Good morning and welcome to the United Therapeutics Corporation first quarter 2019 earnings call. My name is Michelle and I will be your conference operator today. All participants will be in listen-only mode until the question-and-answer session. [Operator Instructions]. I will now to turn the conference call over to James Edgemond, Chief Financial Officer of United Therapeutics.

Good morning. It is my pleasure to welcome you to the United Therapeutics Corporation first quarter 2019 earnings call. Accompanying me on today's call are Dr. Martine Rothblatt, our Chairman and Chief Executive Officer and Mr. Michael Benkowitz, our President and Chief Operating Officer. 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 Form 10-K and 10-Q contain additional information on these risks and uncertainties. We assume no obligation to update forward-looking statements. Today's remarks may also include financial measures that were not prepared in accordance with U.S. Generally Accepted Accounting Principles. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in our earnings release available on our website at www.unither.com. Today's remarks 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 other products are safe and effective for any unapproved or investigational usage. Full prescribing information for these products is available on our website. Now I will turn the call over to Dr. Rothblatt for an overview of the first quarter 2019 financial results and business activities of United Therapeutics.

Thank you James and good morning everybody. Welcome to our 2019 first quarter earnings call. I would like to give an overview of our prospects for the next few years and then open up the phone lines for questions directed to myself, James or President Mike Benkowitz. United Therapeutics expects to triple the number of patients that we helped from over 7,000 currently to over 20,000 during the next few years. We are confident of achieving this because each of our three main therapeutic platforms Remodulin, Tyvaso and Orenitram have each been infused with new technology breakthroughs that will enable their use by thousands of new patients. There are five technology breakthroughs for Remodulin, four technology breakthroughs for Tyvaso and three technology breakthroughs for Orenitram. In addition to this expected tripling of our business over the next few years, we also have a deep pipeline of new product candidates in oncology, new chemical entities for unmet medical needs in pulmonary fibrosis and pulmonary hypertension and a transformative organ manufacturing solution for the dire national shortage of transplantable kidneys, hearts and lungs. Let me now expand on our five technology breakthroughs for Remodulin, which we expect to triple this part of our business over the next few years. First, the implantable system for Remodulin is a revolutionary technology that completely eliminates the two biggest problems with Remodulin, subcutaneous pain bad enough to require monthly opioid treatment and the life-threatening sepsis risk with such a significant rate of hospitalization that it is registered in the product label. We expect to commercially launch the implantable system for Remodulin in the second half of this year. We believe many thousands of pulmonary hypertension patients will end up using this breakthrough product. Second, the RemUnity semi-disposable pump is an extraordinary product for subcutaneous Remodulin because…

[Operator Instructions]. Our first question comes from Chris Shibutani of Cowen. Your line is open.

Thanks very much. Good morning, Martine and the United team. As we think about how you are commenting about the PAH business, you make reference quite a bit to patient numbers and I think it's a little bit challenging for us, since we are kind of where that, to sort of quantify that where that's coming from. And typically when we are modeling, I think we are talking about units and prices. What is the source of these additional patients that you are talking about? Is this a shifting of patients from different disease classes? Are these patients that you are taking from competitor regimens? A little bit more color around that? And then also you have had some price increases that I think you haven't had precedent for there. Can you talk to us how you are thinking about that going forward? Thanks.

Sure Chris. Good morning. So with regard to the numbers, the starting point is the number of patients who are currently being treated by physicians for pulmonary hypertension. And that number is currently at 45,000 patients. So that's the first number to start with. The second number is the number I mentioned in my introductory remarks that approximately half of that very large patient population die without ever going ahead and being placed on parenteral therapy. And the reason for that are the reasons that I gave in my introductory remarks. So there is, what one would say, a capturable new patient population, north of 20,000 patients in addition to the patients currently being treated. The third number, I think, which is most important to keep in mind is the mean duration of patients on pulmonary hypertension therapy. The mean survival of a patient with pulmonary hypertension from the time of diagnosis varies from five to 10 years. At the best clinical trial centers, the major university hospitals, the mean survival was about 10 years. More generally across the entire patient population the published data shows the mean survival treated is around five years. So what that means that there are constantly patients who are failing their oral medications and needing more and more aggressive and ending up in the Remodulin basket or the Tyvaso basket. The numbers of those patients would be, you know you could go ahead and if you took kind of like the middle point of seven or eight years mean survival, it means basically about one-fourteenth or roughly speaking about 7% or 8% of that population of 45,000 patient is progressing each year on to needing Remodulin therapy. So one of the reasons that we have been working hard for so many years to develop…

Thanks Martine. Yes, I think your question was around some unusual price increases that we have taken which I would challenge a little bit. I think if you look back at our history with respect to Tyvaso and Orenitram, we have been fairly consistent in taking annual price increases in the low single digits. With respect Remodulin, we took a price increase last year, but that was the first increasing that we have taken in, I guess, it has been eight years at that point since we had taken an increase. And that really just reflected the investments in Remodulin delivery technology that Martine talked about in her opening. And so, we understand that our drugs are very expensive. We take that very, very seriously and then we think we have a responsibility to be good stewards of the health care system and moderate our price increases. So we don't take aggressive price increases. On the patient side, we do a lot of things to help support them and make our drugs affordable. We have copay cards for all of our products for our commercial patients and then we have, we think, a very generous patient assistance program for all of our patients so if they can't afford our medicines for whatever reason we are able to give that to them for free.

Thanks Mike. Next question, operator?

Our next question comes from Liana Moussatos of Wedbush Securities. Your line is open.

Thank you for taking my questions. Can you give us some metrics for modeling XPS and Steen Solution?

Yes. Thank you, Liana. That's a reference for those on the call, who may not be aware, we received on Friday FDA's full commercial approval for the ex vivo lung perfusion system that we use to increase the supply of transplantable lung. I guess I probably misspoke a little bit at the beginning when I said that there is no cure for pulmonary hypertension. In fact, a lung transplant is a cure for pulmonary hypertension. But there are very few lungs available. When we started our ex vivo lung perfusion effort, there were about 1,600 lung transplants done each year in the U.S. And we are very proud and excited that we have now been able to push that total number of lung transplants each year up just under 2,000 lung transplants a year. Statistically, our head of that group has shown me the data that this technology has enabled a 12% increase in lung transplants after the number of lung transplants was completely flat-lined for many years going back to the 20 marks. So it's no doubt that being able to take marginal lungs that no transplant surgeon wants the use, fly them to our, what we call, lung bioengineering center here in Silver Spring and by the way, this August, the second lung bioengineering center will open up at the Mayo Clinic. Fly them to these centers. Have our expert super well-trained technicians operate on these lungs as one would operate on a patient. And then more than 50% of the time, restore these lungs to transplantable condition and provide the transplant surgeons assurance for that by giving them access to a high resolution visualization network to their phones and tabs and whatnot that they can actually look inside the lung here at our lung bioengineering center in…

Our next question comes from Jessica Fye of JPMorgan. Your line is open.

Hi there. Good morning. Thanks for taking my question. I wanted to check in on the new pumps you are working on, in particular the DEKA pump, which I think early in the year you had suggested was going to re-file in January with a 90-day clock. Has DEKA heard from back from the FDA on that? And if so, what was the finding? Is there a plan to re-file if they need to do more work there?

Yes. Thanks Jessica. So the answer is yes, they have heard back from the FDA. It has already been re-filed. It was re-filed some month ago. And we expect the approval of that pump within the next one to two weeks.

All right. Thank you.

Next question, please.

Our next question comes from Martin Auster of Credit Suisse. Your line is open.

Hi. Good morning all. This is [indiscernible], on for Marty Auster. I just had a quick question. If you can just give us a quick update /refresher on the Medtronic ISR pump and give us some expectations on supply? Is there any chance that you are going to manufacturing additional pumps in the near term in the future or anything to that degree? But additional color on that would be very helpful for us. Thanks.

Okay. Great. As mentioned since we received our approval from the FDA last year, that's become a commercialized program at UT. We expect commercial launch in the second half of this year. And I am going to turn the question over to Mike Benkowitz to give you little bit more color about that.

Yes. Thanks Martine. Yes, as Martine said, our expectation is that we will launch the implantable system in the second half 2019. I guess the last issue that remains is, Medtronic had a series of conditions of approval associated with their pump filing. They are down to their last issue and we expect and they expect that we will receive clearance from the FDA on that very soon and then we will be able to launch. Our plans for launch, as we have talked about previously, are to start with the 10 clinical trial sites that have experience with the implantable system. And launch preparation has already started with those sites. And so most are already to go and as soon as we have clearance from the FDA, we will be able to start implanting almost immediately. And then, we are also looking to and have started the process of getting another 100 sites up and running and expect to do that by the end of the year. So by the end of the year, we will have roughly 100 sites that can do the implants through the implantable system. Regarding supply, practically there is really no limit on the supply. Medtronic has increased the number of pumps that they have been able to manufacture such that any current IV patient that wants the implantable system can have it. And so we will launch with that supply. Meanwhile, they are working on their next generation version of the pump which we expect to be available sometime next year. And there will be again plenty of supply there for any future patients that wish to have the implantable system.

Great. Thanks Mike. Operator, next question please.

Our next question comes from Terence Flynn of Goldman Sachs. Your line is open.

Hi. Good morning. Thanks for taking the question. Maybe two for me on Ralinepag. I was just wondering, I know Arena had previously talked about potentially doing a head-to-head trial versus Uptravi. So I would just be curious to get your thoughts on that, if that's still something you guys would consider? And then any color you can give in terms of incremental R&D spend to support the Phase 3 program for Ralinepag? Thank you.

Thank you. So at present, we are not planning to do a head-to-head trial with Uptravi. We have our hands full with the three pivotal trials that the FDA had agreed with Arena to be an adequate basis for approval. In fact, out of those three pivotal trials, there are seven different ways in the FDA's view for the drug to achieve approval based on whether results in any given trial were highly statistically significant or just two trials with statistical significance or one trial with high statistical significance. So there are many different ways to gain approval there. The data that enticed us to acquire Ralinepag in the first place was pretty compelling, in our view, in terms of its advantages over Uptravi. And that's actually the same kind of feedback that we received during the due diligence process from the different entities that we interviewed. So I am not really sure what would be the cost-effectiveness of doing such a head-to-head trial. But we are always open-minded at United Therapeutics and we are always interested in providing clinically significant information. So I would definitely not exclude that possibility by any means. With regard to incremental R&D, we don't really believe that there is any net increase in our R&D spending at all due to the acquisition of Ralinepag. We have products that are constantly coming in and out of our pipeline and in and out of Phase 3 trials. To just give you one example right now, obviously our Ralinepag expenses are beginning to ramp up because the pivotal trials have begun. For example, the largest of the trials, the OUTCOMES trial has already enrolled its first patients now. So those expenses are ramping up. On the other hand, we have other trials going on within the company whose expenses are beginning to wind down. Obviously, the BEAT trial, those expenses are all wound down right now. And to a rough approximation, I would say, the savings on the BEAT is almost equal to the cost of our Ralinepag. Another trial, which is just about to start winding down is our INCREASE trial of Tyvaso in patients with interstitial lung disease. That's almost fully enrolled. So those expenses are beginning on the wind down. So this kind of coming in, coming out processes is always going on. And as I believe James, our CFO, has guided at healthcare conferences several times, we keep a philosophy of a kind of a steady state on our R&D spending. And you should not expect any spikes due to Ralinepag at all. Next question, operator. I think we have time for one more question.

Our next question comes from Carter Gould of UBS. Your line is open.

Hi. This is Angela, on for Carter. Thanks for taking our question. Now that a Remodulin generic has launched, how does that impact how you are thinking about allocating capital across business development, additional R&D investment and share buyback?

Okay. I am going to ask, when you talk about capital, you talk about our Chief Financial Officer. So James here is going to answer that.

Great. Thanks Martine. Thank you for the question. Our capital allocation priorities will remain unchanged even as you described an entry of a generic Remodulin. And our capital priorities continue to be first investing in R&D opportunities. As Martine just described, in terms of the clinical trials around Ralinepag and our other clinical trials, really looking at opportunities to support our business mission. Second, we are going to invest in value creating business development activities. And third, share repurchases. So those capital allocation priorities are consistent with what we have discussed before and will be so going forward. Thank you very much.

Thank you James. Thank you everybody for joining our first quarter earnings call and we look forward to seeing you at some of the upcoming healthcare conferences where things could be dealt into in greater detail. So there are a number of them coming up in June, July. I myself will next be at the Wedbush Conference in New York in August. Thank you everyone for joining the call.

Thank you for participating in today's United Therapeutics Corporation conference call. A rebroadcast will be available for replay for one week by dialing 1-855-859-2056 with international callers dialing 1-404-537-3406 and using access code 5569533. You may now disconnect. Everyone have a great day.