UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`WATSON LABORATORIES, INC.
`
`Petitioner,
`
`V.
`
`UNITED THERAPEUTICS CORPORATION
`
`Patent Owner.
`
`Case IPR2017-01621
`
`Patents 9,358,240
`
`REBUTTAL DECLARATION OF JEFFERY A. STEC, Ph.D.
`
`April 26, 2018
`
`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
`
`Page 1 of 87
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`
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`WATSON LABORATORIES, INC.
`
`Petitioner,
`
`V.
`
`UNITED THERAPEUTICS CORPORATION
`
`Patent Owner.
`
`Case IPR2017-01621
`
`Patents 9,358,240
`
`REBUTTAL DECLARATION OF JEFFERY A. STEC, Ph.D.
`
`April 26, 2018
`
`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
`
`Page 1 of 87
`
`
`
`I, Jeffery A. Stec, Ph.D., declare as follows:
`
`1.
`
`I have been retained as an expert in this case by counsel for United
`
`Therapeutics Corporation (“UTC” or “Patent Owner”). For this declaration, I have
`
`been asked to offer my opinions, based on my knowledge, experience, and analysis
`
`of information available in this case, about whether Tyvaso®, which is covered by
`
`U.S. Patent No. 9,358,240 (“the ’240 patent”), has achieved commercial success. I
`
`have also been asked to review and evaluate the Declaration of DeForest McDuff,
`
`PhD.‘
`
`2.
`
`I understand that the commercial success of a product can be used as
`
`an “objective indicia” in demonstrating the non-obviousness of the underlying
`
`patented invention. The reason why commercial success shows non—obviousness is
`
`because, if a product is successful in the marketplace as demonstrated by objective
`
`factors, including substantial sales, then there are reasons to infer that such market
`
`success would have provided a significant incentive for others to pursue the
`
`patented invention. For the reasons set forth below, it is my opinion that Tyvaso®
`
`has demonstrated commercial success as reflected by, among other things, its sales
`
`and market share in the relevant market.
`
`
`
`1 See Ex. 1055 (Declaration of DeForest McDuff, PhD.)
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`1.
`
`Professional and Educational Background
`
`3.
`
`I am a Managing Director with Berkeley Research Group, LLC
`
`(“ERG”). I am also a leader of its Intellectual Property practice and a co—leader of
`
`its Economics and Damages community. BRG is a leading global strategic
`
`advisory and expert consulting firm that provides independent advice, data
`
`analytics, valuation, authoritative studies, expert testimony, investigations,
`
`transaction advisory, restructuring services, and regulatmy and dispute consulting
`
`to Fortune 500 corporations, financial institutions, government agencies, major law
`
`firms, and regulatory bodies around the world.
`
`4.
`
`I have served as a consultant to a wide variety of clients on matters
`
`involving economic, financial, and statistical analysis and modeling for the
`
`purpose of interpreting and projecting data and evaluating the impact of business
`
`decisions, transactions, and economic events. I have also served as an expert
`
`witness or consultant in a wide range of litigation matters, including patent,
`
`copyright, and trademark infringement and trade secret misappropriation litigation.
`
`While the issues have varied from case to case, most included an analysis and
`
`evaluation of company-specific as well as industry-wide data for the purpose of
`
`determining the extent of economic damages. As palt of these analyses, I have
`
`often examined the commercial success of products and the drivers of that success.
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`5.
`
`I received Ph.D. and Master’s degrees in Economics from the Ohio
`
`State University. I received Bachelor’s degrees in Philosophy and Psychology from
`
`Cornell University and in Economics with a Math Minor from the University of
`
`Illinois-Chicago. I am a member of various professional organizations, including
`
`the American Economic Association, the American Association of Public Opinion
`
`Research, and the Licensing Executives Society, among others.
`
`6.
`
`My curriculum vitae, which includes all publications and
`
`presentations I have authored, is provided in Exhibit 2054. A list of the cases in
`
`which I have testified is also provided in Exhibit 2054. BRG is being compensated
`
`on a rate times hours basis for the work my staff and I perform. My current rate is
`
`$595 per hour. BRG’s compensation does not depend in any way on the outcome
`
`of this litigation.
`
`II.
`
`Background
`
`A.
`
`Pulmonary Arterial Hypertension Market Overview
`
`1. Disease Characterization and Classifications
`
`7.
`
`PAH is a life—threatening medical condition that is characterized by
`
`increased blood pressure in the pulmonary arteries.2 This increased pressure in the
`
`arteries strains the right side of the heart and can ultimately lead to right heart
`
`
`2 Ex. 1157, 7 (United Therapeutics 2015 IO-K).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`failure and death.3 PAH is a rare disease which affects fewer than 50,000 people in
`
`the U.S., although only a fraction of those affected are treated due to the
`
`complexity of diagnosing the condition.4
`
`8.
`
`The World Health Organization (“WHO”) classifies pulmonary
`
`hypertension patients into groupings based on the cause of the condition.5 The first
`
`group (“WHO Group 1”) encompasses PAH patients?) The New York Heart
`
`Association (NYHA), Functional Classification system, is the most commonly
`
`used system to classify heart failure patients.7 Under the NYHA classification
`
`system, patients are placed into one of the following four categories based on how
`
`limited they are during physical activity:8
`
`3 Id.
`
`4 Ex. 2055, 10 (Tyyaso® (treprostinil) An Inhaled Prostacyclin Analogue
`
`presentation); Ex. 1 157, 7 (United Therapeutics 2015 10-K).
`
`5 Ex. 1122 (Types of Pulmonary Hypertension, National Institute of Health
`
`website).
`
`6 Id.
`
`7 Ex. 2056 (Classes of HeaIt Failure, American Heart Association website).
`
`8 1d.
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`Table 1
`
`NYHA Heart Failure Classifications
`
`
`NYHA Class Patient Symptoms
`
`palpitation, dyspnea (shortness of breath).
`
`
`
`No limitation of physical activity. Ordinary
`
`physical activity does not cause undue fatigue,
`
`Slight limitation of physical activity. Comfortable
`
`at rest. Ordinary physical activity results in fatigue,
`
`palpitation, dyspnea (shortness of breath).
`
`Marked limitation of physical activity. Comfortable
`
`at rest. Less than ordinary activity causes fatigue,
`
`palpitation, or dyspnea.
`
`Unable to carry on any physical activity without
`
`discomfort. Symptoms of heart failure at rest. If any
`
`physical activity is undertaken, discomfort
`
`increases.
`
`
`
`2. PAH Treatments
`
`9.
`
`Currently, there are three categories of FDA-approved therapies for
`
`PAH, each of which targets a different molecular pathway that is involved in the
`
`disease process.9 These categories include: (1) prostacyclin analogues and [P
`
`prostacyclin receptor agonists, (2) PDE—S inhibitors and guanylate cyclase
`
`
`
`9 Ex. 1157, 8 (United Therapeutics 2015 10-K).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`stimulators, and (3) endothelin receptor antagonists (ETRAs).10 One or more of
`
`these classes of drugs may be used simultaneously to treat patients with PAH.ll
`
`10.
`
`For patients with mild PAH symptoms (e.g., NYHA Class II), oral
`
`therapies such as PDE-S inhibitors and ETRAs are commonly prescribed as first-
`
`line treatments.12 As the disease progresses in severity (NYHA Class III and IV),
`
`non-oral therapies, such as inhaled or infused prostacyclin analogues, are
`
`commonly added.13 As a result, not all PAH products directly compete with each
`
`other for the same patients because not all PAH products are able to treat
`
`effectively the various stages of the disease. In fact, the only PAH product that has
`
`the same indication as Tyvaso® is Ventavis® as they are the only two inhalable
`
`PAH treatments available on the market-
`
`1 1.
`
`UTC currently markets four FDA approved PAH therapies. Three of
`
`these products, Remodulin® (infilsed therapy), Tyvaso® (inhaled therapy), and
`
`Orenitram® (oral therapy), share the same active pharmaceutical ingredient, a
`
`'0 Id.
`
`” Id.
`
`12 1d., 23.
`
`'3 1d.
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`T
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`prostacyelin analogue known as treprostinil.l4 The fourth PAH therapy marketed
`
`by UTC, Adcirca®, is an oral PDE-S inhibitor.15
`
`12.
`
`The FDA approved PAH therapies are shown in the table below.
`
`Table 2‘6
`
`UTC PAH Therapy Alternatives
`
`
`Name
`
`231:2;th
`
`Launch AdministrationManufacturer
`
`
`
`Flolan®
`epoprostenol
`
`
`Tracleer®
`bosentan
`
`
`Ventavis®
`iloprost
`
`
`Revatio®
`
`Letairis®
`
`sildenafil citrate
`
`ambrisentan
`
` Bayer
`
`
`
`
`
`generic epoprostenol epoprostenol
`
`
`
`
`Veletri® epoprostenol
`
`Imultiple
`generic sildenafil
`citrate
`
`
`Adempas®
`
`Opsumit®
`
`Uptravi®
`
`sildenafil citrate
`
`riociguat
`
`macitentan
`
`selexipag
`
`l41d.,8, 11-12.
`
`”M, 13.
`
`‘6 1a., 22-23.
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`B.
`
`Tyvaso® Overview
`
`13.
`
`The FDA approved Tyvaso® in July 2009, and the product was
`
`launched in September 2009. 17 When Tyvaso® entered the market, there were
`
`many approved PAH therapies, including Remodulin® and Adcirca®, first sold in
`
`2002 and 2009, respectively,18 as well as the six products shown in Table 2 that
`
`were launched between 1996 and 2008. Following Tyvaso®’s launch, a number of
`
`additional PAH therapies entered the market including Orenitram®, first sold in
`
`2014,19 and the five products shown in Table 2 that were launched between 2010
`
`and 2015.
`
`14.
`
`In June 2010, the FDA granted orphan drug designation to Tyvaso®.20
`
`This designation gave the drug exclusivity for the orphan indication through July
`
`2016.2l There are currently eight patents listed in the Orange Book for Tyvaso®.22
`
`‘7 Ex. 2057 (FDA Approves TYVASO (Treprostinil) Inhalation Solution for the
`
`Treatment ofPu/manary Arterial Hypertenston, July 30, 2009); Ex. 2058, 25-26
`
`(2014 Fourth-Quarter and Annual Financial Results, Investor Conference Call
`
`Q&A); Ex. 1 152, 9 (United Therapeutics 2010 IO-K).
`
`‘8 Ex. 1158, 5 (United Therapeutics 2016 IO-K).
`
`19 Id.
`
`2“ Ex. 1 157, 12 (United Therapeutics 2015 lO-K).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`C.
`
`The ’240 Patent
`
`15.
`
`US. Patent No. 9,358,240 is titled “Treprostinil administration by
`
`inhalation.” The ’240 patent issued on June 7, 2016, and expires on May 5, 2028.23
`
`I understand that claims 1-9 of the ’240 patent are at issue in this case. The patent
`
`claims methods for treating pulmonary hypertension comprising administering
`
`treprostinil by inhalation with a nebulizer. I understand that the use of the Tyvaso®
`
`Inhalation System, in the intended manner and as taught in UTC’s label and
`
`package insert, practices the asserted claims of the ’240 patent.24 It is my
`
`understanding that if a product embodies the claimed features of the patent, and the
`
`product and those features are coextensive, then a nexus is presumed.
`
`D.
`
`Benefits of the ’240 Patent
`
`16.
`
`I understand that the ’240 patent relates to methods of administering
`
`treprostinil Via inhalation that includes a pulsed ultrasonic nebulizer with an opto-
`
`acoustical trigger that is used to deliver therapeutically effective amounts of the
`
`2‘ 1d.
`
`22 Ex. 2012 (Tyvaso®, FDA Orange Book)-
`
`23 1a.; Ex. 1001 (The ’240 patent).
`
`24 Ex. 2040, 1174 (Declaration of Dr. Aaron Waxman).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`drug.25 As explained by Dr. Aaron Waxman, one of UTC’s technical experts in this
`
`matter, the Tyvaso® Inhalation System and directions for use contains such a
`
`method.26
`
`17.
`
`The Tyvaso® Inhalation System contains a pulsed ultrasonic
`
`nebulizer comprising an opto—acoustical trigger. Furthermore, I understand from
`
`Dr. Waxman that:
`
`The Tyvaso® Prescribing Information explicitly describes
`
`the
`
`nebulizer as “an ultrasonic, pulsed delivery device." Pulsed indicates
`
`that
`
`the nebulizer
`
`intermittently generates aerosol
`
`rather
`
`than
`
`continuously generating aerosol. Ultrasonic indicates that the device
`
`uses Vibration of a piezoelectric element to generate drug containing
`
`droplets.
`
`The device uses light and sound to trigger each time the patient must
`
`inhale through the mouthpiece in successive breaths, with the intent of
`
`triggering inhalation at the same time as a bolus of aerosol is being
`
`generated. The optical component takes the form of a green flashing
`
`inhalation indicator light and the acoustical component takes the form
`
`of a single short beep. This opto-acoustical trigger is the mechanism
`
`25 161.,1111; Ex. 1001.
`
`2“ lat; Ex. 2040, 11111 1, 74-75.
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`Rebuttal Declaration of Jeffery A. Stec. Ph.D.
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`1 1
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`by which the patient is prompted to synchronize each inhalation to
`
`each pulse of aerosol generation.27
`
`18.
`
`I also understand from Dr. Waxman that the unique features of the
`
`claimed method for using the nebulizer (e.g., the combination of visible and
`
`audible signals designed to prompt the correct number of inhalations, and
`
`inhalations coordinated with aerosol generation), together with its more convenient
`
`dosing regimen, are critical to the device’s ability to deliver precise drug doses that
`
`balance safety and efficacy.28 These features also help patient compliance.29
`
`1. Inhaled Treprostinil
`
`19.
`
`Intravenous treprostinil therapy is prone to catheter-related infections,
`
`drug tolerance, quality of life complications, and major systemic side effects.30
`
`Subcutaneous therapy avoids catheter infections but can cause local pain at the
`
`2" Id, 111174-75.
`
`28 1d.,1176.
`
`29 Id., Ex. 1163, 27-28 (Second Declaration of Dr. Roham T. Zamanian, ’240 File
`
`History).
`
`30 Ex. 2059, 1 (Voswinckel, e! at, “Favorable Effects of Inhaled Treprostinil in
`
`Severe Pulmonary Hypertension: Results from Randomized Controlled Pilot
`
`Studies,” J. Am. Coll. Cardiol., 48:1672-1681 (2006)).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`infusion site and may limit effective dosing and long—term treatment.31 The
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`development of inhaled treprostinil therapy allows patients to avoid these issues.
`
`20.
`
`The only other FDA approved inhaled PAH therapy is iloprost, a
`
`prostacyclin analogue.32 In contrast to inhaled iloprost, inhaled treprostinil has an
`
`unexpectedly slower time to reach peak plasma concentration when administered
`
`by the inhalation route, making treprostinil surprisingly well suited to administrer
`
`with a pulsed ultrasonic nebulizer using the particular claimed dosing regimen.33 I
`
`understand that the technology claimed by the ”240 patent is essential to providing
`
`the unique benefits of Tyvaso®.34
`
`2. Comparison of Tyvaso® Benefits to Ventavis®
`
`21.
`
`Patients are administered Tyvaso® using the proprietary methods and
`
`nebulizer described above, from which they draw up to nine breaths four times
`
`daily.35 Through this administration method, patients save on average 1.4 hours per
`
`
`3‘ Id.
`
`32 Ex. 1158, 9 (United Therapeutics 2016 10-K).
`
`33 Ex. 2098, 111113-14 (Second Declaration of Dr. Werner Seeger).
`
`3“ Ex. 2040,111173-83 (Declaration of Aaron Waxman); Ex. 1162, 21-24.
`
`(Declaration of Dr. Roham T. Zamanian, ’240 File History).
`
`35 Ex. 1157, 1 1 (United Therapeutics 2015 IO-K).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`day when using Tyvaso® compared to the only other FDA-approved inhaled
`
`prostacyclin analogue, Ventavis (iloprost).36 Patients prescribed to Ventavis® need
`
`to inhale the drug six to nine times each day, with each session consisting of four
`
`to ten minutes of continuous inhalation via the nebulizer.37 Also, the Tyvaso®
`
`Inhalation System uses a single ampule, once per day, so the system only needs to
`
`be cleaned once per day.38 Ventavis®, on the other hand, uses an ampule each
`
`session and must be cleaned after each session.” In other words, Tyvaso® is more
`
`convenient and easier to use than Ventavis®. Additionally, Ventavis® can cause a
`
`decrease in systemic blood pressure if the patient is administered too high of a
`
`dose.40
`
`111. Analysis
`
`22.
`
`I understand that the commercial success of a product can be used as
`
`an “objective indicia” in demonstrating the non-obviousness of the underlying
`
`patented invention. Commercial success shows non—obviousness because if a
`
`3" Id.
`
`37 1d
`
`38 1d.
`
`39 Ex. 1160, 20—24.
`
`4° Ex. 1157, 11 (United Therapeutics 2015 10-K).
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`product is successful in the marketplace, then there are reasons to infer that such
`
`market success would have provided a significant incentive for others to pursue the
`
`patented invention.
`
`23.
`
`In examining commercial success, financial metrics such as the
`
`product’s sales, profits, and market share are computed and evaluated. This
`
`evaluation often includes how the product has performed in the relevant market
`
`relative to its competitors.41 Other indications of commercial success include
`
`whether the drug is able to command a price premium relative to other competing
`
`drugs while still making substantial sales and widespread diffusion of the drug in
`
`the marketplace.
`
`24. Here, the commercial success of Tyvaso® is demonstrated in a
`
`number of ways, including the substantial sales and market share of the product
`
`despite marketplace challenges, as well as the acceptance of Tyvaso® by doctors
`
`
`41 For example, the Federal Circuit has indicated that “the most probative evidence
`
`of commercial success is not overall sales, but whether those sales represent ‘a
`
`substantial quantity in th[e] market.” See Nova Nordisk A/S v. Cameo Pharm.
`
`Labs, Ltd, 719 F.3d 1346, 1356 n.5 (Fed. Cir. 2013) (citing In re Applied
`
`Materials, Inc, 692 F.3d 1289, 1300 (Fed. Cir. 2012)). In re Huang, 100 F.3d 135,
`
`140 (Fed. Cir. 1996).
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`and patients. I have also considered whether the sales are driven by economic
`
`factors other than the patented invention, including marketing or pricing.
`
`A.
`
`Factors Demonstrating Commercial Success of the Patented
`Product
`
`25.
`
`There are many factors that indicate the commercial success of
`
`Tyvaso® and the underlying patents at issue in this case. These include: substantial
`
`sales of the product; profitability of the product; significant market share achieved
`
`by the product, despite marketplace challenges; and consistent price increases for
`
`Tyvaso® compared to other treatments. I discuss each of these more fully below.
`
`1. Sales of Tyvaso®
`
`26.
`
`The significant sales of Tyvaso® provide evidence indicating
`
`commercial success of the product. The process by which a consumer (patient)
`
`purchases Tyvaso® is fairly complex. First, a physician who wishes to prescribe
`
`Tyvaso® to a patient fills out a referral form.42 Next, a specialty pharmacy takes
`
`over case management for the patient, checking the data provided by the physician
`
`to confirm that the patient has PAH and falls within the Tyvaso® indication.43
`
`Finally, if the patient is determined to have PAH and be appropriate for Tyvaso®,
`
`42 Ex. 2060.
`
`43 Id.
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`the specialty pharmacy will deliver the medication and train the patient to use the
`
`inhaler.4'i1 This process makes it clear that sales of the product reflect demand for
`
`the particular features and benefits of Tyvaso®-
`
`27.
`
`Tyvaso® sales since its launch are therefore compelling evidence of
`
`the product’s commercial success. Figure 1 below shows the rapid growth in
`
`Tyvaso® sales revenue during the period September 2009 through 2017.
`
`Figure 1
`
`Net Sales of Tyvaso® September 2009 through 201745
`
`5500
`5450
`
`5400
`
`5350
`
`.2 5300
`'3
`$5250
`35200
`
`5150
`
`51012}
`
`550
`
`320.3
`
`30 -
`2009
`
`$403.1
`
`$420.1
`
`8438.8
`
`5404.6
`
`5372.9
`
`$325.6
`
`240.4
`
`S
`
`$151.8
`
`2010
`
`2011
`
`2012
`
`2013
`
`2014
`
`2015
`
`2010
`
`2012
`
`28.
`
`Comparing Tyvaso®’s first eight years of revenue to the first years of
`
`revenue available for each of the other drugs in PAH therapy market, shows that
`
`44 Id.
`
`45 Appendix 1.
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`1?
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-O1621
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`Page 17 of 87
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`
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`Tyvaso® had at least the third largest revenue every year after the first year of
`
`launch, with having the second largest revenue in the 2nd through 4m, 6m, and 7'“1
`
`years after launch and the largest revenue in the 5th year afier launch.46
`
`29. Additionally, from 2010, the first full year that Tyvaso® was on the
`
`market, through 2017, Tyvaso® has accounted for between 22% and 40% of
`
`UTC’s total revenues as shown in Figure 2 below.
`
`Figure 2
`
`Net Sales of Tyvaso® as a Percentage of UTC’s Total Revenue —
`47
`
`2010 through 2017
`
`SLXlJlJ
`
`5|.600
`
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`
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`
`51598.3
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`51.4653
`
`$1,238.:q
`
`SLIIIU
`
`$916.]
`
`$7432
`
`$592.9
`
`.25.6°o
`2010
`
`EIJII
`
`35.5%
`
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`, u,
`19
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`1
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`
`353%
`
`21.5%
`
`30D
`
`20]}
`
`IIIIJ
`
`2015
`
`11116
`
`EDI?
`
`l '1'_\'\':l.laJR Sales
`
`[I'l'("l'otalfizllu.~
`
`46
`
`-
`Appendlx 7.
`
`47
`
`-
`Appendlx 4.
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`18
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v- UNITED THERAPEUTICS, IPR2017-01621
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`Page 18 of 87
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`
`
`30.
`
`The demand for and commercial success of Tyvaso® is demonstrated
`
`by the billions of dollars in revenues generated since the launch of the product.
`
`Total annual net sales of Tyvaso® grew from $151.8 million in 2010, the first full
`
`year the product was on the market, to over $3 70 million in 2017, reflecting a
`
`compound annual growth rate of 14%.48 As discussed in more detail below, the
`
`fact that these sales have been significant despite a number of marketplace
`
`challenges is further evidence of the demand for, and success of, Tyvaso®.
`
`31.
`
`I also note that UTC was recognized by Forbes as the #12 best small
`
`company in the US. in 2012 based on factors such as its retum on equity, sales
`
`growth, earnings growth, and stock performance compared to similar companies.49
`
`The following year UTC was recognized on Fortune’s list of the 100 fastest
`
`growing companiesso These awards indicate that the market considered UTC to be
`
`a particularly valuable and fast-growing company as Tyvaso® sales continued to
`
`grow and made up more than a third of UTC total revenue. Similarly, in the years
`
`since Tyvaso® was launched, UTC’s market capitalization has grown from
`
`43 Appendix 1.
`
`49 Ex. 2061 (The World's Biggest Public Companies — United Therapeutics,
`
`Forbes); Ex. 2062 (America’s Best Small Public Companies, Forbes).
`
`50 Ex. 2063 (Fastest-Growing Companies, Forbes).
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`19
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 19 of 87
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`
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`approximately $2.9 billion in 2009 to $6.1 billion in 2016.51 These data correlate
`
`with Tyvaso®’s growing importance as a source of revenue to UTC during the
`
`same time period and provide further evidence of commercial success.
`
`2. Profitability of Tyvaso®
`
`32.
`
`Tyvaso®’s high profitability also shows the demand for and
`
`commercial success of the product. UTC has enjoyed positive gross profitability
`
`from the sale of Tyvaso® since launch. Figure 3 below summarizes the gross
`
`profits of Tyvaso®.
`
`
`
`5] Ex. 2064 (United Therapeutics Corp, Momingstar).
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`20
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 20 of 87
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`
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`Figure 3
`
`Gross Profits of Tyvaso® September 2009 through 201752
`
`$500
`
`5450
`
`S400
`
`$350
`
`,7 5300
`l'l5
`
`é 325“
`‘-' $200
`
`$150
`
`$100
`
`55“
`$0
`
`$446J
`
`$405.6
`
`$378.0
`
`$385.0
`
`$354.4
`
`3271.3
`
`$203.4
`
`$121.?
`
`$15.0
`-
`
`2009
`
`2010
`
`2011
`
`2012
`
`2013
`
`2014
`
`2015
`
`2016
`
`201?
`
`33.
`
`As this figure shows, UTC was able to earn profits on Tyvaso®
`
`quickly, with billions of dollars in gross profits earned since the product was
`
`launched. Total gross profits earned from the sale of Tyvaso® grew from $121.7
`
`million in 2010, the first full year the product was on the market, to $354 million in
`
`2017, reflecting a compound annual growth rate of 17%.53 Furthermore,
`
`Tyvaso®’s gross profit margin has been steadily increasing since launch.54
`
`52 Appendix 2.
`
`53 1d.
`
`5“ 1d.
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`2]
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-O1621
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`Page 21 of 87
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`3. Tyvaso® Market Share
`
`34.
`
`As noted above, Tyvaso®“s sales and profit growth demonstrate that it
`
`is a commercial success. Tyvaso®’s market share also shows the demand for the
`
`product, in spite of marketplace challenges that UTC has faced, which is further
`
`evidence supporting Tyvaso®“s commercial success. It is my understanding that
`
`the target market for Tyvaso® includes patients on Ventavis®, the only other
`
`inhaled PAH product on the market, and patients on oral PAH therapies.55
`
`35.
`
`As previously mentioned, there were at least eight other PAH
`
`therapies on the market when Tyvaso® was launched in September 2009.56
`
`Additionally, at least six other PAH therapies entered the market after Tyvaso®.57
`
`Despite this crowded market, Tyvaso®’s estimated share of the overall PAH
`
`55 Exhibit 1142, 4 (UTC, “Q2 2010 United Therapeutics Earnings Conference
`
`Call,” 7/28/2010).
`
`56 The eight PAH therapies on the market prior to Tyvaso® included Remodulin®
`
`and Adcirca® as well as the six products shown in Table 2 that were launched
`
`between 1996 and 2008.
`
`57 The six PAH therapies that were launched after Tyvaso® included Orenitram®
`
`and the five products shown in Table 2 that were launched between 2010 and 2015.
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`22
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`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 22 of 87
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`market grew from 1.2% in 2009 to 10.0% by 2016-58 Tyvaso® has held the fourth
`
`largest share in this market from 2012 through 2016.59 However, as explained
`
`above, Tyvaso® competes primarily with oral and inhaled therapies. Within this
`
`market segment, Tyvaso®’s estimated share grew from 1.7% in 2009 to 22.0% in
`
`2013, declining to 11.9% by 2016.60 Since 2012, Tyvaso® has held the third
`
`largest share in this market.“ These data demonstrate that Tyvaso® has been able
`
`to gain a substantial portion of the market in spite of the numerous competitors that
`
`were launched both before and after Tyvaso®. In other words, as the market
`
`became even more competitive with additional entrants launching, Tyvaso®
`
`continued to increase its market share.
`
`36.
`
`Between the time that Tyvaso® was launched in 2009 and 2013, the
`
`percentage of PAH patients on inhaled therapy doubledfi2 Within the inhaled
`
`58 Appendix 6.4.
`
`59 1d. There were nine drugs in the market in 2012, 1 1 between 2013 and 2015, and
`
`12 in 2016.
`
`60 Appendices 6.0 and 6.1.
`
`6] Appendix 6.0. There were six drugs in the market in 2012, eight in 2014, nine in
`
`2014 and 2015, and 10 in 2016-
`
`62 Ex. 2065, 5 (Tyvaso 2014 Brand Plan).
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`23
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 23 of 87
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`
`
`therapy market segment, Tyvaso® became the inhaled market leader within seven
`
`months after the product launched.63 This is particularly notable given the fact that
`
`Ventavis®, the only other FDA approved inhaled PAH therapy, was a well—
`
`established product that had been on the market since 2004. Additionally, the
`
`number of active users onyvaso® grew from approximately 850 in Q1 2010 to
`
`3,199 in Q4 2015.64 By 2015, Tyvaso® had approximately an 85% share of the
`
`patients on inhaled therapy.65 The following figure compares the change in
`
`Tyvaso® and Ventavis® shares of the inhaled PAH therapy market between 2009
`
`and 2016.
`
`63 Ex. 2066, 3 (2013 Marketing Plan).
`
`64 Appendix 5.
`
`65 Ex. 2067, 33 (Tyvaso Marketing Overview, August 19, 2015).
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`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`24
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 24 of 87
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`
`
`Figure 4
`
`Inhaled PAH Therapy Market Shares, 2009—201666
`
`1 [II] _1}° a
`
`91} :0a
`
`3'
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`
`tin
`0a
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`.
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`
`.'
`
`d
`
`
`
`a
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`
`40.
`
`t'a
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`Is 2%
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`-4 3%
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`_
`_
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`
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`3309
`
`2010
`
`1011
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`:01:
`
`2013
`
`2014.
`
`2015
`
`3016
`
`“-0 -- Tyvaso Market Shae
`
`\‘entavis Marl-:6! Share
`
`37. Given that the patented features and benefits of Tyvaso® contribute to
`
`its ease of use and efficacy, there is a nexus between Tyvaso®’s success and the
`
`’240 patent.67 It is also important to recognize that while the inhaled therapy
`
`66 Appendix 6.2. Over this same time, the inhaled PAH therapy grew from $147
`
`million in 2009 to almost $590 million in 2014; ending at $481 million in 2016.
`
`See Appendix 6.3.
`
`6" Ex. 2040,1184 (Declaration of Dr- Aaron Waxman); Ex. 1163, 26-28 (Second
`
`Declaration of Dr. Roham T. Zamanian, ’240 File History).
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`25
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 25 of 87
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`
`
`market began to contract after 2013,68 the number of active users of Tyvaso® has
`
`remained relatively constant.69 Tyvaso®’s ability to gain or maintain market share
`
`in a declining market provides further evidence of the commercial success of the
`
`product.
`
`4. Price Premium of Tyvaso® Versus Other Treatments
`
`38.
`
`UTC has recognized in its SEC filings that its prostacyclin analogue
`
`products, including Tyvaso®, are expensive therapies.70 The average annual cost of
`
`PAH therapy in 201 1 was -.7' In contrast, according to a review article
`
`published in 2012, “the average cost per claim for inhaled treprostinil in early 201 1
`
`represented an annual expense of approximately $142,000.”72 Additionally, a study
`
`published in 2014 which compared the costs of oral and inhaled PAH therapies
`
`('8 Ex. 2074, 15 (Pulmonary Arterial Hypertension Market Surveillance ATU:
`
`Wave 5 (Q2 ’ 15) — Final Repon, Fielded July 2015).
`
`69 Appendix 5.
`
`7“ Ex. 1158, 38 (United Therapeutics 2016 10—K).
`
`7] Ex. 2068, 53 (Pulmonary Arterial Hypertension (PAH) Therapeutics — Global
`
`Drug Forecasts and Treatment Analysis to 2020).
`
`72 Ex. 2069, 13 (Frumkin, L.R., “The Pharmacological Treatment of Pulmonary
`
`Arterial Hypertension,” Pharmacological Reviews, 64(3):583-620 (2012)).
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
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`26
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`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v. UNITED THERAPEUTICS, IPR2017-01621
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`Page 26 of 87
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`
`
`found that while a one month supply of Tyvaso® was less expensive than an
`
`equivalent supply of Ventavis®, it was substantially more expensive than all of the
`
`approved PAH oral therapies.T3 The following figure compares the costs of a one
`
`month supply of the approved oral and inhaled PAH therapies as of 2014.
`
`Figure 5
`
`2014 Average Wholesale Price For 1 Month Supply of
`Inhaled and Oral PAH Therapies-l4
`
`$21,049
`
`315 ,5“
`
`$25 000
`
`320,000
`
`‘3 15,0 00
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`.
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`39, 828
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`59.— 70
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`59,126
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`73 Ex. 2070, 6 (Khaybullina, 6! £11., “Riociguat (Adempas): a Novel Agent For the
`
`Treatment of Pulmonary Arterial Hypertension and Chronic Thromboembolic
`
`Pulmonary Hypertension,” Pharmacy and Therapeutics, 39(11):749—758 (Nov.
`
`2014)).
`
`7“ Id.
`
`Rebuttal Declaration of Jeffery A. Stec. PhD.
`
`27
`
`UNITED THERAPEUTICS, EX. 2053
`WATSON LABORATORIES v
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