UNITED THERAPEUTICS CORP
`
`FORM 10-K
`
`(Annual Report)
`
`Filed 02/26/13 for the Period Ending 12/31/12
`
`
`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 2013, 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, 2012
`
`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. (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)
`
` The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the closing price on June 30, 2012, as reported by the NASDAQ Global Select Market
`was approximately $2,256,964,700.
`
` The number of shares outstanding of the issuer's common stock, par value $0.01 per share, as of February 18, 2013, was 50,183,353.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
` Portions of the registrant's definitive proxy statement for the registrant's 2013 annual meeting of shareholders scheduled to be held on June 26, 2013, 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
`
` 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
`
`
`
`3
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` 38
` 58
` 58
` 58
` 59
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`
` 60
` 62
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` 63
` 89
` F-1
`
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` 91
` 91
` 91
`
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` Directors, Executive Officers and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and
`Related Stockholder Matters
` 94
` Certain Relationships and Related Transactions, and Director Independence 94
` Principal Accounting Fees and Services
` 94
`
`
`
`
` 92
` 93
`
`
`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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` 95
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` 96
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`Table of Contents
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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), which is 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 37 other countries, most of which have approved both routes of
`administration. In 2009, the FDA approved Tyvaso® (treprostinil) Inhalation Solution (Tyvaso), an inhaled prostacyclin therapy
`for the treatment of PAH, and we commenced commercial sales later that year. We are in the late stages of developing our oral
`tablet of treprostinil diolamine for the treatment of PAH, and have recently commenced pre-clinical studies of a self-injectable
`form of treprostinil, which we refer to as TransCon Treprostinil. Our wholly-owned subsidiary Lung LLC is separately
`developing beraprost, another type of prostacyclin analogue, as an oral tablet known as 314d and as an extended release injection
`we refer to as TransCon Beraprost, both 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 exclusive U.S.
`commercialization rights to Adcirca from Eli Lilly and Company (Lilly) in 2008. In 2009, the FDA approved Adcirca for the
`treatment of PAH, and we commenced commercial sales later that year.
`
`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 of the United States National Institutes of Health (NIH). 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
`National Institute of Allergy and Infectious Diseases of the NIH 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 PAH 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, and expect to commence a phase I clinical study in Australia
`during the first half of 2013.
`
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`•
`
`Engineered Lungs and Lung Tissue for Transplantation. The only reported cure for PAH is a full lung transplant. Using the
`xenotransplantation technology we acquired through our July 2011 acquisition of Revivicor Inc. and several regenerative
`medicine technologies that we have licensed, we are in the early pre-clinical stage of developing engineered lungs and lung tissue
`which can be transplanted into patients suffering from PAH and other lung diseases.
`
` We devote most of our research and development resources to developing these key products and product candidates.
`
` 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
`
`
`Remodulin
`
`
`Tyvaso
`
`
`Adcirca
`
`
`
`
`
`
`
`
`
`
`
`Continuous
`intravenous
`
`
`Inhaled
`
`
`Oral
`
`
`Oral Treprostinil
`
`
`
`
`
`Oral
`
`
`Oral Treprostinil
`Combination
`Therapy
`
`Ch14.18 MAb
`
`
`
`
`
`
`
`
`Oral
`
`
`Intravenous
`
`Mode of
`Delivery
`
` Continuous
`subcutaneous
`
`
`
`
`Indication/Market
` Pulmonary arterial
`hypertension
`
`
`
`
`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.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Commercial in the U.S.
`
`
`NDA filed with FDA; resubmission filed in
`response to FDA's complete response letter
`
`Phase III
`
`
`Phase III
`
`4
`
`
`
`
`Our Territory
`Worldwide
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Worldwide
`
`
`Worldwide
`
`
`United States
`
`
`Worldwide
`
`
`Worldwide
`
`
`Worldwide
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`Neuroblastoma
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`Product
`Remodulin
`
`
`Beraprost 314d
`
`Mode of
`Delivery
`
` Continuous
`intravenous via
`implantable pump
`
`Oral
`
`
`
`
`
`8H9 MAb
`
`TransCon Treprostinil
`
`
`
`
`
`
`
`
`Intravenous
`
`Self-Injection
`
`
`TransCon Beraprost
`
`
`PLX Cells
`
`
`Glycobiology
`Antiviral Agents
`
`Engineered Lungs for
`Transplantation
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Self-Injection
`
`
`Intravenous
`
`
`Oral
`
`
`Various
`
`
`
`
`Indication/Market
` Pulmonary arterial
`hypertension
`
`Current
`Status
`
` Phase III
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`Metastatic brain cancer
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`Broad-spectrum agents against
`viral infectious diseases
`
`End-stage lung disease
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Phase II
`
`
`Phase I
`
`Pre-
`Clinical
`
`
`Pre-
`Clinical
`
`
`Pre-
`Clinical
`
`Pre-
`Clinical
`
`Pre-
`Clinical
`
`Our Territory
`United States, United Kingdom,
`France, Germany, Italy and Japan
`
`
`North America, Europe, Mexico,
`South America, Egypt, India, South
`Africa and Australia
`
`Worldwide
`
`North America, Europe, Mexico,
`South America, Egypt, India, South
`Africa and Australia
`
`North America, Europe, Mexico,
`South America, Egypt, India, South
`Africa and Australia
`
`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 are in the process of submitting pricing applications and our risk management plan 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. The awareness of PAH continues to grow, as we have seen increases 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.
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` Currently, treatment of PAH focuses on three distinct molecular pathways that have been implicated in the disease process: the prostacyclin
`pathway, the 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 cyclic guanosine monophosphate (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 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 (treprostinil) Injection, the active pharmaceutical ingredient of which is a prostacyclin
`analogue known as treprostinil. We sell Remodulin to specialty pharmaceutical distributors in the United States and to international
`pharmaceutical distributors. We recognized approximately $458.0 million, $430.1 million and $403.6 million in Remodulin revenues,
`representing 50 percent, 58 percent and 68 percent of our net revenues for the years ended December 31, 2012, 2011 and 2010, respectively. In
`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 2004, the FDA expanded its approval to permit continuous intravenous
`infusion of Remodulin for patients who cannot tolerate subcutaneous infusion. In 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 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 37 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 (where we filed a
`marketing application in September 2011) and Japan (where we expect to file a marketing application in 2013).
`
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` 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 PAH. Generic formulations of Flolan are also available. We believe subcutaneous 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 potentially safer and more convenient drug delivery to patients. Unlike Flolan, Remodulin can be delivered by subcutaneous
`infusion with a pager-sized miniature infusion 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 manufacture 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 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. Also in 2008, the FDA approved
`another intravenous version of epoprostenol, which is currently marketed by Actelion Pharmaceuticals Ltd (Actelion) under the name Veletri®.
`Veletri is stable at room 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. Actelion also markets Tracleer®, an ETRA, and Ventavis®, an inhaled prostacyclin, for the treatment of PAH.
`
` In February 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. On December 7, 2012, we received notice that Sandoz had amended its previously filed
`abbreviated new drug application to request additional approval to market generic versions of the 1mg/mL, 2.5 mg/mL, and 5 mg/mL strengths
`of Remodulin. For further details, see the section below entitled Governmental Regulation—Hatch-Waxman Act and Item 3.—Legal
`Proceedings.
`
` 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 infusion site pain related to use of
`subcutaneous Remodulin may instead use intravenous Remodulin. Intravenous Remodulin is delivered continuously 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. General
`side effects associated with Remodulin include diarrhea, jaw pain, vasodilation and edema.
`
`International Regulatory Review of Subcutaneous and Intravenous Remodulin
`
` Remodulin is approved in 37 countries outside the United States. In 31 of these countries, it is approved for both subcutaneous and
`intravenous use. In the other six countries, Remodulin is approved for subcutaneous use only.
`
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` 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 Union (EU). The mutual recognition process
`for subcutaneous Remodulin was completed in 2005, with positive decisions received from 23 member countries of the EEA. 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. In December 2011, we received regulatory approval by the French regulatory agency, L'Agence Nationale de Sécurité du
`Médicament et des Produits de Santé (ANSM), for the intravenous use of Remodulin to treat PAH. The ANSM approval followed a review
`period during which each EEA member nation which had previously approved subcutaneous Remodulin through the mutual recognition process
`reviewed and endorsed the final variation assessment report issued by ANSM, which will allow us to market intravenous Remodulin in those
`countries following pricing approval and approval of our risk management plan (RMP) in each country.
`
` In Europe, an 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 an RMP focused on
`minimizing the known risks of central venous catheter-related blood stream infections associated with intravenous administration. To date, our
`RMP for intravenous Remodulin has been approved in ten EEA countries.
`
` 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
`
` A majority of the patients who die of PAH in the United States each year have not initiated treatment with an infused prostacyclin analogue,
`which is a complex and burdensome form of medical therapy. In 2009, we entered into an agreement with Medtronic, Inc. (Medtronic) to
`develop its Synchromed® implantable pump to deliver Remodulin, which, if successful, could eliminate many of the patient burdens associated
`with infused prostacyclins.
`
` Medtronic commenced a clinical trial administering Remodulin using the Synchromed in April 2011 to support FDA approval for the use of
`Remodulin with its implantable pump. Patient enrollment in the clinical trial was completed in late November 2012. Based on current
`projections of patient days and discontinuations, we expect that the clinical trial will be completed in late 2013. In certain countries in Europe, an
`implantable pump distributed by OMT GmbH & Co. KG is used to deliver intravenous Remodulin to some patients.
`
`Tyvaso
`
` We commenced commercial sales of Tyvaso in the United States in 2009. We sell Tyvaso to the same specialty pharmaceutical distributors
`in the United States that distribute Remodulin. For the years ended December 31, 2012, 2011 and 2010, we recognized approximately
`$325.6 million, $240.4 million and $151.8 million in Tyvaso revenues, representing 36 percent, 32 percent and 26 percent, 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
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`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 package insert, each Ventavis inhalation consists of four to ten 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. Patients in this study also saved an average of approximately 1.4 hours per day
`when administering Tyvaso compared to Ventavis.
`
`Regulatory Approval of Tyvaso
`
` In 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.
`
` 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 analysis have been completed, and in September 2011, the FDA notified us that we had fulfilled the requirements of
`the PMCs. In July 2012, we received FDA approval for a modified Tyvaso Inhalation System based on the results of the PMCs. As a result, we
`are