UNITED THERAPEUTICS CORP
`
`FORM 10-K
`
`(Annual Report)
`
`Filed 02/24/15 for the Period Ending 12/31/14
`
`
`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 2015, 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, 2014
`
`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 30, 2014, as reported by the NASDAQ Global Select Market
`was approximately $3,053,391,425.
`
` The number of shares outstanding of the issuer's common stock, par value $0.01 per share, as of February 17, 2015, was 46,665,517.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
` Portions of the registrant's definitive proxy statement for the registrant's 2015 annual meeting of shareholders scheduled to be held on June 26, 2015, 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
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` 36
` 55
` 55
` 55
` 57
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`
` 58
` 59
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` 61
` 86
` F-1
`
`
` 89
` 89
` 90
`
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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
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`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 innovative 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) to diminish symptoms associated with exercise. The United States Food and Drug Administration
`(FDA) approved Remodulin for subcutaneous and intravenous administration in 2002 and 2004, respectively. Outside the United
`States, Remodulin is approved in 39 countries, most of which have approved both routes of administration. We are developing
`new technologies to make Remodulin delivery more convenient, such as implantable pump systems for intravenous Remodulin
`and pre-filled, semi-disposable pumps for subcutaneous Remodulin. In 2009, the FDA approved Tyvaso ® (treprostinil) Inhalation
`Solution (Tyvaso), an inhaled prostacyclin therapy for the treatment of PAH to improve exercise ability. In December 2013, the
`FDA approved Orenitram ® (treprostinil) Extended-Release Tablets (Orenitram), which commenced sales during the second
`quarter of 2014. Our wholly-owned subsidiary, Lung Biotechnology Inc., is developing another oral prostacyclin analogue for the
`treatment of PAH called esuberaprost.
`
`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 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 to improve exercise ability.
`
`Monoclonal Antibody (MAb). MAbs act by targeting tumor-associated antigens located on the surfaces of 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 in June 2014, the FDA accepted our biologics license application (BLA) for review.
`
`Glycobiology Antiviral Agents. Glycobiology antiviral agents are a novel class of small, sugar-like molecules that have shown
`preclinical indications of efficacy against a broad range of viruses. In 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 third quarter of 2014, we commenced a phase I clinical
`trial of our lead antiviral candidate, an alpha-glucosidase inhibitor called UV-4B.
`
`Cell-Based Therapy. In 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. We commenced a phase I clinical
`study in Australia in 2013.
`
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`•
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`Lung Transplantation. The only reported cure for PAH is a lung transplant. Using the xenotransplantation technology we
`acquired through our acquisition of Revivicor Inc. (Revivicor) and several regenerative medicine technologies that we have
`licensed, we are in the early preclinical 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 donated lungs through ex-vivo
`perfusion of donor lungs prior to transplant.
`
` We devote most of our research and development resources to developing these key products and product candidates.
`
` We generate revenues from the sale of Remodulin, Tyvaso, Adcirca and Orenitram (which we refer to as our commercial products). We
`commenced sales of Orenitram during the second quarter of 2014. We expect that sales of our existing commercial products 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 and at 55 T.W. Alexander Drive, Research Triangle Park, North Carolina 27709.
`
` Unless the context requires otherwise or unless otherwise noted, all references in this Annual Report on Form 10-K to "United
`Therapeutics" and to the "company", "we", "us" or "our" are to United Therapeutics Corporation and its subsidiaries.
`
`Our Products
`
` Our product portfolio includes the following:
`
`Product
`Remodulin
`
`Mode of
`Delivery
`
` Continuous
`subcutaneous
`
`
`
`
` PAH
`
`Indication
`
` Our Territory
` Commercial in the U.S., most of Europe*,
`Worldwide
`
`Current Status
`
`
`Argentina, Brazil, Canada, Chile, China,
`Israel, Japan, Mexico, Peru, Puerto Rico,
`Saudi Arabia, South Korea, Taiwan and
`Venezuela
`
`
`
`Commercial in the U.S., most of Europe*,
`Argentina, Canada, China, Israel, Japan,
`Mexico, Peru, Puerto Rico, Saudi Arabia,
`South Korea and Switzerland
`
`Commercial in the U.S. and Puerto Rico;
`also approved in Israel
`
`Commercial in the U.S. and Puerto Rico
`
`
`
`
`
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`Remodulin
`
`
`Tyvaso
`
`
`Adcirca
`
`
`Orenitram
`
`Ch14.18 MAb
`
`
`Remodulin
`Implantable
`System
`
`
`Orenitram
`Combination
`Therapy
`
`
`Continuous
`intravenous
`
`
`Inhaled
`
`
`Oral
`
`
`Oral
`
`Intravenous
`
`
`Continuous
`intravenous via
`implantable pump
`
`
`Oral
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`PAH
`
`
`
`
`PAH
`
`
`
`
`PAH
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`PAH
`
`
`
`High-risk neuroblastoma
`
`
`
`
`PAH
`
`
`
`
`PAH
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Commercial in the U.S.
`
`MAA filed with the EMA in December
`2013; BLA filed with the FDA in June
`2014
`
`PMA submitted by Medtronic Inc. to the
`FDA in December 2014. We submitted an
`NDA to the FDA in January 2015
`
`
`
`
`
`
`
`
`Phase III
`
`4
`
`
`Worldwide
`
`
`Worldwide
`
`
`United States and
`Puerto Rico
`
`Worldwide
`
`Worldwide
`
`
`United States, United
`Kingdom, Canada,
`France, Germany,
`Italy and Japan
`
`Worldwide
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`Product
`Esuberaprost
`
`
` Oral
`
`Mode of
`Delivery
`
`
`
`
`Indication
` PAH
`
` Current Status
` Phase III
`
`
`
`Ex-Vivo Lung
`Perfusion
`
`
`PLX Cells
`
`UV-4B
`
`Remodulin
`
`
`Glycobiology
`Antiviral Agents
`
`
`Lung
`Transplantation
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
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`Pre-transplant service providing
`extended preservation and
`assessment of donor lungs.
`
`Intravenous
`
`Oral
`
`Subcutaneous via pre-filled,
`semi-disposable pump
`
`Oral
`
`
`Various
`
`
`
`
`
`
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`
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`End-stage lung
`disease
`
`
`
`
`
`Phase III
`
`
`
`
`PAH
`
`
`
`Dengue and influenza
`
`
`
`PAH
`
`
`
`
`
`
`
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`
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`Broad-spectrum
`agents against viral
`infectious diseases
`
`
`
`End-stage lung
`disease
`
`
`
`
`
`
`
`
`Phase I
`
`Phase I
`
`Preclinical
`
`
`Preclinical
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`
`Preclinical
`
`
`
`
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`
`
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`
`
`
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`
`
`Our Territory
`North America, Europe,
`Mexico, South America, Egypt,
`India, South Africa and
`Australia
`
`U.S.
`
`
`Worldwide
`
`Worldwide
`
`Worldwide
`
`
`Worldwide
`
`
`Worldwide
`
`*
`
`We have obtained approval for subcutaneous and intravenous Remodulin in 24 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.
`
`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. We have seen increases in the number of people diagnosed with the disease, but 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, FDA-approved therapies for PAH focus 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 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.
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`•
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`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 of, and structural changes to, 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, Tyvaso and Orenitram are
`prostacyclin analogues, and Adcirca is a PDE-5 inhibitor.
`
`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 $553.7 million, $491.2 million and $458.0 million in Remodulin revenues, representing 43 percent, 44 percent
`and 50 percent of our total net revenues for the years ended December 31, 2014, 2013 and 2012, 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), which includes multiple etiologies such as idiopathic and heritable PAH, as
`well as PAH associated with connective tissue diseases, 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 the treatment of PAH in 39 countries by continuous subcutaneous administration
`and in 33 countries 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.
`
` We believe Remodulin has many qualities that make it an appealing alternative to competitive therapies. Remodulin is stable at room
`temperature, so it does not need to be cooled during infusion and patients do not need to use cooling packs or refrigeration to keep it stable.
`Treprostinil is highly soluble, which enables us to produce Remodulin in highly concentrated solutions. This allows therapeutic concentrations of
`Remodulin to be delivered at very low flow rates via miniaturized infusion pumps for both subcutaneous and intravenous infusion. Remodulin
`can be continuously infused for up to 48 hours intravenously or 72 hours subcutaneously before refilling the infusion pump, and is packaged as
`an aqueous solution so patients do not have to reconstitute the drug before refilling their pumps.
`
` In 2008, the FDA approved Teva Pharmaceuticals USA, Inc.'s (Teva) version of generic epoprostenol (the active ingredient in Flolan) for
`the treatment of PAH via intravenous delivery. Also in 2008, the FDA approved another intravenous version of epoprostenol, which is currently
`marketed by Actelion Pharmaceuticals Ltd (Actelion) under the name Veletri ® . Actelion also markets Tracleer ® and Opsumit ® , both ETRAs,
`and Ventavis ® , an inhaled prostacyclin. Flolan and generic epoprostenol are not stable at room temperature, but Veletri may be stable at room
`temperature depending on its concentration. Flolan, generic epoprostenol, and Veletri have shorter half-lives than Remodulin, require mixing and
`daily pump refills, and are not administered with miniaturized infusion pumps. None of these products may be administered via subcutaneous
`infusion.
`
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` There are serious 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. Patients who receive therapy through implanted venous catheters have a risk
`of developing blood stream infections and a serious systemic infection known as sepsis. Other common side effects associated with both
`subcutaneous and intravenous Remodulin include headache, diarrhea, nausea, jaw pain, vasodilation and edema.
`
`International Regulatory Review of Subcutaneous and Intravenous Remodulin
`
` Remodulin is approved in 39 countries outside the United States. In 33 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) in 2005. Our reference
`member state for the mutual recognition process was the French regulatory agency, L'Agence Nationale de Sécurité du Médicament et des
`Produits de Santé (ANSM). In 2011, we received regulatory approval for intravenous Remodulin by ANSM, which allows us to market
`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 20 EEA countries, with pricing approval in 16 of these.
`
` In March 2013, the China Food and Drug Administration approved intravenous and subcutaneous Remodulin for PAH in the People's
`Republic of China. In March 2014, Japan's Ministry of Health, Labor and Welfare approved Remodulin for the treatment of PAH by
`subcutaneous and intravenous administration. Remodulin is sold in Japan under the brand name Treprost™. In the second and third quarters of
`2014, we commenced sales of Remodulin to our distributors in China and Japan, respectively.
`
`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, Canada, 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
`Remodulin Implantable System) in order to deliver Remodulin for the treatment of PAH. If the Remodulin Implantable System is successful, it
`could reduce many of the patient burdens associated with infused prostacyclin analogues. In September 2013, Medtronic released the results of
`the DelIVery clinical trial, which we funded, in order to study the safety of the Remodulin Implantable System while administering Remodulin.
`The primary endpoint of the study was to demonstrate a rate of catheter-related complications below 2.5 per 1,000 patient-days while using the
`Remodulin Implantable System to deliver Remodulin.
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`Medtronic informed us that this primary objective was met (p<0.0001). In December 2014, Medtronic completed other stability, compatibility
`and technical assessments of the Remodulin Implantable System, including modifications to its hardware and software, and filed a premarket
`approval application (PMA) seeking FDA approval for the catheter and labeling changes. Medtronic is responsible for addressing any FDA
`requests for additional information concerning the Remodulin Implantable System. In January 2015, we submitted new labeling requesting FDA
`approval to allow the use of Remodulin with the Remodulin Implantable System. The FDA has indicated that our submission will be treated as a
`new NDA.
`
`Subcutaneous Remodulin Administered via Pre-Filled, Semi-Disposable Pump
`
` In December 2014, we entered into an exclusive agreement with DEKA Research & Development Corp. (DEKA) to develop a pre-filled,
`semi-disposable pump system for subcutaneous delivery of Remodulin. Under the terms of the agreement, we will fund all of the development
`costs related to the semi-disposable pump system and will pay product fees and a single-digit royalty to DEKA based on commercial sales of the
`system and the Remodulin sold for use with the system. Our goal is to be in a position to receive FDA approval for this delivery system by the
`end of 2018.
`
`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, 2014, 2013 and 2012, we recognized approximately
`$463.1 million, $438.8 million and $325.6 million in Tyvaso revenues, representing 36 percent, 39 percent and 36 percent, respectively, of our
`total net revenues.
`
` Tyvaso, which contains the active ingredient treprostinil, 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. A single ampule containing Tyvaso is emptied into the Tyvaso
`Inhalation System once per day, so the Tyvaso Inhalation System only needs to be cleaned once each 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.
`Patients in this study saved an average of approximately 1.4 hours per day when administering Tyvaso compared to Ventavis.
`
` Ventavis is the only other FDA-approved inhaled prostacyclin analogue and is marketed by Actelion in the United States and by Bayer
`Schering Pharma AG (Bayer) in Europe. The active ingredient in Ventavis is iloprost. 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. Ventavis can cause a decrease in systemic (body-wide) blood pressure if the drug is administered at too high a dose.
`
`Regulatory Approval of Tyvaso
`
` In 2009, the FDA approved Tyvaso for the treatment of PAH in WHO Group 1 patients to improve exercise capacity using the Tyvaso
`Inhalation System. Studies establishing effectiveness included predominately patients with NYHA Functional Class III symptoms.
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` 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 modified certain aspects of the Tyvaso Inhalation System. We also performed a usability analysis incorporating the
`evaluation and prioritization of user-related risk followed by a human factors study. In 2012, the FDA acknowledged we had satisfied our PMCs
`and approved our modifications to the Tyvaso Inhalation System. The Tyvaso Inhalation System now includes a nebulizer called TD-100, which
`incorporates these modifications. In addition, we are developing further enhancements to make the Tyvaso Inhalation System easier for patients
`to use.
`
` In accordance with our PMR, we are required to complete a long-term observational study in the United States that includes 1,000 patient
`years of follow-up in patients treated with Tyvaso, and 1,000 patient years of follow-up in control patients receiving other PAH treatments, to
`evaluate the potential association between Tyvaso and oropharyngeal and pulmonary toxicity. We have completed this study and are preparing to
`submit the results of the study by the FDA's deadline of June 30, 2015. While we believe we are on schedule to complete the PMR by this
`deadline, any failure or delay could result in penalties, including fines or withdrawal of Tyvaso from the market, unless we are able to
`demonstrate good cause for the failure or delay.
`
` In June 2010, the FDA granted orphan drug designation for Tyvaso. Such a designation, coupled with an approval of the product for the
`orphan indication, confers an exclusivity period through July 2016, during which the FDA may not approve any application to market the same
`drug for the same indication, except in limited circumstances.
`
` We are not seeking EMA approval of Tyvaso as a standalone treatment of PAH, but we are planning to seek EMA approval to market
`Tyvaso in combination with esuberaprost, if the BEAT study described below under Esuberaprost is successful. Tyvaso is approved in Israel,
`and we are in the process of updating its registration to include the TD-100 device so that we can commence commercial sales through our
`Israeli distributor, Rafa Laboratories Ltd.
`
`Orenitram
`
` Orenitram is an extended-release, oral tablet form of treprostinil, which we launched commercially in t