Good morning and welcome to the United Therapeutics Corporation Fourth Quarter 2019 Earnings Call. My name is Kensey, and I will be your conference operator today. [Operator Instructions]I will now turn the conference call over to Mr. Dewey Steadman, Head of Investor Relations at United Therapeutics.

Thank you, Kensey. Good morning. It's my pleasure to welcome you to the United Therapeutics Corporation Fourth Quarter 2019 Earnings Call. Accompanying me on today's call are Dr. Martine Rothblatt, our Chairman and Chief Executive Officer; Mr. Michael Benkowitz, our President and Chief Operating Officer; Mr. James Edgemond, our Chief Financial Officer and Treasurer; and Dr. Leigh Peterson, Vice President of Product Development.Remarks today will include forward-looking statements, representing our expectations or beliefs regarding future events. These statements involve risks and uncertainties that may cause actual results to differ materially. Our latest SEC filings, including Form 10-K and 10-Q, contain additional information on these risks and uncertainties. We assume no obligation to update forward-looking statements.Today's remarks also include financial measures that were not prepared in accordance with US generally accepted accounting principles or GAAP. Reconciliations of non-GAAP measures - financial measures to the most directly comparable GAAP financial measures can be found in our earnings release available on our website at www.unither.com.Today's remarks 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 any - that any products are safe and effective for any unapproved or investigational uses. Full prescribing information for the products is available on our website.Now, I will turn the call over to Dr. Rothblatt for an overview of fourth quarter and full year 2019 financial results and business activities of United Therapeutics. Dr. Rothblatt?

Thank you, Dewey. Good morning, everyone, and thank you for joining us on our fourth quarter and full year 2019 earnings call.We are conducting this call from our organ manufacturing laboratory up in Manchester, New Hampshire because last night, we had a blowout celebration with the DEKA Research & Development folks who are headquartered in Manchester for the FDA approval of our Remunity product, which we released the news about that on Monday. And it was a tremendous accomplishment and a tremendous party. So we're still here up in Manchester, New Hampshire and conducting our call from here.I'm also pleased that Dr. Peterson is joining us on this call because another press release we issued on Monday was of the really grand slam home run results that we had on our INCREASE trial in Group 3 pulmonary hypertension.And Dr. Peterson was in charge of that clinical trial, which hit all of its primary and secondary endpoints, and she is here on this call today to help answer any questions that may come up regarding the scientific and clinical aspects of that INCREASE success.So I'm going to start the call today, first, with having our President, Mike Benkowitz, explain a one-time distributor inventory issue, and then after that, we will open up the call lines for any questions that you may have regarding Remunity increase, our pipeline, everything else. On the advice of our expert new Head of IR, Mr. Steadman, we've expanded this call to 45 minutes, so that there will be plenty of time to answer everybody's questions and answers.So Mike, can you take it up from here?

Thanks Martine.I want to spend a few minutes discussing our 2019 full year revenue, especially in light of an inventory destocking by one of our distributors in the fourth quarter that unfortunately clouds our underlying product performance. Overall, we are very pleased that total treprostinil net revenues, represented by sales of Orenitram, Tyvaso and Remodulin, increased in 2019, despite the launch of generics against Remodulin earlier this year.We are also pleased with the growth in Unituxin, a monoclonal antibody approved to treat pediatric neuroblastoma and this product's increasing contribution to our overall revenues. Unituxin now contributes almost as much revenue as our ex-US product sales. We believe these trends will continue into 2020, translating into total product revenue growth for the year.The growth in treprostinil revenues reflects the strong demand and patient growth trends we have communicated on prior earnings calls and at investor conferences throughout the second half of 2019 and into 2020.In 2019, we achieved the highest number of new patient starts on our treprostinil products, highlighted by the highest level of new Remodulin starts in 10 years and the highest number of new Orenitram and Tyvaso starts in nearly four years. This resulted in an all-time high number of active patients on a treprostinil product at the end of 2019.As we mentioned consistently in our public filings and periodically on these calls, our US treprostinil revenues reflect sales of our products to specialty pharmacy distributors who typically place monthly orders based on current patient utilization trends and contractual minimum and maximum inventory requirements.As a result, sales of Remodulin, Tyvaso and Orenitram can vary quarter to quarter depending on the timing and magnitude of these orders and do not precisely reflect changes in patient demand for our products. In other words, these orders do not always track the…

Thank you so much, Mike.Following the positive results of the INCREASE study of Tyvaso in pulmonary hypertension associated with interstitial lung disease, we're looking forward to submitting a supplemental new drug application to expand the Tyvaso label mid-year. That, if approved, could expand Tyvaso's addressable US population by more than 30,000 patients and help patients with no available approved therapies to control their pulmonary hypertension associated with ILD.After INCREASE, we're looking forward to continued progress on three new infusion systems for delivery of parenteral treprostinil over the next 18 months: the launch of Remunity system by July of this year, FDA action on Trevyent, and the potential launch of the Implantable System for Remodulin expected next year.Coupling all of these results together, what you can see is that over the next 18 months, all things going well - and I'm definitely like knocking on wood here - in the biotech arena, we should have three new product launches and approvals. We would have the Trevyent one is the one coming up next for FDA approval. And that should - we're hoping that to see that well within the next 18 months. And then the ISR system from Medtronic, that one we've guided toward looking for approval in early 2021.And then, because of the fantastic results that Dr. Peterson's team has delivered on INCREASE, we'll be filing that by the summer. And given a normal 10-month or so turnaround time at the FDA, we will be able to also launch that product within this 18-month window.So super excited to have three approvals/launches within the next 18 months, on top of the Remunity launch which, as noted on Monday, we are going to get that out to patients by Independence Day, marking the freedom that Remunity product will give to our patients compared to the older delivery systems.So with that overview of our near-term pipeline activities and being conscious of the likely large question load, I'd like to ask our operator to kindly open the lines for any questions, and then I will direct them to Mike, James or Dr. Peterson as appropriate. Operator?

[Operator Instructions] Our first question comes from the line of Chris Shibutani from Cowen. Please go ahead. Your line is open.

Hoping to get a little bit more clarity in terms of your expectation for 2020 over 2019 full year Remodulin growth. There seem to be several factors underpinning your assumption here. It's also very difficult for us to track some of these nuances beyond your net reporting. You talk about new patient starts on an absolute basis increasing. You talk about sort of a slowing of the trend that you saw toward the end of the year of these patients switching to generics. Can you provide us with a little bit more quantitation of the forces that you expert to occur in 2020 that are guiding your expectation for the increased revenues? Thank you.

Good to hear your voice this morning. Thanks for the question. I'm going to ask Mike Benkowitz to address your question.

Sure. Well, I think as you know, we don't provide forward-looking guidance on revenues for the coming year. And so, we're not going to deviate from that policy. But just qualitatively, as I said in my opening remarks, the transitions from branded Remodulin to generic really declined to a trickle at the end of the year. And for the first part of this year, we've not really seen a change in that trend. Meanwhile, we continue to add new patients at, I would say, a very healthy clip.And so, we need to factor in the fact that we're not losing patients, but we're adding patients. And then, when you have the launch of the Remunity later this year, which we think is going to be very attractive to new Remodulin patients and other patients with PAH, we think that the combination of those factors will lead us to growth on that product.And then, again, with the EV label, I think we - I think the numbers are roughly about 20% higher starts in Q4 compared to the historical trend for Remodulin. And so, as we continue to get the - communicate to the physicians and explain the data and the benefits of the EV data, we look for continued growth in Remodulin. And then Tyvaso continues to steadily hold on and growing incrementally. But as Martine talked about, with the approval of - in ILD due to the increased data probably first part of 2021, that will certainly provide a catalyst for that product.

Awesome. Mike, thanks so much for addressing that question. Operator, could you queue up the next question please?

Our next question comes from the line of Liana Moussatos from Wedbush Securities. Please go ahead. Your line is open.

You just mentioned the first part of the INCREASE impacting the first part of 2021. Do you - Dr. Peterson, do you think physicians are going to wait that long since Tyvaso is already on the market and there's nothing else for these patients?

Well, thanks for your question, Liana. Nice to hear your voice this morning. Let's have Dr. Peter review the - some of the key outcomes from the INCREASE study. And then, I think those - when she shares that data with you, the data I think will speak for itself in terms of what physicians are likely to do. Dr. Peterson?

Yes, so as Martine mentioned, we're extremely excited by these results. Tyvaso has been shown to be safe and effective in this additional population of ILD PH patients, which is about 30,000 Americans. So it's larger than what we've been working on with PAH. And it's really, really important because this is the only therapy that's been shown to be effective out of like five others that have been tried, and they have not shown efficacy and this one has with - this one showed to be effective with regards to the primary endpoint, which was the six-minute walk, p-value of 0.004, and also was positive with all of the secondary endpoints, including it showed a 39% decrease in the risk of clinical worsening. And that's pretty huge in a study that this short. So - and also had a highly statistically significant decrease in NT-proBNP of less than 0.0001.So it's a huge win for the patients. We're really, really excited for this. And as you mentioned, this population has had nothing else. All of those - all of the other PAH meds trials have failed. Some events were terminated early due to safety concerns, and this one really showed great tolerability and efficacious, as we know, Tyvaso is in PAH as well.

Thank you very much, Dr. Peterson. Operator, next question?

Our next question comes from the line of Jessica Fye from JPMorgan. Please go ahead.

Can you talk about your expectations for patient and physician demand for Remunity with the pharmacy filled cartridges in light of the shelf life? Will you be able to give patients and physicians enough support to move over to that product without any concern about continuity, just given that shorter shelf life?

Yes, Jessica, thank you so much for the question. I'll just add a brief introduction while Mike is spooling up a more detailed response to your question. But when you see the Remunity product, it is so elegant and nice. And I always try to put myself in the patient's shoes, and they've been given terrible news that they have a potentially fatal illness that once they are at the point of needing parenteral therapy, they understand that they have to be in some way or another connected to a catheter that is putting lifesaving medicine into their bloodstream 24 hours a day. And they're taught by the nurses, no matter what, don't disconnect this for - in the case of subcutaneous, more than just for the time it takes to change it. And of course, intravenous, they have a continuous risk of sepsis until - except for those lucky few who are on our ISR product already.So when they see the rather bulky and it bulks of their clothing and whatnot, current pump that's used to deliver Remodulin, it's intimidating, and it is so kind of intimidating that they are told they need to have two of these, in case one of them ever fails. So when you compare that with this elegant Remunity product, which has the footprint of like a silver dollar, and it's so intuitive and can interface with the control devices wirelessly, it really is going to be I think for the patients and their physicians, a breath of fresh air.And now, it is absolutely true, Jessica, that whenever you transition patients, especially like New York Functional Class III and IV patients who are most of the patients on this product, from one device to another, you have to do that very cautiously and gradually. And every single aspect like the shelf life issues and what not that you mentioned, all come into play. But we always try to look at any downside as a positive side.And this product did take a little bit longer to launch than we had hoped, and we did have like kind of a heads-up with the first approval a few months ago before we got to this pharma fill. We do have excellent relationships with Accredo and CVS Caremark who would be responsible for filling these.So I do feel that we've done a very diligent job of making it graceful as a process as possible, the transition. But let me ask Mike, who directly manages that entire process, to give you a little bit more color on why we think the transition process is going to be smooth, and before too long, the great majority of subcutaneous patients will end up on Remunity. Mike?

Sure, thanks Martine. Yeah, I think from a support perspective from specialty pharmacy, there's really no concerns. As you think about what specialty pharmacy currently does with Remodulin patients, it's not like there's a referral and a start and then they go away. They're providing ongoing nursing support on an almost weekly basis during the first 60 to 90 days, and then as directed by the physician, thereafter.And then they're at least going back I think once a quarter just to do a checkout and training, making sure that everything is going well with the patient, and then the actual pharmacist is connecting with the patient at least on a monthly basis to make sure that they have adequate supply and arranging for the next shipment.So, really the only difference here from an SP perspective is, the frequency of the refills. So you're looking at something like twice a month instead of once a month, and then the fact that they're doing the - the specialty pharmacy is doing the refill.The good news is, they're already doing that for our IV premix. So that template is in place and exists, and so it's really just leveraging what's already in place for the premix and porting that over to the pharmacy fill. And that's part of why we're not launching today, we're launching in July as we're working through all of those logistics with specialty pharmacy and make sure that they have their filling process down to a science, so there is no issues there, that there is no disruptions in terms of product going out to patients and that the nurses are experts in the use of the pumps when they're going out and teaching the patients, the patients have the confidence that the nurses know how to work the pump. And so, that along with building inventory over the next couple of months is what we're doing those things in parallel. So by the time July rolls around, it should be a pretty smooth running machine.

Thanks so much Mike. And I know many people on this call have seen Mike - Mike or James show the Remunity device at our one-on-one meetings at healthcare conferences. And I think everybody would agree it's an elegant and attractive device. When you make such a nice medical device like this, what you're really doing is, you're showing respect for the patients. And I believe that the physicians and the patients very much appreciate that respect. Operator, can you queue up the next question please?

Our next question comes from the line of Hartaj Singh from Oppenheimer. Please go ahead.

With the increased - we're getting a lot of increased focus from actually investors looking at United Therapeutics, both previous investors and new to the story investors. Martine, one question that comes up very frequently is that United Therapeutics ran a very disciplined P&L early in the decade, also did quite a few share buybacks. The capital allocation strategy was very tight and sort of well executed on. So investors ask us how to think about that going forward. Is that something that is still high on the list of United Therapeutics' priorities, especially in light of your full pipeline and impending launches? How to just think about your capital allocation, whether it's share buybacks, potential dividend, etc., etc., going forward? Thank you.

Awesome, Hartaj, nice to hear your voice this morning. That's an excellent strategic question. And I'm going to ask our Chief Financial Officer, who oversees all capital allocation questions, James Edgemond, to respond.

It is something that we are continuing to evaluate. But at the moment, our capital allocation priorities remain unchanged and will continue to be, first, investing in R&D opportunities that really support the business mission, for example, what Dr. Peterson talked about in terms of the INCREASE study. The second leg of the capital allocation priority is going to be investing in value-creating business development activities, and third is share repurchase.With respect to investing in our R&D budget, our first capital allocation priority, keep in mind that our annual expense budget algorithm, which we have consistently and continue to apply, will not allow us to exceed 50% of our prior-year revenue. And why this is important is that this methodology forces us to continually evaluate each opportunity on an ongoing and going-forward basis.With regard to M&A, we place an emphasis on the strategic impact of targets in terms of the attractiveness of the therapeutic area, opportunity for near-term revenues and the incremental value that can be added by UT, among other items, and includes therapeutic areas like cardiology, pulmonology and oncology as well, although we're not just limited to those areas. So, Hartaj, our capital allocation strategy is still the same. And I hope that gave you some background on how we frame it internally.

Thank you, James, for that great answer. Hartaj, I might provide, if I could - like tag along on James Edgemond's answer a little bit and highlight the interesting interface between capital allocation and R&D, which has to do with our organ manufacturing activities. So we have been making quite good progress with our xenokidney effort, which are aimed to address the unmet medical needs of over 100,000 Americans on dialysis today.Unfortunately, many of them die daily, waiting for a kidney transplant that they won't be able to receive. We reached the point of, in our xenokidney effort, that we've now optimized on a 10-gene pig, which we believe will provide a repeatable, a reliable survival that would be as good as what patients on dialysis could expect, but with a much better quality of life, not having to be tethered to dialysis centers.So to give you a little bit more color on this, the FDA have guided us that a key threshold that they want to see before taking the xenokidneys into man is that they want to see what - they have like kind of a six-by-six matrix, plus a GMP-like facility to produce the xenokidneys. So the six-by-six stands for six baboons, which is the standard model to use for this as a preclinical model, six xenografts put into six baboons with the six baboons' survival to at least six months without evidence of infection or other untoward safety consequences at the point of six months.The reason for six months is actually just practical. Baboons are quite small on the order of like 10 kilograms and the kidneys, which are designed to be human-size, after six months, simply become too large for the baboon abdomen. So we have repeatedly demonstrated over six-month survival with various versions of…

Our next question comes from the line of Martin Auster with Credit Suisse. Please go ahead.

This is Thomas on for Marty. Thanks for taking the question. Maybe just a quick follow-up on Remunity. Given at launch, these Remunity cartridges will be prefilled by specialty pharmacies, it sounds like, can you give us some idea of what the gating steps are for getting this as part of the manufacturing process? And then how much control do you guys have over this versus your partner DEKA? And can you give us any kind of idea for timeline expectations on this? Thanks.

Yeah, thanks Thomas, and give our regards to Marty. We have a very close partnership with DEKA. We have spelled out in a specific written agreement a production quantity per month. We and all of our QA/QC manufacturing people have all been on the assembly line here in Manchester, where they are manufactured. And before we put into the press release quote that we would launch the product on July 4, pretty much everybody signed in blood that everything was queued up with adequate supply to be able to meet the demand for the Remunity cartridges.Mike, do you want to add anything to that?

I think that's [indiscernible].

Great. Thanks Thomas. Operator, next question?

Our next question comes from the line of Eun Yang from Jefferies. Please go ahead.

I have a question for Dr. Peterson. Now, with the Tyvaso success in PH patients with ILD, what's your view on another Phase III trial in PH patients with COPD? Thanks.

So, Eun, thank you for your question. And if I think I understood your question correctly, you're asking based on the success of INCREASE, what do you see as the probabilities of Tyvaso in another Group III population, which is COPD? Just to bring everybody on the call to be at the same level, and then I'll turn the question over to Dr. Peterson to answer in detail. We do have another Phase III study already going on in a COPD population. It's called the PERFECT study.And I think one very good auger, if you will, if I'm using that word correctly, for the PERFECT study is that the same principle investigator, Dr. Waxman, who initiated the INCREASE study - and I want to simply in public provide a shout-out to Dr. Waxman for his assistance and encouragement for United Therapeutic entering into this WHO Group III patient population. He was also the prime mover behind the PERFECT study.So the same individual that was - have a dominant fingerprint and the dominant shaping of the trial design for INCREASE also have that same footprint and shaping on of PERFECT. But with those introductory remarks, Dr. Peterson, could you provide more color on Tyvaso in COPD patients?

Yes. So, as you just mentioned, this is - the PH-COPD patients are a subcategory of the Group III as is ILD PH. And so, for the disease mechanism, there is - it's similar in that you have the lung disease, and then the associated - or the lung disease is actually complicated by pulmonary hypertension. And the theory behind why our inhaled Tyvaso would work and actually would hopefully not show the safety issues that we're seeing in the systemic therapies in previous studies is that because of the whole wanting to avoid the V/Q mismatch.And that's essentially, you want to treat or vasodilate the vasculature that is next to the healthy alveoli but not dilate those that are next to the unhealthy or damaged alveoli. And so - and that's - not only was that true, it seems to have held up. And increased Tyvaso was very, very well tolerated relative to placebo.And so, we are very hopeful that that will hold up also with the COPD PERFECT study, and we have every reason to believe it will. So we're really, really excited for those results. It's about 20% enrolled. And so, that will be coming out in the relatively near future. And so, more to come.

Yes. Thank you, Dr. Peterson for that good scientific and physiological insight into the lung. It's such an amazing organ. And one of the reasons that this has been such a corridor of indifference is because pulmonary hypertension affects the very, very back-end of that lung corridor. It's not the arteries that come right out of the heart. It's those far distal arteries. And somehow, you have to manage that disease without worsening the blood flow between the heart and the lung. And I salute you and your entire team for figuring out how to do that. Thank you.Operator, can you queue up the next question please?

Next question comes from the line of Geoff Meacham with Bank of America. Your line is now open.

This is Jason on for Geoff. What are your expectations for the rates of adoption for Remunity and potentially Trevyent? Are these primarily new starts or current users of the Smiths pump? And then, is this going to be affected at all by payer dynamics with the availability of generics? And then, I was hoping you could please give us a brief update on Orenitram, the FREEDOM-EV label and how is that going and how should we think about patient growth moving forward. Thanks so much.

Thank you for your question. Mike, do you want to start with answering his questions on Remunity? And then, after that, I'll provide - I or Dr. Peterson will provide a couple of remarks on Orenitram label.

Sure. So on Remunity, in terms of the rate of adopt between existing patients and new patients, we believe that both populations will be interested and excited about transitioning over to - transitioning or starting on the Remunity pump. And so, we've talked about earlier in the call, we expect to launch in July. And starting in July and over a period of time, we expect to see a pretty rapid adoption of those patients to Remunity.From a payer standpoint, there is not really going to be a cost difference relative to the existing pump. It may actually be less expensive. We're still looking through the pricing. And today, we're not seeing any pressure with respect to generics. And we will see if that changes, if another subcu pump becomes available on the market. But I think that right now, we're just not seeing a lot of payer pushback really on the IV side or the subcu side.

Thanks Mike. So the Orenitram label was a great success for all of us, and we are very, very pleased to see it. Actually, Dr. Peterson was also in charge of that study, which - just again to bring everybody on the call to a level playing field here, that study resulted in demonstrating that Orenitram, on top of background study, reduced morbidity and mortality in the patient population. It was something that everybody had long suspected. But it's one thing to suspect it and another thing to scientifically prove it.And Dr. Peterson and her team did successfully proven in the EV study, the FDA agreed, and hence that is on the label. That is definitely supercharging the reputation of Orenitram among prescribers. We're seeing prescribers prescribing Orenitram earlier and earlier in the patients - natural history of their disease. So we do believe that that new label has made a material impact in bending upwards the curve of Orenitram adoption.And we're quite confident that Orenitram will be able to deliver $1 billion a year in revenue to United Therapeutics as a result of that new label, and the large number of patients with pulmonary hypertension, who unfortunately don't get treprostinil therapy early enough in their disease, to save them.I'd like to also mention that we have entered into the next stage of development of our once-daily formulation of Orenitram, and that's an exciting pipeline product for us. And I think that it's quite a reasonable expectation that within less than a handful of years, we should be able to launch that product commercially into the market and provide an even more convenient means for a patient to take Orenitram.So we've got so many exciting things going on at United Therapeutics. I'm told that there are no more questions. So, operator, you can conclude the call. And everybody, thank you for joining us this morning.

Thank you for participating in today's United Therapeutics Corporation conference call. A rebroadcast will be available for replay for one week by dialing 1-800-585-8367 with international callers dialing 1-416-621-4642 and using access code 1598163. You may now disconnect.