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`Page 152
`
`DEFOREST MCDUFF, Ph.D.
`
`Q.
`
`And you didn't make any
`
`attempt to compare Tyvaso sales only to other
`
`orphan drugs, correct?
`
`A.
`
`Not specifically to other
`
`orphan drugs. That is addressed inherently in
`
`paragraph 24 where all of the competing drugs
`
`in that paragraph are treatments for PAH.
`
`So
`
`that is an analysis that takes into account the
`
`patient population size, but paragraph 23 is
`
`independent of the patient population size.
`
`Q.
`
`So just so I am clear, it is
`
`your opinion that an orphan drug with
`
`potentially less than 200,000 total patients
`
`making over 2.5 billion in net sales over a
`
`seven-year period is not a commercial success?
`
`please.
`
`A.
`
`Q.
`
`Could you repeat the question,
`
`Well, let me break it down.
`
`Earlier we looked at your
`
`Attachment B—4.
`
`If you can turn to that on
`
`page 38 of 45.
`
`A.
`
`Q.
`
`Okay.
`
`And for Tyvaso from 2009 to
`
`
`
`2016 you totaled revenue at 2.515 billion for
`
`
`800-642-1099
`
`A Veritext Company
`
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`
`Page1520f297
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`

`

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`Page 153
`
`DEFOREST MCDUFF, Ph.D.
`
`Tyvaso, correct?
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`That's right --
`
`And -—
`
`—- over all years.
`
`Yes. And Tyvaso is an orphan
`
`drug meaning that it likely has less than
`
`200,
`
`000 patients, correct?
`
`A.
`
`I don't know if that's true as
`
`of today. There may have been less than
`
`200,
`
`000 PAH patients in the U.S. at one point
`
`in time.
`
`Q.
`
`So is it your opinion that
`
`$2.5 billion in sales over a seven-year period
`
`for an orphan drug is not a commercial success?
`
`A.
`
`It depends.
`
`It's a
`
`case-by-case analysis.
`
`So I couldn't give you
`
`an answer to that in a global way that would
`
`apply to every drug with that profile, but I
`
`have analyzed Tyvaso, and the magnitude of
`
`sales here do not demonstrate commercial
`
`SUCCESS.
`
`Q.
`
`So in your opinion an orphan
`
`drug with 2.5 billion in sales over seven years
`
`
`
`in this case is not a commercial success?
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
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`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
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`
`Page1530f297
`
`

`

`mum-Lurch-
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`DEFOREST MCDUFF, Ph.D.
`
`A.
`
`It sounds like the same
`
`Page 154
`
`question and the same answer.
`
`Q.
`
`A.
`
`It's a yes or no question.
`
`I've found that Tyvaso sales
`
`do not demonstrate commercial success here.
`
`Q.
`
`So an orphan drug with 2.5
`
`billion in sales over a seven-year period is
`
`not a commercial success in this case, correct?
`
`A.
`
`Maybe I am missing the
`
`distinction with the previous question, but it
`
`sounds like the same question to me.
`
`Q.
`
`Do you agree with that
`
`statement?
`
`A.
`
`Tyvaso sales, as I have
`
`analyzed them here, do not demonstrate
`
`commercial success.
`
`Q.
`
`A.
`
`Q.
`
`opinion.
`
`And those sales ——
`
`I agree with that as a summary
`
`And those sales were 2.5
`
`billion over a seven—year period, correct?
`
`A.
`
`Q.
`
`Yes.
`
`You provided no opinion
`
`
`
`regarding gross profits for Tyvaso, correct?
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
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`
`UNITED THERAPEUTICS, EX. 2035
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`
`Page154of297
`
`

`

`mU'IIb-wMH
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`DEFOREST MCDUFF, Ph.D.
`
`A.
`
`That's correct.
`
`I am not
`
`Page 155
`
`aware of that information being available.
`
`Q.
`
`Did you try to find that
`
`information?
`
`A.
`
`I don't believe so.
`
`I am not
`
`aware of it being available.
`
`Q.
`
`Did you ask counsel for that
`
`information without disclosing any actual
`
`conversations with counsel?
`
`A.
`
`I don't recall.
`
`It's not the
`
`kind of information that's typically available
`
`in IPRs in my experience.
`
`Q.
`
`And you provided no opinion
`
`regarding gross margins for Tyvaso, correct?
`
`A.
`
`Similar answers as before.
`
`I
`
`don‘t recall that information being available
`
`here, but I have not analyzed it as I am not
`
`aware of it being available.
`
`Q.
`
`Did you attempt
`
`to find
`
`information about it?
`
`A.
`
`Q.
`
`I don't recall.
`
`So going back to the top two
`
`deciles, why did you consider just the top two
`
`
`
`deciles as being relevant benchmarks for
`
`
`800-642-1099
`
`A Veritext Company
`
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`UNITED THERAPEUTICS, EX. 2035
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`
`Page1550f297
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`

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`Page 156
`
`DEFOREST MCDUFF, Ph.D.
`
`commercial success analysis of pharmaceutical
`
`sales?
`
`A.
`
`I don't think that accurately
`
`captures my opinion.
`
`I don't think they are
`
`the only relevant benchmarks.
`
`Q.
`
`I didn't say only, but you did
`
`specify the top two deciles, correct?
`
`A.
`
`Among other things that I
`
`compared it to, yes.
`
`deciles?
`
`Q.
`
`A.
`
`So why just the top two
`
`I don't limit my analysis to
`
`just the top two deciles.
`
`Q.
`
`But you didn't compare to the
`
`third decile, right?
`
`A.
`
`That's correct.
`
`In this
`
`literature they don't report on sales for every
`
`decile.
`
`They report the first decile and
`
`second decile an average as I have provided
`
`here in this chart on page 16. Had the
`
`literature published other deciles,
`
`I might
`
`have considered those.
`
`Q.
`
`Is it your opinion that when
`
`
`
`compared against top decile drugs, 90 percent
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.com
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNITED THERAPEUTICS, |PR2017-01621
`
`Page1560f297
`
`

`

`mU'IIIh-wMH
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`DEFOREST MCDUFF, Ph.D.
`
`of approved drugs would not achieve commercial
`
`Page 157
`
`success?
`
`wayr
`
`no.
`
`A.
`
`I wouldn't describe it that
`
`Q.
`
`So is it your opinion when
`
`compared against the top two decile drugs,
`
`that
`
`80 percent of approved drugs would not achieve
`
`commercial success?
`
`1'10.
`
`A.
`
`Q.
`
`I would not put it that way,
`
`So a drug could be below the
`
`second decile and still be a commercial
`
`success, correct?
`
`A.
`
`It depends.
`
`It's a
`
`case-by-case basis and analysis.
`
`Q.
`
`But you are not saying that
`
`commercial success is limited to the top two
`
`decile of drugs, correct?
`
`A.
`
`Q.
`
`I am not, no.
`
`Do you know how many top
`
`decile drugs treat pulmonary arterial
`
`hypertension?
`
`A.
`
`Not sitting here, no.
`
`I don't
`
`
`
`recall, nor am I aware of that information
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNITED THERAPEUTICS, |PR2017-01621
`
`Page1570f297
`
`

`

`mU'IIIh-wMH
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`Page 158
`
`DEFOREST MCDUFF, Ph.D.
`
`being available.
`
`Q.
`
`Well, you calculated the total
`
`revenue of drugs that treat pulmonary arterial
`
`hypertension and also reported the amount
`
`needed to reach the top decile, correct?
`
`A.
`
`I performed both of those
`
`analyses, yes.
`
`Q.
`
`And none of the drugs that
`
`treat pulmonary arterial hypertension are in
`
`the top decile, correct?
`
`A.
`
`Well, comparing the graphs on
`
`page 16 and page 17 of my declaration, it
`
`appears that Tracleer is either first decile or
`
`second decile, and Letairis is possibly second
`
`decile, possibly not.
`
`I am not exactly sure
`
`where the cutoffs are that allow one to make
`
`that determination.
`
`24?
`
`Q.
`
`A.
`
`Q.
`
`Are you looking at paragraph
`
`Yes.
`
`Well, your previous chart
`
`compares the peak annual sales on page 16 shows
`
`first decile drugs 3.565 billion, correct?
`
`
`
`Yes, as an average for first
`A.
`
`
`800-642-1099
`
`A Veritext Company
`
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`
`Page158of297
`
`

`

`mmwaI-I
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`Page 159
`
`DEFOREST MCDUFF, Ph.D.
`
`decile drugs.
`
`Some are higher.
`
`Some are
`
`lower.
`
`Q.
`
`But Tracleer is far below that
`
`number, correct?
`
`A.
`
`Tracleer is between the
`
`averages of the first decile and the second
`
`decile.
`
`So it depends where the cutoff is.
`
`The cutoff between the first decile and the
`
`second decile is somewhere between 1.3 billion
`
`and 3.5 billion as are the sales of Tracleer.
`
`So without that additional information, we
`
`don't know whether Tracleer will be in the
`
`first decile or the second decile.
`
`It might be
`
`more likely to be in the second decile given
`
`that it's closer to the average for second
`
`decile, but I can't say for sure.
`
`Q.
`
`And given that the average
`
`second decile according to your analysis is 1.3
`
`billion,
`
`is it fair to say that the vast
`
`majority of the drugs you analyzed for
`
`pulmonary arterial hypertension do not meet the
`
`top two deciles?
`
`A.
`
`I would say the majority do
`
`
`
`not.
`I think that's sensible in light of 12
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
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`David Feldman Worldwide
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`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNlTED THERAPEUTICS, |PR2017-01621
`
`Page1590f297
`
`

`

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`Page 160
`
`DEFOREST MCDUFF, Ph.D.
`
`drugs being here on -- in paragraph 24 and two
`
`out of 12 being near first decile and second
`
`decile around 20 percent, 15 to 20 percent.
`
`I
`
`think that's consistent with the industry,
`
`maybe slightly lower.
`
`Q.
`
`You did not provide an opinion
`
`on the profit obtained by UTC on Tyvaso,
`
`correct?
`
`A.
`
`Not here.
`
`I am not aware of
`
`that information being available or provided by
`
`UTC.
`
`Q.
`
`A.
`
`Did you look for it?
`
`Not specifically, nor am I
`
`aware of that information being available here.
`
`It's typically not.
`
`Q.
`
`Would you be surprised if UTC
`
`had a high profit margin on their 2.5 billion
`
`in net sales of Tyvaso from 2009 to 2016?
`
`A.
`
`I don't know.
`
`I would
`
`evaluate that information if it were available.
`
`Q.
`
`Do you consider profit margin
`
`to be an important factor in analyzing
`
`commercial success?
`
`
`
`It depends on the situation.
`A.
`
`
`800-642-1099
`
`A Veritext Company
`
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`
`PageISOonQ?
`
`

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`Page 161
`
`DEFOREST MCDUFF, Ph.D.
`
`Sometimes I analyze it if it's available.
`
`Q.
`
`So going back to paragraph 23
`
`and your analysis of peak annual sales of
`
`Tyvaso compared to first and second decile and
`
`average drugs, you rely on a 2002 article by
`
`Grabowski as part of your analysis, correct?
`
`A.
`
`As part of my analysis as well
`
`as the actual Tyvaso sales.
`
`(WHEREUPON,
`
`the document was
`
`tendered to the witness.)
`
`BY MR. DELAFIELD:
`
`Q.
`
`You have been handed what has
`
`been marked as Exhibit 1113 which is an article
`
`entitled Returns on Research and Development
`
`for 19905 New Drug Introductions, and Exhibit
`
`1113 is the same for both cases.
`
`Do you recognize this
`
`document?
`
`A.
`
`Q.
`
`Yes.
`
`And is this the document that
`
`you cite in footnote 12?
`
`A.
`
`Q.
`
`Yes, it is.
`
`Or one of the documents.
`
`
`
`this study analyzes drugs
`Now,
`
`
`800-642-1099
`
`A Veritext Company
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`PageIB10f297
`
`

`

`Page 162
`
`DEFOREST MCDUFF, Ph.D.
`
`launched between 1990 and 1994, correct?
`
`A.
`
`Q.
`
`Yes.
`
`And then also uses actual
`
`sales that those products made through 2000,
`
`correct?
`
`A.
`
`Q.
`
`That sounds right.
`
`So this means that the study
`
`only had between seven and 11 years of actual
`
`data from 16 years ago, correct?
`
`A.
`
`I don't believe that's
`
`accurate. This is a paper that's based on a
`
`line of research that occurred in the 19705,
`
`19805, 19905, and then 20005.
`
`They use some
`
`data on drugs that were launched from 1990 to
`
`1994, and they combined that with older data
`
`it's my understanding to get the longer
`
`timeframe and project the full sales path.
`
`Q.
`
`So instead of relying on
`
`actual data, you chose to rely purely on the
`
`projections made in the study or some
`
`combination of actual sales and projected sales
`
`to create your comparison, correct?
`
`MR. MATHAS: Object
`
`to the form.
`
`
`
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`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNlTED THERAPEUTICS, |PR201T-01621
`
`Page1620f297
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`

`

`Eh(.J'IIII'I-l.an.)l’\3|-I
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`Page 163
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`DEFOREST MCDUFF, Ph.D.
`
`BY THE WITNESS:
`
`A.
`
`I wouldn't describe it that
`
`way ,
`
`no.
`
`BY MR. DELAFIELD:
`
`Q.
`
`Well, let's look at the sales
`
`page 17 which is one of the pages you cite,
`
`page 7 of the exhibit, 17 internal page.
`
`A.
`
`Q.
`
`Okay.
`
`And at the top Figure 2 shows
`
`worldwide sales profiles of 1990 to 1994 new
`
`drug introductions.
`
`right?
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`Do you see that?
`
`Yes.
`
`And it goes out
`
`to 20 years,
`
`Yes.
`
`But this paper was published
`
`in 2002, and so many of those years are just
`
`projections, correct?
`
`A.
`
`The later years are
`
`projections based on actual historical sales
`
`data as I
`
`indicated in my previous response.
`
`Q.
`
`But it says sales profiles of
`
`
`
`1990 to 1994 new drug introductions, right?
`
`
`800-642-1099
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`Page1630f297
`
`

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`DEFOREST MCDUFF, Ph.D.
`
`A.
`
`I am not sure I understand the
`
`Page 164
`
`question.
`
`Q.
`
`Let me rephrase.
`
`So we can agree some of the
`
`data in this chart represents actual sales of
`
`drugs launch between 1990 and 1994, correct?
`
`A.
`
`Q.
`
`Yes.
`
`And some of the data used to
`
`generate this are projections of where those
`
`sales would go after the time of this paper
`
`based on prior sales, correct?
`
`A.
`
`Q.
`
`I agree with that, yes.
`
`So your reliance on this is
`
`using both actual and projected sales, right?
`
`A.
`
`It's a combination of those.
`
`That's the methodology that's described in this
`
`paper. This is among the most widely cited
`
`literature in pharmaceutical research and
`
`development.
`
`Q.
`
`And you will notice it says
`
`worldwide sales, right?
`
`A.
`
`Q.
`
`Yes.
`
`Now,
`
`in evaluating commercial
`
`
`
`success of a U.S. patent, you would agree that
`
`
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`Page1640f297
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`

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`Page 165
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`DEFOREST MCDUFF, Ph.D.
`
`it's appropriate to look at only U.S. sales,
`
`correct?
`
`A.
`
`Q.
`
`I don't agree with that, no.
`
`Well, if it's not protected in
`
`other countries,
`
`then the commercial success
`
`isn't relevant because there's no patent
`
`protection, correct?
`
`MR. MATHAS: Object
`
`to the form.
`
`BY THE WITNESS:
`
`A.
`
`I am not seeking to provide a
`
`legal conclusion on this issue of whether sales
`
`outside the U.S. are relevant from a legal
`
`perspective, but from an economic perspective,
`
`evaluating the commercial opportunity it's
`
`common to evaluate sales worldwide.
`
`BY MR. DELAFIELD:
`
`Q.
`
`So, for example, if someone
`
`patented a product and sold none of it in the
`
`United States with the patented —— strike that.
`
`So if someone patented a
`
`product in the United States and there were no
`
`sales in the United States but they had a lot
`
`of sales where there was no patent protection,
`
`
`
`are you saying that those sales are relevant to
`
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`Page 166
`
`DEFOREST MCDUFF, Ph.D.
`
`the commercial success of the patent?
`
`A.
`
`I don't think I can provide a
`
`global conclusion on that.
`
`It would depend on
`
`the circumstances. That's not the circumstance
`
`here.
`
`Q.
`
`Well, you are providing global
`
`sales numbers for a U.S. patentr correct?
`
`A.
`
`I wouldn't describe it that
`
`way.
`
`I am analyzing sales both in and outside
`
`the U.S. for these comparisons in order to put
`
`Tyvaso sales into context so that we can
`
`understand what the magnitude of Tyvaso sales
`
`means.
`
`I think it's fully appropriate.
`
`Q.
`
`And you didn't provide any
`
`analysis of U.S. only sales, correct?
`
`A.
`
`Not here in my declaration.
`
`I
`
`am not aware of those being readily available.
`
`Companies report their worldwide sales in
`
`public filings.
`
`They typically do not do so
`
`for U.S. sales alone.
`
`Q.
`
`Did you attempt to determine
`
`U.S.
`
`sales for any of the drugs that you list
`
`in your analysis?
`
`
`
`I did not view that as
`No,
`A.
`
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`Page 167
`
`DEFOREST MCDUFF, Ph.D.
`
`necessary for the conclusions I am drawing.
`
`Q.
`
`So you don't know how well
`
`Tyvaso has performed in terms of U.S. sales
`
`only, correct?
`
`A.
`
`I know that their U.S. sales
`
`are at least at or below their worldwide sales.
`
`So I know the sales are if anything lower than
`
`the sales I have analyzed in my report.
`
`that?
`
`Q.
`
`A.
`
`I'm sorry. Could you repeat
`
`In other words,
`
`the U.S. sales
`
`are certainly no greater than the worldwide
`
`sales that I have analyzed.
`
`So if anything the
`
`U.S.
`
`sales are lower than what I have analyzed.
`
`Q.
`
`But likewise for every drug
`
`and even the top decile drug,
`
`those would also
`
`be lower, correct?
`
`A.
`
`If limiting to U.S. sales
`
`only,
`
`they could be, yes.
`
`Q.
`
`So you don't know how much
`
`lower either —— strike that.
`
`You don't know how much lower
`
`each drug would sell in the U.S. compared to
`
`
`
`worldwide sales, correct?
`
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`Page1670f297
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`Page 168
`
`DEFOREST MCDUFF, Ph.D.
`
`A.
`
`I haven't provided that
`
`specific breakdown in my declaration, nor do I
`
`view it as necessary.
`
`I
`
`think one would draw
`
`the same conclusions if one looked at U.S.
`
`data.
`
`Q.
`
`You said one would draw the
`
`same conclusions if they looked at U.S. data;
`
`is that right?
`
`A.
`
`It seems likely to me that one
`
`would, yes.
`
`Q.
`
`But you didn't look at U.S.
`
`data.
`
`So how you would know that someone would
`
`draw the same conclusions?
`
`A.
`
`In my experience doing many
`
`cases of this type,
`
`typically doing the
`
`analysis on a worldwide basis or a U.S. basis
`
`provides similar conclusions.
`
`Q.
`
`But you don't provide any
`
`evidence of that, correct?
`
`A.
`
`Again, that's not something I
`
`specifically sought to do in my declaration.
`
`I
`
`did not view it as necessary to draw the
`
`opinions or the conclusions that I am drawing
`
`
`
`here, but I think it's likely that if one did
`
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`Page 169
`
`DEFOREST MCDUFF, Ph.D.
`
`the analysis with U.S. sales, one would draw —-
`
`or I would draw similar conclusions.
`
`Q.
`
`So just to clarify, it is your
`
`opinion with respect to analyzing the
`
`commercial success of a U.S. patent,
`
`the sales
`
`in the U.S. are no more relevant than sales in
`
`Japan, correct?
`
`MR. MATHAS: Object
`
`to the form.
`
`BY THE WITNESS:
`
`A.
`
`I wouldn't put it that way,
`
`1'10.
`
`BY MR. DELAFIELD:
`
`Q.
`
`Would you agree that sales in
`
`the U.S. are more relevant than sales in other
`
`countries with respect to analyzing the
`
`commercial success of a U.S. patent?
`
`A.
`
`I don't think I have a global
`
`opinion or conclusion on that issue.
`
`I think
`
`what I have done here by comparing Tyvaso sales
`
`as publicly reported on a worldwide basis is
`
`sufficient for the opinions I have reached.
`
`Q.
`
`Are you aware that UTC —-
`
`strike that.
`
`
`
`Are you aware that United
`
`
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`Page1690f297
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`Page 170
`
`DEFOREST MCDUFF, Ph.D.
`
`Therapeutics holds patents in many different
`
`countries on Tyvaso and I believe all of their
`
`treprostinil products?
`
`MR. MATHAS: Object
`
`to the form.
`
`BY THE WITNESS:
`
`A.
`
`I am aware that they have some
`
`international patents.
`
`BY MR. DELAFIELD:
`
`Q.
`
`Did you analyze what patents
`
`are available in what countries with respect to
`
`Tyvaso?
`
`A.
`
`I don't believe I did that
`
`specifically, no.
`
`Q.
`
`So if Tyvaso is patented in
`
`the U.S. and Tyvaso is patented in England,
`
`would sales in England still be relevant to the
`
`commercial success of a U.S. patent or just the
`
`patent in England?
`
`MR. MATHAS: Object
`
`to the form.
`
`BY THE WITNESS:
`
`A.
`
`I don't have a global
`
`conclusion or opinion on that.
`
`I would
`
`evaluate it on a case—by—case basis.
`
`I think
`
`
`
`evaluating Tyvaso sales as I have done here is
`
`
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`
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`DEFOREST MCDUFF, Ph.D.
`
`appropriate and sufficient for the conclusions
`
`Page 171
`
`I have drawn.
`
`BY MR. DELAFIELD:
`
`Q.
`
`In your career have you ever
`
`evaluated commercial success of patents from
`
`different countries?
`
`A.
`
`I don't believe so.
`
`I think
`
`given that most of my work occurs here in the
`
`U.S., all the litigations I have worked on have
`
`been for U.S. patents. Of course, sometimes
`
`worldwide patents are relevant to the
`
`evaluation, but the litigations are
`
`specifically about U.S. patents.
`
`Q.
`
`And so just to clarify, it is
`
`your opinion that sales outside the U.S. are
`
`directly relevant to the commercial success of
`
`a U.S. patent, correct?
`
`MR. MATHAS: Object to the form.
`
`BY THE WITNESS:
`
`A.
`
`They can be, yes,
`
`from an
`
`economic perspective.
`
`I understand that's
`
`consistent with guidance provided by the U.S.
`
`PTO,
`
`and it's consistent with what I have done
`
`
`
`with my work in the past and what other experts
`
`
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`Page 172
`
`DEFOREST MCDUFF, Ph.D.
`
`evaluating commercial success analyze, but it‘s
`
`a case—by-case situation.
`
`It depends on what
`
`conclusions one is reaching.
`
`The worldwide
`
`sales that I have analyzed here are sufficient
`
`for the conclusions I have drawn.
`
`BY MR. DELAFIELD:
`
`Q.
`
`You mentioned guidance from
`
`the U.S. PTO.
`
`You don't cite any such guidance
`
`in your declaration, correct?
`
`A.
`
`Q.
`
`I don't recall doing so, no.
`
`So looking back at the
`
`Grabowski article Exhibit 1113, Figure 2,
`
`is —-
`
`this is one of the figures you used for your
`
`calculations, correct?
`
`A.
`
`Q.
`
`Which page are you on?
`
`Page 7 of Exhibit 1113,
`
`internal page 17.
`
`A.
`
`Q.
`
`Yes.
`
`Is that a, yes,
`
`that was one
`
`of the figures you used to base your
`
`calculations on?
`
`A.
`
`Q.
`
`Yes, that's right.
`
`And if you look at page 16 of
`
`
`
`your report next to that Exhibit 1113, you
`
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`Page 173
`
`DEFOREST MCDUFF, Ph.D.
`
`report comparisons for first and second decile
`
`and mean or average, correct?
`
`A.
`
`Q.
`
`Yes, that's right.
`
`And you don't report a
`
`comparison of Tyvaso to the median sales of
`
`pharmaceuticals, correct?
`
`A.
`
`That's correct, because I
`
`don't view them as a relevant benchmark for
`
`commercially successful pharmaceutical
`
`products.
`
`Q.
`
`Why is the median not a
`
`benchmark for commercially successful
`
`pharmaceutical products?
`
`A.
`
`As indicated in this
`
`literature, median pharmaceutical products tend
`
`to lose money.
`
`They tend to not be
`
`economically profitable.
`
`So they are not a
`
`benchmark or an example of a commercially
`
`successful drug product.
`
`Q.
`
`So you don't know whether
`
`Tyvaso would be above the median sales because
`
`you didn't do that analysis, correct?
`
`A.
`
`I haven't calculated it here
`
`
`
`for my declaration because I don't view it as
`
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`Page 174
`
`DEFOREST MCDUFF, Ph.D.
`
`an appropriate benchmark for commercial
`
`SUCCESS.
`
`Q.
`
`But you included the mean
`
`sales, right?
`
`A.
`
`Yes, because I viewed that as
`
`a relevant benchmark for evaluation.
`
`right?
`
`Q.
`
`A.
`
`But this paper reports both,
`
`That's correct, and they
`
`explain the context for each, and the context
`
`that's relevant for commercial success is that
`
`average drugs tend to be about break even in
`
`terms of profitability, and so when thinking
`
`about a commercially successful drug product,
`
`the fact that Tyvaso is below average indicates
`
`that it's likely not profitable. Whereas, a
`
`median drug tends to be not economically
`
`profitable, and so it's not a relevant
`
`benchmark for evaluating commercial success.
`
`Q.
`
`Now, we talked about the fact
`
`that this paper uses sales numbers of drugs
`
`from 1990 to 1994, correct?
`
`A.
`
`Products that were launched
`
`
`
`The sales
`over that period, that's right.
`
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`Page 175
`
`DEFOREST MCDUFF, Ph.D.
`
`occurred over the next seven to 11 years and
`
`beyond.
`
`Q.
`
`And the beyond we discussed
`
`that those are all projections, correct?
`
`A.
`
`Projections based on actual
`
`data prior to that time period.
`
`Q.
`
`So this paper the actual data
`
`all oCCurred prior to 2000, correct?
`
`A.
`
`I think it's through 2001
`
`based on the launch dates and length of time
`
`they appear to report data.
`
`Q.
`
`And so haven't pharmaceuticals
`
`changed since pharmaceuticals launched in 1990
`
`and sales of those same products in 2001 since
`
`that time?
`
`A.
`
`Not to my knowledge, not in a
`
`way that would make these results inapplicable.
`
`I followed this literature over time, and there
`
`have been more recent publications, but no
`
`publications are as complete that provide the
`
`kind of drug sales distribution information
`
`that this paper provides.
`
`For example,
`
`these authors who
`
`
`
`are among the most widely cited authors in
`
`
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`Page 176
`
`DEFOREST MCDUFF, Ph.D.
`
`pharmaceutical R&D research published a book
`
`chapter in 2010 where they report on this same
`
`research as being applicable today.
`
`So I have
`
`no reason to doubt its validity here.
`
`Q.
`
`Did you look for more recent
`
`papers that analyzed drug sales?
`
`A.
`
`I have.
`
`I do that on an
`
`ongoing basis.
`
`Q.
`
`And isn't it possible that the
`
`model
`
`from 20 to 30 years ago has changed
`
`significantly over that time?
`
`A.
`
`No, not in my opinion. This
`
`literature has continued and this is the
`
`highest cited paper of any paper in this genre,
`
`and the most recent papers have the same model
`
`and the same structure and way of thinking
`
`about it economically as these authors did in
`
`2002.
`
`Q.
`
`Are you aware that both the
`
`number of drugs and the number of drug patents
`
`has dramatically increased since 2000?
`
`A.
`
`It depends what you mean by
`
`dramatically.
`
`I am aware that they have
`
`
`
`increased.
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNlTED THERAPEUTICS, |PR2017-01621
`
`Page1760f297
`
`

`

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`Page 177
`
`DEFOREST MCDUFF, Ph.D.
`
`Q.
`
`And so if there are more drugs
`
`and more patents out there, you don't believe
`
`that the trends may have been changed due to
`
`that fact?
`
`A.
`
`Not in a way that would make
`
`the results inapplicable.
`
`Q.
`
`There were no commercially
`
`available treatments for pulmonary arterial
`
`hypertension as of 2001, correct?
`
`A.
`
`I think that's right at or
`
`around that time they started being released.
`
`Q.
`
`So in the analysis that
`
`Grabowski does,
`
`there are no drugs that were
`
`used to treat pulmonary arterial hypertension,
`
`correct?
`
`A.
`
`Not in this data set to my
`
`knowledge. That's not the intention of using
`
`this data set.
`
`Q.
`
`Are you aware of any
`
`criticisms of the DiMasi and Grabowski studies
`
`that you relied on for your opinion?
`
`A.
`
`I am aware of some criticisms
`
`from special interest groups. Yet the
`
`
`
`peer-reviewed literature on the topic is widely
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.com
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNlTED THERAPEUTICS, |PR2017-01621
`
`Page1770f297
`
`

`

`Page 178
`
`DEFOREST MCDUFF, Ph.D.
`
`accepting of this literature and of this paper
`
`specifically.
`
`Q.
`
`Do you recall what
`
`those
`
`criticisms were?
`
`A.
`
`Not sitting here.
`
`I believe
`
`they are methodological or data critiques that
`
`people have articulated and have been evaluated
`
`and discredited by the academic literature.
`
`Q.
`
`When you say discredited by
`
`the academic literature, have you seen academic
`
`literature that specifically addresses the
`
`criticisms of Grabowski and DiMasi?
`
`A.
`
`I guess I would say that there
`
`are a number of peer-reviewed publications that
`
`have evaluated the methodologies in Grabowski
`
`and DiMasi and have confirmed their
`
`correctness. That's how I could describe that.
`
`Q.
`
`But given the criticisms, it's
`
`fair to say that not everyone agrees with the
`
`analysis that Grabowski and DiMasi provide with
`
`respect to trends in pharmaceutical sales,
`
`correct?
`
`MR. MATHAS: Object
`
`to the form.
`
`
`
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`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNlTED THERAPEUTICS, |PR2017-01621
`
`Page178of297
`
`

`

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`Page 179
`
`DEFOREST MCDUFF, Ph.D.
`
`BY THE WITNESS:
`
`A.
`
`Everyone in the world?
`
`BY MR. DELAFIELD:
`
`Q.
`
`Well,
`
`is it fair to say that
`
`other economists disagree with the analysis
`
`provided by DiMasi and Grabowski?
`
`A.
`
`There may be some who disagree
`
`with it, but as I indicated earlier,
`
`the
`
`majority of the peer-reviewed literature
`
`accepts this as the gold standard research on
`
`this topic.
`
`Q.
`
`And you didn't cite any
`
`documents that cite it as the gold standard,
`
`correct?
`
`A.
`
`Not here in this declaration,
`
`but I am aware of more than a dozen papers over
`
`the last decade that evaluate this topic and
`
`cite to this paper specifically as
`
`foundational, and this is among the most widely
`
`cited papers in pharmaceutical economics
`
`overall.
`
`Q.
`
`But you don't cite any
`
`evidence of that either in your declaration,
`
`
`
`correct?
`
`
`800-642-1099
`
`A Veritext Company
`
`ww.veritext.00m
`
`David Feldman Worldwide
`
`UNITED THERAPEUTICS, EX. 2035
`WATSON LABORATORIES v. UNITED THERAPEUTICS, |PR2017-01621
`
`Page1790f297
`
`

`

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`Page 180
`
`DEFOREST MCDUFF, Ph.D.
`
`No, but it's true.
`
`How do you know it's the most
`
`A.
`
`Q.
`
`cited?
`
`How would you determine that?
`
`A.
`
`I have seen rank lists of
`
`paper citations that is something that's
`
`tracked in order to evaluate impact of papers,
`
`and this paper has shown up at the top of those
`
`lists.
`
`Q.
`
`Would you agree that it is the
`
`overall context rather than the particular
`
`market share that defines whether market share
`
`are interpreted as persuasive evidence of
`
`commercial success?
`
`A.
`
`I think that's a fair
`
`statement.
`
`I think context matters.
`
`Q.
`
`You did not provide any
`
`opinion regarding Tyvaso's contribution to
`
`UTC's overall profitability, correct?
`
`A.
`
`Q.
`
`A.
`
`No,
`
`I don't believe so.
`
`Did you look into that?
`
`No,
`
`I do

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