UNITED THERAPEUTICS CORP
`
`FORM 10-K
`
`(Annual Report)
`
`Filed 02/28/12 for the Period Ending 12/31/11
`
`
`Address
`
`
`1040 SPRING ST
`SILVER SPRING, MD 20910
`3016089292
`Telephone
`0001082554
`CIK
`Symbol UTHR
`SIC Code
`2834 - Pharmaceutical Preparations
`Industry
`Biotechnology & Drugs
`Sector Healthcare
`Fiscal Year
`12/31
`
`http://www.edgar-online.com
`© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
`Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
`
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`Use these links to rapidly review the document
`TABLE OF CONTENTS
`ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
`
`Table of Contents
`
`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.
`
` (cid:1)
`
`
`
`
`For the fiscal year ended December 31, 2011
`
`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)
`
`1040 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
`Common Stock, par value $.01 per share
`and associated preferred stock purchase rights
`
`
`
`
`
`Name of each exchange on which registered
`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
`
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`(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 whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted
`pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
`files). 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
`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, 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)
`
` The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 30, 2011, as reported by the NASDAQ Global Select Market
`was approximately $2,783,978,000
`
` The number of shares outstanding of the issuer's common stock, par value $0.01 per share, as of February 23, 2012, was 53,626,744.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
` Portions of the registrant's definitive proxy statement for the registrant's 2012 annual meeting of shareholders scheduled to be held on June 26, 2012, are incorporated by reference in
`Part III of this Form 10-K.
`
`
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`Table of Contents
`
`
`TABLE OF CONTENTS
`
`
` Business
` Risk Factors
` Unresolved Staff Comments
` Properties
` Legal Proceedings
` Mine Safety Disclosures
`
`
`
`3
`
` 38
` 56
` 56
` 56
` 56
`
`
` 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
`
`
`
`
`
`
`
` 57
` 59
`
`
` 60
` 83
` F-1
`
`
` 85
` 85
` 85
`
`
` Directors, Executive Officers and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and
`Related Stockholder Matters
` 88
` Certain Relationships and Related Transactions, and Director Independence 88
` Principal Accounting Fees and Services
` 88
`
`
`
`
` 86
` 87
`
`
`PART I
`Item 1.
`Item 1A.
`Item 1B.
`Item 2.
`Item 3.
`Item 4.
`
`PART II
`Item 5.
`
`Item 6.
`Item 7.
`
`Item 7A.
`Item 8.
`Item 9.
`
`Item 9A.
`Item 9B.
`
`PART III
`Item 10.
`Item 11.
`Item 12.
`
`Item 13.
`Item 14.
`
`PART IV
`Item 15.
`
` Exhibits, Financial Statement Schedules
`
`SIGNATURES
`
`2
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`
`
` 89
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`
` 90
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`ITEM 1. BUSINESS
`
`
`PART I
`
` United Therapeutics Corporation is 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 conditions.
`
` Our key therapeutic products and product candidates include:
`
`•
`
`•
`
`•
`
`•
`
`•
`
`Prostacyclin Analogues. Prostacyclin analogues 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 product is Remodulin® (treprostinil) Injection
`(Remodulin) to be administered subcutaneously or intravenously for the treatment of pulmonary arterial hypertension (PAH). The
`United States Food and Drug Administration (FDA) initially approved Remodulin in 2002 for subcutaneous (under the skin)
`administration. Subsequently, the FDA broadened its approval of Remodulin for intravenous (in the vein) use and for the
`treatment of patients who require transition from Flolan® (epoprostenol), the first FDA-approved prostacyclin therapy for PAH.
`In addition to the United States, Remodulin is approved in 36 other countries, most of which have approved both routes of
`administration. In July 2009, the FDA approved Tyvaso® (treprostinil) Inhalation Solution (Tyvaso), an inhaled prostacyclin
`therapy for the treatment of PAH. We commenced commercial sales of Tyvaso in the third quarter of 2009. In December 2011,
`we submitted a new drug application (NDA) to the FDA for treprostinil diethanolamine sustained release tablets (oral treprostinil)
`for the treatment of PAH. Our subsidiary, Lung LLC, is separately developing modified release beraprost (beraprost-MR),
`another type of oral prostacyclin analogue, for the treatment of PAH.
`
`Phosphodiesterase Type 5 (PDE-5) Inhibitor. PDE-5 inhibitors act to inhibit the degradation of cyclic guanosine monophosphate
`(cGMP) in cells. cGMP is activated by nitric oxide (NO) to effect relaxation of vascular smooth muscle. Our PDE-5 inhibitor
`product is Adcirca® (tadalafil) tablets (Adcirca), a once-daily oral therapy for the treatment of PAH. We acquired certain
`exclusive commercialization rights to Adcirca from Eli Lilly and Company (Lilly) in 2008. In May 2009, the FDA approved
`Adcirca for the treatment of PAH. We commenced commercial sales of Adcirca in the third quarter of 2009.
`
`Monoclonal Antibodies (MAbs). MAbs act by targeting tumor-associated antigens on cancer cells to activate a patient's immune
`system against the cancer cells. We are developing the antibody Ch14.18 MAb for the treatment of neuroblastoma, under an
`agreement with the National Cancer Institute. We are also developing another antibody, 8H9 MAb, for the treatment of metastatic
`brain cancer, under an agreement with Memorial Sloan-Kettering Cancer Center.
`
`Glycobiology Antiviral Agents. Glycobiology antiviral agents are a novel class of small, sugar-like molecules that have shown
`pre-clinical indications of efficacy against a broad range of viruses. In September 2011, we were awarded a contract from the U.S.
`National Institute of Allergy and Infectious Diseases for studies directed at the development of a broad spectrum antiviral drug
`based on our glycobiology antiviral platform.
`
`Cell-Based Therapy. In June 2011, we entered into a license agreement with Pluristem Ltd. (Pluristem) to develop and
`commercialize its cell-based product known as PLacental eXpanded (PLX) cells for the treatment of pulmonary hypertension
`using Pluristem's proprietary cell technology. We are currently conducting preclinical toxicology and pharmacology studies to
`support a potential investigational new drug application for the treatment of PAH.
`
` We devote most of our research and development resources to developing these key products and product candidates.
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` We generate revenues primarily from the sale of Remodulin, Tyvaso and Adcirca (which we refer to as our commercial products). Our sales
`and marketing staff supports the availability of our commercial products in the countries in which they are approved. These efforts are
`supplemented by our specialty pharmaceutical distributors in the United States and our other distributors internationally.
`
` United Therapeutics was incorporated in Delaware in June 1996. Our principal executive offices are located at 1040 Spring Street, Silver
`Spring, Maryland 20910. We also maintain executive offices at 55 T.W. Alexander Drive, Research Triangle Park, North Carolina 27709.
`
` Unless the context requires otherwise or unless otherwise noted, all references in this Annual Report on Form 10-K to "United
`Therapeutics" and to the "company", "we", "us" or "our" are to United Therapeutics Corporation and its subsidiaries.
`
`Our Products
`
` Our product portfolio includes the following:
`
`Product
`Remodulin
`
`Mode of
`Delivery
`
` Continuous
`subcutaneous
`
`
`
`
`Indication/Market
` Pulmonary arterial
`hypertension
`
`
`Remodulin
`
`
`Tyvaso
`
`
`Adcirca
`
`
`Oral Treprostinil
`(UT-15C)
`
`Oral Treprostinil
`(UT-15C)
`Combination
`Therapy
`
`Ch14.18 MAb
`
`Remodulin
`
`
`Beraprost-MR
`
`
`8H9 MAb
`
`IW001
`
`
`
`
`
`
`
`
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`Continuous
`intravenous
`
`
`Inhaled
`
`
`Oral
`
`
`Oral
`
`
`Oral
`
`
`
`
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`
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`
`
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`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
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`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`Intravenous
`
`Continuous
`intravenous via
`implantable pump
`
`
`Oral
`
`
`Intravenous
`
`Oral
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Neuroblastoma
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`Metastatic brain cancer
`
`Idiopathic pulmonary
`fibrosis and primary
`graft dysfunction
`
`Current Status
`
` Approved in the U.S., most of Europe*,
`Argentina, Australia, Canada, Chile,
`Israel, Mexico, Peru, Saudi Arabia,
`South Korea, Taiwan and Venezuela;
`commercial sales in most of these
`countries
`
`Commercial in the U.S., Canada, Israel,
`Switzerland, Argentina and Saudi
`Arabia; also approved in most of
`Europe*, Mexico, Peru and South Korea
`
`
`
`Commercial in the U.S.; Phase III in
`Europe
`
`Commercial in the U.S.
`
`
`
`
`
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`NDA filed with FDA
`
`
`Phase III
`
`
`Phase III
`
`Phase III
`
`
`Phase I
`
`
`Phase I
`
`Phase I
`
`4
`
`Our Territory
`Worldwide
`
`
`Worldwide
`
`
`Worldwide
`
`
`United States
`
`
`Worldwide
`
`
`Worldwide
`
`
`Worldwide
`
`United States, United
`Kingdom, France,
`Germany, Italy and
`Japan
`
`North America,
`Europe, Mexico, South
`America, Egypt, India,
`South Africa and
`Australia
`
`Worldwide
`
`Worldwide
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`
`Mode of
`Delivery
`Product
`
`Glycobiology Antiviral Agents Oral
`
`
`PLX Cells
`
`Pulmonary Tissue Replacement
`and Remodeling
`
`
`
`
`
`
`
`
`Intravenous
`
`Various
`
`
`
`
`
`
`
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`
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`
`
`Indication/Market
` Broad-spectrum agents against viral
`infectious diseases
`
`Pulmonary hypertension
`
`End-stage lung disease
`
`
`
`
`Current
`Status
`
`
` Pre-Clinical
`
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`
`
`Pre-Clinical
`
`
`
`Pre-Clinical
`
`Our Territory
`Worldwide
`
`
`Worldwide
`
`Worldwide
`
`*
`
`We have obtained approval for subcutaneous Remodulin in 23 member countries of the European Economic Area (EEA), as well as other non-EEA countries in
`Europe, and have received pricing approval in most of these countries. We have obtained approval for intravenous Remodulin in 23 EEA countries and
`Switzerland, and will submit pricing applications in select countries based on market factors.
`
`Products to Treat Cardiopulmonary Diseases
`
`Pulmonary Arterial Hypertension
`
` PAH is a life-threatening disease that affects the blood vessels in the lungs and is characterized by increased pressure in the pulmonary
`arteries, which are the blood vessels leading from the heart to the lungs. The elevated pressure in the pulmonary arteries strains the right side of
`the heart as it pumps blood to the lungs. This eventually leads to right heart failure and, ultimately, death. PAH is characterized by structural
`changes in blood vessel walls, aggregation of platelets and alteration of smooth muscle cell function. 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, due to the rarity of the disease and the complexity of diagnosing it, only a small fraction of patients with
`PAH are being treated. There is scientific interest in identifying easier, less invasive methods of diagnosing PAH. If this research is successful,
`more patients could be diagnosed at an earlier stage of the disease.
`
` Currently, treatment of PAH focuses on three distinct molecular pathways that have been implicated in the disease process: the prostacyclin
`pathway, the nitric oxide (NO) pathway, and the endothelin (ET) pathway. The three classes of drugs that target these three pathways are:
`
`•
`
`•
`
`•
`
`Prostacyclin Analogues. 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 the pulmonary vessels. Therefore, drugs that mimic the action of prostacyclin, known as
`prostacyclin analogues, are established PAH treatments.
`
`PDE-5 Inhibitors. Patients with PAH have also been shown to have reduced levels of the enzyme responsible for producing NO,
`a naturally occurring substance in the body that causes relaxation of the pulmonary blood vessels. NO produces this effect by
`increasing intracellular levels of an intermediary known as cGMP. Therefore, another established therapeutic approach has been
`to inhibit the degradation of cGMP, using drugs that are known as PDE-5 inhibitors.
`
`Endothelin Receptor Antagonists. PAH patients have also been shown to have elevated levels of endothelin-1, a naturally
`occurring substance in the body that causes constriction and structural changes of the pulmonary blood vessels. Therefore, another
`established therapeutic approach has been to block the action of endothelin with drugs that are known as endothelin receptor
`antagonists (ETRAs).
`
`Because any or all of the three pathways may be therapeutic targets in a patient, these three classes of drugs are used alone or in combination to
`treat patients with PAH. We currently market drugs in two
`
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`of these three classes. Remodulin and Tyvaso are prostacyclin analogues, and Adcirca is a PDE-5 inhibitor.
`
`Remodulin
`
` Our lead product for treating PAH is Remodulin, the active pharmaceutical ingredient of which is a prostacyclin analogue known as
`treprostinil. We sell Remodulin to our specialty pharmaceutical distributors in the United States and to our international distributors. We
`recognized approximately $430.1 million, $403.6 million and $331.6 million in Remodulin revenues, representing 58%, 68% and 92% of our net
`revenues, for the years ended December 31, 2011, 2010 and 2009, respectively. In May 2002, Remodulin was approved by the FDA as a
`continuous subcutaneous infusion for the treatment of PAH in patients with New York Heart Association (NYHA) Class II-IV (moderate to
`severe) symptoms. In November 2004, the FDA expanded its approval to permit continuous intravenous infusion of Remodulin for patients who
`cannot tolerate subcutaneous infusion. In March 2006, the FDA expanded its approval to include transition of patients to Remodulin from Flolan
`(epoprostenol), the first FDA-approved prostacyclin therapy for PAH. In January 2007, the results of a prospective, open-label study
`demonstrated that stable patients with PAH can be safely transitioned from Flolan to intravenous Remodulin using a rapid switch protocol.
`Remodulin is the only prostacyclin analogue approved for patients with NYHA class II-IV symptoms.
`
` Outside of the United States, Remodulin is approved for treatment of PAH in 36 countries by continuous subcutaneous administration.
`Remodulin is also approved for treatment of PAH by continuous intravenous administration in 31 countries outside the U.S., including 23
`countries in Europe that granted approval in December 2011. Applications for approval of both subcutaneous and intravenous Remodulin are
`under review in other countries. We continue to work toward commercializing Remodulin in new territories, including China (application filed
`in September 2011) and Japan (filing anticipated in late 2012 or early 2013).
`
` We believe Remodulin offers many competitive advantages over Flolan, which is delivered continuously through a surgically implanted
`intravenous catheter connected to an external pump and is not approved for subcutaneous use. Flolan is approved for the treatment of patients
`with certain subsets of late-stage PAH. Generic formulations of Flolan are also available. We believe subcutaneous Remodulin provides patients
`with a less invasive alternative to Flolan and its equivalents. In contrast to Flolan, Remodulin is stable at room temperature and lasts significantly
`longer inside the human body. These attributes allow for potentially safer and more convenient drug delivery to patients. Unlike Flolan,
`Remodulin can be delivered by subcutaneous infusion with a pager-sized miniature pump. Subcutaneous delivery of Remodulin also eliminates
`the risk of central venous catheter infection and the hospitalization required to begin intravenous 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, so patients do not have to mix the drug, as they do with Flolan. Remodulin 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. Treprostinil, the active
`ingredient in Remodulin, is highly soluble in an aqueous solution, which enables us to produce Remodulin in 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 keep the drug cool during infusion. This eliminates the need for cooling
`packs or refrigeration to keep Remodulin stable, as is required with Flolan due to Flolan's chemical instability at room temperature.
`
` In April 2008, Teva Pharmaceuticals Industries Ltd. (Teva) announced that the FDA approved its version of generic epoprostenol (the
`active ingredient in Flolan) for the treatment of PAH, which has all of the attributes of Flolan discussed above. In June 2008, the FDA approved
`another intravenous version of epoprostenol, developed by GeneraMedix, Inc. (GeneraMedix), which is stable at room
`
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`temperature but shares most of Flolan's other attributes, including risk of central venous catheter infection, required hospitalization at the start of
`treatment, short half-life (which increases risk of rebound PAH), mixing requirements, daily pump refills and large pump size. In February 2009,
`GeneraMedix licensed the commercial rights for its epoprostenol therapy to Actelion Pharmaceuticals Ltd (Actelion), marketed as Veletri®.
`Actelion also markets Tracleer®, an ETRA, and Ventavis®, an inhaled prostacyclin, for the treatment of PAH.
`
` In February 3, 2012, we received notice of an abbreviated new drug application by Sandoz Inc. requesting FDA approval to market a
`generic version of the 10 mg/mL strength of Remodulin. For further details, see the section below entitled Governmental Regulation—Hatch-
`Waxman Act .
`
` There are noteworthy adverse events associated with Remodulin. When infused subcutaneously, Remodulin causes varying degrees of
`infusion site pain and reaction (redness and swelling) in most patients. Patients who cannot tolerate the site pain related to use of subcutaneous
`Remodulin may instead use intravenous Remodulin. Intravenous Remodulin is delivered continuously by an external pump through a surgically
`implanted central venous catheter, similar to Flolan, Veletri and generic epoprostenol. When delivered intravenously, Remodulin bears the risk
`of central venous catheter infection and a serious bloodstream infection known as sepsis, as do Flolan, Veletri and generic epoprostenol.
`
`International Regulatory Review of Subcutaneous and Intravenous Remodulin
`
` Remodulin is approved in 36 countries throughout the world. In 31 of these countries, it is approved for both subcutaneous and intravenous
`use. In the other approved countries, Remodulin is approved for subcutaneous use only.
`
` We used the mutual recognition process, described more fully in Governmental Regulation—Marketing Pharmaceutical Products Outside
`the United States , to obtain approval of subcutaneous Remodulin in most countries in the European Economic Area (EEA). The mutual
`recognition process for subcutaneous Remodulin was completed in August 2005, with positive decisions received from 23 EEA member
`countries. We withdrew our applications in the Republic of Ireland (Ireland), Spain and the United Kingdom (UK) following a request for
`additional documentation from these countries. A license variation for intravenous Remodulin was approved on December 23, 2011, thus
`permitting marketing of intravenous Remodulin in each of the 23 member countries where subcutaneous Remodulin had been previously
`approved. In Europe, a risk management plan (RMP) is routinely required as part of the regulatory approval process for new medicines and also
`for significant variations involving a change to the route of administration, formulation or indication. For intravenous Remodulin, we will
`implement a RMP focused on minimizing the known risks of central venous catheter-related blood stream infections associated with intravenous
`administration.
`
` Remodulin is available under the named-patient system in the EEA member countries where Remodulin is not approved (including the UK,
`Ireland and Spain). Under the named-patient system, our distributors are permitted to import Remodulin into EEA member countries based on
`requests for Remodulin for use in treating specific patients, but neither we nor our distributors are permitted to market the product in those
`countries. We are evaluating the resubmission of our applications for Remodulin in Ireland and Spain.
`
`Intravenous Remodulin Administered via Implantable Pump
`
` We are also working with Medtronic, Inc. (Medtronic) on demonstrating the safety of its Synchromed® II implantable infusion pump for
`intravenous Remodulin. Medtronic commenced a clinical trial administering Remodulin using the Synchromed in April 2011. In certain
`countries in Europe, an implantable pump distributed by OMT GmbH & Co. KG is used to deliver intravenous Remodulin to certain patients.
`
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`Tyvaso
`
` We commenced commercial sales of Tyvaso in the United States in September 2009. We sell Tyvaso to the same specialty pharmaceutical
`distributors in the United States that distribute Remodulin. For the years ended December 31, 2011, 2010 and 2009, we recognized
`approximately $240.4 million, $151.8 million and $20.3 million in Tyvaso revenues, representing 32%, 26% and 6%, respectively, of our net
`revenues.
`
` Currently, the only other FDA-approved inhaled prostacyclin analogue is Ventavis. Ventavis is marketed by Actelion in the United States
`and by Bayer Schering Pharma AG in Europe. The active ingredient in Ventavis, iloprost, has a half-life of approximately 20 to 30 minutes and
`can cause a decrease in systemic (body-wide) blood pressure if the drug is administered at too high a dose. Patients need to inhale Ventavis six to
`nine times per day via a nebulizer. According to its label, each Ventavis inhalation consists of 4 to 10 minutes of continuous inhalation via the
`nebulizer.
`
` In contrast to iloprost, treprostinil (the active ingredient in Tyvaso) has a longer half-life and greater selectivity to the lungs. Tyvaso is
`administered four times a day, by inhaling up to nine breaths during each two-to-three-minute treatment session. Tyvaso is required to be
`administered using our proprietary Tyvaso Inhalation System, which consists of an ultra-sonic nebulizer that provides a dose of Tyvaso on a
`breath-by-breath basis. In addition, a day's supply of Tyvaso is packaged in a single ampule emptied into the Tyvaso Inhalation System once a
`day. As a result, unlike the Ventavis nebulizer which requires cleaning after each use, the Tyvaso Inhalation System only needs to be cleaned
`once a day.
`
` Tyvaso has been generally well tolerated in our trials, during which adverse events appeared to be similar to those previously reported for
`treprostinil or due to administration by inhalation. The most common adverse events were transient cough, headache, nausea, dizziness and
`flushing. We completed an open-label study in the United States to investigate the clinical effects of switching patients from Ventavis to Tyvaso,
`in which improvements in patient quality of life were observed.
`
`FDA Approval of Tyvaso
`
` In June 2008, we submitted an NDA to obtain FDA approval to market Tyvaso for the treatment of PAH in the United States. In July 2009,
`the FDA approved Tyvaso for the treatment of PAH using the Tyvaso Inhalation System. Tyvaso is indicated to increase walk distance in
`patients with NYHA Class III symptoms of PAH, which includes multiple etiologies such as idiopathic and familial PAH, as well as PAH
`associated with scleroderma and congenital heart disease.
`
` In connection with the Tyvaso approval, we agreed to a post-marketing requirement (PMR) and certain post-marketing commitments
`(PMCs). PMRs and PMCs are studies that sponsors conduct after FDA approval to gather additional information about a product's safety,
`efficacy, or optimal use. PMRs are required studies, whereas a sponsor voluntarily commits to conduct PMCs. We are required to provide the
`FDA annual updates on our PMR and PMCs. Failure to complete the studies or adhere to the timelines set by the FDA for the PMR could result
`in penalties, including fines or withdrawal of Tyvaso from the market, unless we are able to demonstrate good cause for not completing the
`studies or adhering to our timelines.
`
` In accordance with our PMR, we are enrolling patients in a long-term observational study in the U.S. that will include 1,000 patient years of
`follow-up in patients treated with Tyvaso, and 1,000 patient years of follow up in control patients receiving other PAH treatments. This study
`will allow us to continue to assess the safety of Tyvaso. We are currently required to submit the results of the study by December 15, 2014.
`
` Under the PMCs, we committed to modify particular aspects of the Tyvaso Inhalation System. As part of these modifications, we agreed to
`perform a usability analysis incorporating the evaluation and prioritization of user-related risk followed by a human factors study. The
`modifications and usability
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`analysis have been completed, and in September 2011, the FDA notified us that we had fulfilled the requirements of the PMCs.
`
` In June 2010, the FDA granted orphan drug designation for Tyvaso. Such a designation, coupled with an approval of the product for the
`orphan indication, confers an exclusivity period through July 2016, during which the FDA may not approve any application to market the same
`drug for the same indication, except in limited circumstances.
`
`International Regulatory Review of Tyvaso
`
` In April 2004, the European Medicines Agency (EMA) designated Tyvaso an orphan medicinal product for the treatment of both PAH and
`chronic thromboembolic pulmonary hypertension. The EMA orphan drug designation confers a ten-year exclusivity period commencing with
`marketing approval. We filed a Marketing Authorization Application (MAA) in December 2008 for Tyvaso and the Tyvaso Inhalation System
`with the EMA using the centralized filing process. See Governmental Regulation below for further discussion on the centralized filing process
`for the European Union (EU). In February 2010, we withdrew our MAA from consideration by the EMA due to the EMA's major objection
`related to findings of non-compliance with good clinical practice (GCP) at two clinical sites. The EMA stated that these findings would preclude
`a recommendation for approval of Tyvaso in the EU. The EMA had no major objections at the time of withdrawal related to the safety or
`efficacy of Tyvaso.
`
` In mid-2011, we reached an agreement with the EMA on a new study design acceptable for the filing of an MAA in Europe. We expect the
`new trial will be conducted in patients who are either not on an approved background therapy (ETRA or PDE-5 inhibitor) or have been on an
`approved background therapy for up to one year. The trial's planned primary endpoint is the median change in six-minute walk distance after
`24 weeks.