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Operator: Good morning and welcome to the United Therapeutics Corporation First Quarter 2024 Earnings Webcast. My name is Danielle and I will be your conference operator today. All participants on the call portion of this webcast will be in listen-only mode until the question-and-answer portion of the earnings call. [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.

Dewey Steadman: Thank you, Danielle and good morning. It’s my pleasure to welcome you to the United Therapeutics Corporation’s first quarter 2024 earnings webcast. Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events. These statements will 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 forward-looking statements. Today’s remarks 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 basics for medical decision-making or to suggest that any products are safe and effective for any unapproved or investigational uses.

And 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, Product Development and Xenotransplantation and Pat Poisson, our Executive Vice President of Technical Operations. Note that Pat Poisson and I will present in a fireside chat session and one-on-one meetings at the Goldman Sachs Global Healthcare Conference on June 12 in Miami. Also, our scientific, medical and commercial teams will present at the American Thoracic Society International Conference May 17 through the 22nd in San Diego; The Seventh World Symposium on Pulmonary Hypertension, June 29 to July 1st in Barcelona and the Pulmonary Hypertension Association’s 2024 International PH Conference and Scientific Sessions, August 15 to 18th in Indianapolis.

Now, I will turn the webcast over to James Edgemond, our CFO and Treasurer for some brief comments on our recent accelerated share repurchase plan, followed by Martine and Michael for an overview of our first quarter 2024 financial results and the business activities of United Therapeutics. James?

James Edgemond: Thank you, Dewey and good morning, everyone. In our meetings with shareholders over the last several years, we’ve noticed a common theme. Shareholders are excited about our potential, both the continued growth in our foundational core business and our innovative organ manufacturing opportunities and they are also impressed by our P&L philosophy that results in outstanding cash flow generation to support our ways of growth. But we recognize that there has been a disconnect between our desire to preserve capital to support our ambitious long-term organ manufacturing goals and some shareholder perspectives around capital allocation. We continue to follow our three capital allocation priorities, which in order are, first, to invest in our commercial and R&D opportunities through P&L spend, as well as capital outlays like our new North Carolina manufacturing facility.

Our second priority to pursue intelligent business and corporate development opportunities that enhance our rare disease focus and complement our organ manufacturing initiatives like bolt-on M&A and in-license opportunities. And our third priority, to return capital to shareholders like share repurchases. And we consider all three priorities when deploying our financial capital. Over the last year, we have learned a great deal of at the size, the staging and the timing for capital expenditures associated with the construction and commissioning of our designated pathogen-free facilities or DPFs to support our xenotransplantation efforts. With the commissioning of our Christiansburg, Virginia clinical scale DPF last quarter, we now better understand the phasing of capital spending associated with a commercial scale DPF construction project for the commercial launch of our xeno organs.

With this improved awareness of our future cash outlays and taking into consideration our near-term cash flow generation potential, we saw an opportunity to return capital to you our shareholders, to deploy it as you see fit and announced on March 25, a $1 billion accelerated share repurchase program or ASR. Through the ASR, we expect Citibank to repurchase $1 billion in UTHR shares through the end of the third quarter of this year. Under the ASR, on March 27th, Citibank delivered to us approximately 3.3 million UTHR shares, representing approximately 80% of the total shares that will be repurchased under the ASR, and we have placed these shares into treasury stock as reflected on our balance sheet. The final number of shares that we will ultimately repurchase pursuant to our ASR agreement with Citibank will be based upon the average of the daily volume weighted average price per share of our common stock during the ASR agreement.

Following the ASR, we believe that we will have ample financial capital to deploy for the commercial scale of EPF facilities in the coming years that I previously mentioned. We also continue to believe in our core business and our cash flow generation potential, driven by our foundational products led by Tyvaso DPI and nebulized Tyvaso, and potentially accelerated by our innovative studies of Tyvaso in pulmonary fibrosis and Ralinepag in pulmonary hypertension. We’re excited about our current business and our growth potential, and we appreciate the feedback and support of our shareholders. I’ll now turn the call over to Dr. Martine Rothblatt, our Chairperson and Chief Executive Officer, for insight into our development portfolio. Martine?

Martine Rothblatt: Thank you, James. Good morning, everyone. I’m going to let the next few slides speak for themselves and forego a script in favor of speaking directly from the perspective of being our CEO. We have had a fantastic quarter coming on the heels of previous great quarters and we are confident continued good news will flow in the quarters ahead. The main basis for our confidence is that we have multiple best in category products for growing indications; Remodulin for parenteral PAH, Orenitram for oral prostacyclin in PAH, Tyvaso for inhaled treatment of both PAH Group 1 and PH Group 3 in interstitial lung disease and Unituxin for neuroblastoma. Other categories of good news in the years ahead are clinical trial outcomes.

We have three Phase 3 trials in varieties of pulmonary fibrosis known as the TETON trial and another Phase 3 trial of a best-in-class oral prostacyclin agonist called OUTCOMES. Upon approval and market launch, the products from these Phase 3 trials could help more than twice the number of people that we are helping today. And there’s even more good news in the area of organ manufacturing. We have now successfully enabled hundreds of additional lungs to be transplanted. We have now built a xenotransplantation facility with the potential for over 100 xeno hearts and 200 xeno kidneys a year to be transplanted. We have now commenced a clinical trial of a xeno liver assistance product. And we have now helped to save the life of a woman in New York with our manufactured thymokidney.

Now, let me comment on a few topics that I’ve heard some questions about. First, the big buyback. James did a superb overview of every aspect of that. We did the recent $1 billion stock buyback, because the stock is too cheap, full stop. Because our future is so bright, we believe this could be one of the best ROI investments for our shareholder partners. As James has long said, other great ROI opportunities are first and foremost in our own pipeline and secondly, in our strategic business development decisions. Next, I’d like to say a word about insider selling. I personally hold options for 10 full years and I only sell just before expiry. This is a passive longstanding program. There is nothing more than that to read into these sales. They are use it or lose it sales.

Third, our Group 1 business. Our expectation remains that the Group 1 PAH business will continue to grow and will do so even more rapidly if we can gain FDA approval of Ralinepag after the completion of our clinical trial. As a reminder, this is a best-in-class once-a-day oral treatment for PAH and its Phase 3 trial endeavors to show long-term morbidity and mortality benefit on top of multiple conventional therapies. It is a worldwide study and we intend to commercialize that product globally. Let’s talk about Tyvaso trends next. Tyvaso has been a dramatic grower since interstitial lung disease approval and it is a roughly $1 billion indication today. We have only gotten started serving the large unmet need for this product with its unique delivery methods.

In addition to our continued growth in PH Group 3, supercharged by our two proprietary modes of inhaled drug delivery, we are also very excited about the enrollment of our Phase 3 trials in IPF and known as TETON1, TETON2 and TETON- PPF. Once the results of these studies are approved, we will be able to help multiples of the number of patients we are helping today in PAH. Finally, let me talk about our transformational strategy. As Mike said a year or so ago, the ramp for DPI toward our Tyvaso goals would not be linear, but it would bend upwards after a period of provider familiarity with both treating Group 3 PH patients and our unique products. We are now seeing the bend upward that Mike had predicted. I doubt any organization interacts with as many PAH providers as do we, given our multiple pAH products and multiple pipeline activities including in addition our exciting ARTISAN trial showing that you can transition patients from a parenteral form of prostacyclin onto oral Orenitram.

It is born of the great confidence in our products that these many, many providers share with us that we undertook the $1 billion buyback and continue to invest heavily in our Tyvaso pipeline. We have organically developed drugs that solve difficult unmet needs. We have built a magnificent business. We have created a fortress balance sheet and we have pipeline programs that could be worth more than the entire current market cap of our company. The transformation of UT is well underway and we welcome shareholder partners to join us in not only a great investment opportunity, but in supporting a company that is a true biotech innovator. On that note, Mike, can you please take it from here?

Michael Benkowitz: Thanks, Martine, I will. Good morning, everybody. As Martine noted; today, we report yet another quarter of record revenue at $678 million and 34% growth in the first quarter of 2023. We saw meaningful growth for all of our key products; Tyvaso, Orenitram, Remodulin and Unituxin. Before I get into the details on each of the products, I just want to take a moment to thank all of our fellow unitarians for an amazing quarter. First, I want to talk about Tyvaso, which when viewing the nebulizer and dry powder inhaler delivery systems together, represents our largest product and remains the number one prescribed prostacyclin treatment in the U.S. Total Tyvaso revenue for the first quarter was $373 million, up 56% over last year, with growth led by continued uptake of Tyvaso DPI, our regular annual price increase and the increased commercial utilization following the implementation of the Part D redesign provisions under the Inflation Reduction Act or IRA.

Again, this quarter, there were no material changes in inventories of Tyvaso DPI at our specialty pharmacy distributors during the first quarter. and both distributors remain within their contracted inventory levels. After relatively consistent monthly referral rate over the course of 2023, referrals are what we call prescriptions, we saw a nice positive trend break in referral levels for both DPI and nebulizer in the first quarter, with about a 10% to 15% total increase in monthly referrals. This is continuing at least so far into the second quarter. Patient starts also increased, but at a lesser rate during the first quarter. but this is not surprising as there is often a many-week lag between referrals and starts. but it does appear that starts per month are increasing in line with the first-quarter referral level into the second quarter.

During the first quarter, we were pleasantly surprised to see an increase in commercial utilization of Tyvaso due to the implementation of the IRA. We are expecting to see this increase begin in the second quarter as patients reach their out-of-pocket maximums. We expect commercial utilization will continue to increase over the balance of the year. Lastly, on Tyvaso, we’re well positioned for competition should it come to market this year. The sales force expansion that we began last year is now complete and fully deployed as of January 1. We expect that we’ll start to see the impact of this enhanced sales team beginning in the second half of the year. We’re also now engaging regularly with HCPs or healthcare providers on the key characteristics of our DPI device, namely that Tyvaso DPI requires only one-breath per cartridge.

Our low-flow design requires less patient breath than high-flow devices, which we believe will be beneficial to patients with compromised lungs. The low-flow design also allows for more efficient delivery of treprostinil relative to the nebulizer and other treprostinil DPI devices. And finally, the BREEZE study demonstrated 98% patient satisfaction with Tyvaso DPI. As I said on our last call, 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 effectively with similar product offerings in the inhaled market, given our presence in the PAH and PH-ILD community, our commitment to patients and platform of both nebulized and dry powder delivery options.

Moving to Orenitram. we are very excited to report that not only did we achieve record revenue for the quarter, but we eclipsed $100 million in the quarter for the very first time, reaching $106 million during the first quarter, up 20% from the prior year. This was driven by a combination of increased commercial utilization, pricing and what we consider to be an extremely modest inventory buy-in during the quarter, counter to the normal seasonality we experienced with Orenitram ordering patterns in the first quarter of the year. Because Orenitram is a Medicare Part D drug, like Tyvaso DPI, we saw a meaningful increase in commercial utilization for Orenitram due to the implementation of the IRA. Our medical teams continue to have scientific discussions with healthcare providers on the EXPEDITE induction protocol, where PAH patients initiate therapy on Remodulin and then transition to Orenitram, based on recent scientific publications as an option for appropriate patients, who may not want or need to go on long-term parental therapy.

Transitioning to Remodulin, worldwide Remodulin revenue of $128 million was up 5% from last year, with very strong performance across all of our underlying demand metrics. And this is almost five years since the first launch of the generic for Remodulin, reflecting our continued commitment to our patients and the products. Remodulin, both intravenous and subcutaneous, remains the most prescribed parenteral prostacyclin in the U.S. We expect this momentum to continue given the high level of referrals and starts in the first quarter. Our Remunity pump remains the only option for new subcutaneous patient starts. And we have heard through the channel that specialty pharma distributors are beginning to proactively convert remaining subcu treprostinil patients to our Remunity pump, given the discontinuation of support for the CADD-MS 3 system by its manufacturer.

Regarding the recent approval of the first active inhibitor, based on conversations with physicians both before and after approval, we expect many practices will take a measured stance toward its wide use, and most used initially could be consistent with the product’s clinical evidence, largely in combination use with a prostacyclin therapy. Finally, moving to Unituxin. worldwide revenue of $58 million a record, was up 19% from the prior-year quarter and U.S. Unituxin revenue of $53 million was up 21%. U.S. growth was driven by both price and volume. To wrap up, following this record quarter, we remain confidence that we have a product portfolio, marketing muscle, support structures, clinical data and commercial expertise to continue to grow in both PAH and PH-ILD.

With that, I’ll turn the call back over to Martine to run the Q&A.

Martine Rothblatt: Thank you, Mike for that superb overview and deep dive into so many key and important details all of our different products. It’s literally a historic quarter. It’s the best we’ve ever had. Operator, we’re ready for the first question.

Operator: [Operator Instructions] The first question comes from Terence Flynn from Morgan Stanley. Please go ahead.

Terence Flynn: Great. Good morning. Thanks for taking the question. Maybe, a two-part from me. I was just wondering what you’re seen now with respect to breadth of prescribing for Tyvaso and ILD. I know you went to a broader prescriber audience sometime last year and you have the new sales force, but just wondering if you can comment at all there. And then can you provide the percentage of Remodulin patients that are now on the Remunity pump? Thank you.

Martine Rothblatt: Thank you, Terrence and congratulations on being over at Morgan Stanley now. Mike, given the queue, feel free to answer as much of that question as you feel time permits.

Michael Benkowitz: Yes, sure. So, on the breadth of prescribing, I mean, overall, we’re continuing to see growth in both breadth and depth. And I think a lot of that is attributable to, again, just the work and pounding the pavement that we’ve been doing over the last couple of years and gain traction with new prescribers. As I said in my opening remarks, we now have the expanded sales force fully deployed. It’s going to take time for them to go relationships. And so, I think you all, start to see the impact of that effort as we move into the third quarter really. So, there could be, we’re expecting continued breadth as we move on. One interesting statistic I was looking at is, if you look at historically ILD physicians that didn’t have experience writing for PAH products.

Over the last 15 months, we’ve seen a 50% — so 50% increase in breadth. And then the depth is which we measure by that three plus metric that I’ve mentioned on prior calls, has increased by — and that group has increased by about 30%. So, we are really starting to get traction in the ILD community, not only on a referral basis, which we’ve had, but also on an actual writing basis. So, we’re really happy to see that. Just quickly on Remunity. right now, we’ve got the vast majority of patients are on Remunity. I think there’s maybe a few 100 left that need to be transitioned. And as I said, I think specialty pharmacies are looking to probably get those transitioned over Remunity by the end of the year.

Martine Rothblatt: Thanks so much, Mike, for the fully comprehensive answer. Terrence, hopefully that addressed all your concerns. next question?

Operator: The next question comes from Roanna Ruiz from Leerink. Please go ahead.

Roanna Ruiz: Great. Good morning, everyone. So, I was curious, what are your field reps hearing on the ground from physicians around the sotatercept approval in March, if you’re able to say? And a bigger picture of what’s your outlook on the future in terms of combined use of Tyvaso with sotatercept and prescribers’ consideration of both these products?

Martine Rothblatt: Great. That would also be within President, Benkowitz’s preview. So, Mike, take it away.

Michael Benkowitz: Sure. Thanks for the question. So, with sotatercept, it’s been in terms of the launch, it’s actually been relatively quiet. I mean, I think what we’ve heard through the Rumour Mill as they’re supposed to launch this week, but it’s been a little bit quiet. So, I mean, it’s probably a question that correct to Merck on what their launch plans are. The second point on what’s our outlook for the use of our products with sotatercept, I think as we said in prior quarters and as I mentioned in my opening remarks, we really look at this as being a complementary product to the existing products that are on the market. It’s not a cure, it’s not a replacement for prostacyclin. We don’t expect the existing patients are going to be transitioned off of a prostacyclin as a result of sotatercept.

it goes almost 70% of the patients in their clinical trial were on background prostacyclin therapy. So, certainly, we think and based on the conversations, we think largely, sotatercept is going to be used in combination with prostacyclin therapy. And if it works well and patients are able to live longer than that means they’re staying on our products longer, which helps us from a financial standpoint. That’s kind of what we’ve been hearing for the last, I would say, six to nine months and what we heard during the Q4.

Martine Rothblatt: Excellent, Michael. Thank you so much. Operator, we have time for about two more questions. Next question?

Operator: And the next question comes from Ash Verma from UBS. Please go ahead.

Ash Verma: Hi, good morning. Thanks for taking my question. Congrats on all the progress. So, I have to — like for xenotransplantation, can you comment on how do you decide which and how many genes are modified? There’s another player in this field, which is using slightly different approach. How confident are you that your level and selection of gene modification is the most appropriate approach here? And then secondly, I wanted to understand the — some of the pricing pushes and pulls for 2025 across your portfolio. I mean, clearly, there is a benefit that you get from the co-pay normalization with IRA, out of pocket going to 2000, but then also the donut hole impact. Net-net, does that shake out as a headwind or tailwind on 2025 pricing? Thanks.

Martine Rothblatt: So, Ash. thank you for your questions and great analyst coverage. But there’s only going to be time to answer the first question. Each of those questions would take an hour to like fully delve into. Fortunately, we have on the call our Executive Vice President for Product Development and Xenotransplantation, Dr. Peterson. And Leigh, can you answer the Xeno question?

Leigh Peterson: Yes, of course. Thanks for this question. And so, as you know, at United Therapeutics, we believe on multiple shots on goal. So, in fact, we are developing, we have our 10-gene pig that we have, we’re developing two different organs, our 10-gene xeno kidney, as well as our 10-gene xeno heart. And then we also are developing our thymokidney, which is from a pig with a single-genetic modification. And this was the organ that was transplanted into the recent NYU patient. And we actually have good scientific rationale, as well as preclinical evidence that both of these products, again, with a single genetic modification, as well as the 10-gene pig, are effective. And again, there’s advantages to both, at least from the scientific rationale.

So, but really to establish the scientific, safety and efficacy of each, we need to conduct clinical studies and we’re planning on doing those for both of these products. And ideally, we will receive approval for multiple products and which will allow different options for patients and enhance the available supply. So, again, your question is the obvious question, which is better. Well, again, advantages to both, and we’ll be testing those in our clinical studies in the near future.

Martine Rothblatt: Thanks so much, Leigh. Fantastic answer. Operator, last question, please.

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

Joseph Thome: Hi, there. Good morning. Thank you for taking my question and congrats on the progress. Maybe, one more on the xenotransplantation side. Maybe, where do you see the importance of using a CD40, CD154 product in xenotransplantation? I know preclinical, I think you looked at both with and without. Maybe, what will impact your decision to take a CD40-154 into the human clinical study or not? Thank you.

Martine Rothblatt: Okay, very good. Dr. Peterson, would you like to also address that question?

Leigh Peterson: Yes. Well, the main difference is that the CD40, there’s no agents that with the CD40 blockade mechanism of action approved by FDA for use in any indication actually. And so, what we chose to do is, if you look at the background and the history of the xenotransplantation at least with the preclinical models, those studies were done with the CD40 blockade. But our study that we’re doing, we actually have two arms, CD40 blockade, as well as with conventional immunosuppression in our baboon, IND-enabling studies, and we’re getting good results with both. And in fact, there was a publication that recently came out, by Izenson et al. 2024 that discusses a case, that the — a really significant case, where a baboon was transplanted with standard-of-care regimen and survived for nine and a half months, which has never — absolutely never been seen, and we have some reasons why that that happens.

So, we prefer to go into a clinical study with approved medicines to not introduce another variable into the study. And again, we’re backing it up with our preclinical studies and we’re seeing good results in the model. So, that’s where we’re going first.

Martine Rothblatt: Thank you so much, Dr. Peterson. Very comprehensive answer. Operator, you can now conclude the call.

Operator: 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 AND PRESENTATIONS section of the United Therapeutics’ Investor Relations website at ir.unither.com. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.