Our Commercial Products
Our commercial product portfolio consists of the following:
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Product
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Mode of Delivery
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Indication
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Current Status
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Our Territory
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Remodulin
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Continuous subcutaneous
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PAH
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Commercial in the U.S., most of Europe*, Argentina, Brazil, Canada, Chile, China, Israel, Japan, Mexico, Peru, Saudi Arabia, South Korea, Taiwan and Venezuela
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Worldwide
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Remodulin
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Continuous intravenous
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PAH
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Commercial in the U.S., most of Europe*, Argentina, Canada, China, Israel, Japan, Mexico, Peru, Saudi Arabia, South Korea and Switzerland
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Worldwide
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Tyvaso
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Inhaled
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PAH
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Commercial in the U.S. and Israel
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Worldwide
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Adcirca
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Oral
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PAH
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Commercial in the U.S.
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United States
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Orenitram
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Oral
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PAH
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Commercial in the U.S.
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Worldwide
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Unituxin
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Intravenous
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High-risk neuroblastoma
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Commercial in the U.S.
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Worldwide
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We
have obtained approval for subcutaneous and intravenous Remodulin in 24 member countries of the European Economic Area (EEA), as well as other non-EEA countries in
Europe, and have received pricing approval in most of these countries.
Products to Treat Pulmonary Arterial Hypertension
PAH is a life-threatening disease that affects the blood vessels in the lungs and is characterized by increased pressure in the pulmonary
arteries, which are the blood vessels leading from the heart to the lungs. The elevated pressure in the pulmonary arteries strains the right side of the heart as it pumps blood to the lungs. This
eventually leads to right heart failure and, ultimately, death. PAH is characterized by structural changes in blood vessel walls, aggregation of platelets and alteration of smooth muscle cell
function. We believe that PAH affects about 500,000 individuals worldwide. We have seen increases in the number of people diagnosed with the disease, but due to the rarity of the disease and the
complexity of diagnosing it, only a small fraction of patients with PAH are being treated.
Current
FDA-approved therapies for PAH focus on three distinct molecular pathways: the prostacyclin pathway, the nitric oxide (NO) pathway, and the endothelin (ET) pathway. The classes
of drugs that target these three pathways are:
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Prostacyclin Analogues and IP Prostacyclin Receptor Agonists.
Patients with
PAH have been shown to have reduced levels of prostacyclin, a naturally occurring substance that relaxes the pulmonary blood vessels, prevents platelet aggregation and inhibits the proliferation of
smooth muscle cells in the pulmonary vessels. Therefore, drugs that mimic the action of prostacyclin, known as prostacyclin analogues, are established PAH treatments. Another class of therapy, called
IP prostacyclin receptor agonists, has recently been developed to address PAH through the prostacyclin pathway. As compared with prostacyclin analogues, which broadly mimic the effect
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Because
any or all of the three pathways may be therapeutic targets in a patient, these classes of drugs are used alone or in combination to treat patients with PAH. We currently market
drugs in two of these classes. Remodulin, Tyvaso and Orenitram are all formulations of treprostinil, a prostacyclin analogue, and Adcirca is a PDE-5 inhibitor.
The
clinical severity of PAH is classified according to a system originally developed for heart failure by the New York Heart Association and then modified by the World Health
Organization (WHO) for patients with PAH, ranging from functional class I (no symptoms) through functional class IV (severe symptoms). Labeled indications for PAH therapies often note
that clinical studies for the drug predominantly included patients in one or more functional classes.
PAH
is a subset of the condition more broadly known as pulmonary hypertension. WHO has classified pulmonary hypertension into five groups, with PAH being designated WHO Group 1, which
includes multiple etiologies such as idiopathic (meaning the cause is unknown) and heritable PAH, as well as PAH associated with connective tissue diseases. While our PAH therapies' labeling is
limited to the treatment of WHO Group 1 PAH, we are engaged in research and development efforts to expand the use of Orenitram to treat pulmonary hypertension in certain categories of WHO Group 2, and
Tyvaso to treat pulmonary hypertension in certain categories of WHO Group 3. For further details, see
Research and Development
below.
We sell Remodulin to specialty pharmaceutical distributors in the United States and to pharmaceutical distributors internationally. We
recognized approximately $670.9 million, $602.3 million and $572.8 million in Remodulin net product sales, representing 39 percent, 38 percent and 39 percent
of our total revenues for the years ended December 31, 2017, 2016 and 2015, respectively. Remodulin is indicated to treat patients with PAH, to diminish symptoms associated with exercise.
Studies establishing effectiveness included patients with functional class II-IV (moderate to severe) symptoms.
Outside
of the United States, Remodulin is approved for the treatment of PAH in 38 countries by continuous subcutaneous administration and in 35 countries by continuous intravenous
administration, and is sold commercially in most of these countries. Applications for approval of both subcutaneous and intravenous Remodulin are under review in other countries.
We
believe Remodulin has many qualities that make it an appealing alternative to competitive therapies. Remodulin is stable at room temperature, so it does not need to be cooled during
infusion
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and
patients do not need to use cooling packs or refrigeration to keep it stable. Treprostinil is highly soluble and highly potent, which enables us to manufacture Remodulin in concentrated solutions.
This allows therapeutic concentrations of Remodulin to be delivered at very low flow rates via miniaturized infusion pumps for both subcutaneous and intravenous infusion. Remodulin can be continuously
infused for up to 48 hours intravenously or 72 hours subcutaneously before refilling the external infusion pump, and is packaged as an aqueous solution so patients do not have to
reconstitute the drug before refilling their pumps. This profile contrasts favorably with the other continuously infused prostacyclin therapies in the marketFlolan®,
Veletri® and generic epoprostenol.
Flolan
and generic epoprostenol are not stable at room temperature (and therefore require refrigeration or the use of cooling packs), but Veletri may be stable at room temperature
depending on its concentration. Flolan, generic epoprostenol, and Veletri have shorter half-lives than Remodulin, requiring mixing prior to pump refills. None of these competitive products may be
administered via subcutaneous infusion, and therefore may only be delivered intravenously.
We
have settled patent litigation with four generic drug companies that filed abbreviated new drug applications (ANDAs) with the FDA to market generic versions of Remodulin in the United
States. Under the terms of these settlements, Sandoz, Inc. (Sandoz) is permitted to launch its generic version of Remodulin in the United States in June 2018, and Teva Pharmaceuticals
USA, Inc. (Teva), Par Sterile Products, LLC (Par) and Dr. Reddy's Laboratories, Inc. (Dr. Reddy's), are permitted to launch 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. For further detail, see the section below entitled
Patents and Other Proprietary
Rights, Strategic Licenses and Market ExclusivityGeneric Competition
.
There
are serious adverse events associated with Remodulin. For example, when infused subcutaneously, Remodulin causes varying degrees of infusion site pain and reaction (redness and
swelling) in most patients. Patients who cannot tolerate the infusion site pain related to the use of subcutaneous Remodulin may instead use intravenous Remodulin. Intravenous Remodulin is delivered
continuously through a surgically implanted central venous catheter, similar to Flolan, Veletri and generic epoprostenol. Patients who receive therapy through implanted venous catheters have a risk of
developing blood stream infections and a serious systemic infection known as sepsis. Other common side effects associated with both subcutaneous and intravenous Remodulin include headache, diarrhea,
nausea, jaw pain, vasodilation and edema.
We sell Tyvaso to the same specialty pharmaceutical distributors in the United States that distribute Remodulin. We recognized approximately
$372.9 million, $404.6 million and $470.1 million in Tyvaso net product sales, representing 22 percent, 25 percent and 32 percent of our total revenues for
the years ended December 31, 2017, 2016 and 2015, respectively.
Tyvaso
is administered four times a day by inhaling up to nine breaths during each treatment session, which takes approximately three minutes. Tyvaso is required to be administered using
our proprietary Tyvaso Inhalation System, which consists of an ultra-sonic nebulizer that provides a dose of Tyvaso on a breath-by-breath basis, and related accessories. A single ampule containing
Tyvaso is emptied into the Tyvaso Inhalation System once per day, so the Tyvaso Inhalation System only needs to be cleaned once daily. Tyvaso is regulated by the FDA as a drug-device combination
product, consisting of Tyvaso drug product and the Tyvaso Inhalation System.
Ventavis®
(iloprost) is the only other FDA-approved inhaled prostacyclin analogue. Patients need to inhale Ventavis six to nine times per day via a nebulizer. According to
its package insert, each Ventavis inhalation consists of four to ten minutes of continuous inhalation via the nebulizer. We completed an open-label study in the United States to investigate the
clinical effects of switching
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patients
from Ventavis to Tyvaso. Patients in this study saved an average of approximately 1.4 hours per day when administering Tyvaso compared to Ventavis.
Studies
establishing effectiveness included predominately patients with functional class III symptoms (may not have symptoms at rest but activities are greatly limited by
shortness of breath, fatigue, or near fainting). Tyvaso was generally well tolerated in our trials. The most common adverse events were transient cough, headache, nausea, dizziness and flushing.
Tyvaso is also approved in Israel, where we commenced commercial sales during the second quarter of 2015.
Orenitram is the only FDA approved, orally administered prostacyclin analogue, and is the only oral PAH prostacyclin class therapy approved in
the United States that is titratable to a maximum tolerated dose, without a dose ceiling. We sell Orenitram to the same specialty pharmaceutical distributors in the United States that distribute
Remodulin and Tyvaso. We recognized approximately $185.8 million, $157.2 million and $118.4 million in Orenitram net product sales, representing 11 percent, ten percent and
eight percent of our total revenues for the years ended December 31, 2017, 2016 and 2015, respectively. The primary study that established efficacy included predominately patients with
functional class II-III symptoms and etiologies of idiopathic or heritable PAH (75 percent) or PAH associated with connective tissue disease (19 percent). The most common side
effects observed in our clinical studies were headache, nausea and diarrhea.
In
February 2018, we settled patent litigation with Actavis Laboratories FL, Inc. (Actavis) relating to its ANDA seeking to market a generic version of Orenitram in the United
States. Under the terms of this settlement, Actavis will be permitted to launch its generic version of Orenitram in the United States in June 2027, although Actavis may be permitted to enter the
market earlier under certain circumstances. For further detail, see the section below entitled
Patents and Other Proprietary Rights, Strategic Licenses and Market
ExclusivityGeneric Competition
.
Adcirca is a PDE-5 inhibitor, the active pharmaceutical ingredient of which is tadalafil. Tadalafil is also the active pharmaceutical ingredient
in Cialis®, which is marketed by Eli Lilly and Company (Lilly) for the treatment of erectile dysfunction. We acquired the commercial rights to Adcirca for the treatment of PAH in the
United States from Lilly in 2008. We sell Adcirca at prices established by Lilly, which are at parity with Cialis pricing. We recognized approximately $419.7 million, $372.2 million and
$278.8 million in Adcirca net product sales, representing 24 percent, 23 percent and 19 percent of our total revenues for the years ended December 31, 2017, 2016 and
2015, respectively.
In
2009, the FDA approved Adcirca with a recommended dose of 40 mg, making it the only once-daily PDE-5 inhibitor for the treatment of PAH. Adcirca is indicated to improve exercise
ability in patients with PAH. Studies establishing effectiveness included predominately patients with functional class II-III symptoms. Headaches were the most commonly reported side effect.
Prior
to the approval of Adcirca, Revatio®, which is marketed by Pfizer Inc. (Pfizer), was the only PDE-5 inhibitor approved for the treatment of PAH. Sildenafil
citrate, the active ingredient in
Revatio, is also the active ingredient in Viagra®, which is marketed by Pfizer for the treatment of erectile dysfunction. In 2012, several companies launched generic formulations of
sildenafil citrate. Revatio and generic sildenafil citrate are dosed three times daily.
In
September 2014, Gilead Sciences, Inc. (Gilead) announced the results of a study of ambrisentan (an ETRA) and tadalafil in PAH patients as a first-line combination treatment,
compared to treating PAH patients with only ambrisentan or tadalafil. In the study, first-line treatment with both therapies reduced the risk of clinical failure (a composite endpoint that
incorporates clinical worsening events
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death,
hospitalization and disease worseningand a component of unsatisfactory long-term clinical response) compared to a monotherapy treatment by 50 percent. Based on these
results, in October 2015, the FDA approved an update to the new drug application (NDA) for Letairis® (ambrisentan), permitting the use of Letairis in combination with tadalafil for PAH to
reduce the risks of disease progression and hospitalization for worsening PAH, and to improve exercise ability.
A
U.S. patent for Adcirca for the treatment of pulmonary hypertension expired in November 2017. Lilly has two additional patents expiring in April and November 2020, respectively,
covering Adcirca and claiming pharmaceutical compositions and free drug particulate forms (the 2020 Patents). The Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO)
has issued a Final Written Decision finding these patents invalid as the result of an
inter partes
review (IPR) proceeding initiated by Actelion
Pharmaceuticals Ltd. Lilly's appeal of the PTAB's decision is pending before the United States Court of Appeals for the Federal Circuit. In May 2017, we amended our license agreement with Lilly
relating to Adcirca to clarify and extend the term of the agreement and to amend the economic terms of the agreement following the expiration of a patent covering Adcirca in November 2017. As a result
of this amendment, beginning December 1, 2017, our royalty rate on net product sales of Adcirca increased from five percent to ten percent, and we are required to make milestone payments to
Lilly equal to $325,000 for each $1,000,000 in net product sales. Adcirca's cost of product sales as a percentage of Adcirca's net product sales has increased significantly since December 1,
2017 due to these cost increases. In the event that Lilly prevails in one or both of the appeals noted above: (a) the previous five percent royalty rate will apply and the effective date of the
new payment structure will be deferred until the expiration, lapse, abandonment or invalidation of the last claim of the 2020 Patents covering commercialization of Adcirca for pulmonary hypertension;
and (b) to the extent we had previously paid amounts in excess of five percent, those amounts will be refunded by Lilly. The FDA has already tentatively approved ANDAs filed by at least two
generic companies to market generic versions of Adcirca following the expiration of the November 2017 patent. However, the FDA granted Lilly's request for pediatric exclusivity, which provides an
additional six-month exclusivity period through May 2018. As a result, following the expiration of regulatory exclusivity in May 2018, we anticipate the launch of generic versions of Adcirca resulting
in decreased Adcirca sales, which will likely lead to a material adverse impact on Adcirca revenue. As amended, the term of our license agreement with Lilly expires on the latest to occur 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;
(2) expiration of any government-conferred exclusivity rights to use Adcirca for the treatment of pulmonary hypertension in the United States; or (3) December 31, 2020.
Product to Treat Cancer
Unituxin
In March 2015, the FDA approved our Biologics License Application (BLA) for Unituxin, in combination with granulocyte-macrophage
colony-stimulating factor (GM-CSF), interleukin-2 (IL-2), and 13-cis-retinoic acid (RA), for the treatment of patients with high-risk neuroblastoma (a rare form of pediatric cancer) who achieve at
least a partial response to prior first-line multiagent, multimodality therapy. Unituxin is a chimeric, composed of a combination of mouse and human DNA, monoclonal antibody that induces
antibody-dependent cell-mediated cytotoxicity, a mechanism of cell-mediated immunity whereby the immune system actively targets a cell that has been bound by specific antibodies. Unituxin therapy is
associated with severe side effects, including infections, infusion reactions, hypokalemia, hypotension, pain, fever, and capillary leak syndrome.
We
commenced U.S. sales of Unituxin in the third quarter of 2015. We recognized approximately $76.0 million, $62.5 million and $20.5 million in Unituxin net product
sales, representing four percent, four percent and one percent of our total revenues for the years ended December 31, 2017, 2016 and 2015, respectively.
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Research and Development
We focus most of our research and development efforts on the following near-term pipeline programs (intended to result in product launches in
the 2018-2021 timeframe) and medium-term pipeline programs (intended to result in product launches in the 2022-2025 timeframe). We are also engaged in a variety of additional medium- and long-term
research and development efforts, including technologies designed to increase the supply of transplantable organs and tissues and improve outcomes for transplant recipients through regenerative
medicine, xenotransplantation, biomechanical lungs and ex-vivo lung perfusion.
Near-Term Pipeline Programs (2018-2021)
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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
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Our Territory
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Implantable System for
Remodulin
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Continuous intravenous via implantable pump
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PAH
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Pending regulatory
approval
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United States, United Kingdom, Canada, France, Germany, Italy and Japan
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RemUnity
(treprostinil)
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Continuous subcutaneous via pre-filled, semi-disposable system
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PAH
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Pre-NDA
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Worldwide
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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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Worldwide
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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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North America, Europe, Mexico, South America, Egypt, India, Israel, South Africa and Australia
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RemoPro
(pain-free
subcutaneous Remodulin prodrug)
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Continuous subcutaneous
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PAH
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Pre-Clinical
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Worldwide
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Dinutuximab
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Intravenous
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Small cell lung cancer
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Phase II/III
DISTINCT
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Worldwide
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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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Worldwide
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Medium-Term Pipeline Programs (2022-2025)
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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
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Our Territory
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Tyvaso (treprostinil)
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Inhaled
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Pulmonary hypertension associated with chronic obstructive pulmonary disease (WHO Group 3)
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Phase III
PERFECT
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Worldwide
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Aurora-GT
(eNOS gene
therapy)
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Intravenous
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PAH
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Phase II/III
SAPPHIRE
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United States
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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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Worldwide
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Implantable System for Remodulin
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) in order to deliver Remodulin
for the treatment of PAH. The SynchroMed 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 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 the Implantable System for Remodulin in the
United States, we are pursuing parallel regulatory filings with Medtronic relating to the device and the drug, respectively. Medtronic's premarket approval application (PMA) for the device was
approved by the FDA in December 2017.
We resubmitted our NDA for the use of Remodulin in the implantable pump on January 30, 2018, and we anticipate a two-month review period.
Medtronic
is entirely responsible for regulatory approvals and all manufacturing and quality systems related to its infusion pump and related components. Medtronic entered into 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. During the fourth quarter of 2017, Medtronic was notified by the FDA that
these provisions have been satisfied, and Medtronic has therefore been permitted to recommence manufacture and sale of the systems without limitation, but certain other elements of the consent decree
remain in effect, such as the requirements to comply with a remediation plan and to submit to periodic auditing of Medtronic's quality systems. Although we believe we will be permitted to launch
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the
Implantable System for Remodulin following FDA approval, any non-compliance by Medtronic with its consent decree could interrupt its manufacture and sale of the device.
In December 2014, we entered into an exclusive agreement with DEKA Research & Development Corp. (DEKA) to develop a pre-filled,
semi-disposable 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. The RemUnity system consists
of a small, lightweight, durable pump that is intended to have a service life of at least three years. The RemUnity system uses disposable cartridges pre-filled with treprostinil, which can be
connected to the pump with less patient manipulation than is typically involved in filling currently-available subcutaneous pumps. Currently, we are engaged in engineering, design and development
efforts to optimize the RemUnity system to deliver treprostinil in pre-filled reservoirs, and intend to complete human factor studies and functionality testing in subjects before submitting an
application to the FDA to approve the pre-filled RemUnity system.
We
are also engaged in pre-clinical development of a new prodrug of treprostinil called RemoPro, which is intended to enable subcutaneous delivery without the site pain currently
associated with
subcutaneous Remodulin. A prodrug is a metabolically inactive compound that, after administration, metabolizes into an active compound. RemoPro is intended to be inactive in the subcutaneous tissue,
which should decrease or eliminate site pain. Once RemoPro is absorbed into the blood, it metabolizes into treprostinil.
Orenitram, OreniPlus and OreniLeft
In 2013, the FDA approved Orenitram for the treatment of PAH 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.
In
order for Orenitram to reach its full commercial potential, we believe we need to complete successfully further studies to support an amendment to Orenitram's label to indicate that
Orenitram delays morbidity and/or mortality (also known as "time to clinical worsening") in PAH patients who are on an approved oral background therapy. We refer to this initiative to amend
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. Enrollment of this study was completed in December 2017, and we anticipate full results of the study will be available during the second half of 2018.
We
are also enrolling patients in a study of Orenitram (
SOUTHPAW
) to treat WHO Group 2 pulmonary hypertension (specifically associated
with left ventricular diastolic dysfunction), which we refer to as OreniLeft. There are presently no FDA approved therapies indicated for treatment of WHO Group 2 pulmonary hypertension.
In 2012, we completed a phase I safety study of esuberaprost, a single-isomer orally bioavailable prostacyclin analogue, and the data
suggested that dosing esuberaprost four times a day was tolerable. We believe that esuberaprost and treprostinil have differing prostacyclin receptor-binding profiles and are studying the potential
safety and efficacy benefits for patients when used in combination. We also believe that inhaled treprostinil and oral esuberaprost have complementary pharmacokinetic and pharmacodynamic profiles,
which indicate that they should provide greater efficacy in combination. In March 2017, we completed enrollment of our phase III registration study called
BEAT
(
BE
raprost 314d
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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 Tyvaso or have a less than optimal response to Tyvaso treatment. We refer to the resulting use of esuberaprost and Tyvaso therapies in combination with each other 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 conducting studies of Unituxin in adult patients with other forms of GD2-expressing cancers. We are currently enrolling the phase III portion of a
phase II/III study called
DISTINCT
, in patients with small cell lung cancer. During the fourth quarter of 2017, we completed the phase II
portion of the study, and commenced the phase III portion of the study following an interim safety review. These research and development efforts into new indications for Unituxin have been
substantially outsourced to a contract research organization called Precision Oncology, LLC.
Unituxin
therapy is associated with severe side effects, including infections, infusion reactions, hypokalemia, hypotension, pain, fever, and capillary leak syndrome. In post-approval
use of Unituxin, the adverse reactions of prolonged urinary retention, transverse myelitis, and reversible posterior leukoencephalopathy syndrome have been observed. Unituxin's label also includes a
boxed warning related to serious infusion reactions and neurotoxicity.
Finally,
we are developing a fully humanized (non-chimeric) version of dinutuximab, the active ingredient in Unituxin. This new version is expected to reduce some of the side effects
associated with Unituxin, which is a chimeric composed of a combination of mouse and human proteins.
In October 2017, we received FDA approval of a supplement to our NDA for Tyvaso, covering a new inhalation device as part of the Tyvaso
Inhalation System. The new device, called the TD-300/A, was designed based on physician and prescriber feedback, and is intended to aid patient compliance and enhance ease of use. We plan to launch
the TD-300/A in 2018, which we believe will help reduce the rate of Tyvaso discontinuation associated with the current device. In addition to the TD-300/A, we are engaged in research and development
efforts into new devices to further optimize the delivery of inhaled treprostinil.
We
are enrolling 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 combined pulmonary fibrosis and emphysema), which we refer to as Tyvaso-ILD. We
are also planning a phase III registration study called
PERFECT
(
P
ulmonary hypertension
E
n
R
ichment study
F
or the
E
valuation of
C
OPD with
T
yvaso), which is a study of
Tyvaso in patients with WHO Group 3 pulmonary hypertension associated with chronic obstructive pulmonary disease. There are presently no FDA approved therapies indicated for treatment of WHO Group 3
pulmonary hypertension.
We are enrolling a phase II/III study (called
SAPPHIRE
) of a gene therapy product called
Aurora-GT, in which a PAH patient's own endothelial progenitor cells are isolated, transfected with the
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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.
This study is being conducted entirely in Canada, and is sponsored by Northern Therapeutics, Inc., a Canadian entity in which we have a 49.7 percent voting stake and a
71.8 percent financial stake. We have the exclusive right to pursue this technology in the United States, and plan to seek FDA approval of Aurora-GT if
SAPPHIRE
is successful.
Each year, end stage organ failure kills millions of people. A significant number of these patients could have benefited from an organ
transplant. Unfortunately, the number of usable, donated organs available for transplantation has not grown significantly over the past half century while the need has soared. Our long-term goals are
aimed at addressing this shortage. With advances in technology, we believe that creating an unlimited supply of tolerable manufactured organs is now principally an engineering challenge, and we are
dedicated to finding engineering solutions. Since 2011, we have been 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,
regenerative medicine, biomechanical lungs, and other technologies 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, and our manufactured lungs, kidneys and hearts have set records for viability in FDA-required animal models. Most recently, in February 2018 we
reached a significant milestone by achieving 30-day survival of our genetically modified porcine lungs in FDA-required animal models. 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. While we continue to develop and commercialize therapies for rare and life-threatening conditions, we
view organ manufacturing as the ultimate technology solution for a broad array of diseases, many of which (such as PAH) have proven incurable thus far through more traditional pharmaceutical and
biologic therapies. For this reason, in 2015 we created a wholly-owned public benefit corporation called Lung Biotechnology PBC, chartered with the express purpose "to address the acute national
shortage of transplantable lungs and other organs with a variety of technologies that either delay the need for such organs or expand the supply."
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.
During the years ended December 2017, 2016 and 2015, we
incurred $264.6 million, $147.6 million and $245.1 million in research and development expenses.
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 the importance of early treatment; and (3) increase awareness of our commercial
products and how they fit into the various stages of disease progression and treatment. 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
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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. and its affiliates, including Curascript SD Specialty Distribution (collectively 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.
We
distribute Unituxin throughout the United States through an exclusive distribution agreement with ASD Specialty Healthcare, Inc. (ASD), an affiliate of AmerisourceBergen
Corporation. 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 typically 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 ExclusivityAgreements with Lilly Related to Adcirca
below for more details), Lilly manufactures and distributes Adcirca 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. Upon shipment, 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 our license agreement for Adcirca. 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.
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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 sell Tyvaso commercially to a distributor that has exclusive distribution rights in Israel. 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.
We also maintain similar named patient programs for Tyvaso in certain countries.
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.
Remodulin, Tyvaso and Orenitram Proprietary Rights
We have a number of issued patents and pending patent applications covering our treprostinil-based products, Remodulin, Tyvaso and Orenitram. We
have been granted three patents relating to manufacturing treprostinil that expire in 2028 and are 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. One of these patents has been held invalid by the PTAB following an IPR proceeding, as discussed below under
Generic Competition
.
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In
addition to the treprostinil patents noted above, we have other patents specific to our individual treprostinil-based products, including the following:
-
-
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.
-
-
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 have also been granted
two patents directed to a method of treating pulmonary hypertension and a kit for treating pulmonary hypertension. These two patents expire in 2028 and are listed in the Orange Book. Counterparts to
these two patents are issued in several other countries. Both are subject to an ongoing IPR proceeding, as discussed below under
Generic Competition
.
-
-
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 seven unexpired Orange
Book-listed patents with expiration dates ranging from 2024 to 2029. Tyvaso currently has eight unexpired Orange Book listed patents with expiration dates ranging from 2018 to 2028. Orenitram
currently has thirteen unexpired Orange Book listed patents with expiration dates ranging from 2024 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 United States and Europe has expired. In 2010, the FDA granted orphan drug designation for Tyvaso,
which resulted in an orphan exclusivity
period that expired in July 2016. In 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, and we are currently challenging that denial in litigation pending
before the United States District Court for the District of Columbia.
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
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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.
We settled litigation with Sandoz, Teva, Par and Dr. Reddy's, 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 can market its generic version of Remodulin in the United States beginning in June
2018, and Teva, Par and Dr. Reddy's can each launch their generic versions in the United States beginning in December 2018, although each of these companies may be permitted to enter the market
earlier under certain circumstances. We also settled litigation with Actavis relating to its ANDA seeking FDA approval to market a generic version of Orenitram before the expiration of certain of our
U.S. patents. Under the terms of this settlement agreement, Actavis can market its generic version of Remodulin in the United
States beginning in June 2027, although Actavis 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 seeking 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. In addition, Watson filed IPR petitions seeking to invalidate the claims of two of our patents that expire in 2028 and relate to
Tyvaso, and on January 11, 2018, the PTAB issued decisions to institute IPR proceedings with respect to both patents.
Finally,
SteadyMed Ltd. (SteadyMed) filed an IPR petition 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 March 2017, the PTAB issued a Final Written Decision in this
matter, finding that all claims of the '393 patent are not patentable. In May 2017, we appealed this decision to the U.S. Court of Appeals for the Federal Circuit, and the Federal Circuit affirmed the
PTAB's Final Written Decision. In February 2018, we submitted a petition for certiorari with the United States Supreme Court to review the Federal Circuit decision. The '393 patent remains valid and
enforceable until all appeals have been exhausted. We are currently asserting the '393 patent (along with several other patents) against Watson in connection with its efforts to obtain approval to
market a generic version of Tyvaso.
In
January 2016, SteadyMed announced that the FDA had granted orphan drug designation for 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 June 2017, SteadyMed submitted an NDA to the FDA seeking approval of Trevyent for the treatment of PAH. In
August 2017, SteadyMed announced receipt of a refuse-to-file letter from the FDA, in which the FDA refused to accept SteadyMed's NDA for review, requested further information on certain device
specifications and required performance testing and additional design verification and validation testing on the final, to-be-marketed Trevyent product. SteadyMed has indicated it plans to resubmit
its NDA by the end of 2018.
We
intend to continue vigorously defending the '393 patent, but even if the ultimate result is unfavorable to us, we have other patents covering subject matters similar to the '393
patent and with the same expiration date (December 2028). Specifically, in March 2017, the USPTO awarded us two additional patents related to the '393 patent, U.S. Patent Nos. 9,593,066 and
9,604,901. We prosecuted the applications that resulted in these new patents in parallel with the '393 patent IPR proceedings and presented claims addressing the invalidity arguments raised by
SteadyMed in the '393 patent IPR proceedings and by Watson in our ongoing litigation. The USPTO allowed the new patent claims with
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full
knowledge of the '393 patent IPR proceedings, the invalidity arguments presented therein, and the invalidity arguments raised by Watson in connection with the '393 patent. Thus, we anticipate
that these new patents should be less susceptible to challenge than the '393 patent. We have listed both of these new patents in the Orange Book for Remodulin, Tyvaso and Orenitram and may in the
future decide to assert these patents against any competitor marketing or seeking approval to market generic versions of Remodulin, Tyvaso or Orenitram. Following the Final Written Decision in the
'393 patent IPR, SteadyMed asked the PTAB to invalidate the new patents because SteadyMed claimed that the new patents' claims are patentably indistinct from the '393 patent claims. The PTAB denied
SteadyMed's request. Thus, SteadyMed must petition the PTAB to request new IPR proceedings if it wishes to attempt to invalidate the patents issued in March 2017. SteadyMed also asked the PTAB to
assert jurisdiction over additional new patent applications we filed related to the '393 patent that are pending before the USPTO and hold that the claims are patentably indistinct over the claims of
the '393 patent. The PTAB denied SteadyMed's request. As a result, the USPTO could potentially award us additional patents based on these applications.
For
further details regarding the Watson, Actavis and SteadyMed matters, please see Note 16
Litigation
, to our
consolidated financial statements.
As
a result of our settlements with Sandoz, Teva, Par and Dr. Reddy's, we expect to see generic competition for Remodulin from these companies in the United States beginning in
June 2018 (Sandoz) and December 2018 (Teva, Par and Dr. Reddy's) (or earlier under certain circumstances). The two patents granted in March 2017 will not impact these settlements allowing
generic competition for Remodulin. 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.
The
U.S. patent for Adcirca for the treatment of pulmonary hypertension expired in November 2017. The FDA has granted additional regulatory exclusivity through May 2018. After this time,
we expect generic competition for Adcirca and a resulting significant reduction of Adcirca sales, which would lead to a material adverse impact on Adcirca revenues. For additional information, refer
to
Part I, Item 1Business OverviewProducts to Treat Pulmonary Arterial HypertensionAdcirca.
Patent
expiration, patent litigation and generic competition for any of our commercial PAH products could have a significant, adverse impact on our revenues, profits and stock price, 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
Part I
,
Item 1ARisk 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.
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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 based on our net product sales of Adcirca. 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 the wholesale price of Adcirca, which has been and is
expected to continue to be at price parity with Cialis®. In May 2017, we amended our license agreement with Lilly relating to Adcirca, in order to clarify and extend the term of the
agreement and to amend the economic terms of the agreement following a patent expiry in November 2017. For additional discussion, refer to our
Adcirca
product description contained in
Part I, Item 1Business OverviewProducts to Treat Pulmonary Arterial
Hypertension.
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 net 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.
We have orphan drug exclusivity in the United States for Unituxin, expiring March 2022, which precludes the FDA from approving 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.
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) 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 the Implantable System for Remodulin, 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
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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 the Implantable System for Remodulin for the treatment of PAH in the exclusive territories. Our agreement with Medtronic expires on a country-by-country basis upon the later
of ten years from first commercial sale in the relevant country, or ten years after we no longer have a valid patent claim covering the use of Remodulin to treat PAH in such country. Either party may
terminate the agreement immediately for safety, quality or regulatory concerns, in the event of the other party's bankruptcy or insolvency, or in the case of a material breach by the other party that
remains uncured following the relevant cure period. In addition, either party may terminate the agreement without cause on one year's notice to the other party.
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.
Pursuant
to a 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
March 2017, we amended our license agreement with Toray to further reduce the royalty rate to single digits in exchange for contingent milestone payments in the event that we do not
achieve certain clinical and regulatory events by certain dates. In addition, Toray granted us sole manufacturing rights for commercial esuberaprost.
In
2011, the FDA granted orphan designation for esuberaprost for treatment of PAH. Thus, the FDA should grant orphan drug exclusivity if esuberaprost 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 system for subcutaneous delivery of
Remodulin, which we refer to as RemUnity. Under the terms of the agreement, we are funding the development costs related to the semi-disposable 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 agreement with DEKA expires on the last to occur of twenty-five years from the first product
launch under the agreement, or upon the expiration of the last valid claim of a patent licensed from DEKA under the agreement that covers the RemUnity system. Either party may terminate the agreement
immediately upon a material breach by the other party that is uncured following the relevant cure period, or in the event of the other party's bankruptcy or insolvency.
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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.
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 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. 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 finished Unituxin drug product, and are constructing an additional facility to increase our manufacturing capacity for dinutuximab, the active ingredient in Unituxin. We
have no plans to develop a redundant manufacturing source for Orenitram.
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 (which was acquired by Johnson & Johnson in 2017) 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.
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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 reported positive phase II results for ralinepag in patients with PAH in July 2017, and is currently planning a phase III study;
-
-
Trevyent
, a formulation of treprostinil being developed by SteadyMed to treat PAH using
SteadyMed's pre-filled, disposable PatchPump technology. SteadyMed received a refusal to file letter from the FDA in August 2017, and has indicated it plans to resubmit its NDA by the end of 2018;
-
-
Bardoxolone
, an oral therapy being developed by Reata Pharmaceuticals, Inc. for
treatment of PAH associated with connective tissue disease. Reata is enrolling patients in a phase III clinical trial, with data expected during the second half of 2018;
-
-
LIQ861
, a powder formulation of treprostinil designed for deep-lung delivery using a
disposable, dry powder inhaler being developed by Liquidia Technologies Inc., which announced commencement of a phase III study in PAH patients in January 2018;
-
-
CAM2043
, a liquid crystal gel formulation of treprostinil being developed as a once-weekly
subcutaneous depot injection for PAH by Camurus AB. Camarus announced the commencement of a phase I clinical study in December 2017;
-
-
Treprostinil Technosphere
®, an inhaled, dry powder formulation of treprostinil
being developed for PAH by MannKind Corporation, which has announced the filing of an investigational new drug application for a phase I clinical study it plans to commence in 2018; and
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-
-
INS1009
, an inhaled nanoparticle formulation of a treprostinil prodrug being developed by
Insmed Incorporated for PAH. Insmed announced the completion of a phase I study in September 2016.
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. 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 treprostinil-based 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 four generic drug companies permitting them to launch
generic versions of Remodulin in 2018. We also settled litigation with Actavis permitting it to launch a generic version of Orenitram in June 2027. We are also engaged in litigation with a generic
company seeking to launch a generic version Tyvaso. 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 developed by Apeiron Biologics AG that is already approved in Europe to treat high-risk neuroblastoma. 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 2018.
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
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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.
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.
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-
-
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.
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.
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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.
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 21st Century Cures Act (Cures Act), which became law in
December 2016, expanded 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.
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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 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
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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.
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
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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 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).
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
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controls
and may require FDA clearance of a premarket notification (510(k)) or approval of a premarket approval application.
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 Cures Act requires
the FDA to establish a program that would expedite access to devices that provide more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions, for
which no approved or cleared treatment exists or which offer significant advantages over existing approved or cleared alternatives; in 2017, the FDA published draft guidance on this "breakthrough"
devices pathway.
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 non-significant 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.
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 the FDA will issue a designation letter
within 60 calendar days of the filing of the RFD. Depending on the type of combination product, the 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 2017,
the FDA released final documents addressing the application of cGMP requirements and classification issues relating to combination products.
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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 participants who qualify based on income. 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. Remodulin and Tyvaso are reimbursed by 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. As a condition of the inclusion of Adcirca and Orenitram in the Medicare Part D program, which provides
a voluntary outpatient prescription drug 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, are subject to regulatory changes and amendments that we cannot
control, 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 and prescribers, purchasers, formulary managers and others. Violations of the anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties, exclusion
from participation in federal healthcare programs and liability under the False Claims Act. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common
activities from prosecution or other regulatory sanctions, the exemptions
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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. In addition, although the Office of Inspector General of the Department of Health and Human Services (OIG) issues guidance and advisory opinions regarding compliance with the
anti-kickback statute, and applicable exemptions and safe harbors, such guidance and opinions may change over time.
The
federal False Claims Act prohibits any person from, among other things, presenting, or causing to be presented, a false or fraudulent claim for payment to the federal government, or
making, or causing to be made, a false statement material to a false or fraudulent 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; for violating the anti-kickback laws; 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
treble damages, 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 penalties for violations. In addition, PDMA requires manufacturers and distributors to submit similar drug sample information to the 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
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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.
In
December 2017, Congress repealed a PPACA requirement that individuals obtain healthcare insurance coverage or face a penalty, which could decrease the number of patients who have
coverage under health plans that pay for patient use of our products.
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 the 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 the FDA to facilitate development programs
for, and provides expedited review of, regenerative advanced therapies. The law further requires the 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.
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 800 employees as of December 31, 2017. The success of our business is highly dependent on attracting and retaining
highly talented and qualified personnel.
Industry Segments and Geographic Areas
Since 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 14
Segment Information
to our
consolidated financial statements.
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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 21, 2018, 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.
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Martine A. Rothblatt, Ph.D., J.D., M.B.A.
|
|
|
63
|
|
Chairman, Chief Executive Officer and Director
|
Michael Benkowitz
|
|
|
46
|
|
President and Chief Operating Officer
|
James C. Edgemond
|
|
|
50
|
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Chief Financial Officer and Treasurer
|
Paul A. Mahon, J.D.
|
|
|
54
|
|
Executive Vice President, General Counsel and Corporate Secretary
|
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 2008 through January 2013. He also served in a variety of roles at The Corporate Executive Board Company from 1998 to 2008, serving as Executive Director, Finance from 2005 to
2008. He began his career as a public accountant at KPMG Peat Marwick LLP, from 1990 through 1998, where he served in a variety of roles, including as a Senior Manager prior to his departure.
Paul A. Mahon, J.D.,
has served as General Counsel and Corporate Secretary of United Therapeutics since its inception in 1996. In 2001,
Mr. Mahon joined United Therapeutics full-time as Senior Vice President, General Counsel and Corporate Secretary. In 2003, Mr. Mahon was promoted to Executive Vice President, General
Counsel and Corporate Secretary. Prior to 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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