Good morning, and welcome to the United Therapeutics Corporation First Quarter 2023 Earnings Webcast. My name is Danielle, and I will be your conference operator today. Please note this call is being recorded. I would now like to turn the webcast over to Dewey Steadman, Head of Investor Relations at United Therapeutics.

Thank you, Danielle, and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation First Quarter 2023 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; and then Pat Poisson, our Executive Vice President of Technical Operations; and finally, Dr. Leigh Peterson, our 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, and we assume no obligation to update these forward-looking statements. Today's remarks also 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 the product's website. Now I will turn the webcast over to Dr. Rothblatt for an overview of our first quarter 2023 financial results and the business activities of United Therapeutics. Martine?

Thank you, Dewey. I am very excited to welcome everyone to another great quarter at United Therapeutics. We are thrilled to continue on course towards our mid-decade goals of 25,000 patients being treated for pulmonary hypertension and the doubling of our revenue run rate. This quarter, we moved toward those goals with double-digit revenue growth from first quarter '22 to first quarter '23. And that also includes, by the way, nearly 40% growth in our main growth driver, which is Tyvaso. I think our double-digit growth rate remains a solid forecast even with the possibility of new FDA approvals of sotatercept or Liquidia. The reason is that sotatercept has not even been tested in our main growth market of Group III pulmonary hypertension. Indeed, systemic drugs are generally contraindicated there due to them causing ventilation-perfusion mismatch. In the disease sotatercept was tested in, Group I pulmonary arterial hypertension, we expect it to be complementary to either our Orenitram, Tyvaso or Remodulin products. So we don't forecast a realistic threat from sotatercept to our growth. Sales in Liquidia, if approved, also do not challenge our projected double-digit growth because it is not a generic product, but is instead a strongly differentiated drug-device product requiring 65% more drug to even match Tyvaso's effect based on their own clinical trial data. Also exciting to report this quarter is the robust progress in our pipeline. We are spot on target to fully enroll our current big Phase III trials by the end of next year, each of which have their own $1 billion potential. In other words, the pipeline now embeds more than double our current total revenues, and then there is the aforementioned organic doubling of our revenues from our existing products already commercialized and now entering the market, such as Tyvaso DPI, Remunity, and our new Orenitram dose titration kits. I'm also very excited to report big news on the use of capital front. We have allocated $0.5 billion to a new Tyvaso DPI manufacturing facility in Research Triangle Park, North Carolina, with a 50,000 patient capacity. And by the way, this is in addition to our existing nearly $100 million allocation of capital to our new clinical xeno transplantation facility in Virginia. Speaking about transplant, I'd like to thank the dozens of our shareholders and other stakeholders who sent me Amy Silversea's superb story of her heroism in the face of heart transplants and immunosuppressants. In that vein, I wanted to take a moment to update everyone on what we at United Therapeutics are doing to effectuate Amy's Quest. In our own line of company, we reprogrammed differentiated cells from patients back to stem cells called iPSCs or inducible pluripotent stem cells. By the end of this year, we'll be creating iPSCs from two patient donors every single month. In our own labs, we differentiate cells into different types of cells needed for cellularizing different organs, such as the lung, including stromal cells and epithelial cells and different types of alveolar cells. In our own labs, we grow differentiated cells in 3D to change into the billions of cells needed to cover each organ, and in our own labs over the past three years we have produced about two trillion cells every year. Also in our own labs, we cellularize our organ scaffolds with the cells that we have expanded. Indeed, last month, we achieved what might be considered proof of concept for one of our own cellularized lungs, providing a pig model with a level of oxygen considered acceptable for human lung transplants. As mentioned, we produce this time under GMP conditions about 500 lung scaffolds every year and are now working on 3D printing kidney and liver scaffolds in partnership with 3D Systems. In short, Amy's vision of an immunosuppressant-free organ transplant is realistic for this decade, the 2020s. Here at United Therapeutics, we expect to have patient-derived stem cell differentiated autologous lungs, kidneys, and livers in the clinic within five years. Parts could also be done, though immunosuppressants would be needed because the transplanted organs will have the same DNA as the patient. So it is really the best of times here at United Therapeutics with record revenues, another $0.5 billion quarter; record pipeline potential, $2 billion-plus opportunities; and record deployment of capital and business expansion. At UT, our mantra is go big or go home. We are going big on pulmonary hypertension, we are going big on pulmonary fibrosis, and we are going big on creating an unlimited supply of transplantable, tolerable organs. Michael Benkowitz, our President and Chief Operating Officer, will now give you a deeper dive into the business. Mike?

Thanks, Martine, and good morning, everyone. We're pleased to report yet another quarter of meaningful growth for our treprostinil business. And as Martine said, we're really excited to have quarterly revenues of more than $500 million for the second time in our company's history. As usual, I'm going to provide some color around what we're seeing with respect to each of our treprostinil products, Tyvaso, Remodulin, and Orenitram. For Tyvaso and Tyvaso DPI, underlying physician and patient demand for Tyvaso remained exceptionally strong in the first quarter as we continue to grow our Tyvaso active patients at a clip consistent with the patient growth trends for the prior three quarters. We saw a record number of referrals, which is what we call prescriptions and new patient starts during the first quarter. We also continue to increase the breadth and depth of the Tyvaso prescriber base. Since the PH-ILD launch in 2021, we have now doubled the number of Tyvaso prescribers. That's our breadth metric. And in terms of prescribing depth, I mentioned on prior calls that our key metric here is the number of prescribers with three or more Tyvaso patients. I'm really happy to report that we've also doubled the number of prescribers in this category. The 3-plus Tyvaso prescribers now represent about 40% of all prescribers, which means we still have an opportunity to expand depth, which should pave the way to further accelerate Tyvaso growth over time. The first quarter performance for Tyvaso saw the usual early-year seasonality with respect to patient discontinuations due to insurance changes, and also as usual, discontinuations returned to normal levels in February, March, and in April. Importantly, discontinuations for Tyvaso DPI continue to run well below that of nebulized Tyvaso, reflecting patient satisfaction with Tyvaso DPI. So overall, we believe the underlying strength of the Tyvaso business is great. Looking at first quarter revenue, as I said in the past, due to the nature of our business, we regularly encourage investors to look at longer-term revenue trends compared to quarterly revenue fluctuations. With that said, there were three main factors that impacted Tyvaso revenue in the first quarter, given that we're essentially in the middle of two product launches within the Tyvaso franchise, PH-ILD and then Tyvaso DPI. First, and as we discussed last quarter, our specialty pharmacies are still rightsizing orders for the correct DPI and nebulized mix. In the third quarter of last year, specialty pharmacies made significant orders of nebulized Tyvaso in anticipation of increased PH-ILD demand without fully appreciating the potential for Tyvaso DPI demand. Moving to the fourth quarter of last year and the first quarter of this year, we saw unexpectedly strong demand for Tyvaso DPI relative to nebulized Tyvaso. And the specialty pharmacies needed to reduce their nebulized inventory, which reduced Tyvaso revenue well under actual patient demand in the fourth quarter of 2022 and the first quarter of this year. Second, we're seeing a higher level of PAP utilization for Tyvaso DPI than we expected. We believe this is a short-term phenomenon and will subside to a large degree when the Medicare changes that are part of the inflation reduction act go into effect starting next year. Finally, due to the incredible demand for DPI and the fact that we launched immediately upon approval without building inventory, we have not been able to allow specialty pharmacies to build up their contractual minimum inventories each month. Based on our DPI demand trends and forecast, this is something that could persist for the balance of the year. Having said that, we are taking steps to increase DPI production capacity in both the short and medium term. First, our partner, MannKind, is activating a second production line and additional kitting capacity from which we expect to see increased DPI supply as soon as this quarter. Second, and in parallel, MannKind is also on track to significantly expand manufacturing capacity in the first half of next year to support up to 25,000 Tyvaso DPI patients a year. Finally, as Martine mentioned, we have initiated a construction project to build a new UT-owned and operated Tyvaso DPI manufacturing facility. That facility is intended to provide enough capacity to support an additional 50,000 DPI patients per year and with expansion capacity for up to 75,000 DPI patients. Turning to Remodulin, this business continues to be incredibly resilient, even though it's faced a generic competitor for almost four years now. We saw the second highest number of referrals for Remodulin in the first quarter. After a small dip in active patients following the generic launch of a subcutaneous version of Remodulin, our active patients are back to pre-generic levels. Remunity continues to gain traction in the market as it is the only subcutaneous pump widely available for new Remodulin patient starts, with Remunity representing over half of our monthly subcutaneous Remodulin shipments during the quarter. Finally, Orenitram had a very solid quarter, achieving a record number of patients on therapy and record revenues. We launched a 90-day titration kit during the first quarter, which simplifies dosing and titration for new patients. While still early, physician and patient feedback has been very positive around the convenience of these new kits. There continues to be a lot of buzz in the physician community around the EXPEDITE data we top-lined last October, demonstrating that prostacyclin induction with Remodulin can lead to double the average Orenitram dose when patients shift to oral therapy and in a shorter period of time as compared to patients who do not have a Remodulin induction. We expect to publish a peer-reviewed manuscript detailing the study in the coming months. To wrap up, we're very pleased with the overall Treprostinil business, led by the incredible demand for Tyvaso DPI, and we believe we're on our way to hitting our goal of a $4 billion revenue run rate. With that, I'll turn the call back over to Martine to start the Q&A session.

Thank you so much, Mike. Those were terrific insights into every one of the products. We take that call that you shared with everyone. Operator, could you please open the phones, and I will sort the questions to the person most appropriate for answering them.

The first question comes from Joseph Thome of TD Cowen.

Mike, I know you mentioned that the Tyvaso DPI discontinuations are a little bit lower than what you were seeing with the nebulized Tyvaso. Maybe what are the expectations for the Tyvaso DPI average time on therapy versus what you were seeing with the nebulizer? And as we see sotatercept potentially launching next year, do you expect the Tyvaso time on therapy could actually increase as these patients kind of continue to do better than they did without sotatercept? Or would they intend to maybe ramp down their use? How do you expect that to kind of play out?

Looks like this question is directed to you.

Sure. So I think overall, we're really encouraged by the lower level of discontinuation rates with Tyvaso DPI. And we do think that, that augurs well for increased time on therapy. To put a number on that, I think it's still a little early to kind of say definitively what that's going to be. But certainly, patient satisfaction has been really high with Tyvaso DPI. I think it's led to better adherence, better compliance and that leads to patients doing better, and then that will ultimately lead to patients staying on therapy longer. So I think your premise, your hypothesis that time on therapy will increase with DPI over time is absolutely right. And that's something we're certainly expecting. Similarly, I think sotatercept probably helps in that regard as well. If you look at the underlying data and the sotatercept study, 70% of the patients in that study were on a background prostacyclin. So as Martine said in her opening comments, we think there's a lot of complementary effects between prostacyclin and sotatercept. And so we would expect that when sotatercept is launched into the market, that will continue and patients will experience a nice benefit between the two products as well as the other products on background therapy and should continue to lead to increased time on therapy.

Thanks, Mike. Operator, next question please.

Next question comes from Hartaj Singh of Oppenheimer.

Nice update, everybody. Just had a question on OrCam in the EXPEDITE study. I know at ERS last year in Barcelona really big updates there and educating the patient/physician community. It seems like at ATS this year, again, you will kind of delve into that. If you can just talk to us a little bit about what the patient flow is. Are patients mostly starting in Remodulin, and then going over to Orenitram? Or are they still starting Orenitram and what's the breakdown? And then how can we expect sort of that to benefit Orenitram going forward? I know it already is, but could that add even more going forward?

Great question, Hartaj. Mike, I think you'd be, again, the best person to address that question.

Sure. Thanks, Hartaj, for the question. So in terms of kind of the mix of patients between starting de novo on Orenitram versus transitioning from Remodulin, I think it's roughly, call it, two-thirds of patients are starting Orenitram right now. As I mentioned in my comments, I think the fact that we've got that new titration kit is going to continue to help patients titrate up on Orenitram starting de novo, and then the balance are transitions from Remodulin. I still believe that there will be patients that will start de novo on Orenitram over time once we really fully take advantage of the EXPEDITE data. But I also think it's true that Tyvaso DPI is proving to be so convenient for patients, and it's almost sort of your gateway to prostacyclin therapy. So I think over time, you're going to see a higher number, higher percentage of patients initiate prostacyclin therapy on DPI even over the orals, both Orenitram and selexipag. The thing that we really like about the EXPEDITE data and then the ARTISAN study, which we've talked about on prior calls, is it's an opportunity to take these functional Class III patients or even IV patients in the case of ARTISAN, start them on Remodulin, get their hemodynamics down to closer to normal levels. Then you can flip them over to Orenitram and really use Orenitram as their maintenance drug, and continue to titrate up as you need. If they continue to decline over time, you can switch them back to Remodulin. We truly see that as a key position for Orenitram as we move forward over the next several years. In some, it really just speaks to the flexibility of treprostinil and the fact that we've got different delivery options. It allows us to meet both the patient and the physician where the patient is in their disease progression.

Great. Thanks so much, Mike. That was really beautiful the way you're able to describe that with ARTISAN and EXPEDITE and the whole rapid transition to oral. We're able to get patients into a stable equilibrium, if you will, with the pulmonary artery pressures down around, I would say, below 40 millimeters of mercury. There's like an increasing volume of data out there. Well over a dozen scientific papers have shown that patients with pulmonary hypertension who are managed in this kind of potential well between 30 and 40 millimeters of mercury are able to achieve very long-term survival, 10, 20 years out to the limit of the papers that the data that the papers had access to. And those are papers by independent physicians, not from us. We really believe that our initial mission of the company of being able to keep patients with pulmonary hypertension living with pulmonary hypertension instead of dying from pulmonary hypertension has been very largely achieved with the combination of parenteral prostacyclin to rapidly get their pressures down and then oral prostacyclin, Orenitram, to be able to keep them stable in the long term. Operator, next question.

The next question comes from Jessica Fye of JPMorgan.

On the plans to increase capacity for Tyvaso DPI, that sounds pretty bullish with respect to the anticipated demand trends there. And it sounds like you're seeing nice net patient adds as well. But can you just confirm whether there's any capacity constraint on DPI right now that's at all limiting to patient adds? Or is it that you're keeping up with patient demand and then in the near term, the capacity is maybe just keeping the specialty pharmacies from reaching target inventory levels? And just related to that, I think you said Tyvaso net patient adds were in line with the past three quarters. Can you just remind me what that run rate was that you're tracking in-line with?

Okay. Thanks so much for the questions, Jess, and good to hear your voice this morning. There were several questions there. So let me start with the production expansion questions. And then, Mike, if you could queue up your responses to the rest of the questions that Jess asked there. So Jess, we are pretty bullish on our forecast for Tyvaso DPI and the maximum capacity of the MannKind facility up in Danbury, Connecticut, will be by the beginning of next year for 25,000 DPI patients. As I mentioned in my introductory remarks, our company's goals for the middle of the decade are to treat 25,000 pulmonary hypertension patients. So if a large proportion of those 25,000 patients are on Tyvaso DPI, which I think is reasonable, then it would be, well, where is the production capacity for the go-big on pulmonary fibrosis? Best as we can tell, we expect the pulmonary fibrosis market to be even larger than the pulmonary hypertension market for Tyvaso DPI. Thus, we would need more than an additional 25,000 patient capacity for the pulmonary fibrosis market. Indeed, the market research and the disease-modifying hypotheses that we have for Tyvaso DPI in pulmonary fibrosis suggest that we could easily expect to have 50,000 pulmonary fibrosis patients being treated in addition to the 25,000 mid-decade pulmonary hypertension patients. That's why we need to start now deploying a substantial amount of capital to build this brand-new Tyvaso DPI production facility in Research Triangle Park, North Carolina. As Mike mentioned, even that facility, although its launch capacity will be 50,000 patients, will have a surge capacity to go up to 75,000 patients. We think between the 25,000 at MannKind, the 50,000 in North Carolina, the surge to 75,000 in North Carolina, as we enter the 2026 time frame, we then have a capacity to support 75,000 to 100,000 DPI patients, which would cover our needs for both Group I pulmonary hypertension, Group III pulmonary hypertension, idiopathic pulmonary fibrosis, and additional forms of pulmonary fibrosis that are classified as progressive pulmonary fibrosis, under which we are embarking on other additional Phase III trials. So Mike, with those comments regarding production capacity, can you answer the other questions that Jess had?

Absolutely. So Jess, I think your question around the first part of your question was about patient demand versus specialty pharmacy demand to build up their inventory. We're definitely in the latter category. So we're not having to delay patient starts on DPI. We're making enough to meet patient demand. I think the issue I was referencing in my opening comments is typically, specialty pharmacies have an algorithm for figuring out how much they order every month. They generally like to keep at least 30 days of inventory on hand. So due to the demand, we're not able to meet that need on the part of the specialty pharmacy. Like I said, we have some additional production capacity coming online as soon as this quarter. That will start to open things up a little bit. But I think really between now and through the balance of the year, we will be in this situation where they're not going to be able to order up to the levels they're accustomed to until, as Martine said, we get to the significant expansion next year to reach 25,000 patients. The second part of your question was about the average, I guess, the run rate in terms of patient adds. So if you look back over this quarter and the prior three quarters, it's averaged around 500 patient adds per quarter on Tyvaso, and that's between both DPI and nebulized.

Perfect, Mike. Thanks so much. Operator, we're ready for your next question.

The next question comes from Eun Yang from Jefferies.

I have a question on the TETON trial. So we are expecting data in 2025. Based on the Phase III INCREASE trial, a subgroup of patients with underlying IPF presented benefits on FVC up to 16 weeks. So the TETON trial is a 52-week time point. Do you expect benefits on FVC to continue to increase to 52 weeks? And can you comment on powering assumptions for the TETON trial?

Thanks. Good morning, Eun. Nice to hear your questions. I think it will be best to have Dr. Peterson. She is in charge of running the TETON trial, answer your questions.

Yes. Thank you for your question. Yes, so in fact, the INCREASE study, indeed, the main study, the placebo-controlled study, was 16 weeks, as you mentioned. However, we do have an open-label extension study of the INCREASE data where we've looked to see how the patients do over the longer period of time, including the 52-week time period. We still see benefits for patients on Tyvaso in the INCREASE population. So we feel confident that, that will translate to the longer period in the TETON studies. As far as the TETON studies, they are definitely powered— I mean, we have 90% power to detect the difference that we've seen in the INCREASE studies with regard to absolute FVC. So we have sufficient power to see the difference over the 52-week period. Again, we feel confident about that.

Thank you so much, Leigh. Operator, we are ready for your next question.

The next question comes from Andreas Argyrides of Wedbush Securities.

Congrats on the quarter. When thinking — so quickly, first, what's the status of the organ manufacturing programs? When can we expect the first clinical trial? How should we think about spending when it comes to organ manufacturing? And I have one follow-up.

Okay. We won't be able to take your follow-up, and Andreas, congrats on the quarter. Your line broke up a little bit, but I think the gist of your question was to get an overview of the organ manufacturing situation and when we expect results of the organ manufacturing to enter into clinical trials. The organ manufacturing program is a broad, multifaceted, multiple shots on goal program. It won't be realistic to give an overview of everything beyond the really exciting things I mentioned this morning. In response to any silver team's passionate arguments, part of our organ manufacturing program is strongly focused on organs that would not require immunosuppressants. In other words, autologous organs manufactured with cells downstream from a patient's own donated cells. Within different laboratories at United Therapeutics, we currently produce iPSC cells. In other words, we reprogram PBMCs and other differentiated cells from patients back into stem cells. We then use proprietary techniques to differentiate those stem cells into the different types of cells that we would cellularize organs with. Other programs at other laboratories within United Therapeutics are based on allogeneic cell lines that we are able to MHC segment. Patients could expect a much lighter immunosuppressant load than if they were just taking an average donor organ. The organs we have closest to clinical trials are our xeno hearts and xeno kidneys. These are hearts and kidneys from donor animals that have been grown under good manufacturing practice conditions, and they have 10 genetic modifications that we believe will allow them to surmount hyperacute and acute rejection with no more than the normal commercially available immunosuppressants today, and be able to continue on for the long-term duration in the recipient's body while managing chronic rejection as is done today with allografts. Those organs are currently in what is called by the FDA a pivotal preclinical program. That means it's the last preclinical program before going into a human study. We hope to complete that program by the end of '24 and be able to then enter into the first clinical trials in '25. So that would be the bottom line answer to your question at the first manufactured kidneys and hearts hopefully. Knock on wood, should be able to enter into clinical trials in '25.

We have time for one last question.

I had one on sotatercept impact. The feedback that we've heard from physicians indicates that Merck's product positioning and payer reception can have an important bearing on what part of your portfolio may get impacted. In your view, does that matter? What assumptions do you have on competitors' pricing and line of therapy positioning?

Okay. Thanks for the questions, Ash. It looks like a frontline question for Mike to answer, and Mike will give you more of a definitive answer. But as I noted in our introductory remarks, we don't see sotatercept having any effect whatsoever on the growth guidance that we've provided for our company. The reason is that a lot of people are not completely clear that there are two different diseases treated with drugs such as ours that sound very similar. The disease that sotatercept was tested in and the disease that all of our drugs are approved for is called Group I pulmonary arterial hypertension, with an acronym of PAH. A different disease is called Group III pulmonary hypertension or just Group II PH. Sotatercept has never been tested, at least anything published that we're aware of, in Group III pulmonary hypertension. The only drug approved for Group III pulmonary hypertension is Tyvaso, including Tyvaso DPI. And as Mike described very well, most of our growth in the coming years is expected to come from Group III pulmonary hypertension. So by definition, sotatercept cannot have any effect on that growth trajectory whatsoever. In addition to that, within Group I pulmonary arterial hypertension, where we do continue to have growth across our franchise—our highest quarterly sales of Orenitram ever expected—we think sotatercept to be complementary. Mike, would you like to expand on that?

Sure. I'll pick up right there. We definitely look at sotatercept as complementary to our drug and the other drugs currently on the market for treating Group I PAH. It's another pathway to which we now have a drug to treat four different pathways associated with pulmonary arterial hypertension. As I said, if you look at the data in the sotatercept trial, 70% of those patients were on prostacyclin therapy. Clearly, there appear to be complementary or synergistic effects between prostacyclin and sotatercept. We think that all of the drugs will continue to be used. I think some physicians that we've talked to have discussed this sort of Four Corners approach of treating PAH, so you have a drug for each of the four pathways. How that gets sequenced and in the grand scheme of things doesn't really matter because I think it's still a progressive disease. There was nothing in the sotatercept data really to suggest that it's a cure or even a disease-modifying agent. I know there was some speculation that might be the case, but I don't think that's borne out in the data. So clearly, patients are benefiting from it, but I think it's a combination with the other drugs. Over time, it's another drug that physicians can add to their treatment on Remodulin, but it doesn't appear to be something that's going to replace or displace our products.

Thanks so much, Mike. And thank you, operator, and everyone for joining our first quarter conference call. The great work of Dewey Steadman. We'll be presenting at various health care conferences during the balance of the year, and we look forward to seeing you there and providing additional insights and color on United Therapeutics' business. Operator, you can disconnect the call.

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.