Research and Development
We focus most of our research and development efforts on the following pipeline programs:
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Product
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Mode of Delivery
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Indication
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Current Status
STUDY NAME CAPS
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Target FDA
Approval
Date
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Our Territory
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Target U.S.
Patient
Population
Size
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RemoSynch
(Implantable System for Remodulin)
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Continuous intravenous via implantable pump
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PAH
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Medtronic PMA pending (FDA action anticipated April 2017). UT NDA pending (FDA action anticipated June 2017).
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2017
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United States, United Kingdom, Canada, France, Germany, Italy and Japan
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6,000
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RemUnity
(treprostinil)
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Continuous subcutaneous via pre-filled, semi-disposable pump
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PAH
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Pre-NDA
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2018
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Worldwide
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6,000
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Dinutuximab
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Injection or infusion
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Multiple GD2 expressing cancers
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Phase II/III
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2019-2023 for accelerated approval and other regulatory pathways
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Worldwide
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12,000
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OreniPlus
(Orenitram in combination with approved background therapy)
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Oral
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PAH
(decrease morbidity and mortality)
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Phase IV
FREEDOM-EV
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2019
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Worldwide
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15,000
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Tysuberprost
(esuberaprost in combination with Tyvaso)
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Oral
(esuberaprost) Inhaled (Tyvaso)
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PAH
(decrease morbidity and mortality)
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Phase III
BEAT
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2019
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North America, Europe, Mexico, South America, Egypt, India, South Africa and Australia
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10,000
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Tyvaso-ILD
(treprostinil)
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Inhaled
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Pulmonary hypertension associated with idiopathic pulmonary fibrosis
(WHO Group 3)
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Phase III
INCREASE
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2020
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Worldwide
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27,500
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Aurora-GT
(eNOS gene therapy)
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Intravenous injection
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PAH
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Phase II/III
SAPPHIRE
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2020*
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United States**
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10,000
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OreniLeft
(treprostinil)
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Oral
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Pulmonary hypertension associated with left ventricular diastolic dysfunction
(WHO Group 2)
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Phase III
SOUTHPAW
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2021
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Worldwide
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50,000
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OreniCell
(treprostinil)
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Oral
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Reduce morbidity and mortality in patients with pulmonary hypertension associated with sickle cell disease (WHO Group 5)
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Phase II/III
IRONS
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2022
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Worldwide
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25,000
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Manufactured Organs
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Transplant
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End-stage organ failure
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Pre-clinical
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2023
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Worldwide
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> 30,000
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*
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Reflects
anticipated Canadian approval date. FDA filing and approval will follow Canadian approval.
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Canadian
rights are held by an affiliated Canadian entity, of which we hold a majority financial stake.
We are working with Medtronic, Inc. (Medtronic) on a program to develop Medtronic's proprietary intravascular infusion catheter to be
used with its SynchroMed
®
II implantable infusion pump and related infusion system components (together referred to as the Implantable System for
Remodulin, or RemoSynch) in order to deliver Remodulin for the treatment of PAH. The SynchroMed
9
II
device is already approved for delivery of medication to treat neuropathic pain. With our funding, Medtronic completed the DelIVery clinical trial, which studied the safety of the Implantable
System for Remodulin. The primary objective was to demonstrate a rate of catheter-related complications below 2.5 per 1,000 patient-days while using the Implantable System for Remodulin. In September
2013, Medtronic informed us that this primary objective was met. If the Implantable System for Remodulin is approved, the technology has the potential to reduce many of the patient burdens and other
complications associated with the use of external pumps to administer prostacyclin analogues. In order to launch RemoSynch in the United States, Medtronic and we are pursuing parallel regulatory
filings relating to the device and the drug, respectively. Medtronic's PMA relating to the device is pending review, with FDA action anticipated in April 2017. We have resubmitted our NDA requesting
FDA approval to allow the use of Remodulin with the Implantable System for Remodulin, and anticipate FDA action in June 2017.
Medtronic
is entirely responsible for regulatory approvals and all manufacturing and quality systems related to its infusion pump and related components. Medtronic has received a consent
decree citing violations of the quality system regulation for medical devices and requiring it to stop manufacturing, designing and distributing SynchroMed II implantable infusion pump systems, except
in limited circumstances, until the FDA determines that Medtronic has met all the provisions listed in the consent decree. It is unclear how this consent decree will impact our ability to obtain FDA
approval for RemoSynch, or its commercial prospects if approved.
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 treprostinil, which we call the RemUnity system. Under the terms of the agreement, we are funding the development costs related to the RemUnity
system and will pay product fees and a single-digit royalty to DEKA based on commercial sales of the system and the treprostinil drug product sold for use with the system. Currently, we are engaged in
engineering, design and development efforts to optimize the RemUnity pump to deliver treprostinil in pre-filled reservoirs, and intend to complete human factor studies in healthy volunteers and
functionality testing in patients before submitting an application to the FDA to approve the pre-filled RemUnity pump.
We are developing further enhancements intended to make the Tyvaso Inhalation System easier to use and have submitted a supplement for the new
device, with FDA action anticipated in late 2017. In addition, we have commenced a phase III registration study called INCREASE, which is a study of Tyvaso in patients with WHO Group 3
pulmonary hypertension associated with interstitial lung disease (specifically associated with idiopathic pulmonary fibrosis or emphysema), which we refer to as Tyvaso-ILD. There are presently no FDA
approved therapies indicated for treatment of WHO Group 3 pulmonary hypertension.
Orenitram, OreniPlus, OreniLeft and OreniCell
In December 2013, the FDA approved Orenitram for the treatment of PAH in WHO Group 1 patients to improve exercise capacity. The primary study
that supported efficacy of Orenitram was a 12-week monotherapy study (FREEDOM-M) in which PAH patients were not on any approved background PAH therapy.
We
believe that in order for Orenitram to reach its full commercial potential, we need to complete further studies to support an amendment to Orenitram's label to indicate that Orenitram
delays morbidity and mortality (also known as "time to clinical worsening") in PAH patients who are on an approved oral background therapy. We refer to this program to improve Orenitram's label as
OreniPlus. As such, we are conducting a phase IV registration study called FREEDOM-EV, which is intended to support such a label amendment if successful.
10
We
are also planning studies of Orenitram in patients with WHO Group 2 pulmonary hypertension (specifically associated with left ventricular diastolic dysfunction), which we refer to as
OreniLeft, and WHO Group 5 pulmonary hypertension (specifically associated with sickle cell disease), which we refer to as OreniCell. There are presently no FDA approved therapies indicated for
treatment of WHO Group 2 or 5 pulmonary hypertension.
In July 2012, we completed a phase I safety trial of esuberaprost, a single-isomer orally bioavailable prostacyclin analogue, and the
data suggested that dosing esuberaprost four times a day was safe. We believe that esuberaprost and treprostinil have differing prostacyclin receptor-binding profiles and thus could provide benefits
to certain groups of patients with differing sets of safety and efficacy profiles. We also believe that inhaled treprostinil and oral esuberaprost have complimentary pharmacokinetic and
pharmacodynamic profiles, which indicate that they should provide greater efficacy in combination. As a result, we are conducting a phase III registration study called BEAT
(
BE
raprost 314d
A
dd-on to
T
yvaso) to evaluate the
clinical benefit and safety of esuberaprost in combination with Tyvaso for patients with PAH who show signs of deterioration on inhaled treprostinil or have a less than optimal response to inhaled
treprostinil treatment. We refer to the resulting combination of esuberaprost and Tyvaso therapies as Tysuberprost.
Under our BLA approval for Unituxin, the FDA has imposed certain post-marketing requirements and post-marketing commitments on us. We are
conducting additional clinical and non-clinical studies to satisfy these requirements and commitments. While we believe we will be able to complete these studies, any failure to satisfy these
requirements or commitments could result in penalties, including fines or withdrawal of Unituxin from the market, unless we are able to demonstrate good cause for the failure.
In
addition, we are planning studies of Unituxin in adult patients with other forms of GD2-expressing cancers. These research and development efforts into new indications for Unituxin
have been substantially outsourced to a contract research organization called Precision Oncology, LLC.
Finally,
we are working on the development of a fully humanized (non-chimeric) version of dinutuximab, the active ingredient in Unituxin. We intend this new version to reduce some of the
side effects associated with Unituxin, which is a chimeric form of the drug composed of a combination of mouse and human DNA.
We are planning a phase II/III study of a gene therapy product called Aurora-GT, in which a PAH patient's own endothelial progenitor
cells are isolated, transfected with the gene for human endothelial NO-synthase (eNOS), expanded ex-vivo and then delivered to the same patient. This product is intended to rebuild the blood vessels
in the lungs that are destroyed by PAH.
We are engaged in research and development of a variety of technologies designed to increase the supply of transplantable organs and tissues and
improve outcomes for transplant recipients. These programs include preclinical research and development of alternative tissue sources through tissue and organ xenotransplantation, as well as
regenerative medicine to create engineered organs and organ tissues. Although our primary focus is on engineered lungs, we are also
developing technology for other engineered organs, such as kidneys and hearts. Through our wholly-owned subsidiary, Lung
11
Biotechnology
PBC, we are also developing technologies to improve outcomes for lung transplant recipients and to increase the supply of donor lungs through ex-vivo lung perfusion.
We have incurred substantial expenses for our research and development activities and expect to continue to do so in connection with the
programs described above. For details regarding our research and development expenses, see
Part IIItem 7Management's Discussion and
Analysis of Financial Condition and Results of OperationsOverviewResearch and Development.
Sales and Marketing
Our marketing strategy for our commercial products is to use our sales and marketing teams to reach out to the prescriber community to:
(1) increase PAH awareness; (2) increase understanding of the progressive nature of PAH; and (3) increase awareness of our commercial products and how they fit into the various
stages of disease progression and treatment. Our sales and marketing teams consisted of approximately 130 employees as of December 31, 2016. During the second half of 2016, we consolidated and
restructured our domestic sales force into a unified team that sells all of our PAH products, in order to better educate physicians about how our products can be used to create a "continuum of care"
for treating patients across all stages of the disease. Previously, our sales and marketing personnel were divided into two teams that sold different PAH products.
Distribution of Commercial Products
United States Distribution of Remodulin, Tyvaso, Orenitram, and Unituxin
We distribute Remodulin, Tyvaso and Orenitram throughout the United States through two contracted specialty pharmaceutical distributors: Accredo
Health Group, Inc. (Accredo) and CVS Caremark (Caremark). These distributors are required to maintain certain minimum inventory levels in order to ensure an uninterrupted supply to patients who
are prescribed our therapies. We compensate Accredo and Caremark on a fee-for-service basis for certain ancillary services in connection with the distribution of these products. If any of our
distribution agreements expire or terminate, we may, under certain circumstances, be required to repurchase any unsold Remodulin, Tyvaso or Orenitram inventory held by our distributors.
These
specialty pharmaceutical distributors are responsible for assisting patients with obtaining reimbursement for the cost of our treprostinil-based products and providing other
support services. Under our distribution agreements, we sell each of our treprostinil-based products to these distributors at a transfer price that we establish. We have also established patient
assistance programs in the United States, which provide our treprostinil-based products to eligible uninsured or under-insured patients at no charge. Accredo and Caremark assist us with the
administration of these programs.
In
the second quarter of 2015, we entered into an exclusive distribution agreement with ASD Specialty Healthcare, Inc. (ASD), an affiliate of AmerisourceBergen Corporation, to
distribute Unituxin in the United States. Under this agreement, we sell Unituxin to ASD at a transfer price that we establish, and we pay ASD fees for services provided in connection with the
distribution and support of Unituxin.
To
the extent we increase the price of any of these products, increases are in the single-digit percentages per year.
Under our manufacturing and supply agreement with Lilly (see
Patents and Other Proprietary Rights, Strategic Licenses
and Market Exclusivity
below for more details), Lilly manufactures Adcirca and
12
distributes
on our behalf through Lilly's wholesaler network, which includes Accredo and Caremark, in the same manner that it distributes its own pharmaceutical products. Under the terms of this
agreement, we take title to Adcirca upon completion of its manufacture by Lilly. Adcirca is shipped to customers in accordance with purchase orders received by Lilly. When customers take delivery of
Adcirca, Lilly sends an invoice and collects the amount due from the customer subject to customary discounts and rebates, if any. Although Lilly provides these services on our behalf, we maintain the
risk of loss as it pertains to inventory, product returns and non-payment of invoices. The manufacturing and supply agreement will continue in effect until expiration or termination of the license
agreement. Lilly retains authority under the license agreement for all regulatory activities with respect to Adcirca, as well as its retail pricing, which has been and is expected to remain at price
parity with Cialis. Since receiving FDA approval of Adcirca, Lilly has generally increased the net wholesale price of Adcirca two or three times each year by approximately nine to ten percent each
time. We have also established a patient assistance program in the United States, which provides Adcirca to eligible uninsured or under-insured patients at no charge.
We currently sell Remodulin outside the United States to various distributors, each of which has exclusive distribution rights in one or more
countries within Europe, Israel and the Middle East, Asia and South and Central America. We also distribute Remodulin in Canada through a specialty pharmaceutical wholesaler. In some of the European
markets where we are not licensed to market Remodulin, such as Spain and the United Kingdom, we sell (but do not market) Remodulin on a named-patient basis in which therapies are approved for
individual patients by a national medical review board, hospital or health plan on a case-by-case basis.
Patents and Other Proprietary Rights, Strategic Licenses and Market Exclusivity
Our success depends in part on our ability to obtain and maintain patent protection for our products, preserve trade secrets, prevent third
parties from infringing upon our proprietary rights and operate without infringing upon the proprietary rights of others in the United States and worldwide. Many of these proprietary rights stem from
licenses and other strategic relationships with third parties. In addition to intellectual property rights, U.S. and international regulatory authorities often provide periods of market exclusivity
for manufacturers of biopharmaceutical products.
Patents
provide the owner with a right to exclude others from practicing an invention. Patents may cover the active ingredients, uses, formulations, doses, administrations, delivery
mechanisms, manufacturing processes and other aspects of a product. The period of patent protection for any given product generally depends on the expiration date of various patents and may differ
from country to country according to the type of patents, the scope of coverage and the remedies for infringement available in a country. Most of our commercial products and investigational products
are protected by patents that expire on varying dates.
Significant
legal questions exist concerning the extent and scope of patent protection for biopharmaceutical products and processes in the United States and elsewhere. Accordingly, there
is no certainty that patent applications owned or licensed by us will be issued as patents, or that our issued patents will afford meaningful protection against competitors. Once issued, patents are
subject to challenge through both administrative and judicial proceedings in the United States and other countries. Such proceedings include re-examinations,
inter
partes
reviews, post-grant reviews and interference proceedings before the U.S. Patent and Trademark Office, as well as opposition proceedings before the European Patent
Office. Litigation may be required to enforce, defend or obtain our patent and other intellectual property rights. Any administrative proceeding or litigation could require a significant commitment of
our resources and, depending on outcome, could adversely affect the scope, validity or enforceability of certain of our patent or other proprietary rights.
13
Remodulin, Tyvaso and Orenitram Proprietary Rights
We have a number of issued patents and pending patent applications covering the stable prostacyclin analogue known as treprostinil, which is the
active pharmaceutical ingredient in Remodulin, Tyvaso and Orenitram.
In
January 1997, we acquired patents covering the use of treprostinil for PAH from GlaxoSmithKline PLC (formerly Glaxo Wellcome, Inc.) (Glaxo) in exchange for certain
payments including a royalty on sales of any product containing treprostinil. All of these patents expired in October 2014, as did our royalty payment obligation to Glaxo.
In
October 1997, we filed patent applications for a new synthesis method for treprostinil in the United States, Europe and various other countries. These applications resulted in the
grant of three patents in the United States, all of which expire in October 2017, as well as patents granted in a number of other countries which expire in October 2018.
We
continue to conduct research into new methods to synthesize treprostinil and have filed a number of additional patent applications relating to manufacturing treprostinil, several of
which have already been granted in the United States. One such patent was granted, expiring in 2028, and is listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations,
commonly known as the Orange Book (see
Orange Book
below), for Remodulin, Tyvaso and Orenitram.
In
addition to the treprostinil patents noted above, we have other patents specific to our individual treprostinil-based products, including the following:
-
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Remodulin.
We have been granted three U.S. patents covering an improved
diluent for Remodulin, which expire in 2028 and 2029. We have another patent covering intravenous administration of Remodulin with certain diluents, which expires in 2024. All four of these patents
are listed in the Orange Book.
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Tyvaso.
We have been granted two U.S. patents, as well as patents in other
countries, for Tyvaso that cover methods of treating PAH by inhaled delivery. These patents will expire in the United States in 2018 and in various countries throughout the world in 2020. We recently
were granted two additional patents directed to a method of treating pulmonary hypertension and a kit for treating pulmonary hypertension. These two new patents expire in 2028 and are listed in the
Orange Book. Counterparts to these patents are issued in several other countries.
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Orenitram.
Our patents for Orenitram cover methods of use for treating PAH,
orally administered formulations, controlled moisture storage and manufacturing methods, as well as those covering controlled release formulations licensed to us by Supernus
Pharmaceuticals Inc. (Supernus). These patents will expire in the United States between 2024 and 2031 and in various countries throughout the world between 2024 and 2030.
We
have additional pending U.S. and international patent applications relating to Remodulin, Tyvaso and Orenitram.
In seeking approval of a drug through an NDA or upon issuance of new patents following approval of an NDA, applicants are required to submit to
the FDA each patent that has claims covering the applicant's product or a method of using the product. Each of the patents submitted is then published in the Orange Book. See
Governmental RegulationPatent Term and
Regulatory Exclusivity
below for further details. Remodulin currently has six unexpired Orange
Book-listed patents with expiration dates ranging from 2017 to 2029. Tyvaso currently has six unexpired Orange Book listed patents with expiration dates ranging from 2017 to 2028. Orenitram currently
has twelve unexpired Orange Book
14
listed
patents with expiration dates ranging from 2017 to 2031. Additional patent applications are pending, and if granted, may be eligible for listing in the Orange Book.
Remodulin's regulatory exclusivity in the U.S. and Europe has expired. In June 2010, the FDA granted orphan drug designation for Tyvaso, which
resulted in an orphan exclusivity period that expired in July 2016. In April 2004, the EMA designated Tyvaso an orphan medicinal product for the treatment of both PAH and chronic thromboembolic
pulmonary hypertension, which would confer a ten-year exclusivity period commencing if and when we obtain marketing approval. As a result of FDA approval of our NDA for Orenitram as a new dosage form,
Orenitram had three years of market exclusivity for PAH, which expired in December 2016. A request for orphan drug designation for Orenitram was denied by the FDA.
In 2006, we entered into an exclusive license agreement with Supernus to use certain of its technologies in manufacturing Orenitram. Under the
agreement, we paid Supernus certain amounts upon the achievement of specified milestones based on the development and commercial launch of Orenitram for PAH, and we would be obligated to make
additional milestone payments if we develop Orenitram for a second indication. In addition, the agreement provides that we will pay a single-digit percentage royalty based on net worldwide sales. This
royalty will be paid for approximately twelve years commencing with the first product sale, which occurred in the second quarter of 2014.
Generic Competition
We settled litigation with Sandoz, Teva and Par relating to their ANDAs seeking FDA approval to market generic versions of Remodulin before the
expiration of certain of our U.S. patents. Under the terms of our settlement agreements, Sandoz will be permitted to market its generic version of Remodulin in the United States beginning in June
2018, and both Teva and Par will be permitted to market their generic versions of Remodulin in the United States in December 2018, although each of these companies may be permitted to enter the market
earlier under certain circumstances.
We
are engaged in litigation with Watson Laboratories, Inc. (Watson), based on its ANDA to market a generic version of Tyvaso before the expiration of certain of our U.S. patents
at various dates from
November 2018 through December 2028. We also are engaged in litigation with Actavis Laboratories FL, Inc. (Actavis), contesting its ANDA to market a generic version of the 0.25 mg,
1.0 mg and 2.5 mg strengths of Orenitram before the expiration of certain of our U.S. patents at various dates from 2024 through 2031.
Finally,
SteadyMed Ltd. (SteadyMed) has filed a petition for
inter partes
review seeking to invalidate the claims of one of our
patents that expires in December 2028 and relates to treprostinil (U.S. Patent No. 8,497,393, which we refer to as the '393 Patent), which is the active ingredient in Remodulin, Tyvaso and
Orenitram. In April 2016, the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office instituted an
inter partes
review of the '393
Patent on the basis of SteadyMed's petition. The PTAB preliminarily agreed with SteadyMed's arguments concerning invalidity, and initially found that there is a reasonable likelihood that SteadyMed
would prevail in challenging the '393 patent. Oral argument was held before the PTAB in November 2016. We are currently awaiting the PTAB's final decision, which we expect in or before April 2017.
SteadyMed announced that it is developing a product called Trevyent
®
, which is a single-use, pre-filled pump intended to deliver a two-day supply of
treprostinil subcutaneously using SteadyMed's PatchPump
®
technology. In January 2016, SteadyMed announced that Trevyent had been granted orphan drug
15
designation
by the FDA for the treatment of PAH. SteadyMed has announced plans to file an NDA for Trevyent during the second quarter of 2017, and launch the product in 2018.
For
further details regarding the Watson, Actavis and SteadyMed matters, please see Note 19
Litigation
, to our
consolidated financial statements.
As
a result of our settlements with Sandoz, Teva and Par, we expect to see generic competition for Remodulin from these companies in the United States beginning in June 2018 (Sandoz) and
December 2018 (Teva and Par) (or earlier under certain circumstances). This increased competition could reduce our net product sales and profits. In addition, while we intend to vigorously enforce our
intellectual property rights relating to our products, there can be no assurance that we will prevail in defending our patent rights, or that additional challenges from other ANDA filers or other
challengers will not surface with respect to our products. Our patents could be invalidated, found unenforceable or found not to cover one or more generic forms of Remodulin, Tyvaso or Orenitram. If
any ANDA filer were to receive approval to sell a generic version of Remodulin, Tyvaso or Orenitram and/or prevail in any patent litigation, the affected product(s) would become subject to increased
competition, which could reduce our net product sales and profits.
Certain
patents for Revatio, a PDE-5 inhibitor marketed by Pfizer for treatment of PAH, expired in 2012, leading several manufacturers to launch generic formulations of sildenafil
citrate, the active ingredient in Revatio. Generic sildenafil's lower price relative to Adcirca could lead to pressure from payers to use generic products within the same class of therapy initially,
which could erode Adcirca's market share and limit its potential sales. Although we believe Adcirca's once-daily dosing regimen provides a significant competitive advantage over generic sildenafil's
multiple dosing regimen, government payers and private insurance companies may favor the use of less expensive generic sildenafil over Adcirca. Thus far, we have not observed any measurable impact of
generic sildenafil on sales of Adcirca; however, circumstances could change over time and our revenues could be adversely impacted. The U.S. patent for Adcirca for the treatment of pulmonary
hypertension will expire in November 2017, after which time we expect to see generic competition for Adcirca that could have a material adverse impact on our Adcirca revenues.
Patent
expiration and generic competition for any of our commercial PAH products could have a significant, adverse impact on our revenues and profits, and is inherently difficult to
predict. For additional discussion, refer to the risk factor entitled,
Our intellectual property rights may not effectively deter competitors from developing competing products
that, if successful, could have a material adverse effect on our revenues and profit
s, contained in
Item 1A
Risk Factors
included in this Report.
In 2008, we entered into several agreements with Lilly regarding Adcirca, including a license agreement and a manufacturing and supply
agreement.
Under the terms of the license agreement, Lilly granted us an exclusive license for the right to develop, market, promote and commercialize
Adcirca for the treatment of pulmonary hypertension in the United States. We agreed to pay Lilly royalties equal to five percent of our net product sales of Adcirca, as a pass through of Lilly's
third-party royalty obligations, for so long as Lilly is required to make such payments.
Lilly
retained the exclusive rights to develop, manufacture and commercialize pharmaceutical products containing tadalafil, the active pharmaceutical ingredient in Adcirca, for the
treatment of pulmonary
hypertension outside of the United States and for the treatment of other diseases worldwide. Lilly retained authority for all regulatory activities with respect to Adcirca and for setting
16
the
wholesale price of Adcirca, which has been and is expected to continue to be at price parity with Cialis.
The
license agreement will continue in effect until the later of: (1) expiration, lapse, cancellation, abandonment or invalidation of the last claim to expire within a Lilly
patent covering the commercialization of Adcirca for the treatment of pulmonary hypertension in the United States; or (2) expiration of any government-conferred exclusivity rights to use
Adcirca for the treatment of pulmonary hypertension in the United States. The U.S. patent for Adcirca for the treatment of pulmonary hypertension will expire in November 2017. Lilly has two additional
patents expiring in 2020 covering Adcirca and claiming pharmaceutical compositions and free drug particulate forms. The PTAB issued a final decision finding these patents invalid as the result of an
inter
partes
review proceeding initiated by Actelion Pharmaceuticals Ltd (Actelion). Lilly's appeal of the PTAB's decision is pending before the
United States Court of Appeals for the Federal Circuit. As a result, it is unclear whether our license agreement will expire in November 2017. In any event, we are likely to face generic competition
following the expiration of the November 2017 patent, as the FDA has already tentatively approved ANDAs filed by several generic companies to market generic versions of Adcirca following the
expiration of the November 2017 patent.
We
have the right to terminate the license agreement upon six months written notice to Lilly. Lilly has the right to terminate in the event of a change of control of our company. Either
party may terminate upon a material breach by the other party of the license agreement or the manufacturing and supply agreement, described above.
Under the terms of the manufacturing and supply agreement, Lilly agreed to manufacture Adcirca and distribute it on our behalf via its
pharmaceutical wholesaler network, in the same manner that it distributes its own pharmaceutical products. Under the terms of this agreement, we take title to Adcirca upon its manufacture by Lilly.
Adcirca is shipped to customers, generally pharmaceutical wholesalers, in accordance with customers' purchase orders received by Lilly. Lilly invoices and collects amounts due from the customer
subject to customary discounts and rebates, if any, and remits the collections to us. Although Lilly is providing these services on our behalf, we maintain
the risk of loss as it pertains to inventory, product returns and nonpayment of sales invoices. The manufacturing and supply agreement will continue in effect until expiration or termination of the
license agreement.
We
also agreed to purchase Adcirca at a fixed manufacturing cost. The agreement provides a mechanism, generally related to the increase in the national cost of pharmaceutical
manufacturing, pursuant to which Lilly may raise the manufacturing cost of Adcirca.
In 2010, we entered into a Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) of the United States
National Institutes for Health (NIH) to collaborate on the late-stage development and regulatory approval process for Unituxin for children with high-risk neuroblastoma and patients with other forms
of cancer. In lieu of a royalty payment to the NCI, we are obligated to provide the NCI with Unituxin for certain of its studies free of charge. We previously received orphan drug designation for
Unituxin from the FDA. Orphan designation, coupled with FDA approval of our BLA in March 2015, confers an exclusivity period through March 2022, during which the FDA may not approve any application to
market the same drug for the same indication, except in limited circumstances. In addition, approval of our BLA conferred a 12-year exclusivity period through March 2027, during which the FDA may not
approve a biosimilar for Unituxin. Under a non-exclusive license agreement with The Scripps Research Institute, we pay a royalty of one percent of net Unituxin sales.
17
We are collaborating with Medtronic under an exclusive agreement to develop and commercialize Medtronic's proprietary intravascular infusion
catheter for use with Medtronic's SynchroMed II implantable infusion pump and related infusion system components (together referred to as the Implantable System for Remodulin, or RemoSynch) to deliver
Remodulin for the treatment of PAH in the United States, United Kingdom, Canada, France, Germany, Italy and Japan. Under our agreement, we have been working together at our expense to develop
RemoSynch, conduct a clinical
trial (which was completed in 2013) and obtain regulatory approval. If this development program is successful, our agreement provides that, upon commercialization, we will purchase infusion pumps and
supplies from Medtronic and will also pay a ten percent royalty to Medtronic based on net product sales of Remodulin for use in the Implantable System for Remodulin within the exclusive territories,
subject to certain adjustments specified in the agreement. The Implantable System for Remodulin will be exclusive to Remodulin so long as we purchase a minimum percentage of our annual requirement for
implantable pump systems from Medtronic. We will be solely responsible for all marketing and promotion of RemoSynch for the treatment of PAH in the exclusive territories.
In 2000, we licensed from Toray Industries, Inc. (Toray) the exclusive right to develop and market beraprost for cardiovascular
indications. Beraprost is a chemically stable oral prostacyclin analogue in a sustained release formulation, which is approved to treat PAH in Japan and certain other countries. This license gives us
exclusive rights to develop beraprost and its variants (including esuberaprost) throughout North America, Europe, and certain other territories. We are currently developing esuberaprost under this
license agreement in combination with Tyvaso, which we refer to collectively as Tysuberprost.
Pursuant
to a March 2007 amendment to our license agreement with Toray, we issued 200,000 shares of our common stock to Toray. Toray has the right to request that we repurchase these
shares (which have since split into 400,000 shares) upon 30 days prior written notice at the price of $27.21 per share. The 2007 amendment also provided for certain milestone payments during
the development period and upon receipt of regulatory approval for beraprost in the United States or the EU.
In
2011, we amended our license agreement with Toray to reduce the royalty rates in exchange for a total of $50.0 million in equal, non-refundable payments to Toray over the
five-year period ending in 2015. As of December 31, 2015, this obligation was fully satisfied. Toray has the right to terminate the license agreement in the event of a change of control of our
company under certain circumstances.
In
2011, the FDA granted orphan designation for esuberaprost for treatment of pulmonary arterial hypertension. Thus, the FDA should grant orphan drug exclusivity if Tysuberprost is
approved; such exclusivity will extend for seven years from approval.
In December 2014, we entered into an exclusive agreement with DEKA to develop a pre-filled, semi-disposable pump system for subcutaneous
delivery of Remodulin. Under the terms of the agreement, we are funding 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.
We are party to various other license agreements relating to therapies and technologies under development. These license agreements require us
to make payments based on a percentage of sales if we are successful in commercially developing these therapies, and may require other payments upon the achievement of certain milestones.
18
Manufacturing and Supply
We manufacture our primary supply of Remodulin, Tyvaso, Orenitram and Unituxin at our own facilities. In particular, we synthesize treprostinil,
the active ingredient in Remodulin and Tyvaso, and treprostinil diolamine, the active ingredient in Orenitram, at our facility in Silver Spring, Maryland. We also produce dinutuximab, the active
ingredient in Unituxin, at our Silver Spring facility. We also manufacture finished Tyvaso, Remodulin, and Unituxin at our Silver Spring facility. We manufacture Orenitram and we package, warehouse
and distribute Remodulin, Tyvaso, Orenitram and Unituxin at our facility in Research Triangle Park, North Carolina.
We
maintain a two-year inventory of Remodulin, Tyvaso and Orenitram based on expected demand, and we also contract with third-party contract manufacturers to supplement our capacity, in
order to mitigate the risk that we might not be able to manufacture sufficient quantities to meet patient demand. For example, Baxter Pharmaceutical Solutions, LLC is approved by the FDA, the
EMA and various other international regulatory agencies to manufacture Remodulin for us. In the case of Tyvaso, we rely on Catalent Pharma Solutions, Inc. to serve as an additional manufacturer
of Tyvaso, and we rely entirely on Minnetronix Inc. to manufacture the nebulizer used in our Tyvaso Inhalation System. We are working to obtain FDA approval of a third party contract
manufacturer to serve as an additional manufacturer of Orenitram, and we are constructing an additional facility to increase our manufacturing capacity for Unituxin.
Although
we believe that additional third parties could provide similar products, services and materials, there are few companies that could replace our existing third-party
manufacturers and suppliers. A change in supplier or manufacturer could cause a delay in the manufacturing, distribution and research efforts associated with our respective products or result in
increased costs. See also
Item 1ARisk Factors
included in this Report.
Competition
Many drug companies engage in research and development to commercialize products to treat cardiovascular diseases and cancer. For the treatment
of PAH, we compete with many approved products in the United States and the rest of the world, including the following:
-
-
Flolan, Veletri and generic epoprostenol.
Flolan (epoprostenol) is a
prostacyclin that is delivered by intravenous infusion. Glaxo began marketing Flolan in the United States in 1996. In 2008, the FDA approved Teva's version of generic epoprostenol for the treatment of
PAH. In 2010, Actelion commenced sales of Veletri, which is another version of intravenous epoprostenol;
-
-
Ventavis and
Ilomedin
®
. Approved in 2004 in the United States and in 2003 in Europe, Ventavis (iloprost) is an
inhaled prostacyclin analogue. Ventavis is currently marketed by Actelion in the United States and by Bayer Schering Pharma AG (Bayer) in Europe. Iloprost is also marketed by Bayer in certain
countries outside the United States in an intravenous form known as Ilomedin;
-
-
Tracleer
®
. Tracleer
(bosentan), an oral ETRA therapy for the treatment of PAH, was approved in 2001 in the United States and in 2002 in Europe. Tracleer is marketed worldwide by Actelion. Generic bosentan is expected to
launch in the U.S. during 2017, and is already available in other countries;
-
-
Letairis.
Approved in 2007 in the United States, Letairis (ambrisentan) is
an oral ETRA therapy marketed by Gilead for the treatment of PAH. In 2008, Glaxo received marketing authorization from the EMA for Letairis in Europe, where it is known as
Volibris
®
;
-
-
Revatio and generic sildenafil citrate.
Approved in 2005 in the United
States, Revatio (sildenafil citrate) is an oral PDE-5 inhibitor therapy marketed by Pfizer. Revatio contains sildenafil citrate,
19
There
are also a variety of investigational PAH therapies in the later stages of development, including the following:
-
-
Ralinepag,
an oral IP prostacyclin receptor agonist being developed by Arena
Pharmaceuticals, Inc. (Arena). Arena commenced a phase II clinical trial of ralinepag in 2014, and has announced that results are expected in mid-2017;
-
-
Trevyent
, a formulation of treprostinil being developed by SteadyMed Ltd. (SteadyMed)
for delivery via its pre-filled, disposable PatchPump
®
. SteadyMed has announced plans to file an NDA for Trevyent during the second quarter of 2017, and
launch the product in 2018; and
-
-
Bardoxolone
, a product being developed by Reata Pharmaceuticals, Inc. for treatment of
PAH associated with connective tissue disease. Reata has announced enrollment of a phase III clinical trial, with results anticipated during the first half of 2018.
Oral
non-prostacyclin therapies (such as PDE-5 inhibitors and ETRAs) are commonly prescribed as first-line treatments for the least severely ill PAH patients (functional class II
patients). As patients progress in their disease severity (functional classes III and IV), less convenient approved therapies, such as inhaled prostacyclin analogues (such as Tyvaso) or infused
prostacyclin analogues (such as Remodulin) are commonly added. Orenitram was the first approved oral prostacyclin-class therapy for PAH in the United States, and offers a less invasive and more
convenient alternative therapy to Remodulin and Tyvaso. The use of available oral therapies could delay many patients' need for inhaled or infused prostacyclin therapy. As a result, the availability
of oral therapies affects demand for our inhaled and infused products.
Orenitram
faces direct competition from Uptravi, which is indicated to delay disease progression and reduce the risk of hospitalization for PAH. As a result, many physicians may choose
to prescribe Uptravi instead of Orenitram, which is indicated to improve exercise capacity. As noted above, however, Uptravi is an oral IP prostacyclin receptor agonist, a new class of therapy that
addresses PAH through the prostacyclin pathway. While prostacyclin analogues such as Orenitram broadly mimic the effect of prostacyclin, IP prostacyclin receptor agonists bind selectively to the IP
receptor, one of several prostacyclin receptors. In addition, Orenitram's label allows physicians flexibility to titrate each
patient's dosing up to a level according to tolerability, without any stated maximum. By contrast, Uptravi's label limits uptitration to a specific maximum dose. Given the progressive nature of PAH,
we believe many patients will initiate Orenitram or another one of our PAH therapies after their disease progresses on Uptravi.
We
will also face competition from generic pharmaceutical companies in the future. For example, we have settled litigation with three generic drug companies permitting them to launch
generic versions of Remodulin in 2018, and we are engaged in litigation with companies seeking to launch generic
20
versions
of Tyvaso and Orenitram. In addition, we expect to see the launch of generic versions of Adcirca following patent expiry in November 2017. For details regarding these and other potential
generic competitors, see the section above entitled
Patents and Other Proprietary Rights, Strategic Licenses and Market ExclusivityGeneric
Competition
.
Unituxin
may face competition from dinutuximab beta, a similar antibody product being developed by Apeiron Biologics AG that is already being used in Europe to treat neuroblastoma under
an unmarketed, managed access program. A marketing authorization application for dinutuximab beta is also pending review by the EMA. In October 2016, EUSA Pharma (UK) Ltd. announced it had
acquired global commercialization rights to dinutuximab beta, and plans to file for FDA approval in 2017.
We
compete with the developers, manufacturers and distributors of all of the products noted above for customers, funding, access to licenses, personnel, third-party collaborators,
product development and commercialization. Many of these companies have substantially greater financial, marketing, sales, distribution and technical resources, and more experience in research and
development, product development, manufacturing and marketing, clinical trials and regulatory matters, than we have.
Governmental Regulation
The research, development, testing, manufacture, promotion, marketing, distribution, sampling, storage, approval, labeling, record keeping,
post-approval monitoring and reporting, and import and export of pharmaceutical products are extensively regulated by governmental agencies in the United States and in other countries. In the United
States, failure to comply with requirements under the Federal Food, Drug, and Cosmetic Act (FDC Act), the Public Health Service Act (PHSA), and other federal statutes and regulations, may subject a
company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs or BLAs, warning letters, product recalls, product seizures, total or partial suspension of
manufacturing or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Satisfaction
of FDA pre-market approval requirements is extremely costly and typically takes many years. The actual cost and time required may vary substantially based upon the type,
complexity and novelty of the product or disease. Drugs are subject to rigorous regulation by the FDA in the United States, the EMA in the EU and similar regulatory authorities in other countries. The
steps ordinarily required before a new drug may be marketed in the United States, which are similar to steps required in most other countries, include: (1) preclinical testing;
(2) submission to the FDA of an investigational new drug application (IND); (3) clinical studies, including well-controlled clinical trials, in healthy volunteers and patients to
establish safety, efficacy and dose-response characteristics for each drug indication; (4) submission of an NDA to the FDA; and (5) FDA review and approval of the NDA.
Preclinical tests include laboratory evaluation of product chemistry and formulation, as well as animal studies to explore toxicity and for
proof-of-concept. The conduct of the preclinical tests must comply with federal regulations and requirements including good laboratory practices.
The results of preclinical testing are submitted to the FDA as part of an IND, along with other information including information about product
chemistry, manufacturing and
controls and a proposed clinical trial protocol. Absent FDA objection within 30 days after submission of an IND, the IND becomes effective and the clinical trial proposed in the IND may begin.
21
Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a
qualified investigator. Clinical trials must be conducted: (1) in compliance with federal regulations; (2) in compliance with good clinical practices (GCP), an international standard
meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators, and monitors; and (3) under protocols detailing the objectives of the
trial, the parameters to be used in monitoring safety and the criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA
as part of the IND.
The
FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial is not being conducted in
accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients in clinical trials must also be
approved by an institutional review board (IRB). An IRB may also require the clinical trial at a site to be halted temporarily or permanently for failure to comply with the IRB's requirements, or may
impose other conditions.
Clinical
trials in support of an NDA typically are conducted in sequential phases, but the phases may overlap.
-
-
Phase I involves the initial introduction of the drug into healthy human subjects or patients to assess metabolism, pharmacokinetics,
pharmacological actions, side effects associated with increasing doses, and, if possible, early evidence on effectiveness.
-
-
Phase II usually involves studies in a limited patient population to assess the efficacy of the drug in specific, targeted indications,
explore tolerance and optimal dosage, and identify possible adverse effects and safety risks.
-
-
Phase III trials, also called pivotal studies, major studies or advanced clinical trials, demonstrate clinical efficacy and safety in a
larger number of patients, typically at geographically diverse clinical study sites, and permit the FDA to evaluate the overall benefit-risk relationship of the drug and provide adequate information
for drug labeling.
-
-
Phase IV studies are often conducted following marketing approval, in order to meet regulatory requirements or to provide additional
data relating to drug use.
After successful completion of the required clinical testing, an NDA is typically submitted to the FDA in the United States, and an MAA is
typically submitted to the EMA in the EU. FDA approval of the NDA is required before the product may be marketed in the United States. The NDA must include the results of all preclinical, clinical and
other testing and a compilation of data relating to the product's pharmacology, chemistry, manufacture, and controls.
The
FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing. If the FDA determines that the application is not sufficiently
complete to permit substantive review, it may request additional information and decline to accept the application for filing until the information is provided. Once the submission is accepted for
filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of NDAs. Most applications for non-priority drugs are reviewed within ten to twelve months.
Special pathways, including "accelerated approval," "fast track" status, "breakthrough therapy" status and "priority review" status are granted for certain drugs that offer major advances in
treatment, or provide a treatment where no adequate therapy exists. These special pathways can significantly reduce the time it takes for the FDA to review a NDA, but do not guarantee that a product
will receive FDA approval.
22
The
FDA may refer applications for novel pharmaceutical products or pharmaceutical products that present difficult questions of safety or efficacy to an advisory committee, typically a
panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an
advisory committee, but it generally follows such recommendations. During the review process, the FDA also reviews the drug's product labeling to ensure that appropriate information is communicated to
health care professionals and consumers. In addition, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP and the facility or the
facilities at which the drug is manufactured to ensure they are in compliance with the FDA's current Good Manufacturing Practices (cGMP).
After
the FDA evaluates the NDA and the manufacturing facilities, the FDA may issue either an approval letter or a complete response letter, which generally outlines the deficiencies in
the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those conditions have been addressed to the FDA's
satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information
included. Even after a resubmission, the FDA may decide that the application does not satisfy the regulatory criteria for approval.
Once an NDA is approved, the product is subject to continuing regulation. For instance, pharmaceutical products may be marketed only for their
approved indications and in accordance with the provisions of their approved labeling. The FDA closely regulates the post-approval marketing, labeling and advertising of prescription drugs, including
direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.
Adverse
event reporting and submission of periodic reports continue to be required following FDA approval of an NDA. In addition, as a condition of NDA approval, the FDA may require
post-marketing testing, including phase IV clinical studies, and/or a risk evaluation and mitigation strategy (REMS) to help ensure that the benefits of the drug outweigh the potential risks. A
REMS can include medication guides, communication plans for healthcare professionals, special training or certification for prescribing or dispensing, dispensing only under certain circumstances,
special
monitoring, and the use of patient registries. Additionally, quality control as well as drug manufacture, packaging, and labeling procedures must continue to conform to cGMP requirements.
Manufacturing facilities are subject to continual review and periodic inspections by the FDA and certain state agencies.
Regulatory
authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards or if previously unrecognized problems are
subsequently discovered. Discovery of previously unknown problems with a product, including adverse events or problems with manufacturing processes of unanticipated severity or frequency, or failure
to comply with regulatory requirements, may also result in (1) revisions to the approved labeling; (2) imposition of post-market studies or clinical trials to assess new safety risks; or
(3) imposition of distribution or other restrictions under a REMS program. Other potential consequences include: (1) restrictions on the marketing or manufacturing of the product;
(2) fines, warning letters or holds on post-approval clinical trials; (3) refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of
product license approvals; (4) product seizure or detention, or refusal to permit the import or export of products; or (5) injunctions or the imposition of civil or criminal penalties.
23
Certain changes to the conditions established in an approved application, including changes in indications, labeling, equipment, or
manufacturing processes or facilities, require submission and FDA approval of an NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires
clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing supplements as it does in reviewing NDAs.
Under the Orphan Drug Act, an applicant can request the FDA to designate a product as an "orphan drug" in the United States if the drug is
intended to treat a rare disease or condition affecting fewer than 200,000 people in the United States. Orphan drug designation must be requested before submitting an NDA or BLA. Orphan drug
designation does not convey any advantage
in, or shorten the duration of, the regulatory review and approval process. The first NDA or BLA applicant to receive orphan drug designation and FDA approval for a particular active ingredient to
treat a particular disease via a particular delivery method is entitled to a seven-year exclusive marketing period in the United States. During the seven-year period, the FDA may not approve any other
application to market the same drug for the same disease, except in limited circumstances such as a showing of clinical superiority to the product with orphan drug exclusivity, meaning that it has
greater effectiveness or safety, or provides a major contribution to patient care (such as a change in delivery system). Orphan drug exclusivity does not prevent the FDA from approving a different
drug for the same disease or condition, or the same drug for a different disease or condition. The recently enacted 21st Century Cures Act (Cures Act) expands the types of studies that qualify
for orphan drug grants. Orphan drug designation also may qualify an applicant for federal tax credits relating to research and development costs.
In 1984, the Hatch-Waxman Act created a faster approval process for generic drugs, called the ANDA. Generally, an ANDA provides for marketing of
a drug product that has the same active ingredients in the same strength(s), route of administration, and dosage form as an approved drug and has been shown through bioequivalence testing to be
therapeutically equivalent to the approved drug. ANDA applicants are not required to conduct or submit results of preclinical or clinical tests to prove the safety or effectiveness of their drug
product, other than the requirement for bioequivalence testing. Drugs approved in this way are commonly referred to as "generic equivalents" to the approved drug, and can often be substituted by
pharmacists under prescriptions written for the original approved drug.
NDA
applicants are required to identify each patent whose claims cover the product or FDA-approved method of using the product. Upon product approval, these patents are listed in the
FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Every ANDA applicant must certify to the FDA that (1) the required information for the
original product was not filed or (2) every patent listed for the approved product in the Orange Book is either (a) expired or will expire on a particular date and approval is sought
after patent expiration or (b) invalid or will not be infringed by the new product. A certification that the new product will not infringe the already approved product's listed patents or that
such patents are invalid is called a Paragraph IV certification. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents
claiming the referenced product have expired. Alternatively, for a patent covering an approved indication, an ANDA applicant may submit a statement to the FDA that the company is not seeking approval
for the covered indication.
If
the ANDA applicant has submitted a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent
holders once the ANDA has
24
been
accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a
patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months,
expiration of the patent, settlement of the lawsuit or a decision in the infringement case that is favorable to the ANDA applicant.
The
Hatch-Waxman Act also provides that patent terms may be extended to compensate for some of the patent life that is lost during the FDA regulatory review period for a product. This
extension period is generally one-half of the time between the effective date of an IND and the submission date of an NDA, plus all of the time between the submission date of an NDA and its approval,
subject to a maximum extension of five years. Similar patent term extensions are available under European laws.
An
ANDA application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of an NDA for a new chemical entity, has expired. Federal law
provides a period of five years following approval of a drug containing no previously approved active ingredient, during which ANDAs for generic versions of those drugs cannot be submitted unless the
submission contains a Paragraph IV certification, in which case the submission may be made four years following the original product approval. Following approval of an application to market a
drug that contains previously approved active ingredients in a new dosage form, route of administration or combination, or for a new condition of use that was required to be supported by new clinical
trials conducted by or for the sponsor, the FDC Act provides three years of exclusivity during which the FDA cannot grant effective approval of an ANDA for such new condition of use, dosage form or
strength that meets certain statutory requirements.
Most drug products (other than biological products) obtain FDA marketing approval pursuant to an NDA submitted under Section 505(b)(1) of
the FDC Act, or an ANDA. A third alternative is a special type of NDA submitted under Section 505(b)(2) of the FDC Act, commonly referred to as a Section 505(b)(2) NDA, which enables the
applicant to rely, in part, on the FDA's finding of safety and efficacy data for an existing product, or published literature, in support of its application.
Section 505(b)(2)
NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products. Section 505(b)(2) permits
the filing of an NDA in which the applicant relies, at least in part, on information from studies made to show whether
a drug is safe or effective that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. A Section 505(b)(2) applicant may eliminate
the need to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted for a previously-approved product is scientifically appropriate. The FDA may also
require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the labeled
indications for which the referenced product has been approved, as well as for any new indication for which the Section 505(b)(2) NDA applicant has submitted data.
To
the extent that the Section 505(b)(2) applicant relies on prior FDA findings of safety and efficacy, the applicant is required to certify to the FDA concerning any patents
listed for the previously approved product in the Orange Book to the same extent that an ANDA applicant would. Thus, approval of a Section 505(b)(2) NDA can be delayed until all the listed
patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new active ingredient, listed in the Orange Book for the
referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a
decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
25
Outside of the United States, our ability to market our products is also contingent upon receiving marketing authorizations from regulatory
authorities. The foreign regulatory approval process may include some or all of the risks associated with the FDA review and approval process set forth above, and the requirements governing the
conduct of clinical trials and marketing authorization vary widely from country to country.
Biological products used for the prevention, treatment, or cure of a disease, or condition, of a human being are subject to regulation under the
FDC Act and the PHSA. Biological products are approved for marketing via a BLA that follows an application process and carries
approval requirements that are very similar to those for NDAs. To help reduce the increased risk of the introduction of adventitious agents, the PHSA emphasizes the importance of manufacturing control
for products whose attributes cannot be precisely defined. The PHSA also provides authority to the FDA to immediately suspend licenses in situations where there is a danger to public health, to
prepare or procure products in the event of shortages and critical public health needs, and to authorize the creation and enforcement of regulations to prevent the introduction, or spread, of
communicable diseases in the United States.
After
a BLA is approved, the product may also be subject to official lot release, meaning the manufacturer must submit samples of each lot of product to the FDA together with a release
protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer's tests performed on the lot. The FDA may also perform certain confirmatory tests on lots
of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. As with drugs, after approval of biologics, manufacturers must address any safety issues that
arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval.
The
Biologics Price Competition and Innovation Act of 2009, or BPCI Act, created an abbreviated approval pathway for biological products shown to be "biosimilar" to an FDA-licensed
reference biological product to minimize duplicative testing. Biosimilarity requires the absence of clinically meaningful differences between the biological product and the reference product in terms
of safety, purity, and potency, which, absent a waiver, must be shown through analytical studies, animal studies, and at least one clinical study. Intricacies associated with the larger, and often
more complex, structures of biological products, as well as the processes by which such products are manufactured, pose significant hurdles to implementation that are still being addressed by the FDA.
A
reference biologic is granted twelve years of exclusivity from the time of first licensure of the reference product. The first biologic product submitted under the abbreviated approval
pathway that is approved as a biosimilar and also meets additional standards for interchangeability with the reference product, has exclusivity against other biologics submitted under the abbreviated
approval pathway for a set period.
Because
biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries.
Manufacturers of cell and tissue based products must comply with the FDA's current good tissue practices (cGTP), which are FDA regulations that
govern the methods used in, and the facilities and controls used for, the manufacture of such products. The primary intent of the cGTP
requirements is to ensure that cell and tissue based products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable diseases. Cell and tissue based
products may
26
also
be subject to the same approval standards, including demonstration of safety and efficacy, as other biologic and drug products, if they meet certain criteria such as if the cells or tissues are
more than minimally manipulated or if they are intended for a non-homologous use (a use different from the cell's origin). In 2015 and 2016, the FDA published guidance documents relating to topics
such as donor screening, adverse reaction reporting, reducing risks of virus transmission from donors, and the applicability of premarket approval and clearance requirements to cell and tissue based
products. Following the numerous public comments on these draft guidance documents, the FDA held a public hearing in September 2016. In November 2016, the FDA released revised recommendations on donor
eligibility but did not finalize the other draft guidance.
The
Cures Act established a new FDA Office of Tissues and Advanced Therapies and Regenerative Advanced Therapy (RAT) designation, which makes a product eligible for FDA priority review
and accelerated approval. Therapies that are eligible for RAT designation include cell therapies, therapeutic tissue engineering products, human cell and tissue products, or any combination product
using these therapies, with certain exceptions. For RAT designation, the product also must be intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition, and the
preliminary clinical evidence must indicate that the product has the potential to address unmet medical needs for the disease or condition.
Medical devices may also be subject to FDA approval and extensive regulation under the FDC Act. Medical devices are classified into one of three
classes: Class I, Class II, or Class III. A higher class indicates a greater degree of risk associated with the device and a greater amount of control needed to ensure safety and
effectiveness.
All
devices, unless exempt by FDA regulation, must adhere to a set of general controls, including compliance with the applicable portions of the FDA's Quality System Regulation (QSR),
which sets forth good manufacturing practice requirements; facility registration and product listing; reporting of adverse medical events; truthful and non-misleading labeling; and promotion of the
device consistent with its cleared or approved intended uses. Class II and III devices are subject to additional special
controls and may require FDA clearance of a premarket notification (510(k)) or approval of a premarket approval application (PMA).
Most
Class I devices are exempt from FDA premarket review or approval. Class II devices, with some exceptions, must be "cleared" by the FDA through the 510(k) process,
which requires a company to show that the device is "substantially equivalent" to certain devices already on the market. Class III devices, again with some exceptions, must be approved through
a PMA. A PMA generally requires data from clinical trials that establish the safety and effectiveness of the device. A 510(k) application also sometimes requires clinical data. The recently enacted
Cures Act requires FDA to establish a program to provide priority review for "breakthrough" devices and for devices that are more effective in addressing life threatening or debilitating conditions
than currently available devices.
Clinical
trials for medical devices are subject to similar requirements as those conducting clinical trials with drugs or biologics. Clinical trials involving significant risk devices
(e.g., devices that present a potential for serious risk to the health, safety, or welfare of human subjects) are required to obtain both FDA of approval of an investigational device exemption
(IDE) application and IRB approval before study initiation; clinical trials involving nonsignificant risk devices are not required to submit an IDE for FDA approval but must obtain IRB approval before
study initiation.
The
FDA has broad regulatory and enforcement powers with respect to medical devices, similar to those for drugs and biologics. The FDA requires medical device manufacturers to comply
with detailed requirements regarding the design and manufacturing practices, labeling and promotion, record keeping, and adverse event reporting.
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States
also impose regulatory requirements on medical device manufacturers and distributors. Failure to comply with the applicable federal or state requirements could result in, among
other things: (1) fines, injunctions, and civil penalties; (2) recall or seizure of products; (3) operating restrictions, partial suspension or total shutdown of manufacturing;
(4) refusing requests for approval of new products; (5) withdrawing approvals already granted; and (6) criminal prosecution.
The
FDA also administers certain controls over the import and export of medical devices to and from the United States. Additionally, each foreign country subjects medical devices to its
own regulatory requirements. In the EU, a single regulatory approval process has been created, and approval is represented by the CE Mark.
A combination product is a product composed of a combination of two or more FDA-regulated product components or products,
e.g., drug-device or device-biologic. A combination product can take a variety of forms, such as a single entity made by physically or chemically combining components, or a single unit made of
separately packaged products. Each combination product is assigned a lead FDA Center, which has jurisdiction for the premarket review and regulation, based on which constituent part of the combination
product provides the primary mode of action, i.e., the mode of action expected to make the greatest contribution to the overall intended therapeutic effect of the product. If the classification
as a combination product or the lead Center assignment is unclear or in dispute, a sponsor may request a meeting submit a Request for Designation (RFD), and FDA will issue
a designation letter within 60 calendar days of the filing of the RFD. Depending on the type of combination product, FDA may require a single application for approval, clearance, or licensure of the
combination product, or separate applications for the constituent parts. During the review of marketing applications, the lead Center may consult or collaborate with other FDA Centers. In January
2017, FDA released final guidance recommendations relating to the application of cGMP requirements to combination products and draft guidance on pre-requests for designation.
The
Cures Act sets forth a number of provisions pertaining to combination products, such as procedures for negotiating disagreements between sponsors and FDA and requirements intended to
streamline FDA premarket reviews of combination products that contain an already-approved component. For drug-device combination products, comprised of an FDA-approved drug and device primary mode of
action, the Cures Act applies Hatch Waxman requirements to the premarket review process such that a patent dispute regarding the listed drug may result in the delay of the 510(k) clearance or PMA
approval of the combination product. Furthermore, the Cures Act applies exclusivity provisions (e.g., new chemical entity and orphan drug exclusivities) to the device clearance and approval
process for combination products with a device primary mode of action.
In the United States, many independent third-party health plans, and government health care programs, pay for patient use of our commercial
products. Medicare is the federal program that provides health care benefits to senior citizens and certain disabled and chronically ill persons. Medicaid is the federal program jointly funded and
administered by the states to provide health care benefits to certain indigent persons. Unituxin is administered entirely as an in-patient therapy and would typically be reimbursed under Medicare
Part A, which covers inpatient hospital benefits. However, because Unituxin is indicated for treatment of a pediatric cancer, Medicare beneficiaries are unlikely to receive this treatment. The
purchase prices for Remodulin and Tyvaso are reimbursed within the Medicare Part B program, which covers physician services and outpatient care. The Medicare Part B contractors who
administer the program provide reimbursement for Remodulin and Tyvaso according to statutory guidelines. In return for the inclusion of our commercial products Adcirca and Orenitram in the Medicare
Part D program, which provides a voluntary outpatient prescription drug
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benefit,
we pay rebates to Medicare Part D plan sponsors that reimburse these products. State Medicaid programs also reimburse the cost of our commercial products at rates established by
statutory guidelines. Because Remodulin, Tyvaso, Adcirca, Orenitram and Unituxin are reimbursed by state Medicaid programs, we must pay a rebate to those state Medicaid programs. We are required by
government contract to sell our commercial products under contracts with the Department of Veterans
Affairs, Department of Defense, Public Health Service and numerous other federal agencies as well as certain hospitals that are designated as 340B covered entities (entities designated by federal
programs to receive drugs at discounted prices) at prices that are significantly below the price we charge to our specialty distributors. These programs and contracts are highly regulated and impose
restrictions on our business. Failure to comply with these regulations and restrictions could result in a loss of our ability to continue receiving reimbursement for our drugs, exclusion of our
products from reimbursement under the federal healthcare programs, or debarment, and expose us to liability under federal and state false claims laws. We estimate that between 40-50 percent of
Remodulin, Tyvaso, Adcirca and Orenitram sales are reimbursed under the Medicare and Medicaid programs.
Anti-Kickback, False Claims Laws and The Prescription Drug Marketing Act
The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or
receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of, or referring an individual for the furnishing of, any healthcare item
or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements between pharmaceutical
manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary
penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from
prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may
be subject to scrutiny if they do not qualify for an exemption or safe harbor.
The
federal False Claims Act prohibits any person from, among other things, presenting, or causing to be presented, a false claim for payment to the federal government, or making, or
causing to be made, a false statement material to a false claim. Many pharmaceutical and other healthcare companies have been prosecuted under the False Claims Act for allegedly inflating drug prices
they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates; for allegedly providing free product to customers with the expectation that
the customers would bill federal programs for the product; and on the basis of allegations relating to marketing practices, including off-label promotion. The majority of states also have statutes or
regulations similar to the federal anti-kickback statute and False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply
regardless of the payer. Sanctions under these federal and state laws may include civil penalties, exclusion of a manufacturer's products from reimbursement under government programs, criminal fines,
and imprisonment.
We
are also subject to numerous other anti-bribery and anti-fraud laws, including the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and the federal Civil Monetary
Penalties Law.
As
part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. The Prescription Drug Marketing Act (PDMA) imposes
requirements and limitations upon the distribution of drugs and drug samples, and prohibits states from licensing distributors of prescription drugs unless the state licensing program meets certain
federal guidelines that include minimum standards for storage and handling, as well as record keeping requirements for information regarding sample requests and distribution. The PDMA sets forth civil
and criminal
29
penalties
for violations. In addition, PDMA requires manufacturers and distributors to submit similar drug sample information to FDA.
The PPACA is intended to expand healthcare coverage within the United States. Several provisions of the law, which have varying effective dates,
have impacted us and have increased certain of our costs. The PPACA imposes an annual fee on pharmaceutical manufacturers, based on the manufacturer's sale of branded pharmaceuticals and biologics
(excluding orphan drugs) to certain U.S. government programs during the preceding year; expands the 340B drug discount program (excluding orphan drugs) including the creation of new penalties for
non-compliance; includes a 50 percent discount on brand name drugs for Medicare Part D participants in the coverage gap, or "donut hole"; and revised the definition of "average
manufacturer price" for reporting purposes, which could increase the amount of the Medicaid drug rebates paid to states.
In
addition, the PPACA imposes new annual reporting requirements for pharmaceutical, biological and device manufacturers with regard to payments or other transfers of value made to
physicians and teaching hospitals. In addition, pharmaceutical, biological and device manufacturers are required to report annually investment interests held by physicians and their immediate family
members during the preceding calendar year. Many of these laws and regulations contain ambiguous requirements that have not yet been clarified. Further, the PPACA amends the intent requirement of the
federal anti-kickback and criminal health care fraud statute. A person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them. In addition, the
government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims
Act.
The Cures Act, which was signed into law on December 13, 2016, contains a wide range of provisions designed to promote clinical research
and streamline and expedite the FDA review and approval process. For example, the law clarifies FDA's authority regarding drugs that target rare diseases, and broadens the type of data and information
that may be used to support a drug or biologic application for a genetically targeted drug or variant protein targeted drug. The law requires FDA to facilitate development programs for, and provides
expedited review of, regenerative advanced therapies. The law further requires FDA to establish a program to evaluate the use of real world evidence, i.e., evidence from sources other than
randomized clinical trials, to support the approval of certain drug applications and to satisfy post-approval requirements. Other key provisions relating to orphan drugs, combination products, and
medical devices, are discussed separately above.
If not preempted by the PPACA, several jurisdictions require pharmaceutical companies to report expenses relating to the marketing and promotion
of pharmaceutical products and to report gifts and payments to healthcare practitioners in those jurisdictions. Some of these jurisdictions also prohibit various marketing related activities. Still
other states require the posting of information relating to clinical studies and their outcomes. In addition, certain states require pharmaceutical companies to implement compliance programs or
marketing codes and several other states are considering similar proposals. Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face
civil penalties or other civil enforcement action.
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Numerous other statutory and regulatory regimes affect our business and operations. For example, our research and development efforts may be
subject to laws, regulations and recommendations relating to data privacy and protection, safe working conditions, laboratory practices, use of animals in research and development activities, and the
purchase, storage, movement, import, export and use and disposal of hazardous or potentially hazardous substances. Antitrust and competition laws may restrict our ability to enter into certain
agreements involving exclusive license rights. Future legislation and administrative action will continue to affect our business, the extent and degree of which we cannot accurately predict.
Employees
We had approximately 750 employees as of December 31, 2016. The success of our business is highly dependent on attracting and retaining
highly talented and qualified personnel.
Industry Segments and Geographic Areas
Since March 2011, our core business has been pharmaceuticals, in which we closely monitor the revenues and gross margins generated by our
commercial products. We sell our products in the United States and throughout the rest of the world. The information required by Item 101(b) and 101(d) of Regulation S-K relating to
financial information about industry segments and geographical areas, respectively, is contained in Note 17
Segment Information
to
our consolidated financial statements included in this Report.
Corporate Website
Our Internet website address is
http://www.unither.com
. Our filings on Form 10-K,
Form 10-Q, Form 3, Form 4, Form 5, Form 8-K and any and all amendments thereto are available free of
charge through this internet website as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (SEC). They are also available through the SEC
at
http://www.sec.gov/edgar/searchedgar/companysearch.html
.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list, as of February 10, 2017, setting forth certain information regarding our executive officers. Each executive
officer holds office until the first meeting of the Board of Directors after the annual meeting of shareholders, and until his or her successor is elected and qualified or until his or her earlier
resignation or removal. Each executive officer's employment will end pursuant to the terms of his or her employment contract.
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Name
|
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Age
|
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Position
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Martine A. Rothblatt, Ph.D., J.D., M.B.A.
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62
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Chairman, Chief Executive Officer and Director
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Michael Benkowitz
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45
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President and Chief Operating Officer
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James C. Edgemond
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49
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Chief Financial Officer and Treasurer
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Paul A. Mahon, J.D.
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53
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Executive Vice President, General Counsel and Corporate Secretary
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Martine A. Rothblatt, Ph.D., J.D., M.B.A
., founded United Therapeutics in 1996 and served as Chairman and Chief Executive Officer since
its inception through January 2015, when she became Chairman and Co-Chief Executive Officer. She was promoted to her current role as Chairman and
soul
CEO in June 2016. Prior to United Therapeutics, she founded and served as Chairman and Chief Executive Officer of SiriusXM Satellite Radio. She is a co-inventor on six of our patents pertaining to
treprostinil.
Michael Benkowitz
joined United Therapeutics in 2011 as our Executive Vice President, Organizational Development. In this role, he was
responsible for most companywide administrative functions, including human resources, information technology, corporate real estate and risk management, and was also responsible for many of our
business development efforts and oversight of several of our key collaborations. He was promoted to President and Chief Operating Officer in June 2016, when he also became responsible for all of our
commercial and medical affairs activities.
James C. Edgemond
joined United Therapeutics in January 2013 as Treasurer and Vice President, Strategic Financial Planning.
Mr. Edgemond was promoted to Chief Financial Officer and Treasurer in
March 2015. Prior to joining United Therapeutics, he was Vice President, Corporate Controller and Treasurer of Clark Construction Group from November 2008 through January 2013. He also served in a
variety of roles at The Corporate Executive Board Company from 1998 to 2008, including most recently as Executive Director, Finance from 2005 to 2008. He began his career as a public accountant at
KPMG Peat Marwick LLP, where he served in a variety of roles from 1990 through 1998, including most recently as a Senior Manager.
Paul A. Mahon, J.D.,
has served as General Counsel and Corporate Secretary of United Therapeutics since its inception in 1996. In June
2001, Mr. Mahon joined United Therapeutics full-time as Senior Vice President, General Counsel and Corporate Secretary. In November 2003, Mr. Mahon was promoted to Executive Vice
President, General Counsel and Corporate Secretary. Prior to June 2001, he served United Therapeutics, beginning with its formation in 1996, in his capacity as principal and managing partner of a law
firm specializing in technology and media law.
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