Can United Therapeutics' Patents Fend Off Liquidia And MannKind?

About: United Therapeutics Corporation (UTHR), Includes: MNKD, STDY
by: Spencer Osborne

United Therapeutics recently received two new patents on treprostinil.

Liquidia and MannKind are both attempting to create a dry powder inhaled version of treprostinil.

United's new patents may provide a level of protection until 2028.

United Therapeutics (UTHR) is one of the primary companies delivering treatments for pulmonary arterial hypertension. The disease impacts about 30,000 patients in the United States and has various treatments including oral, inhaled, intravenous, and subcutaneous. United Therapeutics markets several drugs for PAH in all of its forms.

Over the last several years, United Therapeutics has been involved in several court proceedings challenging its patents. Watson Laboratories filed an ANDA with the FDA in 2015 to make a generic Tyveso stating that certain United Therapeutics patents were not valid. Actavis filed an ANDA to create a generic Orenitram. United settled with Actavis and a generic version can be marketed beginning in 2027. SteadyMed (STDY) and United found themselves embroiled in yet another patent dispute regarding the method of manufacturing treprostinil. Ultimately, United and SteadyMed agreed to a merger, thus, removing any litigation from the table.

One result of all of these actions was that one United Therapeutics patent was deemed to be unenforceable. That being said, the company recently received two new patents that do not expire until 2028.

Although the '393 patent is no longer valid, we have other patents covering subject matters similar to the '393 patent and with the same expiration date (December 2028).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 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. - United Therapeutics 10Q

Both new patents, 9,593,066 and 9,604,901 relate to methods to create treprostinil. These patents were granted in March 2017. The question then becomes this. Why might Liquidia and MannKind (MNKD) decide to pursue a treprostinil product, and does United have teeth in its patents that it could challenge these potential products or at least force them to the negotiating table for a license?

Given what was transpiring over the past couple of years in the legal landscape, it is little surprise that some players might enter the treprostinil game with certain patents being deemed unenforceable. Perceived weakness on United Therapeutics patents invites such things to transpire. That being said, I cannot imagine that United Therapeutics was unaware of what was happening at Liquidia and MannKind, and despite that knowledge, United Therapeutics has decided at this stage to go another route with a Corsair deal and a SteadyMed deal. Could it be that United has no worries about Liquidia and MannKind because it feels it is well protected and well positioned? Is it possible that United has already had discussion at some level with both? MannKind and Liquidia have both passed phase 1 clinical trials. Liquidia has progressed directly to phase 3 and is already recruiting patients. It's anticipated that MannKind will progress directly to phase 3 as well. Both Liquidia and MannKind compared the results of their respective phase 1 trials to United's Tyveso, and those comparisons were very favorable to both the Liquidia product and MannKind product.

In concept, neither the Liquidia product nor the MannKind product violates any patented method of delivering treprostinil. What may be protected is the method by which treprostinil itself is manufactured. It appears that both MannKind and Liquidia are seeking a 505b(2) route through clinical trials. A 505b(2) streamlines the clinical trial process because the product in question contains similar active ingredients to a previously approved drug. In this case, that drug is treprostinil. The FDA can, in concept, rely on safety and efficacy which was produced in trials on the initial product. The million-dollar question is whether either Liquidia or MannKind can manufacture the molecule without violating any patents. We may not know the strength of these United patents until MannKind or Liquidia file a drug application.

What United Therapeutics Investors Need To Consider

United has had some patent issues that present concerns to investors. That being said, the company has made several moves to protect itself in reaction to challenges. If as an investor you believe that the Liquidia and MannKind products can come to market unchallenged by United, then your concerns will start to surface in 2020, when these products could come to market. If you feel that the patent portfolio has teeth, then you should be prepared for another round of litigation. Meanwhile, United has bought itself at least a couple of years of relative control over the marketplace and within that time the SteadyMed product Trevyent, which could launch in the near future. Treprostinil could see generic competition as early as this month. In its most recent 10-Q, the company stated: "Generic treprostinil may be launched as early as June 2018..."

In my opinion, United has a strong portfolio in PAH and will maintain a strong presence in the marketplace. While the acquisition of SteadyMed should give investors some confidence, the introduction of new products in the years ahead could bring very real challenges. A key element of the next couple of years with United Therapeutics is the strength of the two patents that last until 2028. Stay tuned!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.