United Therapeutics Q2 2024 Earnings Call Transcript

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July 31, 2024

There are 10 speakers on the call.

Operator

Good morning, everyone, and welcome to the United Therapeutics Corporation Second Quarter 2024 Earnings Webcast. My name is Cole, and I'll be your conference operator today. All participants on the call portion of this webcast will be in a listen only mode until the question and answer portion of this earnings call. And please note that this call is being recorded. I would now like to turn the webcast over to Dewey Steadman, Head of Investor Relations at United Therapeutics.

Operator

Please go ahead. Yes.

Speaker 1

Thank you, Cole. Good morning. It's my pleasure to welcome you to the United Therapeutics Corporation's Q2 2024 Earnings Webcast. Remarks we make 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.

Speaker 1

Our latest SEC filings, including Forms 10 ks and 10 Q, contain additional information on these risks and uncertainties, and we assume no obligation to update these forward looking statements. Remarks today may discuss the progress and results of clinical trials or other developments with respect to our products, and these remarks are intended solely to educate investors and are not intended to serve as a basis for medical decision making or to suggest that any products are safe and effective for any unapproved or investigational uses, and full prescribing information for our products are available on our website. Accompanying me on today's call are Doctor. Martine Rothbod, our Chairperson and Chief Executive Officer Michael Binkowitz, our President and Chief Operating Officer James Edgemond, our Chief Financial Officer and Treasurer Doctor. Lee Peterson, our Executive Vice President of Product Development and Xeno Transplantation and Pat Poisson, our Executive Vice President of Technical Operations.

Speaker 1

Note that Michael Benkowitz and I will participate in the fireside chat and 1 on 1 meetings at the Morgan Stanley 22nd Annual Global Healthcare Conference in New York on September 4, and James Edgemond and I will participate in the fireside chat and 1 on 1 meetings at the 2024 Wells Fargo Healthcare Conference in Hypertension Association 2024 International PAH Conference

Speaker 2

and

Speaker 1

Scientific Sessions August 15 to 18 in Indianapolis the European Respiratory Society Congress in Vienna, September 7 to 11 and the American College of Chest Physicians, CHEST 2024 Annual Meeting in Boston, October 6 through 9. Now, I will turn the webcast over to Doctor. Rothblatt for an overview of our Q2 2024 financial results and the business activities of United Therapeutics. Doctor. Rothblatt?

Speaker 3

Thank you very much, Dewey. We at UT are very pleased and proud to present the results of another record quarter. As described in the press release, PowerPoint and the financials, we are doing very well across the board. Double digit revenue growth is the norm. In a moment, our President, Mike Benkowitz will provide some deep insight into these numbers.

Speaker 3

So let me start with a strategic overview. We see our business as 3 waves of success. 1st, approved products that are market leaders for the mid-2020s. 2nd, next generation products and new indications that can be market leaders in the late 2020s. 3rd, an organ manufacturing business that can transform the treatment of end stage organ disease.

Speaker 3

Examples of the first wave are Remodulin, Tyvaso, Perenitram and Unituxan. Examples of the second wave are Ralinepag as a once daily pill for pulmonary hypertension and our TETON trial aiming to show improvement in pulmonary fibrosis. Examples of our 3rd wave of success are our xenotransplantation products that offer tremendous potential for the thousands of patients on dialysis. Now, I'm sometimes asked with all of this success, Martine, what keeps you up at night? Well, let me start with what does not keep me up.

Speaker 3

What does not keep me up is our foundational business because I do not see any threats to the vitality of our Remodulin, Tyvaso or Orenitram products. For Remodulin and Tyvaso, my confidence is born of the uniqueness and clinical efficacy of our drug device combination technology. For Remodulin, there is no other parenteral drug delivery device that is as small, accurate and easy to use as our RemUnity pump. Its patented acoustic volume sensing technology is more than 10 times more accurate than legacy pumps and has fewer moving parts. For Tyvaso, there is no other dry powder inhaler so well matched to deep lung delivery of our drug as the MannKind DPI.

Speaker 3

The proof is really in the pudding. In record times, thousands of patients have begun using our patented device in both old and new pulmonary indications such as pulmonary arterial hypertension and interstitial lung disease. Competition in our current foundational doesn't really keep me up either because they are mostly used in combination with our drugs or if not use drug delivery devices that are not as elegant as our RemUnity and our DPI devices. Now, let me jump ahead to the organ business. That also doesn't keep me up because in the last year, we have obtained multiple times scientific proof that our Xeno Kidneys function well in human bodies with no more immunosuppression than an allograft.

Speaker 3

Folks, that cannot happen by accident. Of course, there's more work to do to get these XenoKittney's FDA approved and even more work to do to get them into quantity production, but I see no showstoppers and we have achieved proof of concept. It is only in our 2nd wave of success, Tyvaso for pulmonary fibrosis and Ralinepag for PAH that I find myself kept up at night. The reason is that the results of a clinical trial cannot be known until it is unblinded. And even a study that is 90% powered for success by definition still has a 10% chance of missing.

Speaker 3

Of course, we are doing everything we can to ensure the credibility and approvability of our IPF and Ralinepag clinical trials. But because these two products have the potential to more than double our current $3,000,000,000 revenue run rate, the stakes are extremely high. In conclusion, UT is a rock solid bet on its current foundational business. UT is a very, very good bet and a highly rewarding one at that in its next stage generation products that are now in late stage clinical trials. And UT is a once in a lifetime biotechnology opportunity in manufactured organs.

Speaker 3

With that strategic overview, I'd like to now turn the call over to our President, Michael Benkowitz. Mike?

Speaker 2

Thanks, Martine, and good morning, everyone. As Martine noted, today we reported yet another quarter of record revenue at $715,000,000 and 20% growth from the Q2 of 2023. We saw meaningful worldwide revenue growth for all of our key products, Tyvaso, Orenitram, Remodulin and Unituxan. First, I want to touch on Tyvaso, which when viewing the nebulizer and dry powder inhaler delivery systems together remains the number one prescribed prostacyclin treatment in the U. S.

Speaker 2

Total Tyvaso revenue for the Q2 was $398,000,000 up 25% over last year with growth led by continued uptake of Tyvaso DPI, an increase in pricing and increased commercial utilization following the implementation of the Part D redesign provisions under the Inflation Reduction Act or IRA. For the franchise, we saw record referrals and starts during the quarter, leading us to have confidence in the durability of our growth profile as Martine mentioned. The percentage of Tyvaso DPI patients using our patient access programs continues to tick down following the implementation of the first provisions of the IRA earlier this year, albeit not at the same rate we saw between the Q4 of 2023 and the Q1 of 2024. We could continue to see a modest decline in patient access program utilization through the remainder of the year as new patients on therapy are less likely to need patient assistance having met their copay obligations on another product before starting Tyvaso DPI. The benefit from this could be offset by modest rebates from our initial contracting efforts to ensure parity of access in the future for Tyvaso DPI.

Speaker 2

As an aside, we understand that CMS will soon publish the negotiated prices for the first 10 drugs selected under the IRA's drug price negotiation provision. I want to remind investors that our drugs are not on this list. In addition, based on our current understanding of the IRA statute and guidance issued by CMS thus far, we expect our treprostinil products will not be subject to price negotiation under the IRA because there is at least one marketed generic version of treprostinil. Moving to Orenitram, we reported yet another quarter of record revenue $107,000,000 representing 13% growth from the Q2 of 2023. Like the Q1, this was driven by a combination of increased commercial utilization, pricing and a modest increase in average dose from prior quarter levels.

Speaker 2

Recall that retotram and Remodulin are priced on a per milligram basis. Like with Tyvaso DPI, we saw a modest decrease in patient access program use for Orenitram in the 2nd quarter, driven by the same dynamics. Likewise, we expect a modest decline in patient access program use through the remainder of the year. Our medical teams continue to have scientific discussions based on recent scientific publications with health care providers on the expedite induction protocol where PAH patients initiate on Remodulin and then transition to Orenitram as an option for appropriate patients who may not want or need to go on long term for oral therapy. Moving to Remodulin.

Speaker 2

Worldwide revenue of $147,000,000 was up 16% from last year with very strong performance across all of our underlying demand metrics. And this comes 5 years after the first launch of generics for Remodulin, reflecting our continued commitment to our patients and Remodulin. Remodulin both intravenous and subcutaneous remains the most prescribed renal prostacyclin in the U. S. Our RemUnity pump remains the only option for new subcutaneous patient starts.

Speaker 2

Last quarter, we heard through the channel that specialty pharmacy distributors are going to start proactively converting all subcu treprostinil use to Remodulin and our immunity pump given the discontinuation of support for the CAD MS3 system by its manufacturer. We've seen this trend continue through the Q2. Finally, Unituxan. Worldwide revenue of $52,000,000 was up 17% from the prior year quarter and U. S.

Speaker 2

Unituxan revenue of $47,000,000 up 18%. U. S. Growth was driven by price and volume. To wrap up with our 5th quarter in a row of record revenue, our commercial products clearly have the innovation, interest, momentum and muscle to continue to grow and serve our patients.

Speaker 2

With that, I'll turn the call back over to Martine to run the Q and A.

Speaker 3

Michael, that was just such a perfect overview of everything. Thanks so much and thanks for all of your leadership in all of those areas. Operator, you may now bring forward the first call.

Operator

Thank you. And we will now begin the question and answer session. Today, we'll come from Roanna Reiss with Leerink Partners. Please go ahead.

Speaker 4

Hey, morning everyone. So I was curious, could you elaborate a bit on the different drivers you saw in quarter for Tyvaso DPI versus nebulized Tyvaso? And were there any changes or reasons for greater confidence coming through? Like I think you mentioned increased number of referrals and possibly ramping the new field force that we should keep in mind going into 3Q this year.

Speaker 3

Thank you for that question, Roanna. That type of commercialization question would be best handled by Michael.

Speaker 2

Sure. Thanks for the question. So I think the underlying demand metrics just kind of we continue to just I think plug along or chug along like we have the past few quarters with the referrals and with the starts and it continues to come from both Group 1 PAH as well as Group 3 PAH ILD. The second part of your question about the sales force, I think we are starting to see some of the impact of that sales force expansion in the Q2. As you recall, we started that ramp up in the last fall, really fully deployed that team January 1.

Speaker 2

And of course, it takes a little bit of time for the reps to get out in the field and get in front of those physicians and have the opportunity to educate them on the benefits of our products. But what's been really nice to see so far in the 1st 6 months is the increase in the number of ILD prescribers actually writing Tyvaso. So when we first launched in the PH ILD a couple of years ago, our efforts are really focused on educating around the need to screen for pulmonary hypertension. And then once they started to do that, suspect that the patients had pulmonary hypertension associated with ILD, then they can make the decision whether we refer that patient into the PH clinic or trying to treat them themselves. I would say the vast majority of doctors at that time started referring to the PH clinic.

Speaker 2

So, but we knew really in order for us to, I think realize the full opportunity that we have in PH ILD, these physicians are going to have to start treating just because of the number of patients that are out there and the bandwidth constraints on the physicians in the PAH clinic. So it's been really nice to see that over the last 6 months, we really started to increase both the breadth of ILD prescribers, as well as the depth and recall the depth metric we always look at is physicians with 3 plus patients. And so, we're seeing really positive momentum and growth on both of those key metrics.

Speaker 3

Thank you so much, Mike, and thank you, Roanna, for your question. Operator, you could bring forward the next question.

Operator

And our next question will come from Jessica Fye with JPMorgan. Please go ahead.

Speaker 5

Great. Good morning. Thanks for taking my question. Curious if you could talk a little bit about what you're seeing in the PAH marketplace as it relates to the initial WinRiver launch. Do your observations line up with Merck's commentary yesterday?

Speaker 5

Have you noticed any changes in referrals or starts in PAH?

Speaker 3

Thanks, Jeff. Nice to hear your voice this morning. Again, I it's a market dynamics question that Michael is the best person to answer.

Speaker 2

Yes, sure. Thanks for the question, Jess. Yes, I mean, I'm not going to really comment you mentioned on Merck's product. I mean, they're plenty capable of speaking for themselves. I would say with respect to our business, and specifically in the PAH, I think the business remains very solid, very strong, really strong referral growth, really strong start growth, patient shipments, all of the underlying demand metrics continue to be in line with what we expect at where we think we need to be.

Speaker 2

And that's obviously being reflected in the revenue line on our financial statement. So, yes, so at this point, in the Q1, no surprises there. As Martine said in her opening remarks, if the Merck's clinical trial, most of those patients were using sezatercept in combination with prostacyclins and that certainly at least seems to be how that's playing out so far.

Speaker 3

Perfect. Thanks so much, Mike. Thank you, Jeff. Operator, could you bring forward the next question, please?

Operator

And our next question will come from Ashburma with UBS. Please go ahead.

Speaker 6

Great. Thanks for that. So my question just wanted to understand. So look, I mean, I think the stock has reacted pretty favorably to the ASR and I know from a cash out flow, you mentioned last quarter that you have now a more specific understanding of what's required for Xeno. So given where we are right now, like what's your appetite for another significant share buyback or another ASR?

Speaker 3

Thank you for your question, Ash. That being basically a kind of a capital allocation question, I think the best person on the call to answer that would our Chief Financial Officer, James Hedgemont. James?

Speaker 7

Great. Thanks, Martine. Ash, good to hear your voice. Thank you for the question. Two kind of responses to your question.

Speaker 7

One is, our current ASR is still in process, right? The existing or the second tranche, as we've described in our disclosure, the $700,000,000 still is in process through the end of September of this year. So we're going to first focus on executing the existing ASR and share repurchase program. A second kind of consideration is we are still committed to allocating capital wisely and in the best interest of stakeholders by first deploying it. As we've said historically, Ash, internally for our R and D initiatives, including manufacturing facilities.

Speaker 7

And included in those manufacturing facilities certainly is our consideration of future commercial DPF capital requirements. 2nd is we're going to still focus on corporate development to find those opportunities where we think can bring value to shareholders and values to patients. And third, kind of what we've said at the beginning, our current share repurchase program. So our capital allocation program will continue to be the same. We'll continue to evaluate and get more knowledgeable about the construction of the DPF facilities.

Speaker 7

But right now, we're just going to continue to focus on the ASR that's in place and then continue to use that capital allocation waterfall to evaluate any future opportunities, whether it's share repurchase or otherwise. But thank you for the question. Martine, back to you.

Speaker 3

James, that was a 3 60 degree comprehensive answer to Ash, so greatly appreciated. Operator, next question please.

Operator

And our next question will come from Joseph Thome with TD Cowen. Please go ahead.

Speaker 2

Hi there. Good morning and thank you for taking my question. Maybe one on the filing strategy for IPF assuming success. I guess do both of the ongoing IPF studies need to be successful in order to pursue a filing? Or do you think there is a p value level or level benefit that you could see in one where you maybe would only need one of these studies to work?

Speaker 2

And any feedback from the FDA on that point will be helpful if you have it. Thank

Speaker 3

you. Thank you, Joe, for that question. Fortunately, we have on our call the person who's in charge of that entire program, Doctor. Lee Peterson. So, Doctor.

Speaker 3

Peterson, could you kindly respond to Joe?

Speaker 8

Yes, sure. We haven't recently discussed this with FDA. I mean, this was really early, early discussions with the IND. They really just gave us the boilerplate language that they always do, which is typically we require 2 studies for 2 positive studies for registration. But of course, I mean, if we see we'll likely see the TETON-two results coming out before TETON-one, at least the top line results because as you know, we completed the TETON-two enrollment period early.

Speaker 8

And so we'll see those and we will certainly continue discussions with FDA. I mean, assuming a really significant, highly positive, clinically significant results, then we will certainly have a discussion with them about that.

Speaker 3

Thank you so much, Doctor. Petersen. And just to because she's too modest to really her own horn, but I just want to remind everybody that Doctor. Peterson and Doctor. Smith, her right hand clinical trial leader, they're the same team that executed so successfully our interstitial lung disease trial that resulted in really much of what we are celebrating today, the explosive growth in Group 3 PAH and the entry into that space of the DPI.

Speaker 3

So this team, I can I know for sure, because I see them often, they too, they swept this trial day and night? And we are this is our if somebody said like what is your number one priority, it is the success of the TETON trial and the indication to achieve an indication in pulmonary fibrosis, a market that is probably 3 times the size of the pulmonary hypertension market. And again, our trial design is in combination with already approved background therapies. So there is no real kind of having to like take a patient off a drug to start them on an inhaled treprostinil and similarly there's no need to put a patient on another drug to start them because we have both types of patients in the trial. So we would hope for all of that to be in the label.

Speaker 3

Anyway, sorry to ramble on there a bit, Doctor. Peterson, but great answer to Joe. And operator, due to the time, we have time for just one more question.

Operator

And that question will come from Andreas Argyris with Oppenheimer. Please go ahead.

Speaker 9

Good morning and thanks for taking our questions. And continuing on the topic of TETON, what kind of bridging study might the FDA require to approve TAVASO DPI in addition to the nebulized if TETON is successful? And then how are you thinking about presenting the data? I mean, is there a chance for maybe like an interim readout of sorts or anything like that?

Speaker 3

Okay. Yes. Thanks for those two questions. Again, I think Doctor. Peterson would be the best person on the call to answer.

Speaker 3

Once again, just for your recollection, she and her team did the bridging study from the Tyvasen at the lysine to the DPI for PAH. So she's very, very familiar with how to do that. She also was the lead author in the publication on those results in the New England Journal of Medicine. So very much on top of getting the word out in the most credible and respected way. So with that little toot toot of your horn, Doctor.

Speaker 3

Peterson, can you answer the questions?

Speaker 8

Thank you. Yes, sure. So for the bridging study, again, we will let me answer the second question first for the interim results. We will not do an interim analysis or an interim look. We have for Teton II, as I just said, we have completed enrollment.

Speaker 8

So we're in the final follow-up period and we have the actual final results within a year, just shortly after the year follow-up is up. So we completed in July, so that would be July plus some time to clean those data just for the top line results. So that will be the next time we that will be the first time we see the actual results from these one of these studies. And as far as bridging into DPI, now as you know, the so what we did for in our brief study, we looked at PAH patients, we transitioned from nebulized Tyvaso to Tyvaso DPI and that was actually sufficient to get approval for both PAH patients and PHILD patients for the Tyvaso DPI. Now for the IPF studies, we still have some ongoing discussions with FDA.

Speaker 8

We will be discussing as soon as I mean, really when we get further into the follow-up period or when we get top line results, we're going to have a discussion because it's a different group. It's the pulmonary division for IPS versus the cardiorenal division for PH and PHILDs. So different group, different people, sometimes just slightly different requirements. So we need to just confirm what we need to do for the bridging. It might be a matter of a small substudy in our Teton OLE program.

Speaker 8

So we need to sort that out. But again, it shouldn't delay. We'll get the results of the TETON studies. We will pursue the approval based on the TETON-one, TETON-two. And then while that is occurring, we'll do what we need to do for bridging.

Speaker 3

Excellent, excellent answer. Thank you so much, Doctor. Peterson. Thank you everybody for being on the call today. I'd like to just wrap up with drawing everybody's attention to the terrific PowerPoint that Dewey Steadman and his team released.

Speaker 3

I think it's not only aesthetically beautiful, which it is, it's just rich in content, graphs, charts, numbers, kind of strategic overview kind of things. So please study that PowerPoint at depth if you really want to understand the beauty of the United Therapeutics story. And then finally, I'd like to just do a shout out to everybody that is part of our United Therapeutics family, what we call our unitarians, we're now bumping up on 1500 people and it's in line with the metric that Michael, James and I have long adopted at UT to grow our headcount in accordance with a revenue per head metric of approximately $2,000,000 per head. And that's on par with the absolute best, not only of biotech, but of really American corporations in general. So now that we're knocking on the door of $3,000,000,000 revenue run rate, that's $2,000,000 per head for our knocking on the door of 1500 people and it's just another tremendous testament to the success of United Therapeutics and to the fact that the leaders of this company, Michael, James, myself, Pat Trosson, Doctor.

Speaker 3

Peterson, others, for all of us, our number one goal is to make sure that everybody working at our company is having the absolute best career development experience of their dreams. And so long as that is happening, then all of our goals pretty much happen automatically. And I think a great another metric I can share with you that I got from our HR department is our percentage of employees who voluntarily terminate, we call voluntary termination rate is about 5%. That is far lower than I think any of our peers, but certainly far lower than the averages in the biotech sector and definitely outside biotech. So the numbers say we're doing things right.

Speaker 3

The people say we're doing things right. And I hope all of you agreed that we're doing the things you want to see us do. Have a great day. Operator, you can close the call.

Operator

Thank you for participating in today's United Therapeutics Corporation earnings cast. A rebroadcast of this webcast will be available for replay for 1 week by visiting the Events and Presentations section of the United Therapeutics Investor Relations website at ir.uniter.com. Thank you again for your participation. You may now disconnect.

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