United Therapeutics - Earnings Call - Q2 2025

Executive Summary

• Record total revenue of $798.6M (+12% y/y), marking 12 straight quarters of double-digit y/y growth; diluted EPS was $6.41, and the Board authorized up to $1B in share repurchases through March 31, 2026.
• Tyvaso franchise led performance: Tyvaso DPI revenue $315.2M (+22% y/y), total Tyvaso $469.6M (+18% y/y); Orenitram posted a record $123.9M (+16% y/y); Nebulized Tyvaso rose 10% y/y.
• Versus S&P Global consensus, Q2 revenue was a slight miss and EPS/EBITDA missed more meaningfully due to higher SG&A (including a $21.7M PP&E impairment) and a higher effective tax rate (24% vs 22% y/y).
• Key catalysts: TETON 2 IPF data in September 2025; ADVANCE OUTCOMES (ralinepag) enrollment complete with top-line data expected 1H26; organ/organ-alternative programs advanced (first miroliverELAP patient treated).

What Went Well and What Went Wrong

What Went Well

• Tyvaso DPI delivered record revenue with strong referrals and starts; management reaffirmed “continued double digit revenue growth for Tyvaso” and total revenues well into the future.
• Broad product strength: Double-digit y/y growth in Nebulized Tyvaso, Orenitram (record quarter), and Unituxin; Remodulin posted a top-five quarter in patient shipments and new Remunity pump launch is planned.
• Pipeline momentum: TETON 2 completed with data expected in September; ADVANCE OUTCOMES enrollment concluded (728 participants), keeping 1H26 top-line timeline; organ programs saw a first-in-human miroliverELAP procedure.

What Went Wrong

• EPS and EBITDA missed consensus, driven by higher SG&A (+20% y/y) including $21.7M PP&E impairment and a higher tax rate (ETR 24% vs 22% y/y) impacting net income conversion.
• Ex-U.S. Nebulized Tyvaso showed sequential variability attributed to distributor ordering patterns; management emphasized strong end-of-quarter shipments nonetheless.
• Competitive noise around Liquidia’s DPI prompted management to spend time addressing dose, tolerability, deposition, and ease-of-use claims; UTHR expects curiosity trials but remains confident in Tyvaso DPI’s positioning.

Transcript

Operator (participant)

Good morning and welcome to the United Therapeutics Corporation Second Quarter 2025 Corporate Update. My name is Steve and I'll be your conference operator today. All participants on the call portion of this webcast will be in the listen-only mode until the Question and Answer portion of this earnings call. If you would like to ask a question during this time, simply press Star then the number one on your telephone keypad. If you would like to withdraw a question, simply press Star then two on your telephone keypad. Please note this call is being recorded. I would now like to turn the webcast over to Dewey Steadman, Head of Investor Relations at United Therapeutics. Please go ahead.

Dewey Steadman (Head of Investor Relations)

Thank you Steve and good morning. It's my pleasure to welcome you to the United Therapeutics Corporation Second Quarter 2025 Corporate Update 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. We assume no obligation to update these forward looking statements. 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 any products are safe and effective for any unapproved or investigational uses. Full prescribing information for our products is available on our website.

Accompanying me today 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 of Product Development and Xenotransplantation, Patrick Poisson, our Executive Vice President of Technical Operations, Dr. Gil Golden, our Executive Vice President and Chief Medical Officer, and C.Q. Deng, our Senior Vice President of Biostatistics, Statistical Programming and Data Management. Note that James Edgemond, my colleague Terry Silvers and I will participate in a fireside chat and one on one meetings at the Morgan Stanley Global Healthcare Conference in New York on September 8. Along with Martine Rothblatt, Terry and I will be at the Bernstein 2nd Annual Healthcare Forum in New York on September 23rd for a fireside chat and one on one meetings.

Additionally, our scientific, commercial and medical affairs team will present at the World Transplant Congress in San Francisco August 2nd through 6th, the European Respiratory Society Congress in Amsterdam on September 27th through October 1st, the 18th Congress of the International Xenotransplantation Association in Geneva, September 30th to October 3rd, and the American College of Chest Physicians meeting at Chest 2025 in Chicago October 19th through 22nd. Now I'll turn the webcast over to Martine for an overview of our development pipeline and business activities. Martine?

Martine Rothblatt (Chairperson and CEO)

Thank you, Dewey, and good morning, everyone. We have slides available for reference, and I encourage you to review those at your leisure. Today we're proud to report that United Therapeutics has achieved another record quarter of earnings, marking 12 consecutive quarters of double-digit year-over-year revenue growth. Our performance is a testament to our unwavering strategic approach, which has allowed us to consistently drive sustainable growth while improving the lives of the patients we serve. Our strong foundational business is supported by our robust Tyvaso franchise, which continues to achieve record results underpinned by our first-in-class Tyvaso DPI device and enduring market fundamentals that we expect will propel future growth. Additionally, Orenitram, Remodulin, and Unituxin remain integral components of our commercial portfolio and continue to deliver strong performance.

Our next wave of growth, which we call our Innovation Wave, consists of our TETON studies in idiopathic pulmonary fibrosis and our ADVANCE OUTCOMES study in pulmonary arterial hypertension, which we're on the cusp of reporting results for, starting with TETON-2 in September of this year. Each of these catalysts has the potential to fundamentally change our revenue profile and deliver growth well into the next decade. Our largest potential wave of growth, our revolution wave, continues to make progress, and we are on track to conduct the first transplant in our EXPAND UKidney Clinical Study shortly. Concurrently with this first-ever [phase I] study, and as part of our multiple shots on goal approach, we're also proud to announce that we have filed an investigational new drug application for our EXTEND study evaluating our UThymoKidney, and we expect to file for our EXPRESS study evaluating our Uheart.

Additionally, last month we announced that we enrolled and treated the first patient in our miroliverELAP study. Recently, our Investor Relations team launched a new pipeline website at pipeline.unither.com that contains detailed information and links to publications about our pipeline candidates. I encourage you to take a look. Our ability to deliver such remarkable growth and pipeline innovation is matched only by our commitment to financial prudence. The exceptional operating efficiency that we have cultivated has allowed us to generate nearly $1.5 billion in annual operating cash flow. Our disciplined approach allows us to strategically allocate capital, ensuring that United Therapeutics remains flexible, resilient, and well positioned for sustained success in the years ahead.

Given the strength of our commercial business, our robust balance sheet, and confidence in our upcoming catalysts, we believe that the recent dislocation in our share price presents a particularly compelling investment opportunity, and as such, our Board of Directors has authorized the repurchase of up to $1 billion in our shares through March of next year. We will continue to regularly evaluate our capital needs and deploy cash toward the highest and best uses. Even after the potential repurchase of shares as authorized by our Board, we remain well capitalized to continue advancing our commercial and development programs. As we approach these meaningful and potentially value creating catalysts across pulmonary fibrosis and pulmonary arterial hypertension, we could not be more confident in the future of our business.

To conclude, we expect to sustain growth in our foundational business, which continues to drive significant cash flow and opportunity, while also progressing our innovative Small Molecule Pipeline and our platform of organ alternative technologies. We're excited about our current business and our growth potential, and we appreciate the feedback and support from our shareholders. We have a number of different presentations this morning, with Michael Benkowitz addressing our commercial performance, Leigh Peterson outlining our TETON-2 study for which we expect to report data in September, C.Q. Deng, our Chief Biostatistician, to talk about the recent Insmed phase II data, and then Dr. Gil Golden, our Chief Medical Officer, who will outline the expected limited impact we believe TPIP will have on the market if it is approved. Mike?

Michael Benkowitz (President and COO)

Thank you, Martine, and good morning, everyone. Today we are pleased to report record total revenue of $799 million, reflecting 12% growth over the second quarter of 2024. This is our 12th consecutive quarter of double-digit year-over-year total revenue growth, driven by robust results across our commercial portfolio. Underpinning this performance, Tyvaso DPI achieved a record total revenue of $315 million, representing 22% growth over the second quarter of 2024. This quarter also marked a record for patient shipments for Tyvaso DPI as well as the total Tyvaso franchise. The underlying dynamics remain strong, with referrals and starts each reaching record levels for Tyvaso DPI during the quarter. We also saw year-over-year double-digit revenue growth for nebulized Tyvaso, Orenitram, and Unituxin. For Orenitram, this quarter represented a record in both total revenue and patient shipments.

Touching briefly on Remodulin performance, we are still seeing strong demand for Remodulin, which notched a top five quarter in total patient shipments, and we are confident that parenteral prostacyclins will continue to play a meaningful role in the marketplace. We look forward to the launch of our next-generation pump RemunityPRO later this year. With the recent launch of a competing treprostinil dry powder inhaler, I'd like to address several areas of misinformation in the marketplace about Tyvaso DPI. Liquidia is attempting to differentiate their product in the areas of dosing, tolerability, particle deposition, and ease of use. First, there is no maximum dose for Tyvaso DPI, and there's no commercially available treprostinil DPI that has published [data] at higher doses than Tyvaso DPI. Recall, in the brief study of Tyvaso DPI, we saw patient exposure up to 33 nebulized breath equivalents, or 176 micrograms, at 51 weeks.

Next, tolerability clinical data for Tyvaso DPI show that key tolerability factors like cough and throat irritation decreased meaningfully over time. Contrary to that, clinical data for Liquidia's product shows that cough and throat irritation actually increase over time. Now turning to deposition. It has been previously shown in peer-reviewed publications that the optimal particle size for pulmonary deposition is 1-5 microns, thus leading to effective delivery and absorption to more peripheral areas of the lungs. Tyvaso DPI particles at 2.6 microns are in the optimal size range to promote efficient medication delivery. This feature, coupled with our low flow and low inspiratory effort device, has been shown to allow for the deep deposition of Tyvaso DPI in the lung. Finally, there is ease of use and convenience, and we believe that Tyvaso DPI is the better all-around package for patients.

Tyvaso DPI only requires one breath per cartridge four times a day. When administering Tyvaso DPI, patients can hold their head in a normal neutral position, and Tyvaso DPI requires no daily cleaning where patients could potentially come in contact with DPI powder, causing unwanted effects. As we begin our competitive journey with Tyvaso DPI, we understand that physicians and patients may want to try new product offerings. However, we believe that over the long term, with Tyvaso DPI's product profile, along with the deep experience we have built in the pulmonary hypertension marketplace over the last three years, we are positioned for continued growth. I'll now turn the call over to Leigh to discuss the TETON studies.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Thanks Michael and good morning everyone. As we look ahead to the expected September data readout for our TETON-2 registration study, we wanted to spend some time today providing a brief landscape of idiopathic pulmonary fibrosis, or IPF. I'll cover the biological rationale behind treprostinil as a therapeutic approach, provide details regarding our clinical trials, and set the stage for interpreting the forthcoming results. IPF is a progressive scarring disease of the lungs of unknown cause. It's most common after age 50 and it's linked to risk factors like smoking, genetics, and certain environmental exposures. It affects approximately 100,000 people in the U.S. and currently there's only two approved therapies for IPF, nintedanib and pirfenidone. These drugs only slow lung function decline. They're used by about 30% of the U.S. patients, largely due to their unpleasant side effects, yet together they generate over $4 billion globally.

As mentioned, these two therapies only showed a decrease in the rate of decline in FVC at 52 weeks. In their registration studies, the mean FVC change from baseline for nintedanib was approximately 111 mL from placebo and 148 mL for pirfenidone. However, the studies had very different placebo effects, with over 200 mL of FVC loss in the nintedanib study and more than 300 mL for pirfenidone, demonstrating the wide variety in the placebo responses that have plagued development efforts in IPF. Many investors and even physician experts in the space believe that treprostinil is just a vasodilator, and that's likely because treprostinil has become—it's much more than a vasodilator.

It's likely because treprostinil has become widely used in pulmonary hypertension, but it also has activity on the IP, EP2, DP1, and PPAR receptors, collectively inhibiting fibroblast proliferation and migration, fibroblast to myofibroblast differentiation, extracellular matrix deposition, and inflammation, all of which contribute to fibrosis. These findings are supported by a post hoc analysis from our INCREASE study, where a subset of pulmonary hypertension patients with IPF treated with Tyvaso showed an improved FVC and reduced exacerbations of underlying lung disease. This, along with treprostinil's anti-fibrotic properties, makes us optimistic that Tyvaso may benefit IPF patients by improving lung function through multiple pathways beyond those typically associated with pulmonary hypertension. The TETON program is made up of three studies. TETON-1 is a 598 patient study of nebulized Tyvaso in IPF for participants in the U.S. and Canada.

TETON-2 is a 597 patient study identical to TETON-1 but evaluating participants outside the U.S. and Canada. TETON-PPF is a worldwide study evaluating the use of nebulized Tyvaso in PPF or progressive pulmonary fibrosis. As we've been saying, we expect TETON-2 to report data in September while TETON-1, which was fully enrolled in January of 2025, should report data in the first half of 2026. Our focus today is on TETON-2. Again, TETON-2 is a 597 patient multicenter randomized double-blind placebo-controlled phase III study evaluating nebulized Tyvaso in IPF patients over 52 weeks outside the U.S. and Canada. Full enrollment was reached in July of 2024. Participants were randomized to Tyvaso or placebo starting at 3 breaths 4 times daily or QID, titrated as tolerated up to 12 or more breaths QID.

The primary endpoint is a change in FVC at 52 weeks and the secondary endpoints include time to clinical worsening, time to acute IPF exacerbation, overall survival, percent predicted FVC, quality of life measured by the King's Brief ILD questionnaire, and change in lung diffusing capacity. Safety is assessed via adverse events, labs, vital signs, and ECGs. Key inclusion criteria of note include subjects who are 40 or more years of age, have a predicted FVC of 45% or more, be on a stable dose of nintedanib or pirfenidone if using one, and have a diagnosis of IPF confirmed by HRCT within the last 12 months. The exclusion criteria of note include obstructive diseases, high supplemental oxygen use, use of drugs commonly used for PAH, recent IPF exacerbation, or pulmonary infections per the TETON 1 and 2 protocols.

We reviewed the blended blinded data and adjusted the sample size considering the FVC variability, discontinuation rate, background therapy use, and regulatory feedback, and in 2024 we expanded each of these studies from 396 to 576 participants to account for observed data, patient retention, and better alignment with the other major IPF trials at ATS. This year we presented fully enrolled baseline data for TETON 1 and TETON 2, reflecting the full populations of both studies. The baseline demographics of TETON 1 and 2 are largely similar and compare favorably with the recently reported FIBRONEER-IPF study and earlier clinical programs for nintedanib and pirfenidone. While our statistical analysis plan is very long and detailed, we've been getting some questions in four key areas that I'd like to address. First, the study is 80% powered to detect an 80 mL change in FVC.

This compares to a 90% power to detect a 74 mL change in FVC for the recent FIBRONEER-IPF study. Next, deaths in the study will be penalized with an FVC value at the 2.5 percentile of observed values across arms. This is based on recent feedback from the FDA. This is more conservative than the 10th percentile value used in the FIBRONEER-IPF study. Discontinuations for other reasons will be handled through statistical models like the mixed model repeated measures or multiple imputation. Finally, we've had five data monitoring committee reviews that evaluated safety over the course of the studies and the last one occurred in February of this year which covered more than 1,100 patients between the two studies.

To close, our expectation is that our TETON-2 study will report top line data in September of this year as said, and TETON-1 will report top line data in the first half of 2026. If both trials are successful, we intend to use the data from the studies to support a regulatory filing with the FDA to add IPF to the labeled indications for nebulized Tyvaso and setting up a commercial launch by 2027. With that, I'll now turn the call over to C.Q. to discuss TPIP.

C.Q. Deng (SVP of Biostatistics, Statistical Programming and Data Management)

Thank you Leigh. It's a pleasure to speak with you today about the questions we have concerning the TPIP phase II-B PAH data that was recently presented. Of course, our discussions are based on publicly available information. First, we believe the patient population in the recently announced phase II-B PAH study was imbalanced between the active and placebo groups that may have favored the treatment effect in the active group. Second, we believe inappropriate statistical analysis was conducted in the PAH study, again favoring the active arm of the study and potentially overestimating the treatment effect. Finally, we did not see compelling data in the phase II-A PAH PH-ILD study that give us confidence TPIP can be successful in a phase III PH-ILD study.

We think the study population in the phase II-B PAH study was imbalanced and not reflective of PAH patients who present today that are more heavily pretreated and less symptomatic than when we first developed nebulized Tyvaso. The combined baseline 6-minute walk distance in the phase II-B study was meaningfully lower, at least 45 m lower relative to the recent clinical studies in PAH, potentially favoring a treatment effect. Most if not all recent PAH studies conducted this decade have had baseline 6-minute walk distance of 400 m or more reflecting improvements in the standard of care of this patient population globally. Further, there was an imbalance between the two arms of the study with baseline 6-minute walk distance. The 23 m difference in baseline 6-minute walk distance between the active and placebo arms is more than three times that of previous well controlled studies in PAH.

Of course, this favors the treatment arm of the study potentially leading to great treatment effect. Moving to study discontinuations, we also saw a large imbalance that could favor the active arm with 10% of active participants discontinued the study versus no discontinuations in the control group. The high discontinuation level imbalance, especially relative to the control group, could influence how missing values should be imputed. Moving to statistical analysis, the change from baseline to week 16 data is not symmetric and it's skewed to opposite directions. In the TPIP group the mean value was approximately 20% higher than the median suggesting that the data was right skewed or positively skewed. In the placebo group the mean was 40% lower than the median suggesting that the data was less skewed or negatively skewed.

The nonparametric method used to report this data in this case, rank [ANCOVA and the Hodges-Lehmann estimate], relied on the data to be symmetric or at least skewed towards the same direction. However, the right-skewed data in the active arm and the left-skewed data in the control arm is likely causing the overestimation of the treatment effect by Hodges-Lehmann estimate or making the Hodges-Lehmann estimate of the location shift in medians not interpretable. Finally, there were eight subjects, or 12%, with missing data at week 16 in the active group and zero in the control group. A severe imbalance in dropout rate suggests that the data is not missing at random. The multiple imputation method relies on the data actually being missing at random, which is not the case here. As such, we think this analysis may have overestimated the treatment effect of TPIP in PAH.

Beyond the concerns with the recent phase II-B PAH data, we continue to question the earlier phase II-A PH-ILD data and it may not be an indicator of potential phase III success in this indication. First, the study was extremely small in sample size with a 3-to-1 randomization ratio. There were only 10 patients in the placebo arm, so it's difficult to draw any efficacy conclusion from the study. In addition, though baseline 6-minute walk distance was given, the 6-minute walk distance result was not statistically significant. Further, the ILD subtypes resulted in the PH-ILD study were not balanced between arms. For example, only two CPFE patients were randomized into the study but were all randomized to placebo group on a 3-to-1 TPIP to placebo randomization ratio. CPFE is known to be a category in which inhaled treprostinil is less effective.

Finally, the safety data in the PH-ILD encounters additional imbalance between arms as five subjects, or 17% of active subjects, had dyspnea compared to only one subject, or 10% of subjects, in the control group. Dyspnea is not a prostacyclin class adverse event and we saw more dyspnea in the control group than the active group in the INCREASE study. As you can tell, we think investors have overreacted to the TPIP phase II-B PAH data. The baseline imbalance skewed the data in opposite directions and aggressive statistical analysis based on the missing at random assumption may all contribute to the potential overestimation of the treatment effect and we still have no convincing data in PH-ILD. I will now hand the call to Gil Golden, our Chief Medical Officer, to outline the expected limited impact we believe TPIP will have on the market if it's approved.

Gil Golden (EVP and Chief Medical Officer)

Thank you, C.Q. We believe that investors have overreacted to the TPIP data and misunderstand the opportunity or lack thereof in the marketplace. Specifically, we do not see a near term path to market in IPF. Long term safety has not been proven. A potential launch, even if it happens, is many years away and our business profile will look very different if and when TPIP reaches the market. First, TPIP lacks a clear path to approval in IPF before 2034 if Tyvaso gains approval in 2027 due to orphan drug exclusivity. Further, as an ester prodrug, TPIP would need to show clear clinical superiority over Tyvaso or a meaningful improvement in patient care, and less frequent dosing may not qualify. The slide lists an example for Lumryz from Avadel that was the only recent declaration of meaningful improvement in patient care by FDA that was of the same dosage form.

Next, long term safety data for a liposomal prodrug in pulmonary hypertension is lacking, with the longest studies covering only 16 weeks. For progressive diseases like PAH, PH-ILD, and IPF, robust long term data is essential. Recent experience with sotatercept, for example, shows that even after FDA approval, unexpected safety issues can arise over time, highlighting the need for caution. If TPIP were to pass through all these remaining hurdles, it's still the end of the decade or even the next decade before the product will reach the market. Recent phase III studies in PH have taken an average of three years to complete, with clinical outcome studies taking even longer to complete. If everything works perfectly, we could see a product on the market in late 2029 or 2030. Looking ahead to 2030, the market landscape will likely shift significantly.

If the ADVANCE OUTCOMES study succeeds next year, ralinepag may become the first true once daily oral prostacyclin for PAH, potentially reducing the need for inhaled therapies like TPIP. We're also working on our own once daily inhaled prostacyclin, which is on a similar development timeline as TPIP and could serve both PAH and PH-ILD. Additionally, in line with our approved and improve strategy, we are developing new Tyvaso devices and combinations to enhance convenience for patients. Lastly, by 2030, our organ development programs could begin generating revenue, making competition from small molecule drugs relatively minor compared to our broader long term opportunities. To close, with no near term path to market in IPF, unproven safety, and many, many years before reaching the market, we have little reason to be concerned about our prospects in the face of TPIP.

With that, I'd like to turn the call back to Martine to start our Q&A session. Martine?

Martine Rothblatt (Chairperson and CEO)

Thank you, Gil. Operator, you can open up the phones for Q&A.

Operator (participant)

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your questions have been answered and you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble a roster. The first question comes from Olivia Brayer from Cantor Fitzgerald. Please go ahead.

Martine Rothblatt (Chairperson and CEO)

Olivia. Are you on mute? Operator, Maybe you should proceed to the next question.

Operator (participant)

Yes, Ms. Olivia, can you hear us?

Olivia Brayer (Director and Senior Biotech Analyst)

Yep. Can you guys hear me?

Operator (participant)

Yeah. Please go ahead.

Martine Rothblatt (Chairperson and CEO)

Yeah, we can.

Olivia Brayer (Director and Senior Biotech Analyst)

Okay, perfect. Sorry about that. Hi, good morning. Thank you for the question. Any comments on what you're seeing in terms of Tyvaso uptake in both PAH and ILD? So far, I mean it looks like you're not really seeing any impact on DPI, but appreciate anything you can tell us and any color on why ex-U.S. nebulized Tyvaso was down sequentially. Whether that had more to do with ordering patterns or any sort of demand trend that you're seeing. I have one follow-up question on TETON if you do not mind.

Martine Rothblatt (Chairperson and CEO)

Olivia. There's no more. There's so many people in the queue, there's not going to be time for a follow up question. Sorry, the marketing question. Michael will handle.

Michael Benkowitz (President and COO)

Sure. Thanks for the question, Olivia. Based on the visibility we have into what's going on, which admittedly is not perfect, you know, we're, you know, things are going about as we expected in terms of launch. I mean we finished Q2 really strong in terms of shipments and orders in June, July. Based on what we're seeing so far, looks really good. Really from our standpoint, no surprises in terms of what we're seeing. Terms of the launch.

As I said in my opening remarks, we know that docs are curious people. There's a new kid on the block, a new product and some of them are going to want to try it out and see what it could potentially do for patients, I think particularly in light of some of the claims that Liquidia is making about their product. We are seeing a little bit of that. As I said too, to really kind of wrap up my opening remarks, I think we're really confident that with Tyvaso DPI's product profile, plus the associated support that we provide to physician offices and patients, along with the really deep experience, I mean the really. More than 10,000 patients have used DPI. You've got almost 3,000 prescribers for Tyvaso DPI. We think over the long term that's going to support continued growth of Tyvaso DPI well into the future.

Martine Rothblatt (Chairperson and CEO)

Thank you, Michael. Operator, next question. Operator?

Operator (participant)

This question comes from the line of Joseph Thome with TD Cowen. Please go ahead.

Joseph Thome (Managing Director and Senior Biotechnology Equity Research Analyst)

Hi there. Good morning. Congrats on the progress and thank you for taking my question.

Leigh called out the variability seen in. FVC decline in placebo arms of IPF studies. Is there a way in the TETON trials that you attempted to standardize this or is there a way to make this predictable? When we think about any considerations. In clinical practice between the U.S. and. The ex-U.S. experience, what should we. Think about when we see the first. Data in September and translatability into the U.S. trial in the first half of next year. Thank you.

Martine Rothblatt (Chairperson and CEO)

Thank you, Joe. Questions relating to TETON will be answered by Dr. Peterson.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Thanks, Martine. Yeah, as you noticed, there's very wide variability in FVC measures and this really shows in the placebo arms, especially of the two approved drugs. What we've done to really narrow that is we have central readers of our FVC results and we've also made very huge attempts at the site level in order for training on the procedures and to make sure that people are doing everything consistently with regard to the pulmonary function testing. That's really been at the top of our list as far as management of these studies. Hopefully we will see that we have less variability which will show better, a true result.

Martine Rothblatt (Chairperson and CEO)

Thank you very much, Dr. Peterson. Operator, next question please.

Operator (participant)

The next question is from the line of Jessica Fye from JPMorgan. Please go ahead.

Jessica Fye (Managing Director and Equity Research Analyst)

Hey guys, good morning. Thanks for taking my question. Another one for Dr. Peterson, which is really a question that we hear from investors and that is how to read across from the compelling INCREASE IPF subgroup where the patients saw improvement in FVC, but they also all had pulmonary hypertension. The question is how do we read that across to an IPF population where presumably the majority of folks are not going to have pulmonary hypertension. Can you address that kind of question on the read across and if I can ask one more, it would be just whether you can touch on the circumstances under which you would deploy the share repo authorization. Thank you.

Martine Rothblatt (Chairperson and CEO)

Thank you, Jess. Dr. Peterson, it's another TETON question for you.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Yeah, sure, yeah. For, I mean, as I discussed in my script earlier, treprostinil has very multiple mechanisms of action. It works through multiple receptors. In INCREASE, of course, we'd already seen, I mean Tyvaso had already been approved for PAH and we believe, and some nonclinical studies support, that that really is for PAH. The main mechanism, as I also discussed, is through maybe a vasodilation function. That tends, at least the nonclinical studies have shown, that really is working through the IP receptor to do that. On top of it, there are other receptors, EP2 receptor, DP1, PPAR receptors, that have additional functions. Basically, as I went through, they can inhibit fibroblast activity and extracellular matrix deposition and really work on the fibrosis end of the disease.

While treprostinil does work on IP, working through these other receptors, we believe that it can work on fibrosis, which means it would be effective in IPF and PPF. Again, multiple mechanisms of action would lead to efficacy in multiple indications.

Martine Rothblatt (Chairperson and CEO)

Superb answer, Dr. Peterson. James Edgemond, could you kindly address Jess' question regarding the buyback?

James Edgemond (CFO and Treasurer)

Yep. Thanks, Martine, and Jess, thanks for the question. Good to hear your voice this morning. We did announce this morning that our board of directors authorized a share repurchase of up to $1 billion of our shares. We plan to implement this board of director authorization expeditiously. As a little bit of background maybe as to why now, it really is given the continued strength of our commercial business, our robust balance sheet, our confidence in our upcoming catalysts, and our belief in our share price potential, we and the board of directors concluded that now was the right time to authorize this share repurchase. Like many shareholders we've met with, we believe the return of capital represents confidence in our near term as well as long term business prospects. We share the view of many shareholders that our stock is an excellent investment opportunity.

Jess, thanks for the question. Martine, back to you.

Martine Rothblatt (Chairperson and CEO)

Thank you so much for that.

Great response, James. Operator, you may take the next question.

Operator (participant)

The next question is from the line of Roger Song from Jefferies. Please go ahead.

Roger Song (Senior Equity Research Analyst)

Great. Congrats for the progress and thank you for taking our question. Also question related to TETON.

Given the INCREASE subgroup data and.

Martine Rothblatt (Chairperson and CEO)

The powering assumption, 80%, detect the 80 mL difference. What will be considered clinically meaningful as we see results from that trial, and what will be the home run scenario from that trial? Also, follow up on Jessica's question earlier. Do you have a sense or any corporate level comment on how many patients from the TETON is actually having the pulmonary hypertension with the IPF versus a pure IPF? Thank you. Thank you, Roger, for that concatenated question. It's all basically in the domain of biostatistics, so I'll ask Dr. Deng to kindly answer that question.

C.Q. Deng (SVP of Biostatistics, Statistical Programming and Data Management)

Since the TETON study will test the antifibrotic effect, not the vasodilate. We design our study to enroll the patient similar to other IPF studies, not try to design the study similar to previous PH IRD studies. We actually did not perform the hemodynamic measure to actually determine if the subject had pulmonary hypertension or not.

Martine Rothblatt (Chairperson and CEO)

Thank you C.Q. for responding to Roger's question. Operator, you could open the line to the next question.

Operator (participant)

The next question is from the line of Andreas Argyrides from Oppenheimer. Please go ahead.

Andreas Argyrides (Managing Director and Senior Biotech Analyst)

Good morning. Thanks for taking our question. Congrats on the quarter, all the positive updates. Appreciate the additional color here. I wanted to ask about ralinepag with the PH space. With the PH space moving towards more convenient dosing, can you share your thoughts more on the Ralinepag opportunity with once daily oral dosing and the powering assumptions from the ADVANCE OUTCOMES study? Just a quick question for Dr. Peterson. You mentioned the refined imputation for TETON-2. Can you expand on how that method aligns with the FDA expectations and whether this adds confidence and strength of the upcoming readout? Thank you.

Martine Rothblatt (Chairperson and CEO)

All righty. Andreas, thanks for the kudos on the corridor. Both of those questions are really within Dr. Peterson's domain. Dr. Peterson, could you address them?

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Yeah. I guess for the powering, I'm not sure that I got all of the questions, but the powering for ralinepag, it's powered at 80% to detect a treatment difference, 0.65 hazard ratio. That is for clinical worsening events. We're on target to achieve the number of clinical worsening events to be able to see a difference and to detect a treatment difference by the end of the year. I think that was your question about the powering and then you had a TETON question and I didn't quite get all of that. I'm sorry.

Martine Rothblatt (Chairperson and CEO)

Andreas, can you repeat your TETON question?

Dewey Steadman (Head of Investor Relations)

He's out of the queue now.

Martine Rothblatt (Chairperson and CEO)

Okay, I'm sure IR can follow up with him. Operator, can you answer the next question?

Operator (participant)

Yes, the next question is from the line of Ash Verma from UBS. Please go ahead.

Ash Verma (Biopharma Equity Research Analyst)

Yeah, thanks. Thanks for taking my question.

I wanted to ask about the. Design of TETON studies, specifically about the. Potential amputation of measurement for discontinuity attenuation for the protocol. In this case, based on your.Protocol, would these be reported as a missing or a zero or extruded from the analysis? That is one. And then secondly, to the extent like there is Tyvaso-induced cough in the study, wouldn't that mean functional unblinding if patients are only seeing that in the Tyvaso arm. Thanks.

Martine Rothblatt (Chairperson and CEO)

Oh, okay. Thank you.Ash, for that question, I'd like to ask C.Q. if he could answer the first part of the question, C.Q. if you got it all. And then Dr. Peterson, to answer the second part of the question, on the unblinding.

C.Q. Deng (SVP of Biostatistics, Statistical Programming and Data Management)

I would just add potential unblinding due to the cough event.

Actually. Based on the previous study, even the patients who are randomized to the placebo group, they will also experience some cough event. It is not just once you see there is a cough event, you can guess that the subject will be in the active arm. You probably see a little more cough in the active than placebo group, but placebo patients also experience cough events. We do not think that unblinding potential unblinded is an issue there.

Martine Rothblatt (Chairperson and CEO)

Thank you, C.Q.

Dr. Peterson, since C.Q. answered kind of the second question, do you want to comment on the first question?

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Yeah. We talked quite a bit about the deaths, how they'll be penalized with the FVC value at 2.5 percentile of observed values, and then discontinuations for other reasons will be handled through statistical models like the mixed model repeated measures or multiple imputation. Yeah, I agree with what C.Q. said. I mean, it's just like any study where there's a known AE that can be associated with the treatment, but very often, you know, there's a similar AE that's seen with the placebo. We generally are. We definitely are surprised at the end of the day sometimes where we see things, we think, oh, yeah, maybe that's on active because of cough. It's definitely not. I would say there's no risk, and especially in this study of cough, because people cough a lot just by inhaling placebo. No worries there.

Martine Rothblatt (Chairperson and CEO)

Perfect. Dr. Peterson, thank you so much. Operator, can you take the next question, please?

Operator (participant)

The next q`uestion is from the line of Jason Gerberry from Bank of America. Please, go ahead.

Jason Gerberry (Managing Director and Equity Research Analyst)

Hey, guys, thanks for taking my question. Mine's also just on IPF, and I. Guess the physician KOL seem to think. That the neuroendomalas data at ATS were pretty underwhelming. Just the neutral benefit on exacerbation as. A secondary endpoint and the lack of.

a p-value in the monotherapy subgroup. I am just kind of curious, you know, how important is it in your view to show a meaningful improvement on the exacerbation as well as sort of establish with stats of benefit, maybe in. A pooled manner in the monotherapy subgroup?

Martine Rothblatt (Chairperson and CEO)

Thank you so much for the question. Dr. Peterson, I think you'd be the best person to answer it.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Okay. Yeah. So, I mean, yeah, there was definitely a positive study for the FIBRONEER-IPF and PPF, and they met their endpoint. They had 90% power to detect a 74 mL change in FVC. We're 80% powered to detect 80 mL change. But we, you know, obviously we look forward to seeing events or seeing a result where, you know, there's ideally we would see that our Tyvaso is disease modifying and that patients don't decline. However, we may see a slight decline or more decline, but we fully anticipate having a clinically meaningful effect which would be greater than an 80 mL change in FVC. Again, but blinded, we will know in September.

Martine Rothblatt (Chairperson and CEO)

Thank you so much, Dr. Peterson. That's an excellent answer. Operator, you can take the next question.

Operator (participant)

The next question is from the line of Terence Flynn from Morgan Stanley. Please go ahead.

Terence Flynn (Managing Director in Equity Research Pharma and Biotech Analyst)

Great. Thanks so much for taking the question. I'll stick to one just on TETON. When you look at background therapy from the INCREASE study, it looked like there was maybe a difference in terms of patients that were on background TKI versus those that were on no background TKI. Maybe you could just talk through that dynamic. As we think about the phase III, the mix there and how that might impact the overall treatment effect that you're expecting to see. Thank you so much.

Martine Rothblatt (Chairperson and CEO)

Thank you, Terry. Good to hear your voice this morning, Dr. Peterson. You'd be the best person.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Yep. We, I mean, definitely versus INCREASE, we see more background therapy use. In both TETON 1 and TETON 2, as shown on one of the slides that I went through today, TETON 1 and TETON 2 have 77% background therapy use and 75%. It is more, I mean, it can, just like any, again, any study, when you have effective background therapy, then it can mute your efficacy of your investigational drug. Again, we are right in there. FIBRONEER-IPF also had 78% use of background therapy. There is a lot of room for improvement. I mean, I also showed the slide that the patients even on the active background therapies have a significant decline in FVC. There is a lot of room for improvement. This is exactly what we expect as far as the use of background therapy.

Again, stay tuned in September. That does not, it is not a concern.

Martine Rothblatt (Chairperson and CEO)

Dr. Peterson, thank you so much. Just because you've been on the phone so much answering these questions, I do want to toot your horn for a moment to make sure these questioners understand your expertise that you are the lead author on the New England Journal of Medicine publication on our INCREASE, in addition to being the lead author of our Physiological Reviews publication on xenotransplantation. Folks on the phone, you're privileged really to hear from such an expert source as Dr. Peterson. Operator, I think we're ready to take the second questions from people. Next question.

Dewey Steadman (Head of Investor Relations)

Oh, Martine, there's no more questions in the queue but I do have Andreas' follow-up question and he was asking can you expand on how the FVC imputation method in TETON aligns with FDA expectations and whether this adds confidence in the strength of the upcoming readout? It relates to the recent change in how we handled deaths in that study?

Michael Benkowitz (President and COO)

Sure. Since we have the New England Journal of Medicine lead author in this field down the line, we will ask Dr. Peterson to answer.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Yeah, and I must correct, I'm not lead, but I'm one of them for that one. But thank you, Martine. Very, very good.

Martine Rothblatt (Chairperson and CEO)

I think you are the boss of the lead.

Leigh Peterson (EVP of Product Development and Xenotransplantation)

Okay, what was the question?

Yeah, so we have our slides. Statistical analysis plan is very lengthy and very long and all of that is submitted to FDA for their feedback. And so and often they, and they have and given us feedback again. We've talked extensively about the death penalty with them. This is what, this is the current feedback as just, you know, just a few weeks ago. So that's already set. And then C.Q. and his group have been in conversations with FDA about as was true for INCREASE the same for this these studies where you know what specific statistical models should be used and how to impute the measures. Again, the mixed model repeated measures or multiple imputation.

C.Q. Deng (SVP of Biostatistics, Statistical Programming and Data Management)

Perfect. Thank you so much, Dr. Peterson. Thank you folks on the call. Operator, you can wrap up the call now.

Operator (participant)

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 presentation section of the United Therapeutics Investor Relations webcast website at ir.unither.com. Thank you.