Good morning. My name is Kevin, and I'll be your conference operator today. At this time, I would like to welcome everyone to United Therapeutics Corporation's Third Quarter 2014 Financial Results Conference Call. [Operator Instructions] Remarks today concerning United Therapeutics Corporation will include forward-looking statements, representing the company's expectations or beliefs regarding future events. The company cautions that such statements involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements. Please see the company's latest forms 10-K and 10-Q and subsequent filings with the SEC for additional information on these risks and uncertainties. There can be no assurance that these actual results, events or developments referenced in these statements will occur or be realized. The company assumes no obligation to update forward-looking statements to reflect actual results, new information or changes in underlying assumptions. Today's remarks are intended to educate investors about the company. This may include reporting on the progress of results of the clinical trials or other developments with respect to the company's products. Today's remarks are not intended to promote the company's products, to suggest that they are safe and effective for any other use than what is consistent with the FDA-approved labeling or to provide all available information regarding the products, their risks or related clinical trials. Anyone seeking information regarding the use of -- the use of any of the company's product should consult the full prescribing information for the product available on the company's website at www.unither.com. Thank you, Dr. Rothblatt. You may begin your conference.

Thank you, operator. And good morning or afternoon to everybody listening in for the United Therapeutics' Third Quarter 2014 Financial Results. My name is Martine Rothblatt. I'm the Chairman and CEO. And I'm joined on the conference call this morning by Dr. Roger Jeffs, our President and Chief Operating Officer; and also by Mr. John Ferrari, our Chief Financial Officer; and last, but not least, by Mr. Andrew Fisher, our Chief Strategy Officer. So as I complete a few introductory remarks, I'll open up the lines for any questions, and the questions will be answered by either Roger, John, Andy or myself, depending on who's got the most expertise in that area. So we're very pleased with the results this third quarter. I think that there are a couple of areas I'd like to give some introductory comments on before opening up the line for questions. The first is the GAAP loss of $25 million compared to the non-GAAP profit of a much larger amount listed here in the company's press release as some $207.9 million. So that requires a bit of explanation. Now the reason for this is completely, or overwhelmingly, I'd say, an artifact of the GAAP treatment for how we account for our non-dilutive share tracking awards, which we issue to the employees of the company as a bonus compensation. Now most companies issue dilutive stock options. And the way the GAAP rules require dilutive stock options to be accounted for is that they are priced at issuance, in accordance with their Black-Scholes value, and that price is an expense in that period, which is, to some extent or another, amortized over time. But when you issue non-dilutive share tracking awards, which is what we do here at United Therapeutics, the accounting rules require those non-diluted share…

[Operator Instructions] Our first question comes from Liana Moussatos with the Wedbush Securities.

Can you give us an update on the status of some pipeline products like the antibody from neuroblastoma and the x U.S. Remodulin launches and maybe beraprost?

Sure. Thank you very much for your question, Liana. Most of those products are directly managed by Dr. Jeffs. So Roger, if you can please walk through them.

Yes. Thank you, Martine, and thanks for the question, Liana. So a couple of exciting things are going to happen in the fourth quarter. So the 1418, the chimeric monoclonal antibody for neuroblastoma, the action date for that is in December. We've continued to have very, very good discourse with the agency about that following in our manufacturing of the antibody and we remain optimistic for a positive outcome in the U.S. in the fourth quarter. Another exciting thing in the fourth quarter for United Therapeutics is that in concert with Medtronic, we plan to file the implantable infusion system for Remodulin. So Medtronic is coordinating the PMA filing, and we will coordinate a labeling supplement for the use of Remodulin with the implantable SynchroMed II pump. So those are the -- sort of the nearest term, I'd say, binary news events that we're going to have in the fourth quarter. In terms of rest of world revenues, as everybody knows, we have approval now in China and Japan. We're just in a very, almost immediate term in terms of getting reimbursement and pricing for those therapies, both in China, which is not government-reimbursed but insurance privately paid, and then in Japan, where pricing has just been announced and the product will be on the market in November. We've just actually shipped product to our partner, Mochida, in Japan. So while we think there will be a slow buildup of revenues in the near term from the Asian markets, I think, over time, it will significantly contribute to the rest of world Remodulin sales that exist. So those are some of our near-term pipeline and revenue opportunities. We also are advancing many of our other core programs. So probably the one most of interest to these callers on the phone…

Yes. Sure, Roger. The -- that's a Phase III study in which we are combining Tyvaso, together with oral beraprost 314d, and it's about 20% enrolled now and continuing to move forward.

Our next question comes from Phil Nadeau with Cowen and Company.

Martine, I was wondering if you could talk a bit more about the Orenitram launch. In particular, just wondering who are the patients that are starting therapy? Are they coming from Tyvaso? Or are they naive to treprostinil? And also, how are they using Orenitram? Is it twice a day, 3 times a day? And is there any kind of initial feedback on tolerability in clinical practice?

Yes, thanks for the question. The answer is sort of all of the above, where they're coming a little bit from Tyvaso, a little bit from Remodulin and de novo, from patients that are not previously on any form of treprostinil. There's dosing BID, but also dosing TID, and I think the trend line is moving rather sharply in favor of TID. I think that the great beauty of Orenitram is that it can be titrated in so many different steps that, that has really militated against a significant problem of the dosage nature that you referred to. So I've not heard of that being any sort of significant problem at all.

Our next question comes from Mark Schoenebaum with ISI Group.

Martine, this is Salim in for Mark. Couple more questions, just on Orenitram. What are you seeing patients being dosed up to right now in terms of milligrams? And then also, how quickly is that titration curve and inventory for Orenitram as well? How much inventory is in the number for 3Q?.

Yes. Thanks, Salim, nice to hear your voice. The dosing is, as noted in response to the previous question, it's extremely variable. And I think this is, perhaps, one of the real core strengths of Orenitram and, indeed, of treprostinil in general is that you can almost like analogically, analog sense, dial-up and dial down the dose with great deal of flexibility. I would probably endeavor to guess that maybe the most titratable way of treating pulmonary hypertension when you consider not only the amount of milligrams or nanogram per kilogram that you can give to the patients, but also all of the different dose formulation. So that titratability is a huge strength. It also makes it a little bit of a mathematical exercise to address what kind of doses are patients in track receiving. What we're seeing right now is that if you were to convert the milligrams into dollars, the average patient looks like they will be generating approximately $250,000 per year based on a TID dosing. And that -- it's early days still. But I think that's kind of like where it's leveling out. As with Remodulin, there are some patients that are on teeny tiny doses of Remodulin. There'll be some patients on teeny tiny doses of Orenitram. There are some patients that are on whopping doses of Remodulin. There'll be some patients on whopping doses of Orenitram. But again, the beauty of this drug is that it is something that the doctor can titrate and, of course, much more easily PO than intravenously. I think the number is a good number. I don't think there's any unusual stocking or inventory in the numbers, so it reflects, as I had mentioned, the fact that we've got several hundred patients now on Orenitram. I think that we will crack 500 patients before the end of the year and that we will be on a revenue run rate of $100 million per year by the first quarter of next year.

Our next question comes from Terence Flynn with Goldman Sachs.

Irene in for Terence. On Orenitram COGS, it looks like it's around 27% this quarter. Can you maybe give some color around that?

Yes, thanks for your question. I'm going to ask our Chief Financial Officer to address the COGS on Orenitram a little bit more with a little more granularity.

Okay. Thanks, Martine. The COGS number for Orenitram is high, and it's very similar to what we saw for Tyvaso and Remodulin in the early stages of a launch, where the revenue level is just not there to support what you typically see as a 12% cost of goods ratio margin on the products. As a -- because we're doing a lot of manufacturing, we're just -- we just moved our people over from R&D to classification now to commercial, since the drug got approved. So over time, as the revenue builds up and the number of patients increases, the expectation is that we'll -- the cost of goods will be in line with the -- our other products.

[Operator Instructions] Our next question comes from Robyn Karnauskas with Deutsche Bank.

This is Evan Seigerman on for Robyn. A quick question on Remodulin patent case. Can you help us understand why the judge found that the patent was valid but did not infringe on the Sandoz -- was not infringed by Sandoz?

I think you're referring -- thanks for the question. I think you're referring to the 007...

You've got it.

Patent and -- whereas our double -- 117, it was, I don't know, even stronger results for UT. But fortunately, we have our IP guru and Chief Strategy Officer, Andy Fisher, on the line to answer your call -- answer your question.

Sure. Thanks, Martine, and thanks for the question. So just to review real quick. There were 2 patents involved in the Sandoz case, as Martine just highlighted. We had the 117 patent, which is a product-by-process patent. The district court found that, that patent was both valid and would be infringed by Sandoz. That patent expires in October 2017. The other patent, what we call the 007 patent, related to the use of a certain type of diluent with Remodulin. That patent expires in 2029. The court held that, that patent was valid but found that it would not be infringed by Sandoz as a proposed version of generic treprostinil. The best way to probably understand the court's rationale, it is 100-plus page opinion by the court, so digesting the portions relevant to the 007 patent are probably the best way to get a comprehensive understanding of the court's views on that infringement issue for that patent. But I guess to sum it up, Sandoz's argument was that they don't intend to make any mention of the use of that diluent in their label for their generic product. And the court found that compelling and found that the fact that Sandoz would not be recommending the use of the diluent for their product, that they would not be sort of inducing the infringement of the 007 patent. So that issue, along with the issues that were decided in our favor, are all now the subject of an appeal before the federal circuit.

Great. And is that really crucial for the drug, this aspect that you're describing?

We believe that the use of that diluent contributes to the safer administration of the drug, yes.

Our next question comes from Michael Yee with RBC.

This is John on behalf of Michael Yee. As we look at the launch of Orenitram in terms of sales, it looks very similar to the launch of Tyvaso. So is that what you're also seeing as well, maybe in terms of the patient uptake? And what else do you think are similar or different as you compare the launch of Orenitram with the launch of Tyvaso? And then lastly, going forward, you mentioned that you expect Orenitram to be on track to $1 billion. So do you think Orenitram's launch will outpace Tyvaso's launch?

Yes. So thanks for the question. We actually see Orenitram launching more aggressively than Tyvaso with a faster take-up. To give you kind of a frame of reference -- and this very much is in line, I think, with the pharmaceutical industry experience in different methods of drug administrations. The -- it took us about 10 years to get to around $400 million in revenue for Remodulin, which is, of course, delivered parenterally. It took us about 5 years to get to around $400 million a year in revenue on Tyvaso. And based on the current growth trajectory, I think that we will be somewhere in the 2- to 3-year time period to achieve that level of revenues on Orenitram. So it is much more -- it's being taken up much more rapidly, and this is simply for the obvious fact that it's much easier to take a pill than to do a nebulization, easier to do a nebulization than it is to put up with an indwelling catheter. And therefore, when larger and larger populations of doctors look at what to give for their patient, the doctors who represent, say, half of the pulmonary hypertension patients but may represent only about 5 or 10 patients per doctor, those doctors are going to have pause to manage a patient on a complicated therapy but would be more willing to manage the patient on an oral therapy. Now in terms of the growth trajectory upwards, up toward a $1 billion, that would represent something like 4,000 patients on Orenitram at the average revenue figures that I gave previously. Well, we are just about at that number already with Remodulin and with Tyvaso. So if you're going to get 4,000 patients on the parenteral system or on the nebulize system, it's pretty…