`
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`UNITED THERAPEUTICS CORP
`
`FORM 10-K
`(Annual Report)
`
`Filed 2/27/2006 For Period Ending 12/31/2005
`
`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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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
`
`FORM 10-K
`
`(Mark One)
`    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934.
`For the fiscal year ended December 31, 2005
`OR
` TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934.
`For the transition period from to
`Commission file number 0-26301
`United Therapeutics Corporation
`(Exact Name of Registrant as Specified in Its Charter)
`
`Delaware
`(State or Other Jurisdiction of
` Incorporation or Organization)
`1110 Spring Street, Silver Spring, MD
`(Address of Principal Executive Offices)
`
`52-1984749
`(I.R.S. Employer
`Identification No.)
`20910
`(Zip Code)
`
`(301) 608-9292
`Registrant’s Telephone Number, Including Area Code
`(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
`Securities registered pursuant to Section 12(b) of the Act:
`None
`Securities registered pursuant to Section 12(g) of the Act:
`Common Stock, par value $.01 per share
`and associated preferred stock purchase rights
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No 
`
`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
` 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large
`accelerated filer” in Rule 12b-2 of the Securities Exchange Act. (Check one) Large accelerated filer  Accelerated filer Non-accelerated filer
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 
`The number of shares outstanding of the issuer’s common stock, par value $.01 per share, as of February 21, 2006 was 23,370,889.
`
`The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 30, 2005 as reported by the NASDAQ National
`Market was approximately $963.3 million.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`Portions of the registrant’s definitive proxy statement for the registrant’s 2006 annual shareholders meeting are incorporated by reference in Part III of this Form 10-K.
`
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`TABLE OF CONTENTS
`
`PART I
`Item 1. Business
`Item 1A. Risk Factors
`Item 1B. Unresolved Staff Comments
`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, Related Stockholder Matters and
`Issuer Purchases of Equity Securities
`Selected Financial Data
`Item 6.
`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. Other Information
`
`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
`
`PART IV
`Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
`SIGNATURES
`EXHIBITS
`Subsidiaries of the Registrant
`EX-21
`EX-23.1 Consent of Ernst & Young 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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`F-1
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`ITEM 1. BUSINESS
`
`PART I
`
`United Therapeutics is a biotechnology company focused on the development and commercialization of innovative therapeutic products
`for patients with chronic and life-threatening diseases. We are active in three therapeutic areas—cardiovascular, cancer and infectious diseases.
`Our key therapeutic platforms include:
`• 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. Our 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;
`• Immunotherapeutic Monoclonal Antibodies , which are antibodies that activate patients’ immune systems to treat cancer, including
`®
`OvaRex
`, which is being developed for the treatment of 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;
`
`Most of our resources are focused on our prostacyclin analogs for the treatment of cardiovascular disease and immunotherapeutic
`monoclonal antibodies for the treatment of cancer. Our other principal focus area is the development of glycobiology antiviral agents for the
`treatment of hepatitis and other diseases.
`
`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
`
`Our product portfolio includes the following:
`
`Product
`
` Mode of Delivery
`
`Continuous subcutaneous
`Remodulin
`
`®
`
`Remodulin
`
`®
`
`
`
`Continuous intravenous
`
`®
`
`Arginine
`Formulations
`CardioPAL
` and
` Recorders
`®
`Decipher
`OvaRex
`Remodulin
`TRIUMPH
`UT-15C Sustained
`Release
`®
`BrevaRex
` SR
`®
`Beraprost
`
`Glycobiology
`Antiviral Agents
`®
`OncoRex
`®
`ProstaRex
`®
`GivaRex
`
`
`Oral dietary supplement
`
`
`Telemedicine
`
`
`
`
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`
`
`
`
`
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`
`
`Intravenous
`Intermittent subcutaneous
`Inhaled
`Oral
`
`Intravenous
`Oral
`
`Oral
`
`Intravenous
`Intravenous
`Intravenous
`
`
` Indication/Market
`
`Pulmonary arterial hypertension
`
`Pulmonary arterial hypertension
`
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`
`
` Current Status
`
`Commercial in U.S.,
`most of Europe**,
`Australia, Canada,
`Israel, Chile and
`Argentina
`Commercial in U.S.,
`Canada and Israel.
`European reviews
`are ongoing
`
`
`Commercial
`Vascular function
`
`
`Arrhythmias and ischemic heart disease
`
`Commercial
`
`Ovarian cancer
`
`Critical limb ischemia
`
`Pulmonary arterial hypertension
`
`Pulmonary arterial hypertension and
`peripheral vascular disease
`Pancreatic cancer
`Peripheral vascular disease and
`pulmonary arterial hypertension
`Hepatitis B/C, dengue fever and
`Japanese encephalitis
`Various cancers
`Prostate cancer
`Gastrointestinal cancer
`
`
`
`
`
`
`
`
`
`
`
`
`Phase III
`Phase II
`Phase II/III
`Phase I/II
`
`Phase I
`Phase I
`
`Preclinical
`
`Preclinical
`Preclinical
`Preclinical
`
`
`
` Our Territory
`Worldwide
`
`
`
`
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`
`
`
`
`
`
`
`
`
`
`
`
`
`Worldwide
`
`Worldwide
`
`Worldwide
`
`Worldwide *
`Worldwide
`Worldwide
`Worldwide
`
`Worldwide *
`U.S./Canada
`
`Worldwide
`
`Worldwide *
`Worldwide *
`Worldwide *
`
`* Including Germany, but excluding the rest of Europe and the Middle East.
`** We have obtained approval of 23 member countries of the European Union, but are awaiting formal approval letters and pricing approvals in most of them.
`
`Remodulin
`
`In January 1997 and December 1996, we obtained worldwide rights for all indications to Remodulin, a prostacyclin analog, from Glaxo
`Wellcome, Inc. and Pharmacia & Upjohn Company (see Patent and Proprietary Rights below). In October 1999, we acquired all the
`outstanding stock of SynQuest, Inc., the manufacturer of treprostinil, the bulk active ingredient in Remodulin. In May 2002, Remodulin, our
`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 (through a vein or artery) infusion in patients who cannot tolerate subcutaneous
`infusion. Remodulin is also approved as a continuous subcutaneous infusion in most of Europe, Canada, Israel, Australia, Argentina and Chile.
`It is also approved as a continuous intravenous infusion in Canada and Israel.
`
`Pulmonary Arterial Hypertension
`
`We have focused primarily on developing Remodulin as our lead product for treating pulmonary arterial hypertension. Pulmonary arterial
`hypertension, or PAH, is a life-threatening vascular disease that
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`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. However, due to the rareness of
`pulmonary arterial hypertension and the complexities of diagnosing it, only a fraction of these patients are being treated for pulmonary arterial
`hypertension.
`
`Pulmonary arterial hypertension is associated with reduced production of the natural hormone prostacyclin in the pulmonary blood
`vessels. Prostacyclin appears to dilate blood vessels, 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 is approved for the treatment of patients with
`certain subsets of late-stage pulmonary arterial hypertension.
`
`Subcutaneous Remodulin
`
`In March 2000, we 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 showed 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, we filed a New Drug
`Application 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-III-IV (with class IV representing
`the most severely ill patients) 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 anywhere for patients with NYHA class II
`(early-stage) symptoms.
`
`We believe Remodulin provides patients with a less invasive alternative to Flolan. In contrast to Flolan, Remodulin is stable at room
`temperature and has a significantly longer duration inside 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 such as
`those 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 an intravenous catheter. Remodulin’s extended life in the body
`may also reduce 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 instead 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, we were 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
`
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`amend the due date of the final study report and 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 have been one-half enrolled by June 2004 and fully enrolled by June 2005, with a final
`study report due December 2005. These enrollment deadlines were not met, and a final study report was not submitted in December 2005.
`
`Although the Phase IV clinical trial, as amended, established deadlines and required a final report by December 2005, the FDA permitted
`an interim assessment and opportunity to terminate the Phase IV study after only 21 patients completed the study. In July 2005, the first 21
`patients completed the study and we chose to perform the interim assessment. The results of the interim assessment, as analyzed by an
`independent statistician were positive. The p value was 0.0006, meaning that the likelihood that the achieved result was incorrect is six out of
`ten thousand. Specifically, 13 of 14 patients (93%) in the Remodulin arm were able to successfully transition from Flolan and complete the
`study without the need to institute rescue therapy, compared to only 1 of 7 patients (14%) in the placebo arm. Based on this positive outcome,
`we submitted the interim study results to the FDA in July 2005, and requested permission to end the Phase IV clinical study in satisfaction of
`our Phase IV commitments. By agreement with the FDA, enrollment in the Phase IV clinical study has been suspended pending FDA review
`and acceptance of the interim study results.
`
`If the FDA does not accept the interim study results or does not otherwise agree with our assessment of the interim results, the FDA could,
`among other things, 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, we would pursue the opportunity to participate in the hearing, as we believe
`that we have exercised good faith due diligence in pursuing enrollment of this trial.
`
`Subcutaneous infusion of Remodulin has also been approved in the following countries:
`
`
`
`
`
`
`
`Approved Indication
`Date
`October 7, 2002
`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
`Primary pulmonary hypertension and pulmonary
`hypertension with connective tissue disease for NYHA
`class III and IV patients
`Primary pulmonary hypertension in NYHA class III
`patients
`Pulmonary arterial hypertension in NYHA class II-IV
`patients
`Primary pulmonary hypertension in NYHA class III
`patients
`
`
`
`
`
`
`
`
`
`
`
`
`
`
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`October 31, 2002
`
`May 21, 2004
`
`November 26, 2004
`
`March 8, 2005
`
`May 4, 2005
`
`August 10, 2005
`
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`Country
`
`Canada
`
`Israel
`
`Australia
`
`Switzerland
`
`France
`
`Argentina
`
`Austria, Belgium, Czech Republic,
`Cyprus, Denmark, Estonia, Finland,
`Germany, Greece, Hungary, Iceland,
`Italy, Latvia, Lithuania, Luxembourg,
`Netherlands, Norway, Poland,
`Portugal, Slovakia, Slovenia and
`Sweden
`Chile
`
`
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`
`January 3, 2006
`
`
`
`5
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`Pulmonary arterial hypertension in NYHA class II-IV
`patients
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`In most of Europe, the national governments must approve an official price for Remodulin before it can be marketed there by us or our
`distributors. Currently, France and Portugal are the only countries that have agreed to official prices for Remodulin and we are just now
`commencing our commercialization efforts in those countries. The receipt of official pricing approvals for the remainder of Europe may take
`up to one or two years or longer. In the meantime, we will continue to sell (but not market) Remodulin across Europe under the named-patient
`system, whereby these governments permit us to import and sell Remodulin to hospitals for use in specifically named patients.
`
`We filed applications in Ireland, Spain and the United Kingdom were filed, and later withdrew them with plans to resubmit applications in
`those countries with data from the Phase IV clinical trial discussed above. Marketing authorization applications are currently under review in
`other countries for subcutaneous Remodulin.
`
`Intravenous Remodulin
`
`In July 2003, the FDA accepted our Investigational New Drug Application 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 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.
`
`In March 2005, we commenced a 12-week placebo-controlled trial of intravenous Remodulin in patients with pulmonary arterial
`hypertension to further assess the clinical benefits of Remodulin. The trial was conducted in India and was designed to enroll up to 126
`patients. Interim results of this trial were to be analyzed after 33, 66 and 99 patients completed the 12-week trial. In August 2005, after
`enrolling 45 patients, we suspended enrollment of new patients, per the recommendation of the trial’s independent Data Safety Monitoring
`Board, which is a panel of independent experts. Preliminary results from the 45 patients were positive (p=0.008). Specifically, intravenous
`Remodulin produced an 83-meter median improvement in six-minute walk distance compared to placebo after twelve weeks.
`
`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, even while being administered to a patient by continuous
`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 while Flolan can only be infused for 24 hours, allowing patients to prepare medication solutions every
`other day as opposed to daily.
`
`Intravenous infusion of Remodulin was approved in Israel in 2006 and in Canada in 2005 for the treatment of pulmonary arterial
`hypertension. Marketing authorization applications are currently under review in other countries for intravenous Remodulin.
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`Peripheral Vascular Disease/Critical Limb Ischemia
`
`We are 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 in the United States. 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 temporary relief to patients, but do not address the
`underlying causes of peripheral vascular disease. Due to the lack of adequate treatments, approximately 200,000 limb amputations are
`performed each year on patients with critical limb ischemia.
`
`In September 1998, we 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. We 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. We believe 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
`
`We recently completed Phase I studies of a longer-acting prostacyclin analog, known as UT-15C Sustained Release. UT-15C Sustained
`Release is being 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. We filed an Investigational New Drug Application for UT-
`15C Sustained Release with the FDA on January 28, 2005. We are currently planning multi-national placebo-controlled trials in patients with
`pulmonary arterial hypertension.
`
`TRIUMPH
`
`During 2004 and 2005, independent clinical investigators in the United States and Europe performed small uncontrolled trials of inhaled
`treprostinil, the active ingredient in Remodulin. We are now conducting a 12-week placebo-controlled trial of inhaled treprostinil in at least 150
`®
`patients with pulmonary arterial hypertension who are also being treated with Tracleer
`, which is another drug used to treat pulmonary arterial
`hypertension. The trial is known as TRIUMPH-1, Tr eprostinil I nhalation U sed in the M anagement of P ulmonary H ypertension, and is
`being conducted at approximately 15 centers in the U.S. and Europe. Additional centers are expected to be added during 2006. As of
`December 31, 2005, approximately 55 patients were enrolled in the study. At February 21, 2006, the trial is approximately one-half enrolled.
`
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`Sales and Marketing
`
`Our marketing strategy for Remodulin relies upon our own staff to educate the prescribing community . During 2002, we formed an
`internal marketing team to handle these educational efforts. The team consisted of approximately 20 employees as of December 2005 with
`further employee growth expected in 2006. Additionally, we rely 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 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, we entered into six exclusive distributor agreements covering Canada, most of Europe, Australia, South America
`and Israel. We sell Remodulin to our distributors in the United States at a discount from an average wholesale price recommended by us, and to
`our international distributors at a transfer price set by us. We earned approximately $109.2 million, $66.1 million and $45.1 million of revenues
`from the sales of Remodulin in 2005, 2004 and 2003, respectively.
`
`Immunotherapeutic Monoclonal Antibodies
`
`In April 2002, we entered into an agreement with AltaRex Corp. (which later became known as AltaRex Medical Corp., a wholly owned
`subsidiary of ViRexx, Inc.) to exclusively license certain rights to a platform of five immunotherapeutic monoclonal antibodies, including
`OvaRex, BrevaRex, OncoRex, ProstaRex and GivaRex. 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
`ovarian cancer.
`
`Ovarian cancer is the deadliest form of women’s reproductive cancer 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, we initiated two identical Phase III pivotal clinical trials of OvaRex in patients with stage III/IV advanced ovarian
`cancer, called IMPACT I and II. We are conducting these studies throughout the United States at approximately 60 centers. We are recruiting a
`total of 354 patients. As of December 31, 2005, approximately 330 patients were enrolled in the IMPACT I and II trials. Patients enrolled in
`these studies have successfully completed front-line therapy, consisting of surgery and chemotherapy. The primary endpoint for these trials is
`upon a patient’s relapse, so that we can measure the time it takes for the disease to relapse. The study results will be analyzed once there have
`been at least 118 relapses in each study. Following relapse, patients will also be followed to assess survival rate.
`
`Glycobiology Antiviral Agents
`
`In March 2000, we entered into a license agreement with Synergy Pharmaceuticals, Inc. (Synergy) 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 also being synthesized.
`
`The most advanced agent identified to date is UT-231B. An Investigational New Drug Application 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. We are now conducting preclinical testing of
`additional glycobiology drug candidates for the treatment of infectious diseases.
`
`
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`
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`8
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`Telemedicine Services
`
`We provide telemedicine services to detect cardiac arrhythmias and ischemic heart disease through our wholly owned subsidiary
`Medicomp, Inc. (Medicomp), which we 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 (a 24 hour continuous test of heart rhythms), event monitoring and analysis and pacemaker
`monitoring remotely via telephone l