United Therapeutics Corporation (UTHR) Earnings Call Transcript

I feel pretty comfortable saying that without any facts behind that. So go ahead.

Well, it's funny when one of the times that Howard Stern had me on the show, he was very, very grateful and thankful for SiriusXM. It says it saved his career, made his life. And then one time he invited my daughter on to the show. And my -- he said to my daughter, well, are you single? I will say she's very attractive. And she said, well, I'm engaged and he said, your dad didn't save your life in order for you to like marry some guy. So it was kind of funny. But it is -- I never took biology in college. I mean -- and probably that was a good thing. I didn't know what I was getting into. But I've been very fortunate in surrounding myself with amazing talent like James Edgemond here and all of our great scientists. I love science. I've always loved science. That's how I came up with SiriusXM. So over time, I began to realize that the body is just another kind of technology. And so of it being satellite radio technology, it's biotechnology. And instead of like frequencies having to have a match between the ascending signal and the receiving signal, it's molecules have to link up with receptors. So I began to look at the body as technology and lead groups. And I'd just say that I'm just so happy, Jeff, they've been able to achieve success in 2 very different industries. But to this day, to your question, A lot of people come up to me when I'm at a group like this and they reach into their pocket and they pull out like one of those orange Ambrish bottles appeals and they say, thank you for Orenitram, one of our medicines or another our medicines. This medicine has kept me alive, got me into college, got me to my job. But for every one person who has thank me for the life-saving drugs of at least 10 people have come up to me and said, "Can I give you a hug because SiriusXM has changed my life. It's made my life everything it is". So it's just an interesting comment on human nature, how important communication broadcasting. And I'd say in the U.S., SiriusXM is to our culture.

Absolutely. And by the way, I...

Are you a subscriber?

I'm not a subscriber, but I have listened and a fan of a lot of SiriusXM. Yes. I will get -- I will start just because of his interview, and you could hold me to it. Yes. But as an aside, I would say that your commentary and your way of describing the biology and human physiology is perfect. And it's great that somebody who comes from a background outside of that can simplify and condense something that I've always told my colleagues at Bernstein, I say biotech, pharma, it's just like everything else. It is actually not more complicated. The only difference is that you don't get -- you don't drink Coke, you drink Pepsi, you experience these other products. So you have a perspective on those products day in and day out. And so you feel more comfortable on the sales side, maybe talking about that or maybe taking that research, taking that takeaway to and speak on it. But I would just say that I feel like you've isolated perfectly that it really is just the same. And there are technical words that we don't typically talk about on a day-to-day basis.

You're so right, Jeff. I mean, there's like a talk that you have to talk, but functionally or what they would call like from a systems level is the same thing. Biology is technology.

And our keynote that we just had, I don't know if you had a chance to listen to that, but where [ Leora ] is , and she's SVP of AstraZeneca, where she is really strong is her ability to synthesize down simplistically this is what an ADC is. This is how drugs work. And I feel like that's really the best part of medicine is taking something that may sound complicated in synthesizing it down to be very simple, which is back to then the achievements you had for your daughter, which is tremendous. And congratulations again on that. I do think it's you highlight areas, you highlight all of the drug development you've done. So we sort of talked about your high-level achievements in terms of drugs coming on market in terms of the culture of the company and your strategy. So maybe I would like to hone in on maybe a couple of them because we've got 17 minutes, but I want to make sure that we touch on the key readouts, the key things that you'd like to talk about. So maybe in the condensed time, is there some would you like to go to IPF, where would you like to focus, I guess, the next part of our conversation? Maybe we can do a couple of questions on that.

Well, I think the IPF one is a really good example of how we are a disruptor in that the -- our development of this therapy began with another clinical trial study we call the INCREASE trial, in which we tried to develop our drug for a related but different condition called PH-ILD, interstitial lung disease. And we have an amazing result in that indication. We got FDA approval for that indication. And when we did that indication, us being entrepreneurs, we said, let's see if we can kill 2 birds with 1 stone. Let's make all of the primary endpoints, the ones that would satisfy the FDA for gaining approval in ILD. Let's make the secondary endpoints a de facto Phase II trial for IPF and PPF. So we did that, and we hit all of our primary and our secondaries. We got the approval for ILD, which produces over $1 billion a year in revenue for us. And we went to the FDA and we said, we would like to do a single study in IPF with nebulized Tyvaso. And here's all the in vitro data that shows the antifibrotic efficacy of the treprostinil molecule Here's the result we had from the secondary endpoints in the ILD trial, that constitutes our Phase II trial. Now that's not the normal way to do a Phase II trial. It's an entrepreneur's way to do a Phase II trial because it's a shortcut to get to Phase III. The FDA looked at it and they said, we believe in your mechanism of action. We're going to go ahead and clear you to do a Phase III trial in IPF. But we're going to require you to do 2 adequate and well-controlled Phase III trials. And we went back and we said, but this drug has already been approved. And usually under the FDA's rules, just one adequate and well-controlled trial is enough in a new indication for a drug which is already approved. The FDA -- and this was the pulmonary division of the FDA, they said that, well, those previous approvals were from the cardiorenal division of the FDA, and we will require you to do 2 adequate and well-controlled trials, has double the cost could be double the time and whatnot and so forth. So here's how we approach that, Jeff, is like, do you sit there and you complain about that? Do you sit there and like you keep going back and back and back to the FDA? We actually looked at the positive sub it, but like the FDA cleared us to do this drug. If it works in 1 trial, it's going to work in 2 trials. So we said, yes, sir, we marched off when we did it, and we got this amazing result. And as a result of that trial, we will now be able to say to all of the doctors treating pulmonary fibrosis that this is the only drug that reduces the patient's decrease in forest vital capacity by so much that it's equivalent to the patients having years of additional life. I mean that's crucially important. And this is a disease that generally affects people in their 6 or so a decade of life. So it's an instructive story, and we have recently doubled our sales force to launch into IPF. We plan to launch it in Europe as well. And then we went to the FDA, and we said all the physicians who are enrolling patients in the IPF study they would like us to go into an adjacent disease called PPF, progressive pulmonary fibrosis. Now IPF has 100,000 patients. PPF has 300,000 patients. We went to the FDA, and we are ready for them to say you have to do 2 adequate and welcome, but they said you did such a beautiful job in your core study, which, by the way, has 2 articles on it published in the New England Journal of Medicine, that's what a high caliber result was, you just do a single study in PPF and that will be adequate enough. We've already fully enrolled that study. We'll unblind the results next year. And like magic, we went from, as James said, a pulmonary hypertension company last year to a pulmonary fibrosis company next year. From a company with a maximum number of patients we can help of 50,000 in pulmonary hypertension to a company with the maximum number of patients we can help of 10x more in pulmonary fibrosis.

That is great and great outcome. Successful interactions with the FDA are -- should be celebrated because they're not always the case. And I speak from experience having some good ones and some bad ones. I would love to talk about the organ side of the business. But before I do, is there anything you want to highlight on IPF or PPF before we switch over to organ?

Folks love the Oregon part of the United therapeutics, [indiscernible] ahead. This is what we call an unmet medical need. There are 100,000 people on the organ transplant list just waiting for an organ. Many dying every single hour, every day. What a lot of people don't realize, and I'm happy to share this Jeffrey conference -- at this Bernstein conference, sorry, is that there are 5x more people that are dying on dialysis off the transplant list than on the transplant list. If everybody with end-stage renal disease was put on the transplant list, the odds of especially younger people being able to get a kidney with almost vanish. So United Therapeutics is very tightly focused on these 500,000 people with end-stage renal disease on dialysis so you know exactly where they are. They're being treated by doctors, and we would offer these individuals as xenograft. Xenograft for the audience who is not aware, it's a genetically modified pig organ. And in our case, it has 10 genetic modifications that makes it appear to the body and be treated with immunosuppressants no different than an allograft. That means a kidney from another person. We have successfully done a lot of these preclinically, and the FDA authorized to do a registration trial which we are in the midst of right now. And the registration trial has already enrolled and transplanted the first 4 patients with the xeno-kidneys, 2 more will be done this year. And at that point, we wait until 3 months after the sixth patient has been transplanted, present the data to the FDA. And if they are pleased with the data, then they say, okay, you can go to the end of the trial, which we expect to be 30 patients total, including the 6. We have every expectation that, that trial will be fully enrolled in by '28, and then we'll be able to launch the product commercially not later than 2030. In anticipation of that, we have built 3 commercial xenograft production facilities, one in Virginia, one by the Mayo in Rochester, and on by Baylor in Houston. These 3 commercial organ production facilities by 2030 should be turning out about 1,000 each of them, 1,000 xenografts a year. So that will be thousands of people that we'll be able to save from end-stage kidney disease as well as the FDA has also authorized our [indiscernible] pigs to be used for the heart. So we have a heart clinical trial in parallel to the kidney clinical trial, and we plan to expand these whether call designated pathogen-free facilities or DPF. It's what GMP is with pigs. And so we could ultimately, I think, make a huge dent in the need for organs. One last thing I'll just mention quickly, we have yet a third clinical trial that the FDA has approved based on our successful preclinical work, which is a completely, Jeff, so amazing and revolutionary that to me, it is to organs like SiriusXM is to radio is like revolutionary. And that is -- it's called a thymokidney and a thymoheart. So what happens is the thymus, each of us has a thymus, it's right in front of your heart. And the thymus is what trains all of the T cells in your body that you're you and other things are not you. So if you're attacked by a bug, you get like an infection or something, the T cells say, okay, that's not this person. I'm going to attack it and cash it. So when you bring the xeno pigs thymus along with the xeno pigs kidney or the xeno pigs heart, that trains the recipient, the human recipient to see the xeno pig and the xeno-heart as itself. So these patients, we believe that within 2 or 3 months after transplant can be weaned off of all immunosuppression completely and live a normal life. It's a little bit like there's a few cases in medicine where a person who donated bone marrow to somebody else because they had a cancer and they needed a bone marrow transplant. Later on, that recipient has a failed kidney. And there -- when they go back to the bone marrow donor and have asked them whether they'd be willing to donate a kidney, and that individual has agreed to donate the kidney, the recipient needs no immunosuppression at all because the bone marrow has already trained their immune system to recognize that individual as part of themselves. So that trial is also -- I think, will complete its enrollment by 2030, and we'll completely revolutionize the field of transplant medicine. It's amazing.

Did you -- James, did you want to add any introductions to the organ side of the business?

One thing that's worthwhile to add on to what Martine said is, previously, we were talking about DPF or designated pathogen-free facilities that were very large, requiring capital of $1.5 billion to $2 billion to build a sizable organ plant that would grow these pigs that we actually got smarter over time. And so as we talk to investors and we looked at the program, One of the things we realize is that we can scale back our capital investment to use it for things like share repurchase now, but build these 3 facilities in Christiansburg, Virginia, in Minnesota and down in Houston, Texas. Tabs a smarter, more financial awareness and better deployment of capital. So we're able to actually build these facilities at a scale that we learned a lot from doing the construction work and doing the initial operations work. But now we're poised that as these clinical trials go forward, we can invest the capital to build these facilities to match their commercial demand. And so maybe to add on to what Martine said, it's a very involved program from clinical trials all the way through to these facilities. that we actually came up with a better way and we're better financial stewards of our capital to deploy it now, for example, in the 14 products Martine talked about, share repurchase, et cetera, and be poised to deploy capital in the future as these clinical trials go forward, and we approach commercialization in 2030. So just more on the financial side to it that kind of complements what Martine talked about on the opportunity as well as the clinical development side.

And that's great to hear. I have a note here about climb computational laboratory for in silico molecular biology, I'd like to hear a little bit about that.

Sure. Thanks so much for asking, Jeff. So several years ago, we formed an AI lab at UT with the task of creating an accurate digital model down to the level of all the membrane-bound receptors on all of the molecules in the lung. And that's a very tall challenge because you have to cover both the airways as well as the vascular side of lung. We ended up hiring the entire AI computational biology team from Johns Hopkins and moved them over to United Therapeutics. And this team worked assiduously and built up what I am -- I'm sure, is the world's most detailed digital AI model of the lung and specifically tuned for testing drugs in the diseases of interest to us, which is pulmonary hypertension and pulmonary fibrosis. I didn't mention in the previous discussions of our molecules that those molecules were tested and validated for those indications first in our digital model. And it's remarkable to me that, for example, we ended up improving. I'll just round the number here a little bit by 100 milliliters of oxygen, the improvement in forced vital capacity of the patients in the pulmonary fibrosis study. In the digital model, which we've completed before we did this study, the estimate was 105 milliliters, which is insignificantly different. So -- and it also accurately predicted the success of our ralinepag molecule, pulmonary hypertension. It actually predicted accurately the failure of other companies' molecules that James was getting ready to possibly have to write a check to license these other and the model said, don't do it, it's not going to work. And in fact, it didn't work. So we are like total believers in AI is the ability to develop new molecules and new diseases specifically in the lung, and we're now very honored that multiple big pharma partners are interested in us testing their molecules within our digital lung.

I'm going to put a plug in. Courtney has -- my colleague has an AI panel that's going to discuss AI and drug development after this in case you're interested. Like you have something to add to that conversation. So that will also be either here or any other room. But then back to you guys. So we've got just a couple of minutes left. And I think it would be nice to sort of -- you have a lot of drugs that you sort of gave in the overview. So I'd like to give you a 2.5 minutes here, maybe to highlight something we haven't had a chance to talk about whatever that might be, even if it's -- you intend to start another satellite radio business.

What I'd like to talk about this is my favorite drug being queued up right now is a drug called RALDPI. So it takes the superior and [ phocodynamics ] of ralinepag over treprostinil, which, for example, includes just once-daily dosing and applies it to these vast indications such as pulmonary fibrosis, and progressive pulmonary fibrosis. This molecule actually has stronger antifibrotic and anti-inflammatory activity than treprostinil, and it's got both composition of matter protection and pulmonary fibrosis patent protection out into the 2040s. So I think our development of RALDPI will be the greatest drug that we could possibly develop at UT. It will take us up toward that $100 billion a year in revenues. And by the time we completed its clinical trial and start marketing it which is scheduled for basically 2030. That's the same year that we will be launching the commercial organ manufacturing that we can provide thousands upon thousands of people with commercial organs completely disrupting nose, which is the kind of sharing for the human donor organs, completely disrupting the entire immunosuppressant pharma business. So for us, being a disruptor is not a laurel to rest upon and then you become a leader. For us, a disruptor is a culture. And going back to your great question, Jeff, on what makes UT click. If you take a look at our annual reports, you will see this is a company that all the directors not sitting there in bigly fashioned with their hands. Every annual report is disrupting. Our culture is disrupting. Our #1 mantra is question authority and identify the corridors of indifference like organ development, pulmonary fibrosis and then run down those corridors have been different.

Well, this has been a pleasure.

My honor to be here. Thank you so much, Jeff. I appreciate it.

Thank you so much.

Thank you.