United Therapeutics Corp (UTHR) 2013 Q1 法說會逐字稿

Good morning. My name is Sayed and I will be your conference operator today. At this time, I would like to welcome everyone to United Therapeutics Corporation First Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

Remarks today concerning United Therapeutics will include forward-looking statements which 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 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 factors affecting such forward-looking statements.

(Inaudible) Dr. Rothblatt, you may begin your conference.

Good morning, everyone. Welcome to the United Therapeutics First Quarter 2013 Financial Results Conference Call. I'm joined on the call this morning by my colleagues, Dr. Roger Jeffs, President and Chief Operating Officer of the company; Mr. John Ferrari, Chief Financial Officer of the company; and Mr. Andrew Fisher, Chief Strategy Officer of the company. I'll provide a few brief opening remarks and then open up the lines to any questions.

I'm pleased that our first-quarter 2013 results were solid, providing a strong foundation for continued growth. Our pipeline continues to grow, with two Phase III trials, a new Phase I trial of mesenchymal stem cells in PH patients, and advances in our strategic product portfolio.

Some particular high points that I'd like to bring to everybody's attention are that the revenues for the quarter have grown from $204 million during the matching quarter last year up to $245 million this quarter. I think particularly striking are that the sales of Tyvaso have grown 35% from the matching quarter, very much closing the gap between Tyvaso and Remodulin sales at $114 million and pretty much hearkening the point where we now have two lead products more or less neck and neck in terms of being primary contributors to the company's revenues -- Tyvaso and Remodulin.

Taking a look at the trend lines, we continue to believe (inaudible) that Tyvaso sales will end up surpassing Remodulin sales in the very near future to become the company's primary product.

With regard to Adcirca, it's striking that sales increased 51% from the matching quarter previously and now clearing the way -- the most prescribed medicine in the United States for pulmonary aterial hypertension.

Our pipeline has never been stronger, with two Phase III trials -- the FREEDOM-EV trial of oral treprostinil in combination with other therapy, a time to clinical worsening endpoint. That's the trial being conducted in numerous countries throughout the world -- of course, the US, Europe, China and other major markets around the world -- and will be our largest trial ever of any therapy for pulmonary hypertension. The second Phase III trial is our (inaudible) trial -- that's beraprost extended release in addition to Tyvaso -- also a time to clinical worsening endpoint. That trial is being conducted in the United States.

We also have teed up at the Phase I line -- in addition to the mesenchymal stem cell study in PAH -- our first antiviral, a result of our special partnership with Oxford University. We'll begin testing in dengue disease later this year. All expenses associated with that trial are paid for by the US government pursuant to our grant from the National Institutes of Health.

I'd also like to remind everybody that beyond Phase III, we have a study which is being wrapped up -- a compatibility -- a biocompatibility study -- for our monoclonal antibody, 1418, against neuroblastoma, which was licensed to us by the National Cancer Institute, and is being prepared for regulatory approval in both the US and oversease.

Finally, with regard to the advances in our strategic product portfolio, that strategic product portfolio revolves around our TransCon platform of providing a once-daily pain-free quick injection -- like an insulin-like quick injection -- of a special conjugated form of both treprostinil and, separately, beraprost to provide zero-order relief of those potent prostacyclin analogs over a 24-hour period. We believe that that TransCon portfolio represents the ultimate future of prostacyclin therapy for pulmonary hypertension, providing zero-order relief of a true prostacyclin analog with a simple delivery, and therefore represents a multi-billion-dollar revenue potential for us as we move into the 2020s.

So with those introductory remarks, I'd now like to open up the phone lines to any questions.

Thank you. (OPERATOR INSTRUCTIONS.) Our first question comes from Michael Yee from RBC Capital Markets.

Good morning. This is John on behalf of Michael Yee. Thanks for taking my question. Could you just provide us an update on the timeline and just more detail on the implantable pump? What data will we get this year exactly? And just remind us on the study design. Thank you.

Sure, John. Let me give you a couple of kind of 30,000-foot views on the timeline and then I'm going to pivot to Roger to walk you through the details of the study designs. He's more adept at that information than I am. Basically, it's a -- it's purely a safety study, not an efficacy study. And the -- so there are a specifically calculated number of patient days of exposure until you reach the necessary number to (inaudible) safety. Originally, those calculations assume a certain dropout rate from the study and we were originally thought to be in the October/November timeframe. However, the dropouts have been much less than expected in that study, and currently we're believing that we will reach the necessary number of 75 patient years worth of exposure in the late July timeframe of 2013. From that point in time, there is a necessary process to go through with our partner, Medtronic. As you know, the implantable pump is a Medtronic product and the catheter -- the unique catheter that's associated with it is a Medtronic product. The unique syringe to fill the catheter is a Medtronic product. So all the regulatory filings will have to be done Medtronic -- just a sort of a trivial filing by us. So we're going to pretty much have to march to their regulatory processes and timelines. I would like to 2015 as the year for product introduction of the implantable form of Remodulin, assuming that a regulatory filing could get in by some time in 2014 and that the FDA would (inaudible) in something like a 6-month time frame.

Roger, can you spell out exactly what is the trial's parameters (inaudible)?

Sure. Yes. Sure, Martine. So this is a very exciting study that we enrolled 60 patients at 10 sites in the US, and as Martine had said earlier that we expect to enroll (inaudible) the accrued safety data some time in Q3 of this year. Basically what we're looking to achieve is 60 patients followed for one year or 60 patient years of exposure, and that's what predicts the August or September completion of that safety data. As Martine also said, there's two components of the filing. Medtronic will file a PMA, seeking clearance to use the Synchromed II with Remodulin, and in tandem, we will seek a label supplement to describe the characteristics of the Synchromed infusion in our Remodulin label. To be respectful of both of those requirements, Medtronic has some things that they need to do to sufficiently have all of the NDA-enabling study for the PMA, and then we have things that we need to do to complete our NDA supplement. So, as Martine said, to do all of that, both from the Medtronic side of the fence and from our side of the fence, that would predict a 2015 approval.

Thanks, Roger, and thank you for correcting me. Just so the transcript is clear, it's 60 patient years, not 75 patient years. Thanks.

Yes.

Next question?

Thank you. Our next question comes from Mark Schoenebaum from ISI Group.

Hi, Martine. This is Salim on behalf of Mark. Actually, this question is for you or Andy, I presume. On the Markman, could you remind us of the date specifically -- I was looking at the public docket. I don't think it's listed there. And then also, is there anything in particular we should be looking for when we see the -- when we get the -- I guess the Markman results or the transcript? Any particular terms that you think are more important than others that we should be looking out for? Thanks.

(Inaudible). Thanks. Andy is comprehensively responsible for the Sandoz matter so let's let Andy talk about that.

Sure. Thanks for the question, Salim. So yes, Markman's hearing in the first case is next month. I believe it's -- I think it's May 20, to be specific. The -- in terms of trying to qualitatively assess the potential outcomes of the hearing, I'd prefer to stay away from that just because it's a litigation matter, but there -- yes, of course there are claims being construed. I know oftentimes, from an investor perspective, there's a question about cases turning on Markman hearings. This is a very complex case with a number of patents at issue and obviously many claims within each of those patents. So I'm not sure this particular Markman hearing fits that mold that I just mentioned. So once the Markman hearing has occurred and the outcome is known, we'll obviously be able to discuss it and walk you through whatever the outcome is. But again, it's fairly straightforward. And that also just brings up the point that this is a Markman that is just for the first complaint that was filed. As we'd previously disclosed, there's a second pending lawsuit related to Sandoz's subsequent amendment of the original ANDA filing to add the three additional concentrations of Remodulin to their filing, but that case is proceeding on a separate calendar currently, and at present, it -- we're working on agreeing upon a scheduling order with Sandoz and the court. And at present, that would also call for a separate Markman hearing for the second lawsuit, which would take place down the road.

Super. Thanks, Andy, so much. Operator, next question?

Thank you. Our next question comes from Phil Nadeau from Cowen and Company.

Good morning. Thanks for taking my questions. Martine, I was wondering if you could talk a little bit more about the beraprost Phase II trial and give us more details on the design there and also talk commercially about where you think that could fit into current portfolio. What unmet medical need does it fill?

Yes. I probably -- I'm just going to give you some broad outlines. We just got FDA clearance on the trial design a couple of weeks ago, but it pretty much is the -- is a normal and customary nowadays time to clinical worsening protocol, similar to (inaudible), (inaudible), FREEDOM-EV -- basically the new standard for PH clinical trial designs. The unmet medical need that it serves most prominently, in my mind, is I am really happy that Tyvaso is growing so rapidly and have mentioned in my introductory remarks is essentially our primary product now as it's in the shadows of eclipsing Remodulin for the top revenue spot. However, I'm troubled by the fact that the patients' duration on that therapy, while it has increased significantly from when we launched -- it's right now on average about 18 months, and that's not as long as I would like. I would like to see patients stay on that therapy quite a bit longer. When we've gone ahead and carefully understood the whys and wherefores associated with this, the one thing which is -- which stands out is that the Tyvaso is unsurpassable in terms of being a pulmonary selective vasodilator and delivering the drug on target right there where it's needed. However, the beauty of Tyvaso compared to, say -- compared to Ventavis -- is also somewhat of a pharmacodynamic shortcoming in that a patient cannot -- does not have to take Tyvaso more than 4 times a day. I don't think realistically patients can really comply with an inhalation therapy more than 4 times a day. Sadly, I think this is (inaudible) for the -- at least from the market research data that we get -- that the mean duration on Ventavis is only 6 or 7 months because -- that drug being less of a pulmonary selective vasodilator than Tyvaso -- patients need to take it 6, 8 or more times a day, and nobody in real life can really -- I won't say nobody, but just very few people in real life can comply with that. And as a result, the disease progresses more rapidly than would otherwise be the case. So the beauty of taking one beraprost pill at the exact same time that you take one Tyvaso inhalation is it keeps compliance in sync. We found compliance with Tyvaso to be superior. And it's getting even better with our next-gen and even our third-gen Tyvaso inhalation devices, making it more and more portable, more and more [possible]. So the compliance with the 4 times a day is great. The beauty of adding beraprost to that is then we're able to basically extend the duration of a prostacyclin analog in the patient's bloodstream for a longer period of time than in a case if you just inhaled Tyvaso 4 times a day. So you begin to approach the 24-hour zero-order relief type of delivery that you can, in general, only get from a parenteral therapy or, as I mentioned in my introductory remarks, our strategic product which is the TransCon treprostinil. Now, of course, it might be in the patient's best interest to be on a parenteral therapy all the time, but the fact of the matter is that is, by definition, an invasive therapy. Patients resist going on Flolan or Remodulin until it's clear that they have exhausted all of the other options. So the unmet medical need here, to (inaudible) full circle to your question, is there are 25,000 patients diagnosed (inaudible). Despite all of the best efforts of ourselves, (inaudible), Gilead, Pfizer, Teva -- these patients are still dying on average in about 5 to 7 years after diagnosis. And that's a pitiful and unfortunate situation. The -- more patients die from pulmonary hypertension having never had the benefit of prostacyclin than patients who die from pulmonary hypertension with prostacyclin. So our hope is that by combining beraprost extended release together with Tyvaso, we will be able to move the number of patients on prostacyclin therapy up from the roughly 8,000 that there are out today up towards the 25,000 patients who could be benefiting from it and push survival with this condition up into the double-digit years.

Next question please?

Thank you. Our next question comes from Salveen Richter from Canaccord.

Hi. This is Andrew Goldsmith on the line for Salveen. Thank you for taking my question. I was just curious if you could give us an update on the stock buyback program -- the $420-million one? Maybe how much was in 1Q or 2Q or any other color? Thanks.

Yes. I'm going to ask John Ferrari, our Chief Financial Officer, to comment on that.

Our buyback program started in earnest in March. For the quarter, we've only bought back about 99,000 shares. But as of Monday, we've bought back 700,000 shares and we've spent about 10% of the program thus far.

Thanks, John. Next question?

Thank you. And our next question comes from Richard Lau from Wedbush Securities.

Morning, guys. Are you guys still on track to release the Phase I data for self-injectible treprostinil by year-end? And also maybe can you remind us about the trial design there? Thanks.

Thanks. Can you repeat the first part of the question? It got kind of garbled.

Oh sorry. Yes. Just are you still on track to release the Phase I data by year-end for --

Phase I for the TransCon treprostinil?

Yes. Yes.

Okay. So TransCon treprostinil's still in a preclinical stage of development and our schedule is to commence Phase I studies next year in 2014.

Oh okay. Thank you.

Yes. We have -- I did mention in my introductory remarks that we've made some advances in that program, and what I would share with you is that the chemistry to combine the unique linker, which is able to achieve a non-enzymatic 24-hour release in bloodstream, to a PEG, to a prostacyclin analog, is novel -- far from trivial, and in fact, it has never been done before in scale (inaudible). We are really blessed here at UT that we have the best prostacyclin scientists in the world, and this team has successfully achieved a novel scale of synthesis of this 3-part molecule. And it was definitely the basis for patent filing. It's very novel and that clears the way for us to produce to adequate quantities needed for Phase I studies and expanded pre-clinical studies. Originally, the work that we thought would take about a year and a half of chemistry -- and there was no assurances that it would be able to be achieved -- was, in fact, achieved in under 6 months with much better yields than anybody could have hoped for. So that was a major advance in that program. And given that our partner who we licensed it from had already demonstrated -- in small quantities of the drug that they were able to product in a lab environment -- the exciting results in non-human primates that led us to invest in the program, we continue to be very, very excited and positive about this as basically crown jewel of the strategic product portfolio.

Great. That's helpful. Thank you.

Next question?

Thank you. Our next question comes from [Natasha Esman] from [Sera].

Hi. Thank you for taking my question. I wanted to ask about your program with regards to the PLX Phase I program -- if you could give us some color on that. I know that you said that you have started the trial or plan to start the trial. If you could give us some timelines, that would be great. Thank you.

Thanks for the question on our neuroblastoma program and the -- oh I'm sorry -- the Pluristem program for the mesenchymal stem cells for pulmonary hypertension. Sorry about my misspeak there. Roger is responsible for managing that program as part of our regenerative medicine group. And Roger, can you provide some answers there?

Yes. Certainly, Martine. And thanks for the question, Natasha. It's a program we are tremendously excited about. We view it as a leap forward in next-generation type of therapy for patients with pulmonary hypertension -- certainly novel and something never contrived before. So just as background, we licensed mesenchymal stem cells, or what are also called placental-derived adherent stromal cells, from Pluristem and we've been doing a lot of the IND-enabling studies -- toxicology and other things -- throughout the year. And we're very pleased now to say that we have the IND for a Phase I trial in (inaudible) patients approved, which will be conducted at a single center in Australia. It's a very simple first introduction of the PLX cells into patients with PAH, and as such, we'll go with three escalating dose cohorts. So we'll start with a very minimal cell load. Once that's viewed as safe, we'll then go to the second level of cells and then finally to a third level of cells, which we've predicted based on all of our animal work. We've done some proof-of-concept studies in monocrotaline and (inaudible) mice models, which are somewhat predictive models of pulmonary hypertension in murine models. And based on those results, we have predicted the weight-based application cells for these patients. But again, we'll go very carefully since we haven't applied these cells to patients. It'll be an intravenous infusion and we'll be looking for safety measures as well. It's a single-dose study. We will follow the patients obviously chronically, and we will look for measures of safety that include measures that would -- someone would typically use for efficacy, including hemodynamics, 6-minute walk and other things. Given that it's a single dose, it's low-dose and we've yet to define the dose profile, we're not really looking for efficacy here, but we will peek, so to speak. But we're excited. We think the first patients will come in the following month or so. And then based on a successful outcome of that, we will then design Phase II dosing studies probably in the next year. But very exciting. There's a lot of buzz in the PH community about this next-gen program and certainly the data that we have preclinically we will begin to publish in major congresses and I think that will amplify the excitement that we're currently seeing with the program for those in the know already. So that's the basics of the trial. Again, just safety. Don't want to have any expectation that we're trying to show efficacy here, but just simply a safety study.

Thanks, Roger. Terrific answer. Next question please?

Thank you. (OPERATOR INSTRUCTIONS.)

We have time for just one last question.

Okay. We do have a question from Joseph Schwartz from Leerink Swann.

Great. Thank you so much for taking the question. I was wondering if you could give us an update on the neuroblastoma program?

Thanks, Joseph. Excellent and that's the question I was about to answer before so I'm glad you did ask it. I'm really excited about that program. It's run by one of the terrific scientists in our company, Dr. Mary Smith, who has long lineage in this area. She is ultimately managed by Dr. Jeffs. So Roger, if you could basically give everybody a briefing on where we are with the neuroblastoma regulatory approval process US and Europe.

Sure. And great question, Joe. So just maybe a primer for those who aren't familiar with our neuroblastoma program. So we license from MCI a monoclonal antibody that binds to a lipid called GD2 and the antibody is Ch14.18. It binds to the surface of neuroblastoma cells. And for those who don't know, neuroblastoma is a cancer of the peripheral nervous system and it's responsible for about 12% of all deaths due to cancer in children under 15 years of age. 14.18 was demonstrated by -- through work with a COG and the NCI to prolong survival in a Phase III trial in patients with high-risk neuroblastoma, and that data was published in the New England Journal in September of 2010. The NCI has also completed an open-label clinical trial in an additional 105 children to better define the safety (inaudible) profile of Ch14.18 immunotherapy in children. Following our license, our role in this now is we are developing the commercial manufacturing capability for the antibody in our Silver Springs facility, and we are also currently enrolling a human PK study with our -- what we'll call the UT manufactured product in children, and we are close to enrolling that study. So once we complete all of the basically process validation batches from the scale up as well as collect the data for the human PK and [for] comparability, both in terms of genetics and other things, we will file the DLA. Our expectations for the filing are actually pretty near-term. So in Europe, we plan to file by the end of the year, and in the US, we plan to file in the first quarter 2015. So a very exciting program. Certainly the data is as robust as one would like. It's a survival endpoint. And then based on the high, high, high unmet medical need, we think it would an expedited review. We certainly will seek that. So based on the filings, we would think a review completion by -- within a 6-month time frame or so would be predicted. So that's the update on that very exciting program, Martine.

Thank you, Roger. Thank you for the question. So the wrap-up here -- it has been, as of the beginning, a very good year and a very good quarter for United Therapeutics. The fundamental approved products -- each of them continue to grow. Remodulin's growth continues to be organic within the United States, notwithstanding the fact that it is -- competes against epoprostenol -- both generic and branded forms of it. We look for continued growth in Remodulin overseas as well. We now have approval to launch Remodulin in China. We expect within 1 to maybe 2 years at most to have approval to launch Remodulin in Japan. Just last year, we got approval to launch intravenous Remodulin in Europe, and this coming 12-month period we should be able to wrap up most of the reimbursement authorizations we need to complete the rollout process for intravenous Remodulin in Europe. So we expect to see continued growth in that franchise. Tyvaso, as I mentioned, is now beginning to lap Remodulin. And Adcirca is growing fastest of all. The pipeline has never been more active, with two Phase III trials and all the different post-Phase III and pre-Phase III work that Roger covered so wonderfully. So it's a great time to be here at United Therapeutics. Thank you for your calls and we look forward to seeing you either at upcoming health care conferences or pulmonary hypertension thoracic type of meetings in the near future. Thank you. Operator, you can conclude the call.

Thank you for participating in today's United Therapeutics Corporation First-Quarter 2013 Earnings Conference Call. This will be available for replay beginning at 11.30 a.m. Eastern today through 11.59 p.m. Eastern, May 3, 2013. Conference ID number for the replay is 32040188. Again, that number is 32040188. The number to dial in for the replay is 855-859-2056 or 404-537-3406. This concludes our program. You may all disconnect and have a wonderful day.