UNITED THERAPEUTICS Corp Q4 FY2021 Earnings Call

Good morning, and welcome to the United Therapeutics Corporation Fourth Quarter and Full Year 2021 Earnings Webcast. My name is Emma, and I will be your conference operator today. All participants on the call portion of this webcast will be in listen-only mode until the question-and-answer portion of this earnings call. I will now turn the webcast over to Dewey Steadman, Head of Investor Relations at United Therapeutics.

Good morning, and thank you, Emma. It's my pleasure to welcome you to the United Therapeutics Corporation Fourth Quarter and Full Year 2021 Earnings Webcast. Accompanying me on today's call are Dr. Martine Rothblatt, our Chairperson and Chief Executive Officer; Michael Benkowitz, our President and Chief Operating Officer; James Edgemond, our Chief Financial Officer and Treasurer; Pat Poisson, our Executive Vice President of Technical Operations; and Dr. Leigh Peterson, Senior Vice President of Product Development. Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events. These statements involve risks and uncertainties that may cause actual results to differ materially. Our latest SEC filings, including forms 10-K and 10-Q, contain additional information on these risks and uncertainties. We assume no obligation to update these forward-looking statements. Today's remarks may also include financial measures that were not prepared in accordance with U.S. generally accepted accounting principles. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release available on our website at ir.unither.com. Today's remarks may discuss the progress and results of clinical trials or other developments with respect to our products. These remarks are intended solely to educate investors and are not intended to serve as the basis for medical decision-making or to suggest that any products are safe and effective for any unapproved or investigational uses. Full prescribing information for these products is available on our website. Now I'll turn the call over to Dr. Rothblatt for an overview of the fourth quarter and full year 2021 financial results and business activities of United Therapeutics. Dr. Rothblatt?

Good morning, and thank you, Dewey, for that great introduction. We are very excited about this 2021 annual results call. 2021 has undoubtedly been the most exciting year in our company's history. I would like to start with a couple of big picture observations before going into more details. From a broad perspective, we achieved double-digit percentage growth in both patient count and revenues in 2021, just as we had forecasted at the beginning of the year. The generics market has not affected our growth trajectory for treprostinil, as patients, physicians, and payers recognize our commitment and track record for customer service and supply chain reliability. Our sustained double-digit patient growth is essential to reaching our target of 25,000 patients by 2025, and we are on track to achieve that goal. In fact, we anticipate again experiencing double-digit patient growth in 2022. Another important point is that our organ manufacturing products made a remarkable and successful debut, including one 10 gene UHeart, two 10 gene UKidneys, and two UThymoKidneys transplanted. Naturally, everyone is focused on our living UHeart recipient, Mr. David Bennett Sr., and I am pleased to report that he is doing well nearly two months post-transplant. His cardiovascular function at 7 weeks is excellent, and there are no signs of rejection even after a 30-day postoperative biopsy. Despite facing significant health challenges beyond his heart, he expressed gratitude for the chance to live. I responded to Mr. Bennett by thanking him for enabling us to potentially help countless others live as well. Our clear successes in 2021 with xenotransplant products, alongside our solid capabilities in this area—including the FDA approval of our GalSafe meat in December 2020—demonstrate that our organ manufacturing pipeline is now more credible than ever and possesses tremendous potential. Moving beyond these headlines, we have also made significant advancements in our pharmaceutical pipeline. Some key updates include the progress of our once-daily treatment for PAH, ralinepag, which is nearing the completion of its Phase III enrollment. Our Phase III PERFECT trial, testing a first-ever treatment for COPD-related pulmonary hypertension, continues to gather patient randomizations steadily. Our TETON trial for idiopathic pulmonary fibrosis is performing so well in U.S. Phase III enrollment that we have initiated a TETON 2 trial outside the U.S. to broaden access to this product. Our Tyvaso DPI is on track for a summer 2022 launch, although the FDA has delayed its approval decision to May. However, this three-month delay is minor compared to the product's significant revenue potential and patent life extending into the 2030s. In summary for 2021, we met our patient growth and revenue targets, validated three new xeno-organ product candidates, and launched a new category of biotechnology. We currently have seven Phase III trials in progress with multiple new product candidates. Most importantly, this past year, we saved the life of Mr. Bennett with a 10 gene xenoheart, helped at least 100 children suffering from neuroblastoma due to our Unituxin medicine, increased the usable donor lung supply for over 200 lung transplant patients with our lung bioengineering technology, and improved the lives of thousands of pulmonary hypertension patients with our Remodulin, Remunity, Tyvaso, and Orenitram products. From saving individual lives to helping many children and improving thousands of lives, I can confidently say that our first year as a public benefit company has been true to our public benefit mission. Mike, can you now provide an update on our commercial operations?

Sure. Thanks, Martine, and good morning, everybody. As Martine said, we're very pleased to have posted double-digit revenue and patient growth for the full year of 2021, ending the year with more than 10,000 patients on one of our treprostinil therapies. This quarter, I'd like to dive into the underlying performance of our three treprostinil products, Tyvaso, Remodulin, and Orenitram. As usual, I'm going to focus more on our patient metrics, and I'll remind everyone that our quarterly treprostinil revenue does not always track exactly with quarterly underlying patient demand due to our specialty pharmacy partner ordering patterns. So I'll begin with Tyvaso. As you may recall, in early 2021, we established a goal to double the number of patients on Tyvaso from approximately 3,000 when the PH-ILD indication was added to the label to 6,000 by the end of 2022. This assumes no COVID-related impacts to physician access and patient initiation of therapy and importantly recognizes that our path to doubling may not be linear. The fourth quarter was our third quarter of the PH-ILD launch. In this quarter, we had the highest number of Tyvaso referrals, which is what we call prescriptions since launch, and we added close to 300 patients to our Tyvaso active patient census. Our new patient starts were less than Q3, which is common in the fourth quarter as many patients opt to wait until after the holidays to begin advanced therapies. Our specialty pharmacy partners are working to clear this backlog and get these patients started on therapy during the current quarter. We continue to anticipate a CMS coverage decision regarding Medicare reimbursement for Tyvaso and PH-ILD any time between now and May of this year. All the necessary steps have been completed, including the close of a public comment period last year. We can't predict the timing of this coverage decision, but in the meantime, federal health care patients still have the opportunity to apply to our patient assistance program to access Tyvaso therapy prior to the coverage decision if they are eligible. We anticipate three core drivers for continued Tyvaso work over the next several quarters. I think I mentioned these on the last call. First, we think the CMS coverage decision in PH-ILD will be a driver for Tyvaso growth through the middle of this year. Even though federal health care patients may apply for our patient assistance program, we are hearing through the channel that many physicians are simply waiting for CMS coverage before prescribing Tyvaso in their PH-ILD patients. Second, we continue to grow the Tyvaso prescriber base, particularly among ILD treaters, and expect to see continued growth in prescriptions from these physicians over the next two quarters and beyond as we continue our outreach and educational efforts in this space. Up until now, the vast majority of Tyvaso prescribing has come from historical PAH trials. So, there is a lot of untapped potential in this area. Finally, we view the upcoming Tyvaso DPI approval as an additional catalyst to Tyvaso growth. While we would have been thrilled with an FDA approval for Tyvaso DPI this week, as we said on our Q3 call, we've been assuming a launch by summer of this year. So nothing's really changed in that regard. In the meantime, we are completing our launch preparations, and we will be ready to launch immediately upon approval. Moving to Orenitram. We saw yet another quarter of record patient counts during the fourth quarter. As we've discussed before, we believe this uptick is driven by the FREEDOM-EV label expansion now that we're able to have more robust interactions with prescribers about the data. Finally, we're pleased with the continued strong performance of Remodulin despite the launch of a generic form of subcutaneous treprostinil last year. That generic launch has continued to play out closely with what we saw with the IV generic launch in 2019, with an initial bolus of patients, primarily those dual-eligible Medicare Medicaid patients transitioning to the generic treprostinil trickling down to an immaterial number of generic transitions in recent months. The feedback we've received on our Remunity pump has been quite positive in our early launch efforts. As part of that feedback, we learned that the pump's alarms can, in some cases, be overly sensitive. To be clear, the issues we're seeing with the alarms are not safety issues. But to ensure that physicians and patients have an awesome experience with the pump, we recently paused the introduction of new patients to Remunity while we work with our partner, DEKA, to optimize the alarm profile. We just completed final testing of the new alarm system. Everything is working as expected, and we will recommence our Remunity rollout next week. To wrap up, we're pleased with the progress with Tyvaso in PH-ILD. We look forward to a CMS coverage decision in May or earlier. Likewise, we're on track to achieve our 6,000 patients on Tyvaso by the end of the year, and we're pleased with the continued momentum for Orenitram. Finally, we think that our Remodulin revenues will remain robust despite generic competition, especially once we recommence the introduction of new patients to the Remunity pump. And with that, I'll turn the call back over to Martine.

Thanks so much, Mike. Super excited about the Remunity breakout next week. Awesome. So operator, I understand that you probably have some people in queue and feel free to bring them on.

Your first question today comes from the line of Joseph Thome with Cowen and Co. Your line is now open.

Good morning and thank you for taking my question and congrats on the progress. Maybe just on the Tyvaso DPI request by the FDA. Are you able to provide a little bit more information as to the type of information that you submitted? And then in terms of the safety profile you've seen with Tyvaso DPI to date, some high-level thoughts there, especially as it relates to potential for bronchospasm? Thank you.

Yes. Thanks Joe. We've really had some absolutely great experience with the Tyvaso DPI to date, and we have not experienced those bronchospasm side effects that you referred to. So we really don't believe that that's going to be an issue at all. There is some more information in the press release if you look down towards the second or so page of the press release. Be a little bit more information there about the submission and what was admitted and not submitted. So I think it's all really quite routine and the FDA doing their job as best as they can. As I mentioned in my introductory remarks and as Mike emphasized in his remarks, three months is really meaningless in the context of this product's life. This product has a very long patent life. It is an amazing product. I mean it's so convenient and easy for the patients to use. We have the great results of the BREEZE trial. It's going to end up being used, I'm confident, by thousands and thousands. And over the course of its life, like, 10,000 more or more patients. It's just an amazing product. So it will get out there. Everybody just has to make sure that, like all the boxes are checked and the Is are dotted and the Ts are crossed. And as Mike said, we feel confident with the launch by the time frames that we've previously guided everyone to. Thanks for the question and operator you can bring up the next one.

Your next question today comes from the line of Eun Yang with Jefferies. Your line is now open.

Thank you. Another question on DPI. Once it's approved, does it need to go through a CMS approval process similar to the PH-ILD indication for Medicare coverage?

Thank you, Eun. So nice to hear your voice this morning. I think we have a lot of experts on our call, but I think Mike Benkowitz would be the best person to respond to your question. Mike, if that's okay?

Sure. Happy to take that question. So there is a seamless approval process that will need to happen or review process that will need to happen with Tyvaso DPI, but it's different than what we're experiencing with PH-ILD. So for PH-ILD, it's approved for use with our TD-300 nebulizer, and it's covered in the medical benefit or Part B side of Medicare. The DPI will be a pharmacy benefit product, so covered in Part D. So the process is a little different. So while Medicare is reviewing the data, reviewing the product for coverage, patients can still access federal health care patients can still access DPI. The physician simply has to go through an appeal process, and they're accustomed to doing this. They have to do this often with products that aren't on Medicare formulary, and it's just an extra step they have to go through, and then it gets approved. So we won't see the same issue we're experiencing with PH-ILD where we have this hold up with the DPI. Those will continue to go through with doctors, like I said, doing this additional step of appealing.

Perfect, thank you so much Mike.

Your next question today comes from the line of Jessica Fye with JPMorgan. Your line is now open.

Good morning and thanks for taking my question. Curious what proportion of Tyvaso patients are currently on free drug and what are the next clinical or manufacturing milestones we should look out for in the organ transplant business? And what results in your mind would justify ungating the potential investment in the first GMP or GMP-like manufacturing facilities for those products?

Great, Jess. So happy to hear you on the call. We think of you as one of the KOLs of pharmaceutical analyst. So it's always exciting to hear your voice here. I think the first part of your question is probably best answered by Mike. And then, Mike, if you bounce it back over to me, I'll then talk about the xeno aspects of Jess's question.

This question has been asked a few times over the past year. As a baseline, there is always a small percentage of patients, typically low to mid single-digit, who are in our patient assistance program at any given time. We are awaiting the CMS coverage decision on PH-ILD, which has been steadily increasing. In the last call, I mentioned that it was nearing the higher single digits and approaching double digits. We have now crossed over into double digits. It is currently in the low end of the double-digit percentage of patients.

That's great, Mike. Jess, the launch of these new xenotransplant products is really interesting. We have Dr. Peterson on our call, our Senior Vice President for Product Development, who will now lead the effort to advance these products through clinical development. We also have Pat Poisson, our Executive VP for Technical Operations, along with his team who are currently handling the manufacturing of our biologic products like Unituxin. They will be responsible for producing this new type of biologic, the xenografts, including UHearts, UKidneys, and UThymoKidneys. Everything is moving into the clinical development phase, which is very exciting. We are working on identifying clinical trial centers, selecting clinical investigators, creating the necessary protocols, and meeting with the FDA for protocol approval. Our biostatisticians are already calculating essential clinical trial parameters, and everyone is working collaboratively towards clinical development and the necessary milestones for these products. You can expect to see progress soon. In the meantime, there may be some expanded access opportunities, like in the case of Mr. Bennett, where a leading surgeon at a top hospital could potentially save someone's life thanks to the unique benefits of these xenografts. In Mr. Bennett's situation, there were no other options, and now, almost two months later, there are no signs of rejection. I'm incredibly proud of our team at Revivicor for successfully integrating these 10 genes to create that heart. Dr. Griffith, the transplant surgeon, describes it as a "rock star" heart. He has extensive experience, having performed the second Jarvik heart transplant. Additionally, Dr. Montgomery at NYU is very impressed with the urine produced by the xeno kidney. Dr. Locke, the Head of Transplant at UAB, has placed her xeno kidneys into Mr. Parson, who is seeking kidney donors, and she is very pleased with the results from both of her xeno kidney transplants. The xenotransplantation journey has definitely begun, and exciting developments in clinical progress and production opportunities are on the horizon.

Your next question comes from the line of Andreas Argyrides with Wedbush Securities. Your line is open.

Hi, good morning and thank you for taking my question. Before I ask, congratulations on the quarter and all the life-saving progress you've achieved. It truly reflects your commitment. I would like to ask about xenotransplantation. Could you provide more details on what you believe the next major milestone will be in these programs? Is it around six months away? Additionally, how do you see the DPI approval and its potential launch impacting the growth of patients on Tyvaso this year and next year? Thank you.

Thank you so much, Andreas, for the questions. And thank you for the recognition of us doing our best with our public benefit purpose. Mike, if I could call on you again to answer first the DPI-related question, and then I'll follow up with the xeno-related question?

Sure. On the DPI launch, as I said in my opening remarks, we'll hear back from the FDA in May. Assuming that's an approval and we're ready to go, ready to launch. We have everything in place and ready to go. We'll have inventory, plenty of inventory. We actually had our launch meeting with our sales team this week. So they're prepped and ready to go, and so we'll be able to really press play on our launch once we hear back from the FDA. And we do think that there are opportunities in both PH-ILD, as I mentioned, to accelerate growth there as well as PAH. So there's really, I think, a lot of excitement and enthusiasm around the Tyvaso DPI. I think it really is going to create an opportunity for us to expand the number of patients that we're able to help with prostacyclin therapy and PAH as well as PH-ILD, as I said. So we look at that as being a significant contributor to our March to 25,000 patients by the end of 2025. As Martine said, it should be a blockbuster drug, that's certainly how we view it and how we're planning to approach it from a launch perspective.

Thanks so much, Mike. Andreas, regarding the next announcement, there is a good chance there will be something to share, and I'm hopeful that Mr. David Bennett Sr. continues to progress positively at the 90-day and 6-month marks. The FDA places significant importance on certain timelines, like two weeks, 30 days, 60 days, 90 days, and potentially one year when assessing clinical transplantation milestones. This is evident from one of our Phase III trials, which has saved over 200 lives with our Lung Bioengineering technology. This is crucial for obtaining clinical FDA approval for our second Lung Bioengineering technology, which is completing its last few patients in the Phase III trial. This type of technology, referred to as ex-vivo lung perfusion technology, requires the FDA to ensure that patients using our Lung Bioengineering technology perform comparably at various intervals to those who do not have this technology. I believe the same milestone criteria will be relevant in the context of xenotransplantation. Our aim is to demonstrate that our xenograft patients, specifically for kidneys and hearts, have similar outcomes at two weeks, four weeks, three months, six months, and one year as patients with allografts. The survival rates, depending on the organ, vary, with heart transplants showing 80% to 90% survival after one year. While this is commendable, there is a strong desire to improve and reduce the 10% to 20% loss. Lung transplants generally have poorer results, while kidneys fare better. A notable benefit of kidney transplants is the option to revert to dialysis, which is a significant advantage, especially for patients who have had a previous kidney transplant and produced reactive antibodies in their blood that do not target xeno antigens. Such patients may face challenges with allotransplants but could have a more favorable reaction to xenotransplants. Additionally, approximately 80% of U.S. patients on dialysis do not qualify for the kidney transplant list, representing a large patient demographic. Many patients on long-term dialysis have no remaining access ports for treatment, leading to further complications. There are numerous opportunities for integrating xenotransplantation into the transplant process. We are committed to this direction and will adhere to the same clinical milestones the FDA has established for allotransplantation, such as the intervals of two weeks, 30 days, 60 days, and 90 days.

Operator, it looks like we have one more question in line.

Your final question comes from the line of indiscernible.

Thank you, everyone, for joining us today. We appreciate your time and support. Looking forward to connecting with all of you in the near future.

Thank you for participating in today's United Therapeutics Corporation Earnings Webcast. A rebroadcast of this webcast will be available for replay for one week by visiting the Events and Presentations section of the United Therapeutics Investor Relations website at ir.unither.com. Thank you. You may now disconnect.