`
`
`UNITED THERAPEUTICS CORP
`
`FORM 10-K
`(Annual Report)
`
`Filed 3/19/2003 For Period Ending 12/31/2002
`
`Address
`
`Telephone
`CIK
`Industry
`Sector
`Fiscal Year
`
`1110 SPRING ST
`SILVER SPRING, Maryland 20910
`301-608-9292
`0001082554
`Biotechnology & Drugs
`Healthcare
`12/31
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`Securities and Exchange Commission
`Washington, DC 20549
`
`Form 10-K
`
` ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
`ACT OF 1934
`
`For the fiscal year ended December 31, 2002
`OR
`
` TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`For the transition period from to
`
`Commission File Number 0-26301
`
`
`
`
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`UNITED THERAPEUTICS CORPORATION
`(Exact name of Registrant as specified in its charter)
`
`
`
`Delaware
`
`52-1984749
`
`(State or Other Jurisdiction
`of Incorporation or Organization)
`
`1110 Spring Street
`Silver Spring, MD
`
`(Address of principal executive offices)
`
`
`
`
`
`
`
`
`
`
`(IRS Employer Identification No.)
`
`
`
`20910
`
`(zip code)
`
`Registrant’s telephone number, including area code: (301) 608-9292
`
`Securities registered under Section 12(b) of the Exchange Act:
`None.
`
`Securities registered under Section 12(g) of the Exchange Act:
`Common Stock, par value $.01 per share
`and associated preferred stock purchase rights
`(Title of Class)
`
` Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
`Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
`subject to such filing requirements for the past 90 days. Yes X No
`
` Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
`contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PART III of this
`Form 10-K or any amendment to this Form 10-K.
`
` Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No
`
` The number of shares outstanding of the registrant’s Common Stock, par value $0.01 per share, as of March 12, 2003 was 20,924,120
`shares. The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 28, 2002
`as reported by the Nasdaq National Market was approximately $258.3 million.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
` Portions of the registrant’s definitive proxy statement for the registrant’s 2003 annual shareholders meeting are incorporated by reference in
`Part III of this Form 10-K.
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`ITEM 1. BUSINESS
`
`PART I
`
` United Therapeutics is a biotechnology company focused on the development and commercialization of unique therapeutics to treat
`chronic and life-threatening diseases. United Therapeutics is active in three therapeutic areas — cardiovascular medicine, infectious disease
`and oncology – with five therapeutic platforms:
`
`
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`
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`• Prostacyclin Analogs , which are stable synthetic forms of prostacyclin, an important molecule produced by the body that has powerful
`effects on blood-vessel health and function. United Therapeutics’ drug Remodulin® has been approved in the United States for the
`treatment of pulmonary arterial hypertension in patients with NYHA Class II-IV symptoms to diminish symptoms associated with
`exercise, and in Canada and Israel for similar uses;
`
`• Immunotherapeutic Monoclonal Antibodies , which are antibodies that activate patients’ immune systems to treat cancer, including
`OvaRex® that is being developed for the treatment of metastatic ovarian cancer;
`
`• Glycobiology Anti-viral Agents , which are a class of small molecules that may be effective as an oral therapy for hepatitis C and other
`infections;
`
`• Telemedicine , which involves portable digital devices that enable physicians to remotely monitor patients’ bodily measurements such as
`heart function, including the CardioPal® cardiac event recorder; and
`
`• Arginine Formulations , including the HeartBar® product line, which deliver the amino acid arginine that is necessary for the promotion
`of vascular function.
`
` Most of United Therapeutics’ resources are focused on its prostacyclin analogs for the treatment of pulmonary hypertension and
`peripheral vascular disease. United Therapeutics’ other principal focus areas are the development of immunotherapeutic monoclonal antibodies
`for the treatment of cancers and glycobiology anti-viral agents for the treatment of hepatitis and other diseases. United Therapeutics also
`devotes resources to the commercialization and further development of arginine supplementation therapy, especially in cardiovascular health,
`and of telecardiology, principally for cardiac arrhythmia.
`
` United Therapeutics was incorporated in June 1996 in Delaware under the name Lung Rx, Inc. The company changed its name to United
`Therapeutics Corporation in December 1997. United Therapeutics’ wholly owned subsidiaries include Unither Pharmaceuticals, Inc., Unither
`Telemedicine Services Corp., Lung Rx, Inc., United Therapeutics Europe, Ltd., Unither Pharma, Inc., Medicomp, Inc. and Unither
`Nutriceuticals, Inc.
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`United Therapeutics’ Products
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` United Therapeutics’ product portfolio includes the following:
`
`
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`
`
`Product
` Mode of Delivery
`Indication/Market
`
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`Remodulin®
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`Continuous subcutaneous
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`Pulmonary arterial hypertension
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`Current Status
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`Commercial in U.S.,
`Canada and Israel
`EU Reviews Ongoing
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`UT Territory
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`Worldwide
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`Commercial
`
`Worldwide
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`Commercial
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`
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`Worldwide
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`Oral dietary supplement
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`Telemedical
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`Vascular function
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`Arrhythmias and angina
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`Intravenous
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` Ovarian cancer
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` Phase III
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` Worldwide*
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`Intermittent subcutaneous
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` Critical limb ischemia
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` Phase II/III
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` Worldwide
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` Oral
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` Hepatitis C
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` Phase I/II
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` Worldwide
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`
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`Intravenous
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` Multiple myeloma
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` Phase I
`
` Worldwide*
`
`
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`Arginine
`Formulations
`
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`CardioPAL® and
`PM350
`
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`OvaRex®
`
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`Remodulin®
`
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`UT-231B
`
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`BrevaRex®
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`Beraprost SR
`
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`Epicardia
`Auto-Trigger
`
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`UT-15 Sustained
`Release
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`ADMA Diagnostic
`
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`Glycobiology
`Antiviral Agents
`
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`MultiRex
`
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`ProstaRex
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`GivaRex
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` Oral
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` Peripheral vascular disease
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` Phase I
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` U.S./Canada
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`Telemedical
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`Oral
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`
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`Cardiac arrhythmias
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`Pulmonary arterial
`hypertension and peripheral
`vascular disease
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`Preclinical
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`Preclinical
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`Worldwide
`
`Worldwide
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` Diagnostic test
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` Cardiovascular disease
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` Preclinical
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` Worldwide
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`Oral
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`Intravenous
`
`Intravenous
`
`Intravenous
`
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`Hepatitis B, dengue and
`Japanese encephalitis
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`
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`Preclinical
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`Worldwide
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` Breast cancer
`
` Preclinical
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` Worldwide*
`
` Prostate cancer
`
` Preclinical
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` Worldwide*
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` Pancreatic cancer
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` Preclinical
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` Worldwide*
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`* except Europe and the Middle East.
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` Remodulin®
`
` In December 1996 and January 1997, United Therapeutics obtained worldwide rights for all indications to Remodulin® (also known as
`UT-15 and formerly known as Uniprost), a prostacyclin analog, from Glaxo Wellcome, Inc. and Pharmacia & Upjohn Company (see Patent
`and Proprietary Rights below). In October 1999, United Therapeutics acquired all the outstanding stock of SynQuest, Inc., the manufacturer of
`treprostinil, the bulk active ingredient in Remodulin. Remodulin, United Therapeutics’ main product, was approved in May 2002 in the United
`States and in October 2002 in Canada and Israel.
`
` Pulmonary Arterial Hypertension
`
` United Therapeutics has focused primarily on developing Remodulin as its lead product for treating pulmonary arterial hypertension.
`Pulmonary arterial hypertension is a vascular disease that affects the blood vessels between the heart and lungs known as the pulmonary blood
`vessels. Pulmonary arterial hypertension is characterized by the degradation of the blood-vessel wall lining, the aggregation of platelets and the
`disruption of smooth muscle cell function. These conditions cause blockages and affect the ability of the blood vessels to dilate and then
`constrict as blood flows to the lungs. The resulting elevated pulmonary blood pressure causes increasing strain on the right side of the heart as
`it tries to pump blood to the lungs.
`
` Pulmonary arterial hypertension is associated with reduced production of the natural hormone prostacyclin in the pulmonary blood
`vessels. Prostacyclin appears to dilate blood vessels where necessary, prevent platelet aggregation, and prevent proliferation of smooth muscle
`cells surrounding the vessels. The first FDA-approved prostacyclin for pulmonary arterial hypertension was Flolan®, a synthetic form of
`prostacyclin delivered continuously by an external pump through a surgically implanted intravenous catheter. Flolan was approved for use in
`certain subsets of late-stage pulmonary arterial hypertension.
`
` United Therapeutics believes Remodulin provides patients with a convenient and non-intravenous alternative to Flolan. In contrast to
`Flolan, Remodulin is stable at room temperature and is significantly longer lived in the human body. These attributes allow for safer and more
`convenient delivery of Remodulin to patients. Specifically, Remodulin is delivered by subcutaneous infusion with a pager-sized microinfusion
`device made by Medtronic MiniMed. Subcutaneous delivery of Remodulin also eliminates the risk of sepsis infection and related
`hospitalization associated with the Flolan catheter. Remodulin’s extended life in the body also greatly reduces the risk of pulmonary
`hypertension rebound and death from an abrupt recurrence of hypertension known as rebound hypertension when 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.
`
` In late 2001, the FDA approved Tracleer®, an oral treatment for patients with certain subsets of late-stage pulmonary arterial
`hypertension. Tracleer is the first drug in a class of drugs known as endothelin antagonists. Endothelin constricts blood vessels and is elevated
`in patients with pulmonary arterial hypertension. Many pulmonary arterial hypertension leading experts believe that Tracleer or other
`endothelin antagonists may in the future be used in combination with Remodulin or Flolan since these drugs provide symptomatic relief in
`different ways and might complement each other to treat these seriously ill patients.
`
` In March 2000, United Therapeutics completed an international, randomized, placebo-controlled, double-blind study of Remodulin
`involving a total of 470 patients with pulmonary arterial hypertension. Half of the patients received Remodulin subcutaneously for 12 weeks,
`while the other half received a placebo. The study data show that patients who received Remodulin had significant improvement in exercise
`capacity, pulmonary blood pressure and in the signs and symptoms of the disease. Based on the favorable results of this study, United
`Therapeutics filed a New Drug Application (NDA) with the U. S. Food and Drug Administration (FDA) in late 2000.
`
` On May 21, 2002, the FDA approved Remodulin (treprostinil sodium) Injection for the treatment of pulmonary arterial hypertension in
`patients with NYHA class II-IV symptoms to diminish symptoms associated with exercise. Remodulin may be prescribed for all disease
`subsets of symptomatic pulmonary arterial hypertension and is the only pulmonary arterial hypertension treatment approved for patients with
`NYHA class II (early-stage) symptoms.
`
` United Therapeutics agreed with the FDA that it would perform a post-marketing phase IV clinical study to further assess the clinical
`benefits of Remodulin. The phase IV study commenced in late 2002 and must be completed within 24 months from the May 2002 approval. As
`of March 2003, four patients had been enrolled in the 100 patient Phase IV study.
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`United Therapeutics intends to meet with the FDA in April or May 2003 to report on the progress of the study. Continued FDA approval is
`conditioned on the completion and outcome of the phase IV study. On October 7, 2002, the Canadian Therapeutics Products Directorate
`approved Remodulin for long term subcutaneous treatment of pulmonary arterial hypertension in NYHA class III and IV patients who do not
`respond adequately to conventional therapy. On October 31, 2002, the Israeli Ministry of Health, Drug Registration Department, approved
`Remodulin for the treatment of primary pulmonary arterial hypertension, pulmonary arterial hypertension associated with connective tissue
`disorders and pulmonary arterial hypertension associated with congenital systemic to pulmonary shunts. Remodulin marketing applications are
`under review in France, Australia and Switzerland, with additional European filings to follow approval in France.
`
` Peripheral Vascular Disease/Critical Limb Ischemia
`
` United Therapeutics is also developing Remodulin for late-stage peripheral vascular disease known as critical limb ischemia. Peripheral
`vascular disease is a vascular disease that affects the blood vessels in the legs. While the precise cause of peripheral vascular disease is
`unknown, diabetes, obesity, smoking and lack of exercise are associated with the disease. Peripheral vascular disease appears to be similar to
`pulmonary hypertension in that there is a reduction in natural prostacyclin in the affected blood vessels.
`
` In the United States, it is estimated that 750,000 people suffer from critical limb ischemia. The disease is characterized by extreme pain,
`non-healing ulcers in the legs, reduced exercise capacity and severely reduced blood flow in the limbs. There are currently no approved drugs
`to treat critical limb ischemia. Physicians, therefore, perform surgical interventions (such as balloon angioplasty, stents and by-passes) to
`restore or improve blood flow in the limbs. These procedures can provide relief to patients, but do not address the underlying causes of
`peripheral vascular disease. Due to the lack of adequate treatments, approximately 200,000 amputations of major limbs are performed each
`year on patients with critical limb ischemia.
`
` In September 1998, United Therapeutics completed a Phase II study which assessed the safety and blood flow effects of Remodulin
`administered intravenously to patients with critical limb ischemia. The study demonstrated that Remodulin can be administered safely to
`patients with critical limb ischemia and that Remodulin substantially increased blood flow in the affected areas of the legs. United Therapeutics
`has commenced pre-pivotal clinical studies of Remodulin for critical limb ischemia. These studies are expected to be completed by late 2003.
`The results of the pre-pivotal studies will be used to design a pivotal study that is anticipated to commence in 2004.
`
` Metastatic Cancer
`
` United Therapeutics has tested the anti-cancer capabilities of Remodulin in laboratory experiments. These in vitro studies showed that
`Remodulin has an anti-metastatic effect at the same dose given to pulmonary hypertension patients. In addition, there are many published
`reports of the anti-cancer effects of various analogs of the prostacyclin molecule. Much of the excitement regarding prostacyclin as an anti-
`cancer molecule has to do with prostacyclin’s ability to block an endothelial cell receptor (called the PPAR receptor) which is believed to be
`needed for tumor growth. Given the potency of Remodulin, and its relative ease of use, United Therapeutics believes there may be anti-cancer
`potential in this lead product and further development may be initiated in the future.
`
` UT-15 Sustained Release
`
` United Therapeutics is currently in the early stage of development of a longer-acting prostacyclin analog, known as UT-15 Sustained
`Release. UT-15 Sustained Release will be developed as an oral therapy for vascular diseases, including pulmonary arterial hypertension and
`peripheral vascular disease. A longer-acting prostacyclin analog could enable patients to take fewer doses per day. United Therapeutics is
`currently screening potential candidates for further evaluation.
`
` Sales and Marketing
`
` United Therapeutics’ marketing strategy for Remodulin relies upon United Therapeutics staff to educate the prescribing community.
`During 2002, United Therapeutics formed an internal marketing team to handle these educational efforts. The team consisted of five persons as
`of March 2003 and is expected to continue growing during 2003. Additionally, United Therapeutics relies on chronic care specialty pharmacy
`distributors to handle doctor and patient requests for Remodulin on a non-exclusive basis in the United States. To further this strategy, United
`Therapeutics has entered into two non-exclusive distributor agreements with Accredo Therapeutics, Inc. (formerly known as Gentiva Health
`Services, Inc.) and Priority Healthcare Corporation for the United States. See Priority Healthcare and Accredo Therapeutics, Inc. Strategic
`Alliances below. These specialty distributors are experienced in the sale, distribution and reimbursement of chronic therapies.
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`In addition, United Therapeutics has an internal sales and marketing department focused on educational efforts directed at pulmonary
`hypertension clinicians. Outside of the United States, United Therapeutics has entered into six exclusive distributor agreements covering
`Canada, most of Europe, Australia, South America and Israel. United Therapeutics sells Remodulin to its distributors in the United States at a
`discount from an average wholesale price suggested by United Therapeutics and to its international distributors at a transfer price set by United
`Therapeutics. The distributors are responsible for assisting patients with obtaining reimbursement. During 2002, approximately $21.2 million
`of revenues were earned from the sales of Remodulin.
`
` Arginine and ADMA
`
` In December 2000, United Therapeutics expanded its cardiovascular focus when it acquired the assets and certain liabilities of Cooke
`Pharma, Inc., the exclusive manufacturer of the HeartBar® line of arginine products that is now operating as Unither Pharma, Inc. Unither
`Pharma owns the exclusive patent rights to use HeartBar’s key ingredient, arginine, for the promotion of vascular function. Although arginine
`is broadly sold as a nutritional supplement in pill form, there are no existing arginine products, other than HeartBar, that can deliver 6 grams of
`arginine in a single dose. Pills generally contain only 500 milligrams of arginine or one-twelfth the amount in one HeartBar. Arginine is
`required by the body to produce nitric oxide, which is critical for maintaining vascular function. HeartBar products are sold in several flavors
`and in bar or drink formulation.
`
` Recent studies show that people with high levels of another molecule called asymmetric dimethylarginine (ADMA) may be at especially
`high risk of heart disease. ADMA reduces the amount of arginine that can be converted to nitric oxide. In December 2001, United Therapeutics
`acquired the exclusive worldwide rights to develop a blood test to measure a person’s ADMA levels, much like a cholesterol test. As most
`people age, their blood pressure rises as endothelial dysfunction gradually sets in. While it is not a cure for the problems of advancing age,
`arginine supplementation is one way to help with dietary management of cardiovascular risk. This is particularly true for those persons with
`genetically determined high levels of ADMA.
`
` Presently, the HeartBar line of products is marketed directly to consumers via independent distributors and the Internet. During 2002,
`approximately $1.4 million of revenues were earned from the sales of HeartBar products.
`
` Telemedicine Services
`
` United Therapeutics provides telemedicine services for a fee to patients and physicians, through its subsidiary, Medicomp, Inc.
`Medicomp, Inc. provides cardiac Holter and event monitoring analysis services remotely via telephone lines and the Internet for hospitals,
`clinicians and other providers. These services are designed to address the needs of patients suspected of suffering from cardiac arrhythmias and
`other abnormalities such as ischemic events and are delivered via Medicomp’s proprietary PM350 Holter Monitor and CardioPAL® event
`recorder. The Epicardia Auto-Trigger, a next-generation event recorder, is currently in the pre-clinical stage of development. Medicomp also
`provides pacemaker monitoring services.
`
` 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. Treatment of cardiac arrhythmias and
`ischemia with pharmaceuticals requires careful dosing based upon life-long, repeat cardiac monitoring.
`
` Holter and event monitoring services and systems are marketed to physicians, hospitals, and managed care providers directly by
`Medicomp’s internal sales force. During 2002, revenues of approximately $3.4 million from the sales of telemedicine services and $444,000
`from the sales of telemedicine systems were earned.
`
` Immunotherapeutic Monoclonal Antibodies
`
` In April 2002, United Therapeutics entered into an agreement with AltaRex Corp. to exclusively license certain rights to a platform of
`five immunotherapeutic monoclonal antibodies. These products were being developed by AltaRex for use in ovarian, prostate, lung, breast,
`multiple myeloma and other forms of cancer. The lead product, OvaRex, had completed Phase II studies in metastatic ovarian cancer.
`
` In January 2003, United Therapeutics initiated two identical Phase III pivotal clinical trials of OvaRex in patients with stage III/IV
`advanced ovarian cancer. The study will be conducted at approximately 60 centers throughout the United States and is expected to be fully
`enrolled in approximately 15 months from the study’s initiation. Patients enrolled in these
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`studies have successfully completed front-line therapy, consisting of surgery and chemotherapy. The primary endpoint for the trials is to assess
`the time to disease relapse. Patients will also be followed for survival. Approximately 200,000 women in the United States have ovarian cancer.
`
` Glycobiology Antiviral Agents
`
` In March 2000, Unither Pharmaceuticals, Inc., a wholly owned subsidiary of United Therapeutics, entered into a license agreement with
`Synergy Pharmaceuticals, Inc. to obtain from Synergy the exclusive worldwide rights to certain patents relating to anti-viral compounds. These
`glycobiology antiviral agents are small molecules which may be effective as an oral therapy for hepatitis C and B infections, as well as dengue
`and Japanese encephalitis virus. Currently, many of these agents are undergoing laboratory testing while new agents are being synthesized.
`
` The most advanced agent identified to date is UT-231B. An Investigational New Drug Application (IND) was submitted for UT-231B in
`2002 and accepted by the FDA. UT-231B completed acute and chronic Phase I dosing studies in early 2003. A phase II proof-of-concept study
`in patients infected with hepatitis C that have failed conventional therapies is expected to begin during 2003.
`
` Beraprost
`
` In June 2000, United Therapeutics obtained from Toray Industries, Inc. the exclusive right to develop and market the oral prostacyclin,
`beraprost, in the sustained release formulation in the United States and Canada for the treatment of all vascular and cardiovascular indications.
`
` Beraprost is an oral form of prostacyclin that is chemically stable. Like natural prostacyclin and Remodulin, beraprost dilates blood
`vessels, prevents platelet aggregation and prevents proliferation of smooth muscle cells surrounding blood vessels. Intermittent oral doses of
`immediate release beraprost did not prove effective in phase III studies conducted by United Therapeutics during 2000 and 2001. However,
`United Therapeutics believes that sustained release oral doses of beraprost may be an important treatment for early-stage peripheral vascular
`disease and for early-stage pulmonary hypertension. Beraprost is presently in Phase I clinical testing being conducted by Toray Industries in
`Japan.
`
` Toray is required to complete testing of sustained release beraprost through Phase I. If Toray succeeds, United Therapeutics would be
`obligated to grant Toray an option to purchase 500,000 shares of United Therapeutics’ common stock at the current fair value of that stock.
`However, the development of sustained release beraprost has been significantly delayed by Toray and United Therapeutics may cancel this
`agreement prior to granting any options.
`
` Northern Therapeutics, Inc.
`
` In December 2000, Lung Rx, Inc. formed a new company in Canada, Northern Therapeutics, Inc. (Northern Therapeutics), with the
`inventor of a new form of autologous (non-viral vector) gene therapy for pulmonary arterial hypertension and other conditions. The purpose of
`Northern Therapeutics is to develop the gene therapy and also to distribute certain United Therapeutics’ products in Canada. United
`Therapeutics received approximately 59 percent of the initial outstanding common stock of Northern Therapeutics in exchange for $5.0 million
`in cash of which $1.5 million was paid as of December 31, 2002. The remainder is generally being paid in $1.0 million annual increments.
`
`The Medtronic MiniMed Strategic Alliance
`
` Medtronic MiniMed has agreed to the use of its pager-sized microinfusion pump for delivery of Remodulin continuously and
`subcutaneously. United Therapeutics entered into an agreement with MiniMed, Inc. (now Medtronic MiniMed) in September 1997, which was
`implemented in a detailed set of guidelines to collaborate in the design, development and implementation of therapies to treat pulmonary
`hypertension utilizing MiniMed products and Remodulin. The guidelines require United Therapeutics to purchase its Remodulin infusion
`pumps exclusively from Medtronic MiniMed at a discount to Minimed list prices unless MiniMed’s infusion pumps fail to receive certain
`government approvals or cannot be appropriately used, as for intravenous Remodulin. The term of the agreement commenced on September 3,
`1997 and continues for seven years after the May 2002 FDA approval of Remodulin. The agreement will be automatically extended for
`additional 12-month periods unless otherwise terminated. The agreement is subject to early termination in the event of a material breach or
`bankruptcy of either party. In the event that there are any discoveries or improvements arising out of work performed under the agreement, the
`parties will have joint ownership of those discoveries or improvements. United Therapeutics and MiniMed have established a Management
`Committee comprised of two representatives from each company to oversee implementation of the agreement. United Therapeutics
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`acquires Medtronic MiniMed products and resells these products to its distributors at their acquisition cost. During 2002, approximately
`$3.7 million of revenues were earned from the resales of MiniMed pumps and supplies.
`
`Priority Healthcare and Accredo Therapeutics Strategic Alliances
`
` To provide for marketing, promotion and distribution of Remodulin in the United States, United Therapeutics entered into non-exclusive
`distribution agreements with Priority Healthcare Corporation and Accredo Therapeutics, Inc. (formerly known as Gentiva Health Services,
`Inc.) on February 9, 2000 and March 21, 2000, respectively. Under the distribution agreements, United Therapeutics will sell Remodulin to
`Priority and Accredo at a discount from an average wholesale price recommended by United Therapeutics as well as Medtronic Minimed
`infusion pumps. Priority and Accredo will be responsible for assisting patients with obtaining reimbursement for the cost of the therapy and
`providing other support services. The terms of the agreements commenced on signing and continue for two years following the May 2002 FDA
`approval of Remodulin in the case of Priority and three years following the May 2002 launch of Remodulin in the case of Accredo. The
`agreements will be automatically renewed thereafter for additional two-year periods in the case of Priority and one-year periods in the case of
`Accredo unless either party provides notice of termination. The agreements are subject to early termination in the event of a material breach or
`bankruptcy of either party or upon 180-day advance notice of termination.
`
`Patents And Proprietary Rights
`
` United Therapeutics’ success will depend in part on its ability to obtain and maintain patent protection for its products, preserve trade
`secrets, prevent third parties from infringing upon its proprietary rights and operate without infringing upon the proprietary rights of others,
`both in the United States and internationally. See Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of
`Financial Condition and Results of Operations – Liquidity and Capital Resources for information regarding royalties and milestone payments
`under these agreements.
`
` Glaxo Wellcome Assignment
`
` In January 1997, Glaxo Wellcome, Inc. (now GlaxoSmithKline PLC) assigned to United Therapeutics all rights to the use of the stable
`prostacyclin analog known as UT-15, now known as Remodulin. For pulmonary hypertension, the patent does not expire in the United States
`until October 2009 and until various dates from September 2009 to August 2013 in nine other countries. For congestive heart failure, the patent
`does not expire until May 2011 in the United States and from May 2011 to March 2012 in five other countries.
`
` Pharmacia License
`
` In December 1996, Pharmacia & Upjohn Company (now Pharmacia Corporation) exclusively licensed to United Therapeutics certain
`patents, a patent application and know-how for the composition and production of the stable prostacyclin analog known as UT-15 (now known
`as Remodulin). United Therapeutics filed its own U.S. patent application for a new synthesis and production method for Remodulin in October
`1997, which was granted in August 2002. United Therapeutics believes that its method is a substantial improvement over the Pharmacia
`method. United Therapeutics is using its unique synthesis method rather than the licensed Pharmacia method for the production of Remodulin.
`United Therapeutics also has three pending patent applications with respect to additional Remodulin synthesis improvements.
`
` AltaRex Corp. Agreement
`
` In April 2002, Unither Pharmaceuticals, Inc. (UPI) entered into a licens