Roger just described, is in fact, originally European technology. Ascendis, is a Danish German company with some USbasing. This technology will be developed by Roger and his clinical team for worldwide application. And given the time frames that Roger discussed earlier in the call, it is also in fact quite probable that that mode of providing treprostinil in a zero order release fashion, would be available to the European patients prior to the completion of a Tyvaso time to clinical worsening study. When you look at all of those data points, it doesn't seem to be a good expenditure of money to do another kind of clinical worsening study for Europe.

Next question, Tyvaso -- I mean, Tyrone.

Next question is from Geoff Meacham of JPMorgan. Your line is open.

Hi, Geoff.

Thanks for taking the question.

How did you like the quarter, Geoff?

Good.

Me too.

Pipeline wise -- just wanted to get your sense, Martine, does the oral Remodulin outcome, does that move [Veraplas] up, in your mind as a priority? Or do you feel like what you have today for strategy for oral is going to be good enough for longer term life cycle management?

Interesting question, Geoff. We really move them both along as two forms of our strategic product development. The way we look at it is that there is a tremendous diversity in the patient population here. Each of those molecules are two very different analogs of prostacyclin. They activate different sets of the prostacyclin receptors, and they do so with different strengths. They also have different side effect profiles. And those side effect profiles are different for different patients.

Our goal being to have every one of the 30,000 USand comparable number of European PH patients on one UT therapy or another,it seems wisest to bring both of those programs all the way through to approval. So if a particular patient either had a side effect profile or not as much desired improvement with one of the prostacyclin analogs, they could be segued to the other protacyclin analog.

You see a similar situation with many drugs. In the PH base, there is legions of stories of patients who have not improved on Tracleer, and then they are moved over to Letairis and they have a remarkable improvement. I know personally of some of those stories.

There is also -- I'll admit that I do kind of apply some pressure to my sales forces with regard to the PD-5 because I find it hard to understand why would anybody take a pill three times a day, in the case of sildenafil, when you can take a pill one time a day, tadalafil. And if you look at the six-minute walk distance results and the side effect profiles, it is very much six of one, half dozen of the other. While there is no doubt that the momentum is moving toward tadalafil. As I mentioned at the beginning of the call, it is now the most prescribed one. But physicians for whom I have the highest respect tell me, Martine,there are some patients who just do better on sildenafil then on tadalafil, even though I have other patients who do better on tadalifil than on sildenafil.

This is just part of the pharmacode genomic reality that we all today in 2013, we are in the dark ages of pharmacal genomics. We are not yet being at the level of the doctor being able to screen our personal genome, much less be able to compare it to the pharmical genomic profile of different drugs and say, ah-ha, this blood pressure pill or this pulmonary hypertension pill is the best one for you. We are still in the trial and error phase. Some patients will do better on tadalafil and some will do better on treprostinil. We win exactly the same whether they take either of them. We will continue to move both forward and maintain our -- not only two shots on goal, but hopefully winning with both shots.

Thanks.

Thanks a lot. Tyrone, next question.

The next question is from Phil Nadeau of Cowen and Company.

For those waiting in the call, we have room for one more question after Phil's.

Good morning, thanks for fitting me in. Two questions. One, I was wondering if we can get an update on the intellectual property dispute with Sandoz and get your thoughts on maybe an IP settlement. It does seem like with new formulations of Remodulin coming down the pike, if you could just push out the uncertainty on the IP beyond the availability of those -- or to alleviate a lot of concerns of shareholders.

Second, Martine, at one point in the call, you mentioned misunderstandings in the complete response letter for oral Remodulin. Wondering if you would be willing to provide us more details on what those misunderstandings were?

Let me address the second question, while Andy is gathering his thoughts with regard to the Sandoz question. There were three points that were mentioned in the letter that we repeated in our press released and we talked about briefly. Those are the three things that -- I think we just have to work the system in the appropriate way to clear up the misunderstandings. One was with regard to the clinical significance -- the six-minute walk distance on oral treprostinil trials. At that point, the six-minute walk distance was in fact greater than the six-minute walk distance on Tyvaso and on Remodulin. Both of those drugs were approved based on the clinical significance of that six-minute walk distance. The FDA was absolutely brilliant for having reached those conclusions.

Since it was mentioned earlier in the call, they have become far and away the most preferred inhaled treatments for pulmonary hypertension. And there are literally thousands of patients, positive clinical experience, to testify to the clinical significance of treprostinil in Remodulin and Tyvaso witheven a lesser six-minute walk distance than we demonstrated with our oral treprostinil.

The second point that we'll be clearing up in the months ahead relates to the issue of imputation and -- data imputation. This is getting into a statistical area that I am not going to bore the people on the phone with. And anyway, I might misstate something.

The bottom line is that the imputation methodology was exactly what we had pre-discussed with the FDA, which was already approved, the fiscal analysis plan. The same imputation methodology that everybody else uses. It's totally clean and kosher as it gets. Our thinking is that maybe because of the rapid onset of the PDUFA date that something fell through the cracks in the understanding of the imputation submission. There is nothing there. There is absolutely nothing there. We will clear that up in the upcoming months.

And finally there was some forward-looking questions raised with regard to the desirability or the feasibility of a fixed dose concept for oral treprostinil. Here too, the reality of the situation is going back to flolan, which is the indigenous prostacyclin module. It has always been a molecule, whether in the indigenous form or in its analog that has been created, albeit our analogs or other people's analogs.

There is always a need to titrate the dose over time as patients develop tolerance, and as the receptors become somewhat saturated with the prostacyclin. You can pretty much draw a clean linear curve that the longer the patients live, the higher the doses they are on of these drugs. There is nothing wrong with there not being a fixed dose.

In fact, there is a lot right with there not being a fixed dose. The patients do worse if you were to limit them to a fixed dose and better if you don't. This has been shown in clinical trials. This has been shown in the field experience with flolan, with the generic copies of flolan,with our own treprostinil.

Again this was something that was mentioned, almost a dictum, if you will. We just have to work the normal channels to do so. This is such a great molecule. It offers so much promise to so many patients to free them from pumps and inhalers and to treat their disease, right at its initial diagnosis with what is the -- considered one of the most potent molecules, and for many patients, perhaps the one they need most. Some patients, their biggest problem is prostacyclin deficiency, and those are the patients you want to address right up front with oral treprostinil. I feel confident that everybody will realize that the right thing to do is to make the drug available as quickly as possible.

Andy, can you address the Sandoz question?

Sure. Thank you for the question. To update everyone on the status of the case, pursuant to the scheduling order issued by the court back in, I think it was July, that scheduling order is available for public download from the federal court docket. We are engaged in the procedural back and forth set forth in that scheduling order right now. There is not anything really to update you on, other than the fact that the parties are engaged in the activities outlined in that scheduling order.

With respect to your question about settlement, given that we are currently engaged in that back and forth and given the early stage of the case and the lack of substantive rulings by the court and substantive exchange of information between the parties, I think it is way too premature to get into any discussion about such things right now. In any event, our policy is not to comment on active litigation in that way. So hopefully that helps answer your question.

Next question, operator.

Our next question is Jim Birchenough of BMO Capital.

Thanks. Tyrone, we will talk about Jim's question now and then take one last one after Jim's question. Jim?

Thank you for fitting me in, Martine, and congratulations on the quarter. Just a question on the continuous delivery device. The implantable intravascular catheter is not yet approved by FDA. Is that something that will get approval prior to filing for an expanded use of the Medtronic pump? Or does that happen in concert with the filing?

And then the broader question is where do you see the implantable pump fitting in separate from the Remodulin switch business and from the Tyvaso switch business. I guess the concern would be patients looking for better convenience might just use this as an alternative to Tyvaso. I am trying to get a sense of what the incremental market opportunity would be. Thanks.

Let me answer your second question, while I ask Roger to gather his thoughts with regards to the first question on the regulatory approval process for the indwelling catheter associated with the implantable pump.

The research that we have both, statistical and anecdotal all confirms the fact that only about half of all of the patients who a physician would say, you need to have a continuous, measurable level of prostacyclin in your system actually avail themselves of that. And the patients who are on Tyvaso, I think it would be an odd and rare situation that those patients would feel that the brief one to two minutes four times a day inhalation with Tyvaso was an inconvenience strong enough to accept having a pump implanted in them that had to be filled by a nurse specialist or a doctor once a month. And simply the fact that they have this machine in them, whereas with the Tyvaso they don't. The Tyvaso is not appearing to be burdensome to those patients.

Instead the natural market is for the patients who are no longer able to have their disease managed on Tyvaso because their pulmonary hypertension is progressing. And the doctor is telling them Tyvaso has a local effect. It has a great local effect. But shortly after an inhalation, we can't really detect very much treprostinil in your blood stream. What you need to do is you need to go on either the subcutaneous or the intravenous form of Remodulin so you can have a continuous high level or treprostinil circulating in your blood stream. At least half the patients just say no, I can't do that.

You might think, well, why would a patient risk their life to say no? The fact of the matter is that it is almost impossible for those of us on the phone to put ourselves in the patient's shoes. The patient has been told that they have a life-threatening disease. They have read on the internet that the mean survival is five to seven years if well treated.

They have read on the internet that once you are down to the other drugs not working for you and you are on the pump, you are at the last stage of the disease. It is entirely normal for a person to think at that point in time, maybe their life is in somebody else's hands. And they should not put up with the strong inconvenience and difficulties of an infusion pump.

I have had many of the leading [KOLs] in this country tell me basically in these words, Martine, I can be pretty strong and clear with patients when I need to, and I tell them it is time you need to go on the pump, and they tell me, no, doctor, I don't want to do it. That happens at least half the time.

So it is these refusenics, if you will, these second half of the Remodulin patients which would be the growth potential for the implantable pump. That represents in the USabout $400 million, maybe $500 million in market potential.

So I don't think it is really going to cannibalize the Tyvaso space. I think instead it will cannibalize the subcu and IV pumps, and then it is going to grow into half the patients who don't want to walk around with something hanging outside their body and have to deal with that.

Roger, do you have your thoughts gathered with regard to the regulatory approval track on the Medtronic catheter?

Certainly, Martine. Jim, you are essentially correct. The pump is already approved for other uses, but it is novel here. What is the basis for IDE is the catheter. When we file, we will file the PMA based on the system, which is the use of this catheter with this pump to infuse Remodulin, and the characteristic flow dynamics associated with that. The filing will be more system-based than catheter-based. That's no issue at all, really. That's the way the filing will port. Hopefully, that's helpful.

Very helpful. Thanks, guys.

All right, Tyrone, last question.

Our final question is from Terence Flynn of Goldman Sachs. Your line is open.

Congrats on the quarter, as well. Just wondering if you can comment on any trends you are saying on the Tyvaso side with respect to treatment duration, types of patients there? And ultimately, where do you see this product -- where or when do you see this product peaking out? Thanks.

Thanks a lot, Terence for the congratulations. The responsibility for the continued growth and strategic development of Tyvaso rests with Roger. So Roger, perhaps, you could address that question.

Thanks for the question, Terence. When we look at the market dynamics for Tyvaso, obviously we are seeing some strong and consistent growth, as evidenced by the earnings. Some of the benefit is from the pricing increasethat we recently took in the previous months.

What we are seeing from a market dynamic is really three drivers of the business, which is we continue to gain new prescribers,we continue to gain depths of prescriptions within existing and these new prescribers, and then finally, we continue to focus on and maintain a duration of therapy which is approaching 18 months. It is certainly a goal for us that once we start a patient on therapy, to manage that patient to the best of everyone's ability, so that the benefits of those therapies are durable. Those three are key drivers.

And then in terms of strategic product development, we are also working on some modifications to the device so it is a little more friendly to the patient in terms of ergonomics and other things. There are some future things we will do to help patients with the management of the device. As Martine said, is very well received by the market, as evidenced by our patient share --80% plus of the inhaled market is ours. And I think [Actilion] recently reported a decline in the market share.

So everything, particularly with the growth of prescribers, the depth of prescriptions, and then a focus by our sales and marketing team and our medical science liaison team and our distribution partners on improving the duration and management of Tyvaso continue to lead to the numbers that we are seeing today and look forward to seeing tomorrow.

Thanks, Roger. Thanks, Terence. So I would like to now wrap up by thanking everybody for participating in this call. Thanks for the wide range of your questions.

In summary, the core business continues to be very strong. Growth going forward looks very positive. We have exciting new products in our pipeline, products that promise to make what might otherwise be generic forms of treatment entering into the market place. And finally, we have a important challenge in front of us that we are focused on, on turning around the complete response letter on oral treprostinil so that we can all do the right thing and bring that very important medicine to the benefit of thousands of pulmonary hypertension patients.

Thank you, everybody, for your participation this morning. We look forward to seeing you at upcoming health care conferences. Operator, you can now disconnect the call.

Ladies and gentlemen, thank you for participating in today's United Therapeutics Corporation Third Quarter Earnings Conference Call. This call will be available for replay beginning at 8.30 AM Eastern Time today through 11.59 PM Eastern Time on Friday, November 9th, 2012. The conference id number for the replay is 348-579-15. The number to dial for the replay is 855-859-2056 or 404-537-3406.

Thank you for your participation in today's conference. You may now disconnect.