Good morning and welcome to the United Therapeutics Corporation Second Quarter 2020 Earnings Call. My name is Marcela and I will be your conference operator today. All participants are in listen-only mode until the question-and-answer portion of this earnings call. [Operator Instructions] I'd now like to turn the call over to Mr. Dewey Steadman, Head of Investor Relations at United Therapeutics.

Good morning. It's my pleasure to welcome you to the United Therapeutics Corporation Second Quarter 2020 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, our 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 our forward-looking statements. Today's remarks may also include financial measures that were not prepared in accordance with U.S. Generally Accepted Accounting Principles or GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release available on our Web site at ir.unither.com. Today's remarks may discuss the progress and results of our clinical trials or other developments with respect to our products. These remarks are intended solely to educate investors and are not intended to serve as the basis for medical decision-making or to suggest that any products are safe and effective for any unapproved or investigational uses. All prescribing information for the products is available on our Web site. Now, I'd like to turn the call over to Dr. Rothblatt for an overview of our second quarter financial results and business activities of United Therapeutics. Dr. Rothblatt?

Thank you, Dewey, and welcome everybody to our second quarter earnings call. I'll be pleased to coordinate the call starting with a brief overview. I'll then turn the call over to our President, Chief Operating Officer, Mike Benkowitz, who provide a more in depth overview, and then he'll bounce the call back to me and we'll open up the lines to questions and take the questions as they come. And I will forward them according to the topic either if it's finance related to James, our CFO, if it's science or clinical related to our Head of Product Development, Leigh Peterson or if it's commercial related or related to other areas of the company's operations to Mike Benkowitz. While I'm really pleased with the quarter because for the products that are material to us that really matter, namely U.S. sales of Remodulin, Tyvaso, Orenitram and Unituxin. It's clear that we are poised to return to revenue growth as our patients are approaching now the levels that we had pre-pandemic. We have previously guided that we believe these products will more than double current revenues for the following reasons. First, we expect net gains from Remodulin patients each year, once we launched the highly differentiated products for Remunity and the implantable system for Remodulin. These launches have been delayed for various supply chain reasons related to the pandemic, for Remunity and for FDA Medtronic coordination reasons for the implantable system for Remodulin, but we think these delays will not carry on very much longer. Also, we expect to contribute to net gains in Remodulin the pending approval of Trevyent, which is in front of the FDA, as a form of subcutaneous Remodulin and our R&D project of the -- with Smiths medical of have a very advanced, smart, pump device for…

Thanks, Martine. Yes, I'd like to provide some color around physician and patient demand in the second quarter and our commercial plans for PH ILD. As Martine said at the top, we're very pleased with our revenue performance in the second quarter often considered following the achievement of a record high number of U.S. patients on our treprostinil therapy in each of the prior three quarters. We're happy that we're able to maintain relatively stable quarter-over-quarter active patient census in the midst of the COVID pandemic. Our first quarter earnings call, we mentioned that we were seeing some impact of treprostinil prescriptions and starts for the month of April attributable through the pandemic. However, the quarter progressed we saw the number of new patient prescriptions grow and reach close to pre-pandemic levels by the close of the quarter. We're especially pleased with the 40% year-over-year growth of Orenitram in the second quarter which we believe is driven by increased acceptance of FREEDOM-EV label by physicians and patients. We continue to see growth at Orenitram prescribers, including among KOLs at large PAH candidates who have historically not written much for Orenitram. We also observed a decline in discontinuation and an increase in average dose per patient during the second quarter. And we're excited that we've been able to improve formulary access to Orenitram since the start of the year for plans that cover close to 11 million additional lives. According to our payer tracking data sources, Orenitram is now considered covered for around 76% of lives in the U.S. and preferred or non-preferred formulary physicians. This compares to under 72% of the U.S. lives for [indiscernible]. So all-in-all, we believe that physicians and payers and patients are understanding and appreciating the value proposition Orenitram provides. We thought the biggest impact of…

Thank you so much, Mike. That was a great color and insight on all the different areas of our activities and it's just -- it's so beautiful to see us helping our over 7000 patients so thank you, Mike, so much for your and the entire large team of medical and pharmaceutical professionals that you have working with you. Operator, we now can accept the questions that may like to be directed to either myself, James, Leigh or Michael.

[Operator Instructions] Your first question comes from the line of Hartaj Singh from Oppenheimer. Your line is open.

Really nice quarter. Martine, the main question I have is that, most -- almost every other biopharma company reported decreases of 5% to 10% in revenues in the second quarter. You actually, I believe, had a slight increase over the first quarter. So can you just talk a little bit about the dynamics through the rest of the year into the third and the fourth quarter, with the same seasonality hold the United Therapeutics has historically with COVID-19. And then --and just talk a little bit about that in terms of also as you expect sort of near-term growth going forward.

Thanks so much Hartaj. Great to hear your voice this morning and looking forward to the upcoming conference of your bank. Mike, I think you would be the best placed person on the call to respond to Hartaj's question.

Sure. Thanks for the question Hartaj. Yes, I mean, I think we haven't seen anything to suggest the seasonality that we typically see in the second half of the year, which change this year versus prior years. The big wild card obviously, is what happens with COVID. And, if things continue to increase, if cases rise and centers are having to shut down, we get as kind of a situation where new prescriptions and new starts kind of wax and wane like we saw throughout the second quarter, but I think we're all learning had a growth and had a deal in this new environment. And I think physicians are no exception to that. So I think, as I said my opening statement, I think they're becoming more comfortable prescribing via telemedicine and a lot of these institutions are allowing their patients to come back in and get the treatment they need. So and plus we have this warehousing effect. So, unless we have another complete shutdown, I think we would expect that we hopefully -- it's not necessarily smooth sailing, but certainly continue to kind of on an upward trajectory as we move into the second half of the year.

Your next question comes from the line of Eun Yang from Jefferies. Your line is open.

A question on Remodulin. So you mentioned that the reduction in the new patient start assume to have a more negative impact on Remodulin versus a Tyvaso or Orenitram. So question to you that during the pandemic, you think that Tyvaso may have a more impact. So why do you think there is a greater impact on Remodulin versus the others? And then, x-U.S. sales decreased dramatically. So do you think that x-U.S. sales will be stabilized from here? Thank you.

Thanks, Eun. I'm going to again ask Mike to respond to that question since he's responsible for all those areas.

Sure. So I think, in the case of Tyvaso versus Remodulin and the impact there, I think the main issue is, with Remodulin, you're talking about a perennial therapy that some cases --most of the time is starting in a hospital. So patients aren't able to come in during the first half of those second quarter, get into the doctor, get into hospitals because of the pandemic that's what we saw the sharpest decline in new prescriptions and new starts. And then, as we set a rebound towards the end of the second quarter with an inhaler with Tyvaso, while I think physicians would probably prefer to start with that in their clinic. It is more easily started in a home setting. And so our specialty pharmacy nurses are very well trained on how to use a nebulizer and how to start patients on Tyvaso. And it's much more common that Tyvaso is starting to the home. So that's really I think the dynamic there. It's just really I think the familiarity and sort of historical precedents are starting Tyvaso in the home much more regularly than what you would see with Remodulin. But again, I think we're starting to see a little bit of that change as people start to adjust to the current situation. As it relates to x-U.S. yeah, I think that the situation there is that we always see some lumpiness of the ordering. So it's really hard to kind of look at one quarter and project that out over subsequent quarters, because there's not a regular ordering pattern in x-U.S., as we see here in the U.S. But, I think what we've seen there, certainly, the impact of generic entrants and a big reason for that is the payer landscape outside of the U.S., as…

Next question comes from the line of Martin Auster from Credit Suisse. Your line is open.

I'm going to do a no, no and try to sneak in two questions but let…

You know what they say for every 10 years somebody has in the field they're entitled at least one question. So you're good for two and soon for three.

So the first probably for Mike, you mentioned 30 to 35, kind of new sales marketing liaison reps that support the PH ILD opportunity. I was curious if you could kind of add a little more color to what sort of percent increases as at about 20%, 30% increase to the effort? And can we read into that that you expect to see kind of at least a commensurate type of revenue growth with that? The second question, Martine was for you. There's a competitor in transportation that's out there that I noticed has been kind of hiring up senior staff this year and had a successful financing last year. I was curious if you could comment on kind of competitive positioning for where you see versus the competition in Dino? And any kind of other competitive advantages, you see you guys having? And then secondly, is that company progressive as United giving any thought to potentially seeking to kind of capture value for that program through a spin out or some other kind of effort just because they think it's something that gets overlooked within the [indiscernible] other franchises that are commercial. Thanks.

Great questions. A lot of good thought into each of those questions, let me, if it's okay, I will talk about the second one because the first one involves more metrics and give Mike a couple minutes to line up those metrics. So there are a few competitors in the xeno space and there seemed to be more creeping up all the time. It probably has been inspired by the successful financing of one of the companies. And I don't -- I'm going to, I hope it doesn't break with anybody's protocols. I believe you're referring to eGenesis has that company. But if not, feel free to tell me afterwards. But eGenesis is the one that I'm aware of that's completed a financing. And they're a great company. They're spun out by George Church who's one of the geniuses, certainly biological geniuses of our time. And it's based on great genetic engineering work by Luhan Yang, who's absolutely stellar molecular biologist. And now is, I believe running an arm of that company in China. So that company has a lot of -- a lot going for it and very good investors. We at UT are actually very happy to see the progress of eGenesis because for a while, it had been a little bit lonely for us in the xeno field. And we were wondering, like why don't other people see this opportunity? There are 100,000 people, over 100,000 people on kidney dialysis machines and very few of them can survive past 10 years. And yet there are thousands and thousands -- more than 10,000 that are out toward that the number of years So there's no other solution for these patients who are not going to get allograft other than something like xeno transplantation. So we think it's an…

Sure. So, yes, Martin, I think that your first part of your question was just around the kind of 30 to 35 headcount adds to sales, marketing and medical and what does that look like as a percentage of the current staffing there? So if I think about the current -- of the current group and those three functions that are principally focused on PAH, the 30 to 35, is about a 25% to 30% increase, roughly in terms of headcount. I think it's hard to sort of draw -- sort of extend that out to an expectations around revenue. We certainly think that the revenue opportunity with ILD is tremendous, certainly based on [indiscernible] with the data and what we're hearing from physicians that have seen the data. I think the challenge and trying to draw a correlation between the headcount increase size to the revenue is just there's a lot of variables in the air. So, in PAH, I mean in the variable entity, where are the patients? How concentrated are they at the physician -- at each physician or at each center? How many physicians and centers are there? And if I look at what PAH looks like and what ILD looks like those are different. What's the other variable? What's the overlap between the [indiscernible] in ILD and those that are treating PAH and there's not a lot of overlap there. So, the expansion of the -- in the field sales force and medical teams will be really dedicated to ILD. So it'll be a dedicated team detailing these ILD doc's. And you're also talking about as another variable, the fact that there's really not a lot of competition in ILD and these reps and these MSOs will only be detailing one indication, while those on the PAH either they're carrying three products in the back. So there's a lot of variables that kind of go into sales force sizing. And again, it's just really hard to kind of draw that correlation to what we think the revenue opportunity is and say, okay, because we're increasing by 25%, that we only think that the ILD opportunity is 25% of our current revenues. I think we all believe that given the size of the patient population, the unmet need, the opportunity is significantly greater just with the increased data and then certainly following it all with perfect with the TETON study, it's even greater than that.

The next question comes from the line of Liana Moussatos from Wedbush Securities. Your line is open.

Congratulations on the strong quarter. Of these two programs, which one is going to provide a cure first, gene therapy or organ manufacturing?

Wow! That is a very tough and challenging question. I'm not smart enough to know the answer to that question because both of them are very promising and both of them have kind of come to their time. Gene therapy has been something people have talked about for 20 years. Organ manufacturing, especially xenotransplantation, something people talked about for 20 years. And it's just both of them are finally coming into their own. In all likelihood, there will be different solutions for different patients. I find that the thing that most people gloss over with disease generally and certainly with pulmonary disease is a tremendous heterogeneity of the patient population. And what works for some patients doesn't work for other patients. As you may know, Liana, we've been conducting pharmacogenomics screening of patients coming into our studies. And we've recently seen that there are significant pharmacogenomic differences among patients who respond to two different types of medications for pulmonary hypertension. Those differences we've seen are now correlative. So there are hypotheses that will test in future studies, but it indicates the heterogeneity of the patient population. I think for a patient who pretty much looks like they still have time on their lungs if one could reverse the remodelling process, gene therapy would be a little bit more promising. Although I'd like to note that there is increasing data out there, Liana showing that aggressive upfront treatment with Remodulin with the goal of reducing pulmonary artery pressure below 40 millimeters of mercury is also appears to be associated with a much better long-term horizon. And more and more researchers are publishing articles, where they dose to reducing pulmonary artery pressure rather than dosing to some symptomatic endpoints such as six minute walk. Dr. Matsubara of Japan is one of the…

Your last question comes from the line of Christopher Zopf from Cowen and Company. Your line is open.

This is CJ on for Chris Shibutani. Given your interactions with the FDA on the Tyvaso SNDA, what sort of timeline are you expecting for being able to add the PH ILD indication label? And can you give us a sense what fraction of Q2 and maybe current Tyvaso groups might be seeing some off label use there? Are we seeing some transition from their modeling setting or is this purely kind of new patient group?

Yes. I'm going to kind of chop on the last second part of your question and ask Dr. Peterson, our Head of Product Development and the one who -- she's really the one that made the discovery or led the team that made the discovery in terms of efficacy to confirm of Tyvaso in chronic fibrosing interstitial lung disease. But we just before you get on a let me mentioned that, I don't think that there is off label use of Tyvaso in that condition and it's certainly something that we would never suggest, promote, encourage or any of the above. So we are your on label company and with that introduction, Leigh, could you talk about the timeframe that you see for the TETON study?

Yes. I believe it was for the increase FDA submission timeline.

The timeline for the FDA submission. Okay, sure.

Yes. So, thank you, I love to talk about increase because as you can imagine, it's a really, really exciting --

Are you also in-charge to that team?

And so we submitted that SNDA in June and we are any -- very, very soon we will find out from FDA, whether that receives priority review, which would be a six month turnaround and if it doesn't, it would be 10 months. So that's the timeline for finding out the approval of the increase in the ability to add it onto the label assuming positive response.

That's great. That's fantastic. And while we have you on the line, would you give a sketch of when you think that we would likely begin enrolling patients in the TETON study? And about how long do you think that study will take?

Yes. So again, the TETON study is our study of using Tyvaso in patients that have not been diagnosed with -- also have pulmonary hypertension, as was the case in increase. So we have actually submitted some questions and the protocol to FDA and we're currently finalizing the study design with them as well as with our steering committee and once that happens, we will begin study startup. It's approximately 250 to 300 patients were imagining that we would need to enroll. So that would probably take about two years to enroll, depending on the follow up period. It's either six months or one year for that. And then, we would finish things up, submit, prepare that NDA and submit that for, again, we would submit for priority review, six month timeline, or if we didn't get that it would be 10 months.

Thanks so much, Leigh. So much exciting group activity going on in our product development group and really glad to share that with all of the shareholders on the call. Well, operator, thank you so much for doing such a great job of coordinating all the questions today. And I will now turn the line back to you for your wrap up statement.

Thank you for participating in today's United Therapeutics Corporation Conference Call. A rebroadcast will be available for replay for one week by calling 1-800-585-8367 with international. Thank you. This concludes today's conference call. You may now disconnect.