UTHR
#Thank you, operator.
Good morning, everyone.
Welcome to the United Therapeutics\
Sure.
Well, we are ---+ the good news is, when you always keep the FDA busy with submissions, then you're always going to be waiting on the FD<UNK>
And it's not a bad waiting, it's a good waiting.
So we definitely are waiting on the FD<UNK>
And as well when you work with great partners as we do with Medtronic and DEKA and other companies, then there's always a research and development involves a certain amount of waiting.
But again, it's a good waiting.
It's a kind of waiting like when you're baking a pie and you're waiting for the pie to be ready.
So let me go through some of those waitings, it's an excellent question.
So start with the Implantable System for Remodulin, the acronym, ISR, just like the Israeli acronym for the Olympics, ISR.
The ISR system is now before the FD<UNK>
We submitted the drug portion of the ISR at the end of January.
And we expect to learn by the end of February whether or not it will be a 1 or 2 submission.
And depending on that is whether it's a shorter or a little bit of a longer review.
But in either event, the review period would be consistent with our being able to get approval and launch the product in the next calendar year.
So everything is on schedule.
Everything is consistent with what we previously advised, that 2017 ---+ 2018 is the year that we expect the ISR to be approved, and we continue to be very optimistic and bullish about that.
I'd have to leave it to our legal experts as to exactly when to provide advice as to the type of approval process ---+ review process, excuse me, that the FDA will go through 1 or 2 for ISR.
But certainly, I know that's something that's obviously important to you and to other people, and I'm sure that at minimum, there would be an update of our SEC filings.
I'm sure to say what type of review process the FDA decided to put that through.
So that's definitely on the checklist for a new product launch.
And within the next 12 months, we will be there.
We'll be there ---+ not (inaudible) everything's going okay with the FDA, we should be there with the launch of ISR.
If they ---+ it is a revolutionary product.
It is ---+ you've never heard me ---+ anybody who says to me ---+ and I've been on this phone for like more than 15 years, I think.
You've never heard me say this before with any other products, I have not seen more physician excitement and anticipation over any product than the ISR system, which is a little bit surprising to me because when you get into the nitty-gritty details of it, which I am that type of a manager, it's pretty high-tech and amazing.
You're talking about over a foot of a medical-based capillary inside of a patient's body connected to a machine, it's a pump, but it's a machine, that has to work automatically for years upon years, 4 years without any failure or anything, and then have it rate of flow beat controls through the electromagnetic spectrum, okay, through wireless connections.
This is pretty Star Trek, futuristic, sci-fi technology.
And yet, there are dozens of patients who feel that this is the therapy that gave them their lives back, life back.
It was not getting put on IV or subcu of Remodulin after they were panting for breath and couldn't make it up the stairs that got them their life back.
It was getting rid of the [pus], having everything internal.
So there was nothing they had to do every day.
That's what's got them their life back and that's what we hear from every one of the physicians involved in the ISR program.
And I've heard from multiple patients sending me YouTubes of gratitude and that sort of thing.
So 12 months to launch there.
The next one that you talked about was the RemUnity.
And on the RemUnity, we expect to file the 510(k) for its approval this month.
So again, we'll knock on wood because that's a big filing, a lot of parts and pieces going together.
So RemUnity should do for subcu what the ISR does for IP.
That's the easy way to think of it.
And hopefully, that too will be a rapid review at the FD<UNK>
510(k)s are usually pretty rapid reviews just because it's a rapid reviews, no guarantees that there's not going to be any need for back-and-forth.
And everything the FDA is looking out for our safety and our efficacy and we are thankful for that.
But that is on track for filing this month, the first time you've heard me say that.
And also, I would say that means that it is in our planning and on track for a commercial launch this calendar year.
So that's 2 additional commercial launches that I'm able to talk about on this call.
So those are the main things that we're waiting for, either the FDA or for other partners.
Thank you for your question.
Operator, could you queue up the next question, please.
Yes, no.
This is not going to be patient-filled.
These are all prefilled.
Next question, please.
Well, thank you for the question.
I'm fortunate to have our Chief Financial Officer sitting right next to me here in Silver Spring.
And <UNK>, could you kindly field that question.
Sure.
<UNK>, thanks for the question.
So there was 2.
There was 1 about COGS and there was a step-up in COGS this quarter reflective of the increased royalty that we paid to [Lilly] associated with the new contract.
So the ---+ there was probably about a $20 million increase in COGS there.
With respect to the general spend levels, specifically to R&D, as you asked, there was about a $100 million increase year-over-year.
And if you recall back to the start of this year, our expectation that we communicated was that there will be an increase of R&D to advance our expanding product pipeline that we talked about in our opening remarks.
The increase that we anticipate going forward will be at these levels.
But again, we don't want to get into a quarterly discussion because of the starting and stopping of studies, the starting and stopping of research projects just within a calendar year.
So it's best to look at it overall.
And we don't want to get into a quarterly discussion as you brought up.
But I would expect going forward, the R&D expenses to continue at an elevated level just with the large amount of pipeline products that <UNK> talked about and that are reflected in the pipeline chart on our website.
Thanks, <UNK>, for your question.
I think the bar for the competition is actually pretty low.
As according to the label on Uptravi, which would be the closest comparable drug to Orenitram, about half of the patients fail the Uptravi therapy within 3 years.
So that's a lot of patients.
I mean, with ---+ we're looking at here, 30,000, 40,000 patients with pulmonary arterial hypertension.
If only the half that failed within 3 years ended up on Orenitram, which would be the logical thing to do once you failed 1 oral therapy, you'd go to another oral therapy before you take on more invasive therapies, it would be well north of about 10,000 patients coming on to Orenitram.
So that part of therapy ---+ for competition right there is pretty low.
It's actually lower than that because in the real world, one never sees results as good as the ---+ I won't say never, but I rarely see results as good as in a (inaudible) controlled clinical trial where you have a lot of forces kind of making people stick to the therapy that they're on instead of switching to another therapy as soon as the patient is not doing as well.
And in fact, as highlighted in my introductory remarks, we see Orenitram growing quarter-after-quarter, third consecutive growth ---+ quarter growth of greater than 20%.
And this is reflective of the fact that ever more patients are failing AMBITION therapy, are failing Uptravi therapy and are coming on to Orenitram therapy.
Now Orenitram has a beautiful characteristic that neither AMBITION nor Uptravi can match.
And that is, it's titratable.
It's titratable as titratable really as is a (inaudible) therapy, such as Remodulin.
So this is a fantastic skill set that is resident within Orenitram that allows it to hold on to its patient for a much longer period of time because you can continue to titrate the therapy.
I think it's on top of all of that, which has led us to have approximately a 1/3 versus 2/3 market share of Uptravi as of right now without the readout of the EV therapy, without any data in combination therapy, without a label showing the equivalent morbidity/mortality.
We've got like 1/3 market share right now without any of that stuff.
I think that once we report our data showing a improvement in morbidity/mortality from Orenitram that there will be no competitive difference in terms of anything that advantages Uptravi.
And in fact, there'll be a significant competitive advantage towards Orenitram, which is its titratability and which is the ---+ also the efficacy inherent in being the only true prostacyclin oral analogue.
Operator, can you queue up the next ---+ this I guess would be the last question.
Yes.
Thank you very much for the question.
Again, on a day of the ---+ accompanied by our great CFO, <UNK> <UNK>.
So <UNK>, if you could perhaps talk a little bit about what tax reform has done for United Therapeutics' effective tax rates.
I think that's something that people are very, very interested in.
Sure.
Thank you for the question.
U.S. tax reform offers many benefits to UT.
But by far, the biggest benefit from tax reform in 2018 will be the lowering ---+ we will recognize the benefit of the lowering of the Federal rates to 21% from 35%, which will result in improved after-tax cash flows going forward.
Keep in mind, we as well as others in the biotech and pharma industry will lose some benefits with respect to the domestic manufacturing deduction as well as some other research credits.
But like many other companies, one thing you will note in our financial statements for 2017 is that we [didn't] need to recognize the benefit of this lower rates and revalue our existing deferred tax assets and liabilities, which represented to us a noncash charge of about $71 million.
But these benefits that we will recognize going forward, as I just talked about, will be at these lower rates.
With respect to capital allocation priorities, which was the second part of your question, our priorities really remain unchanged.
We will continue to invest in R&D products and research activities that Dr.
<UNK> talked about at the opening part of the call.
And then the next, we will evaluate and continue to look at value-creating M&A opportunities.
Our third priority would be share repurchases from time to time, if appropriate, but if only mission-critical R&D and M&A opportunities do not avail themselves to us.
So thank you for the question.
Thank you very much.
Operator, you can now wrap up the call.
