United Therapeutics Corp (UTHR) 2013 Q4 法說會逐字稿

Good morning. My name is Kevin, and I will be your conference operator today. At this time I would like to welcome everyone to the United Therapeutics Corporation fourth-quarter and annual 2013 financial results conference call.

(Operator Instructions)

Remarks today concerning United Therapeutics Corporation will include forward-looking statements representing the Company's expectations or beliefs regarding future events. The Company cautions that such statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Please see the Company's latest Forms 10-K and 10-Q and subsequent filings with the SEC for additional information on those risks and uncertainties. There can be no assurance that the actual results, events or developments referenced in these statements will occur or be realized. The Company assumes no obligation to update forward-looking statements to reflect the actual results, new information or changes in underlying assumptions.

Today's remarks are intended to educate investors about the Company. This may include reporting on the progress and results of clinical trials and other developments with respect to the Company's products

Today's remarks are not intended to promote the Company's products, to suggest that they are safe and effective for any use other than what is consistent with their FDA-approved labeling. Or to provide all available information regarding the products, their risks or related clinical trial results.

Anyone seeking information regarding the use of one of the Company's products should consult the full prescribing information for the product, available on the Company's website at www.unither.com. Thank you.

Dr. Rothblatt, you may begin the conference.

Thank you very much, operator. And good morning to everybody joining our 2013 annual financial reports conference call, which will also cover the fourth-quarter 2013 results.

I'm joined in the conference call today by our President and Chief Operating Officer, Dr. Roger Jeffs; by our Chief Financial Officer, Mr. John Ferrari; and by our Chief Strategy Officer, Mr. Andy Fisher, who is also especially good at answering questions relating to patents, IP and litigation.

Let me give a brief introductory talk here, and then open up the phones to questions. And I'll be pleased to either answer them myself or to refer the questions to Roger, John or Andy, as would be most appropriate.

So reflecting back on 2013, I think it's pretty indisputable that 2013 was the best year in United Therapeutics' corporate history. It was a year in which our revenues for the first time not only crested $1 billion -- which was our original forecast for this year -- but in fact, soared 10% above that.

It's a year in which our annual non-GAAP earnings crested over $0.5 billion. And that is certainly a sign of a well-operating Company that can deliver on non-GAAP earnings of over $0.5 billion on revenues of just over $1 billion.

If you're taking a look at the financial results, you have noticed that the GAAP earnings per share showed a loss for the year. However, this is simply an artifact of the accounting treatment for the share tracking awards which we issued to our employees in lieu of equity-based stock options or restricted shares.

These type of share tracking awards are required by the accounting rules to be mark-to-market every quarter. And continuing on the theme of this being our best year ever, in 2013 and in the fourth quarter in particular, our stock price soared to its highest level ever, bringing our market cap to over $5 billion.

So as a consequence of this very great news in terms of the growth in our stock price and our market cap, we are obligated by the accounting rules to mark-to-market the share tracking awards. And that result today inflated value for those awards and inflated expense, and hence the gap loss. Whereas the actual Company's performance is best demonstrated, in our opinion, by the non-GAAP earnings of over $0.5 billion.

Now, I certainly am aware of the adage that a Company really cannot be evaluated based on what it's done in the past, but it's only going forward that is most important. And while I can say -- and I think without much room for disagreement -- that 2013 was the best year ever for United Therapeutics, I'm equally confident in saying that 2014 will be an even better year. Let me go through a few of the key moments -- key points supporting that.

2014 will be better even than 2013. First and foremost because 2014 is a year in which the Company has realized and will realize its original founding purpose.

The purpose of United Therapeutics was to develop an oral or pill form of the important vasoactive molecule prostacyclin, which is present in all persons' bodies. And in fact, a mammal or a person is not even viable without the prostacyclin gene being expressed in their body.

However, one of the most marked findings in terms of the differences of pulmonary hypertension patients from non-PAH patients is that the PAH patients have a marked reduction in the levels of prostacyclin and its metabolites in their bloodstream. As a result, their pulmonary arteries are not as vasoactive as those of the rest of us. And as a result, the pulmonary arteries tend to suffer further immunoproliferation and obstructions to blood flow oxygenation, with the result of a increasingly enlarged right heart, and ultimately, right heart failure.

So the beautiful thing about prostacyclin is that it prevents these negative things. And hence, most people don't have those symptoms.

Now, it was realized very early on, around the late 1980s, early 1990s, that people who lacked appropriate levels of prostacyclin, especially pulmonary hypertension patients, could have those prostacyclin levels increased by giving them prostacyclin exogenously, in other words, from outside their body. It was a Nobel Prize achievement to synthesize the prostacyclin molecule, first done by John [Bane], the Founding Chair of our SAB.

And the problem, though, that immediately faced pharmacologists was that prostacyclin in the body has a half-life of less than two minutes, and the DNA is continually re-expressing signals to have more prostacyclin made. And similarly, pharmacologically, when prostacyclin was first synthesized, it would last only for two minutes.

So our first product, Remodulin, continuously, 24 hours a day, infuses prostacyclin into the patients' bodies. Our second product, Tyvaso, tries to achieve a similar effect by having the patient breathe nine puffs a day -- nine puffs at a time four times a day, our prostacyclin analogues molecule.

But the Holy Grail -- the goal of our Company, was to have a pill that a patient could take just two or three times a day and would give them the types of normal prostacyclin levels that non-PAH patients have. We worked assiduously at this goal for many years. And thanks to the efforts of Dr. Roger Jeffs and his team, we were able to successfully achieved FDA approval in the fourth quarter of our oral form of prostacyclin, treprostinil.

Now, that was certainly a big part of what made 2013 the best year ever for us. But the reason why I believe 2014 will be even better is because 2014 is the year in which we will launch oral treprostinil under the trade name Orenitram to the pulmonary hypertension markets in the United States.

And I can certainly assure everybody on this phone that there is not a prescriber of medicines for pulmonary hypertension who have, say, more than or less than 30 or 40 patients -- I'm sorry, who has more than 30 or 40 patients. In other words, a significant treater of people with pulmonary hypertension. All those physicians are very excited about the advent of Orenitram, oral prostacyclin analogue called treprostinil, that we will launch toward the middle of this year.

It is one of the signal, iconic developments in the history of pulmonary hypertension to have an oral ability to help increase the prostacyclin levels of people with pulmonary hypertension. And that will become part of the prescribing reality in 2014. Hugely positive fact in the history of our disease.

In addition, every indication is that Remodulin, Tyvaso and Adcirca will continue to increase their sales levels to new records in 2014. Already in the first couple of months of this year we are seeing growing sales of Remodulin, Tyvaso and Adcirca, as compared to last year. And all indications are that all three of these drugs will reach record revenue levels during 2014.

Another very exciting fact about 2014, is we will really come to the -- what is called the hump level or the peak enrollment rate in two different pivotal trials of new treatments for pulmonary hypertension; Orenitram in combination with PDE5 and ETRA, and oral Beraprost in combination with Tyvaso.

So as we enter into 2014, in summary, I can say that while we have delivered strong results in 2013 reflecting growing demand for Remodulin, Tyvaso and Adcirca, all signs are that we will see yet higher levels of revenues and higher levels of patients using all three of these treatments in 2014.

In addition, while during 2013 we successfully brought a fourth product, Orenitram, to FDA approval. In 2014 we will be able to launch that drug nationwide in one of the most significant developments yet to occur in pulmonary hypertension. Finally, in 2014, we will continue enrolling patients in two pivotal trials demonstrating the strength of our pipeline for developing promising new therapies for pulmonary hypertension.

We enter this year with the largest market share of any product for the parenteral treatment of pulmonary hypertension with any type of prostacyclin or prostacyclin analogue. We enter 2014 with the largest share of any inhale treatment for the treatment of pulmonary hypertension, with our Tyvaso having approximately an 80% market share.

And we enter 2014 with more patients with pulmonary hypertension taking our medicines than those of any other company. And in particular, Adcirca is now used by well over half -- I believe about 60% of all treated pulmonary hypertension patients are on our Adcirca treatment. In addition, many of them, in addition to either our Tyvaso or Remodulin treatment.

So I'm sure you can hear how excited we all are about 2014, how proud we are of 2013.

And with that introduction, operator, I would like to open the lines for any questions.

(Operator Instructions)

Mark Schoenebaum, ISI Group.

This is Salim in for Mark. Just had two questions. One on tax. So with all the discussion on tax these days, I was just wondering if there was any discussion in UTHR about lowering your tax rate. And if not, what's the downside of not having that discussion?

And then on patents. So the 393 process patent that you've got last year and the 137 method patent that you just got last week -- can you confirm that Sandoz has not certified on those patents yet? And --

Okay, thanks, Salim, for those questions. And I'm going to ask John Ferrari, our Chief Financial Officer, to address the tax question. And then to ask Andy Fisher, our Chief Strategy Officer, to address that patent question. John?

Thanks, Martine. We're always interested in reducing our tax rate. I think this year you saw a blip with it going up, in part because of our share-based comp increase and [similar] correlation with section 162(m) with the tax code.

But historically for the last several years, our tax rate has been at 30% or under 30% which, for a pharmaceutical Company, is actually pretty good. So we're always taking steps to see if we can generate business credits and do things to keep the tax rate at a fair rate, around 30% or lower.

Thanks, John. Andy, can you talk about the new patents?

Sure. Thanks, Salim, for the question. So yes, you've noticed that last -- I think, late summer -- we added the 393 patent to the Orange Book for Remodulin. It's actually listed for all three of our treprostinil-based products.

And then just last week, we added another patent to the Orange Book for Remodulin -- the 137 patent. We, as you'll read in our K, we actually have a related patent that issues today, and will also be listed in the Orange Book for Remodulin.

As of yet, Sandoz has not certified on any of those patents. And we're not able to comment on the impact to the litigation, if any, as of yet. So all I can say on that is to stay tuned.

Thanks so much, Andy, and compliments, Andy, to you and your entire patent team. And to Roger and his entire chemistry and chemistry R&D team, which has wrapped up so much of this patents and strong patent position.

One thing which, for those of you who were not on the Orenitram launch call, that new product of ours is covered by, I believe, eight Orange Book patents going out to the end of 2020s. So not only is the Company's pipeline very bright, but the other thing that is really, really exciting for us is that our IP protection is strong and goes out until 2020. Operator, can you please let the next person ask a question?

Salveen Richter, Canaccord.

I'm just wondering, with over $1 billion in cash, just what your plans might be there for uses of cash? And then, just maybe the status of your launch prep for Orenitram, where you stand and what you're doing ahead of launch here.

Thanks so much. Great two questions. So I will touch on the question about cash and strategies, with regard to the use of the cash. And following that, I'd like to ask Dr. Roger Jeffs to address your question about early launch preparations for Orenitram.

So with regards to our cash, our position in using the cash is twofold. First, we are constantly on the lookout for acquisition opportunities where we can strategically expand our footprint, either in pulmonary life-threatening conditions -- where of course, we are already very strong in pulmonary hypertension.

But we would like to expand into other pulmonary conditions, given the large base of understanding that we have for that disease sector. Or for other areas where we have growing strength.

And one of those is in orphan oncology. And as you may be aware, we filed, I believe, last month or a little bit before that, for regulatory approval for our 1418 MAb as a treatment for neuroblastoma in the European Union. And we will be making a similar filing for that biologic in the United States within the next couple months or so.

So certainly before the end of this year, we are hopeful of launching a product into the orphan oncology space. And that is another area where we would be keen to use our cash to make strategic acquisitions that could build on our success in having successfully manufactured a biologic for the treatment of an orphan oncology condition. And hopefully -- crossing are fingers -- successfully getting it approved in both Europe and the US.

The other use of our cash, other than strategic acquisitions, is to return a greater amount of value to our shareholders by engaging in share buyback. And we are currently in the middle of a $400 million-plus share buyback. This is not any kind of a forecast or a promise or guidance. But we expect that, that will be completed this calendar year.

And as we continue to accumulate more cash, such cash which is above what we need for strategic acquisitions we would use for further buybacks. And just to give you a data point in terms of the credibility of my statements on this, we have already -- with the numerous previous buybacks we've done -- bought back just about 20% of our outstanding shares.

That's a pretty good scorecard in terms of our peers, and I think strong evidence of our inclinations in that direction. So with that answer to your question on the cash balance, I'd like to turn to Roger to give us all a briefing on the preparations for an Orenitram launch.

Sure, Martine. And thanks for the question. So we are in an all-systems-go preparatory period with regard to logistics for Orenitram's launch, which we still anticipate by midyear.

So in that regard, just this week in fact, we are manufacturing commercial batches, doing product labeling and packaging in our facility here in Research Triangle Park. A lot of effort in that regard. We are also developing our promotional and brand campaign, and then training materials around that brand campaign, so that we stay consistent with the labeling for the product.

And then finally, another important logistical effort that the Company is doing under Jay Watson's leadership with strategic ops, is building our patient portal or our hub assist center that has had rave remarks for their assistance for patients with Tyvaso Remodulin. To help build that infrastructure so that we are there to support patients as they come towards Orenitram therapy, as a future therapeutic option for them.

So really in a heavy logistical phase right now. Lots of activity, lots of energy and excitement as we build into the midyear launch.

Thanks, Roger. Super answer, great question. Operator, if you could please open up the lines for the next question.

Liana Moussatos, Wedbush Securities.

Congratulations on an outstanding year. And can you give us a little bit more information on the pipeline product status like implantable pump and TransCon tre self-injectable?

Sure. Great questions, Liana. Thanks very much for the congratulations. So I will touch on a little bit of that. And perhaps I'd like to ask Dr. Jeffs to comment about the TransCon products. And I will talk a little bit about the implantable pump.

So without the -- with regard to the implantable pump. This is, Liana, I think, probably going to be looked back in maybe five or ten years hindsight as one of the most revolutionary developments in pharmaceutical delivery of any drug.

And by the way, 99% of the credit of this goes to Medtronic. Their SynchroMed II Pump allows a pharmaceutical to be delivered continuously inside the body, thereby avoiding the need for a puncture of the skin, with the associated infection risks that go along with that.

And the great inconvenience and awkwardness to patients of having to walk around with both a pump and a catheter outside their body -- day and night, sleeping with it, bathing with it. You could just imagine the logistical nightmares.

So Medtronic's SynchroMed II Pump has been used very successfully in -- for example, IntraSee co-delivery of drugs. And our partnership with Medtronic was the first opportunity to use this technology for a continuous intravascular space delivery of the drug. In our case, of course, Remodulin, or treprostinil.

So we're very honored to work with Medtronic on this. And the first big step was to find out what the FDA expected in terms of regulatory approval.

And what they expected was a safety study. It did not require an efficacy study because Remodulin delivered by a Medtronic pump is no more or less of an intravenous Remodulin therapy than delivered by an outside-of-the-body pump, as we do it today.

So no efficacy study was required, just the safety study. That safety study was completed actually ahead of schedule last year, led by the industry pulmonary hypertension medical field leader, Dr. Robert Bosch. And demonstrated success in terms of its primary endpoint quite a bit better than even was called for in the study. So tremendous success in terms of that endpoint.

However, there is a lot of other secondary endpoints that have to be collected and analyzed and submitted to the FDA for Medtronic to have approval to use their SynchroMed II Pump in the intravascular space delivery of a drug, as would be the case for Remodulin in pulmonary hypertension. So they are currently in the process of collecting all of the secondary data points and related data points -- everything geared to safety -- and analyzing that and preparing for submission to the FDA.

I can't give you an exact date that we would launch the implantable pump product. Because that's a process that is really within Medtronic's control. And we certainly completely agree and respect their need to proceed diligently with safety of the foremost consideration.

So that process is moving forward. I feel very confident that it will be submitted to the FDA. I feel very confident that the data is so good that the FDA will end up with a favorable view of this.

The beneficiary, Liana, will be the patients. You may be aware of the statistic that half of all pulmonary hypertension patients who die -- which is, by the way, upwards of 2,000 people a year -- never have the opportunity to avail themselves of any prostacyclin treatment. Not Remodulin, not Tyvaso and not those of our competitors.

The reason for this -- when we asked the doctors: why are these patients dying without ever getting prostacyclin? Every single doctor says the same thing, which is that they cannot force this therapy upon a patient. And patients who are toward the end of their lives are resistant and reluctant to go on something so complicated as an outside-of-the-body pump and catheter system that has to be changed daily or every other day, medicines reconstituted, and so on.

But all of those doctors say, if you can bring implantable Remodulin to the market, where we implant in the patient's abdomen. And only every month or two months they report back to the doctor for a refill of the reservoir with this specially designed syringe that Medtronic has developed, they said this would be a game-changer for patients. And patients who would resist going on Remodulin with an outside-of-the-body pump would very -- a great many of them would very definitely except going on Remodulin with an implantable pump.

So I think this is going to be a game-changer for Remodulin, a game-changer in the field of pulmonary hypertension patients. And certainly a game-changer for the patients.

I would love to give you a specific date. But we are not in control of the regulatory process here, and I do not want to put any dates out there that might disappoint. So the process is under Medtronic's control. It's moving diligently, deliberately forward.

And we should have positive results as soon as Medtronic can put all the information together. So with that answer, Liana, let me now turn it over to Roger to talk about another very exciting pipeline product we have, which is the TransCon technology. Roger?

Thanks, Martine. Good morning, Liana. So the TransCon technology, for those who aren't familiar with it, is a license we gave with our development partner, Ascendis.

Where treprostinil is formulated with a 20,000-kilodalton PEG via proprietary linker in a 4 to 1 -- a [sociomotry capocrial II] PEG. When it's complex as this PEG linker treprostinil [amulety], it is inert. And at least in animal studies to date, when injected, it doesn't have any pain, because it's inert until it is hydrolyzed in the plasma.

So what we're doing is working with Ascendis to do a lot of the IND-enabling studies. This includes cardiovascular safety in pharmacology, toxicology and some PK and PD studies. Which are not trivial, because we have to do not only track the site treprostinil from the linker, but also the linker and the PEG [moidy itself].

Those studies are progressing nicely. And we're also making Phase 1 CTM, which is also not a trivial matter for all those who work in the PEGylation field and try to go around the nuances of PEG purity.

But having said that once again, having some very good success with our chemistry. And all that in building to a 2014 IND filing. So that we hope to inject our first patient with this agent this year.

And with the real goal to see first and foremost, their site pain associated with the injection. And if not, then what is the fate of treprostinil in the plasma, and can we achieve therapeutic levels of treprostinil over a sustained interval?

The hope would be that we only have to give this injection once or maybe twice per week, or even fewer times depending on the PK. But we'll certainly sort that out once we're in humans.

So again, another reason why we're very excited at United Therapeutics about our development pipeline, and all that is in front of us in 2014 and beyond with our pipeline. Thanks, Martine.

Fantastic, Roger. Excellent review of TransCon. Thank you, Liana, for your question. Operator we have time for one more question.

Robyn Karnauskas, Deutsche Bank.

This is Mohit Busisol for Robin. Congratulations on all your progress this year. So I have one question on your neuroblastoma drug. Could you please help us understand the market opportunity with this drug?

And then, how should we think about the pricing? And then, what are the next steps to getting FDA approval?

Excellent question. So we're talking about our first entry into orphan oncology, our neuroblastoma drug. The questions, which I'm going to ask Roger to respond to, because his team has been responsible for the development and regulatory filing.

And also he will be managing the marketing and launch of that drive, both in Europe and the US. So Roger, can you address the three points of the question?

Yes. So in terms of -- let me talk about where we are with filings first. I think Martine touched on this. We filed in December with the European authorities. And we anticipate filing in the coming months in the US. In fact just had our pre-[BLA] meeting with the FDA, and that meeting went very well. So they're anxious, and I would say very receptive to receiving this application, given the high unmet need.

With regard to the number of patients that are addressable, just to remind the callers that the antibody will be indicated, if approved, for high-risk neuroblastoma patients. If you look at the population numbers, we think the numbers are between 350 and 500 patients in the US per year, with an equal amount in Europe. So the addressable market in the US and Europe is about 1,000 patients.

Even now, I think pre-approval -- if you look at the number of those patients per year that receive the therapy -- it's in that 80% to 90% range of patients. I mean, this is a high unmet need with a very dire outcome. And this antibody has been shown, in clinical study at least, to improve survival.

So it's certainly something that physicians feel is a necessary part of the treatment algorithm already. I think that's where we are.

With regard to pricing, we're still working through the price of the therapy. It is a monoclonal antibody, and will be priced accordingly.

But we also are considerate that we did license this from NCI. And that the Children's Oncology Group was instrumental in doing the research. And it really wasn't on our nickel, so we'll be sensitive to that when we price the therapy, and we'll will try to price it responsibly and fairly.

Thanks, Roger. And perfect 360-degree answer. Operator, my head of Investor Relations reminded me that on the annual call, the time period is 45 minutes, not 30 minutes. My bad on that. So can you please take the next caller?

Phil Nadeau, Cowen and Company.

Just a couple of financial questions. So first, there are a lot of moving pieces going into 2014, Martine, as you highlighted. Just wondering if you'd be willing to give us more detailed guidance on your expectations for trends in both revenue and expenses for 2014.

And then, second question on Q4 2013. It did come in somewhat what we were modeling. I'm curious whether there was inventory changes during the quarter?

Yes. Let me -- John, if you would not mind first just commenting on the inventory. And then I'll answer the rest of the question.

Sure, Martine. So inventory during the quarter -- Remodulin inventory dropped in both value and patient days. And there was a slight increase in inventory for Tyvaso during the quarter.

Thanks, John. So with regard to revenue, I think the best guide that I can really suggest to you is to take a look at the trends that have been present for the past several years with regards to Remodulin, Tyvaso and Adcirca. These drugs seem to me to grow pretty linearly into their market space.

And all three of them are still a good ways away from total saturation of the market. So let's take a look at Remodulin for starters.

You're talking about here, as I just described in answer to Liana's question, you're talking about a pretty invasive therapy. The patient has to wear a pump, which is operating 24 hours a day. It's connected to a catheter, which is then wound into either their skin subcutaneously or intravenously.

So obviously, this is a therapy which is generally reserved for patients that are late New York Heart Association functional Class III, or perhaps functional Class IV. And there are, by most public estimates that I've read, up somewhere between 25,000 and 30,000 patients treated for pulmonary hypertension in the US.

And usually the numbers that I see say about 40% of them are functional Class II, about 40% of them are functional Class III, and maybe 10% Class IV and 10% Class I. That's how the bell curve wraps around that population.

So if you're looking at the Class IVs, you're seeing that there is maybe something like 2,500 to 3,000 Class IV patients. And then if you're looking at the late Class IIIs, total Class IIIs, there might be something like 10,000 to 12,000.

So the late Class IIIs might be something like 2,000 to 3,000 out of that. All told, you're looking at a addressable market for Remodulin of about 6,000 patients in the US.

Now, of that addressable market, we have captured about half of it. And every year, as you can see from our growing Remodulin revenue numbers, we continue to capture more and more.

And I tell you, you can tell that from the Remodulin numbers, because we have not increased the price of Remodulin for quite a few years. I'm sure it's more than three years since we've increased the price of Remodulin. So the growth you see in Remodulin reflects real growth in patients. And that's continued year after year.

The situation is even more similar, but more dramatic for Tyvaso. Tyvaso is an inhalation product, so it's a product that perhaps the entire population of functional Class III patients could avail themselves of. There are upwards of 10 to 12 functional Class III patients, as I just mentioned. (sic - see above, "10,000 to 12,000") At present, we have, again, penetrated less than half of that population.

So clear, indisputable room for growth. And you can see that growth year after year. While we have increased the price of Tyvaso in accordance with increases in our costs, the growth in Tyvaso revenue is significantly in excess of the growth in our price for Tyvaso, showing you a real growth in the patients using Tyvaso.

And then finally, with Adcirca, this is a pill which could be taken by all 25,000 to 30,000 patients with pulmonary hypertension. And year after year, our numbers have continued to increase.

It's where we passed 5,000 patients, we passed 10,000 patients. Now we're past 15,000 patients. And the growth continues, despite the fact we've now competed against generic sildenafil for an entire year.

And the result of that is that our Adcirca-paid products have continued grow, primarily because it's a once-a-day product, compared to sildenafil that has to be taken three times a day, implicating significant compliance issues. Which in turn, would lead to cyclic vasodilation, vasoconstriction cycles that are not good if you have pulmonary hypertension.

So that's a preview on the revenue side. On the earnings side, I am really excited about 2014, mostly because 2014 is the year that our patent royalty to Glaxo finally ends.

And I will share with you and everybody else on this call, in all openness, the frustration that I have felt year after year, paying 10% of our net revenues to Glaxo as a patent royalty. For a drug that 99.999% of the work -- I mean the manufacturing work, the synthesis work, the formulation work, the clinical development work, the marketing work, the sales work -- 99.9999% of the work is done by us.

Yet we have to pay 10% of the royalties to Glaxo. It has been an annoyance. But it is what it is. And it goes away in 2014, toward the end of the year, I believe.

So that of course is a 10% -- it translates directly into a 10% jump in our profit margin and in our operating margin. Because we do not have any plans to increase spending into that 10%.

I expect that our operating margin in 2014 and 2015 will be even better than it's been in 2013 and 2012. And as I mentioned in my introductory remarks, you can't say anything too negative about a Company that churns out non-GAAP profits more than $0.5 billion on $1 billion in revenue.

So thank you very much for that question. And operator, ready for the next question.

Bret Holley, Guggenheim Securities.

I'm just wondering -- maybe you can't answer for competitive reasons. I'm just wondering how you're thinking about incentivizing your sales force relative to Orenitram. And how you might tier the different products upon launch of Orenitram.

Well, thanks, Bret. That is a bit of an unusual question. But as Dr. Jeffs is in charge of the Orenitram sales force, I will point it to him.

Yes, thanks the question. I think probably the best answer is to say, you're correct, right? We won't comment on that. (laughter)

Okay, fair enough.

Next question, operator?

Geoff Meacham, JPMorgan.

This is Carter on for Jeff. Question is a [feedback] on Bret's question. Following conversations in launch plannings, do have any incremental color on your pricing strategy? Do still intend to remain agnostic in terms of pricing?

And then other question is, I don't believe you mentioned any incremental details today on your antiviral program. Can you give us the status on that? And the strategic rationale going into antivirals?

Great. Thanks for those questions, and let's start at the beginning. So nothing has changed since our launch guidance and since our approval conference call guidance on Orenitram. We do intend to price it so that it is agnostic in terms of revenue, between Tyvaso and Remodulin.

So there will be no revenue cannibalization as a consequence of the growth of Orenitram. Since, first of all, the vast majority of the growth is going to be into patients who are not currently on Remodulin Tyvaso, and for those patients who transition from Remodulin to Tyvaso. The net revenues that we generate from the patients will be roughly equivalent, whether they are on Remodulin, Orenitram or Tyvaso.

So it is priced on a per milligram basis. Whereas Remodulin is delivered on a nanogram per kilogram per minute basis, Tyvaso is basically a fixed price per vial. So it's not possible to give an exactitude of comparisons of the prices amongst these three drugs. But as best as we can determine, the net revenues per patient to us are going to be roughly equivalent across all three drugs.

The antiviral program is doing very well. It has reached the necessary level of success, in terms of testing our new antiviral candidate in animals, to have allowed us to file an IND to begin our first in human testing of this lead antiviral product we UV-4 -- unither virology 4 -- against dengue disease. This development is, as you may recall, pursuant to a significant contract that we received through the NIH. The government feels that there is an important unmet medical need to develop a broadband antiviral generally. And in particular, one against agents for which there are no acceptable treatments to date, such as dengue.

So the government took a look at our antiviral platform, and saw that it had a great number of attributes that they like. It was an agent that could be transported, shipped, stored, relatively economically. Fast-acting. And most important and most exciting to me, is the potential for a single agent to work against a wide variety of viruses, even if the exact nature of that virus was not previously known.

The strategic value for us in developing this antiviral platform relates to the fact that we have the intellectual property rights to these antiviral agents pursuant to a strategic partnership which we negotiated several years ago with Oxford University. And this antiviral platform is so broad-based, it really has enormous potential.

Our Company 's first credo is to develop the best possible medicines that we can out of the intellectual property that we have. So this is a great intellectual property that we have, the antiviral platform.

And we are able to develop this without using operational spending from the Company 's overall budget. Instead, the vast majority of the funding is coming from the government.

And finally, the revenue potential for this meets our internal goal of targeting products that have $0.5 billion to $1 billion a year of revenue potential. So we've met all the requirements. We have hired a second-to-none team of antiviral clinical developers. And as I mentioned, they have reached an exciting milestone with the IND filing just last month.

Thank you.

Great. Operator, we have time for one last question. This will be the last question.

Matt Kaplan, Ladenburg Thalmann.

A couple things. Could you comment a little further on the current status of the Sandoz litigation? And then, in terms of type line, give us an update on the beraprost, as well?

Sure. Let me turn the first question over to our IP guru, Andy Fisher. And then I will talk about beraprost.

Thanks, Martine. Hi, Matt -- nice to hear from you. The current status of the Sandoz litigation is that we've come to the end of a lot of the formal part of the pre-trial preparation, including fact discovery.

Expert discovery is nearing an end. The summary judgment process is underway. And those motions and responsive motions and hearings are at least calendared to be completed within the next several weeks or month or so.

And trial is currently scheduled for this spring. So that's the basic rundown of the status of the case.

Great, thank you.

Thanks, Andy. With regard to beraprost, this is an analog of prostacyclin, as I described earlier in the call. Prostacyclin being the key molecule of the [san diminiscan] pulmonary hypertension patients and giving rise to their symptoms. Beraprost is a different analog than treprostinil, which is the active agent in Remodulin and Tyvaso and Orenitram.

We in-licensed beraprost exclusively from Toray Industries of Japan several years ago. And have been exploring it for the past few years to find out what type of treatment regimen would be best attuned to its pharmacokinetic and pharmacodynamic properties.

It does have different PK and PD properties from treprostinil. Which gave rise to the observation by Dr. Lewis Rubin, one of the leading gurus in the pulmonary hypertension field. It has the PK/PD properties of beraprost. They are ideally suited to be matched with Tyvaso, the inhaled treprostinil analog.

So we have discussed that with the FDA. They were very excited, especially with the type of morbidity-mortality protocol that we described to them, which has a key element of failure to improve. Something the FDA was looking for very much.

We described it. We discussed the protocol with the leading centers in the United States. All of these centers have been very excited about the protocol, as well.

And hence, this year we have launched the BEAT trial, which is an acronym for beraprost extended release in addition to Tyvaso. And this is a clinical trial in which each time a patient takes a Tyvaso inhalation, they take a beraprost pill. And the quick uptake and quick falloff of Tyvaso is balanced with the slower uptake and slower falloff of beraprost. Allowing the patient to have both a continuous level of prostacyclin analog in their system, as well as a mix of different prostacyclin receptor characteristics between treprostinil and beraprost that will hopefully allow the patience to remain longer on Tyvaso.

Currently, our patients stay -- oh, about 20 months on Tyvaso. And while that's good, we can clearly do a lot better. And really, that's a kind of a saying that goes for the whole pulmonary hypertension field.

You know, when we started our Company and Actelion started their company, the mean survival of a patient who had pulmonary hypertension was 18 months. Not even two years. And not surprisingly, there were very few patients with pulmonary hypertension.

Because of the excellent efforts of Actelion, ourselves, Pfizer and other companies, the mean survival of patients with pulmonary hypertension today is seven years. Well, that's a lot better than a year-and-a-half.

And we can pat ourselves on the back. But remembering that the average age of which a patient contracts pulmonary hypertension is in their 30s, we can do a lot better than seven years. And our goal with the BEAT trial is to be able to extend the efficacy of Tyvaso by combining it with beraprost, so that we can start moving that seven-year number on the dial toward eight years, ten years and even further.

Our -- we have done a lot with pulmonary hypertension. We have a wide range of products. We have the leading market share in each of our three segments. But we really don't pat ourselves on the back so much about that, as we say: how can we do better?

And hence, you heard Roger talk about TransCon treprostinil. You heard me talk about implantable pump. We're launching Orenitram.

We've got in our pipeline the FREEDOM-EV study, and the BEAT study. So our mantra at United Therapeutics is: how can we do better and better and better for the patients with pulmonary hypertension?

Thank you, everybody, for participating on the call today. Operator, thank you for hosting the call. And you may now wrap it up.

Thank you for your participation in today's United Therapeutics Corporation conference call. This call will be available for replay beginning at 11:30 AM Eastern Standard Time today through 11:59 PM Eastern Standard Time on Friday, February 28, 2014.

The conference ID number for the replay is 58833697. The number to dial for the replay is 1-855-859-2056 or (404) 537-3406. Thank you. You may all disconnect.