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

Thanks, Danielle, and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation Second Quarter 2023 Earnings Webcast. Accompanying me on today's webcast 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, our Senior Vice President of Product Development. Please note that 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 during any unapproved or investigational uses. Remember full prescribing information for our products is available on our website. Note that Pat Poisson and I will be participating in one-on-one meetings at the 2023 Wedbush PacGrow Healthcare Conference on August 8. Then Michael Benkowitz, James Edgemond, and I will participate in a fireside chat and one-on-one meetings at the Morgan Stanley 21st Annual Global Healthcare Conference on September 11. In addition, we will present data at the European Society of Cardiology in Amsterdam in August, the European Respiratory Society in Milan in September, and at the CHEST Annual Meeting in Hawaii in October. Now, I will turn the webcast over to Dr. Rothblatt for an overview of our second quarter 2023 financial results and the business activities of United Therapeutics. Martine?

Thank you, Dewey. I'm thrilled that United Therapeutics continues to report double-digit revenue growth and our highest quarterly revenue ever. We expect this growth trajectory to continue, with our current business, as we expect to reach a $4 billion annual revenue run rate by mid-decade. Beyond that, we expect continued waves of growth with an additional doubling of our revenue from the potential launch of Tyvaso in pulmonary fibrosis and of ralinepag in pulmonary arterial hypertension, and then yet another doubling of our revenues with the potential for an unlimited supply of transplantable organs in the next decade. Let me now dive a little deeper into some of these fantastic results that we are pleased to report this quarter. As mentioned, the total revenues are at $596 million for the three months. It's interesting to compare that with the matching three months of last year, which were just about $467 million. So that's a percentage growth rate of 28%, very much in line with the type of growth rate that we have previously indicated we expect to achieve to reach that $4 billion revenue run rate by mid-decade. Another deeper level to look at is the company's net income. For the past quarter, we reported over $250 million in net income. Again, it's instructive to compare that with the matching quarter in 2022 when we reported $116 million in net income, a percentage change of 123%. We're pretty proud that compared to peers we have a relatively low number of shares outstanding, which helps drive those fantastic results. Now let's dive even deeper into some of the results on the products. Tyvaso $319 million, up 59% from last year. Remodulin $127 million, down about $5 million from the matching quarter last year. Orenitram $95 million, up 20% from the matching quarter last year. Unituxin $44 million essentially flat from the matching quarter last year. For those who are perhaps newer to United Therapeutics, I should remind everyone that Unituxin is a treatment for neuroblastoma, a pediatric cancer with a very high rate of mortality. Approximately 50% of the kids treated with Unituxin and other therapies see their cancer wiped out, and it does not return. For the annualized basis, it's getting close to $200 million a year. Let’s move on to the spending section. Here we break out our spending in categories, in terms of external research and development, internal research and development, and then general administrative and sales and marketing categories, with a few miscellaneous rows according to GAAP standards. The external research and development is what we spend on other companies assisting us with our research and development. The majority of that money goes to conducting worldwide clinical trials that are mostly in the Phase III stage of development, which is the largest and most costly phase of development. We have two TETON Phase III trials for idiopathic pulmonary fibrosis and a new TETON 3 trial starting this year for another type of pulmonary fibrosis. We have ongoing worldwide Ralinepag clinical trials covering countries in almost every continent. That trial is more expensive because it aims to show reduced death and morbidity in patients with pulmonary hypertension. We hope to achieve our statistical significance with respect to the treated group. We are also ongoing with our gene therapy trial, and all combined these trials cost us more than $100 million a year just in spending outside the company, not counting the spending inside. Inside of our company, we have a great team of clinical drug developers led by Dr. Peterson, who has been doing an amazing job running these Phase III trials simultaneously. It requires a huge amount of effort to get drugs labeled, translated, and shipped worldwide, and to make sure protocols are being complied with. Another more than $100 million a year is spent on internal research and development. Under internal research and development, we cover the development activities for organ manufacturing efforts. We are working on xenotransplantation efforts that follow the FDA guidance, which we received during our meetings with them. We are proceeding with pivotal preclinical studies necessary for opening an IND for xenokidney and xenoheart, aiming for a 2024-2025 time frame. We also continue to spend heavily on laboratory-based lung manufacturing activities. We have a remarkable program called lung bioengineering, where we work on lungs from organ donors that surgeons don’t yet want to use. Half the time, when we can bioengineer these lungs, they succeed in saving lives. We have saved over 300 people's lives with these lung bioengineering products. We have a substantial cash balance targeting deployment primarily to invest in our internal projects, such as the production of a dedicated Tyvaso DPI production facility, and in building GMP equivalent production facilities for xenotransplantation. We also need to retain capital for business development activities led by Dr. Betsy Eades. You may recall our significant acquisition of ralinepag for about $1 billion. One area we plan to invest in includes repurchasing shares if there is excess capital that cannot be deployed. With those introductory remarks, I'd now like to turn the phone over to Michael Benkowitz, our President and Chief Operating Officer. Mike?

Thanks, Martine. Good morning, everyone. As Martine said, we had a phenomenal second quarter from a revenue standpoint, setting revenue records for Tyvaso, Orenitram, and total treprostinil. I want to begin by publicly thanking and congratulating all of our commercial and medical affairs teams for their hard work and achievements during the quarter. I will provide some color on what we're seeing with respect to Tyvaso, Orenitram, and Remodulin. Regarding Tyvaso, we posted the highest quarterly revenues ever for Tyvaso, reflecting increasing physician and patient demand in both the PAH and PH-ILD indications as well as a Tyvaso DPI inventory build of about $30 million in the quarter at specialty pharmacies. Our underlying demand metrics—referrals, new patient starts, and net patient adds—remained strong and roughly in line with past quarters. New patient starts are currently around a 70-30 split between DPI and the nebulizer. The transitioning of long-term existing nebulized Tyvaso patients to Tyvaso DPI has largely played out at this point at least until the Part D redesign provisions of the Inflation Reduction Act begin to take effect over the next two years. We expect some baseline level of transitioning between the nebulizer and DPI going forward as physicians optimize the delivery device suited to each patient. We continue to grow the Tyvaso prescriber base and the prescribing depth within that base. Our partner MannKind completed their production expansion during the quarter, which we expect will increase production capacity by about 250% going forward. By the end of June, specialty pharmacies built about $30 million of DPI inventory. Specialty pharmacy inventory levels at the end of the quarter reached their contractual range based on historical demand. However, this could fluctuate through the rest of the year as Tyvaso DPI demand grows. We anticipate that pharmacies may reach regular ordering patterns for Tyvaso DPI by later this year or in the first half of 2024. MannKind is also working to further expand production capacity beyond these improvements, which we expect will come online in 2024. The nebulizer destocking we highlighted in previous quarters has now concluded, and second-quarter nebulizer orders aligned with specialty pharmacy contractual inventory levels and patient demand. To summarize the Tyvaso story, we're pleased with our progress and the opportunities ahead. Our focus in the second half of the year and into 2024 consists of increasing production of Tyvaso DPI with MannKind, increasing physician screening for PH-ILD, growing prescribing breadth, and driving depth to three-plus patients. We've made good progress on each item thus far, but there's more to do, and we are in the process of expanding our sales headcount to support these efforts. Regarding Remodulin, this business has shown incredible resilience despite facing generic competition for almost four years. We saw a near-record number of referrals in the second quarter, and active Remodulin patients remain at pre-generic levels. Remunity continues to gain traction as it is the only subcutaneous pump widely available for new Remodulin patient starts. Finally, Orenitram had another record quarter with the highest revenue of patients on therapy since its launch. Our 90-day titration kit, launched in the first quarter, continues to receive positive feedback. We are excited that data from the EXPEDITE trial has now been published in two medical journals, and we look forward to sharing this information with clinicians over the coming year. We're pleased with our overall treprostinil business, led by the demand for Tyvaso DPI, and we believe we're on our way to hitting our goal of a $4 billion annual revenue run rate by mid-decade. With that, I'll turn the call back over to you, Martine.

Mike, that was an amazing wrap-up. Thank you so much. Operator, please open up the lines for any questions. I'll forward them amongst Mike, Pat, and Dr. Peterson.

Thank you. The first question comes from Ash Verma of UBS. Please go ahead.

Hi. Thanks. Good morning and congrats on a very strong quarter here. I have two questions. One just on Tyvaso in IPF. I wanted to ask, what's your level of conviction in clinical success here? The prior increased study showed benefit in IPF subset, but in the TETON studies you're studying IPF all comers. And then can you provide some color on the patient adds? How much of the new patient adds is coming from PH versus PH-ILD? And do you expect the patient adds per quarter to start to ramp up faster in the coming quarters and years?

Ash, thank you for your question, and thanks for the congratulations. We have many callers in the queue. I'm going to have to limit it to one question per caller. So we'll take your first question about pulmonary fibrosis. Dr. Peterson, could you kindly respond to Ash's question?

Sure. Thanks for the question. We had data from the increase study in PH IPF that exhibited improvements in FVC, which is a marker indicating potentially an antifibrotic activity of Tyvaso. This, in addition to many publications on a mechanism for Tyvaso being antifibrotic, gives us confidence it will work in the population of TETON 1 and TETON 2, which focus on idiopathic pulmonary fibrosis as well as our new study in progressive pulmonary fibrosis.

That's excellent, Dr. Peterson. Operator, could you please take the next caller?

The next question comes from Eun Yang from Jefferies. Please go ahead.

Thank you. Congrats on the great quarter. That's amazing numbers on Tyvaso. The question on DPI inventory buildup of $30 million in the second quarter. Would that be the inventory levels that you expect going forward, or do you think it could increase or experience some drawdown in the third quarter? Thank you.

Great question, and so nice to hear your voice this morning, Eun. Thank you for the congratulations. The questions regarding inventory—we normally ask our Chief Financial Officer, James Edgemond, to handle because he's totally on top of the flow of everything of value in and out of the company. So James, could you please answer Eun's question?

Yes. Thanks, Martine. Good morning, Eun, and thanks for the congrats on the quarter. Two parts to the response. Michael talked about the $30 million addition to DPI inventory during the quarter, which was specific to DPI inventory build. With respect to the demand for DPI for the balance of the year, this could fluctuate going forward, as we think about patient demand and manufacturing. There could certainly be fluctuation in DPI inventory, but I want to reiterate what Michael said. As we completed the quarter, we were contractual with all products. It's important to highlight DPI fluctuation going forward based on demand and manufacturing. Thanks for the question. And Martine, back to you.

James, that was an excellent answer, as always. Thank you, and Eun, thanks for asking the question. Operator, can you please pull up the next person from the queue?

The next question comes from Hartaj Singh from Oppenheimer. Please go ahead.

Thank you for the question and for acknowledging our strong quarter. Last year's comparison was quite challenging, so we appreciate the work done. Regarding ralinepag, assuming the Phase 3 trials are successful, Martine and team, how do you envision the product fitting into the treatment landscape? Will it serve as a direct replacement for Orenitram, or might it also cater to some patients currently on selexipag? I'd love to hear your thoughts on this.

That's a great question. I'm really happy to have it. I think, Hartaj, you've asked a question that transcends two different areas. I'm going to ask two separate team members to respond with regard to their different levels of involvement in the treatment for pulmonary hypertension. Mike, if you could answer Hartaj about where you see placing ralinepag once approved in the treatment options that would be presented to physicians, especially by our sales force. Then, Leigh, if after Mike responds, you could provide insights from our clinical trials and what that might shed light on Hartaj's question regarding where it's being used. Mike, you're first.

Sure. Obviously, all of this is contingent on how the study reads out and what we see through the trial, Hartaj. Generally speaking, we expect that you'll still start with a PDE-5 and an ERA. At that point, once the patient's disease continues to progress, the doctor can decide what to add. We expect ralinepag's sweet spot is going to be right after the PDE-5 and ERA. It depends on where the patient is in their disease journey, but we see it as a strong potential option to add.

Yes, Mike, that makes perfect sense. It would be the only once-a-day prostacyclin category. Compliance is key, and once-a-day delivery would be a major advancement for patients. Leigh, what insights do you have regarding Hartaj's question from trial outcomes?

With regard to selexipag, our goal is to aim for a better clinical effect. Ralinepag is once-daily dosing versus twice, and most patients prefer that. Scientifically, Orenitram or treprostinil interacts with multiple prostacyclin receptors, while selexipag and ralinepag are specific activators of the IP-only receptor. This could translate to the clinic where some patients may do better with multiple receptor binding.

Brilliant answer. I'm glad we have a scientist on the call. Hartaj, I'm glad you asked the question because we gained a lot of valuable insights from that discussion.

The next question comes from Terence Flynn of Morgan Stanley. Please go ahead.

Great. Thanks for taking the questions. Congrats on the quarter. A two-part question for me. Just wondering if you can comment on Tyvaso patient start trends in July versus June and the breadth of the prescriber base.

Thanks, Terence. Mike, you got it.

On the referral start trends in July versus June, it has been pretty consistent over the first half of the year. I think the rate of referrals and starts is in line with the first half of the year. Regarding the prescriber growth, we've roughly doubled the number of prescribers since we launched. Month-to-month growth can be choppy, but we have seen stronger growth in the last quarter in terms of the three-plus patient prescribers, which is a positive indicator for the business.

Thanks so much, Mike. That's a great metaphor with the flywheel. You can see how our success compounds once doctors start using our medicine.

The next question comes from Joseph Thome of TD Cowen. Please go ahead.

Hi there. Good morning. Congrats on the quarter. Maybe just as we think about penetration into the PH-ILD market, where do you think you stand now? And have your expectations for the size of the market changed?

Thank you very much, Joe. Mike, I think you're the best person to answer that.

Sure. I think we're in low single-digits for market penetration. The data coming in on the referrals is still not 100% clean, but we think accurately that we are in that low single digits for the PH-ILD market. Regarding market size, we still estimate it's at least 30,000 patients but it could be higher. We remain focused on continuing to penetrate that market and ramping up screening for pulmonary hypertension.

Super. Thank you, Mike, so much. Operator, we have time for just one more question. I'm sorry.

The last question comes from Andreas Argyrides from Wedbush. Please go ahead.

Yes, thanks. Good morning. Great quarter, thank you. I wanted to ask about the potential use of cash and how you are thinking about outside investment opportunities. Is it in the PH space or targeting the company's core focus?

Yes, Andreas, this is an interesting question. We are most interested in the pulmonary fibrosis segment in terms of outside investment. It's not to say we don't have interest in PH, but the PH market has grown considerably over the years. There are now multiple approved drugs in a crowded market. Despite that crowding, there continues to be opportunities, particularly in combination therapies. On the other hand, in pulmonary fibrosis, we have a comparable size patient population but only two approved drugs. We hope to innovate in this area and can deploy our capital for business development activities in pulmonary fibrosis. Our goal is to address the needs in this area similarly to what we have accomplished in pulmonary hypertension. Thank you for your question, Andreas. Operator, feel free to roll into the wrap-up script. 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 & Presentations section of the United Therapeutics Investor Relations website.