UNITED THERAPEUTICS CORP
`
`FORM 10-K
`
`(Annual Report)
`
`Filed 02/29/08 for the Period Ending 12/31/07
`
`
`Address
`
`
`1110 SPRING ST
`SILVER SPRING, MD 20910
`3016089292
`Telephone
`0001082554
`CIK
`Symbol UTHR
`SIC Code
`2834 - Pharmaceutical Preparations
`Industry
`Biotechnology & Drugs
`Sector
`Technology
`Fiscal Year
`12/31
`
`
`
`http://www.edgar-online.com
`© Copyright 2008, EDGAR Online, Inc. All Rights Reserved.
`Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
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`QuickLinks -- Click here to rapidly navigate through this document
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
`
`FORM 10-K
`
`
`
`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934.
`
`
`For the fiscal year ended December 31, 2007
`
`OR
`
`
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`EXCHANGE ACT OF 1934.
`
`
`For the transition period from to
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`(Mark One)
`
` (cid:1)
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`
`
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`
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`Commission file number 0-26301
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`United Therapeutics Corporation
`(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)
`
`
`
`
`
`
`52-1984749
`(I.R.S. Employer
`Identification No.)
`
`20910
`(Zip Code)
`
`(301) 608-9292
`Registrant's Telephone Number, Including Area Code
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`
`Name of each exchange on which registered
`
`Common Stock, par value $.01 per share
`and associated preferred stock purchase rights
`
`
`
`
`
`Nasdaq Global Select Market
`
`Securities registered pursuant to Section 12(g) of the Act:
`
`None
`(Title of Class)
`
` Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No
`
` Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No (cid:1)
`
` 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 (§229.405 of this chapter) is not contained herein, and will not be contained, to the best
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`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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated
`filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
`
`Large accelerated filer (cid:1)
`
`
`
`Accelerated filer
`
`
`
`Non-accelerated filer
`(Do not check if a smaller reporting
`company)
`
`
`
`Smaller reporting company
`
` Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No (cid:1)
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` The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 30, 2007, as reported by the NASDAQ National Market was
`approximately $1,158,300,000.
`
` The number of shares outstanding of the issuer's common stock, par value $0.01 per share, as of February 22, 2008, was 22,343,955
`
` Portions of the registrant's definitive proxy statement for the registrant's 2008 annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.
`
`DOCUMENTS INCORPORATED BY REFERENCE
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`TABLE OF CONTENTS
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`PART I
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`Item 1.
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`Item 1A.
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`Item 1B.
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`Item 2.
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`Item 3.
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`Item 4.
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`PART II
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`Item 5.
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`Item 6.
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`Item 7.
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`Item 7A.
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`Item 8.
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`Item 9.
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`Item 9A.
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`Item 9B.
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`PART III
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`Item 10.
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`Item 11.
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`Item 12.
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`Item 13.
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`Item 14.
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`PART IV
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`Item 15.
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`SIGNATURES
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`EXHIBITS
` EX-10.45
` EX-12.1
` EX-21
` EX-23.1
` EX-31.1
` EX-31.2
` EX-32.1
` EX-32.2
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` Business
` Risk Factors
` Unresolved Staff Comments
` Properties
` Legal Proceedings
` Submission of Matters to a Vote of Security Holders
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` Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
` 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
` Other Information
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` Directors, Executive Officers and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
` Certain Relationships and Related Transactions, and Director Independence
` Principal Accounting Fees and Services
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` Exhibits, Financial Statement Schedules
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` Distribution Agreement dated March 20, 2000, between Registrant and Accredo Therapeutics, Inc., as amended.
` Computation of Earnings to Fixed Charges
` Subsidiaries of the Registrant
` Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
` Rule 13a-14(a) Certification of CEO
` Rule 13a-14(a) Certification of CFO
` Section 1350 Certification of CEO
` Section 1350 Certification of CFO
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`ITEM 1. BUSINESS
`
`
`PART I
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` We are a biotechnology company focused on the development and commercialization of unique products to address the unmet medical
`needs of patients with chronic and life-threatening cardiovascular and infectious diseases and cancer.
`
` Our key therapeutic platforms are:
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`•
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`•
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`•
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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. Our lead prostacyclin analog is Remodulin®, a treprostinil-based compound
`for the treatment of cardiovascular disease. Remodulin (treprostinil sodium) Injection, has been approved by the U.S. Food and
`Drug Administration (FDA) for the treatment of pulmonary arterial hypertension (PAH) in patients with New York Heart
`Association (NYHA) Class II-IV (moderate to severe) symptoms to diminish symptoms associated with exercise, and in other
`countries for similar use, and in most of Europe for the treatment of NYHA Class III patients with idiopathic or familial PAH.
`Our inhaled and oral formulations of treprostinil are in the later stages of development. We are also developing Beraprost-MR,
`another prostacyclin analog, for the treatment of cardiovascular disease;
`
`Glycobiology Antiviral Agents , which are a class of small molecules that have shown promise against a broad range of viruses,
`such as hepatitis C; and
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`Monoclonal Antibodies , which are antibodies that activate patients' immune systems to treat cancer. This platform includes the
`3F8 and 8H9 murine antibodies, which are being developed for the treatment of neuroblastoma and metastatic brain cancer,
`respectively.
`
` We devote most of our resources to developing products within these three therapeutic platforms. We also devote resources to the
`commercialization and further development of telemedicine products and services, principally for the detection of cardiac arrhythmias.
`
` We generate revenues from sales of Remodulin, telemedicine products and services and, until September 2007, from the sale of arginine
`products. We field a sales and marketing organization that supports the commercial availability of Remodulin in the United States, Canada,
`Europe and other countries, aided by specialty pharmaceutical distributors.
`
` United Therapeutics was incorporated in Delaware in June 1996. Our principal executive offices are located at 1110 Spring Street, Silver
`Spring, Maryland 20910.
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`United Therapeutics' Products
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` Our product portfolio includes the following as of December 31, 2007:
`
`Our Products
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`Mode of Delivery
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`Indication/Market
`
`Current Status
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`Our Territory
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` Pulmonary arterial hypertension
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`Pulmonary arterial hypertension
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`Cardiac arrhythmias and ischemic heart
`disease
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`Pulmonary arterial hypertension
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`Pulmonary arterial hypertension
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`Improved transplant outcome
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`Pulmonary arterial hypertension
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`Neuroblastoma
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`Peripheral vascular disease
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`Cardiac arrhythmias and ischemic heart
`disease
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`Hepatitis C
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`Idiopathic pulmonary fibrosis
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`Pulmonary arterial hypertension
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`Metastatic brain cancer
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`Hepatitis C and other infectious diseases
`
`
` Commercial in the U.S., most of the
`European Union, Canada, Israel,
`Australia, Mexico, Argentina and
`Peru*
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`Commercial in the U.S., Canada,
`Israel, Mexico, Argentina and Peru.
`European reviews are ongoing
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`Commercial
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`Phase III
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`Phase III
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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 II
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`Phase I
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`Phase I
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`Phase I
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`Phase I
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`Pre-Clinical
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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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`North America/Europe
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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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`Product
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`Remodulin
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`Remodulin
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` Continuous
`subcutaneous
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`Continuous
`intravenous
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`CardioPAL® SAVI and Decipher Cardiac
`Monitors
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`Inhaled Treprostinil
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`Oral Treprostinil
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`Remodulin
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`Beraprost—MR
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`3F8 MAb
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`Oral Treprostinil
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`CardioPAL SAVI Wireless Cardiac Event
`Monitors
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`Miglustat
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`Inhaled Treprostinil
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`Inhaled Treprostinil with AERx Essence®
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`8H9 MAb
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`Glycobiology Antiviral Agents
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`Telemedicine
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`Inhaled
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`Oral
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`Intravenous
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`Oral
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`Intravenous
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`Oral
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`Telemedicine
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`Oral
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`Inhaled
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`Inhaled
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`Intravenous
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`Oral
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`*
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`We have obtained approval in 23 member countries of the European Union (Austria, Belgium, Czech Republic, Denmark, Estonia, France, Germany, Greece, Iceland, Italy,
`Luxembourg, Netherlands, Portugal, Cyprus, Finland, Hungary, Latvia, Lithuania, Norway, Poland, Slovakia, Slovenia, and Serbia), and have received formal approval letters and
`pricing approvals in most of them.
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`Products to Treat Cardiovascular Disease
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`Remodulin
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` Our lead product for treating PAH is Remodulin (treprostinil sodium) Injection, the main ingredient of which is treprostinil sodium, a
`prostacyclin analog. 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 $200.9 million, $152.5 million and $109.2 million
`of revenues, representing 95%, 96% and 94% of our total revenues from sales of Remodulin in 2007, 2006 and 2005, respectively. We obtained
`worldwide rights for all indications to Remodulin from GlaxoSmithKline PLC (formerly Glaxo Wellcome, Inc.) in January 1997 and from
`Pfizer, Inc. (formerly Pharmacia & Upjohn Company) in December 1996. In May 2002, Remodulin was approved by the FDA as a continuous
`subcutaneous (under the skin) infusion for the treatment of PAH in patients with NYHA Class II-IV (moderate to severe) symptoms. In
`November 2004, our FDA approval was expanded to permit continuous intravenous (through a vein or artery) infusion in patients who cannot
`tolerate subcutaneous infusion. In March 2006, our FDA approval was further expanded to allow patients to transition to Remodulin from
`Flolan® (epoprostenol), the first FDA-approved prostacyclin for PAH. Remodulin is also approved as a continuous subcutaneous infusion
`treatment for various forms of PAH in 33 countries throughout the world, and as a continuous intravenous infusion treatment for various forms
`of PAH in Canada, Israel, Mexico, Peru and Argentina. Applications for approval for both subcutaneous and intravenous Remodulin infusion are
`under review in many other countries. In addition, we are continuing to work on expanding commercialization to new territories such as Japan
`and South Korea.
`
` PAH is a life-threatening vascular disease that affects the blood vessels in the lungs, known as the pulmonary blood vessels, which
`increases blood pressure in the artery between the heart and the lungs known as the pulmonary artery. PAH 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 increases strain on the right side of the heart as it tries to pump blood to the lungs. It is estimated that PAH affects between 100,000 and
`200,000 individuals worldwide. In recent years, as awareness of PAH has grown, we have seen an increase in the number of people diagnosed
`with the disease. However, because of the rareness of PAH and the complexities of diagnosing it, only a small fraction of these people are being
`treated. Many organizations are conducting research to develop easier, less invasive methods to diagnose PAH. If this research is successful,
`more patients could be diagnosed at an earlier stage.
`
` The complexity of diagnosing PAH is due in part to the current uncertainties surrounding the etiology and pathophysiology of the condition.
`Currently, treatment of PAH focuses on three distinct molecular pathways that have been implicated in the disease process. These are the
`endothelin pathway, the nitric oxide pathway, and the prostacyclin pathway. Patients with PAH have been shown to have elevated levels of
`endothelin, a naturally occurring substance in the body that causes constriction of the pulmonary blood vessels. Therefore, one established
`therapeutic approach has been to block the action of endothelin with drugs that are known as endothelin receptor antagonists. Patients with PAH
`have also been shown to have reduced levels of the enzyme responsible for producing nitric oxide (NO), a naturally occurring substance in the
`body that has the effect of relaxing pulmonary blood vessels. NO produces this effect by increasing intracellular levels of an intermediary known
`as cGMP in cells. Therefore, another established therapeutic approach has been to inhibit the degradation of cGMP, using drugs that are termed
`phosphodiesterase 5 (PDE5) inhibitors. Finally, patients with PAH have been shown to have reduced levels of prostacyclin, a naturally occurring
`substance that has the effect of relaxing the pulmonary blood vessels, preventing platelet aggregation, and inhibiting the proliferation of smooth
`muscle cells in pulmonary vessels. Therefore, drugs that mimic the action of prostacyclin, termed prostacyclin analogs, are also established PAH
`treatments. Because any or all of these three
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`pathways may be operative in a patient, these three classes of drugs are used alone or in combination to treat patients with PAH.
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` A long-term outcome study published in the European Respiratory Journal (vol. 28, Number 6; December 2006) demonstrated improved
`survival with Remodulin therapy when compared to predicted survival (NIH registry formula) over a four-year period. One-, two-, three- and
`four-year survival was 87%, 78%, 71%, and 68%, respectively, for all 860 patients (including 130 patients who received combination therapy)
`and 88%, 79%, 73%, and 70%, respectively, for patients receiving only treprostinil monotherapy (730 patients). In patients with idiopathic PAH
`for whom baseline hemodynamics were available (332 patients), survival was 91%, 82%, 76%, and 72% at years 1-4, respectively. This
`compares to respective predicted survival estimates of 69%, 56%, 46%, and 38% over the four-year period based on the NIH registry formula.
`
` Flolan, the first FDA-approved synthetic prostacyclin for PAH, is 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 PAH. We believe Remodulin
`provides patients with a less invasive alternative to Flolan. In contrast to Flolan, Remodulin is stable at room temperature and lasts significantly
`longer 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. Subcutaneous delivery of Remodulin also eliminates the risk
`of central venous catheter infection and related hospitalization associated with an IV infusion. Remodulin's extended presence in the body may
`also reduce the risk of rebound PAH, and possibly death, if treatment is abruptly interrupted. The stability of Remodulin also allows it to be
`packaged as an aqueous solution, eliminating the need for patients to mix the drug one or more times each day, as is required with Flolan.
`Treprostinil, the active ingredient of Remodulin, is highly soluble in an aqueous solution and therefore Remodulin can be manufactured at highly
`concentrated solutions. This allows therapeutic concentrations of Remodulin to be delivered at low flow rates via miniaturized infusion pumps
`for both subcutaneous and intravenous infusion. Lastly, Remodulin does not require the patient to continuously keep the drug cool even during
`infusion. This eliminates the need for cooling packs or refrigeration to keep it stable, as is required with Flolan due to Flolan's chemical
`instability at room temperature.
`
` There are noteworthy adverse events associated with Remodulin infusion. When infused subcutaneously, Remodulin causes infusion site
`pain and reaction in most patients to 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 central venous catheter, similar to Flolan.
`When delivered intravenously, Remodulin bears the risk of a bloodstream infection known as sepsis, as does 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, unlike Flolan which must be
`mixed and refilled every 24 hours.
`
`FDA Review of 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 PAH. 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 important clinical endpoints, including a composite
`index that measured exercise capacity and shortness of breath, cardiopulmonary hemodynamics 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. In May 2002, the FDA approved
`Remodulin, under Subpart H regulations, as a continuous subcutaneous infusion for the treatment of PAH in patients with NYHA class II-IV
`symptoms (with class IV representing the most
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`severely ill patients) to diminish symptoms associated with exercise. Remodulin may be prescribed for all types of PAH and is the only PAH
`treatment approved for NYHA class II, III and IV patients.
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`FDA Review of 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 PAH. A bioequivalence study in 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 that there were no additional safety concerns associated with chronic intravenous infusion.
`
` On January 30, 2004, a supplemental New Drug Application was filed with the FDA to request approval for intravenous use of Remodulin
`for PAH. 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.
`
` Results in a prospective open-label study reported in January 2007 demonstrate that rapid transition from intravenous Flolan to intravenous
`Remodulin was achieved in 12 PAH patients with no serious adverse events and baseline clinical status was maintained over 12 weeks. The
`patients were transitioned from Flolan to intravenous Remodulin by a direct switch from a Flolan medication cassette to a Remodulin medication
`cassette. Rapid transition to Remodulin was achieved without serious adverse events. All patients reported fewer prostacyclin-related side effects
`with Remodulin and remained on Remodulin after study completion. The study demonstrated that stable patients with PAH can be safely
`transitioned from Flolan to intravenous Remodulin using a rapid switch protocol.
`
` Although intravenous Remodulin does not possess all the safety and convenience benefits of subcutaneous Remodulin, it has one important
`advantage: it eliminates infusion site pain and reaction, a common side effect of subcutaneous Remodulin. Many patients are unsuccessful in
`managing such infusion site pain even when using available pain management techniques. Intravenous Remodulin has many beneficial
`characteristics that differentiate it from intravenous Flolan. As intravenous Remodulin does not require refrigeration, it serves as an alternative to
`Flolan which must be continuously refrigerated, even while being administered to a patient by continuous infusion. Furthermore, Remodulin
`remains active for a few hours, whereas Flolan is highly unstable and only remains active in the body for a few minutes. Because Remodulin
`remains active longer, it may reduce the risk of rebound PAH, a severe recurrence of the disease in the case of inadvertent therapy interruption.
`Intravenous Remodulin can be infused continuously for up to 48 hours while Flolan can only be infused for 24 hours. This allows patients to mix
`medication solutions every other day as opposed to daily. Also, because Remodulin can be made in highly concentrated solutions, a wide variety
`of pump options, including miniaturized pumps, is available to patients.
`
` In February 2007, the Scientific Leadership Committee (SLC) of the Pulmonary Hypertension Association announced new guidance related
`to the treatment of PAH patients on long-term intravenous therapy. The SLC guidance was issued in response to the release of a slide
`presentation prepared by researchers with the U.S. Centers for Disease Control and Prevention (CDC) entitled " Bloodstream infections among
`patients treated with intravenous epoprostenol and intravenous treprostinil for pulmonary arterial hypertension, United States 2004—2006 ".
`These slides accompanied a presentation to the SLC and were subsequently published in the March 2, 2007, issue of the CDC's Morbidity and
`Mortality Weekly Report . The slides and report were prepared in connection with a CDC retrospective inquiry at seven centers into a report of
`increased blood stream infections (sepsis), particularly gram-negative blood stream infections, among PAH patients treated with intravenous
`Remodulin as compared to intravenous Flolan. The SLC guidance statement noted that the CDC observations were
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`hypothesis-generating and did not permit definitive or specific conclusions. The SLC reminded physicians of the need to be aware of the range
`of possible gram negative and gram positive infectious organisms in patients with long-term central catheters and to treat them appropriately.
`The risk of sepsis is already noted in the Remodulin package insert. In February 2008, the FDA revised the Remodulin package insert to more
`fully describe the associated infection risk and appropriate techniques to be practiced when preparing and administering Remodulin
`intravenously.
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`International Regulatory Review of Subcutaneous and Intravenous Remodulin
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` Remodulin for subcutaneous use is approved in countries throughout the world. We used the mutual recognition process to obtain approval
`of subcutaneous Remodulin from European Union member countries. The mutual recognition process is described in detail in the section entitled
`Government Regulation below. The mutual recognition process for subcutaneous Remodulin was completed in August 2005, with positive
`decisions received from most European Union countries. We withdrew our applications in Ireland, Spain and the United Kingdom following a
`request for additional documentation from these countries. We anticipate resubmitting these applications following intravenous Remodulin
`approval in Europe. Licenses and pricing approvals have been received in most European Union countries. In addition, we have submitted a
`variation of the license for approval of intravenous Remodulin in the European Union through the mutual recognition process, as we are required
`to follow the same approval process used for the approval of subcutaneous Remodulin. The license variation for intravenous Remodulin is
`currently under review by the host nation, France, which has notified us that it is not satisfied with the filing we have made. We will work to
`address these concerns and believe that we will eventually receive commercial approval for intravenous Remodulin in at least some European
`countries. In the meantime, we will continue to sell (but not market) Remodulin in European Union countries where we are not approved under
`the named-patient system, which allows us to import Remodulin into European Union countries for sale to hospitals for use in treating
`specifically identified patients.
`
`Sales and Marketing
`
` Our marketing strategy for Remodulin relies upon our dedicated sales and marketing team to educate the prescriber community and to reach
`patients suffering from PAH. The sales and marketing team consisted of approximately 65 employees as of December 31, 2007, up from
`approximately 20 employees as of December 31, 2006, with further growth expected in 2008. Our marketing team is divided into two
`approximately equal groups. The first group is primarily responsible for national and large regional medical practice accounts currently
`prescribing Remodulin. The second group is primarily responsible for the smaller, local, community-oriented medical practices not currently
`prescribing Remodulin. Additionally, we rely on specialty pharmacy distributors to handle physician and patient requests for Remodulin on a
`non-exclusive basis in the United States. For additional information, see the section entitled Domestic Distribution Agreements below. These
`specialty distributors are experienced in all aspects of chronic therapies, including patient care, the sale and distribution of medicines and
`reimbursement from insurance companies and other payers. Outside of the United States, we have entered into exclusive distributor agreements
`covering most of Europe, South America, parts of Asia and Israel. Sales in Canada are currently conducted under the management of our wholly-
`owned subsidiary, Unither Biotech Inc., through a national specialty pharmaceutical wholesaler. We are working with our current distributors to
`expand Remodulin sales into other countries in which they have distribution rights.
`
`Domestic Distribution of Remodulin
`
` To provide for marketing, promotion and distribution of subcutaneous and intravenous Remodulin in the United States, we entered into
`non-exclusive distribution agreements with CuraScript, Inc. (a
`
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`wholly-owned subsidiary of Express Scripts, Inc., formerly Priority Healthcare Corporation), Accredo Therapeutics, Inc. (a wholly-owned
`subsidiary of Medco Health Solutions, Inc.), and Caremark, Inc. (a wholly-owned subsidiary of CVS Corporation). Effective January 1, 2007,
`Accredo also became the exclusive U.S. distributor for Flolan. Our distributors are responsible for assisting patients with obtaining
`reimbursement for the cost of Remodulin therapy and providing other support services. Under our distribution agreements, we sell Remodulin to
`our distributors at a discount from an average wholesale price recommended by us. These agreements provide for automatic renewal for
`additional two-year periods, in the case of CuraScript, and one-year periods in the case of Accredo and Caremark, unless either party to the
`agreements provides notice of termination. Due to changes in the regulatory environment, i.e., changes in the regulatory requirements, from time
`to time we update the contracts with our distributors. None of the changes have had or are expected to have a significant impact on our
`operations or relationships with these distributors, as these changes tend to be in the ordinary course of business. In addition, none of our current
`agreements contain the distribution rights for inhaled or oral treprostinil in the United States. If these distributor agreements expire or terminate,
`we may, under certain circumstances, be required to repurchase unsold Remodulin inventory held by the distributors. We have also established a
`patient assistance program in the United States, which provides qualified uninsured or underinsured patients with Remodulin at no charge.
`
`International Distribution of Remodulin
`
` We currently sell Remodulin to six distributors who have distribution rights for subcutaneous and intravenous Remodulin in European
`Union countries, other non-European Union countries, South America, and Israel. In the European markets where we are not licensed, we sell
`(but do not market) Remodulin under the named-patient system in which patients typically are approved for therapy on a case by case review by
`a national medical review board. We are working on expanding our sales of subcutaneous and intravenous Remodulin into new territories
`outside of the United States through our existing distributors and new distributors. In March 2007, we entered into a distributor agreement with
`Mochida Pharmaceutical Co., Ltd. (Mochida) to exclusively distribute subcutaneous and intravenous Remodulin in Japan. In addition, Grupo
`Ferrer Internacional, S.A. (Grupo Ferrer) has been actively working toward commencing commercial sales of Remodulin in Taiwan and South
`Korea, territories to which Grupo Ferrer w