`
`
`UNITED THERAPEUTICS CORP
`
`FORM 10-K
`(Annual Report)
`
`Filed 2/25/2005 For Period Ending 12/31/2004
`
`Address
`
`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
`Form 10-K
`
`
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`(cid:1) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
`ACT OF 1934
`
`For the fiscal year ended December 31, 2004
`OR
`
`
`
` TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`For the transition period from to
`
`Commission File Number 0-26301
`
`UNITED THERAPEUTICS CORPORATION
`
`Delaware
`(State or Other Jurisdiction
`of Incorporation or Organization)
`
`1110 Spring Street
`Silver Spring, MD
`(Address of principal executive offices)
`
`
`
`
`
`
`
`
`
`52-1984749
`(IRS Employer Identification No.)
`
`
`
`20910
`(zip code)
`
`
`
`
`
`(Exact name of Registrant as specified in its charter)
`
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`
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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. (cid:1)
`
` 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, 2004 as
`reported by the NASDAQ National Market was approximately $468.8 million. (1)
`
` The number of shares outstanding of the registrant’s Common Stock, par value $0.01 per share, as of February 9, 2005 was 22,492,980
`shares.
`
`DOCUMENTS INCORPORATED BY REFERENCE
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` Portions of the registrant’s definitive proxy statement for the registrant’s 2005 annual shareholders meeting are incorporated by reference in
`Part III of this Form 10-K.
`
`
`(1) Excludes 3,153,074 shares of common stock held by directors and officers, and any stockholders whose ownership exceeds ten percent of
`the shares outstanding at June 30, 2004. 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
`
`
`PART I
`Item 1. Business
`Item 2. Properties
`Item 3. Legal Proceedings
`Item 4. Submission of Matters to a Vote of Security Holders
`
`
`
`
`PART II
`Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
`Item 6. Selected Financial Data
`Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
`Item 7A. Quantitative and Qualitative Disclosure About Market Risk
`Item 8. Financial Statements and Supplementary Data
`Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
`Item 9A. Controls and Procedures
`Item 9B. Recent Developments
`
`
`
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`PART III
`Item 10. Directors and Executive Officers of the Registrant
`Item 11. Executive Compensation
`Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
`Item 13. Certain Relationships and Related Transactions
`Item 14. Principal Accountant Fees and Services
`
`
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`PART IV
`Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
`
`
`
`SIGNATURES
`
`
`
`EXHIBITS
`EX-21 Subsidiaries of the Registrant
`EX-23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
`EX-23.2 Consent of KPMG LLP, Independent Registered Public Accounting Firm
`EX-31.1 Rule 13a-14(a) Certification of CEO
`EX-31.2 Rule 13a-14(a) Certification of CFO
`EX-32.1 Section 1350 Certification of CEO
`EX-32.2 Section 1350 Certification of CFO
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`ITEM 1. BUSINESS
`
`PART I
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` United Therapeutics is a biotechnology company focused on the development and commercialization of unique products for patients with
`chronic and life-threatening diseases. United Therapeutics is active in three therapeutic areas — cardiovascular medicine, cancer and infectious
`disease — with five therapeutic platforms:
`
`
`
`•
`
`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 other countries for similar use;
`
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`•
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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;
`
`• 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® family of cardiac event recorders and the Decipher™ Holter monitors; and
`
`Arginine Formulations , including the HeartBar® and other products, which deliver the amino acid arginine that is necessary for
`maintaining vascular function.
`
` 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 Delaware in June 1996. United Therapeutics’ principal executive offices 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:
`
`
`Product
`Remodulin
`
`
`Remodulin
`
`
`Arginine
`Formulations
`
`CardioPAL and Decipher
`Recorders
`
`OvaRex
`
`Remodulin
`
`UT-231B
`
`TRIUMPH
`
`
`UT-15C Sustained
`Release
`
`
`BrevaRex®
`
`
`Beraprost® SR
`
`
`Glycobiology
`Antiviral Agents
`
`OncoRex®
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`ProstaRex®
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`GivaRex®
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`Mode of Delivery
`Continuous subcutaneous
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`Continuous intravenous
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`Oral dietary supplement
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`Telemedicine
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`Intravenous
`
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`Intermittent subcutaneous
`
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`Oral
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`Inhaled
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`
`Oral
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`Intravenous
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`Oral
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`Oral
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`Intravenous
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`Intravenous
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`Intravenous
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`Indication/Market
`Pulmonary arterial
`hypertension
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`Pulmonary arterial
`hypertension
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`Vascular function
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`Arrhythmias and ischemic
`heart disease
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`Ovarian cancer
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`Critical limb ischemia
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`Hepatitis C
`
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`Pulmonary arterial
`hypertension
`Pulmonary arterial
`
`hypertension and
`peripheral vascular
`disease
`
`Multiple myeloma/breast
`cancer
`
`Peripheral vascular
`disease
`
`Hepatitis B, dengue fever
`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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`Current Status
`Commercial in U.S.,
`Australia, Canada, Israel,
`and Switzerland.
`European reviews are
`ongoing
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`Commercial in U.S.
`
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`Commercial
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`Commercial
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`Phase III
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`Phase II
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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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`UT Territory
`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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`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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`*
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`Including Germany, but excluding the rest of Europe and the Middle East.
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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. In May 2002, Remodulin, United Therapeutics’ main product, was approved by the FDA
`in the United States as a continuous subcutaneous (under the skin) infusion. In November 2004, the FDA approval was expanded to permit
`continuous intravenous infusion in patients who cannot tolerate subcutaneous infusion. Remodulin is also approved as a continuous
`subcutaneous infusion in Canada, Israel, Australia and Switzerland and is under review in other countries.
`
` Pulmonary Arterial Hypertension
`
` United Therapeutics has focused primarily on developing Remodulin as its lead product for treating pulmonary arterial hypertension.
`Pulmonary arterial hypertension is a life-threatening 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.
`
` In March 2000, United Therapeutics completed an international, randomized, placebo-controlled, double-blind study of subcutaneous
`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 as a continuous subcutaneous infusion 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 forms of pulmonary arterial hypertension
`and is the only pulmonary arterial hypertension treatment approved for patients with NYHA class II (early-stage) symptoms.
`
` United Therapeutics believes Remodulin provides patients with convenient and less invasive alternatives 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 can be 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 intravenous 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. When infused subcutaneously, Remodulin causes infusion site pain and infusion site reaction in most
`patients in varying degrees. Patients who cannot tolerate subcutaneous Remodulin may use it intravenously. Intravenous Remodulin is
`delivered continuously by an external pump through a surgically implanted intravenous catheter, similar to Flolan. When delivered
`intravenously, Remodulin bears a risk of infection, similar to that of Flolan, but it does not require cooling packs or refrigeration and can be
`continuously infused for up to 48 hours before refilling the infusion pump.
`
` Upon FDA approval of Remodulin in 2002, United Therapeutics was required to perform a post-marketing Phase IV clinical study to
`further assess the clinical benefits of Remodulin. Continued FDA approval of Remodulin is subject to the diligent and timely completion of
`that Phase IV trial, as well as its outcome. The study was originally to have been completed by May 2004 and involve 100 patients. In mid-
`2003, the FDA agreed to amend the due date of the final study report and
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`make other changes to the trial design including reducing the number of patients to 39.
`
` As amended, the Phase IV clinical trial was required to be one-half enrolled by June 2004 and must be fully enrolled by June 2005;
`however, the FDA has permitted an interim assessment and opportunity to terminate the Phase IV study after only 21 patients have completed
`the study. The final study report is required to be submitted in December 2005. To date, only 15 patients have been enrolled in this 39-patient
`Phase IV trial. Enrolling patients in this study is difficult, in part because it involves randomizing some of the patients to placebo despite the
`fact that approved drugs are available for these patients.
`
` United Therapeutics is not currently enrolling the Phase IV trial within the time frame specified by the FDA, and therefore is at risk of
`the FDA at any time instituting a public hearing to withdraw marketing approval for Remodulin. United Therapeutics is in discussions with the
`FDA about its due diligence in enrolling the Phase IV trial and has made a proposal which United Therapeutics believes will ensure that it is
`able to provide interpretable results of this trial by the December 2005 final study report delivery deadline. Specifically, United Therapeutics
`has proposed that the FDA evaluate the results of the Phase IV trial based on the number of patients enrolled through September 15, 2005. The
`FDA is reviewing this proposal. The FDA could, among other things, accept this proposal, grant an extension of time to continue to enroll the
`trial, or institute a public hearing to withdraw marketing approval for Remodulin. If a withdrawal hearing were instituted by the FDA, United
`Therapeutics would pursue the opportunity to participate as it believes that it has exercised good faith due diligence in pursuing enrollment of
`this trial.
`
` Subcutaneous infusion of Remodulin has also been approved in the following countries:
`
`
`
`
`
`Country
`
`
`Canada
`
`Date
`October 7, 2002
`
`Approved Indication
`Long term subcutaneous treatment of pulmonary arterial hypertension in
`NYHA class III and IV patients who do not respond adequately to
`conventional therapy
`
`Primary pulmonary arterial hypertension, pulmonary arterial hypertension
`associated with connective tissue disorders and pulmonary arterial
`hypertension associated with congenital systemic to pulmonary shunts
`
`Pulmonary arterial hypertension in NYHA class III and IV to diminish
`symptoms associated with exercise
`
`Long-term treatment of primary pulmonary hypertension and pulmonary
`hypertension with connective tissue disease for NYHA class III and IV
`patients
`
`
`Israel
`
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`Australia
`
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`Switzerland
`
`
`October 31, 2002
`
`
`May 21, 2004
`
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`November 26, 2004
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` Marketing authorization applications are currently under review in France and other countries for subcutaneous Remodulin.
`
` Intravenous Remodulin
`
` 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 for pulmonary arterial hypertension. On November 24, 2004, based on data establishing intravenous Remodulin’s bioequivalence
`with the previously approved subcutaneous administration of Remodulin, the FDA approved the intravenous use of Remodulin for those not
`able to tolerate subcutaneous infusion. This approval was also conditioned upon the diligent and timely completion of the Phase IV trial
`described above, as well as its outcome. A marketing authorization application for intravenous Remodulin is under review in Canada and other
`filings are being planned.
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` Although intravenous Remodulin does not possess all the safety and convenience benefits as subcutaneously delivered Remodulin, it
`eliminates the infusion site pain and reaction currently experienced by most patients using Remodulin subcutaneously. In addition, it serves as
`an alternative to intravenous Flolan, which must be continuously refrigerated, including during infusion, while Remodulin does not require any
`refrigeration. Furthermore, the active ingredient in Flolan is highly unstable and only remains active in the body for a few 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. In addition, Remodulin can be infused continuously for up to 48 hours as opposed
`to only 24 hours for Flolan, allowing patients to prepare medication solutions every other day as opposed to daily.
`
` 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 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
`commenced a 30 patient placebo-controlled pre-pivotal clinical study of Remodulin for critical limb ischemia in 2002. Approximately 19
`patients were enrolled. The study was ended before becoming fully enrolled due to difficulties in recruiting patients for the study. United
`Therapeutics believes that more convenient formulations of Remodulin, such as an oral form, may be more appropriate for patients with
`peripheral vascular disease.
`
` UT-15C Sustained Release
`
` United Therapeutics is currently in Phase I studies of a longer-acting prostacyclin analog, known as UT-15C Sustained Release. UT-15C
`Sustained Release will be developed as an oral therapy for vascular diseases, including pulmonary arterial hypertension and peripheral vascular
`disease. A longer-acting prostacyclin formulation could enable patients to take fewer doses per day. A Phase I study in healthy human
`volunteers was conducted in 2004 and confirmed bioavailability (meaning that the drug reaches the blood stream after being swallowed orally)
`using a liquid solution of treprostinil. Additional Phase I studies were conducted in 2004 with sustained release dosage forms (tablets and
`capsules) in healthy volunteers to assess which formulation provided sustained blood plasma exposure. The Investigational New Drug
`Application for UT-15C Sustained Release was filed with the FDA on January 28, 2005.
`
` TRIUMPH
`
` During 2004, independent clinical investigators performed small uncontrolled trials of inhaled treprostinil. United Therapeutics is now
`planning a controlled trial in patients with pulmonary arterial hypertension using treprostinil, in an inhaled formulation known as TRIUMPH
`( TR eprostinil I nhalation U sed in the M anagement of P ulmonary H ypertension). Such a trial, if allowed by the FDA and European
`authorities, is expected to commence in 2005.
`
` 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 ten people as
`of December 2004 with further employee growth expected in 2005. Additionally, United Therapeutics relies on chronic care specialty
`pharmacy distributors to handle doctor and patient requests for
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`Remodulin on a non-exclusive basis in the United States. See Domestic Distribution Agreements 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 $66.1 million,
`$45.1 million and $21.2 million of revenues were earned from the sales of Remodulin in 2004, 2003 and 2002, respectively.
`
` Immunotherapeutic Monoclonal Antibodies
`
` In April 2002, Unither Pharmaceuticals, Inc., a wholly owned subsidiary of United Therapeutics, entered into an agreement with AltaRex
`Corp. (which later became known as 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 various forms of cancer, including ovarian, prostate, lung,
`breast, multiple myeloma and gastrointestinal. 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
`annually.
`
` 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 throughout the United States and are expected to be fully
`enrolled in the next 12 to 18 months. These studies could take up to two years to complete, following full enrollment, depending on trial
`patients’ relapse rates. A total of 354 patients are being recruited. As of December 31, 2004, approximately 210 patients were enrolled in the
`Phase III trials at approximately 60 centers. 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.
`
` Telemedicine Services
`
` United Therapeutics provides telemedicine services to detect cardiac arrhythmias and ischemic heart disease through its wholly owned
`subsidiary Medicomp, Inc. which was acquired in December 2000. 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, miniaturized, digital
`Decipher Holter recorder/analyzer and CardioPAL family of event monitors.
`
` 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 $5.3 million, $4.2 million and $3.9 million from the sales of telemedicine
`products and services were earned in 2004, 2003 and 2002, respectively.
`
` Glycobiology Antiviral Agents
`
` In March 2000, Unither Pharmaceuticals, Inc. (UPI), a wholly owned subsidiary of United Therapeutics, 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 fever, 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. Phase II clinical studies in patients
`infected by hepatitis C were initiated in July 2003 and were completed in October 2004. In that trial, UT-231B did not demonstrate efficacy
`against hepatitis C in a population of patients that previously failed conventional treatments. United Therapeutics is now planning a trial in
`patients who responded positively to conventional treatments in order to determine if UT-231B can prevent disease relapse in such patients.
`
`6
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` Arginine
`
` In December 2000, United Therapeutics expanded its cardiovascular focus when it acquired the assets and certain liabilities of Cooke
`Pharma, Inc., the exclusive maker 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, and Unither Pharma is the exclusive
`licensee of patents entitling it to claim that arginine is critical for maintaining vascular function and certain other arginine-based claims.
`
` Presently, the HeartBar and a related line of products are marketed directly to consumers by Unither Pharma and by independent
`distributors and the Internet. Unither Pharma is currently suing other parties believed to have violated Unither Pharma’s patents related to the
`arginine line. It has entered into a patent license with one infringer and is in negotiations with others. Unither Pharma believes that there are a
`substantial number of additional infringers and intends to vigorously enforce its patents requiring thes