Good morning, and welcome to the United Therapeutics Corporation Second Quarter 2025 Corporate Update. My name is Steve, and I'll 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.

Thank you, Steve, and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation's Second Quarter 2025 Corporate Update Webcast. Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events. These statements will 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 discuss the progress and results of clinical trials or other developments concerning our products, and 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 our products is available on our website. Accompanying me today 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; Dr. Leigh Peterson, our Executive Vice President of Product Development and Xenotransplantation; Pat Poisson, our Executive Vice President of Technical Operations; Dr. Gil Golden, our Executive Vice President and Chief Medical Officer; and C.Q. Deng, our Senior Vice President of Biostatistics, Statistical Programming, and Data Management. Note that James Edgemond, my colleague Harry Silvers, and I will participate in a fireside chat and one-on-one meetings at the Morgan Stanley Global Healthcare Conference in New York on September 8. Along with Martine Rothblatt, Harry and I will be at Bernstein's Second Annual Healthcare Forum in New York on September 23 for a fireside chat and one-on-one meetings. Additionally, our scientific commercial and medical affairs team will present at the World Transplant Congress in San Francisco from August 2 to 6, the European Respiratory Society Congress in Amsterdam from September 27 to October 1, the 18th Congress of the International Xenotransplantation Association in Geneva from September 30 to October 3, and the American College of Chest Physicians meeting CHEST 2025 in Chicago from October 19 to 22. Now I'll turn the webcast over to Martine for an overview of our development pipeline and business activities.

Thank you, Dewey, and good morning, everyone. We have slides available for reference, and I encourage you to review those at your leisure. Today, we're proud to report that United Therapeutics has achieved another record quarter of earnings, marking 12 consecutive quarters of double-digit year-over-year revenue growth. Our performance is a testament to our unwavering strategic approach, which has allowed us to consistently drive sustainable growth while improving the lives of the patients we serve. Our strong foundational business is supported by our robust Tyvaso franchise, which continues to achieve record results underpinned by our first-in-class Tyvaso DPI device and enduring market fundamentals that we expect will propel future growth. Additionally, Orenitram, Remodulin, and Unituxin remain integral components of our commercial portfolio and continue to deliver strong performance. Our next wave of growth, which we call our innovation wave, consists of our TETON studies in idiopathic pulmonary fibrosis and our ADVANCE OUTCOMES study in pulmonary arterial hypertension, which we're on the cusp of reporting results, starting with TETON 2 in September of this year. Each of these catalysts has the potential to fundamentally change our revenue profile and deliver growth well into the next decade. Our largest potential wave of growth, a revolution wave, continues to make progress and we are on track to conduct the first transplant in our EXPAND - UKidney clinical study shortly. Concurrently, with this first ever Phase I study and as part of our multiple shots on goal approach, we're also proud to announce that we have filed an investigational new drug application for our EXTEND study, evaluating our UThymoKidney, and we expect to file for our EXPRESS study evaluating UHeart. Additionally, last month, we announced that we enrolled and treated the first patient in our miroliverELAP study. Recently, our Investor Relations team launched a new pipeline website at pipeline.unither.com that contains detailed information and links to publications about our pipeline candidates. I encourage you to take a look. Our ability to deliver such remarkable growth and pipeline innovation is matched only by our commitment to financial prudence. The exceptional operating efficiency that we have cultivated has allowed us to generate nearly $1.5 billion in annual operating cash flow. Our disciplined approach allows us to strategically allocate capital, ensuring that United Therapeutics remains flexible, resilient, and well-positioned for sustained success in the years ahead. Given the strength of our commercial business, our robust balance sheet, and confidence in our upcoming catalysts, we believe that the recent dislocation in our share price presents a compelling investment opportunity. As such, our Board of Directors has authorized the repurchase of up to $1 billion in our shares through March of next year. We will continue to regularly evaluate our capital needs and deploy cash for the highest and best uses. Even after the potential repurchase of shares authorized by our Board, we remain well-capitalized to continue advancing our commercial and development programs. As we approach these meaningful and potentially value-creating catalysts across pulmonary fibrosis and pulmonary arterial hypertension, we could not be more confident in the future of our business. To conclude, we expect to sustain growth in our foundational business, which continues to drive significant cash flow and opportunity while also progressing our innovative small molecule pipeline and our platform of organ alternative technologies. We're excited about our current business and our growth potential, and we appreciate the feedback and support from our shareholders. We have a number of different presentations this morning with Michael Benkowitz addressing our commercial performance, Leigh Peterson outlining our TETON 2 study for which we expect to report data in September, C.Q. Deng, our Chief Biostatistician, to talk about the recent Insmed Phase II data, and then Dr. Gil Golden, our Chief Medical Officer, who will outline the expected limited impact we believe TPIP will have on the market if it is approved.

Thank you, Martine, and good morning, everyone. Today, we are pleased to report record total revenue of $799 million, reflecting 12% growth over the second quarter of 2024. This is our 12th consecutive quarter of double-digit year-over-year total revenue growth driven by robust results across our commercial portfolio. Underpinning this performance, Tyvaso DPI achieved a record total revenue of $315 million, representing 22% growth over the second quarter of 2024. This quarter also marked a record for patient shipments for Tyvaso DPI as well as the total Tyvaso franchise. The underlying dynamics remain strong with referrals and starts each reaching record levels for Tyvaso DPI during the quarter. We also saw year-over-year double-digit revenue growth for nebulized Tyvaso, Orenitram, and Unituxin. For Orenitram, this quarter represented a record in both total revenue and patient shipments. Touching briefly on Remodulin performance, we are still seeing strong demand for Remodulin, which notched a top 5 quarter in total patient shipments, and we are confident that parenteral prostacyclin will continue to play a meaningful role in the marketplace. We look forward to the launch of our next-generation pump RemunityPRO later this year. With the recent launch of a competing treprostinil dry powder inhaler, I'd like to address several areas of misinformation in the marketplace about Tyvaso DPI. Liquidia is attempting to differentiate their product in the areas of dosing, tolerability, particle deposition, and ease of use. First, there is no maximum dose for Tyvaso DPI, and there's no commercially available treprostinil DPI that published higher doses than Tyvaso DPI. Recall in the brief study of Tyvaso DPI, we saw patient exposure up to 33 nebulized breath equivalents or 176 micrograms at 51 weeks. Next, tolerability. Clinical data for Tyvaso DPI showed the key tolerability factors like cough and throat irritation decreased meaningfully over time. Contrary to that, clinical data for Liquidia's product shows that cough and throat irritation actually increase over time. Now turning to deposition, it has been previously shown in peer-reviewed publications that the optimal particle size for pulmonary deposition is 1 to 5 microns, thus leading to effective delivery and absorption to more peripheral areas of the lungs. Tyvaso DPI particles at 2.6 microns are in the optimal size range to promote efficient medication delivery. This feature, coupled with our low flow and low inspiratory effort device, has been shown to allow for the deep deposition of Tyvaso DPI in the lung. Finally, there's ease of use and convenience, and we believe that Tyvaso DPI is a better all-around package for patients. Tyvaso DPI only requires one breath per cartridge four times a day. With administering Tyvaso DPI, patients can hold their head in a normal neutral position, and Tyvaso DPI requires no daily cleaning, where patients could potentially come in contact with DPI powder causing unwanted effects. As we begin our competitive journey with Tyvaso DPI, we understand that physicians and patients may want to try new product offerings. However, we believe that over the long term, with Tyvaso DPI's product profile, along with the deep experience we've built in the pulmonary hypertension marketplace over the last three years, we are positioned for continued growth. I'll now turn the call over to Leigh to discuss the TETON studies.

Thanks, Michael, and good morning, everyone. As we look ahead to the expected September data readout for our TETON 2 registration study, we wanted to spend some time today providing a brief landscape of idiopathic pulmonary fibrosis or IPF. So I'll cover the biological rationale behind treprostinil as a therapeutic approach, provide details regarding our clinical trials, and set the stage for interpreting the forthcoming results. IPF is a progressive scarring disease of the lungs of unknown cause. It's most common after age 50 and is linked to risk factors like smoking, genetics, and certain environmental exposures. It affects approximately 100,000 people in the U.S., and currently, there are only two approved therapies for IPF, nintedanib and pirfenidone. These drugs only slow lung function decline and are used by about 30% of U.S. patients, largely due to their unpleasant side effects, yet together, they generate over $4 billion globally. As mentioned, these two therapies only showed a decrease in the rate of decline in FVC at 52 weeks in the registration studies. The mean FVC change from baseline for nintedanib was approximately 111 milliliters from placebo and 148 milliliters for pirfenidone. However, the studies had very different placebo effects, with over 200 milliliters of FVC loss in the nintedanib study and more than 300 milliliters for pirfenidone, demonstrating the wide variety in the placebo responses that have plagued development efforts in IPF. Many investors and even physician experts in the space believe that treprostinil is just a vasodilator. That's likely because treprostinil has become widely used in pulmonary hypertension, but it also has activity on the IP, EP2, DP1, and PPAR receptors, collectively inhibiting fibroblast proliferation and migration, fibroblast to myofibroblast differentiation, extracellular matrix deposition, and inflammation, all of which contribute to fibrosis. These findings are supported by a post hoc analysis from our INCREASE study, where a subset of pulmonary hypertension patients with IPF treated with Tyvaso showed an improved FVC and reduced exacerbations of underlying lung disease. This, along with treprostinil's antifibrotic properties, makes us optimistic that Tyvaso may benefit IPF patients by improving lung function through multiple pathways beyond those typically associated with pulmonary hypertension. The TETON program is made up of three studies. TETON 1 is a 598 patient study of nebulized Tyvaso and IPF for participants in the U.S. and Canada. TETON 2 is a 597 patient study identical to TETON 1 but evaluating participants outside the U.S. and Canada. The TETON PPF is a worldwide study evaluating the use of nebulized Tyvaso in PPF or progressive pulmonary fibrosis. As we've been saying, we expect TETON 2 to report data in September, while TETON 1, which was fully enrolled in January of 2025, will report data in the first half of 2026, and our focus today is on TETON 2. So again, TETON 2 is a 597 patients, multicenter, randomized, double-blind, placebo-controlled Phase III study evaluating nebulized Tyvaso in IPF patients over 52 weeks outside the U.S. and Canada. Full enrollment was reached in July of '24. Participants were randomized to Tyvaso or placebo starting at three breaths four times daily or QID, titrated as tolerated up to twelve or more breaths QID. The primary endpoint is the change in FVC at 52 weeks, and the secondary endpoints include time to clinical worsening, time to acute IPF exacerbation, overall survival percent predicted FVC, quality of life measured by the King's Brief ILD questionnaire and change in lung diffusing capacity. Safety is assessed via adverse events, lab values, vital signs, and ECGs. The inclusion criteria of note include subjects who are 40 or more years of age, have a predicted FVC of 45% or more, be on a stable dose of nintedanib or pirfenidone if using one, and have a diagnosis of IPF confirmed by HRCT within the last 12 months. The inclusion criteria of note exclude obstructive diseases, high supplemental oxygen use, use of drugs commonly used for PAH, recent IPF exacerbation, or pulmonary infections. For the TETON 1 and 2 protocols, we reviewed the blended blinded data and adjusted the sample size, considering the SEC variability, discontinuation rate, background therapy use, and regulatory feedback. In 2024, we expanded each of these studies from 396 to 576 participants to account for observed data, patient retention, and better alignment with the other major IPF trials. At ATS this year, we presented fully enrolled baseline data for TETON 1 and TETON 2 reflecting the full populations of both studies. The baseline demographics of TETON 1 and 2 are largely similar and compared favorably with the recently reported FIBRONEER-IPF study and earlier clinical programs for nintedanib and pirfenidone. While our statistical analysis plan is very long and detailed, we've been getting some questions in four key areas that I'd like to address. First, the study is 80% powered to detect an 80-milliliter change in FVC. This compares to a 90% power to detect a 74-milliliter change in FVC for the recent FIBRONEER-IPF study. Next, deaths in the study will be penalized with an FVC value at the 2.5 percentile of observed values across arms. This is based on recent feedback from the FDA. This is more conservative than the tenth percentile value used in the FIBRONEER-IPF study. Discontinuation for other reasons will be handled through statistical models like the mixed model repeated measures or multiple imputation. Finally, we've had five data monitoring committee reviews that evaluated safety over the course of the studies, with the last one occurring in February of this year, which covered more than 1,100 patients between the two studies. To close, our expectation is that our TETON 2 study will report top-line data in September of this year as said, and TETON 1 will report top-line data in the first half of 2026. If both trials are successful, we intend to use the data from the study to support a regulatory filing with the FDA to add IPF to the labeled indications for nebulized Tyvaso, setting up a commercial launch by 2027. And with that, I'll now turn the call over to C.Q. to discuss TPIP.

Thank you, Leigh. It's a pleasure to speak with you today about the questions we have concerning the TPIP Phase IIb PAH data that was recently presented. Of course, our discussions are based on publicly available information. First, we believe the patient population in the recently launched Phase IIb PAH study was imbalanced between the active and placebo groups that may have favored treatment effect in the active group. Second, we believe inappropriate statistical analysis was conducted in the PAH study, again favoring the active arm of the study and potentially overestimating the treatment effect. Finally, we did not see compelling data in the Phase IIa PAH, PH-ILD study that give us confidence TPIP can be successful in the Phase III PH-ILD study. We think the study population in the Phase IIb PAH study was imbalanced and not reflective of PAH patients who present today that are more heavily pretreated and less symptomatic than when we first developed nebulized Tyvaso. The combined baseline 6-minute walking distance in the Phase IIb study was meaningfully lower, and at least 45 meters lower relative to the recent clinical studies in PAH, potentially favoring treatment effect. Most, if not all, recent PAH studies conducted this decade have had a baseline 6-minute walking distance of 400 meters or more, reflecting improvements in the standard of care of this patient population globally. Further, there was an imbalance between the two arms of the study with baseline 6-minute walking distance. The 23-meter difference in baseline 6-minute walking distance between the active and placebo arms is more than 3x that of previous well-controlled studies in PAH. Of course, this favors the treatment arm of the study, potentially leading to a greater treatment effect. Moving to study discontinuation, we also saw a large imbalance that could favor the active arm with 10% of active participants discontinuing the study versus low discontinuations in the control group. The high discontinuation level imbalance, especially relative to the control group, could influence how missing values should be imputed. Moving to strategic analysis, the change from baseline to week 16 data is not symmetric and it's skewed to opposite directions. In the TPIP group, the mean value was approximately 20% higher than the median, suggesting that the data was right-skewed or positively skewed. In the placebo group, the mean was 40% lower than the median, suggesting that the data was less skewed or negatively skewed. The nonparametric method is used to report this data. In this case, red in color and the estimate relied on the data to be symmetric or at least skewed towards the same direction. However, the right-skewed data in the active arm and the left-skewed data in the control arm likely causes the overestimation of the treatment effect by misestimating or making the estimate of the location shift in medians not interpretable. Finally, there were 8 subjects or 12% with missing data at week 16 in the active group and 0 in the control group; the severe imbalance in dropout rate suggests the data is not missing at random. The multiple imputation method relies on the data actually being missing as random, which is not the case here. As such, we think these analyses may have overestimated the treatment effect of TPIP in PAH. Beyond the concern with the recent Phase IIb PAH data, we continue to question earlier Phase IIa PH-ILD data. It may not be indicative of potential Phase III success in this indication. First, the study was extremely small in sample size with a 3:1 randomization ratio. There were only 10 patients in the placebo arm, so it's difficult to draw any efficacy conclusion from the study. In addition, though based on the 6-minute walking distance we're securing, the 6-minute walking distance results were not statistically significant. Further, the ILD subtype results from the PH-ILD study were not balanced between arms; for example, only 2 CPFE patients were randomized into the study, but they were all randomized to the placebo group on a 3:1 randomization ratio. CPFE is known to be a category in which inhaled treprostinil is less effective. Finally, the first data from the PH-ILD study uncovers additional imbalance between arms, as 5 subjects or 17% of active subjects had a significant gap compared to only 1 subject or 10% of subjects in the control group. Dyspnea is not a prostacyclin class adverse event and we saw more dyspnea in the control group than the active group in the INCREASE study. As you can tell, we think that investors have overreacted to the TPIP Phase IIb PAH data; the baseline imbalance, skewed data in opposite directions, and aggressive statistical analysis based on the missing and random assumption may all contribute to the potential overestimation of the treatment effect, and we have no convincing data in PH-ILD. I will now hand the call to Gil Golden, our Chief Medical Officer, to outline the expected indicative impact we believe TPIP will have on the market if it's approved.

Thank you, C.Q. We believe that investors have overreacted to TPIP data and misunderstand the opportunity or lack thereof in the marketplace. Specifically, we do not see a near-term path to market in IPF. Long-term safety has not been proven, and a potential launch, even if it happens, is many years away. First, TPIP lacks a clear path to approval in IPF before 2034 if Tyvaso gains approval in 2027 due to orphan drug exclusivity. Further, as an ester prodrug, TPIP would need to show clear clinical superiority over Tyvaso or a meaningful improvement in patient care, and less frequent dosing may not qualify. The slide lists an example for LUMRYZ from Avadel; that was the only recent declaration of meaningful improvement in patient care by the FDA that was on the same dosage form. Next, long-term safety data for a liposomal prodrug in pulmonary hypertension is lacking, with the longest studies covering only 16 weeks. For progressive diseases like PAH, PH-ILD, and IPF, robust long-term data is essential. Recent experience with sotatercept, for example, shows that even after FDA approval, unexpected safety issues can arise over time, highlighting the need for caution. If TPIP were to pass through all these remaining hurdles, it’s still likely that the product will reach the market by the end of the decade or even the next decade. Recent Phase III studies in PAH have taken an average of 3 years to complete, with clinical outcome studies taking even longer to complete. So if everything works perfectly, we could see a product on the market in late 2029 or 2030. Looking ahead to 2030 then, the market landscape will likely shift significantly. If the ADVANCE OUTCOMES study succeeds next year, ralinepag may become the first true once-daily oral prostacyclin for PAH, potentially reducing the need for inhaled therapies like TPIP. We are also working on our own once-daily inhaled prostacyclin, which is on a similar development timeline as TPIP and could serve both PAH and PH-ILD. Additionally, in line with our approved and improved strategy, we are developing new Tyvaso devices and combinations to enhance convenience for patients. Lastly, by 2030, our organ development programs could begin generating revenue, making competition from small molecule drugs relatively minor compared to our broader long-term opportunities. To close, with no near-term path to market in IPF, unproven safety, and many years before reaching the market, we have little reason to be concerned about our prospects in the face of TPIP. And with that, I'd like to turn the call back to Martine to start our Q&A session.

Thank you, Gil. Operator, you can open up the phones for Q&A?

The first question comes from Olivia Brayer from Cantor Fitzgerald. Ms. Olivia, can you hear us?

Yes, can you hear me?

Yes, please go ahead.

Okay. Perfect. Sorry about that. Any comments on what you're seeing in terms of Yutrepia uptake in those PAH and ILD so far? I mean, it looks like you're not really seeing any impact on DPI, but appreciate anything you can tell us. And any color on why ex-U.S. nebulized Tyvaso was down sequentially, whether that had more to do with ordering patterns or any sort of demand trend that you're seeing? And then I've got one follow-up question on TETON, if you don't mind.

Olivia, there are so many people in the queue. There's not going to be time for a follow-up question, sorry. The marketing question, Michael will handle.

Sure. Thanks for the question, Olivia. Based on the visibility we have into what's going on, which admittedly is not perfect, things are going about as we expected in terms of the launch. I mean, we finished Q2 really strong in terms of shipments and orders in June. July, based on what we're seeing so far, looks really good. From our standpoint, no surprises in terms of what we're seeing in terms of the launch. As I said in my opening remarks, we know that docs are curious people. There's a new kid on the block, a new product, and some others want to try it out to see what it could potentially do for patients, particularly in light of some claims that Liquidia is making about their product. And so we're seeing a little bit of that. But as I said, to wrap up my opening remarks, I think we're really confident that with Tyvaso's product profile, plus the associated support that we provide to physician offices and patients, along with the really deep experience—over 10,000 patients have used DPI—you've got almost 3,000 prescribers for Tyvaso DPI. We think, over the long term, that's going to support continued growth of Tyvaso DPI well into the future.

Next question comes from the line of Joseph Thome with TD Cowen.

Congrats on the progress. Leigh called out the variability seen in FVC decline in placebo arms of IPF studies. Is there a way in the TETON trial that you attempted to standardize this? Or is there a way to make this predictable? When we think about any considerations in clinical practice between your U.S. and ex-U.S. experience, what should we think about going to the first data in September and translatability into the U.S. trial in the first half of next year?

Thank you, Joe. Questions relating to TETON will be answered by Dr. Peterson.

Thanks, Martine. Yes. As you noticed, there's very wide variability in FVC measures, and this is really shown in the placebo arms especially of the two approved drugs. What we've done to narrow that is we have central readers of our FVC results. We've also made huge attempts at each site level in order for training and for the procedures to ensure that people are doing everything consistently regarding pulmonary function testing. That's really been at the top of our list as far as management of these studies. Hopefully, we will see that we have less variability, which will show better and more true results.

The next question is from the line of Jessica Fye from JPMorgan.

Another one for Dr. Peterson, which is really a question that we hear from investors and that is how to read across from the compelling increased IPF subgroup where the patients saw improvement in FVC, but they also all had pulmonary hypertension. How do we read that across to an IPF population where presumably the majority of folks are not going to have pulmonary hypertension? Can you address that kind of question on the read across, and if I can ask one more, it would be just whether you can touch on the circumstances under which you would deploy a share repurchase authorization?

Dr. Peterson, it's another TETON question for you.

Yes, sure. So for—I mean, as I discussed in my script earlier, treprostinil has multiple mechanisms of action. It works through multiple receptors. An increase—of course, we've already seen, I mean, Tyvaso has already been approved for PAH. We believe and some nonclinical studies support that, that really is for PAH in main mechanism, as I also discussed, is through its vasodilatory function. However, there are other receptors, EP2, DP1, PPAR receptors, that have additional functions that they basically, as I went through, can inhibit fibroblast activity and extracellular matrix deposition, and really work on the fibrosis end of the disease. While treprostinil does work on IP, working through these other receptors, we believe it can work on fibrosis, which means it would be effective in IPF and PPF. So again, multiple mechanisms of action would lead to efficacy in multiple indications.

Superb answer, Dr. Peterson. James Edgemond, could you kindly address Jess's question regarding the buyback.

Yes. Thanks, Martine. And Jess, thanks for the question. We did announce this morning that our Board of Directors authorized a share repurchase of up to $1 billion of our shares, and we plan to implement this Board of Director authorization expeditiously. As a little bit of background, maybe as to why now, it is really given the continued strength of our commercial business, our robust balance sheet, our confidence in our upcoming catalysts, and our belief in our share price potential. We and the Board of Directors concluded that now was the right time to authorize the share repurchase. Like many shareholders we've met with, we believe the return of capital represents confidence in our near-term as well as long-term business prospects, and we share the view of many shareholders that our stock is an excellent investment opportunity. So Jess, thanks for the question, and Martine, back to you.

Thank you so much for that great response, James.

The next question is from the line of Roger Song from Jefferies.

Great. Congrats on the progress, also a question related to TETON. Given the increased subgroup data and then the powering assumption, 80% detect the 80 milliliter difference, what will be considered clinically significant for FVC results from that trial and what will be the home-run scenario from that trial? Also a follow-up on Jessica's question earlier—do you have a sense or any top-level comment on how many patients from the TETON study are actually having pulmonary hypertension with IPF versus pure IPF?

Thank you, Roger, for that concatenated question. It's all basically in the domain of biostatistics, so I'll ask Dr. Deng to kindly answer that question.

Since the TETON study, we are testing the antifibrotic effect, not the vasodilatory effect. We designed our studies to enroll the patient similar to other IPF studies, not to try to design the study similarly to previous PH-ILD studies. So we actually did not perform hemodynamic measures to determine if the subjects had pulmonary hypertension or not.

The next question is from the line of Andreas Argyrides from Oppenheimer.

Congrats on the quarter and all the positive updates. I appreciate the additional color here. I wanted to ask about ralinepag. With the PAH space moving towards more convenient dosing, can you share your thoughts on the ralinepag opportunity with once-daily oral dosing and the powering assumptions from the ADVANCE OUTCOMES study? Also, you mentioned the refined imputation for TETON 2; can you expand on how that method aligns with FDA expectations and whether this adds confidence in the strength of the upcoming readout?

All right, Andreas, thanks for the kudos on the quarter. Both of those questions are really within Dr. Peterson's domain, so Dr. Peterson, could you address them?

Yes. So the powering for ralinepag is powered at 80% to detect a treatment difference of the 0.65 hazard ratio. That's for a clinical worsening event, and we're on target to achieve the number of clinical worsening events to be able to see a difference and to detect a treatment difference by the end of the year. I think that was your question about the powering. You had a TETON question, and I didn’t quite get all of that. I'm sorry.

Andreas, can you repeat your TETON question? Okay. Well, I'm sure IR can follow up with him. Operator, can you answer the next question?

Yes, the next question is from the line of Ash Verma from UBS.

I wanted to ask about the design of TETON studies, specifically about the potential amputation of measurement for discontinuation further protocol. Based on your protocol, would these be reported as a missing value or a zero, or excluded from the analysis? Secondly, to the extent that there is Tyvaso-induced cough in the study, wouldn’t that mean functional unblinding if patients are only seeing that in the Tyvaso arm?

Thank you, Ash, for that question. I would like to ask C.Q. if he could answer the first part of the question, and then Dr. Peterson to answer the second part of the question on the unblinding.

I addressed that potential unblinding due to cough events. Based on the previous study, even the patients who are randomized to the placebo group will also experience some cough events. It's not just once you see there's a cough event that you can guess that the subject will be in the active arm. You probably see a little more cough in the active group than in the placebo group, but placebo patients also experience cough events. So we don't think that potential unblinding is an issue there.

Thank you, C.Q. Dr. Peterson, since C.Q. answered that second question, do you want to comment on the first question?

Yes. We talked quite a bit about how deaths will be penalized with FVC values at the 2.5 percentile observed values, and then discontinuations for other reasons will be handled through statistical models like the mixed model repeated measures or multiple imputation. I agree with what C.Q. said; it’s just like any study where there’s a known adverse event that can be associated with the treatment. Very often, there's a similar adverse event seen with the placebo, and we generally are surprised at the end of the day, sometimes we see things and think it might be due to active treatment because of cough, but it’s definitely not. So I would say there's no risk, especially in the study of cough, because people cough a lot just by inhaling placebo. So no worries there.

Perfect, Dr. Peterson. Thank you so much.

The next question is from the line of Jason Gerberry from Bank of America.

Mine is also just on IPF. I guess the physician KOL seemed to think that the nerandomilast data at ATS were pretty underwhelming, just the neutral benefit on exacerbation as a secondary endpoint and the lack of a p-value in the monotherapy subgroup. I'm curious how important is it in your view to show a meaningful improvement on exacerbation as well as establish a statistically significant benefit maybe in a pooled manner in the monotherapy subgroup?

Thank you so much for the question. I think Dr. Peterson would be the best person to answer it.

Yes. There was definitely a positive study for the FIBRONEER-IPF and PPF. They met their endpoints, they had 90% power to detect a 74-milliliter change in FVC. We're 80% powered to detect an 80-milliliter change. We obviously look forward to seeing results that ideally demonstrate that our Tyvaso is disease-modifying and that patients don’t decline. However, we may see a slight decline or more decline. But we fully anticipate having a clinically meaningful effect which would be greater than an 80-milliliter change in FVC. We will know more in September.

The next question is from the line of Terence Flynn from Morgan Stanley.

Great. I'll stick to one. Just on TETON, when you look at background therapy from the INCREASE study, it looked like there was a difference in terms of patients that were on background TKI versus those that were on no background TKI. Maybe you could talk through that dynamic. As we think about the Phase III, the mix there might impact the overall treatment effect that you're expecting to see?

Thank you, Terence. Dr. Peterson, you'd be the best person.

Yes. We definitely see more background therapy use in both TETON 1 and TETON 2 as shown on one of the slides that I went through today. TETON 1 has 77% background therapy use and TETON 2 has 75%. Just like any study when you have effective background therapy, then it can mute your efficacy of your investigational drug. But again, we're right in there; FIBRONEER-IPF also had 78% use of background therapy. There’s a lot of room for improvement. Patients even on their active standard background therapies still have significant declines in FVC. There’s a lot of room for improvement, and this is exactly what we expected as far as the use of background therapy. Stay tuned in September, but that's not a concern.

Dr. Peterson, thank you so much. Just because you've been on the phone answering these questions, I want to take a moment to recognize your expertise. You were the lead author on the New England Journal of Medicine publication on our INCREASE study, in addition to being the lead author of our physiological reviews publication on xenotransplantation. Folks on the phone, you're privileged to hear from such an expert source, Dr. Peterson.

Martine, there are no more questions in the queue, but I do have Andreas' follow-up question. He was asking if you could expand on how the FVC imputation method in TETON aligns with FDA expectations and whether this adds confidence in the strength of the upcoming readout. So it relates to the recent change in how we handle deaths in that study.

Sure. Since we have the New England Journal of Medicine lead author in this field down the line, we'll ask Dr. Peterson to answer.

Yes. I must correct that I'm not the lead author, but I'm one of them, so thank you, Martine. Our statistical analysis plan is lengthy and very detailed, and all of that is submitted to the FDA for their feedback. They have given us feedback on this process as well. We've talked extensively with them about how we're handling deaths. This is the current feedback as received just a few weeks ago. So that's already set. C.Q. and his group have been in conversations with the FDA regarding which specific statistical models should be used and how to impute the measures. Again, we used the mixed model repeated measures or multiple imputations.

Perfect. Thank you so much, Dr. Peterson. Thank you, folks on the call. Operator, you can wrap up the call now.

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