Good morning, and welcome to the United Therapeutics Corporation Second Quarter 2023 Earnings Webcast. My name is Danielle, and I will be your conference operator today. [Operator Instructions] Please note, this call is being recorded. I will now turn the webcast over to Dewey Steadman, Head of Investor Relations at United Therapeutics.

Thanks, Danielle, and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation Second Quarter 2023 Earnings Webcast. Accompanying me on today's webcast 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; Pat Poisson, our Executive Vice President of Technical Operations; and Dr. Leigh Peterson, our Senior Vice President of Product Development. Please note that, 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, and we assume no obligation to update these forward-looking statements. Today's remarks also 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 that any products are safe and effective during any unapproved or investigational uses. Remember full prescribing information for our products are available on our website. Note that, Pat Poisson and I will be participating in one-on-one meetings at the 2023 Wedbush PacGrow Healthcare Conference on August 8. Then Michael Benkowitz, James Edgemond and I will participate in a fireside chat and one-on-one meetings at the Morgan Stanley 21st Annual Global Healthcare Conference on September 11. In addition, we will present data at the European Society of Cardiology in Amsterdam in August, the European Respiratory Society in Milan in September, and at the CHEST Annual Meeting in Hawaii in October. Now, I will turn the webcast over to Dr. Rothblatt for an overview of our second quarter 2023 financial results and the business activities of United Therapeutics. Martine?

Thank you, Dewey. I'm thrilled that United Therapeutics continues to report double-digit revenue growth and our highest quarterly revenue ever. We expect this growth trajectory to continue, with our current business, as we expect to reach a $4 billion annual revenue run rate by mid-decade. Beyond that, we expect continued waves of growth with an additional doubling of our revenue from the potential launch of Tyvaso in pulmonary fibrosis and of ralinepag in pulmonary arterial hypertension and then yet another doubling of our revenues with the potential for an unlimited supply of tolerable transplantable organs in the next decade. Let me now drive a little bit deeper into some of these absolutely fantastic results that we are pleased to report this quarter. As mentioned, the total revenues are at $596 million for the three months. But it's interesting to compare that with the matching three months of last year, which were just about $467 million. So that's a percentage growth rate of 28% and very much in line with the type of growth rate that we have previously indicated we expect to achieve in order to achieve that $4 billion revenue run rate by mid-decade. Another deeper level to look at is the company's net income. For the past quarter, we reported over $0.25 billion in net income. And again, it's instructive to compare that with the quarter -- matching quarter in 2022, when we reported $116 million in net income a percentage change of 123%. Very comparable numbers can be obtained, if you divide the net income into the outstanding shares. And in fact, we're pretty proud that as compared to peers we have a relatively low number of shares outstanding, which helps drive those fantastic results. Now let's dive even deeper, into some of the results on the…

Thanks Martine. Good morning, everyone. As Martine said, we had a phenomenal second quarter from a revenue standpoint, setting revenue records for Tyvaso, Orenitram and total treprostinil. And I want to begin by publicly thanking and congratulating all of our commercial and medical affairs teams at United Therapeutics for their hard work and achievements during the quarter. As usual, I'll provide some color on what we're seeing with respect to Tyvaso, Orenitram and Remodulin. So, I'll start with Tyvaso, where I want to highlight several things. I should also mention that for purposes of these comments, Tyvaso refers to the combined nebulizer and DPI unless I otherwise know. So first as I just mentioned, we posted the highest quarterly revenues ever for Tyvaso which reflects increasing physician and patient demand in both the PAH and PH-ILD indications as well as the Tyvaso DPI inventory build of about $30 million in the quarter at the specialty pharmacies. Our underlying demand metrics that is referrals, which is what we call prescriptions new patient starts and net patient adds remained very strong and roughly in line with the last few quarters. New patient starts are trending around a 70-30 split between DPI and the nebulizer respectively. The transitioning of long-term existing nebulized Tyvaso patients to Tyvaso DPI has largely played out at this point at least until the Part D redesign provisions of the Inflation Reduction Act begin to go into effect over the next two years. And in fact, nebulized Tyvaso referrals and starts have trended upward over the last few months. We do expect that there will be some basal level of transitioning between the nebulizer and DPI going forward as physicians optimize to which delivery device is best suited to each of their patients. We also continue to make great…

Mike that was an amazing awesome wrap up. Thank you so much. How do you stay on top of some of the details blows my mind. Perfect. Wow. We have the best in the President. Thank you Mike. Okay. Operator, please open up the lines for any questions. And like I'll forward them amongst Mike, Pat and Dr. Peterson.

Thank you. [Operator Instructions] The first question comes from Ash Verma of UBS. Please go ahead.

Hi. Thanks. Good morning and congrats for a very strong quarter here. I have two questions. One just on Tyvaso in IPF. So I wanted to ask what's your level of conviction in clinical success here? The prior increased study showed benefit in IPF subset, but in the TETON studies you're studying IPF all comers. And then second one, can you provide some color on the patient adds? Like how much of the new patient adds is coming from PH versus PH-ILD. And do you expect the patient adds per quarter to start to ramp up faster in the coming quarters and years?

Ash, thank you for your question, and thanks for the congratulations. We have so many callers in the queue. I'm just going to have to limit it to one question per caller. So we'll take your first question about pulmonary fibrosis. And Dr. Peterson could you kindly respond to Ash's question?

Yeah, sure. Thanks for the question. So as you mentioned that we had data from increase in PH IPF a subpopulation of INCREASE that exhibited improvements in FVC, which is a marker that indicates potentially an antifibrotic activity of Tyvaso. Now this in addition to many, many publications on also a mechanism for Tyvaso which is antifibrotic gives us confidence that it will also work in the population of TETON 1 and TETON 2 which are IPF idiopathic pulmonary fibrosis as well as our new study in PPF which is progressive pulmonary fibrosis.

That's excellent. Dr. Peterson. And operator could you please take the next caller.

The next question comes from Eun Yang from Jefferies. Please go ahead.

Thank you. Congrats on the great quarter. That's amazing numbers on Tyvaso. The question on DPI inventory buildup of $30 million in second quarter. Would that be the inventory levels that you would expect going forward, or do you think it would increase or could there be some drawdown in third quarter? Thank you.

Great question, and so nice to hear your voice this morning, Eun. Thank you for the congratulations. The questions with regard to inventory, we normally ask our Chief Financial Officer, James Edgemond to handle because he's totally on top of the flow of everything of value in and out the company. So James, could you please answer Eun's question?

Yes. Thanks, Martine. Good morning, Eun and thanks for the congrats on the quarter. Two parts to the response. So Michael talked about the $30 million addition to DPI inventory during the quarter, which was specific to DPI inventory build and Michael addressed nebulizers inventory as well, which is pretty much normalized. With respect to the demand for DPI for the balance of the year, as Michael talked about, this could really fluctuate going forward through the remainder of the year, as we think about patient demand as well as the manufacturing at MannKind as we work through some of the improvements that we've highlighted. So going forward, there certainly could be a fluctuation in DPI inventory. But I would want to reiterate what Michael said across the portfolio of products, as we completed the quarter, we were in contractual requirements with all the products, but it is important to highlight the DPI fluctuation going forward based upon demand as well as manufacturing at MannKind. So thanks for the question. And Martine back to you.

James, just excellent answer as always. So thank you and Eun thanks for asking the question. Operator, can you please pull up the next person from the queue.

The next question comes from Hartaj Singh from Oppenheimer. Please go ahead.

Great. Thank you for the question and a really nice quarter. Really tough comp last year this quarter, so really well done. Just a question on ralinepag. Assuming the Phase 3s are successful, Martine and team, how do you see the product sort of -- where do you see it being used in the treatment paradigm? Is this a straight replacement for Orenitram? Would we take some of the selexipag patients? There could be some generics there by then. Any thoughts there?

Yeah. That's a great question. I'm really happy to have it. I think, Hartaj, you've been able to ask a question that kind of transcends two different areas. So, unusually I'm going to ask two separate team members to respond to your question with regard to their different levels of involvement in the frontline treatment for pulmonary hypertension clinical situation and end market. First of all Mike, if you could answer Hartaj in terms of where you see placing ralinepag once approved in basically the presentation of treatment options that would be presented to physicians by -- especially by our sales force. And then, perhaps Leigh if after Mike talks you can provide some insight that you're able to share from our clinical trials in terms of how you see what the protocol calls for in our clinical trials and that might also help to shed some light on Hartaj's question in terms of where it's being used in the clinical trial outcomes in particular. So, Mike, you first.

Yeah. Sure. And again all of this is obviously contingent on how the study reads out the data and kind of what we see through the trial Hartaj. But I think generally speaking I think we expect that you'll still start with a PDE-5 and an ERA. And then at that point as once the disease -- the patient's disease continues to progress, the doctor has an option as to what to add. That's where I think we're expecting that ralinepag's sweet spot is going to be right after the PDE-5 and ERA. Now for various reasons depending on where the patient is in their disease journey, it could be maybe they need something stronger so they go to Orenitram or maybe they want the convenience of DPI so they start there and then they kind of transition back and forth. But I really kind of look at it as being sort of in that sort of area of after PDE-5 and ERA and patients' disease has started to progress further.

Yeah, Mike, that makes such perfect sense, because it would really be to my understanding the only once-a-day prostacyclin category. It's not exactly a prostacyclin analog, but it works on that pathway. So the only once-a-day treatment which will just be huge for the patients because if you miss even a few doses, this disease is insidious and it could just start reclaiming territory in your lung. So compliance is king and once-a-day is the emperor type of delivery for compliance. Leigh, what kind of insights do you have on Hartaj's question from the outcome of the from the contact of the outcome study?

Yes. So really with -- as Michael just said with regard to selexipag, I mean, of course we're shooting for a better clinical effect, but also the fact that Michael just said it's ralinepag is once-daily dosing versus twice. So, I mean most patients feel that that's an advantage. But scientifically with -- about your question regarding Orenitram now you might remember that Orenitram or treprostinil actually binds and interacts with multiple prostacyclin receptors versus selexipag and ralinepag, who are IP-specific activators of the IP-only receptor. And so and it's thought at least from several non-clinical studies that these different receptors have different activities. And so, this could very well translate to the clinic where certain patients do better when they have binding and activation of multiple prostacyclin receptors and some patients might do better with regard to both, tolerability and efficacy if they simply have a binding and activation of the IP receptor. And so, I hope that answers your question as to where we see things. It's not a complete overlap with regard to the mechanisms of action for sure.

Brilliant answer. Wow, that's why I'm so glad we have a scientist on the call. And Hartaj, I'm so glad you asked the question because look at all the information that got shared through your question. Thank you. Operator, next question?

The next question comes from Terence Flynn of Morgan Stanley. Please go ahead.

Great. Thanks for taking the questions. Congrats on the quarter. A two-part question for me. Just wondering if you can comment at all on Tyvaso patient start trends in July versus June, as well as breadth of prescriber base. Mike, I know you touched on that but any more color there would be helpful. Thank you.

Okay. Thank you, Terence. Mike, you got it.

Yes. I think on the referral start trends in July versus June, I mean we're continuing – it's been pretty consistent I think over the first half of the year and that's continuing into July. So I think the rate of referrals and starts is consistent with what we've seen in the first half of the year. And I would say on the prescriber growth, I think the rate of growth has been – I think what I've said is that – in the last calls that we've roughly doubled the number of prescribers since we launched. Month-to-month, quarter-to-quarter, that doesn't necessarily change literally. It's just – it's a little choppy. So that's – it's increased marginally above the kind of the doubling in the last quarter. We have seen however continued – maybe stronger growth or higher growth in the last quarter in terms of the depth of three-plus prescribers. So – which is good. I mean as I said on prior calls, we use the analogy that we get the prescribers to three-plus patients you sort of kind of get the flywheel spinning and then the three goes to 10 pretty quickly thereafter. So we are making really good progress on that aspect of prescribing depth, and as I said, continuing to add top line prescribers as well.

Thanks so much, Mike. Yes that's a great metaphor with the flywheel. You could just see how our success compounds, once doctors start using our medicine. Operator, we have time for just two last calls.

The next question comes from Joseph Thome of TD Cowen. Please go ahead.

Hi, there. Good morning. Congrats on a quarter and thank you for taking my question. Maybe just as we think about penetration into the PH-ILD market, where do you think you stand now? And now that the therapy has been on the market for a couple of years in the indication have your expectations for the size of this market changed at all? Thank you.

Okay. Thank you very much, Joe. Mike, I think you're the best person to answer that.

Sure. I think on penetration of the market, I think we're in the low single-digits. And I say think because I still – and this is I think a question that was asked earlier that we just didn't have time to ask but around the kind of the mix of the PAH and the PH-ILD. I mean the data coming in on the referrals is still not – it's still a little dirty. So it's not still 100% clean in terms of what's Group one or what's Group 3. But I think based on kind of what we're seeing it's – I think it's fair to say that we're kind of in that low single digits of the PH-ILD market. And in terms of the size of the market, nothing's really changed in terms of our understanding of what that is. We kind of started out saying it's at least 30,000. We still think that that's accurate. You can talk to some KOLs, you'd think it's significantly higher than that and that may be. But like we've said all along with the 30,000 I mean that's still a really good size market for us. And so we're really focused on continuing to penetrate in that market. And get – as I said in my opening remarks, really kind of ramp up the screening of ILD patients to look for pulmonary hypertension.

Super. Thank you, Mike so much. Operator, the last question we just have time for one more I'm sorry.

The last question comes from Andreas Argyrides from Wedbush. Please go ahead.

Yes, thanks. Good morning. Thanks for taking my questions. I wanted to be the last one here. Great quarter, another congrats there as well. So lots of good questions from my colleagues on Tyvaso in the market evolving in PAH. Going back to the prepared remarks and the potential use of cash, how are you thinking about outside investment opportunities? Is it just in the PH or maybe perhaps targeting the company's core focus? Thanks.

Yes, Andreas, deep and interesting question. And I think that we are most interested right now in the pulmonary fibrosis segment in terms of outside investment. It's not to say that, we don't have continued interest in the PH segment. But the PH segment is, by I think almost anybody's estimation, a pretty crowded marketplace at this point in time. And by reflection, when we started the company, there was no oral treatment approved for PH as well. There was no inhaled treatment approved for PH. In fact, all of that was really available was parenteral flow land. And if you compare that, situation with the situation today, I honestly have lost track of how many different drugs and versions of drugs and generic versions of drugs there are, but it's certainly over a dozen. So PH is a very crowded marketplace. Despite that crowding, there seems to be continued synergy amongst certain drugs in that crowded field. For example, the PDE5 inhibitor Adcirca which can be taken once daily is something which is often used in combination with several of the other drugs less often but still frequently an ETRA such as ambrisentan can be used in combination with the other drugs. And increasingly now our own Orenitram is used in combination with those other two kind of, I don't want to say weaker, but I'd say non-treprostinil strength drugs. So this kind of combination phenomena means that even though the market is very crowded, there always is still great opportunity for a new drug in terms of being used as combination therapy. And that certainly as Mike Benkowitz mentioned in his discussion of ralinepag that's our expectation in ralinepag that will be used in combination. Thanks for the congrats. But one thing that, maybe didn't get enough highlighting…

This concludes our question-and-answer session. I would like to turn it back over to Martine for closing remarks.

Thank you for participating in today's United Therapeutics Corporation earnings webcast. A rebroadcast of this webcast will be available for replay for one week by visiting the Events & Presentations section of the United Therapeutics Investor Relations website at ir.unither.com.