Yahoo Finance United Therapeutics Corporation (NASDAQ:UTHR) Q4 2023 Earnings Call Transcript
United Therapeutics Corporation (NASDAQ:UTHR) Q4 2023 Earnings Call Transcript February 21, 2024
United Therapeutics Corporation beats earnings expectations. Reported EPS is $4.36, expectations were $3.92. United Therapeutics Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the United Therapeutics Corporation Fourth Quarter 2023 Earnings Webcast. My name is David, and I will be your conference operator today. All participants on the call -- the webcast will be in a listen-only until the question-and-answer portion of the earnings call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Dewey Steadman, Head of Investor Relations at United Therapeutics.
Dewey Steadman: Thank you, Dave, and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation's Fourth Quarter 2023 Earnings Webcast. Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events. These statements involve risks and uncertainties that may cause actual results to differ materially. Our latest SEC filings, including Forms 10-K and 10-Q, contain additional information on these risks and uncertainties. We assume no obligation to update those forward-looking statements. Today's remarks also 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 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 the products are available on our website. 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; Dr. Leigh Peterson, our Executive Vice President of Product Development and Xenotransplantation; and Pat Poisson, our Executive Vice President of Technical Operations. Note that James and I will be participating in one-on-one meetings at the 2023 UBS European Healthcare conference on February 27th in London. Michael, James and I'll participate in a fireside chat and one-on-one meetings at the TD Cowen Healthcare conference on March 5 in Boston and Pat Poisson and I will participate in a fireside chat and one-on-one meetings at the Leerink Partners Global Biopharma Conference on March 12 in Miami.
Our scientific, commercial and medical affairs teams will present at the American College of Cardiology 73rd scientific sessions, April 6 through 8 in Atlanta; the International Society for Heart and Lung Transplantation, April 10 through 13 in Prague; and the American Thoracic Society International Conference on May 17 through 22 in San Diego. And now, I will turn the call or the webcast over to Dr. Rothblatt for an overview of our fourth quarter 2023 financial results and the business activities of United Therapeutics. Martine?
Martine Rothblatt: Thank you, Dewey. Good morning, everyone and a good day to those who are on the other side of the oceans. Congratulations to the 1,200 Unitherians who worked tirelessly every day to help us achieve our third straight quarter of record revenue and our second straight year of record revenue. We yet again achieved 20% plus quarterly and annual revenue growth for the fourth quarter and the full year 2023. On top of our record performance in the fourth quarter of 2023 earlier this year, we received important external validation of the value of our Tyvaso DPI business through a royalty transaction executed by our partners at MannKind Corporation. To put it simply, MannKind sold a-tenth of their 10% royalty payment stream from us, which equates to 1% of Tyvaso DPI sales and they sold it to Sagard Healthcare Partners for $150 million, plus other milestones.
That implies an external valuation of the entirety of the Tyvaso DPI revenue stream of $15 billion before even factoring in the additional potential milestones. That's well above the current market cap for our entire business. And importantly, this transaction valuation is far above The Wall Street valuation of our entire company as a whole, and is for only one of our many products. At United Therapeutics, we talk about being positioned for three waves of growth and let's dive into the many reasons why we're so confident in our business. Our first wave of growth will come through our existing commercial business, led by Tyvaso in PH-ILD. We continue to post solid growth in our current business with our third consecutive quarter of record revenues for Tyvaso and revenue growth for our US Remodulin business, despite the presence of competition in the market for the past five years.
Our growth in PH-ILD and continued leadership in pulmonary arterial hypertension also known as PAH has led our nebulized Tyvaso and our Tyvaso DPI products combining to become the most prescribed prostacyclin therapy in the United States. Michael will go into detail on these -- this exciting aspect of our commercial business. Our second wave of growth will come from our near-term pipeline led by the TETON studies in pulmonary fibrosis and the ADVANCE OUTCOMES study of ralinepag in PAH. These programs should enable us to continue our double-digit annual growth trend through the second half of the decade. I will provide updates on the TETON and ralinepag programs shortly. Of course, both our first and second waves of growth are subject to clinical trial outcomes, regulatory approvals, new competitive entrants and the potential impacts of the Inflation Reduction Act, but we feel good about our prospects for meeting these revenue growth targets.
Our third wave of sustainable growth will come through the development manufacture and widespread use of manufactured organs and organ technologies to provide a solution to patients suffering from end-stage kidney, lung, heart and liver disease. Now moving to our near-term pipeline and second wave of growth. We have four key registration trials underway. Three, TETON studies for pulmonary fibrosis and the ADVANCE OUTCOMES study for ralinepag and oral therapy for Group 1 PAH. We also advanced our MiroliverELAP program towards the clinic with a recent and historic IND clearance by the FDA. Moving to TETON. We believe IPF represents a 100,000 patient opportunity in the United States with only two approved therapies that nearly slow lung function decline.
Both TETON 1 and TETON 2 are enrolling patients. And at this time, we are aiming for full enrollment in both studies with 576 patients each by the end of this calendar year. Likewise, we believe PPF or progressive pulmonary fibrosis represents a 60,000-patient opportunity in the US alone. And this disease is quite distinct from IPF or idiopathic pulmonary fibrosis. One of the two FDA approved IPF therapies is also approved for PPF and as in IPF, it only slows the decline of lung function in these fragile patients. The TETON PPF study dosed its first patients in the fourth quarter of 2023 right on schedule and we expect this trial to enroll 698 patients. We believe there is a high probability of success in the three TETON studies based on the IPF subset analysis of the INCREASE study of nebulized Tyvaso in PH-ILD patients.
Unlike the two IPF studies that are already on the market, nebulized Tyvaso in a safety endpoint showed an improvement -- an actual improvement of lung function in the subset of patients that had IPF along with their pulmonary hypertension. That just gives so many people so much hope. Now let's move on to ralinepag and our ADVANCE OUTCOMES study in Group I PAH, which continues to enroll patients and we expect completion of the study in 2025. We are in fact targeting 700 to 1,000 patients in this study depending on the pace of accruing clinical worsening events. Ralinepag is a next-generation selective and potent prostacyclin receptor agonist which we are developing as a once-daily oral therapy for PAH. We believe ralinepag's once-daily dosing, sustained release profile, and titratability could position it favorably against the other oral prostacyclin receptor agonists on the market as well as other therapies for PAH patients.
Ralinepag provides 24-hour coverage with higher potency than the other oral prostacyclin agonists as demonstrated by in-vitro assays and ralinepag significantly demonstrated more than 20% improvement in pulmonary vascular resistance in a Phase 2 study. A long-term Phase 2 open-label study of ralinepag also showed sustained improvement in six-minute walk distance out to more than two years. A manuscript recently published in the journal Advances in Therapy describes these exciting findings. Now, while we and others have made progress at extending lives and improving patient outcomes through treprostinil and other therapies, the only known cure for PAH remains a lung transplant. That also is the case for IPF. The problem for PAH, IPF, and many other patients with end-stage organ disease is that there aren't enough donors and transplantable organs available to address the need.
And for many organ donations, one life sadly must be lost to save another. We believe the best solution to this problem is to create a supply -- an unlimited supply of tolerable transplantable manufactured organs even better with an unlimited supply of organs transplant can become a consideration for therapy in countless end-stage organ diseases for which there are few good treatment options. Accordingly, we have been developing several investigational approaches using multiple technologies with different organs all with this same goal in mind. The first is our ex vivo lung perfusion service or EVLP, which has led to over 380 lives saved with lungs that have undergone EVLP in our facilities in Silver Spring, Maryland and at the Mayo Clinic Jacksonville campus.
Beyond EVLP, we have four platforms xenotransplantation, regenerative medicine, 3D bioprinting, and bioartificial organs. These four platforms cover four key organs lung, heart, kidney, and liver. Starting with xenotransplantation, we continue to work with the FDA on the clinical path forward. We're underway with what we call pivotal preclinical studies in baboons at the request of the agency. Specifically, for our 10-gene program, we expect the last preclinical xeno-kidney transplant to occur in the first half of 2024. We expect to meet with the agency later this year to discuss the IND and clinical protocol for human studies for 10-gene xeno organs. In parallel with the pivotal preclinical studies, the construction of our clinical scale Designated Pathogen-Free facility or DPF in Virginia is complete and we dedicated the facility earlier this month.
We expect the facility to begin receiving pigs this quarter and for the facility to grow its population through the balance of 2024 in preparation for clinical studies in humans for both xeno-kidneys and xeno-hearts. Super, super exciting and wow, just breathing so much hope into the entire transplant space. Last month, we received FDA clearance of our investigational new drug application that allows the miroliverELAP system to enter human clinical trials. By the way this non-registration study will be the first ever clinical study of a bioengineered organ. MiroliverELAP is an external liver-assist product or ELAP that is designed to provide liver support to -- in the critical care setting. Acute liver failure is a devastating condition with no approved therapies.
A liver transplant is often the only way to save these patients. The ELAP is intended to give the patient's liver a chance to heal itself, possibly reducing the need for liver transplantation. We look forward to providing more details on this program in the coming quarters. I'm thrilled that we're in such a great position at United Therapeutics. We have a solid commercial business, posting record results with continued strong growth ahead, a pipeline of novel therapies that continue our strong double-digit revenue growth and a long-term plan to address one of the largest, critical, unmet medical needs in medicine all while helping our patients, employees and shareholders succeed. I'll now turn the call over to our President, Michael Benkowitz, who will give an overview of our commercial performance and expectations for potential competition this year.
Michael?
Michael Benkowitz: Thank you, Martine, and good morning everyone. As Martine noted, today we reported our highest revenue quarter ever at $615 million, up 25% from the fourth quarter of 2022 and record annual revenues of more than $2.3 billion, up 20% over 2022. Importantly, we saw meaningful growth across our entire suite of products, like the Tyvaso franchise, Remodulin in the US, Orenitram and Unituxin. Starting with Orenitram, revenue of $84 million during the quarter was up 11% from the prior year. This growth reflects increases in volume, price and average dose. Following the publication of two peer-reviewed manuscripts in 2023, our medical affairs teams began providing education on data from the EXPEDITE study, which assessed the Orenitram dose achieved, after a rapid Remodulin titration and then transition to Orenitram.
Worldwide Remodulin revenue of $115 million for the fourth quarter was down 6% from last year, primarily impacted by International order timing. However U.S. Remodulin revenue of $106 million was up 9%, from the fourth quarter of 2022. Remodulin both intravenous and subcutaneous remains the most prescribed Parenteral Prostacyclin in the U.S. We expect this momentum to continue in the U.S., as we had a near record number of referrals and starts during the fourth quarter, driven in part by interest in the EXPEDITE study results. Worldwide Unituxin revenue of $54 million in the fourth quarter was up 48% from the prior year quarter and U.S. Unituxin revenue of $49 million was up 34%. U.S. growth was driven by pricing volume and these volume gains were driven primarily through a modest inventory build at our distributor.
International ordering driven by our partner in Japan, was strong over a comparably soft quarter in 2022. Finally, TYVASO, Worldwide TYVASO revenue was up 45% to $351 million, our highest quarter ever. U.S. revenue was up 40% to $337 million and was the highest quarter ever. U.S. growth in TYVASO was led by the continued uptake of TYVASO DPI. TYVASO nebulizer and TYVASO DPI remain the number one prescribed, prostacyclin treatment in the U.S. and they remain the only approved therapies for PH-ILD. We're pleased to report that there were no material changes in inventories of TYVASO DPI, at our Specialty Pharmacy distributors during the fourth quarter and that both distributors remain within their contracted inventory levels. The expansion of our partner MannKind's production capacity over the summer of 2023, continues to be sufficient to meet current demand and a further expansion at MannKind is expected to come online in the coming months, which will allow us to reach as many as 25,000 patients per year with TYVASO DPI.
Assuming normal production operations at MannKind, we do not expect any supply constraints moving forward. Interestingly after the launch of TYVASO DPI in May of 2022, and the subsequent expected decline in revenue for Nebulizer TYVASO, we are starting to see modest sequential growth in U.S. Nebulizer TYVASO revenue, a key reminder of the importance of the Nebulizer for patients with Pulmonary Hypertension. Some physicians and patients continue to prefer the Nebulizer, because of its use profile or for reimbursement reasons. In addition, we are aware that some Pulmonologists, prefer to start and titrate their PH-ILD patients, using the Nebulizer before switching to TYVASO DPI. This allows more precise titration, in one-breath increments, compared to the three-breath equivalent increments of TYVASO DPI.
We expect this platform strategy to emerge, as a competitive advantage over other potential DPI products should they reach the market. Now we've heard a lot about potential competition for TYVASO DPI and I'd like to share several reasons why we're confident, we will have the preferred dry powder inhaler for patients with PAH and PH-ILD. First, TYVASO DPI requires only one-breath per cartridge, compared to two-breaths for the potential competitor. On top of that, our low flow design requires less patient breath than potential high flow devices that may reach the market. In patients with compromised lungs, we think that the less breath required through a low-flow device will be seen as a fundamental benefit by both patients and prescribers. Next, the low flow design of Tyvaso DPI allows for consistent deep lung delivery.
This means, we can achieve similar blood levels as the nebulizer with less treprostinil than high flow devices. The Dreamboat device for Tyvaso DPI requires no cleaning or maintenance, saving patients' time and effort compared to other potential devices that may reach the market. Also Tyvaso DPI is labeled for room temperature storage by patients another important convenience point. There's no maximum label dose for Tyvaso or Tyvaso DPI despite claims to the contrary by our potential competitors. And finally the BREEZE study also demonstrated 98% patient satisfaction with Tyvaso DPI. These factors coupled with the experience physicians have gained through the rapid uptake of Tyvaso DPI since launch lead us to believe that Tyvaso DPI will compete as effectively with similar product offerings in the inhaled market as Remodulin has competed with similar offerings in the parenteral market.
Moving to the other potential competitor this year, the PAH community is anticipating the March FDA action date for the first potential activin signaling inhibitor for the treatment of Group 1 PAH. While we understand that there is some excitement for this new pathway and we've seen this in the past with new offerings, it's important to remember that PAH is a complex multi-factorial disease where polytherapy is the norm not the exception and treating multiple pathways of the disease aggressively and early is critical to patient outcomes. Based on the result of this new product's clinical trial and our conversations with prescribers, it is not -- it does not appear that an activin signaling inhibitor is either a cure for PAH or a replacement for prostacyclin therapy.
In fact in their pivotal trial, 70% of patients were on prostacyclin therapy with 40% on a parenteral prostacyclin Remodulin. Therefore, we see this therapy as additive to our existing prostacyclin patients. And if the activin signaling inhibitor helps further improve outcomes then these patients should stay on our therapies longer. For those patients not yet on a prostacyclin therapy, PAH is a progressive disease and the vast majority of these patients will eventually need a prostacyclin. Whether that's before or after initiating activin signaling inhibitor will be case dependent. But given that polytherapy is becoming the norm, we believe Tyvaso DPI offers patients and prescribers a convenient way to cover the prostacyclin pathway earlier in a patient's disease journey.
Finally, we want to remind investors that this launch will only be in Group 1 PAH and will not affect our growing PH-ILD business where the activin signaling pathway has not been studied. That brings us to the profile of treprostinil-based prostacyclins like Tyvaso Remodulin and Orenitram. We have over two decades of use and safety data to support the use of treprostinil in PAH patients. There's a correlation between prostacyclin dose and patient outcomes. Treprostinil has demonstrated improvement across a wide array of key hemodynamic parameters and no regular blood testing is required for prostacyclin use. To wrap-up, while we're entering a year of potentially increasing competition, we remain confident that we have the product portfolio, clinical data, support structures and expertise to succeed in the emerging competitive landscape.
We're extremely proud of our continued record performance in this past quarter and the entire year and we think we're in the early stages of sustainable growth for our current commercial portfolio. With that, I'll turn the call back over to Martine to run the Q&A.
Martine Rothblatt: Thanks, Mike. And congratulations again to you and your entire sales, commercialization, marketing, strategic operations and allied health teams that have achieved sequential record on quarters and years of growth in these products. It's just really beyond awesome. Thank you so much. Operator, you could now open up the lines for any questions.
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