UNITED THERAPEUTICS CORP
`
`FORM 10-K
`
`(Annual Report)
`
`Filed 02/25/14 for the Period Ending 12/31/13
`
`
`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 2014, 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, 2013
`
`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)
`
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` Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
`(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:1) No
`
` Indicate by check mark 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 28, 2013, as reported by the NASDAQ Global Select Market
`was approximately $2,458,927,716.
`
` The number of shares outstanding of the issuer's common stock, par value $0.01 per share, as of February 18, 2014, was 50,477,071.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
` Portions of the registrant's definitive proxy statement for the registrant's 2014 annual meeting of shareholders scheduled to be held on June 26, 2014, 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 Disclosures 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
`
` 38
` 57
` 57
` 58
` 58
`
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`
`
`
`
`
`
` 59
` 60
`
`
` 62
` 86
` F-1
`
`
` 88
` 88
` 88
`
`
` Directors, Executive Officers and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and
`Related Stockholder Matters
` 91
` Certain Relationships and Related Transactions, and Director Independence 91
` Principal Accounting Fees and Services
` 91
`
`
`
`
` 89
` 90
`
`
`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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`
`
` 92
`
`
` 93
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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 (under the skin) or intravenously (in the vein) for the treatment of pulmonary
`arterial hypertension (PAH). The United States Food and Drug Administration (FDA) approved Remodulin in 2002 for
`subcutaneous administration. Subsequently, the FDA broadened its approval of Remodulin for intravenous use and for the
`treatment of patients who require transition from Flolan® (epoprostenol), the first FDA-approved prostacyclin therapy for PAH.
`Outside the United States, Remodulin is approved in 37 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. In December 2013, the FDA approved Orenitram TM (treprostinil) Extended-Release Tablets (Orenitram), which we expect
`to make commercially available in mid-2014. We are also conducting pre-clinical studies of a self-injectable form of treprostinil,
`which we refer to as TransCon treprostinil. Our wholly-owned subsidiary Lung Biotechnology Inc., formerly known as
`Lung LLC, is developing another prostacyclin analogue we licensed from Toray Industries, Inc. (Toray) called beraprost, for
`treatment of PAH both as an oral tablet known as 314d and as an extended release injection we refer to as TransCon beraprost.
`
`Phosphodiesterase Type 5 (PDE-5) Inhibitor. PDE-5 inhibitors act to inhibit the degradation of cyclic guanosine monophosphate
`(cyclic GMP) in cells. Cyclic GMP is activated by nitric oxide (NO), a naturally occurring substance in the body that mediates the
`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.
`
`Monoclonal Antibody (MAb). 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 (NCI) of the United States National Institutes of Health (NIH). In December 2013,
`our marketing authorization application (MAA) for this antibody was accepted for review by the European Medicines Agency
`(EMA) and we plan to file a biologics license application (BLA) with the FDA during the first half of 2014.
`
`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 (NIAID) of the NIH for studies directed at the development of a broad
`spectrum antiviral drug based on our glycobiology antiviral platform. During the first half of 2014, we plan to begin enrolling a
`phase I clinical trial of our lead antiviral candidate, an alpha-glucosidase inhibitor called UV-4B, for the treatment of dengue.
`
`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
`
`3
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`(PLX) cells for the treatment of PAH. We commenced a phase I clinical study in Australia in 2013.
`
`•
`
`Lung Transplantation. The only reported cure for PAH is a 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 for transplant into patients suffering
`from PAH and other lung diseases. We are also developing technologies to increase the supply of donor lungs through
`collaborations with two ex-vivo lung perfusion companies.
`
` We devote most of our research and development resources to developing these key products and product candidates.
`
` Through 2013, we have generated revenues primarily from the sale of Remodulin, Tyvaso and Adcirca (which we refer to as our
`commercial products). Despite the planned commercial launch of Orenitram in mid-2014, we expect that sales of Remodulin, Tyvaso and
`Adcirca will continue to be our primary sources of revenues for the next several years. 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 contracted specialty pharmaceutical
`distributors in the United States and 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
`
`
`Orenitram
`
`Mode of
`Delivery
`
` Continuous
`subcutaneous
`
`
`
`
`Indication/Market
` Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Continuous
`intravenous
`
`
`Inhaled
`
`
`Oral
`
`
`Oral
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`Current Status
`
` Commercial in the U.S., most of Europe*,
`Argentina, Canada, Chile, Israel, Mexico,
`Peru, Puerto Rico, Saudi Arabia, South
`Korea, Taiwan and Venezuela; also
`approved in China
`
`Commercial in the U.S., Argentina,
`Canada, Israel, Puerto Rico, Saudi Arabia
`and Switzerland; also approved in most of
`Europe*, China, Mexico, Peru and South
`Korea
`
`Commercial in the U.S. and Puerto Rico
`
`
`
`
`
`
`
`
`
`
`
`Commercial in the U.S. and Puerto Rico
`
`
`Approved by the FDA; commercial launch
`expected mid-2014
`
`4
`
`Our
`Territory
`
` Worldwide
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Worldwide
`
`
`Worldwide
`
`
`United States
`and Puerto
`Rico
`
`Worldwide
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`Product
`Ch14.18 MAb
`
`Mode of
`Delivery
`Intravenous
`
`
`
`
`
`
`
`Indication/Market
` Neuroblastoma
`
`
`Orenitram
`Combination
`Therapy
`
`Remodulin
`
`
`Beraprost 314d
`
`
`PLX Cells
`
`
`UV-4B
`
`
`TransCon
`Treprostinil
`
`TransCon
`Beraprost
`
`Glycobiology
`Antiviral Agents
`
`
`Lung
`Transplantation
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Oral
`
`
`Continuous
`intravenous via
`implantable pump
`
`Oral
`
`
`Intravenous
`
`
`Oral
`
`
`Self-Injection
`
`
`Self-Injection
`
`
`Oral
`
`
`Various
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Pulmonary arterial
`hypertension
`
`Dengue
`
`
`Pulmonary arterial
`hypertension
`
`Pulmonary arterial
`hypertension
`
`Broad-spectrum agents
`against viral infectious
`diseases
`
`End-stage lung disease
`
`Current Status
`
` MAA filed with the EMA in
`December 2013; BLA filing
`with the FDA expected first
`half of 2014
`
`Phase III
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Phase III
`
`
`Phase III
`
`
`Phase I
`
`
`Phase I (plan to commence
`enrollment first half of 2014)
`
`Pre-Clinical
`
`
`Pre-Clinical
`
`
`Pre-Clinical
`
`
`Pre-Clinical
`
`
`
`
`Our Territory
`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
`
`
`Worldwide
`
`
`Worldwide, except Asia
`
`
`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.
`
`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. We believe that PAH affects about 500,000
`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.
`
` 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
`
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`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 cyclic GMP. Therefore, another established therapeutic approach has been to inhibit the
`degradation of cyclic GMP, 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. We plan to begin selling another prostacyclin analogue, Orenitram, in mid-2014.
`
`Remodulin
`
` One of our lead products for treating PAH is Remodulin, 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 pharmaceutical distributors internationally.
`We recognized approximately $491.2 million, $458.0 million and $430.1 million in Remodulin revenues, representing 44 percent, 50 percent
`and 58 percent of our net revenues for the years ended December 31, 2013, 2012 and 2011, respectively. The FDA approved Remodulin as a
`continuous subcutaneous infusion therapy in 2002, and as a continuous intravenous infusion therapy in 2004. Remodulin is indicated to treat
`patients with PAH (World Health Organization (WHO) Group 1) to diminish symptoms associated with exercise. Studies establishing
`effectiveness included patients with New York Heart Association (NYHA) Functional Class II-IV (moderate to severe) symptoms. In 2006, the
`FDA expanded its approval to include transition of patients to Remodulin from Flolan, 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.
`
` Outside of the United States, Remodulin is approved for treatment of PAH in 38 countries by continuous subcutaneous administration and
`in 32 countries, including 23 countries in Europe that granted approval in December 2011, by continuous intravenous administration.
`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 Japan (where we filed a marketing application during the third quarter of 2013) and
`China (where we received marketing approval in March 2013, and expect commercial launch in 2014).
`
` 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. 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 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
`
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`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 its subcutaneous formulation 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, the FDA approved Teva Pharmaceuticals Industries Ltd.'s (Teva) 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® and Opsumit®, both ETRAs, and Ventavis®, an inhaled prostacyclin.
`
` In February 2012, we received notice of an abbreviated new drug application (ANDA) by Sandoz Inc. (Sandoz) requesting FDA approval to
`market a generic version of the 10 mg/mL strength of Remodulin. In December 2012, we received notice that Sandoz had amended its
`previously filed ANDA to request additional approval to market generic versions of the 1 mg/mL, 2.5 mg/mL, and 5 mg/mL strengths of
`Remodulin. For further details, see the sections 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 38 countries outside the United States. In 32 of these countries, it is approved for both subcutaneous and
`intravenous use. In the other six countries, Remodulin is approved for subcutaneous use only.
`
` We used the mutual recognition process, described more fully below 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 of intravenous Remodulin by the French regulatory
`agency, L'Agence Nationale de Sécurité du Médicament et des Produits de Santé (ANSM), as the reference member state for the mutual
`recognition process. This approval allows us to market
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`intravenous Remodulin in the EEA countries where subcutaneous Remodulin has already been approved and where we have obtained pricing
`approval and approval of our risk management plan (RMP).
`
` 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 have implemented 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 13 EEA countries, with pricing approval in ten of these.
`
` 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
`physician 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.
`
` In March 2013, the China Food and Drug Administration approved intravenous and subcutaneous Remodulin for PAH in the People's
`Republic of China, and we expect a commercial launch by our local distributor in 2014. We filed a marketing application for Remodulin during
`the third quarter of 2013 in Japan and, assuming a favorable review, expect regulatory approval and commercial launch by our local distributor
`in 2014.
`
`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 exclusive rights in the United States,
`UK, France, Germany, Italy and Japan, with Medtronic, Inc. (Medtronic) to develop its proprietary intravascular infusion catheter to be used
`with Medtronic's SynchroMed® II implantable infusion pump and related infusion system components (together referred to as the Medtronic
`System) in order to deliver Remodulin for the treatment of PAH. If the Medtronic System is successful, it could reduce many of the patient
`burdens associated with infused prostacyclin analogues. In the second half of 2013, Medtronic completed the DelIVery clinical trial, which we
`funded, in order to study the safety of the Medtronic System while administering Remodulin. The primary objective of the study was to
`demonstrate a rate of catheter-related complications below 2.5 per 1,000 patient-days while using the Medtronic System to deliver Remodulin. In
`September 2013, Medtronic informed us that this primary objective was met (p<0.0001). In addition to the clinical study, Medtronic must
`complete other stability, compatibility and technical assessments of the Medtronic System, including modifications to its hardware and software,
`and address any outstanding regulatory issues. Upon completion of these activities by Medtronic, we anticipate Medtronic will make
`preparations to file a premarket approval application (PMA) seeking FDA clearance for the catheter and labeling changes, and will address any
`FDA feedback, to enable the use of the Medtronic System with Remodulin. In tandem, we plan to seek FDA approval of a supplement to
`Remodulin's label to allow the use of Remodulin with the Medtronic System.
`
` 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
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`ended December 31, 2013, 2012 and 2011, we recognized approximately $438.8 million, $325.6 million and $240.4 million in Tyvaso revenues,
`representing 39 percent, 36 percent and 32 percent, respectively, of our net revenues.
`
` 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 (Bayer) 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 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. Tyvaso is administered four times a day, by
`inhaling up to twelve 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,
`once a day, a single ampule containing that day's supply of Tyvaso is emptied into the Tyvaso Inhalation System. 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 was 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
`
`