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`UNITED THERAPEUTICS CORP
`
`FORM 10-K
`(Annual Report)
`
`Filed 3/12/2004 For Period Ending 12/31/2003
`
`Address
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`Telephone
`CIK
`Industry
`Sector
`Fiscal Year
`
`1110 SPRING ST
`SILVER SPRING, Maryland 20910
`301-608-9292
`0001082554
`Biotechnology & Drugs
`Healthcare
`12/31
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`Securities and Exchange Commission
`Washington, DC 20549
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`(cid:1)
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`Form 10-K
`
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` ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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`
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`For the fiscal year ended December 31, 2003
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`or
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` TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
`OF 1934
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`
`
`For the transition period from to
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`Commission File Number 0-26301
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`United Therapeutics Corporation
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`52-1984749
`(IRS Employer
`Identification No.)
`
`20910
`(zip code)
`
`(Exact name of Registrant as specified in its charter)
`
`
`
`
`
`Delaware
`(State or Other Jurisdiction of
`Incorporation or Organization)
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`1110 Spring Street
`Silver Spring, MD
`(Address of principal executive offices)
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`
`
`Registrant’s telephone number, including area code:
`(301) 608-9292
`
`Securities registered under Section 12(b) of the Exchange Act:
`None
`
`Securities registered under Section 12(g) of the Exchange Act:
`Common Stock, par value $.01 per share and associated preferred stock purchase rights
`(Title of Class)
`
` Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
`Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
`subject to such filing requirements for the past 90 days. Yes (cid:1) No
`
` Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
`contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PART III of this
`Form 10-K or any amendment to this Form 10-K.
`
` Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes (cid:1) No
`
` The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 30, 2003 as
`reported by the Nasdaq National Market was approximately $431.5 million. (1)
`
` The number of shares outstanding of the registrant’s Common Stock, par value $0.01 per share, as of March 1, 2004 was 21,332,444 shares.
`
`DOCUMENTS INCORPORATED BY REFERENCE
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` Portions of the registrant’s definitive proxy statement for the registrant’s 2004 annual shareholders meeting are incorporated by reference in
`Part III of this Form 10-K.
`
`(1) Excludes 1,226,424 shares of common stock held by directors and officers, and any stockholders whose ownership exceeds ten percent of
`the shares outstanding at June 30, 2003. Exclusion of shares held by any person should not be construed to indicate that such person possesses
`the power, directly or indirectly, to direct or cause the direction of the management or policies of the registrant, or that such person is controlled
`by or under common control with the registrant.
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`TABLE OF CONTENTS
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` PART I
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` Item 1.
` Item 2.
` Item 3.
` Item 4.
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` Item 5.
` Item 6.
` Item 7.
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` Item 7A.
` Item 8.
` Item 9.
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` Item 9A.
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` Item 10.
` Item 11.
` Item 12.
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` Item 13.
` Item 14.
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` Item 15.
` Signatures
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`EX-10.34
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`EX-21
`EX-23.1
`EX-23.2
`EX-31.1
`EX-31.2
`EX-32.1
`EX-32.2
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` Business
` Properties
` Legal Proceedings
` Submission of Matters to a Vote of Security Holders
` PART II
` Market for Registrant’s Common Equity and Related Stockholder Matters
` Selected Financial Data
` Management’s Discussion and Analysis of Financial Condition and Results of
`Operations
` Quantitative and Qualitative Disclosure About Market Risk
` Financial Statements and Supplementary Data
` Changes In and Disagreements With Accountants on Accounting and Financial
`Disclosure
` Controls and Procedures
`
` PART III
` Directors and Executive Officers of the Registrant
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and
`Related Stockholder Matters
` Certain Relationships and Related Transactions
` Principal Accountant Fees and Services
` PART IV
` Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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`EXHIBITS
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` Real Estate Purchase Agreement dated October 31, 2003 by and between Unither
`Pharmaceuticals, Inc. and Montgomery County, Maryland
` Subsidiaries of the Registrant
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` Consent of Ernst & Young LLP
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` Consent of KPMG LLP
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` Rule 13a-14(a) Certification of CEO
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` Rule 13a-14(a) Certification of CFO
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` Section 1350 Certification of CEO
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` Section 1350 Certification of CFO
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`1
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`Item 1.
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`Business
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`PART I
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` United Therapeutics is a biotechnology company focused on the development and commercialization of unique therapeutics to treat chronic
`and life-threatening diseases. United Therapeutics is active in three therapeutic areas — cardiovascular medicine, infectious disease and
`oncology — with five therapeutic platforms:
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`• Prostacyclin Analogs, which are stable synthetic forms of prostacyclin, an important molecule produced by the body that has powerful
`effects on blood vessel health and function. United Therapeutics’ drug Remodulin® has been approved by the Food and Drug
`Administration (FDA) in the United States for the treatment of pulmonary arterial hypertension in patients with NYHA Class II-IV
`symptoms to diminish symptoms associated with exercise, and in Canada and Israel for similar uses;
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`• Immunotherapeutic Monoclonal Antibodies, which are antibodies that activate patients’ immune systems to treat cancer, including
`OvaRex® which is being developed for the treatment of metastatic ovarian cancer;
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`• Glycobiology Antiviral Agents, which are a novel class of small molecules which may be effective as an oral therapy for hepatitis C and
`other infections;
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`• Telemedicine, which involves portable digital devices that enable physicians to remotely monitor patients’ bodily measurements such as
`heart function, including the CardioPAL® cardiac event recorder; and
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`• Arginine Formulations, including the HeartBar® and other products, which deliver the amino acid arginine that is necessary for
`maintaining vascular function.
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` Most of United Therapeutics’ resources are focused on its prostacyclin analogs for the treatment of cardiovascular disease and
`immunotherapeutic monoclonal antibodies for the treatment of cancer. United Therapeutics’ other principal focus area is the development of
`glycobiology antiviral agents for the treatment of hepatitis and other diseases. United Therapeutics also devotes resources to the
`commercialization and further development of arginine supplementation therapy, especially in cardiovascular health, and of telecardiology,
`principally for the detection of cardiac arrhythmias.
`
` United Therapeutics was incorporated in June 1996 in Delaware under the name Lung Rx, Inc. The company changed its name to United
`Therapeutics Corporation in December 1997. United Therapeutics’ corporate headquarters are located at 1110 Spring Street, Silver Spring,
`Maryland 20910.
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`United Therapeutics’ Products
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` United Therapeutics’ product portfolio includes the following:
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`Product
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`Mode of Delivery
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`Indication/Market
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`Current Status
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`UT Territory
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`Remodulin
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`Continuous subcutaneous
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`Pulmonary arterial
`hypertension
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`Commercial in U.S., Canada
`and Israel; Preapproval in
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`Switzerland and Australia;
`France review ongoing
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` Commercial
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` Commercial
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`Pre-commercial
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`sNDA in review in U.S.
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` Vascular function
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` Arrhythmias and angina
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` Cardiac arrhythmias
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`Pulmonary arterial
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`hypertension
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` Ovarian cancer
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` Critical limb ischemia
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` Hepatitis C
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` Multiple myeloma/breast
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`cancer
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`Peripheral vascular disease
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`Pulmonary arterial
`hypertension and peripheral
`vascular disease
`
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` Hepatitis B, dengue and
`Japanese encephalitis
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` Various cancers
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`Prostate cancer
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` Gastrointestinal cancer
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`Phase III
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`Phase II
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`Phase II
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`Phase I
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`Phase I
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`Phase I
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`Preclinical
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`Preclinical
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`Preclinical
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`Preclinical
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`Arginine Formulations Oral dietary supplement
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`CardioPAL and
`Telemedical
`Decipher Recorder
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`CardioPAL AI
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`Remodulin
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`Telemedical
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`Intravenous
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`OvaRex
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`Remodulin
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`UT-231B
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`BrevaRex®
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`Beraprost® SR
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`UT-15 Sustained
`Release
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`Intravenous
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`Intermittent subcutaneous
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` Oral
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`Intravenous
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` Oral
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`Oral
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`Glycobiology Antiviral
`Agents
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`OncoRex®
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`ProstaRex®
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`GivaRex®
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` Oral
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`Intravenous
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`Intravenous
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`Intravenous
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`* Including Germany, but excluding the rest of Europe and the Middle East.
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`Worldwide
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` Worldwide
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` Worldwide
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` Worldwide
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` Worldwide
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` Worldwide*
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` Worldwide
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` Worldwide
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` Worldwide*
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` U.S./ Canada
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`Worldwide
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` Worldwide
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` Worldwide*
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` Worldwide*
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` Worldwide*
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`Remodulin
`
` In December 1996 and January 1997, United Therapeutics obtained worldwide rights for all indications to Remodulin (also known as UT-
`15 and formerly known as Uniprost), a prostacyclin analog, from Glaxo Wellcome, Inc. and Pharmacia & Upjohn Company (see Patent and
`Proprietary Rights below). In October 1999, United Therapeutics acquired all the outstanding stock of SynQuest, Inc., the manufacturer of
`treprostinil, the bulk active ingredient in Remodulin. Remodulin, United Therapeutics’ main product, was approved by the FDA in May 2002
`in the United States and in October 2002 in Canada and Israel.
`
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`Pulmonary Arterial Hypertension
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` United Therapeutics has focused primarily on developing Remodulin as its lead product for treating pulmonary arterial hypertension.
`Pulmonary arterial hypertension is a vascular disease that affects the blood vessels between the heart and lungs known as the pulmonary blood
`vessels. Pulmonary arterial hypertension is characterized by the degradation of the blood vessel wall lining, the aggregation of platelets and the
`disruption of smooth muscle cell function. These conditions cause blockages and affect the ability of the blood vessels to dilate and then
`constrict as blood flows to the lungs. The resulting elevated pulmonary blood pressure causes increasing strain on the right side of the heart as
`it tries to pump blood to the lungs. It is estimated that there are between 50,000 and 100,000 individuals with pulmonary arterial hypertension
`worldwide.
`
` Pulmonary arterial hypertension is associated with reduced production of the natural hormone prostacyclin in the pulmonary blood vessels.
`Prostacyclin appears to dilate blood vessels where necessary, prevent platelet aggregation, and prevent proliferation of smooth muscle cells
`surrounding the vessels. The first FDA-approved prostacyclin for pulmonary arterial hypertension was Flolan®, a synthetic form of
`prostacyclin delivered continuously by an external pump through a surgically implanted intravenous catheter. Flolan was approved for use in
`certain subsets of late-stage pulmonary arterial hypertension.
`
` United Therapeutics believes Remodulin provides patients with a convenient and less invasive alternative to Flolan. In contrast to Flolan,
`Remodulin is stable at room temperature and is significantly longer lived in the human body. These attributes allow for safer and more
`convenient delivery of Remodulin to patients. Unlike Flolan, Remodulin is delivered by subcutaneous infusion with a pager-sized
`microinfusion device made by Medtronic MiniMed (see The Medtronic MiniMed Strategic Alliance below). Subcutaneous delivery of
`Remodulin also eliminates the risk of sepsis infection and related hospitalization associated with the Flolan catheter. Remodulin’s extended life
`in the body also greatly reduces the risk of an abrupt recurrence of pulmonary hypertension and death if treatment is interrupted. The stability
`of Remodulin also allows it to be prepackaged, thus eliminating the need to reconstitute the drug one or more times daily under completely
`sterile conditions, as is required with Flolan. Lastly, Remodulin does not require the use of cooling packs or refrigeration as is required with
`Flolan to keep it stable. Remodulin causes infusion site pain and infusion site reaction in most patients in varying degrees.
`
` In March 2000, United Therapeutics completed an international, randomized, placebo-controlled, double-blind study of Remodulin
`involving a total of 470 patients with pulmonary arterial hypertension. Half of the patients received Remodulin subcutaneously for 12 weeks,
`while the other half received a placebo. The study data show that patients who received Remodulin had significant improvement in exercise
`capacity, pulmonary blood pressure and in the signs and symptoms of the disease. Based on the favorable results of this study, United
`Therapeutics filed a New Drug Application (NDA) with the FDA in late 2000.
`
` On May 21, 2002, the FDA approved Remodulin (treprostinil sodium) Injection for the treatment of pulmonary arterial hypertension in
`patients with NYHA class II-IV symptoms to diminish symptoms associated with exercise. Remodulin may be prescribed for all disease
`subsets of pulmonary arterial hypertension and is the only pulmonary arterial hypertension treatment approved for patients with NYHA class II
`(early-stage) symptoms.
`
` United Therapeutics agreed with the FDA that it would perform a post-marketing Phase IV clinical study to further assess the clinical
`benefits of Remodulin. The study was originally to have been completed by May 2004 and involve 100 patients. In mid-2003, the FDA agreed
`to extend the due date of the final study report to December 2005 and reduce the number of patients to 39, with the possibility of concluding
`the trial after 21 patients have completed the study. As of February 2004, approximately 11 patients have been enrolled in the Phase IV study.
`
` On October 7, 2002, the Canadian Therapeutics Products Directorate approved Remodulin for long term subcutaneous treatment of
`pulmonary arterial hypertension in NYHA class III and IV patients who do not respond adequately to conventional therapy. On October 31,
`2002, the Israeli Ministry of Health, Drug Registration Department, approved Remodulin for the treatment of primary pulmonary arterial
`hypertension, pulmonary arterial hypertension associated with connective tissue disorders and pulmonary arterial hypertension associated with
`congenital systemic to pulmonary shunts. In December 2003, Switzerland and Australia announced that they would approve Remodulin
`pending final labeling and a commitment to perform a drug interaction study in Switzerland. A marketing authorization application for the
`approval of Remodulin in France is under review. Additional European filings will be made following approval in France.
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`Intravenous Remodulin
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` In July 2003, the FDA accepted United Therapeutics’ Investigational New Drug Application (IND) for the development of Remodulin by
`intravenous delivery for the treatment of pulmonary arterial hypertension. A bioequivalence study in human volunteers was performed in late
`2003, which established that intravenous and subcutaneous Remodulin are bioequivalent (meaning that both routes of infusion result in
`comparable levels of Remodulin in the blood). In addition, animal toxicology studies were completed and indicated comparable safety of
`chronic intravenous infusion as compared to chronic subcutaneous infusion.
`
` On January 30, 2004, a supplemental New Drug Application (sNDA) was filed with the FDA to request approval for intravenous use of
`Remodulin in pulmonary arterial hypertension. The sNDA is currently under review.
`
` While intravenous Remodulin would not possess all the safety and convenience benefits as subcutaneously delivered Remodulin, it would
`eliminate the infusion site pain and reaction currently experienced by most patients using Remodulin subcutaneously. In addition, it could serve
`as an alternative to intravenous Flolan, since Flolan must be continuously refrigerated, including during infusion, whereas Remodulin does not
`require any refrigeration. Furthermore, the active ingredient in Flolan is highly unstable and only remains active in the body for approximately
`two minutes, whereas the active ingredient in Remodulin remains active for a few hours. This may reduce the risk of rebound hypertension,
`which is a severe recurrence of the disease in the case of inadvertent therapy interruption.
`
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`Peripheral Vascular Disease/Critical Limb Ischemia
`
` United Therapeutics is also developing Remodulin for late-stage peripheral vascular disease known as critical limb ischemia. Peripheral
`vascular disease is a vascular disease that affects the blood vessels in the legs. While the precise cause of peripheral vascular disease is
`unknown, diabetes, obesity, smoking and lack of exercise are associated with the disease. Peripheral vascular disease appears to be similar to
`pulmonary hypertension in that there is a reduction in natural prostacyclin in the affected blood vessels.
`
` In the United States, it is estimated that 750,000 people suffer from critical limb ischemia. The disease is characterized by extreme pain,
`non-healing ulcers in the legs, reduced exercise capacity and severely reduced blood flow in the limbs. There are currently no drugs approved
`to treat critical limb ischemia. Physicians, therefore, perform surgical interventions (such as balloon angioplasty, stents and by-passes) to
`restore or improve blood flow in the limbs. These procedures can provide relief to patients, but do not address the underlying causes of
`peripheral vascular disease. Due to the lack of adequate treatments, approximately 200,000 amputations of limbs are performed each year on
`patients with critical limb ischemia.
`
` In September 1998, United Therapeutics completed a Phase II study which assessed the safety and blood flow effects of Remodulin
`administered intravenously to patients with critical limb ischemia. The study demonstrated that Remodulin can be administered safely to
`patients with critical limb ischemia and that Remodulin substantially increased blood flow in the affected areas of the legs. United Therapeutics
`has commenced a pre-pivotal clinical study of Remodulin for critical limb ischemia. There are currently 12 patients enrolled in this 30 patient
`placebo-controlled trial.
`
`
`UT-15 Sustained Release
`
` United Therapeutics is currently in the early stage of development of a longer-acting prostacyclin analog, known as UT-15 Sustained
`Release. UT-15 Sustained Release will be developed as an oral therapy for vascular diseases, including pulmonary arterial hypertension and
`peripheral vascular disease. A longer-acting prostacyclin analog could enable patients to take fewer doses per day. A Phase I study in healthy
`human volunteers to assess bioavailability was conducted during 2003. United Therapeutics is currently testing tablet and capsule dosage forms
`in healthy volunteers to determine which formulation is most suitable for Phase II studies.
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`Metastatic Cancer
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` United Therapeutics has tested the anti-cancer capabilities of Remodulin in laboratory experiments. These in vitro studies showed that
`Remodulin has an anti-metastatic effect at the same dose given to pulmonary hypertension patients. In addition, there are many published
`reports of the anti-cancer effects of various analogs of the prostacyclin molecule. Much of the excitement regarding prostacyclin as an anti-
`cancer molecule has to do with prostacyclin’s ability to block an endothelial cell receptor (called the PPAR receptor) which is believed to be
`needed for tumor growth. Given the potency of Remodulin, and its relative ease of use, United Therapeutics believes there may be anti-cancer
`potential in this lead product and further development may be initiated in the future.
`
`
`Sales and Marketing
`
` United Therapeutics’ marketing strategy for Remodulin relies upon United Therapeutics staff to educate the prescribing community. During
`2002, United Therapeutics formed an internal marketing team to handle these educational efforts. The team consisted of seven people as of
`December 2003 and is expected to continue growing in 2004. Additionally, United Therapeutics relies on chronic care specialty pharmacy
`distributors to handle doctor and patient requests for Remodulin on a non-exclusive basis in the United States. See Domestic Strategic Alliances
`below. These specialty distributors are experienced in the sale, distribution and reimbursement from insurance companies and other payers of
`chronic therapies. Outside of the United States, United Therapeutics has entered into six exclusive distributor agreements covering Canada,
`most of Europe, Australia, South America and Israel. United Therapeutics sells Remodulin to its distributors in the United States at a discount
`from an average wholesale price suggested by United Therapeutics, and to its international distributors at a transfer price set by United
`Therapeutics. Approximately $45.1 million, $21.2 million and $493,000 of revenues were earned from the sales of Remodulin in 2003, 2002
`and 2001, respectively.
`
`
`Arginine
`
` In December 2000, United Therapeutics expanded its cardiovascular focus when it acquired the assets and certain liabilities of Cooke
`Pharma, Inc., the exclusive manufacturer of the HeartBar line of arginine-enriched products that is now operating as Unither Pharma, Inc., a
`wholly owned subsidiary of United Therapeutics. Arginine is required by the body to produce nitric oxide, which is critical for maintaining
`vascular function and Unither Pharma owns the exclusive patent rights to make these claims. Although arginine is broadly sold as a nutritional
`supplement in pill form, there are no existing arginine products, other than HeartBar, that can deliver 6 grams of arginine in a single dose.
`Individual pills generally contain only 500 milligrams of arginine or one-twelfth the amount in one HeartBar. HeartBar products are sold in
`several flavors of protein rich bars and drink mixes.
`
` Presently, the HeartBar and related line of products is marketed directly to consumers via independent distributors and the Internet.
`Approximately $2.3 million, $1.4 million and $542,000 of revenues were earned from the sales of HeartBar and related products in 2003, 2002
`and 2001, respectively.
`
`
`Telemedicine Services
`
` United Therapeutics provides telemedicine services to detect cardiac arrhythmias and ischemic heart disease through its wholly owned
`subsidiary, Medicomp, Inc. Cardiac arrhythmias and ischemic heart disease afflict an estimated 20 million Americans, and possibly ten times
`that number worldwide. If left undetected and untreated, these conditions can result in heart attacks and death. Medicomp provides cardiac
`Holter, event monitoring and analysis and pacemaker monitoring remotely via telephone lines and the Internet for hospitals, clinicians and
`other providers. Medicomp’s services are delivered through its proprietary Decipher miniaturized digital holter recorder/analyzer and
`CardioPAL event monitor. In addition, the CardioPAL AI, a next-generation event recorder, is currently in final testing.
`
` Holter, event and pacemaker services and systems are marketed to physicians, hospitals, and managed care providers directly by
`Medicomp’s internal sales force. Revenues of approximately $4.2 million,
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`$3.9 million and $2.8 million from the sales of telemedicine products and services were earned in 2003, 2002 and 2001, respectively.
`
`
`Immunotherapeutic Monoclonal Antibodies
`
` In April 2002, Unither Pharmaceuticals, Inc., a wholly owned subsidiary of United Therapeutics, entered into an agreement with AltaRex
`Corp. (now AltaRex Medical Corp.) to exclusively license certain rights to a platform of five immunotherapeutic monoclonal antibodies. These
`products were being developed by AltaRex to treat ovarian, prostate, lung, breast, multiple myeloma, gastrointestinal and other forms of
`cancer. The lead product, OvaRex, had completed Phase II studies in metastatic ovarian cancer.
`
` Ovarian cancer is the deadliest of women’s reproductive cancers and is the fifth leading cause of cancer death among women in the United
`States. Over 25,000 cases of ovarian cancer are diagnosed in the United States every year, with over 16,000 women dying of the disease.
`
` In January 2003, United Therapeutics initiated two identical Phase III pivotal clinical trials of OvaRex in patients with stage III/IV
`advanced ovarian cancer, called IMPACT I and II. These studies are being conducted at approximately 60 centers throughout the United States
`and are expected to be fully enrolled in approximately two to three years. Patients enrolled in these studies have successfully completed front-
`line therapy, consisting of surgery and chemotherapy. The primary endpoint for these trials is to assess the time to disease relapse. Patients will
`also be followed for survival.
`
`
`Glycobiology Antiviral Agents
`
` In March 2000, Unither Pharmaceuticals, Inc. entered into a license agreement with Synergy Pharmaceuticals, Inc. to obtain from Synergy
`the exclusive worldwide rights to certain patents relating to novel antiviral compounds. These glycobiology antiviral agents are small
`molecules which may be effective as an oral therapy for the treatment of hepatitis C and B infections, as well as dengue, Japanese encephalitis
`virus and other infectious diseases. Currently, many of these agents are undergoing laboratory testing and new agents are being synthesized.
`
` The most advanced agent identified to date is UT-231B. An Investigational New Drug Application (IND) was submitted for UT-231B in
`2002 and accepted by the FDA. UT-231B completed acute and chronic Phase I dosing studies in early 2003. A Phase II proof-of-concept study
`for UT-231B in patients infected with hepatitis C who have failed conventional therapies is currently being enrolled with an anticipated
`completion date of late 2004.
`
`
`Beraprost SR
`
` In June 2000, United Therapeutics obtained from Toray Industries, Inc. the exclusive right to develop and market the oral prostacyclin
`beraprost in the sustained release formulation in the United States and Canada for the treatment of all vascular and cardiovascular indications.
`
` Beraprost is an oral form of prostacyclin that is chemically stable. Like natural prostacyclin and Remodulin, beraprost dilates blood vessels,
`prevents platelet aggregation and prevents proliferation of smooth muscle cells surrounding blood vessels. Intermittent oral doses of immediate
`release beraprost did not prove effective in Phase III studies conducted by United Therapeutics during 2000 and 2001. However, United
`Therapeutics believes that sustained release oral doses of beraprost may be an important treatment for early-stage peripheral vascular disease
`and for early-stage pulmonary hypertension. Beraprost is presently in Phase I clinical testing being conducted by Toray Industries in Japan.
`
` Toray is required to complete testing of sustained release beraprost through Phase I to adequately document its performance in humans. If
`Toray is able to do so, United Therapeutics would be obligated to grant Toray an option to purchase 500,000 shares of United Therapeutics’
`common stock at the then current fair value of that stock. The development of sustained release beraprost, however, has been significantly
`delayed by Toray and United Therapeutics may cancel this agreement prior to granting any options.
`
`7
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`Northern Therapeutics, Inc.
`
` In December 2000, Lung Rx, Inc., a wholly owned subsidiary of United Therapeutics, formed a new company in Canada, Northern
`Therapeutics, Inc., with the inventor of a new form of autologous (non-viral vector) gene therapy for the treatment of pulmonary arterial
`hypertension and other conditions. In Canada, Northern Therapeutics is developing the gene therapy and also is distributing certain United
`Therapeutics’ products, including Remodulin. United Therapeutics received approximately 59 percent of the initial outstanding common stock
`of Northern Therapeutics in exchange for $5.0 million, and currently owns approximately 68 percent of Northern Therapeutics.
`
`The Medtronic MiniMed Strategic Alliance
`
` Medtronic MiniMed partnered with United Therapeutics for the use of its pager-sized continuous microinfusion pump for delivery of
`Remodulin subcutaneously. United Therapeutics entered into an agreement with MiniMed, Inc. (now Medtronic MiniMed) in September 1997,
`which was implemented in a detailed set of guidelines to collaborate in the design, development and implementation of therapies to treat
`pulmonary hypertension utilizing MiniMed products and Remodulin. The guidelines require United Therapeutics to purchase its Remodulin
`infusion pumps exclusively from Medtronic MiniMed at a discount to MiniMed list prices unless MiniMed’s infusion pumps fail to receive
`certain government approvals or cannot be appropriately used. The term of the agreement commenced on September 3, 1997 and continues for
`seven years after the May 2002 FDA approval of Remodulin. The agreement will be automatically extended for additional 12-month periods
`unless otherwise terminated. The agreement is subject to early termination in the event of a material breach or bankruptcy of either party. In the
`event that there are any discoveries or improvements arising out of work performed under the agreement, the parties will have joint ownership
`of those discoveries or improvements. United Therapeutics and MiniMed have established a Management Committee comprised of two
`representatives from each company to oversee implementation of the agreement. United Therapeutics acquires Medtronic MiniMed products
`and resells these products to its distributors at their acquisition cost. Approximately $1.7 million, $3.7 million and $1.1 million of revenues
`were earned from the resales of MiniMed pumps and supplies in 2003, 2002 and 2001, respectively.
`
`Domestic Strategic Alliances
`
` To provide the marketing, promotion and distribution of Remodulin in the United States, United Therapeutics entered into non-exclusive
`distribution agreements with Priority Healthcare Corporation, Accredo Therapeutics, Inc. (formerly known as Gentiva Health Services, Inc.)
`and Caremark, I