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$7,912,099,590. 45,132,102. Business therapies; and (b) technologies that expand the availability of transplantable organs Our Commercial Products Current Other Proprietary Rights, Strategic Licenses, and Market Exclusivity—Generic Competition and Challenges to our Intellectual Property Rights Outside of the United States, Remodulin is table above. 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. pump’s alarms before we continue with our broader launch. In February 2018, we settled patent litigation with Actavis Laboratories FL, Inc. Product to Treat In June 2021, our Japanese distributor obtained approval to market Unituxin in Japan, and launched sales shortly thereafter. In November 2019, we entered into a supply agreement with an affiliate of DEKA This version is expected to have an extended shelf life and simplified supply chain, and will allow patients to keep more drug product on hand. which should decrease or eliminate site pain, and to metabolize into treprostinil once it is absorbed into the blood. Finally, we are hypertension patients with fibrotic lung disease (improved absolute FVC and reduced exacerbations of underlying lung disease). Specifically, in the treatment of PAH. We are enrolling two phase 3 studies of ralinepag: (1) exclusive right to pursue this technology in the United States and 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 CVS Specialty assist us with the administration of these programs.Registrant'sTitle of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $.01 per share UTHR Nasdaq Global Select Market ý☒ No o☐o☐ No ý☒ý☒ No o☐ý☒ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o"large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act:Large accelerated filer ý☒ Accelerated filer o☐ Non-accelerated filer o☐ Smaller reporting company o☐ Emerging growth company o☐ o☐ No ý☒2018,2021, as reported by the Nasdaq Global Select Market was approximately $4,302,864,919.issuer'sissuer’s common stock, par value $0.01 per share, as of February 20, 2019,17, 2022, was 43,722,436.registrant'sregistrant’s definitive proxy statement for the registrant's 2019registrant’s 2022 annual meeting of shareholders scheduled to be held on June 26, 2019,27, 2022, are incorporated by reference in Part III of this Form 10-K.PART IItem 1.BusinessRisk Factors40Properties58PART IISelected Financial Data601 PART IIIPART IV SIGNATURES2 United Therapeutics, a public benefit corporation ITEMBUSINESS United Therapeutics Corporation focusesbalanced, value-creating biotechnology model. distinctive, entrepreneurial culture that encourages diversity, innovation, creativity, sustainability, and, simply, fun. Since inception, our mission has been to find a cure for pulmonary arterial hypertension (PAH) and other life-threatening diseases. Toward this goal we have successfully obtained approval from the U.S. Food and Drug Administration (FDA) for five medicines, we are always conducting new clinical trials, and we are working to create an unlimited supply of manufactured organs for transplantation.confident in our future thanksthe first publicly-traded biotech or pharmaceutical company to our fundamental attributes, namely our obsession with quality and innovation,take the powerform of our brands, our entrepreneurial culture and our bioinformatics leadership. We also believe that our determination to be responsible citizens—having a positive impact on patients, the environment and society—will sustain our success in the long term. Through our wholly-owned subsidiary, Lung Biotechnology PBC, we are focused on addressing 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. Lung Biotechnology is the first public benefit corporation subsidiary(a public biotechnology ornovel pharmaceutical company.pulmonary arterial hypertension (PAH): Remodulin® (treprostinil) Injection (Remodulin); Tyvaso®PAH: Tyvaso® (treprostinil) Inhalation Solution (Tyvaso)(Tyvaso), which includes the Tyvaso Inhalation System; Remodulin® (treprostinil) Injection (Remodulin); Orenitram® Orenitram® (treprostinil) Extended-Release Tablets (Orenitram)(Orenitram); and Adcirca®Adcirca® (tadalafil) Tablets (Adcirca)(Adcirca). WeTyvaso has also been approved to treat pulmonary hypertension associated with interstitial lung disease (PH-ILD). In the United States, we also market and sell an oncology product, in the United States, Unituxin®Unituxin® (dinutuximab) Injection (Unituxin)(Unituxin), which is approved for the treatment of high-risk neuroblastoma.neuroblastoma, and the Remunity® Pump for Remodulin (Remunity). Outside the United States, our only significantwe generate revenues are derived from the sale of Tyvaso, Remodulin, which is approved in Europe and various other countries. Unituxin.also engaged inactively advancing a pipeline of research and development ofprojects that includes new indications, formulations, and delivery devices for our existing products, as well as new products to treat PAH and other conditions. We generate revenues from sales of our five commercially approved products noted above. Remodulin was approved by the U.S. Food and Drug Administration (FDA) for subcutaneous and intravenous administration in 2002 and 2004, respectively, and has been sold commercially in the United States since 2002. Tyvaso and Adcirca were both approved by the FDA and launched commercially in the United States in 2009. Orenitram and Unituxin were approved by the FDA in 2013 and 2015, respectively, and were launched commercially in the United States in 2014 and 2015, respectively. Our sales, marketing and other commercial staff supports the availability of our commercial products in the United States, and these efforts are supplemented by our contract distributors. Outside the United States, our contract distributors are primarily responsible for sales and marketing efforts. United Therapeutics was incorporated in Delaware in June 1996. Report)Report) to "United Therapeutics"“United Therapeutics” and to the "company"“company”, "we"“we”, "us"“us” or "our"“our” are to United Therapeutics Corporation and its subsidiaries.Product Mode of Delivery Indication Current Status Our Territory RemodulinTyvasoInhaled via ultrasonic nebulizer PAH and PH-ILD Commercial sales in the U.S., Argentina, and Israel* Worldwide Remodulin Continuous subcutaneous PAH PAHCommercial sales in the U.S., most of Europe**, Argentina, Brazil, Canada, Chile, China,Columbia, Israel, Japan, Mexico, Peru, South Korea, and VenezuelaWorldwide Remodulin Continuous intravenous PAH Commercial sales in the U.S., most of Europe**, Argentina, Canada, Columbia, Israel, Japan, Mexico, Peru, Saudi Arabia, and South Korea Taiwan and VenezuelaWorldwide
Remunity Pump for Remodulin
Continuous subcutaneous via pre‑filled cartridgesContinuous intravenousPAH
Commercial sales in the U.S.PAHWorldwideOrenitram
Oral
PAHCommercial sales in the U.S. Worldwide Unituxin Intravenous High-risk neuroblastoma Commercial sales in the U.S., most of Europe*, Argentina, Canada, China, Israel,and Japan Mexico, Peru, Saudi Arabia, South Korea and Switzerland
WorldwideTyvasoAdcirca
OralInhaledPAHPAH
Commercial sales in the U.S., Argentina and IsraelWorldwideUnited StatesAdcircaOralPAHCommercial in the U.S.United StatesOrenitramOralPAHCommercial in the U.S.WorldwideUnituxinIntravenousHigh-risk neuroblastomaCommercial in the U.S.; Approved in Canada, with launch planned for second quarter 2019.Worldwide
the major European markets other than the United Kingdom.We have obtained approval for subcutaneous* Remodulin is marketed 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 approvalsold in most of these countries.2021 Annual Report 3 Arterial HypertensionFDA-approved therapies approved by the FDA 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:substancemolecule that relaxes the pulmonary blood vessels, prevents platelet aggregation, and inhibits the proliferation of smooth muscle cells in the pulmonary vessels. Therefore, drugsDrugs 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 addressalso addresses PAH through the prostacyclin pathway. As compared with prostacyclin analogues, which broadly mimic the effect of prostacyclin, IP prostacyclin receptor agonists bind selectively to (and activate) the IP receptor, one of several prostacyclin receptors.(PDE-5)(PDE-5) Inhibitors and Soluble Guanylate Cyclase (sGC)(sGC) Stimulators. Patients with PAH have also been shown to have reduced levels of the enzyme responsible for producing NO,nitric oxide, a naturally occurring substance in the body that causes relaxation of the pulmonary blood vessels. NONitric oxide produces this effect by increasing intracellular levels of cyclic guanosine monophosphate GMP (cyclic GMP)(cyclic GMP). Therefore, another established therapeutic approach has been to inhibit the degradation of cyclic GMP using drugs known as PDE-5 inhibitors. In addition, sGC is an enzyme found in the endothelial cells and the receptor for NO.nitric oxide. When NOnitric oxide binds to sGC, the enzyme enhances production of cyclic GMP. As a result, sGC stimulators are also approved to treat PAH.substancepeptide in the body that causes constriction of, and structural changes to, the pulmonary blood vessels. Therefore, another established therapeutic approach has been to block the action of endothelin with drugs that are known as endothelin receptor antagonists (ETRAs)(ETRAs). The clinical severity of PAHclassified accordingalso a rare condition, impacting at least 30,000 patients in the United States. In March 2021, Tyvaso became the first and only FDA-approved therapy to a system originally developed for heart failuretreat PH-ILD. Previously, several other leading therapies had been studied in PH-ILD patients, but did not show benefit, and in some cases may have shown adverse consequences.New York Heart AssociationFDA to treat PAH and then modifiedlaunched commercially in the United States in 2009. We sell Tyvaso to specialty pharmaceutical distributors in the United States. We recognized $607.5 million, $483.3 million, and $415.6 million in Tyvaso net product sales, representing 36 percent, 33 percent, and 29 percent of our total revenues for the years ended December 31, 2021, 2020, and 2019, respectively. Tyvaso is approved and commercialized in the United States, Israel, and Argentina.World Health Organization (WHO) forFDA as a drug-device combination product, consisting of Tyvaso drug product and the Tyvaso Inhalation System.4 United Therapeutics, a public benefit corporation PAH, ranging from functional class I (no symptoms) through functional class IV (severe symptoms)III symptoms (patients who may not have symptoms at rest but whose activities are greatly limited by shortness of breath, fatigue, or near fainting). Labeled indications for PAH therapies often note that clinical studies forTyvaso was generally well tolerated in our trials. The most common side effects were transient cough, headache, nausea, dizziness, and flushing.drug predominantly includedresults of the INCREASE phase 3 registration study of Tyvaso in patients with PH-ILD, including patients with underlying idiopathic pulmonary fibrosis (IPF) and combined pulmonary fibrosis and emphysema. The study met all of its primary and secondary endpoints. In January and June 2021, data from the INCREASE study were published in the New England Journal of Medicine and The Lancet Respiratory Medicine, respectively. In March 2021, the FDA approved our efficacy supplement to the Tyvaso NDA, which resulted in revised labeling reflecting the outcome of the INCREASE study. As a result, Tyvaso became the first and only therapy approved by the FDA to treat PH-ILD, which we estimate affects at least 30,000 patients in one or more functional classes. PAH is a subsetthe United States. We are working with an international distributor to seek approval of Tyvaso for PH-ILD in Europe and other territories outside the United States, on the basis of the condition more broadly known as pulmonary hypertension. WHO has classified pulmonary hypertension into five groups,PAH being designated WHO Group 1, which includes multiple etiologies such as idiopathic (meaningWatson Laboratories, Inc. (Watson) related to its abbreviated new drug application (ANDA) seeking FDA approval to market a generic version of Tyvaso in the cause is unknown) and heritable PAH, as well as PAH associated with connective tissue diseases. While our PAH therapies' labeling is limitedUnited States. Under the terms of this settlement, Watson may launch its generic version of Tyvaso in the United States beginning in January 2026, although Watson may be permitted to enter 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 inmarket earlier under certain categories of WHO Group 2, and Tyvaso to treat pulmonary hypertension in certain categories of WHO Group 3.circumstances. For further details,detail, seeResearch the section below entitled Patents and Development below.
.$599.0$513.7 million, $670.9$516.7 million, and$602.3 $587.0 million in Remodulin net product sales, representing 3731 percent, 3935 percent, and 3840 percent of our total revenues for the years ended December 31, 2018, 20172021, 2020, and 2016,2019, 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.approvedmarketed and sold for the treatment of PAH in 38 countries by continuous subcutaneous administration and in 35 countries by continuous intravenous administration, and is sold commercially inthroughout most of these countries. In May 2019, our marketing authorization for RemodulinEurope, Canada, Mexico, and various countries throughout Asia, the Middle East, and South America, as noted in China will expire, at which point we expect to withdraw Remodulin from the Chinese market in light of the anticipated availability of a generic version of Remodulin. Revenues from sales of Remodulin in China have been immaterial.intravenously or 72 hours subcutaneously before refilling the external infusion pump. This profile contrasts favorably with the othernon-treprostinil based, continuously infused prostacyclin therapies inon the market—Flolan®Flolan®, Veletri®Veletri®, and generic epoprostenol.settled litigation with eachalso face competition from manufacturers of Sandoz, Inc. (Sandoz), Teva Pharmaceuticals USA, Inc. (Teva), Par Sterile Products, LLC (Par) and Dr. Reddy's Laboratories, Inc. (Dr. Reddy's), related to their abbreviated new drug applications (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 was permitted to market its generic version of Remodulin in the United States beginning in June 2018, and Teva, Par and Dr. Reddy's were each permitted to launch their generic versions in the United States beginning in December 2018. To our knowledge, none of these companies has yet launched sales of a generic version of Remodulin. For further detail, seeabroad. See the section below entitledPatents and Other Proprietary Rights, Strategic Licenses, and Market Exclusivity—Generic Competition and Challenges to our Intellectual Property Rights.Smiths CADD® CADD-MS® 3 (MS-3) pump used to deliver subcutaneous Remodulin, and the CADD-Legacy® pump to deliver intravenous Remodulin. In 2015, Smiths Medical notified us that it was planning to discontinue the manufacture of the CADD MS-3 pumps and associated cartridges. We entered into an agreement with Smiths Medical for us to fund the manufacture of a further supply of CADD MS-3 pumps and cartridges for use with branded Remodulin only. We anticipate this supply will be sufficient to ensure continued supportrecently launched sales of a next-generation subcutaneous Remodulin for several years,pump called the RemunityPump, and are working with Smiths Medical to develop adeveloping additional next-generation infusion system called RemoLife prior to the exhaustion of the available CADD MS-3 supply. Assubcutaneous and intravenous delivery systems as noted below underResearch and Development, we are also working on developing the Trevyent and RemUnity systems for subcutaneous delivery of Remodulin..adverse eventsside effects 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 ofAs a result, subcutaneous administration is the preferred method of Remodulin delivery, and is used by a majority of U.S. Remodulin patients. Other common side effects associated with both subcutaneous and intravenous Remodulin2021 Annual Report 5 Tyvaso We sell Tyvaso As noted below under same specialty pharmaceutical distributorspump with less patient manipulation than is typically involved in filling other currently-available subcutaneous pumps. In November 2019, we entered into a supply agreement with an affiliate of DEKA to manufacture and supply the United States that distribute Remodulin. We recognized $415.2 million, $372.9 million and $404.6 million in Tyvaso net product sales, representing 25 percent, 22 percent and 25 percent of our total revenues for the years ended December 31, 2018, 2017 and 2016, respectively. Tyvaso is approved in the United States, Israel and Argentina. Tyvaso is administered four times a day by inhaling upRemunity Pump 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 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 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 the effectiveness of Tyvaso 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. In August 2018, we settled patent litigation with Watson Laboratories, Inc. (Watson) related to its ANDA seeking to market a generic version of Tyvaso in the United States.us. Under the terms of this settlement, Watson may launchthe agreement, we reimburse all of DEKA’s and its genericaffiliates’ costs to manufacture the Remunity Pump.Tyvasothe Remunity Pump that enables us to pre-fill cartridges as part of the manufacturing process. This version is expected to have an extended shelf life and simplified supply chain, and will allow patients to keep more drug product on hand.United States beginning in January 2026, although Watson may be permittedpump, we recently paused the introduction of new patients to enterRemunity while we work with DEKA to optimize the market earlier under certain circumstances. For further detail, seealarm profile. We are conducting final testing of the section below entitledPatents and Other Proprietary Rights, Strategic Licenses and Market Exclusivity—Generic Competition.FDA approved, orally administeredFDA-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. In 2013, the FDA approved Orenitram for treatment of PAH patients to improve exercise capacity. The primary study that supported efficacy of Orenitram was a 12-week monotherapy study in which PAH patients were not on any approved background PAH therapy. In August 2018, we announced that our clinical study of Orenitram called FREEDOM-EV had met its primary endpoint of delayed time to first clinical worsening event. In particular, the preliminary results showed that Orenitram, when taken with an oral PAH background therapy, decreased the risk of a clinical worsening event versus placebo by 25 percent (p=0.0391), driven by a 61 percent decrease in the risk of disease progression for patients taking Orenitram, when compared to placebo (p=0.0002). In October 2019, the FDA approved a supplement to our new drug application (NDA) to update the Orenitram label to reflect the FREEDOM-EV results. As a result, Orenitram is now indicated to delay disease progression and improve exercise capacity. Mortality rates were similar between Orenitram and placebo groups at the end of randomized treatment. However, in participants for whom data are available (89 percent), Orenitram was associated with a 37 percent decreased risk of mortality compared with placebo at study closure (p=0.0324). These mortality data are not reflected in the FDA-approved label because they include data accrued in the open-label extension study.RemodulinTyvaso and Tyvaso.Remodulin. We recognized $205.1$306.1 million, $185.8$293.1 million, and $157.2$225.3 million in Orenitram net product sales, representing 1318 percent, 1120 percent, and 1016 percent of our total revenues for the years ended December 31, 2018, 20172021, 2020, and 2016,2019, respectively. The primary studystudies that established efficacy included predominately patients with functional class II-III symptoms and etiologies of idiopathic or heritable PAH (75(66 percent) or PAH associated with connective tissue disease (19(26 percent). The most common side effects6 United Therapeutics, a public benefit corporation notcurrently only approved in the United States. Our distributors are pursuing approval of Orenitram in certain countries outside the United States.(Actavis)(Actavis) related to its ANDA seeking FDA approval to market a generic version of Orenitram in the United States. Under the terms of this settlement, Actavis may launch its generic version of Orenitram in the United States beginning in June 2027, although Actavis may be permitted to enter the market earlier under certain circumstances. We are also engaged in patent litigation with another generic company, ANI Pharmaceuticals, Inc., regarding its ANDA seeking to market a generic version of Orenitram in the United States. For further detail, see the section below entitledPatents and Other Proprietary Rights, Strategic Licenses, and Market Exclusivity—Generic Competition and Challenges to our Intellectual Property Rights.Cialis®Cialis®, which is marketed by Eli Lilly and Company (Lilly)(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 $323.7$55.9 million, $419.7$67.3 million, and $372.2$107.2 million in Adcirca net product sales, representing 20three percent, 24four percent, and 23seven percent of our total revenues for the years ended December 31, 2018, 20172021, 2020, and 2016,2019, respectively. 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—death, hospitalization and disease worsening—and 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. In May 2017, we amended our Adcirca license agreement with Lilly 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. . Our license agreement with Lilly related and Challenges to Adcirca expires on December 31, 2020.Cancer—Cancer — Unituxin(BLA)(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 monoclonal antibody 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. In November 2018, we received approval from Health Canada to market Unituxin, and we are preparing to launchlaunched commercial sales of the product in Canada during the second quarter ofin late 2019.$84.8$202.3 million, $76.0$122.9 million, and $62.5$113.7 million in Unituxin net product sales, representing five12 percent, foureight percent, and foureight percent of our total revenues for the years ended December 31, 2018, 20172021, 2020, and 2016,2019, respectively.near-term pipeline programs (intended to result in product launches in the 2019-2021 timeframe) and medium-term pipeline programs (intended to result in product launches in the 2022-2025 timeframe).programs. We are also engagedengage 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, 3-D organ bioprinting, xenotransplantation, biomechanical lungs and ex-vivo lung perfusion.Near-Term Please note that our expectations regarding our research and development programs are subject to the risks described below under 2021 Annual Report 7 (2019-2021)ProductMode of DeliveryIndicationCurrent StatusSTUDY NAMEOur TerritoryImplantable System for RemodulinContinuous intravenous via implantable pumpPAHFDA approval received July 30, 2018; U.S. launch pending satisfaction of further regulatory requirements by MedtronicUnited States, United Kingdom, Canada, France, Germany, Italy and JapanRemUnity™ (treprostinil)Continuous subcutaneous via pre-filled, semi-disposable systemPAH510(k) application process ongoing with FDAWorldwideProduct Mode of Delivery Indication Current Status
STUDY NAMEOur Territory Orenitram (treprostinil) in combination with approved background therapyOralPAH (decrease morbidity and mortality)Phase IVFREEDOM-EV Study completed, primary endpoint met; NDA supplement submitted to FDA December 2018WorldwideTrevyent®Tyvaso DPI™ (treprostinil)Continuous subcutaneousInhaled dry powder via pre-filled, disposable PatchPump® systemsingle-use cartridges
PAH and PH-ILDPAH
WorldwideNDA to be resubmitted to FDATyvaso
(treprostinil)
Inhaled
PH-COPDWorldwide RemoPro™
(subcutaneous Remodulin prodrug)Continuous subcutaneous PAH Phase 1 Worldwide Tyvaso (treprostinil) Inhaled IPF Worldwide Ralinepag
(IP receptor agonist)Oral PAH Worldwide, subject to out-licenses granted in Europe, Canada and the Middle Eastcertain Asian territoriesTysuberprost™ (esuberaprostAurora-GT™
(gene therapy)Intravenous PAH combination with Tyvaso)Canada)
United StatesOral (esuberaprost) Inhaled (Tyvaso)PAH (decrease morbidity and mortality)Phase IIIBEAT (fully enrolled)North America, Europe, Mexico, South America, Egypt, India, Israel, South Africa and AustraliaRemoPro™ (pain-free subcutaneous Remodulin prodrug)Continuous subcutaneousPAHPhase IWorldwideUnituxin (dinutuximab)IntravenousSmall cell lung cancerPhase II/IIIDISTINCT (fully enrolled)WorldwideTyvaso (treprostinil)InhaledPulmonary hypertension associated with idiopathic pulmonary fibrosis (WHO Group 3)Phase IIIINCREASEWorldwideMedium-Term Pipeline Programs (2022-2025)ProductMode of DeliveryIndicationCurrent StatusSTUDY NAMEOur TerritoryTyvaso (treprostinil)InhaledPulmonary hypertension associated with chronic obstructive pulmonary disease (WHO Group 3)Phase IIIPERFECTWorldwideTreprostinil Technosphere®Inhaled dry powderPAHPhase IIIWorldwideOrenitram (treprostinil)OralPulmonary hypertension associated with left ventricular diastolic dysfunction (WHO Group 2)Phase IIISOUTHPAWWorldwideRalinepag (IP receptor agonist)OralPAHPhase IIIADVANCE studiesWorldwide, excluding the People's Republic of China and certain other Asian territories that have been outlicensed to Everest MedicinesAurora-GT™ (eNOS gene therapy)IntravenousPAHPhase II/IIISAPPHIREUnited StatesSM04646 (Wnt pathway inhibitor)InhaledIdiopathic pulmonary fibrosisPhase IUnited States and CanadaImplantable System for Remodulin On July 30, 2018,As noted above under Products to Treat Pulmonary Arterial Hypertension—Remunity Pump, in February 2021, we obtained FDA approvallaunched commercial sales of the Implantable System for Remodulin in the United States. We developed this system in collaboration with Medtronic, Inc. (Medtronic). The system incorporates a proprietary Medtronic intravascular infusion catheter with Medtronic's 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. We believe this 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. The FDA approved Medtronic's premarket approval application (PMA) for the device in December 2017, and our NDA for the use of Remodulin in the implantable pump in July 2018. Medtronic must satisfy certain conditions to its PMA approval before we can launch the Implantable System for Remodulin. We have no control over when or whether these conditions will be met. In February 2019, we entered into a commercialization agreement underRemunity Pump, which Medtronic will manufacture and supply the Implantable System for Remodulin, and we will manufacture and supply Remodulin for use in the system. Each party will perform certain additional activities to support the commercialization of the Implantable System for Remodulin, and we will reimburse Medtronic's costs to provide such support. We will pay Medtronic a royalty equal to ten percent of our net sales of Remodulin administered via the Implantable System for Remodulin. We have entered into an agreement with Caremark, L.L.C. (CVS Specialty) to provide for refills of implanted pumps at its infusion centers. Once Medtronic satisfies its remaining PMA conditions, we plan to approach the launch in a careful and deliberate manner to ensure the safety of patients and the long-term success of the program. Medtronic has agreed to produce a supply of pumps for the initial launch that we believe will be sufficient to provide the system to any eligible PAH patient in the United States currently receiving intravenous prostacyclin therapy. We anticipate that the initial pump supply will enable us to launch the Implantable System for Remodulin in 2019 at the ten clinical trial sites that participated in the pivotalDelIVery clinical study of the Implantable System for Remodulin, and subsequently commence a broader launch in up to approximately 100 additional sites by the end of the year. These timelines are subject to a number of factors outside our control, including Medtronic's satisfaction of its PMA conditions. We are also working with Medtronic to develop a next-generation system incorporating various enhancements. 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 with the FDA in April 2015, which required Medtronic to complete certain corrections and enhancements to the SynchroMed II pump and the associated quality system. The consent decree restricted Medtronic's ability to manufacture and distribute the SynchroMed II infusion system, unless specific conditions were met, including retention of a third-party expert to inspect the affected quality system and certify that the quality system complies with the requirements of the consent decree. Medtronic completed the third-party certification audits in January 2017 and successfully completed an FDA inspection in June 2017. After the inspection, FDA lifted the consent decree restrictions on manufacturing, distribution, and design in September 2017. The consent decree remains in effect, with ongoing obligations for annual third-party audits continuing until September 2020. Non-compliance by Medtronic with its consent decree could interrupt the manufacture and sale of the Implantable System for Remodulin.RemUnity and RemoPro 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 thedeveloped in collaboration with DEKA under an exclusive 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.license agreement. The RemUnity systemRemunity Pump consists of a small, lightweight, durable pump that is intended to have a service life of at least three years.and separate controller. The RemUnity systemRemunity Pump uses disposable cartridges pre-filledfilled with treprostinil,Remodulin, which can be connected to the pump with less patient manipulation than is typically involved in filling other currently-available subcutaneous pumps.is working withto manufacture and supply the FDARemunity Pump to obtain 510(k) clearanceus. Under the terms of the RemUnity system. Initially,agreement, we planreimburse all of DEKA’s and its affiliates’ costs to launchmanufacture the systemRemunity Pump.disposable components to be pre-filled with Remodulin by our specialty pharmacy distributors.Remodulin. We are also developing a version of the system that includeswill include disposable components that are pre-filled as part of the manufacturing process.also conducting a series of phase I1 studies to develop a new prodrug of treprostinil called RemoPro, which is intended to enable subcutaneous delivery of treprostinil therapy without the site pain currently associated with subcutaneous Remodulin. As a prodrug, RemoPro is designed to be inactive in the subcutaneous tissue,Trevyent In August 2018, we acquired SteadyMed Ltd. (SteadyMed), which is developing Trevyent, a post-phase III development-stage drug-device combination product that combines SteadyMed's two-day, single use, disposable PatchPump technology with treprostinil, for the subcutaneous treatment of PAH. In August 2017, SteadyMed received a refuse-to-file letter from the FDA with respect to its 505(b)(2) NDA for Trevyent. SteadyMed met with the FDA in November 2017, and the FDA indicated that SteadyMed does not need to conduct any clinical trials to prove the safety or efficacy of Trevyent. We are completing certain additional non-clinical activities related to Trevyent, and anticipate resubmitting the NDA during the first half of 2019. These activities include design verification testing on the final to-be-marketed Trevyent product, pharmacokinetic modeling and process validation.Orenitram 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 August 2018, we announced that our phase IV study of Orenitram calledFREEDOM-EV had met its primary endpoint of delayed time to first clinical worsening event. In particular, the preliminary results showed that Orenitram, when taken with an oral PAH background therapy, decreased the risk of a morbidity/mortality event versus placebo by 26 percent (p=0.0391). In December 2018, we submitted a supplement to our NDA to the FDA seeking approval for a label amendment reflecting theFREEDOM-EV results, and we are evaluating whether the results could support marketing applications for Orenitram outside the United States. AdditionalFREEDOM-EV data were presented at a medical conference in January 2019, including a 61 percent decrease in the risk of disease progression for patients taking Orenitram, when compared to placebo (p=0.0002). In addition, in participants for which data are available (89 percent), Orenitram was associated with a 37 percent decreased risk of mortality compared with placebo (p=0.0324) at study closure (which includes additional data accrued in the open-label extension study). Secondary endpoints in theFREEDOM-EV study are summarized below:•Change in six-minute walk distance (6MWD) from baseline. The median 6MWD trended toward improvement at week 24 (Hodges-Lehmann treatment estimate: 7 meters; p=0.0913). Median 6MWD improved with Orenitram at weeks 36 (13 meters; p=0.0094) and 48 (21 meters; p=0.0008) compared to placebo.•Change in Borg dyspnea score and WHO functional class from baseline. When classified categorically as 'improved', 'no change', or 'deteriorated', participants in the Orenitram group exhibited a positive shift in Borg dyspnea score and WHO functional class compared to placebo at weeks 24, 36, and 48 (p<0.05, all).•Change in N-terminal pro-brain natriuretic peptide (NT-proBNP) levels from baseline. NT-proBNP levels were significantly improved with Orenitram at weeks 24 and 36 (p<0.0001, both).•Change in combined 6MWD and Borg dyspnea score from baseline. Combined 6MWD and Borg dyspnea score was significantly improved with Orenitram when assessed at week 24 compared to placebo (p=0.0057). We expect to discuss theFREEDOM-EV results in further detail at upcoming medical conferences. 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). There are presently no FDA approved therapies indicated for the treatment of WHO Group 2 pulmonary hypertension.Tysuberprost 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 we 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. We refer to the use of esuberaprost and Tyvaso therapies in combination with each other as Tysuberprost. In March 2017, we completed enrollment of our phase III registration study calledBEAT 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 anticipate announcing the results of theBEAT study during the first half of 2019.Unituxin 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 a study (DISTINCT) of Unituxin in adult patients with small cell lung cancer, which is another GD2-expressing 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. The phase III portion of theDISTINCT study is now fully enrolled with 472 patients, and we expect to announce the results by the first quarter of 2020. We are also conducting preclinical research to determine Unituxin's potential activity against other types of GD2-expressing tumors. 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.developing a fully humanized (non-chimeric) version of dinutuximab, the active ingredient in Unituxin. We expect this new versioncollaborating with two medical device manufacturers to reduce some of the side effects associated with Unituxin, which is a chimeric composed of a combination of mousedevelop additional next-generation pump systems for Remodulin.human proteins.Tyvaso 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. In addition, we are engaged in research and development efforts into new devices to further optimize the delivery of inhaled treprostinil, including apro re nata (as needed) device called Spiresta™.III3 registration study calledINCREASE, 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 andemphysema). This study is now over 75 percent enrolled. We are also enrolling a phase III registration study calleddisease.disease (PH-COPD). There are presently no FDA approvedFDA-approved therapies indicated for the treatment of WHO GroupPH-COPD, which we estimate affects 100,000 patients in the United States.hypertension.Treprostinil TechnosphereSeptember 2018,December 2020, the FDA granted orphan designation for treprostinil to treat IPF. We are also in the process of commencing TETON 2, which is an additional phase 3 study of Tyvaso in IPF that is similar to TETON 1, but will be conducted outside the United States.8 United Therapeutics, a public benefit corporation entered into a worldwide exclusive licensealso plan to seek FDA approval to expand the Tyvaso-ILD label to include PH-COPD and collaboration agreement with MannKind Corporation (MannKind) for the development and commercialization ofIPF, respectively.Treprostinil Technosphere for the treatment of PAH. The agreement became effective on October 15, 2018. Treprostinil TechnosphereTyvaso DPI, under an in-license from MannKind Corporation (MannKind). Tyvaso DPI incorporates the dry powder formulation technology and Dreamboat®Dreamboat® inhalation device technology used in MannKind's Afrezza®MannKind’s Afrezza® (insulin human) InhalationInhalation Powder product, which was approved by the FDA in 2014. If the FDA approves Treprostinil Technosphere,Tyvaso DPI, we believe that this new inhaled treprostiniltreprostinil therapy will provide substantial lifestyle benefits to PAH and PH-ILD patients, as compared with nebulized Tyvaso Inhalation Solution therapy, because it will be: (1) less time consuming to administer and easier to maintain, as the device and drug will be provided in a pre-filled, single use, disposable cassettecassettes, eliminating the need for cleaning and filling; and (2) mobile and more convenient, as the compact design of MannKind'sthe Dreamboat device and drug cassettes used with Treprostinil Technosphere canTyvaso DPI enables the device to easily fit into the patient'spatient’s pocket and dothe device does not require electricity. electricity to function.also havecompleted two clinical studies of Tyvaso DPI. One was a study in healthy volunteers, comparing the rightpharmacokinetics of Tyvaso DPI to develop a single-use device based on MannKind's Cricket® design. The Cricket device would come pre-loaded withTyvaso Inhalation Solution. We completed the study in October 2020 and announced in January 2021 that the study demonstrated comparable systemic treprostinil exposure between Tyvaso DPI and would be discarded immediately after use.Tyvaso Inhalation Solution. In contrast,December 2020, we envision each Dreamboat device would be used for up to two weeks before it is replaced with a new device. Under our agreement with MannKind, we are responsible for global development, regulatory and commercial activities related to Treprostinil Technosphere. We plan to commencecompleted a clinical study (calledcalled ) during, which evaluated the first half of 2019 to evaluate the safety and pharmacokinetics of switching PAH patients from Tyvaso Inhalation Solution to Treprostinil Technosphere, as wellTyvaso DPI. The BREEZE study demonstrated safety and tolerability of Tyvaso DPI in subjects with PAH transitioning from Tyvaso Inhalation Solution, and comparable systemic treprostinil exposure between Tyvaso DPI and Tyvaso Inhalation Solution. In April 2021, we submitted an NDA to the FDA seeking approval for Tyvaso DPI to treat both PAH and PH-ILD.pharmacokinetic studydeficiency, that the FDA had not yet completed its review of a Citizen Petition submitted to the FDA in healthy volunteers. TheJuly 2021 concerning the safety of an excipient in Tyvaso DPI. In December 2021, we resubmitted our NDA to the FDA, hasaddressing the single deficiency cited in the CRL. In January 2022, the FDA accepted our resubmitted NDA for review, and designated our NDA as a class 1 resubmission with an expected two-month review period ending in February 2022. In February 2022, the FDA requested additional information concerning the pulmonary safety of Tyvaso DPI. We responded to the FDA’s request, and the FDA indicated that these two studies, if successful, will be the only clinical studies necessary to support FDA approval. We and MannKind will share responsibility for manufacturing clinical supplies and initial commercial supplies of Treprostinil Technosphere. We will manufacture long-term commercial supplies. Under the terms of the agreement, we paid MannKind $45.0 million following the effectiveness of the agreement in October 2018, and we are required to make potential milestone payments to MannKind of up to $50.0 million upon the achievement of specific development targets. MannKind is also entitled to receive low double-digit royalties on our net sales of the product. In addition, we have the option, in our sole discretion, to expand the license to include other active ingredients for the treatment of pulmonary hypertension. We will pay MannKind up to $40 million in additional option exercise and development milestone payments for each product (if any) addedresponse constitutes a major amendment to the license pursuantTyvaso DPI NDA, which extends the FDA’s anticipated deadline to this option, as well as a low double-digit royalty on our net sales of any such product. We alsoreview the pending NDA to May 2022.researchcommercial supply agreement with MannKind under(the Supply Agreement), which was later amended in October 2021. Pursuant to the Supply Agreement, MannKind will conduct research relatedis responsible for manufacturing and supplying Tyvaso DPI to products outsideus on a cost-plus basis. Unless earlier terminated, the scopeinitial term of the licensingSupply Agreement continues until December 31, 2031 and collaboration agreement. We paidwill thereafter be renewed automatically for additional, successive two-year terms unless we give 24 months’ written notice of non-renewal, or MannKind $10.0 milliongives 48 months’ written notice of non-renewal, prior to the end of the initial term or any additional renewal term. Each party has customary termination rights, including termination for the other party’s material breach that is not cured within a specific timeframe or in considerationthe event of liquidation, bankruptcy or insolvency of the other party.its performance under the research agreement.Aurora-GTphase II/IIIprimary endpoint of time to first clinical worsening event; and (2) ADVANCE CAPACITY, studying the effect of ralinepag on exercise capacity in PAH patients with a primary endpoint of change in peak oxygen uptake via cardiopulmonary exercise test.Both of these studies are global, multi-center, placebo-controlled trials of patients on approved oral background PAH therapies.patient'spatient’s own endothelial progenitor cells are isolated, transfected with the gene for human endothelial NO-synthase (eNOS),nitric oxide synthase, expanded ex-vivo, and then delivered back to the same patient. This product is intended to rebuild the blood vessels in the lungs that are destroyedcompromised by PAH. This study is being conducted in Canada, is intended to be a registration-phase study for Canadian regulatory submission, 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 theplan to seekwill evaluate seeking FDA approval of Aurora-GT ifSM04646 In September 2018, we entered into a license agreement with Samumed LLC (Samumed) providing us exclusive U.S. and Canadian rights to SM04646, a phase I development-stage Wnt pathway inhibitor being developed for the treatment of idiopathic pulmonary fibrosis (IPF). The Wnt pathway is one of the primary signaling pathways essential for the normal development of all multicellular animals, and for the growth and maintenance of various adult tissues. Recent evidence suggests that aberrant Wnt signaling may be involved in the pathogenesis of chronic lung disease such as IPF. SM04646 is currently undergoing a phase I clinical trial. The FDA has granted orphan drug designation for SM04646 for the treatment of IPF. Under our agreement with Samumed, we paid Samumed $10 million up-front, and we will pay Samumed additional consideration of up to $340 million in developmental milestone payments, plus up to low double-digit royalties on our net sales of the product. Under the terms of the agreement, our subsidiary, Lung Biotechnology PBC, will conduct and fund all development, regulatory and commercialization activities for SM04646 in the United States and Canada. Samumed retains development and commercialization rights for SM04646 for all markets outside of these two countries.Ralinepag In November 2018, we entered into a global license agreement with Arena Pharmaceuticals, Inc. (Arena), providing us exclusive rights to ralinepag, a next-generation, oral, selective and potent IP prostacyclin receptor agonist in development for the treatment of PAH. In January 2019, in connection with the closing of the transactions contemplated by the license agreement, (1) Arena granted to us perpetual, irrevocable and exclusive rights throughout the universe to develop, manufacture and commercialize ralinepag; (2) Arena transferred to us certain other assets related to ralinepag, including, among others, related domain names and trademarks, permits, certain contracts, inventory, regulatory documentation, Investigational New Drug (IND) Application No. 109021 (related to ralinepag) and non-clinical, pre-clinical and clinical trial data; and (3) we assumed certain limited liabilities from Arena, including, among others, all obligations arising after the closing under the assumed contracts and the IND described above; and (4) we paid Arena an upfront payment of $800.0 million. We will also pay Arena (1) a one-time payment of $250.0 million for the first, if any, marketing approval we receive in the United States for an inhaled version of ralinepag to treat PAH; (2) a one-time payment of $150.0 million for the first, if any, marketing approval we receive in any of Japan, France, Italy, the UK, Spain or Germany for an oral version of ralinepag to treat any indication; and (3) low double-digit, tiered royalties on net sales of any pharmaceutical product containing ralinepag as an active ingredient, subject to certain adjustments for third party license payments. In 2017, Arena announced topline results from a 22-week, randomized, double-blind, placebo-controlled phase II trial evaluating the tolerability and safety of ralinepag, and the effectiveness of ralinepag in reducing pulmonary vascular resistance (PVR) and improving exercise capacity. In this trial, 40 patients with PAH received ralinepag and 21 received placebo. Topline results showed statistically significant improvement of both absolute and percentage change from baseline in PVR. Patients on ralinepag also demonstrated numerical improvement in 6MWD, but as the study was not powered to show a difference in 6MWD from placebo, this was a not a statistically-significant finding. The safety and tolerability profiles were in line with other oral prostacyclin-class therapies. We are continuing the ongoing phase IIIADVANCE OUTCOMES study initiated by Arena, which is an event-driven study of ralinepag in PAH patients, with a primary endpoint of time to first clinical event. We are also planning two additional phase III studies, calledADVANCE CAPACITY andADVANCE ENDURANCE, studying the effect of ralinepag on exercise capacity in PAH patients (withprimary endpoints of change in peak oxygen uptake via cardiopulmonary exercise test and change in six-minute walk distance, respectively). All three of these studies are global, multi-center, placebo-controlled trials of patients on approved oral background PAH therapies. These studies collectively provide us with multiple potential avenues for FDA approval of ralinepag. Upon closing, we also assumed Arena's existing outlicense of ralinepag to Everest Medicines in the following territories: the People's Republic of China, Hong Kong, South Korea, Macau and Taiwan.2021 Annual Report 9 Since 2011, we have beenWe are engaged in research and development of a variety of technologies designed to increase the supply of transplantable organs and tissues and to improve outcomes for transplant recipients. These programs include preclinical research and development of alternative tissue sourcesrecipients through tissue and organ xenotransplantation, regenerative medicine, biomechanical lungs,3-D organ bioprinting, xenotransplantation, and other technologiesex-vivo lung perfusion.create engineered organsdevelop a pilot-scale, designated pathogen-free facility to house genetically modified pigs, with a goal of commencing human clinical trials of xenotransplanted kidneys we call UKidneys™ from pigs to humans in the near term. In August 2020, UAB began to conduct operations at the facility with the first introduction of genetically-modified pigs, and organ tissues. Although our primary focus is on engineered lungs,in March 2021, the facility received its recertification of compliance from the American Association for Accreditation of Laboratory Animal Care. In 2019, we are also developing technology for other engineered organs, such as kidneysentered into and hearts,amended agreements with NYU Langone Health (NYU) and our manufactured lungs, kidneys and hearts have set records for viability in FDA-required animal models. In February 2018 we reached a significant milestone by achieving 30-day survivalUniversity of Maryland Baltimore, respectively, to conduct preclinical testing of our genetically modified porcine lungs in FDA-required animal models. We are also developing technologies to improve outcomes for lung transplant recipientsxenografts, which have been generating data regarding our UKidneys, UThymoKidneys™, and to increase the supply of donor lungs through ex-vivo lung perfusion. UHearts™.the ultimate technologya complementary solution for a broad array of diseases, many of which (such as PAH) have proven incurable thus farto date through more traditional pharmaceutical and biologic therapies. For this reason, in 2015 we created a wholly-owned public benefit corporationPBC called Lung Biotechnology PBC, chartered with the express purpose of "address[“address[ing] 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."” It is also why we included the development of “technologies that expand the availability of transplantable organs” as part of our express public benefit purpose when we converted United Therapeutics to a PBC in 2021.10 United Therapeutics, a public benefit corporation Tyvaso,Remunity Pump, Orenitram, and UnituxinTyvasothe Remunity Pump, and Orenitram throughout the United States through two contracted specialty pharmaceutical distributors: Accredo Health Group, Inc. and its affiliates including Curascript SD(Accredo) and Caremark, L.L.C. (CVS Specialty Distribution (collectively Accredo), and CVS Specialty. These). Assuming FDA approval, we plan to distribute Tyvaso DPI through these same distributors. 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 CVS Specialty 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.
| 2021 Annual Report | 11 | ||||
Unituxin
In November 2020, we entered into an exclusive agreement with Ferrer to distribute Orenitram throughout the territories where it also has distribution rights for Remodulin. Ferrer plans to submit a Marketing Authorization Application for Orenitram to the European Medicines Agency (
In addition to intellectual property rights, U.S. and international regulatory authorities often provide periods of market exclusivity for manufacturers of biopharmaceutical products.
Both of these patents are subject to the IPR proceedings discussed below under
Generic Competition and Challenges to our Intellectual Property Rights.| 12 | United Therapeutics, a public benefit corporation | ||||
Orange Book
October 2026. 2026. and Challenges to our Intellectual Property Rights competition. Patent expiration, patent litigation, and competition from generic 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 any such product. Book for Tyvaso DPI. and research efforts associated with our respective products or result in increased costs. See also There are also a variety of investigational PAH therapies in the later stages of development, including the following: PAH patients. A pivotal trial is ongoing. results of our inhaled treprostinil to examine its use to treat the lung diseases underlying PH-ILD, including our frontline high-risk neuroblastoma. 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. FDA Approval Process Internet. post-marketing testing, including phase has been shown through bioequivalence testing to be therapeutically equivalent to the approved As a practical matter, this is available only if the RLD is approved for multiple indications, at least one of which is not patent protected. 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. 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. In July 2018, the FDA announced an action plan to encourage the development and efficient review of biosimilars, including the establishment of a new office within the agency that will focus on therapeutic biologics and biosimilars. On December 20, 2020, Congress amended the Public Health Services Act as part of the COVID-19 relief bill to further simplify the biosimilar review process by making it optional to show that conditions of use proposed in labelling have been previously approved for the reference product, which used to be a requirement of the application. In September 2021, the FDA issued two guidance documents intended to inform prospective applicants and facilitate the development of proposed biosimilars and Because biologically sourced raw materials are subject to unique contamination risks, their use may be restricted in some countries. with its cleared or approved intended uses. Class II and III devices are subject to additional special controls and may require FDA clearance of a premarket notification criteria, including device technologies to treat non-life-threatening or reasonably reversible conditions. STeP is modeled after the breakthrough device program and is intended to provide similar benefits, including increased communication with the FDA and prioritized review. During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping requirements, and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims about them. The clinical investigators in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, the sponsor, the FDA, or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. United States. Additionally, each foreign country subjects medical devices to its own regulatory requirements. 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. participation of a notified body. 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 Anti-Kickback, False Claims Laws, and The Prescription Drug Marketing Act certified nurse-midwives. ( business. laws and regulations that require compliance with federal, state, and local regulations for the protection of the environment. We physical wellness of Unitherians. Our comprehensive total rewards package includes short- and long-term incentive compensation that enables all of our full-time Unitherians to participate in our financial success. For example, all full-time domestic Unitherians are eligible to receive minimum annual compensation of $75,000, including salary and bonus. We also provide meaningful opportunities for Unitherians to share in our success by making every full-time Unitherian a shareholder through our long-term incentive programs. We offer market-leading benefit programs and provide access to a variety of health and wellness facilities and programs, such as on-site childcare centers and state-of-the-art fitness centers, and access to 24/7 Unitherian assistance programs. Name Michael Benkowitz James C. Edgemond Paul A. Mahon, J.D. transplantable organs. and corporate compliance activities, most company-wide administrative functions, including human resources and information technology, many of our business development efforts, and several of our key business alliances and partnerships. Products and Our Operations We cannot predict with certainty Our clinical trials have in the past and may in the future be discontinued, delayed, canceled, or disqualified for various reasons, including: products. Financial pressures may cause United States government payers and/or private health insurers to implement policies that would reduce reimbursement rates for our products, limit future price increases, cap reimbursement rates for pharmaceuticals to rates paid internationally, require the automatic substitution of generic products, demand more rigorous requirements for initial coverage for new products, implement step therapy policies that require patients to try other medicines, including generic products, before using our products, or take other similar steps that could make it more difficult for patients to access our products. Our manufacturing strategy exposes us to significant risks. our business. Additional risks progress of our clinical trials, commercial launch plans, and related revenues. We rely We rely Tyvaso Inhalation System. the bloodstream caused by a wide variety of bacteria. In addition, Unituxin is associated with severe side effects, and its label contains a boxed warning related to potential infusion reactions and neurotoxicity. We are required to report certain adverse events to the FDA. Development of new products, and new formulations and indications for existing products, could result in new side effects and adverse events which may be serious in nature. 2022. While physicians may practices. In the United States, the Federal Anti-Kickback Statute prohibits, among other activities, knowingly and willfully offering, paying, soliciting, or receiving protection under this statute. operations. Data Privacy agreements. This dependence on intellectual property developed by others involves the following risks: intellectual property. In addition, we may be forced to incur substantial costs to maintain the intellectual property ourselves or take legal action seeking to force the licensor to do so. States. A U.S. patent for Adcirca for In March 2020, Liquidia filed IPR petitions for two of our treprostinil-related patents, and in October 2020 the PTAB instituted IPR proceedings with respect to one of these patents and declined to institute proceedings with respect to the other patent. In April 2020, we received a Paragraph IV notification letter from Liquidia indicating that Liquidia’s NDA contains a certification alleging that Yutrepia will not infringe any of the patents currently listed in the Orange Book for Tyvaso because those patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use or sale of Yutrepia. In June 2020, we filed a patent infringement lawsuit against Liquidia related to its NDA for Yutrepia. In January 2021, Liquidia filed an IPR petition for an additional patent that we listed in the Orange Book for Tyvaso and asserted against Liquidia in the pending litigation. We are also engaged in patent litigation with ANI related to its ANDA seeking FDA approval to market a generic version of Orenitram. and expensive to enforce or may not provide an adequate remedy in the event of unauthorized disclosure. Information technology security breaches and other disruptions could compromise our information and expose us to legal responsibility which would cause our business and reputation to suffer. January 1, 2018 - December 31, 2018 January 1, 2017 - December 31, 2017 January 1, 2016 - December 31, 2016 The price of our common stock could decline sharply due to general market conditions as well as the following factors, among others: holdings. For example, our In addition, as a result of our recent conversion to a PBC, our Board is required to consider and balance the financial interests of shareholders, the interests of stakeholders materially affected by our conduct, and the pursuit of our specific public benefit purpose when evaluating takeover offers. This requirement of Delaware PBC law may make our company a less attractive takeover target than a traditional for-profit corporation. Similarly, a change of control, under certain circumstances, could Unresolved Staff Comments Properties clinical studies. Legal Proceedings Mine Safety Disclosures Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 2021. Consolidated Statements of Operations Data: Revenues Operating income Net income Net income per common share: Basic(1) Diluted(1) Consolidated Balance Sheet Data: Cash, cash equivalents and marketable investments Total assets Total non-current liabilities Total stockholders' equity Management’s Discussion and Analysis of Financial Condition and Results of Operations All statements in this filing are made as of the date this Report is filed with the U.S. Securities and Exchange Commission ( For additional detail regarding our commercial products, seePart I, Item 1—Business—Our Commercial Products. fibrosis (the Operating Expenses Our operating expenses include the costs described below. expansion of our pipeline programs. Although we no longer grant STAP awards, we still had Net product sales: Remodulin Tyvaso Adcirca Orenitram Unituxin Total revenues PH-ILD label expansion and, to a lesser extent, price increases. Japan. and available industry data, including our Balance, January 1, 2018 Provisions attributed to sales in: Current period Prior periods Payments or credits attributed to sales in: Current period Prior periods Balance, December 31, 2018 Balance, January 1, 2017 Provisions attributed to sales in: Current period Prior periods Payments or credits attributed to sales in: Current period Prior periods Balance, December 31, 2017 Balance, January 1, 2016 Provisions attributed to sales in: Current period Prior periods Payments or credits attributed to sales in: Current period Prior periods Balance, December 31, 2016 Cost of Product Sales Category: Cost of product sales Share-based compensation (benefit) expense(1) Total cost of product sales February 2021. Category: Research and development projects Share-based compensation (benefit) expense(1) Total research and development expense 2020. Category: General and administrative Sales and marketing Share-based compensation (benefit) expense(1) Total selling, general and administrative expense Share-Based Compensation Category: Stock options Restricted stock units Share tracking awards plan Employee stock purchase plan Total share-based compensation (benefit) expense The table below summarizes share-based compensation Cost of product sales Research and development Selling, general and administrative Total share-based compensation (benefit) expense 2020. Cash and cash equivalents Marketable investments—current Marketable investments—non-current Total cash and cash equivalents and marketable investments Cash Flows Net cash provided by operating activities Net cash (used in) provided by investing activities Net cash provided by (used in) financing activities Operating Activities interest and other changes in assets and liabilities. Operating lease obligations Long-term debt obligations(1) Obligations under the STAP(2) Obligations under the SERP(3) Purchase obligations(4) Total(5) details. products covered by the license agreements. Refer to Note 12— The following 2019. assumptions used in the Black-Scholes-Merton valuation model, see Note Quantitative and Qualitative Disclosures About Market Risk Held-to-maturity investments Available-for-sale investments Weighted average interest rate During sustained periods of instability and uncertainty in the financial markets, we may be subjected to additional investment-related risks that could materially affect the value and liquidity of our investments. In light of these risks, we actively monitor market conditions and developments specific to the securities and security classes in which we invest. In addition, we believe that we maintain a conservative investment approach in that we invest exclusively in unstructured, highly-rated securities with relatively short maturities that we believe reduce our exposure to undue risks. While we believe that we take prudent measures to mitigate investment related risks, such risks cannot be fully eliminated, as circumstances can occur that are beyond our control. Stock Price Risk Consolidated Statements of Stockholders' Equity for the years ended December 31, Consolidated Statements of Cash Flows for the years ended December 31, Corporation: Corporation: maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Assets Current assets: Cash and cash equivalents Marketable investments Accounts receivable, no allowance for 2018 and 2017 Inventories, net Other current assets Total current assets Marketable investments Goodwill and other intangible assets, net Property, plant and equipment, net Deferred tax assets, net Other non-current assets Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses Share tracking awards plan Other current liabilities Total current liabilities Line of credit Other non-current liabilities Total liabilities Commitments and contingencies—Note 14 Temporary equity Stockholders' equity: Preferred stock, par value $.01, 10,000,000 shares authorized, no shares issued Series A junior participating preferred stock, par value $.01, 100,000 shares authorized, no shares issued Common stock, par value $.01, 245,000,000 shares authorized, 70,207,581 and 69,858,840 shares issued, and 43,588,365 and 43,239,624 shares outstanding at December 31, 2018 and 2017, respectively Additional paid-in capital Accumulated other comprehensive loss Treasury stock, 26,619,216 shares at December 31, 2018 and 2017 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Revenues: Net product sales Total revenues Operating expenses: Cost of product sales Research and development Selling, general and administrative Settlement of loss contingency Total operating expenses Operating income Other income (expense): Interest income Interest expense Other, net Impairments of investments in privately-held companies Total other expense, net Income before income taxes Income tax expense Net income Net income per common share: Basic Diluted Weighted average number of common shares outstanding: Basic Diluted Net income Other comprehensive income (loss): Foreign currency translation gains (losses) Defined benefit pension plan: Actuarial gain (loss) arising during period, net of tax Amortization of actuarial gain and prior service cost included in net periodic pension cost, net of tax Total defined benefit pension plan, net of tax Unrealized loss on available-for-sale securities, net of tax Other comprehensive income (loss), net of tax Comprehensive income Balance, December 31, 2015 Net income Foreign currency translation adjustments Defined benefit pension plan Shares issued under employee stock purchase plan Conversion of 2016 convertible notes Equity component—2016 convertible notes Shares issued upon expiration of warrants Repurchase of shares Exercise of stock options Tax benefit from exercises of non-qualified stock options Share-based compensation Balance, December 31, 2016 Net income Foreign currency translation adjustments Unrealized loss on available-for-sale securities Defined benefit pension plan Shares issued under employee stock purchase plan Shares issued upon expiration of warrants Repurchase of shares Exercise of stock options Share-based compensation Cumulative effect of accounting change Consolidation of variable interest entity Balance, December 31, 2017 Net income Unrealized loss on available-for-sale securities Defined benefit pension plan Shares issued under employee stock purchase plan Restricted stock units withheld for taxes Exercise of stock options Share-based compensation Balance, December 31, 2018 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Share-based compensation (benefit) expense Impairments of investments in privately-held companies Other Excess tax benefits from share-based compensation Changes in operating assets and liabilities: Accounts receivable Inventories Accounts payable and accrued expenses Other assets and liabilities Net cash provided by operating activities Cash flows from investing activities: Purchases of property, plant and equipment Proceeds from sale of property, plant and equipment Deposits Purchases of held-to-maturity and other investments Maturities of held-to-maturity investments Purchases of available-for-sale investments Sales/maturities of available-for-sale investments Purchase of investment in privately-held company Purchase of investments under the equity method Consolidation of variable interest entity Acquisition, net of cash acquired Net cash (used in) provided by investing activities Cash flows from financing activities: Proceeds from line of credit Repayment of line of credit Principal payments of debt Payments of debt issuance costs Payments to repurchase common stock Proceeds from exercise of stock options Issuance of stock under employee stock purchase plan Excess tax benefits from share-based compensation Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental cash flow information: Cash paid for interest Cash paid for income taxes Cash paid for settlement of loss contingency Non-cash investing and financing activities: Non-cash additions to property, plant and equipment Issuance of common stock upon conversion of convertible notes On September 30, 2021, we converted to a Delaware public benefit corporation, with the express public benefit purpose and Unituxin. Certain prior year amounts have been reclassified to conform to the current year presentation. In the operating activities section of our consolidated statements of cash flows, we reclassified a portion of the prior period amount within determine fair value. The level in which an asset or liability is disclosed within the fair value hierarchy is based on the lowest level input that is significant to the related fair value measurement in its entirety. The guidance under the fair value measurement framework applies to other existing accounting guidance in the Financial Accounting Standards Board operations within Raw materials Work-in-progress Finished goods Total inventories Goodwill and Other Intangible Assets During the year ended December 31, 2019, we wrote off $3.5 million of goodwill related to the deconsolidation of a variable interest entity, as discussed in Note 4— Note 4— intangible assets subject to amortization. Goodwill Other intangible assets: Technology, patents and trade names In-process research and development Total these efforts, which had a carrying value of $6.1 million, during 2021. The impairment charge was recorded within Land and land improvements Buildings, building improvements and leasehold improvements Buildings under construction Furniture, equipment and vehicles Less—accumulated depreciation Property, plant and equipment, net Depreciation expense for the years ended December 31, Buildings under construction consists of direct costs related to our construction projects. Estimating gross-to-net deductions involves the use of significant assumptions and judgments, as well as information obtained from external sources. For our rebate and chargeback liabilities, in particular, the time lag experienced in the payment of the rebate or chargeback may result in revisions of these accruals in future periods. However, based on our significant history and experience estimating these accruals and our development of these accruals based on the expected value method, we do not believe there will be significant changes to our estimates recorded during the period of sale. We recognized an aggregate At December 31, 2021 and 2020, our accrued rebates and chargebacks were $67.8 million and $65.3 million, respectively. In addition, during the years ended December 31, 2021, 2020, and 2019, we recognized $218.6 million, $195.9 million, and $178.7 million, respectively, in revenue deductions associated with rebates and chargebacks. amount of Adcirca inventory in the downstream channel and the amount of that inventory that we expect will not be During the year ended December 31, 2021, we recognized a decrease of $3.9 million in revenue reductions associated with our allowance for product returns. During the year ended December 31, 2020, we recognized no change in revenue deductions associated with our allowance for product returns. During the year ended December 31, 2019, we recognized a decrease of $6.2 million in revenue deductions associated with our allowance for product returns. As part of our business strategy, we may in-license the rights to develop and commercialize product candidates. For each in-license transaction, we evaluate whether we have acquired processes or activities along with inputs that would be sufficient to constitute a over the requisite service period (the offering period). We issue new shares of our common stock upon the end of each offering period, or exercise date. Cash Intangible assets: In-process research and development Goodwill(1) Trademark Property, plant and equipment Other assets Total fair value of assets acquired Accounts payable and accrued expenses Other current liabilities Total fair value of liabilities assumed Total purchase price U.S. government and agency securities Corporate notes and bonds Corporate equity securities Total Reported under the following captions on the consolidated balance sheets: Cash and cash equivalents Current marketable investments Non-current marketable investments Total U.S. government and agency securities Corporate notes and bonds Total Reported under the following captions on the consolidated balance sheets: Cash and cash equivalents Current marketable investments Non-current marketable investments Total The following table summarizes the contractual maturities of available-for-sale Due within one year Due in one to three years Total Due within one year Due in one to three years Total the privately-held companies in which we invested became publicly traded in 2020 and another one became publicly traded in 2021. As a result, our investments in the equity securities of these companies are now recorded at fair value and included within These impairment charges were recorded within operations. Assets and liabilities subject to fair value measurements are as follows (in millions): Assets Money market funds(1) Time deposits(2) U.S. government and agency securities(2) Corporate debt securities(2) Corporate equity securities(3) Total assets Liabilities Contingent consideration(4) Total liabilities Assets Money market funds(1) Time deposits(2) U.S. government and agency securities(2) Corporate debt securities(2) Total assets Liabilities Contingent consideration(4) Total liabilities Accounts payable Accrued expenses: Sales related (royalties, rebates and fees) Payroll related Other Total accrued expenses Total accounts payable and accrued expenses December 2025. repay any portion of this amount within one year. Agreement though, from time to time, one or more of our other subsidiaries may be required to guarantee our obligations. Credit Facility interest expense(1) Convertible Notes interest expense Other interest expense Total interest expense Common stock subject to repurchase(1) Preferred stock with redemption rights(2) Total United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan Stock Options Restricted Stock Units Share Tracking Awards Employee Stock Purchase Plan Total Share-based compensation (benefit) expense before tax Share-based compensation capitalized as part of inventory which conditions. 0. Expected term of options (in years) Expected volatility Risk-free interest rate Expected dividend yield A summary of the activity and status of stock options under our equity incentive plans is presented below: Outstanding at January 1, 2018 Granted Exercised Forfeited Outstanding at December 31, 2018 Exercisable at December 31, 2018 Unvested at December 31, 2018 The weighted average fair value of a stock option granted during each of the years in the three-year period ended December 31, Cost of product sales Research and development Selling, general and administrative Share-based compensation expense before tax Related income tax benefit Share-based compensation expense, net of tax As of December 31, Stock option exercise data is summarized below (dollars in millions): Number of options exercised Cash received from options exercised Total intrinsic value of options exercised Tax benefits realized from options exercised(1) Unvested at January 1, 2018 Granted Vested Forfeited/canceled Unvested at December 31, 2018 Total share-based compensation expense Cost of product sales Research and development Selling, general and administrative Share-based compensation expense before tax Related income tax benefit Share-based compensation expense, net of tax As of December 31, sheets. Expected term of awards (in years) Expected volatility Risk-free interest rate Expected dividend yield The closing price of our common stock was Outstanding at January 1, 2018 Granted Exercised Forfeited Outstanding at December 31, 2018 Exercisable at December 31, 2018 Unvested at December 31, 2018 Share-based compensation expense (benefit) Cost of product sales Research and development Selling, general and administrative Share-based compensation (benefit) expense before tax Related income tax expense (benefit) Share-based compensation (benefit) expense, net of tax Cash paid to settle STAP exercises during the years ended December 31, Numerator: Net income Denominator: Weighted average outstanding shares—basic Effect of dilutive securities(1): Warrants Stock options, restricted stock units and employee stock purchase plan Weighted average shares—diluted(2) Earnings per common share: Basic Diluted Stock options, restricted stock units and warrants excluded from calculation(2) Accumulated Other Comprehensive Loss Balance, January 1, 2018 Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income Net current-period other comprehensive income (loss) Balance, December 31, 2018 Balance, January 1, 2017 Other comprehensive (loss) income before reclassifications Amounts reclassified from accumulated other comprehensive income Net current-period other comprehensive (loss) income Balance, December 31, 2017 Components of income tax expense (benefit) consist of the following (in millions): Current: Federal State Total current Deferred Federal State Total deferred Total income tax expense Presented below is a reconciliation of income tax expense (benefit) computed at the statutory federal tax rate of 21 percent in Federal taxes at the statutory rate State taxes, net of federal benefit General business credits Change in valuation allowance for investments Nondeductible compensation expense Impact of windfall tax benefits upon exercise of stock options Tax reform Other Section 199 deduction Nondeductible portion of DOJ Settlement Total income tax expense Deferred tax assets: Nonqualified stock options Intangible assets NOLs Impairments Other STAP Awards SERP Reserves Total deferred tax assets Deferred tax liabilities: Plant and equipment principally due to differences in depreciation Basis differences in foreign entities Other Net deferred tax assets before valuation allowance Valuation allowance Net deferred tax assets assets. Projected benefit obligation at the beginning of the year Service cost Interest cost Benefits paid Net actuarial (gain) loss(1) Projected benefit obligation at the end of the year Amount included in Other current liabilities(2) Amount included in Other non-current liabilities The following Discount rate Salary increases Lump-sum distribution rate Service cost Interest cost Amortization of prior service cost Amortization of net actuarial gain Total Net actuarial gain (loss) Prior service cost (benefit) Total recognized in other comprehensive income (loss) Tax (expense) benefit Total, net of tax The table below presents amounts related to the SERP included in accumulated other comprehensive loss that have not yet been recognized as a component of net periodic pension cost Net actuarial gain Prior service cost Total included in accumulated other comprehensive loss Tax expense Total, net of tax Amortization of prior service cost Amortization of net actuarial gain Total The accumulated benefit obligation, a measure that does not consider future increases in 2019 2020 2021 2022 2023 Thereafter Total Employee Retirement Plan 2019 2020 2021 2022 2023 Thereafter Total Total The amounts recorded in operating lease expense include short-term leases, which are immaterial. Supernus Pharmaceuticals, Inc. Lilly The Scripps Research Institute Low double-digit Arena Low double-digit, tiered Year Ended December 31, 2018 Net product sales Cost of product sales Gross profit Year Ended December 31, 2017 Net product sales Cost of product sales Gross profit Year Ended December 31, 2016 Net product sales Cost of product sales Gross profit United States Rest-of-World(1) Total We recorded revenue from United States Rest-of-World Total Total revenues Cost of product sales Gross profit Net income(1) Net income per share—basic Net income per share—diluted Total revenues Cost of product sales Gross profit Net income (loss)(2) Net income (loss) per share—basic Net income (loss) per share—diluted contract pharmacy policies. License Agreement Year Ended December 31, 2018(1) Year Ended December 31, 2017(2) Year Ended December 31, 2016 Year Ended December 31, 2018 Year Ended December 31, 2017 Year Ended December 31, 2016 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Attestation of Independent Registered Public Accounting Firm Directors, Executive Officers, and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Equity compensation plan approved by security holders(1) Total However, if any RSU does not vest, the number of shares available for future issuance will increase by 1.35 and 2.14, under the 2015 Plan and 2019 Inducement Plan, respectively, because of the share counting formula described in note Certain Relationships and Related Transactions, and Director Independence Principal Accountant Fees and Services Exhibits and Financial Statement Schedules The Schedule II—Valuation and Qualifying Accounts is filed as part of this Form 10-K. All other schedules are omitted because they are not applicable or not required, or because the required information is included in Exhibits filed as a part of this Form 10-K are listed on the Exhibit Index, which is incorporated by reference herein. Summaryapplicant'sapplicant’s product or a method of using the product. Each of the patents submitted is then published in the Orange Book. SeeGovernmental Regulation—Patent Term and Regulatory Exclusivity below for further details. Remodulin currently has eightnine unexpired Orange Book-listed patents with expiration dates ranging from 2024 to 2029. Tyvaso currently has foursix unexpired Orange Book listedBook-listed patents expiring in 2028. Orenitram currently has twelve 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. 2004,March 2021, the EMAFDA granted Tyvaso three-year clinical trial exclusivity for PH-ILD as a result of the INCREASE study and the expansion of the Tyvaso label to include a PH-ILD indication. This exclusivity period will extend through March 2024, and will also cover Tyvaso DPI if it is approved for PH-ILD. In 2004, the European Commission 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 resultIn December 2020, the FDA granted orphan designation for treprostinil for treatment of IPF. Thus, if our TETON studies are successful and the FDA approves our supplemental NDA to update the Tyvaso labeling to include an IPF indication, the FDA should grant seven-year orphan drug exclusivity for the new indication.forto reflect the FREEDOM-EV results in the Orenitram as a new dosage form, Orenitram had three years of marketlabel, the FDA granted orphan exclusivity for the new indication that Orenitram delays disease progression in PAH which expiredpatients. This exclusivity expires 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.ThisThe term of this royalty will be paid for approximately twelve years commencing with the first product sale, which occurred inexpires during the second quarter of 2014.each of Sandoz, Teva, Par and Dr. Reddy's related 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, Inc. (Sandoz has been permitted to market its generic version of Remodulin in the United States since June 2018, and Teva, Par and Dr. Reddy's have been permitted to launch their generic versions in the United States since December 2018. To date, both Sandoz and Par have received tentative approval for their ANDAs, but to our knowledge, no generic company has begun to sell its generic version of Remodulin in the United States. We also settled litigation with Actavisagreement,agreements, Watson and Actavis can market itstheir generic versionversions of Tyvaso and Orenitram in the United States beginning in January 20262021 Annual Report 13 Actavisthey may be permitted to enter the market earlier under certain circumstances. We also settled litigation with Watson related to its ANDA seeking FDA approval to market a generic version of Tyvaso before the expiration of certain of our U.S. patents. Under the settlement agreement, Watson can market its generic version of Tyvaso in the United States beginning in January 2026, although Watson may be permitted to enter the market earlier under certain circumstances. 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 sometime in 2019. As a result of our settlements with Watson and Actavis, we expect to see generic competition for Tyvaso and Orenitram in the United States beginning as early as 2026 and 2027, respectively. Competition from these generic companies could reduce our net product sales and profits. We recently filed a patent infringement action against ANI based on its ANDA seeking FDA approval to market a generic version of Orenitram. The litigation is in its very early stages, with trial set for May 2023. If ANI is successful in the pending litigation, it could accelerate the launch of generic competition for Orenitram, which could reduce our net product sales and profits. See Note 14—addition, whileOctober 2020, the PTAB declined to institute IPR proceedings relating to this patent because Liquidia failed to establish a reasonable likelihood of prevailing on any claim of this patent.products, there can be no assuranceproducts. However, we cannot assure you 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 our products. If any ANDA filer or filer of a 505(b)(2) NDA for a branded treprostinil product were to receive approval to sell a generic version of our productsits treprostinil product and/or prevail in any patent litigation, theour affected product(s) would become subject to increased competition, which could reduce our net product sales and profits. A U.S. patent for Adcirca for the treatment of pulmonary hypertension expired in November 2017, and two remaining patents have been invalidated. In May 2017, we amended our Adcirca license agreement with Lilly to extend the term of the agreement through December 2020 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 August 2018, Mylan N.V. announced the launch of its generic version of Adcirca, which resulted in a material adverse impact on Adcirca net product sales, driven by a greater than 40 percent reduction in the number of bottles of Adcirca sold to distributors during the first full month following the availability of the generic version. This reduction has increased each month, resulting in a greater than 55 percent decrease in the average number of bottles sold per month during the period from generic launch in August 2018 through December 2018, compared to the average number of bottles sold per month in 2018 prior to generic launch. Additional companies announced the launch of generic versions of Adcirca in February 2019. In addition, we expect declines in patient demand will increase the amount of Adcirca inventory held by distributors and other downstream customers that expires unsold. Our allowance for product returns was $22.4 million and $7.2 million as of December 31, 2018 and December 31, 2017, respectively. Generic versions of Remodulin have been approved in Austria, Germany, Italy, France and Spain. The launch of generic versions in these countries, which occurred in January 2019 in Austria and is pending in the other countries, will likely lead to a decline in our international Remodulin revenues in 2019 due to increased competition and a contractual reduction in our transfer price for Remodulin sold by an international distributor for sales in countries in which the pricing of Remodulin is impacted by the launch of a generic version of Remodulin. The approval and launch of a generic version of Remodulin in other countries may follow. Our non-U.S. net product sales for Remodulin were $95.4 million for the year ended December 31, 2018.competition for any of our commercial PAH productsor other branded treprostinil manufacturers could have a significant, adverse impact on our treprostinil-based product revenues — including the anticipated revenues fromprice, and isprice. These potential effects are 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 profits, contained inPart I,Item 1A—Risk Factorsincluded in this Report.14 United Therapeutics, a public benefit corporation 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 Adcirca license agreement with Lilly 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. As a result, we are required to make milestone payments to Lilly equal to $325,000 for each $1.0 million in net product sales, plus a royalty equal to ten percent of our net product sales. In June 2020, we amended our Adcirca license agreement expires onto extend its term through December 31, 2023. Previously, the agreement was scheduled to expire at the end of 2020. Following expiration, we will remain obligated to refund the purchase price of any Adcirca that we previously sold to distributors that expires unsold. For additional discussion, refer to ourAdcirca product description contained inPart I, Item 1—Business Overview—Products to Treat Pulmonary Arterial Hypertension.Medtronic As noted above, we are collaborating with Medtronic to develop and commercialize the Implantable System for Remodulin. Following FDA approval of the Implantable System for Remodulin, we entered into a commercialization agreement with Medtronic in February 2019, under which we will collaborate with Medtronic to commercialize the Implantable System for Remodulin in the United States. This agreement provides that the Implantable System for Remodulin will be exclusive to Remodulin, and further provides that we will not work with any third party to develop a competing implantable system to deliver Remodulin in the United States. The commercialization agreement has an initial term of five years, which may be extended for additional one-year terms if mutually agreed by the parties. Either party may terminate the commercialization 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, Medtronic may terminate the commercialization agreement upon 180 days' notice if Medtronic elects to discontinue its drug delivery business, and either party may terminate the commercialization agreement without cause on 180 days' notice to the other party, after the initial five-year term. For further details, see the section above entitledResearch and Development—Implantable System for Remodulin. The Implantable System for Remodulin was developed under a development agreement with Medtronic that covers the treatment of PAH in the United States, United Kingdom, Canada, France, Germany, Italy and Japan. The development agreement provides that the system will be exclusive to Remodulin in these countries, subject to certain conditions. We continue to work with Medtronic under the development agreement to fund further enhancements to the system. The development agreement has similar termination rights to the commercialization agreement described above.Esuberaprost and the Toray Amended License Agreement 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. The FDA has granted orphan drug designation for esuberaprost, which we expect would provide seven years of regulatory exclusivity if the FDA approves an NDA for esuberaprost following successful study results. We have one U.S. patent, which expires in 2031, covering a method of treating pulmonary hypertension using oral and inhaled prostacyclin therapies in combination, which we expect should be eligible for listing in the Orange Book if the FDA approves esuberaprost.DEKA AgreementRemUnity. 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.Remunity Pump. Our agreement with DEKA expires on the last to occur of twenty-five25 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 RemUnityRemunity Pump. Under the terms of the agreement, we funded the development costs related to the Remunity Pump, and will continue to fund further development costs associated with new versions of the pump. We will pay product fees and a single-digit royalty to DEKA based on commercial sales of the Remunity Pump and the Remodulin drug product sold for use with the 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'sparty’s bankruptcy or insolvency. In November 2019, we entered into a supply agreement with an affiliate of DEKA to manufacture and supply the Remunity Pump. Under this supply agreement, we are responsible for all costs associated with manufacturing the Remunity Pump. The RemUnity systemRemunity Pump is covered by issued patents and pending patent applications both in the U.S. and other countries. The expiration dates of currently issued U.S. patents range from 2027 through 2033.Trevyent2016, the FDA granted orphan designation for TrevyentSeptember 2018, we entered into a worldwide, exclusive license and collaboration agreement with MannKind for the development and commercialization of Tyvaso DPI for treatment of PAH. Thus,The agreement became effective on October 15, 2018.FDA should grant orphan drug exclusivity if an NDAterms of the agreement, we paid MannKind $45.0 million following the effectiveness of the agreement in October 2018, and we paid $25.0 million in each of 2019 and 2020 following the achievement of specific development targets. MannKind is also entitled to receive low double-digit royalties on our net sales of the product. In addition, we have the option, in our sole discretion, to expand the license to include other active ingredients for Trevyent is approved; such exclusivity would extendtreatment of pulmonary hypertension. We will pay MannKind up to $40.0 million in additional option exercise and development milestone payments for seven years from approval. Trevyent is protected by a variety of issued patents expiring at various dates ranging from 2024each product (if any) added to the early 2030s. Additional patent applications for Trevyent are pending.Treprostinil Technosphere and the MannKind AgreementDreamboat® and Cricket® devices,Dreamboat device, including multiple patent families covering the U.S. and other major market countries. These patents cover drug formulation, devices and device components, and manufacturing processes and intermediates. Expiration dates for issued patents range from the mid-2020s to the mid-2030s. Additional patents subject to pending patent applications, if issued, would have expiration dates in the late 2030s. ManyWe believe that certain of thesethe issued and pending patents (if issued) we license from MannKind would be eligible for listing in the Orange Book. For a description of the license agreement, please refer to the section above entitledResearch and Development—Treprostinil Technosphere.2021 Annual Report 15 For a description of the license agreement, please refer to the section above entitledResearch and Development—Ralinepag. Tyvaso, Orenitram, and Unituxin at our own facilities. In particular, we synthesize treprostinil, the active ingredient in RemodulinTyvaso and Tyvaso,Remodulin, 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 drug product at our Silver Spring facility. We manufacture Orenitram drug product and we package, warehouse, and distribute Tyvaso, Remodulin, Tyvaso, Orenitram, and Unituxin at our facility in Research Triangle Park, North Carolina. Tyvaso and Orenitram based on expected demand, and we contract with third-party contract manufacturers to supplement our capacity for some products, in order to mitigate the risk that we might not be able to manufacture internally 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 PharmaWoodstock Sterile 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 obtained 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 dinutuximab, the active ingredient in Unituxin, or for finished Unituxin or Orenitram drug product.development to commercializecommercialization of products to treat cardiovascularcardiopulmonary 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:16 United Therapeutics, a public benefit corporation Teva's version of generic epoprostenol for the treatment of PAH. In 2010, Actelion Limited (Actelion) (which was acquired by Johnson & Johnson in 2017) commenced sales of Veletri, which is another version of intravenous epoprostenol;(Bayer)(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 and generic sildenafil citrate. Approved in 20012005 in the United States, Revatio (sildenafil citrate) is an oral PDE-5 inhibitor therapy manufactured by Pfizer Inc. Revatio contains sildenafil citrate, the same active ingredient as Viagra®. In 2012, several companies began marketing generic formulations of sildenafil citrate.in 2002 in Europe. Tracleer is marketed worldwide by Actelion. We anticipate generic bosentan could be launched in the United States in the near term. Generic bosentan is already available in other countries;•Letairis.ambrisentan. the treatment of PAH. In 2008, Glaxo received marketing authorization from the EMA for Letairis in Europe, where it is known as Volibris®Volibris®. In 2015, Gilead announced the positive results of theAMBITION study of ambrisentan and tadalafil as an up-front combination therapy for PAH, which we believe has driven increased use of Letairisambrisentan and Adcirca. We expect generictadalafil. Generic ambrisentan could be launchedbecame available in the United States in the near term;Revatio and generic sildenafil citrate. Approved in 2005 in the United States, Revatio (sildenafil citrate) is an oral PDE-5 inhibitor therapy manufactured by Pfizer. Revatio contains sildenafil citrate, the same active ingredient as Viagra. In 2012, several companies began marketing generic formulations of sildenafil citrate;•the treatment of PAH;Bayer; andBardoxolone, 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;•LIQ861,Technologies Inc. (Liquidia),announced the FDA granted tentative approval for its NDA for Yutrepia to treat PAH, with final approval pending resolution of the regulatory stay triggered by the litigation described above under Patent and Other Property Rights, Strategic Licenses, and Market Exclusivity—Generic Competition and Challenges to our Intellectual Property Rights. In late 2020, Liquidia completed a business combination with RareGen, LLC, which announced commencementmarkets a generic version of a phase III studyRemodulin. Liquidia has indicated that it plans to seek approval to expand Yutrepia’s label to include PH-ILD, following expiration of Tyvaso’s regulatory exclusivity in PAH patientsthat indication in January 2018;commencementsuccessful completion of a phase II2 study in PAH patients in May 2018;CXA-10nitrated fatty acid compoundformulation during 2022. Aerovate Therapeutics, Inc. announced it initiated a phase 2/3 clinical study of an inhaled formulation of imatinib. Aerami Therapeutics Holdings, Inc. is conducting a phase 1 trial of an inhaled formulation of imatinib, and has announced plans to initiate a phase 2/3 trial in early 2022.Complexa Inc., whichInsmed Incorporated (Insmed) for PAH. TPIP is currently enrollingundergoing phase 2 studies in PAH patients, and Insmed has announced plans to commence studies in a phase II study;Tacrolimusoral therapyinhaled, liposomal form of treprostinil being developed by VIVUSPharmosa Biopharm Inc., (Pharmosa) for PAH, which is currently enrolling PAH patients incompleted a phase II study;PB1046, and is currently undergoing a (PhaseBio). In December 2021, PhaseBio announced discontinuation of its phase II2 study in PAH patients;•CAM2043, a liquid crystal gel formulationpatients due to the impact of treprostinil being developed as a once-weekly subcutaneous depot injection for PAH by Camurus AB. Camurus announced the positive results from a phase I clinical studyCOVID-19 pandemic on manufacturing, associated drug supply, and the rate of enrollment in May 2018;•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; andRVT-1201 (rodatristat ethyl)announced it expects to commenceis conducting a phase II2 clinical studiesstudy in PAH patients, and is conducting phase 1 studies for IPF.2021 Annual Report 17 2019.less convenientmore advanced approved therapies, such as inhaled prostacyclin analogues (such as Tyvaso) or infused prostacyclin analogues (such as Remodulin) are then 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'patients’ need for inhaled or infused prostacyclin therapy. As a result, the availability of oral therapies affects demand for our inhaled and infused products.As a result, manyOrenitram’s initial indication was limited to the improvement of exercise capacity, which may have led physicians may choose to prescribe Uptravi instead of Orenitram, which is indicated to improve exercise capacity.Orenitram. 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'sOrenitram’s label allows physicians flexibility to titrate each patient'spatient’s dosing up to a level according to tolerability, without any stated maximum. By contrast, Uptravi'sUptravi’s label limits uptitration to a specific maximum dose. Given the progressive nature of PAH, we believe that many patients will initiate Orenitram or another one of our treprostinil-based therapies after their disease progresses on Uptravi. Furthermore,In August 2018, we believeannounced thewill resultrates. In October 2019, the FDA approved a supplement to our Orenitram NDA expanding the Orenitram label to indicate that it also delays disease progression, in addition to improving exercise capacity. We believe that these clinical results and updated labeling have resulted in increased use of Orenitram.U.S.United States in August 2018, which has significantly reduced our Adcirca revenues. We willhave also face competition from generic pharmaceutical companies in the future. For example, we entered into settlement agreements with four generic drug companies permitting them to launch generic versions of Remodulin beginning in 2018. Although these companies have not yet launched generic versions of Remodulin, we anticipate generic competition in the U.S. for Remodulin in 2019. A generic version of Remodulin was launched in Austria in January 2019, and we anticipatefaced generic competition for Remodulin in additionalthe United States and certain European countries in Europe beginning insince 2019. Finally, we have entered into settlement agreements with Actavis and Watson, permitting them to launch generic versions of Orenitram and Tyvaso in June 2027 and January 2026, respectively, or earlier under certain circumstances. For details regarding these and other potential generic competitors, see the section above entitledPatents and Other Proprietary Rights, Strategic Licenses, and Market Exclusivity—Generic Competition and Challenges to our Intellectual Property Rights.LIQ861,Yutrepia, a dry powder inhaled version of treprostinil.expect Liquidia's products would compete directlyexpanded our investigational efforts with Treprostinil Technosphere, if approved.Qarziba® (dinutuximabQarziba® (dinutuximab beta), a similaran antibody product developed by Apeiron Biologics AG that is already approved in Europe to treat high-risk neuroblastoma.neuroblastoma, but is not approved in the United States. In October 2016, EUSA Pharma (UK) Ltd. announced it had acquired global commercialization rights to Qarziba,Qarziba. In addition, Y-mAbs Therapeutics, Inc. (Y-mAbs), is developing several GD-2 targeting drug candidates, and plansin November 2020 obtained FDA approval for Danyelza® (naxitamab-18 United Therapeutics, a public benefit corporation filetreat pediatric and adult patients with relapsed and refractory (second line) high-risk neuroblastoma in bone or bone marrow. Y-mAbs is also conducting studies of naxitamab for FDA approval.(FDC Act)(FDC Act), the Public Health Service Act (PHSA)(PHSA), and other federal statutes and regulations, may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs or BLAs, warning letters, product recalls, product seizures, total or partial suspension of manufacturing or distribution, injunctions, fines, civil penalties, and criminal prosecution.investigational new drug application (IND);IND; (3) clinical studies, including well-controlled clinical trials, in healthy(GCP)(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.(IRB)(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'sIRB’s requirements, or may impose other conditions.I1 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.II2 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.III3 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.2021 Annual Report 19 IV4 studies are often conducted following marketing approval, in order to meet regulatory requirements or to provide additional data related to drug use.an MAAa marketing authorization application 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 related to the product'sproduct’s pharmacology, chemistry, manufacture, and controls."accelerated“accelerated approval," "fast track"” “fast track” status, "breakthrough therapy"“breakthrough therapy” status, and "priority review"“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 aan NDA, but do not guarantee that a product will receive FDA approval. In May 2018, the Right to Try Act established a new regulatory pathway to increase access to unapproved, investigational treatments for patients diagnosed with life-threatening diseases or conditions who have exhausted approved treatment options and who are unable to participate in a clinical trial.drug'sdrug’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'sFDA’s current Good Manufacturing Practices (cGMP)(cGMP).FDA'sFDA’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.internet.IV4 clinical studies, and/or a risk evaluation and mitigation strategy (REMS)(20 United Therapeutics, a public benefit corporation "orphan drug"“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.States, or for which there is no reasonable expectation that U.S. sales will be sufficient to recoup the development and production costs. 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)(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 related to research and development costs.drug.drug, which is known as the reference listed drug ("generic equivalents"“generic equivalents” to the approved drug, and can often be substituted by pharmacists under prescriptions written for the original approved drug. In 2018, the FDA advanced policies aimed at promoting drug competition and patient access to generic drugs, such as issuing guidance about making complex generic drugs and the circumstances in which approval of a generic product application may be delayed.whosewith claims that cover the productdrug (drug substance or drug product) or FDA-approved method of using the product.drug. Upon product approval, these patents are listed in the FDA'sFDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. The Orange Book Transparency Act of 2020, enacted in January 2021, amends the statutory provisions regarding the types of patents and exclusivity-related information listed in the Orange Book. The impact of these changes is not yet known. Every ANDA applicant must certifymake one of several certifications to the FDA that (1) the required informationwith regard to each Orange Book listed patent for the original product wasRLD. A Paragraph III certification states that the ANDA applicant seeks approval after the patent expires. A Paragraph IV certification asserts that the patent does not filed or (2) everyblock approval of the ANDA, either because the 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 willunenforceable or because the patent, even if valid, is 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 method of use 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.years.years, and the limitation that the patent term cannot be extended more than 14 years after approval. Generally, patent term extension is available if the product represents the first permitted commercial marketing of a drug containing the active ingredient. Similar patent term extensions are available under European laws. 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 new2021 Annual Report 21 FDA'sFDA’s finding of safety and efficacy data for an existing product, or published literature, in support of its application.manufacturer'smanufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. As with drugs, after approval of biologics, manufacturers must address any safety issues that arise, are subject to recalls or a halt in manufacturing, and are subject to periodic inspection after approval."biosimilar"“biosimilar” to an FDA-licensed reference22 United Therapeutics, a public benefit corporation twelve12 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. Starting inEffective March 2020, certain products currentlythat were approved as drugs under the FDC Act, such as insulin and human growth hormone, will beare now deemed to be biologics under the PHSA, which means they may face competition through the biosimilars pathway and they willmay not be eligible for the twelve-year period of exclusivity granted to new BLAs.Cell-andFDA'sFDA’s current good tissue practices (cGTP)(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 cellcell- 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'scell’s origin).(RAT)(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.U.S. FDA'sFDA’s Quality System Regulation (QSR)(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(510(k)(premarket approvalPMA application."cleared"“cleared” by the FDA through the 510(k) process, which requires a company to show that the device is "substantially equivalent"“substantially equivalent” to certain "predicate"“predicate” devices already on the market. To be substantially equivalent, the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Once a 510(k) is cleared, any change that could significantly affect the safety or effectiveness of the device requires the submission and clearance of a new 510(k) before the change can be implemented. In November 2018, the FDA announced plans to significantly revise the 510(k) program to encourage reliance on modern predicates (e.g., predicates that are less than 10 years old). In January 2019, the FDA also finalized guidance on the alternative 510(k) pathway for well-known device types, the "Safety“Safety and Performance Based Pathway,"” which relies on modern performance-based criteria and current technological principles to demonstrate substantial equivalence.devices, again with some exceptions, must be approved throughrequiring approval of a PMA.PMA application. A PMA generally requires data from clinical trials that establish the safety and effectiveness of the device. Once approved, certain changes, such as changes to manufacturing facilities, methods, or quality control procedures, or changes in the design specifications, which affect the safety or effectiveness of the device, require the submission of a PMA Supplement. Some “pre-amendment” devices (devices that were legally marketed prior to May 28, 1976) are unclassified, but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed. A 510(k) application also sometimes requires clinical data.2021 Annual Report 23 "breakthrough"“breakthrough” devices pathway which allows for sponsors to interact directly with the FDA during the development process and announced plans to establishreceive prioritized review of their submission. In January 2021, the FDA released final guidance on the Safer Technologies Program (STeP)(STeP), to encourage the innovation and market entry of device technologies that are safer than current alternatives but that do not otherwise satisfy the breakthrough device criteria.(IDE)(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.requiresenforces these regulatory requirements through, among other means, periodic24 United Therapeutics, a public benefit corporation comply with detailed requirements regardingand from the design and manufacturing practices, labeling and promotion, record keeping, and adverse event reporting.single regulatory approvalconformity assessment process has been created, and approval is represented bythat may include the CE Mark.(RFD)(2021 Annual Report 25 thea federal program that is administered by the federal government that provides covered health care benefits to senior citizensindividuals age 65 or over and to certain disabled and chronically ill persons. Medicaid is the federal program jointly funded and administered by the statesWe are required to provide health care benefitsaverage sales price (ASP) information for certain of our products to participants who qualifyCMS on a quarterly basis. The ASP we report must be calculated based on income. a statutorily-defined formula as well as regulations and interpretations of the statute by CMS. The ASP information is used by CMS to compute Medicare reimbursement rates for our drugs that are covered by Medicare Part B.beneficiaries areis unlikely to receive this treatment. cover treatment, but Medicaid programs may cover pediatric patients requiring care.reimbursed by thereimbursable under Medicare Part B, program, which covers physician services and outpatient care. The Medicare Part B contractors who administer the program provide reimbursement forcover Remodulin and Tyvaso under local coverage determinations and provide reimbursement according to statutory guidelines. As a condition 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 beneficiaries. We anticipate that Tyvaso DPI will also be reimbursed under Medicare Part D, plan sponsors that reimburse these products. if it is approved by the FDA.BecauseAs noted above, when Remodulin, Tyvaso, Adcirca, Orenitram, and Unituxin are reimbursed by state Medicaid programs, we must pay a rebaterebates on our products to those state Medicaid programs.programs. We anticipate that the same will be true for Tyvaso DPI, if it is approved by the FDA. Federal law requires that any company that participates in the Medicaid Drug Rebate program also participate in the Public Health Service’s 340B drug pricing program, in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program, which is administered by the Health Resources and Services Administration (HRSA), requires participating manufacturers to agree to charge statutorily-defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low-income patients. The 340B ceiling price is calculated using a statutory formula, which is based on the average manufacturer price and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate program, and in general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement.contractofficials rendering a decision that could be appealed only in federal court. An ADR proceeding could potentially subject us to selldiscovery by covered entities and other onerous procedural requirements and could result in additional liability. Further, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities, expand manufacturer ceiling price obligations to so-called “contract pharmacies,” or require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting. Any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount could affect our commercial340B ceiling price calculations and negatively impact our results of operations.contracts with the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we also participate in the U.S. Department of Veterans Affairs Department of Defense, Public Health Service(VA) Federal Supply Schedule (FSS) pricing program. Under this program, we are obligated to make our products available for procurement under an FSS contract under which we must comply with standard government terms and numerous otherconditions and charge a price to certain federal agencies as well as certain hospitalsthat is no higher than the statutory Federal Ceiling Price (FCP). The FCP is based on the non-federal average manufacturer price (Non-FAMP), which we calculate and report to the VA on a quarterly and annual basis. We also participate in the Tricare Retail Pharmacy program, under which we pay quarterly rebates on utilization of innovator products that are designateddispensed through the Tricare Retail Pharmacy network to Tricare beneficiaries. The rebates are calculated as 340B covered entities (entities designatedthe difference between the annual Non-FAMP and FCP. Pricing and rebate calculations vary across products and programs, are complex, and are often subject to interpretation by federal programsus, governmental or regulatory agencies, and the courts, which can change and evolve over time.26 United Therapeutics, a public benefit corporation receive drugs at discounted prices) at pricescontinue to be, under close scrutiny, including with respect to companies that are significantly belowhave increased 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 ourproducts after acquiring those products from reimbursement underother companies. There are numerous ongoing efforts at the federal healthcare programs, or debarment, and expose us to liability under federal and state false claims laws. The availabilitylevel seeking to indirectly or directly regulate drug prices to reduce overall healthcare costs using tools such as price ceilings, value-based pricing, and increased transparency and disclosure obligations. Several states have passed or are considering legislation that requires or purports to require companies to report pricing information, including proprietary pricing information. For example, in 2017, California adopted a prescription drug price transparency state bill requiring advance notice of adequate government reimbursementand an explanation for our products mayprice increases of certain drugs that exceed a specified threshold. Similar bills have been introduced previously at the federal level and also enacted in other states, and additional legislation could be subject to regulatory changes and controls. We estimate that between 40-50 percent of Remodulin, Tyvaso, Adcirca and Orenitram sales are reimbursed underintroduced in the Medicare and Medicaid programs.future.(AKS)(AKS) 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. The term "remuneration"“remuneration” has been broadly interpreted to apply to anything of value including, for example, gifts, cash payments, donations, waivers of payment, ownership interests, and providing any item, service, or compensation for something other than fair market value. Liability under the AKS may be established without proving actual knowledge of the statute or specific intent to violate it. Although there are a number of statutory exceptions and regulatory safe harbors to the AKS protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceutical and biological products, including certain discounts, or engaging such individuals as consultants, advisors, and speakers, may be subject to scrutiny if they do not fit squarely within an exception or safe harbor. Moreover, there are no safe harbors for many common practices, such as educational and research grants, charitable donations, product support, and patient assistance programs. The regulatory safe harbors also are subject to regulatory revision and interpretation by a number of government agencies.(FCA)(FCA).to the federalof government funds, or making, or causing to be made, a false statement material to a false or fraudulent claim. Actions under the FCA may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Such private individuals may share in amounts paid by the defendant to the government in recovery or settlement. Many pharmaceutical and other healthcare companies have been prosecuted under the FCA 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 AKS; for materially deviating from statutorily required manufacturing standards; and on the basis of allegations related to certain marketing practices, including off-label promotion. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and significant mandatory penalties per false or fraudulent claim or statement, as well as exclusion from participation in federal healthcare programs.SanctionsSeveral states have enacted legislation requiring pharmaceutical companies to, among other things, establish marketing compliance programs; file periodic reports with the state, including reports on gifts and payments to individual health care providers; make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities; and/or register their sales representatives. Some states prohibit certain sales and marketing practices, including the provision of gifts, meals, or other items to health care providers, and still others prohibit offering co-pay support to patients for certain prescription drugs.these federalMedicare, Medicaid, or the Children’s Health2021 Annual Report 27 state laws mayother transfers of value to physicians (defined to include treble damages, civil penalties, exclusiondoctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of a manufacturer's products from reimbursement under government programs, criminal fines,value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and imprisonment.(FCPA), the UK Bribery Act, and the federal Civil Monetary Penalties Law.(PDMA)(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.(PPACA)is intended to expandexpanded healthcare coverage within the United States. SeveralThe PPACA substantially changed the way healthcare is financed by both governmental and commercial payers, and significantly impacted the U.S. pharmaceutical industry. Among other things, the PPACA subjects biologics to potential competition by lower-cost biosimilars; establishes a different methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program, or MDRP, are calculated for covered outpatient drugs that are inhaled, infused, instilled, implanted, or injected; increases the minimum Medicaid rebates owed by manufacturers under the MDRP and extends the rebate program to individuals enrolled in Medicaid managed care organizations; establishes annual fees and taxes on manufacturers of certain branded prescription drugs; creates a Medicare Part D coverage gap discount program in which, as a condition of coverage of its products under Medicare Part D, manufacturers must agree to offer point-of-sale discounts off of negotiated prices for applicable brand drugs to eligible beneficiaries during their coverage gap period; and expands the Public Health Service Act’s 340B drug pricing program, including by creating new penalties for non-compliance.law, which have varying effective dates, have impacted usstatute are severable from it and have increased certain of our costs.thus remain intact. The PPACA imposes an annual fee on pharmaceutical manufacturers, basedSupreme Court was asked to hear the case before it was remanded to the district court. The Supreme Court heard the case, and overturned the Fifth Court’s affirmation on the manufacturer's salebasis that the plaintiffs lacked standing to challenge the law and did not address its constitutionality. The Supreme Court’s decision left open the opportunity for additional challenges to the ACA.branded pharmaceuticals and biologics (excluding orphan drugs)2018, among other things, amended the Medicare Act (as amended by the PPACA) to certain U.S. government programs duringincrease the preceding year; expandspoint-of-sale discounts that manufacturers must agree to offer under 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 thecoverage discount program from 50 percent to 70 percent off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap or "donut hole"; and revisedperiod, as a condition for the definition of "average manufacturer price" for reporting purposes, which could increase the amountmanufacturer’s outpatient drugs being covered under Medicare Part D. Section 4408 of the Medicaid drug rebates paidCARES Act temporarily suspended Medicare sequestration during the period of May 1, 2020 through December 31, 2020, while extending the Medicare sequestration sunset date through 2030. There may be additional legislative changes, regulatory changes, and judicial challenges related to states. In addition,the PPACA. It is unclear how the PPACA imposes new annual reporting requirements for pharmaceutical, biological and device manufacturers with regardits implementation, as well as any efforts to paymentsrepeal, replace or other transfers of value made to physicians andteaching 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,otherwise modify, or invalidate, the PPACA, amends the intent requirement of the AKS and the federal criminal health care fraud statute. A person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them. In addition, the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act. 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 ofportions thereof, will affect our products.28 United Therapeutics, a public benefit corporation FDA'sFDA’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 and biological product applications and to satisfy post-approval requirements; in 2018, the FDA published a framework for evaluating real-world evidence. In 2019, the FDA announced numerous initiatives and guidance documents intended to improve and streamline the drug approval process. The effects of these initiatives, which are still being implemented and announced, are not yet known. Other key provisions related to orphan drugs, combination products, and medical devices, are discussed separately above.postingdisclosure of information related to drug pricing and 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.2021 Annual Report 29 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.
Environmental MattersTableContentsEmployeeshad approximately 860believe that our operations comply in all material respects with such applicable laws and regulations. Our compliance with these requirements did not change during the past year, and is not expected to have a material effect upon our capital expenditures, cash flows, earnings, or competitive position.aswhom we call “Unitherians,” are mission critical to these commitments because they share the same passion and dedication to meeting our purpose. As of December 31, 2018. The success2021, we had approximately 965 employees working across our 11 facilities worldwide.businessindustry peer group. We feel strongly that such industry-leading productivity cannot be maintained without a core focus on our family of Unitherians, and a dedication to ensuring they are healthy and engaged. The Compensation Committee of our Board of Directors (Board) oversees our human capital management priorities.30 United Therapeutics, a public benefit corporation highly dependentnow obligated to balance the interests of its patient-focused public benefit purpose, the financial interests of shareholders, and the interest of other stakeholders who are materially impacted by our conduct, such as Unitherians. We believe that this conversion has helped further underscore our commitment to Unitherians, and well as our mission-driven public benefit purpose of creating a brighter future for patients.attractingJune 1, 2020 through June 1, 2021 data from Aon/Radford’s Turnover Study for the Life Sciences and retaining highlyMedical Devices Sector, published December 2021).qualified personnel.internetInternet website as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission (SEC)(SEC). They are also available through the SEC athttp://www.sec.gov/edgar/searchedgar/companysearch.html.2021 Annual Report 31 OF THE REGISTRANT27, 2019,24, 2022, 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'sofficer’s employment will end pursuant to the terms of his or her employment contract.NameAgePositionAge Position Martine A. Rothblatt, Ph.D., J.D., M.B.A. 67 64Chairman,Chairperson and Chief Executive Officer and Director50 47President and Chief Operating Officer 54 51Chief Financial Officer and Treasurer 58 55Executive Vice President, General Counsel, and Corporate Secretary A. Rothblatt, Ph.D., J.D., M.B.A., founded United Therapeutics in 1996 and has served as ChairmanChairperson and Chief Executive Officer since its inception through January 2015, wheninception. Previously, she became Chairman and Co-Chief Executive Officer. She was promoted to her current role as Chairman andsoul CEO in June 2016. Prior to United Therapeutics, she founded and served as Chairman and Chief Executive Officer of SiriusXM Satellite Radio.created the satellite radio company SiriusXM. She is an inventor or co‑inventor on nine U.S. patents, with additional patents pending. Her pioneering book, Your Life or Mine: How Geoethics Can Resolve the Conflict Between Private and Public Interests in Xenotransplantation, anticipated the need for both global virus bio-surveillance and a co-inventor on sixgreatly expanded supply of our patents pertaining to treprostinil.Development. In this role, he was responsible for most companywide administrative functions, including human resources, information technology, corporate real estateDevelopment, 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 became2016. He is responsible for all of our commercial, and medical affairs, activities.32 United Therapeutics, a public benefit corporation ITEMRISK FACTORSForward-Looking Statements This Report contains forward-looking statements made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 (the Exchange Act) and the Private Securities Litigation Reform Act of 1995. These statements, which are based on our beliefs and expectations as to future outcomes, include, among others, statements related to the following:
Risk Factors•Expectations of revenues, expenses, profitability, and cash flows, including our expectation that revenue growth will recommence over the long term;•The sufficiency of current and future working capital to support operations;•Our ability to obtain financing on terms favorable to us or at all;•The maintenance of domestic and international regulatory approvals;•Our ability to maintain attractive pricing for our products, in light of increasing competition, including from generic entries and pressure from government and other payers to decrease the costs associated with healthcare;•The expected volume and timing of sales of our existing commercial products—Remodulin, Tyvaso, Orenitram, Adcirca and Unituxin—and potential future commercial products, including the anticipated effect of various research and development efforts (including theFREEDOM-EV study) on sales of these products;•The timing and outcome of clinical studies, other research and development efforts, and related regulatory filings and approvals, including (among others) those described in this Report related to ourBEAT study of esuberaprost, our collaboration with DEKA to develop the RemUnity system, our efforts to obtain FDA approval of Trevyent, ourDISTINCT study of dinutuximab in patients with small cell lung cancer, and our plan to develop a pain-free subcutaneous formulation of treprostinil called RemoPro;•The timing and success of our anticipated launch of the Implantable System for Remodulin;•The outcome of pending and potential future legal and regulatory actions by the FDA and other regulatory and government enforcement agencies, and the anticipated duration of regulatory exclusivity for our products;•The impact of competing therapies on sales of our commercial products and the amount of inventory of our products that will expire unsold, including the impact of generic versions of Adcirca (which launched in August 2018) and Remodulin (which launched in Austria in January 2019 and which we expect will launch in the United States and other countries during 2019); established therapies such as Uptravi; and newly-developed therapies;•The expectation that we will be able to manufacture sufficient quantities and maintain adequate inventories of our commercial products, through both our in-house manufacturing capabilities and third-party manufacturing sites, and our ability to obtain and maintain related approvals by the FDA and other regulatory agencies;•The adequacy of our intellectual property protection and the validity and expiration dates of the patents we own or license, as well as the regulatory exclusivity periods for our products;•The expected eligibility of patents for inclusion in the Orange Book;•Any statements that include the words "believe," "seek," "expect," "anticipate," "forecast," "project," "intend," "estimate," "should," "could," "may," "will," "plan," or similar expressions; and•Other statements contained or incorporated by reference in this Report that are not historical facts.These statements are subject to risks and uncertainties and our actual results may differ materially from anticipated results. Factors that may cause such differences include, but are not limited to, those discussed below. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.Business Tyvaso and Orenitram to generate revenues and support our operations.our current treprostinil-based PAH therapies (Remodulin, Tyvaso, Remodulin, and Orenitram)Orenitram comprise the vast majority of our revenues. DecreasedSubstantially decreased sales of any one of these products could have a material adverse impact on our operations. A wide variety of events, such as withdrawal of regulatory approvals or substantial changes in prescribing practices or dosing patterns, many of which are described in other risk factors below, could cause sales of these products to materially decline, or to grow more slowly than expected. Generic competition due to theThe current commercialand expected availability of generic versions of Remodulin, which launched in Austria in January 2019,our products has decreased and which we expect will be launched in the United States and certain other countries in Europe during 2019, as well as generic versions of Tyvaso and Orenitram, which could be launched in the United States by Watson and Actavis as early as January 2026 and June 2027, respectively (or earlier under certain circumstances), may continue to decrease our revenues. In addition, the inabilityThe approval of new therapies, such as Yutrepia, may negatively impact sales of our current and potential new products. Sales may decrease if any third party that manufactures, markets, distributes, or sells any of our commercial products to perform these functionscannot do so satisfactorily, or our inability towe cannot manage our internal manufacturing processes, could result in an inabilityprocesses. Finally, if we are not able to meet patient demand and decrease sales. Finally, our strategy involves the development and successfulsuccessfully launch of next-generation delivery systems (such as the Implantable SystemTyvaso DPI when we anticipate, or at all, for Remodulin, RemUnity and Trevyent) and expanded indications for our existing treprostinil-based products. RemUnity and Trevyent may not be approved by the FDA, and theregulatory or other reasons, or demand for our productsTyvaso DPI following its launch of the Implantable System for Remodulin or the RemUnity system maydoes not meet our expectations. Without this increased demand,expectations, the revenue opportunity for our treprostinil products could be significantly lower than we expect.obtain or maintain FDA and international regulatory approvals and will be unable to sell those products. regulatory approvals from the FDA and international regulatory agencies to sell new products, or to expand the product labeling for our existing products, to new indications, we must conduct clinical trials demonstrating that our products are safe and effective. These regulatorsRegulators have substantial discretion over the approval process for our products, and may not agree that we have demonstrated the requisite level of product safety and efficacy to grant approval. The FDA and other regulatory agenciesprocess. Regulators may require us to amend ongoing trials or perform additional trials, beyond those we planned, which have in the past and could in the future result in significant delays and additional costs orand may be unsuccessful. For example, approval of an NDADelays and costs associated with regulatory requirements to change or add trials may cause us to discontinue efforts to develop a BLA could be delayed ifproduct, as they did with Trevyent and the FDA determines that it cannot review or approve the application as submitted. In such a case, the FDA may require substantial additional studies, testing or information in order to complete its review of the application.ISR. If our clinical trials are not successful, or we fail to address any identified deficiencies adequately, we will not obtain required approvals to market the new product or new indication.the length of timehow long it will take, or how much it will cost, to complete necessary clinical trials or obtain regulatory approvals related toof our current or future products. The length of time we needand cost needed to complete clinical trials and obtain regulatory approvals varies by product, indication, and country.•The (1) the COVID-19 pandemic, which initially caused us to suspend enrollment of most of our clinical studies, and may do so again; (2) the drug is ineffective, or physicians and/or patients believe that the drug is ineffective, or that other therapies are more effective or convenient;•We fail to reach agreement with the applicable regulatory agencies regarding the scope or design of our clinical trials;•Patients (3) patients do not enroll patients drop out,in or we do not observe worsening events,complete clinical trials at the rate we expect;•Ongoing or new clinical trials conducted by drug companies in addition to our own clinical trials reduce the availability of patients for our trials;•Our (4) clinical trial sites contracted clinical trial administrators or clinical studies conducted entirely by third parties do not adhere to trial protocols and required quality controls under good clinical practices (GCP)(GCP) regulations and similar regulations outside the United States;•Patients (5) patients experience severe side effects during treatment or die during our trials because of adverse events related toevents; and (6) the trial drug, advanced disease, or other medical complications; and•The results of our clinical trials conducted in a particular country are not acceptable to regulators in other countries.andor newly developed drugs or products, or the companies that develop and market them.MostMany of these competitors have substantially greater financial, marketing, manufacturing, sales, distribution, and technical resources, and a larger number of approved products, than we do. TheseMany of these competitors also possess greater experience in areas critical to success such as research and development, clinical trials, sales and marketing, and regulatory matters.therapies, and others are under development.therapies. For example, for the treatment of PAH, we compete with Adempas®, Flolan®, Ilomedin®, Letairis®, Opsumit®, Revatio®, Tracleer®, Uptravi®, Veletri®, Volibris®, Ventavis®, generic tadalafil, generic epoprostenolover fifteen branded and generic sildenafil citrate. Our competitors may introduce new products that render all or some of our technologies and products obsolete or noncompetitive. For example, Uptravi was approved by the FDA in December 2015 for the treatment of PAH and competes directly with Orenitram. In addition, we may not compete successfully against generic competitors.drugs. Sales of a generic version of Adcirca launched in August 2018 and have already had a material adverse impact on demand forour sales of Adcirca. A generic versionThe availability of Remodulin was launched in Austria in January 2019. We anticipate generic versions of Remodulin may be launched in the United States and certain additional countries in Europe in 2019, as described elsewhere in this Report, which could materially impact our revenues. Furthermore, we have limited visibility intorevenues, and generic competition has materially impacted our Remodulin revenues outside the level of Adcirca inventory held by wholesale distributorsUnited States. Our competitors are also developing new products that may compete with ours. For example, Liquidia is developing Yutrepia, which if successful would compete directly with Tyvaso, Tyvaso DPI (if approved), and pharmacies, and rapid generic penetration could cause substantial amounts of Adcirca to expire unsold, causing us to incur increased liabilities for product returns. Any change in our estimated allowance for returns could result in a material impact on our revenues during the quarter in which the change is made. Legislation such as the 21st Century Cures Act, which was enacted in December 2016 and designed to encourage innovation and bring pharmaceutical products to market more quickly, may enable our competitors to bring competing products to market on an expedited basis. In addition, alternative approaches to treating chronic diseases, such as gene therapy, cell therapy or transplantationtechnologies, may make our products obsolete or noncompetitive. Patients and doctors may discontinue use of our products if they perceive competing products as safer, more effective, less invasive, more convenient, and/or less expensive than ours. Alternatively, doctorsDoctors may reduce the prescribed doses of our products if they prescribe them in combination with competing products. In addition, many competing therapies are less invasive or more convenient than Tyvasoour products, and Remodulin, and the use of these products may delaycompeting therapies often delays or preventprevents initiation of Tyvaso or Remodulin therapy. Any of these circumstances could negatively impact our operating results.Salestherapies.2021 Annual Report 33 are subject todepends on the availability of coverage and adequacy of reimbursement from government agenciesthird-party payers, including governmental authorities and other third parties.private health insurers. Pharmaceutical pricing and reimbursement pressures may negatively impact our sales.the availability of reimbursementscoverage by governmental payers such as Medicare and Medicaid, and private insurance companies. A significant portion of Remodulin, Tyvaso, Adcirca and Orenitram sales in the United States are reimbursed under the Medicare and Medicaid programs. A reduction in the availability or extent of reimbursement from domestic or foreign government health care programs could have a material adverse effect on our business and results of our operations. In the United States, the European Union and other potentially significant markets for our products, governmentGovernment payers and/or third-party payers are increasingly attempting to limit or regulate the price of medicinal products and frequently challenge the pricing of new andor expensive drugs. Financial pressures may cause United States government payers to seek cost containment more aggressively through mandatory discounts or rebates on our products, policies requiring the automatic substitution of generic products, more rigorous requirements for initial reimbursement approvals for new products or other similar measures. For example, there have been proposals to reduce reimbursement rates and/or adopt mandatory rebates under Medicare Part B, which covers Remodulin and Tyvaso. In January 2017, the Medicare Prescription Drug Price Negotiation Act was proposed in Congress; this act would require the federal government to negotiate the price of Medicare prescription drugs with pharmaceutical companies. In October 2017, the Medicare Drug Price Negotiation Act of 2017 was proposed in Congress, with similar requirements. More recently, in November 2017, the Centers for Medicare and Medicaid Services (CMS) announced a Final Rule that would adjust the applicable payment rate as necessary for certain separately payable drugs and biologicals acquired under the 340B Program from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. In many markets outside the United States, governments control the prices of prescription pharmaceuticals through the implementation of reference pricing, price cuts, rebates, revenue-related taxes, and profit control.(Remodulin, Tyvaso(Tyvaso, Remodulin, and Orenitram) and our oncology product (Unituxin) are expensive therapies. Consequently, itOur specialty pharmacy distributors may not be difficult for our distributorsable to obtain adequate reimbursement for our products from commercial and government payers to motivate such distributorsthem to support our products. Alternatively, third-partyThird-party payers may reduce the amount of reimbursement for our products based on changes in pricing of other therapies for the same disease. In addition, third-partydisease or the development of new payment methodologies to cover and reimburse treatment costs, such as the use of cost-effectiveness research or value-based payment contracts. Third-party payers mayoften encourage the use of less-expensive generic alternative therapies, following the launch of generic forms ofwhich has materially impacted our Adcirca revenues and which may materially impact our Remodulin and Adcirca.revenues. If commercial and/or government payers do not approvecover our products for reimbursement, or limit reimbursements,payment rates, patients and physicians could choose covered competing products that are approved for reimbursement or provideand may have lower out-of-pocket costs.Patient assistance programs for pharmaceutical products have come under increasing scrutiny by governments, legislative bodies and enforcement agencies. These activities may result in actions that have the effect of reducing prices or demand for our products, harming our business or reputation, or subjecting us to fines or penalties. Recently, there has been enhanced scrutiny of company-sponsored patient assistance programs, including insurance premium and co-pay assistance programs and manufacturers' donations to third-party charities that provide such assistance. If we, our vendors or donation recipients, are deemed to have failed to comply with relevant laws, regulations or government guidance in any of these areas, we could be subject to criminal and civil sanctions, including significant fines, civil monetary penalties and exclusion from participation in government healthcare programs, including Medicare and Medicaid, and burdensome remediation measures. Actions could also be brought against executives overseeing our business or other employees. It is possible that any actions taken by the Department of Justice (DOJ) as a result of this industry-wide inquiry could reduce demand for our products and/or reduce coverage of our products, including by federal health care programs such as Medicare and Medicaid and state health care programs. If any or all of these events occur, our business, prospects and stock price could be materially and adversely affected. growing demand. We manufacture Remodulin, Orenitram, Tyvaso, and Unituxin, including the active ingredient in each of these products, at our own facilities and rely on third parties for additional manufacturing capacity for Remodulin Tyvaso and finished Unituxin drug product.Tyvaso. We rely on Minnetronix, Inc.a variety of third-party sole manufacturers for certain elements of our commercial and development-stage products, as detailed under the sole manufacturer of the Tyvaso Inhalation System, and on Lilly as the sole manufacturer of Adcirca. If and when we launch the Implantable System for Remodulin, we will rely on Medtronic as the sole manufacturer of the SynchroMed II infusion system and related components used in the Implantable System for Remodulin. risk factor below entitled, We rely in part on MannKindthird parties to perform manufacturing activities relatedthat are critical to Treprostinil Technosphere, and we rely on a limited number of sole-source suppliers for manufacturing activities related to ralinepag and Trevyent.In addition, any changeChanges in suppliers and/or service providers could interrupt the manufacturing of our commercial products and impede the progress of our commercial launch plans and clinical trials. In addition, ourFor example, Remodulin, Tyvaso and Unituxin are sterile solutions that must be prepared under highly-controlled environmental conditions, which are challenging to maintain on a commercial scale. In addition, Unituxin is a monoclonal antibody. As with all biologic products, monoclonal antibodies are inherently more difficult to manufacture than our treprostinil-based products and involve increased risk of viral and other contaminants. We manufacture our entire supply of Orenitram and dinutuximab, the active ingredient in Unituxin without an FDA-approved back-up manufacturing site. We are constructing a new facility to expand our manufacturing capacity for dinutuximab, but this process will take several yearssite, and maydo not be successful at all. We presently have no plansplan to engage a third-party contract manufacturerthird party to manufacture Orenitram or dinutuximab.these materials. Our long-term organ manufacturing programs will involve exceptionally complicated manufacturing processes, many of which have never been attempted on a clinical or commercial scale. It will take substantial time and resources to develop and implement such manufacturing processes, orand we may never be able to do so successfully.we face withof our manufacturing strategy include the following: and our third-party manufacturers, and other third parties involved in the manufacturing process, such as third parties that operate testing and storage facilities, are subject to the FDA'sFDA’s current good manufacturing practices regulations, current good tissue practices, and similar international regulatory standards.standards, and other quality standards related to device manufacturing. Our ability to exercise control over regulatory compliance by our third-party manufacturers is limited;products;disruption—for example, Medtronic manufactures the Implantable System for Remodulin at its facilities in Puerto Rico, which is vulnerable to hurricanes;and our third-party manufacturers, and other third parties involved in the manufacturing process comply with applicable drug and device manufacturing regulations, the sterility and quality of our products could be substandard and such products could not be sold or used or could be subject to recalls;If we had to replace our own manufacturing operations or a third-party manufacturer, theinspections. Furthermore, ainspections of new manufacturer would have to be familiarized with the processes necessary to manufacture and commercially validatemanufacturers of our products, as producingor new manufacturing facilities we operate.treprostinil-based and biologic products is complex;all; and34 United Therapeutics, a public benefit corporation 2021 Annual Report 35 Our ability to generate commercial sales or conduct clinical trials could suffer if our third-party suppliers and service providers fail to perform.(5)approvals for the devices used to deliver our drugs; and (6) marketing and distributing our products. For risks related toAny disruption in the involvementability of third parties to continue to perform these critical activities, including as a result of the COVID-19 pandemic, could materially adversely impact our business and results of operations. Any change in service providers could interrupt the manufacture and distribution of our manufacturing process, seeproducts and services, and impede the risk factor above, entitledOur manufacturing strategy exposes us to significant risks. Tyvaso, Orenitram, and Unituxin. From time-to-time, we increase the price of products sold to our U.S.-based and international distributors. Our price increases may not be fully reimbursed by third-party payers. If our distributors do not achieve acceptable profit margins on our products, they mayare unsuccessful in, or reduce or discontinue, the sale ofour products. Furthermore, if our distributors devote fewer resources to sell our products or are unsuccessful in their sales efforts, our revenues may decline materially. Outside the United States, we rely substantially on our international distributors to obtain and maintain regulatory approvals for our products and to market and sell our products in compliance with applicable laws and regulations. We rely on In the United States, we derive all of our treprostinil revenues from sales to two distributors, Accredo and CVS Specialty. If either of these two distributors places significantly larger or smaller orders in a given time period, our revenues can be materially impacted in a way that does not reflect patient demand.to manufacturemanufactures and supplysupplies Adcirca for us, and weus. We use Lilly'sLilly’s pharmaceutical wholesaler network to distribute Adcirca. If Lilly is unable to manufacture or supply Adcirca or its distribution network is disrupted, it could delay, disrupt, or prevent us from selling Adcirca. In addition, Lilly has the right to determine the price of Adcirca. Changes in the price of Adcirca set by Lilly could adversely impact demand or reimbursement for Adcirca. Any change in service providers could interrupt the distribution of our commercial products and our other products and services, and impede the progress of our clinical trials, commercial launch plans and related revenues.heavily on third-party contract research organizations, contract laboratories, clinical investigative sites and other third-parties to conduct our clinical trials, preclinical studies and other research and development activities. In particular, our research and development efforts into new indications for Unituxin are substantially outsourced to a contract research organization called Precision Oncology, LLC. In addition, the success of certain products we are developing will depend on clinical trials sponsored by third parties. Failure by any third party to conduct or assist us in conducting clinical trials in accordance with study protocols, quality controls and GCP, or other applicable U.S. or international requirements or to submit associated regulatory filings, could limit or prevent our ability to rely on results of those trials in seeking regulatory approvals. We relyentirely on third parties to supply pumps and other supplies necessary to deliver Remodulin. There are a limited number of pumps available in the market, and the discontinuation of any particular pump could have a material, adverse impact on our Remodulin revenues if a viable supply of an alternate pump is not available.heavilyentirely on Medtronic forMinnetronix Inc. as the successsole manufacturer of our program to develop an implantable pump to deliver intravenous Remodulin (the Implantable System for Remodulin). In particular, Medtronicthe Tyvaso Inhalation System. As Tyvaso is entirely responsible for regulatory approvals and all manufacturing and quality systems related to its infusion pump and related components. This includes satisfying FDA-imposed PMA conditions prior to launchinga drug-device combination, we cannot sell Tyvaso without the Implantable System for Remodulin. Medtronic entered into a consent decree related to the SynchroMed II implantable infusion pump systems. Medtronic's failure to comply with the ongoing obligations under the consent decree could adversely impact Medtronic's ability to manufacture and supply the Implantable System for Remodulin. In the event Medtronic is unwilling or unable to supply the system for any reason, our ability to meet patient demand and generate additional revenues will be materially adversely impacted; any delays in supply could also adversely impact our ability to meet patient demand and generate revenues.for various manufacturing activitiesand other third parties to manufacture, test, and store Tyvaso DPI, and to meet all FDA requirements related to Treprostinil Technosphere. MannKind has announced that its currently available cashthe manufacture of Tyvaso DPI. This includes maintaining an FDA-compliant facility and financing sources are not sufficient to continue to meet its current and anticipated cash requirements, raising substantial doubt about its ability to continue as a going concern.addressing any FDA concerns regarding the manufacturing process. If MannKind is unable to supplymanufacture Tyvaso DPI for us with devices and other components necessary to develop and manufacture Treprostinil Technosphere,for any reason, our commercial sales of Tyvaso DPI (if approved by the timing and success of this programFDA) could be materially and adversely impacted. Finally, weRemUnity,the Remunity Pump for Remodulin. Supply disruptions caused by COVID-19 impacted DEKA’s ability to secure certain components and raw materials necessary to manufacture sufficient quantities of Remunity Pumps and accessories, delaying our pre-filled, semi-disposableability to commence commercial sales. Finally, we also rely on various sole-source suppliers for manufacturing activities related to ralinepag, RemoPro, and other pumps we are developing for Remodulin. For a further discussion of risks created by the use of third-party contract manufacturers, see the risk factor above entitled, Our manufacturing strategy exposes us to significant risks.36 United Therapeutics, a public benefit corporation subcutaneous treprostinil.operationsearly-stage research and development involves animal testing required by regulatory authorities, which we conduct both directly and through contracts with third parties. Our xenotransplantation and regenerative medicine programs rely heavily on the use of animals to manufacture and test our products. Certain special interest groups categorically object to the use of animals for research purposes. Any negative attention, threats or acts of vandalism directed against our animal research activities could impede the operation of our business.countries, including FDA regulations.countries. Failure to obtain approvals on a timely basis or to achieve continued compliancecomply with these requirements could delay, disrupt, or prevent the commercialization of our products.biomechanical lungs3-D organ bioprinting, and cell-based products. Once approved, the manufacture, distribution, advertising, and marketing of our products are subject to extensive regulation, including product labeling, strict pharmacovigilance and adverse event and medical device reporting, complaint processing, storage, distribution, and record-keeping requirements. Our product candidates have in the past and may in the future fail to receive regulatory approval on a timely basis, or at all.approval. If granted, product approvals can be conditioned on the completion of post-marketing clinical studies, accompanied by significant restrictions on the use or marketing of a given product and withdrawn for failure to comply with regulatory requirements, such as post-marketing requirements and post-marketing commitments, or upon the occurrence of adverse events subsequent to commercial introduction. Our ability to obtain FDA approval for our products has been, and in the future may be, materially impacted by the outcome and quality of our clinical trials and other data submitted to regulators, as well as the quality of our manufacturing operations and those of our third-party contract manufacturers and contract laboratories. In addition, third parties may submit citizen petitions to the FDA seeking to delay approval of, or impose additional approval conditions for, our products. If data from post-marketing studies suggestsuccessful, citizen petitions can significantly delay, or even prevent, the approval of our products. For example, a third party submitted a citizen petition to the FDA requesting that an approved product presents an unacceptable safety risk, regulatory authorities could withdraw the product's approval, suspend production FDA refuse to approve Tyvaso DPI, and/or place other marketing restrictions on thatimpose additional requirements in order to approve the product. In December 2017, we entered into a Corporate Integrity Agreement (the CIA) with This has prompted the Office of Inspector General of the Department of Health and Human Services (OIG), which requires usFDA to maintain our corporate compliance programrequest additional information concerning Tyvaso DPI, and to undertake a set of defined corporate integrity obligationsdelay the anticipated review deadline for a period of five yearsthe Tyvaso DPI NDA from the date the agreement was signed. We may be requiredFebruary 2022 to incur significant future costs to comply with the CIA. The CIA was entered into in connection with a civil Settlement Agreement with the DOJ and the OIG. The Settlement Agreement relates to a May 2016 subpoena from the DOJ requesting documents regarding our support of 501(c)(3) organizations that provide financial assistance to patients. Other companies received similar inquiries as part of a DOJ investigation regarding whether that support may violate the Federal Anti-Kickback Statute and the Federal False Claims Act. If we fail to comply with applicable regulatory requirements or the CIA, we could be subject to penalties including fines, suspension of regulatory approvals that cause us to suspend production, distribution or marketing activities, product recalls, seizure of our products and/or criminal prosecution. If regulatory sanctions are applied or regulatory approval is delayed or withdrawn, our operating results and the value of our company may be adversely affected. In addition, our reputation could be harmed as a result of any such regulatory restrictions or actions, and patients and physicians may avoid the use of our products even after we have resolved the issues that led to such regulatory action.2021 Annual Report 37 If we are not able to obtain FDA approval for any desired future indications for our products, our ability to effectively market and sell our products may be reduced. choose to prescribe drugs for uses that are not described in the product'sproduct’s labeling and for uses that differ from those approved by regulatory authorities (called "off-label"“off-label” uses), our ability to promote our products is limited to those indications that are specifically approved by the FDA. If our promotional activities fail to comply with regulations or guidelines related to off-labelpromotion, we may be subject to warnings from, or enforcement action by, these authorities. In addition, failureFailure to follow FDA rules and guidelines related to promotion and advertising can result in the FDA'sFDA’s refusal to approve a product, suspension or withdrawal of an approved product from the market, product recalls, fines, disgorgement of money, operating restrictions,enforcement action, civil lawsuits, injunctions or criminal prosecution.practices in the pharmaceutical and medical device industries. Failure to comply with such laws could result in penalties and have a material adverse effect on our business, financial condition and results of operations.as anti-kickbackas:UKUnited Kingdom Bribery Act. Any penalties imposed upon us for failure to comply could have a material adverse effect on our business and financial condition.compensationremuneration (i.e., anything of value) to induce, or in return for, the purchase, lease, order or arranging the purchase, lease or order of any health care product or service reimbursable under any federally financed health-care program.healthcare program like Medicare or Medicaid. This statute has beenis interpreted broadly to apply to arrangements between pharmaceutical manufacturers and prescribers, purchasers, specialty pharmacies, formulary managers, patients, and others. The exemptions and safe harbors under this statute may be narrow, and practices that involve compensation may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices domay not always qualify for safe harbor protection. The discount safe harbor is currently the subject of possible reform. Any changes to the discount safe harbor may cause us to review our arrangements and pricing strategies with payers.as amended by the Patient Protection and Affordable Care Act of 2010 (PPACA),which prohibits any person from knowingly presenting or causing to be presented a false or fraudulent claim for payment of government funds, or making or causing a false statement material to a false or fraudulent claim. Several pharmaceuticalPharmaceutical and health care companies have been investigatedfaced liability under this law for allegedly providing free product to customers with the expectation that the customers would bill federal health care programs for the free product. Other companies have been prosecuted for causing false claims to be submitted because of these companies' marketing ofthey marketed a product for unapproved and non-reimbursable uses. Potential liabilityFederal False Claims Act includes mandatory treble damagespayer, including private payers.significant per-claim penalties. The majority of states alsosimilar laws on a state-by-state basis is difficult, time consuming, and requires substantial resources. Any investigation, inquiry, or other legal proceeding under these laws related to our operations, even if we successfully defend against it, or any penalties imposed upon us for failure to comply, could have statutes similar to the Federal Anti-Kickback Statutea material adverse effect on our business and the Federal False Claims Act.financial condition or reputation. Sanctions under these federal and state laws may include treble civil monetary penalties, payment of damages, fines, exclusion of a manufacturer's productour products from reimbursement under state governmentfederal health care programs, debarment, criminal fines,imprisonment, and imprisonment. Any investigation, inquirythe curtailment or other legal proceeding under these laws and related torestructuring of our operations may adversely affect our business, results of operations or reputation. The PPACA also imposed reporting requirements for pharmaceutical, biologic and device manufacturers regarding payments or other transfers of value made to physicians and teaching hospitals, including investment interests in such manufacturers held by physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in civil monetary penalties, which may increase significantly for "knowing failures." Compliance with these and similar laws on a state-by-state basis is difficult and time consuming.The PPACA is a broad measure intended to expand health care coverage within the United States, primarily through the imposition of health insurance mandates on employers and individuals and expansion of the Medicaid program. The reforms imposed by the law will significantlyimpact the pharmaceutical industry; however, the full effects of the PPACA will be unknown until all of these provisions are implemented and CMS and other federal and state agencies issue applicable regulations or guidance. Moreover, in the coming years, additional changes could be made to governmental health care programs that could significantly impact the success of our products or product candidates. We may face uncertainties as a result of federal and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the PPACA. There is no assurance that the PPACA, as currently enacted or as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes related to healthcare reform will affect our business. Since the November 2016 U.S. election, President Trumpmade numerousbeen and continue to be a number of healthcare-related legislative and regulatory initiatives and reforms that significantly affect the pharmaceutical industry. For example, PPACA substantially changed the way healthcare is financed by both governmental and commercial payers, and has significantly impacted the U.S. pharmaceutical industry. The PPACA is a broad measure intended to expand healthcare coverage within the United States, primarily through the imposition of health coverage-related mandates on employers and individuals and expansion of the Medicaid program. The PPACA and certain of its provisions have been subject to judicial challenges as well as efforts to repeal or amendreplace them or to alter their interpretation or implementation. It is unclear how the Affordable Care ActPPACA and its implementation, as well as efforts to repeal, replace, or otherwise modify, or invalidate, the PPACA, or portions thereof, will affect our business.wholethe United States regarding drug pricing practices. Among other things, there have been several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things: bring more transparency to drug pricing; reduce the cost of prescription drugs under government payer programs; review the relationship between pricing and manufacturer patient programs; and reform government program reimbursement methodologies for drugs. For example, on November 20, 2020, CMS issued the38 United Therapeutics, a public benefit corporation part.some cases, measures designed to encourage importation from other countries and bulk purchasing. In May 2017,addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.HouseDepartment of Representatives voted to pass the American Health Care Act (the AHCA), which would repeal many provisions of the Affordable Care Act. Although the U.S. Senate considered but failed to pass the AHCA and other comparable measures, the U.S. Congress may consider further legislation to repeal or replace elements of the Affordable Care Act. In addition, the Tax Cuts and Jobs Act, which President Trump signed into law in December 2017, repeals the Affordable Care Act's individual health insurance mandate, which is considered a key component of the Affordable Care Act. The future stability of the Affordable Care Act and the resulting impact on our business is thus uncertain and could be material. In addition, many states have proposed legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing by requiring biopharmaceutical manufacturers to publicly report proprietary pricing information or to place a maximum price ceiling on pharmaceutical products purchased by state agencies. If such proposed legislation is passed, we may experience additional pricing pressures on our products. For example, in October 2017, California's governor signed a prescription drug price transparency state bill into law, requiring prescription drug manufacturers to provide advance notice and explanation for price increases of certain drugs that exceed a specified threshold. Similar bills have been previously introduced at the federal level, and the Trump administration has focused attention on proposed efforts to curb prescription drug prices. In May 2018, President Trump and the Health and Human Services (HHS) Secretary released(American Patients First blueprint, which included measuresFDA issued a final rule and guidance concerning two new pathways for importing lower-cost drugs into the United States. The final rule allows certain prescription drugs to increase genericbe imported from Canada, and the guidance describes procedures for drug and biosimilar competition, the ability of the Medicare program to negotiate drug prices, public transparency regarding drug prices and information available to beneficiaries regarding ways to lower out-of-pocket costs. The Trump administration has begun implementing many of these measures, and in October 2018, President Trump proposed a demonstration project to establish an "international pricing index" that would be used as a benchmark in deciding how much to pay for Medicare Part B drugs. The potential effect of health insurance market destabilization during ongoing repeal and replace discussions, as well as the impact of potential changes to the way the Medicaid program is financed, will likely affect patients' sources of insurance and resultant drug coverage. In addition to the Trump administration's proposals, discussions continue at the federal level regarding policies that would require manufacturers to pay higher rebatesfacilitate the importation of FDA-approved drugs and biologics manufactured abroad and originally intended for sale in a foreign country into the United States. Additionally, in November 2020, the HHS adopted a rule that will eliminate the safe harbor shielding Medicare Part D give states more flexibility on drugs that are covered underrebates to pharmacy benefit managers from the Medicaid program, permitAnti-Kickback Statute. In response to a legal challenge brought by a trade association representing PBMs, the re-importationBiden Administration agreed to delay the effective date of prescription medications from Canada or other countries and other policy proposals that could impact reimbursement for our products.the rule until January 1, 2023. It is difficult to predict the impact, if any, of any such legislation or executive actions or Medicaid flexibility on the use of and reimbursement offor our products in the United States, including the potential for the importation of generic versions of our products. On January 31, 2019,U.S.Medicaid Drug Rebate Program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions, and fines, which could adversely impact our business, financial condition, results of operations, and prospects.released(OIG) have pursued manufacturers that were alleged to have failed to report data to the government in a proposaltimely manner. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot guarantee that our submissions will not be found by CMS, the VA, or other governmental agencies to revisebe incomplete or incorrect.federal Anti-Kickback Statute safe harbor regulationsdistribution of 340B program drugs at 340B ceiling prices through third-party pharmacies that contract with covered entities participating in the 340B program, known as “340B contract pharmacies”. Increasing use of 340B contract pharmacies, coupled with a lack of oversight and transparency, has resulted in increased risks of 340B statutory violations related to excludethe diversion of 340B-purchased drugs to individuals who are not patients of the 340B covered entity, and to prohibited “duplicate discounts” when 340B-purchased drugs are also billed to Medicaid. These program integrity risks have been exacerbated by the exponential growth in the use of 340B contract pharmacies over the past decade. We adopted a new 340B contract pharmacy policy to address these risks by limiting shipments to 340B contract pharmacies that meet certain criteria. Our new contract pharmacy policy is intended to2021 Annual Report 39 safe harbor protectionthe proliferation of contract pharmacies — problems that overshadow and threaten to undermine this vital safety net program. Nonetheless, certain rebates340B covered entities and the HHS, in a non-binding (and now-retracted) Advisory Opinion, stated that, in their view, manufacturers in the 340B program are obligated to sell 340B drugs at the 340B ceiling prices to all contract pharmacies acting as agents of a covered entity.formsmanufacturers are unable to curb the proliferation of remuneration paidabuses caused by 340B contract pharmacies, we could see an increased prevalence of sales at reduced 340B ceiling prices, which could have a manufacturer of prescription drugs to Medicaid managed care organizations or plan sponsors under Medicare Part D, either directly or through pharmacy benefit managers. In addition, state Medicaid programs could request additional supplemental rebatesmaterial adverse impact on our revenues.the increase in thethis industry-wide inquiry could reduce demand for our products and/or coverage of our products by federal base Medicaid rebate. Private insurers could also use the enactmentand state health care. If any or all of these increased rebatesevents occur, our business, prospects, and stock price could be materially and adversely affected.exert pricing pressurelimit the benefits of co-pay assistance for commercially insured programs through co-pay accumulator programs. These programs do not allow a patient using co-pay assistance to count the manufacturer’s co-payment contribution toward their annual out-of-pocket payment maximum. Therefore, patients using co-pay assistance are penalized financially for using these programs. Some states have passed legislation to limit the use of co-pay accumulator programs, while some other states have indicated that these programs should be allowed to limit cost of care and encourage patients to use lower cost generics. In addition, some states have imposed restrictions on manufacturer co-pay programs when therapeutic equivalents are available. Growing use of such programs, or new laws limiting manufacturer ability to provide co-pay assistance, could affect patient access to our products and limit product utilization, which may, in turn, adversely affect our business, prospects, and stock price.extent that private insurers or managed care programs follow Medicaid coveragecontrolled use of chemicals and payment developments, the adverse effectshazardous substances. We are expanding these activities in both scale and location. Patients may be magnified by private insurers adopting lower payment schedules.Reports of actual or perceived side effects and adverse events associated with our products, such as sepsis, could cause physicians and patients to avoid or discontinue usedispose of our products using means we do not control. Such activities subject us to numerous federal, state, and local environmental and safety laws and regulations that govern the management, storage, and disposal of hazardous materials. Compliance with current and future environmental laws and regulations can require significant costs. The risk of accidental contamination or injury from these materials cannot be completely eliminated. Once chemical and hazardous materials leave our facilities, we cannot control the manner in favorwhich such hazardous waste is disposed of alternative treatments. Reports of side effects and adverse eventsby our contractors. We could be liable for substantial civil damages or costs associated with our productsthe cleanup of the release of hazardous materials and such liability could have a significantmaterial adverse impacteffect on our business.40 United Therapeutics, a public benefit corporation saleeffectiveness of a product or to report an alleged adverse event. When such disclosures occur, we may fail to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend against political and market pressures generated by social media due to restrictions on what we may say about our products. An exampleThere is also a risk of a known risk associatedinappropriate disclosure of sensitive information or negative or inaccurate comments about us on any social networking website. If any of these events occur or we otherwise fail to comply with intravenous Remodulin is sepsis, which is a seriousapplicable regulations, we could incur liability, face overly restrictive regulatory actions, or incur other harm to our business.potentially life-threatening infection of the bloodstream caused by a wide variety of bacteria. Intravenous Remodulin is infused continuously through a catheter placed in a large vein in the patient's chest, and sepsis is a known risk associated with this type of delivery. In addition, Unituxin is associated with severe side effects, and its label contains a boxed warning related to potential infusion reactions and neurotoxicity. Development of new products, and new formulations and indications for existing products, could result in new side effects and adverse events which may be serious in nature. Concerns about side effects may affect a physician's decision to prescribe or a patient's willingness to use our products.Negative attention from special interest groups may impair our business. As is common with pharmaceutical and biotechnology companies, our early-stage research and development involves animal testing required by regulatory authorities, which we conduct both directly and through contracts with third parties. Our xenotransplantation and regenerative medicine programs rely heavily on the use of animals to manufacture and test our products. Certain special interest groups categorically object to the use of animals for research purposes. Any negative attention, threats or acts of vandalism directed against our animal research activities in the future could impede the operation of our business.license or other agreements under which we license or acquired intellectual property rights are licensed to, or were acquired by us, are breached or terminated, we could lose our rightrights to continue to develop, manufacture, and sell the products covered by such agreements could be impaired or lost.agreements. Under each of our purchase agreements we have rights to certain intellectual property covering a drugdrugs or other productproducts or technology. We may be required to license additional intellectual property owned by third parties to continue to develop and commercialize our products.determine we need for our business at a reasonable cost or at all; Tyvaso and Orenitram, expired in October 2017, and three more will expire in 2028. Our patents related to our individual treprostinil-based products expire at various times between 20182024 and 2031. We settled patent litigation with Sandoz, Teva, Par and Dr. Reddy's, and entered into settlement agreements with a number of generic drug companies permitting themcertain companies to launch generic versions of Remodulin in the United States in June 2018 (Sandoz) and December 2018 (Teva, Par and Dr. Reddy's). We anticipate one or more of theseother companies will launch their generic versions of Remodulin in the United States in 2019. We also settled patent litigation with Actavis and Watson, and entered into settlement agreements permitting them to launch generic versions of Orenitram and Tyvaso in the United States in June 2027 and January 2026, respectively, although each may be permitted to enter the market earlier under certain circumstances. the treatment of pulmonary hypertension expired in November 2017, and FDA-conferred regulatory exclusivity expired in May 2018, leading to the launch of a generic version of Adcirca in August 2018. We have no issued patents or pending patent applications covering Unituxin. For further details, please seeCompetition. We continueCompetition and Challenges to conduct research into new methods to synthesize treprostinil and have pending U.S. and international patent applications and patents related to such methods. We also have additional issued and pending patents covering the use of our existing commercial products in new indications and with new devices. However, weIntellectual Property Rights.competitors'competitors’ efforts to bring new products to market, or that additional patent applications will result in new patents. Upon the expiration of any ofWhen our patents expire, competitors may develop generic versions of our products and may market those generic versionsthem at a lower price to compete with our products. Competitors may also seek to design around our patents or exclude patented methods of treatment, such as patent-protected indications, from the label for generic versions of our products in an effort to develop competing products that do not infringe our patents. In addition, patent laws of foreign jurisdictions may not protect our patent rights to the same extent as the patent laws of the United States.2021 Annual Report 41 to our operations,and costly, and may conclude unfavorably for us. In addition, the outcome of patent infringement litigation often ismay be difficult to predict.predict and unfavorable to us. If we are unsuccessful with respect to any future legal action in the defense of our patents, and our patents are invalidated or determined to be unenforceable, our business could be negatively impacted. Even if our patents are determined to be valid or enforceable, it is possible that a competitor could circumvent our patents by effectively designing around the claims of our patents. Accordingly, our patents may not provide us with any competitive advantage. In addition to patent protection, wedisclose to the public. We enter intopublicly disclose. Our confidentiality agreements with our employeesUnitherians and others to whom we disclose trade secrets and other confidential information. These agreementsinformation may not necessarily prevent our trade secrets from being used or disclosed without our authorization and confidentialityauthorization. These agreements may be difficult, time-consuming,In addition, if any ofIf our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor,us, and our business and competitive position could be harmed.royalties. Payment of royalties wouldthat negatively affect our profits; furthermore, if we chose to contest these allegations, we could beprofits, subject us to costly and time-consuming litigation, or couldcause us to lose the ability to continue to sell the related products.In the case ofFor products or services that utilize intellectual property of strategic collaborators or other suppliers, such suppliers may have an obligation to secure the needed license to these patents at their cost. Otherwise,cost; if not, we would be responsible for the cost of these licenses. Royalty payments and other fees under these licenses would erode our profits from the sale of related products and services. Moreover, we may be unable to obtain these licenses on acceptable terms or at all. If we fail to obtain a required license or are unable to alter the design of the product to avoid infringing a third-party patent, we would be unable to continue to manufacture or sell related products.could be compelled tomay incur significant costs to defend the action and our management'smanagement’s attention could be diverted from our day-to-day business operations, whether or not the action were to have anyhas merit. We cannot be certain that we could prevail in the action, and anAn adverse judgment or settlement resulting from the action could require us to pay substantial amounts in damages for infringement or substantial amounts to obtain a license to continue to use the intellectual property that is the subject of the infringement claim.We may not maintain adequate insurance coverage to protect us against significant product liability claims. The testing, manufacturing, marketing, and sale of drugs and diagnostics involve product liability risks. We may not be able to maintain our current product liability insurance at an acceptable cost, if at all. In addition, our insurance coverage may not be adequate for all potential claims. If claimsclaim, or losses significantly exceed our liability insurance coverage, we may experience financial hardship or potentially be forced out of business. While we historically have had a limited number of product liability claims, the clinical testing and eventual marketing and sale of new products, reformulated versions of existing products, or existing productscould result in new indications, could expose us to new product liability risks. The launch of new products will raise new product liability risks, and in many cases the quality of these products will depend on the performance of third parties that we do not control (such as Medtronic, in the case of the Implantable System for Remodulin).If we fail to attract and retain key management and qualified scientific and technical personnel, we may not be able to achieve our business objectives. Members of our management team, including our founder, Chairman and Chief Executive Officer, Dr. Martine Rothblatt, play a critical role in defining our business strategy and maintaining our corporate culture. The loss of the services and leadership of Dr. Rothblatt or any other members of our senior management team could have an adverse effect on our business. We do not maintain key person life insurance on our senior management team members. In addition, effective succession planning is important to our long-term success. Failure to identify, hire and retain suitable successors for members of our senior management team and to transfer knowledge effectively could impede the achievement of our business objectives. Our future success also depends oninjunctive relief limiting our ability to attract andretain qualified scientific and technical personnel. Competition for skilled scientific and technical personnel in the biotechnology and pharmaceutical industries is intense. Furthermore,develop, manufacture, or sell our compensation arrangements may not be sufficient to attract new qualified scientific and technical employees or retain such core employees. If we fail to attract and retain such employees, we may not be successful in developing and commercializing new therapies for PAH and other diseases.Improper handling of hazardous materials used in our activities could expose us to significant remediation liabilities. Our research and development and manufacturing activities involve the controlled use of chemicals and hazardous substances and we are expanding these activities in both scale and location. In addition, patients may dispose of our products using means we do not control. Such activities subject us to numerous federal, state, and local environmental and safety laws and regulations that govern the management, storage and disposal of hazardous materials. Compliance with current and future environmental laws and regulations can require significant costs; furthermore, we can be subject to substantial fines and penalties in the event of noncompliance. The risk of accidental contamination or injury from these materials cannot be completely eliminated. Furthermore, once chemical and hazardous materials leave our facilities, we cannot control the manner in which such hazardous waste is disposed of by our contractors. In the event of an accident, we could be liable for substantial civil damages or costs associated with the cleanup of the release of hazardous materials. Any related liability could have a material adverse effect on our business.We may encounter substantial difficulties managing our growth relative to product demand. If we experience substantial sales growth, we may have difficulty managing inventory levels as marketing new therapies is complicated and gauging future demand can be difficult and uncertain until we possess sufficient post-launch sales experience. In addition, we have spent considerable resources building and expanding our offices, laboratories and manufacturing facilities. However, our facilities could be insufficient to meet future demand for our products. Conversely, we may have excess capacity at our facilities if future demand falls short of our projections, or if we do not receive regulatory approvals for the products we intend to manufacture at our facilities. Our ability to satisfactorily recover our investments in our facilities will depend on sales of the products manufactured at these facilities in sufficient volume.If we need additional financing and cannot obtain it, our product development and sales efforts may be limited. We may be required to seek additional sources of financing to meet unplanned or planned expenditures. Unplanned expenditures could be significant and may result from necessary modifications to product development plans or product offerings in response to difficulties encountered with clinical trials. We may also face unexpected costs in preparing products for commercial sale, or in maintaining sales levels of our currently marketed therapeutic products. In addition, our 2018 Credit Agreement contains affirmative and negative covenants that, among other things, limit our ability to incur additional indebtedness. If we are unable to obtain additional funding on commercially reasonable terms or at all, we may be compelled to delay clinical studies, curtail operations or obtain funds through collaborative arrangements that may require us to relinquish rights to certain products or potential markets. We may require additional financing to meet significant future obligations. For example, our Share Tracking Awards Plan (STAP) awards entitle participants to receive in cash an amount equal to the appreciation in the price of our common stock, which is calculated as the positive difference between the closing price of our common stock on the date of exercise and the date of grant. Consequently, our STAP may require significant future cash payments to participants to the extent the price of our common stock appreciates and the number of vested STAP awards increases over time. If we do nothave sufficient funds to meet such obligations or the ability to secure alternative sources of financing, we could be in default, face litigation and/or lose key employees, which could have a material adverse effect on our business.We may not be able to generate sufficient cash to service our indebtedness, which may have a material adverse effect on our financial position, results of operations and cash flows. In addition, we may be forced to take other actions to satisfy our obligations in connection with our indebtedness, which actions may not be successful. We may borrow up to $1.5 billion under the 2018 Credit Agreement, which matures in June 2023. Currently, our outstanding principal balance is $1.05 billion. Our ability to make payments on or refinance our debt obligations, including any outstanding balance under the 2018 Credit Agreement, and any future debt that we may incur, will depend on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. Our inability to generate sufficient cash flows to satisfy our debt obligations would materially and adversely affect our financial position and results of operations. If we cannot repay or refinance our debt as it becomes due, we could be forced to take disadvantageous actions, including reducing or delaying investments and capital expenditures, disposing of material assets or operations, seeking additional debt or equity capital or restructuring or refinancing our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such actions may not be sufficient for us to meet any such debt service obligations. In addition, our ability to withstand competitive pressures and to react to changes in our industry could be impaired."cloud"“cloud” based platforms. In the ordinary course of our business, weWe collect, store, and use sensitive or confidential data, including intellectual property, our proprietary business information and that of our suppliers, customers, and business partners, and personally identifiable information. The secure maintenance of this information is critical to our operations and business strategy. We are subject to laws and regulations in the United States and abroad, such as the Health Insurance Portability and Accountability Act of 1996 and European Union regulations related to data privacy, which require us to protect the privacy and security of certain types of information. Our information technology and infrastructure may be vulnerable to attacks by hackers, breached due to employee error, malfeasance, or other disruptions, or subject to system failures. We must continuously monitor and enhance our information security controls to prevent, detect, and/or contain unauthorized activity and malicious software. Because the techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures. Any breaches or failures could compromise sensitive and confidential information stored on our networks or those of third parties and expose such information to public disclosure, loss, or theft. Any actual or alleged unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disruption of our operations, and damage to our reputation, any of which could adversely affect our business, financial condition, or results of operations. In addition, remediation, repair and other costsCosts we may incur as a result of any of the foregoing, including increased costs toprotect our information technology systems and infrastructure, and increased insurance premiums, could adversely affect our business, financial condition, or results of operations.The Given the increasing use of social media platforms presents newconferencing technologies to conduct business virtually in light of the COVID-19 pandemic, these cybersecurity risks are becoming more prevalent.challenges. Social media is increasingly being usedInvestmentscommunicate information aboutseek additional sources of financing to meet unplanned or planned expenditures. Unplanned expenditures could be significant and may result from necessary modifications to product development plans or product offerings in response to difficulties encountered with clinical trials. We may also face unexpected costs in preparing products for commercial sale, or in maintaining sales levels of our productscurrently marketed therapeutic products. Our Credit Agreement contains affirmative and the diseasesnegative covenants that, among other things, limit our therapiesability to incur additional indebtedness. If we are designedunable to treat. Social media practices in our industry continue to evolve and regulations related to such use are not always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients and others may use social media channels to commentobtain additional funding on the effectiveness of a productcommercially reasonable terms or to report an alleged adverse event. When such disclosures occur,at all, we may failbe compelled to monitor and comply with applicable adverse event reporting obligationsdelay clinical studies, curtail operations, or weobtain funds through collaborative arrangements that may require us to relinquish rights to certain products or potential markets.42 United Therapeutics, a public benefit corporation defend against political and market pressures generated by social media duegenerate sufficient cash to restrictionsservice or repay our indebtedness, which may have a material adverse effect on what we may say about our products. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate comments about us on any social networking website. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face overly restrictive regulatory actions or incur other harm to our business.Tax legislation may materially adversely affect us. Tax laws are dynamic and continually changing as new laws are passed and new interpretations of existing laws are issued or applied. Governmental tax authorities are increasingly scrutinizing the tax positions of companies. If federal, state or foreign tax authorities change applicable tax laws or issue new guidance, our overall taxes could increase, and our business, financial condition orposition, results of operations, may be adversely impacted.If we are not able to successfully identify, finance, consummate and/or integrate acquisitions, our business operations and financial position could be adversely affected. In August 2018 we acquired SteadyMed. We also entered into several in-licenses related to ongoing development programs in 2018, including our license with Arena related to ralinepag and our license with MannKind related to Treprostinil Technosphere. cash flows.continueborrow up to seek$1.5 billion under our Credit Agreement, which matures in December 2025. Currently, our outstanding principal balance is $800.0 million. Our ability to expand in part through acquisitions of complementary businesses, productsrepay or refinance our debt obligations under our Credit Agreement and technologies, through business combinations or in-licenses. The success of this strategyany future debt that we may incur will depend on our abilityfinancial condition and operating performance, which are subject to identify, and the availabilitya number of suitable acquisition candidates. We may incur costs in the preliminary stages of an acquisition, but may ultimately be unable or unwilling to consummate the proposed transaction for various reasons. In addition, acquisitions involve numerous risks, including the ability to realize or capitalize on anticipated synergies; managing the integration of personnel, products and acquired infrastructure and controls; potential increases in operating costs; managing geographically remote operations; the diversion of management's attention from other business concerns and potential disruptions in ongoing operations during integration; the inherent risks in entering markets and sectors in which we have either limited or no direct experience; and the potential loss of key employees, clients or vendors and other business partners of the acquired companies. External factors such as compliance with laws and regulations, may also impact the successful integration of an acquired business. Acquisitions could result in dilutive issuances of equity securities, the incurrence of debt, one-time write-offs of goodwill and substantial amortization expenses of other intangible assets.beyond our control. We may be unable to obtain financingmaintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on favorableour indebtedness. Our inability to generate sufficient cash flows to satisfy our debt obligations would materially and adversely affect our financial position and results of operations. If we cannot repay or refinance our debt as it becomes due, we may be forced to take disadvantageous actions, including reducing or delaying investments and capital expenditures, disposing of material assets or operations, seeking additional debt or equity capital, or restructuring or refinancing our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if necessarysuccessful, such actions may not enable us to financemeet any such debt service obligations. In addition, our ability to withstand competitive pressures and to react to changes in our industry could be impaired.acquisitions,affect, the income that we receive from our investments, the net realizable value of our investments, and our ability to sell them. These factors have caused, and could in the future cause, us to: (a) experience a decline in our investment income; (b) record impairment charges to reduce the carrying value of our investment portfolio; or (c) sell investments for less than our acquisition cost; each of which in turn could negatively impact our liquidity and our earnings. Our efforts to mitigate these risks through diversification of our investments and monitoring of our portfolio’s overall risk profile may make acquisitions impossible or more costly. Ifnot be successful and the value of our investments may decline. The privately-held companies we are able to obtain financing, the termshave invested in may be onerous and restrictparticularly susceptible to the factors described above as these companies are typically in the early stages of developing technologies or products that may never materialize, which could result in a loss of all or a substantial part of our operations. Further, certain acquisitions may be subject to regulatory approval, which can be time consuming and costly to obtain or may be denied, and if obtained, the terms of such regulatory approvals may impose limitations on our ongoing operations or require us to divest assets.investment in these companies.there can be significant price and volume fluctuations in the market that may not relate to operating performance. The following table sets forth the high and low closing prices of our common stock for the periods indicated: High Low $ 151.94 $ 101.14 $ 168.42 $ 114.60 $ 155.54 $ 98.33 Failure estimates or expectations or those of securities analysts;Quarterly and annual financial results;•trials, including the anticipated announcement of ourBEAT andDISTINCT phase III clinical studies;competitionand other products on our revenues;RemUnity and Trevyent, and the timing and success of our launch of new products, such as the Implantable System for Remodulin;legislationlaws and regulations affecting reimbursement of, our therapeutic products by Medicare, Medicaid or other government payers, and changes in reimbursement policies of private health insurance companies, and negative publicity surrounding the cost of high-priced therapies;2021 Annual Report 43 any other activity which could be viewed as being dilutive to our shareholders; among, or incorrect statements by investors and/or analysts concerning our company, our products, or our operations;regulatory approvals from the FDAdomestic or international regulatory agencies;holdings; and•General market conditions.and our amended and restated certificate of incorporation, seventh amended and restated By-lawscharter, bylaws and employment and license agreements, among other things, could prevent or delay a change of control or change in management that may be beneficial to our public shareholders.and our amended and restated certificate of incorporation, and seventhour ninth amended and restated By-lawsbylaws may prevent, delay, or discourage:•Adiscourage a merger, tender offer, or proxy contest;•The the assumption of control by a holder of a large block of our securities; and/or•The the replacement or removal of current management by our shareholders. amended and restated certificate of incorporation dividespreviously divided our Board of Directors into three classes. MembersThe recent declassification of each class areour Board will be phased in and all directors will not be elected for staggered three-year terms.annually until our 2023 annual meeting of shareholders. This provision may make it more difficult for shareholders to replace the majority of directors.directors until such time. It may also deter the accumulation of large blocks of our common stock by limiting the voting power of such blocks.also result in an acceleration ofaccelerate the vesting of outstanding STAP awards, stock options, and restricted stock units. This, together with anyAny increase in our stock price resulting from the announcement of a change of control, and our broad-based change of control severance program, under which Unitherians may be entitled to severance benefits if they are terminated without cause (or they terminate their employment for good reason) following a change of control, could make an acquisition of our company significantly more expensive to the purchaser. We also have a broad-based change of control severance program, under which employees may be entitled to severance benefits in the event they are terminated without cause (or they terminate their employment for good reason) following a change of control. This program could also increase the cost of acquiring our company.thesethe agreements, plus a specified period thereafter. We are also party to certain license agreements that restrict our ability to assign or transfer the rights licensed to us to third parties, including parties with whom we wish to merge, or those attempting to acquire us. These agreements often require that we obtain prior consent of the counterparties to these agreements if we contemplate a change of control. If these counterparties withhold consent, related agreements could be terminated and we would lose related license rights. For example, Lilly Samumed,and MannKind and Toray Industries, Inc. have the right to terminate our license agreements related to Adcirca SM04646, Treprostinil Technosphere and esuberaprost,Tyvaso DPI, respectively, in the event of certain change of control transactions. These restrictive change of control provisions could impede or prevent mergers or other transactions that could benefit our shareholders.Because we do not intend to pay cash dividends, ourdeclared or paid, cash dividends on our common stock. Furthermore, weand do not intend to pay, cash dividends in the future and our 2018dividends. Our Credit Agreement contains covenants that may restrict us from doing so. As a result, the return on an investment in our common stock will dependdepends entirely upon the future appreciation, if any, in the price of our common stock.canis uncertainty as to whether a court would enforce this provision. If a court ruled the choice of forum provision was inapplicable or unenforceable in an action, we may incur additional costs to resolve such action in other jurisdictions. Our choice of forum provision is intended to apply to the fullest extent permitted by law to the above-specified types of actions and proceedings, including any derivative actions asserting claims under state law or the federal securities laws. Our shareholders will not be no assurances44 United Therapeutics, a public benefit corporation commonconversion to a PBC is in the best interest of shareholders, our status as a PBC may not result in the benefits that we anticipate. For example, we may not be able to achieve our public benefit purpose or realize the expected positive impact from being a PBC.will provideprice. In addition, Delaware's PBC statute may be amended to require more explicit or burdensome reporting requirements that could increase the time and expense required to comply.returnDelaware PBC, we may be subject to investors.increased litigation risk. ITEMUNRESOLVED STAFF COMMENTS ITEMPROPERTIESand occupy a 353,000415,000 square foot combination laboratory and office building complex in Silver Spring, Maryland that serves as our co-headquarters and is used for commercial manufacturing.to manufacture our products. These manufacturing activities include the synthesis of treprostinil, the active ingredient in RemodulinTyvaso, Tyvaso DPI, and Tyvaso,Remodulin, and treprostinil diolamine, the active ingredient in Orenitram, as well as dinutuximab, the active ingredient in Unituxin. We also manufacture finishedTyvaso, Remodulin, Tyvaso and Unituxin drug product in our Silver Spring complex. We own several other buildings in Silver SpringIn 2019, we completed construction of a new cell culture and purification facility. In early 2021, we decided to repurpose this facility to produce autologous cells that will be used principallyto cellularize lung scaffolds for office and laboratory space. We are constructing a 29,000 square foot facility in Silver Spring to serve as a monoclonal antibody manufacturing site.(RTP facility)(RTP facility), which serves as our co-headquarters and is occupied by our clinical research and development, commercialization, and our logistics and manufacturing personnel. We manufacture Orenitram tabletsdrug product and we package, warehouse, and distribute Tyvaso, Remodulin, Tyvaso, Orenitram, and Unituxin at this location. We also own a 132-acre site containing approximately 330,000160,000 square feet of building space adjacent to our RTP facility, which we use for our research, development, and manufacturing facilities related to our lung regeneration program, office space, and for future expansion. District of Columbia—We own four adjacent buildings in Washington, D.C. totaling 30,000 square feet, which serve as office space. Florida—We own two buildings in Brevard County, Florida used for strategic operations and planning. We are also constructing a 75,000 square foot building in Jacksonville, Florida, to serve as a regional ex-vivo lung perfusion facility as part of our collaboration with the Mayo Clinic.2021 Annual Report 45 ITEMLEGAL PROCEEDINGS17—14—Litigation, to our consolidated financial statements, which is incorporated herein by reference. ITEMMINE SAFETY DISCLOSURES ITEMMARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES"UTHR"“UTHR”.20, 2019,17, 2022, there were 3634 holders of record of our common stock.2018 Credit Agreement contains covenants that may restrict us from doing so. We intend to retain any earnings for use in our business operations.three monthsyear ended December 31, 2018, as our most recent share repurchase program was completed in September 2017.46 United Therapeutics, a public benefit corporation 20132016 through December 31, 20182021 of our common stock, compared with an investment in the stocks represented in each of the Nasdaq U.S. Benchmark TR Index and the Nasdaq ICB: 4577 Pharmaceutical Stock Index, assuming the investment of $100 at the beginning of the period and the reinvestment of dividends, if any.
ITEMSELECTED FINANCIAL DATA The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and the notes accompanying the consolidated financial statements andItem 7—Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Report. The historical results are not necessarily indicative of results to be expected for future periods. The following information is presented in millions, except per share data. Year Ended December 31, 2018 2017 2016 2015 2014 $ 1,627.8 $ 1,725.3 $ 1,598.8 $ 1,465.8 $ 1,288.5 $ 805.4 $ 814.9 $ 1,061.7 $ 699.0 $ 538.8 $ 589.2 $ 417.9 $ 713.7 $ 651.6 $ 340.1 $ 13.54 $ 9.50 $ 16.29 $ 14.17 $ 7.06 $ 13.39 $ 9.31 $ 15.25 $ 12.72 $ 6.28 2021 Annual Report 47 As of December 31, 2018 2017 2016 2015 2014 $ 1,858.5 $ 1,430.1 $ 1,053.1 $ 991.8 $ 818.2 $ 3,401.0 $ 2,879.4 $ 2,325.6 $ 2,184.4 $ 1,884.4 $ 316.6 $ 313.7 $ 130.9 $ 144.0 $ 114.5 $ 2,788.6 $ 2,101.8 $ 1,851.3 $ 1,588.6 $ 1,242.4 (1)Refer to Note 11—Stockholders' Equity—Earnings Per Common Share to our consolidated financial statements for the computation of basic and diluted net income per share. ITEMMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS48 United Therapeutics, a public benefit corporation 2021 Annual Report 49 currently market and sell the following commercial products:Remodulina continuously-infusedan inhaled formulation of the prostacyclin analogue treprostinil, approved by the FDA for subcutaneous and intravenous administration to diminish symptoms associated with exercise in PAH patients. Remodulin has also been approved in various countries outside of the United States.•Tyvaso, an inhaled formulation of treprostinil, approved by the FDA and regulatory authorities in Argentina and Israel to improve exercise ability in PAH patients.•Unituxin, a monoclonal antibody approved by the FDA and Health Canada for the treatment of high-risk neuroblastoma.formulations, indications and delivery devices for our existing products. In particular, we are developing the Implantable Systemproducts. This includes Tyvaso DPI, a dry powder inhalation form of Tyvaso. We also recently developed a new pump for Remodulin, called the Remunity Pump, and are currently developing a new version of the RemUnity systemRemunity Pump.We are also working with two medical device manufacturers to develop new delivery systems for delivery of intravenous and subcutaneous Remodulin, respectively.Remodulin. We are studying Tyvaso in patients with WHO Group 3PH-COPD (the PERFECT study) and idiopathic pulmonary hypertension and Orenitram in patients with WHO Group 2 pulmonary hypertension. We are also studying dinutuximab in patients with small cell lung cancer.(esuberaprost, RemoPro, Treprostinil Technosphere, Trevyent,(RemoPro, ralinepag, and Aurora-GT), as well as a product to treat IPF (SM04646). We are also heavily engaged in early-stage research and development of a number of organ transplantation-related technologies including regenerative medicine, 3-D organ bioprinting, xenotransplantation, biomechanical lungs and ex-vivo lung perfusion. Finally, we are engaged in additional, early-stage research and development efforts in PAH and other diseases. For additional detail regarding our research and development programs, seePart I, Item 1—Business—Research and Development.Tyvasothe Remunity Pump, and Orenitram in the United States, and we have entered into an exclusive distribution agreement with ASD Specialty Healthcare, Inc., an affiliate of AmerisourceBergen Corporation, to distribute Unituxin in the United States. We recently amended our agreements with Accredo and CVS Specialty to include the distribution of Tyvaso DPI, if and when it is approved by the FDA. We also sell Tyvaso, Remodulin, and TyvasoUnituxin to distributors internationally. We sell Adcirca through Lilly'sthe pharmaceutical wholesale network.network of Eli Lilly and Company (Lilly). To the extent we have increased the price of any of these products, increases have typically been in the single-digit percentages per year, except for Adcirca, the price of which is set solely by Lilly. In 2018, revenues were higher than we anticipated due to a delay in the launch of generic Adcirca; despite loss of regulatory exclusivity in May 2018, generic Adcirca sales did not commence until August 2018. In 2019, we anticipate revenues will decrease as compared to 2018 because generic Adcirca will be available for the full year in 2019, as compared to only the last four months of 2018. Additional downward pressure on 2019 revenues could result, to a lesser degree, from the launch of a generic version of Remodulin in Austria in January 2019 and the anticipated launch of generic versions of Remodulin in 2019 in the U.S. and other countries in Europe. Longer term, we believe our pipeline of new products and potential label expansions for existing products should result in a return to revenue growth potentially as soon as 2020, although the precise timing depends on a number of factors, including factors that we cannot control. Refer to the risks identified inPart I, Item 1A—Risk Factors, included in this Report.Remodulin, Tyvaso or Orenitram therapythese therapies can be life threatening. Our specialty pharmaceutical distributors typically place monthly orders based on current utilization trends and contractual minimum and maximum inventory requirements. As a result, sales of Remodulin, Tyvaso and Orenitramour treprostinil-based therapies can vary depending on the timing and magnitude of these orders and do not precisely reflect changes in patient demand.Acquisition of SteadyMed Ltd. On April 29, 2018, we entered into an Agreement and Plan of Merger (Merger Agreement) with SteadyMed Ltd. (SteadyMed) and Daniel 24043 Acquisition Corp Ltd., our wholly-owned subsidiary (Merger Sub). The Merger Agreement provided for the merger of Merger Sub with and into SteadyMed (the Merger), with SteadyMed surviving the Merger as our wholly-owned subsidiary. On August 30, 2018, we completed the Merger. At the effective time of the Merger, each SteadyMed ordinary share was converted into the right to receive (1) $4.46 in cash, representing aggregate consideration payable to former holders of SteadyMed securities of approximately $141 million; and (2) one contingent value right, representing the right to receive $2.63 in cash upon the achievement of a milestone defined as 3,000 patients initiating treatment using SteadyMed's Trevyent product on a commercial basis on or before August 30, 2023 (the Milestone). Aggregate contingent consideration of $75.0 million will become payable if the Milestone is achieved. Refer to Note 4—Acquisition, to our consolidated financial statements for additional information.Recent License Agreements During the fourth quarter of 2018, we entered into license agreements with Arena (ralinepag), MannKind (Treprostinil Technosphere) and Samumed (SM04646). For details regarding these license agreements, please seeItem 1—Business—Research and Development. Since our inception, we have devotedfollowing costs:50 United Therapeutics, a public benefit corporation and acquireour products, sold to customers, royalty and milestone payments under license agreements granting us rights to sell related products, direct and indirect distribution costs incurred in the sale of our products, and the costs of inventory reserves for current and projected obsolescence. These costs also include share-based compensation and salary-related expenses for direct manufacturing and indirect support personnel, quality review and release for commercial distribution, direct materials and supplies, depreciation, facilities-related expenses, and other overhead costs. Our cost of product sales for Adcirca increased significantly as a percentage of Adcirca revenues beginning December 1, 2017 as a result of increased royalty and milestone payments, from five percent to an effective rate of approximately 42.5 percent, contained in our amended license agreement with Lilly.pre-FDA approval payments to third-party contract manufacturers.manufacturers before FDA approval of the relevant product. Expenses also include costs for third-party arrangements, including upfront fees and milestone payments required under license arrangements for therapies under development. We have incurred, and expect to continue to incur, increasedsignificant clinical trial-related expenses, driven by the recentprograms, which we expect will result in the enrollment of several large clinical studies.(the 1999 Plan) and awards under our Share Tracking Awards Plans (STAP)(STAP). In June 2015, our shareholders approvedIssuance of awards under these plans was discontinued in 2015. Currently, we grant stock options and restricted stock units under the United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan (the (as amended to date, the 2015 Plan)Plan), which authorizedprovides for the issuance of up to 6,150,00011,000,000 shares of our common stock, including the 1,000,000 shares added pursuant to an amendment and in June 2018, our shareholders approved a 2,900,000 share increase in the number of shares issuable under the 2015 Plan. Following approvalrestatement of the 2015 Plan approved by our shareholders in June 2021. In February 2019, our Board of Directors approved the 2019 Inducement Stock Incentive Plan (the 2019 Inducement Plan), which provides for the issuance of up to 99,000 shares of our common stock pursuant to awards granted to newly-hired Unitherians. Currently, we ceased grantinggrant equity-based awards to Unitherians and members of our Board of Directors in the form of stock options and restricted stock units under the STAP and the 19992015 Plan, and we modified our equity compensation programs to grant stock options to employees and non-employee directors. In June 2016 and October 2017, we also began issuing restricted stock units to non-employee directors and employees, respectively.newly-hired Unitherians under the 2019 Inducement Plan. The grant date fair values of stock options and restricted stock units are recognized as share-based compensation expense ratably over their vesting periods.valuesvalue of STAP awards and stock option grants areoptions is measured using inputs and assumptions under the Black-Scholes-Merton model. The fair value of restricted stock units is measured using our stock price on the date of grant.approximately 2.9 millionapproximat2018.2021. We account for STAP awards as liabilities because they are settled in cash. As such, we must re-measure the fair value of STAP awards at the end of each financial reporting period until the awards are no longer outstanding. Changes in our STAP liability resulting from such re-measurements are recorded as adjustments to share-based compensation expense (benefit) expense and can create substantial volatility within our operating expenses from period to period. The following factors, among others, have a significant impact on the amount of share-based compensation expense (benefit) expense recognized in connection with STAP awards from period to period: (1) volatility in the price of our common stock (specifically, increases in the price of our common stock will generally result in an increase in our STAP liability and related compensation expense, while decreases in our stock price will generally result in a reduction in our STAP liability and related compensation expense); and (2) changes in the number of outstanding awards; and (3) changesawards.vestedpatients prescribed with Orenitram following our expansion of the Orenitram label to reflect the results of the FREEDOM-EV study; (3) the launch of sales of Tyvaso DPI if and unvested awards.Future Prospects As noted above,when it is approved; (4) the2019 we expect revenues will decrease as compared to 2018, largely due to the anticipated impactEurope and other new markets; and (5) modest price increases for some of a full year of competition fromour products; partially offset by further generic versions of Adcirca, the first of which launched in August 2018, and potentially, to a lesser degree, anticipated generic competitionerosion for Remodulin in 2019Adcirca. We believe that additional revenue growth in the U.S.medium- and Europe. We believe we can return to revenue growth, potentially asearly as 2020,longer-term will be driven by commercializing sixfour key therapeutic platforms in our pipeline, each of which isare comprised of multiplethe enabling technologies:2021 Annual Report 51 Platform Enabling Technologies Tyvaso (inhaled treprostinil) Remodulin (parenteral treprostinil) RemUnity, Implantable System for Remodulin, Trevyent, RemoLifeRemoPro, Remunity (machine-filled), additional next-generation pump systemsTyvaso (inhaled treprostinil)BEAT study,INCREASE study,PERFECT study, Spiresta, Treprostinil TechnosphereOrenitram (oral treprostinil)FREEDOM-EV results,SOUTHPAWUnituxin (dinutuximab)DISTINCT study (small cell lung cancer), humanized dinutuximab, and additional GD2-expressing tumorsNew Chemical Entities and New Biologics ralinepag, esuberaprost, SM04646, (gene therapy), Unexisome™ (exosome product for the treatment of bronchopulmonary dysplasia) studyOrgan Manufacturing and Transplantation xenotransplantation,printing,bioprinting, regenerative medicine, ex-vivo lung perfusionsixfour therapeutic platforms with multiple enabling technologies each will lead to significant revenue growth over the medium- and longer-term. For further details regarding our research and development initiatives, please seePart I, Item 1—Business—Research and Development.theseour objectives, grow our business, and maintain profitability will depend on many factors, including among others: (1) the timing and outcome of preclinical research, clinical trials, and regulatory approvalsapproval applications for products we develop; (2) the timing and degree of our success in commercially launching new products; (3) the demand for our products; (4) the price of our products and the reimbursement of our products by public and private health insurance organizations; (5) the competition we face within our industry, including competition from generic companies;companies and new PAH therapies; (6) our ability to effectively manage our business in an increasingly complex legal and regulatory environment; (7) our ability to defend against challenges to our patents; (8) the duration and (8)severity of the COVID-19 pandemic; and (9) the risks identified inPart I, Item 1A—Risk Factors, included in this Report.following table below presents the components of total revenues (dollars in millions):Year Ended December 31, Dollar Change Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 2021 v. 2020 2020 v. 2019 Net product sales: Tyvaso $ 607.5 $ 483.3 $ 415.6 $ 124.2 $ 67.7 26 % 16 % Remodulin 513.7 516.7 587.0 (3.0) (70.3) (1) % (12) % Orenitram 306.1 293.1 225.3 13.0 67.8 4 % 30 % Unituxin 202.3 122.9 113.7 79.4 9.2 65 % 8 % Adcirca 55.9 67.3 107.2 (11.4) (39.9) (17) % (37) % Total revenues $ 1,685.5 $ 1,483.3 $ 1,448.8 $ 202.2 $ 34.5 14 % 2 % Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ 599.0 $ 670.9 $ 602.3 (10.7 )% 11.4 % 415.2 372.9 404.6 11.3 % (7.8 )% 323.7 419.7 372.2 (22.9 )% 12.8 % 205.1 185.8 157.2 10.4 % 18.2 % 84.8 76.0 62.5 11.6 % 21.6 % $ 1,627.8 $ 1,725.3 $ 1,598.8 (5.7 )% 7.9 % 2018 Compared to 2017 Revenues for the year ended December 31, 2018 decreasedNet product sales from our treprostinil-based products (Tyvaso, Remodulin, and Orenitram) grew by $97.5$134.2 million in 2021, as compared to 2020.same period in 2017.by $71.9 million in 20182021, as compared to 2017. International Remodulin net product sales decreased2020, driven by $90.0a $28.9 million primarily due to the transfer of additional regulatory and commercial responsibilities to an international distributordecrease in 2017. As a result of this transfer, in 2017 we recognized $47.4 million of net product sales related to the one-time purchase of Remodulin inventory by that distributor and we reduced the price at which we sell Remodulin to that distributor. The remaining decrease was primarily due to a reduction in quantities shipped to that distributor. U.S. Remodulin net product sales, increased by $18.1 million, primarily due to a price increase that was implemented in April 2018, which was the first price increase for Remodulin since 2010, and an increase in the number of patients being treated with Remodulin. These increases were partially offset by the one-time $4.5a $25.9 million impact of a changeincrease in contractual minimum inventory levels with a U.S. distributor, as discussed below. Tyvasointernational Remodulin net product sales increased by $42.3 millionsales. The decrease in 2018 as compared to 2017. This increase was primarily due to price increases that were implemented in April 2017 and January 2018; the reversal in the fourth quarter of 2018 of an estimated $15.4 million liability for Medicaid rebates, of which $13.6 million was initially recorded in 2017; and an increase in the number of patients being treated with Tyvaso. These increases were partially offset by the impact of replacing $6.2 million of commercial Tyvaso product that our specialty pharmaceutical distributor previously used in connection with a clinical trial; and the one-time $3.5 million impact of a change in contractual minimum inventory levels with a U.S. distributor, as discussed below. AdcircaRemodulin net product sales decreased by $96.0 million in 2018 as compared to 2017. This decrease was primarily due to a decrease in bottlesquantities sold and, to a lesser extent, higher gross-to-net deductions. The increase in international Remodulin net product sales was primarily due to the launch of a generic version of Adcircareduced orders by an international distributor in August 2018, and was partially offset by price increases that were implemented by Lilly2020 in May 2017 and January 2018. In addition, we increased our allowance for product returns for Adcirca by $16.4 million in 2018 based on our estimates oforder to reduce its inventory held by distributors and other downstream customers that would expire unsold as a result of the increased useanticipated impact of a generic version of Adcirca. See the tables in theGross-to-Net Deductions section below for more information on the liability balances related to our allowance for product returns. Orenitramcompetition.by $19.3 million in 2018,2021, as compared to 2017, primarily2020, due to an increase in the number of patients being treated with Orenitram,quantities sold and, to a lesser extent, price increase that wasimplemented in January 2018, and the one-time $3.7 million impact of a change in contractual minimum inventory levels with a U.S. distributor, as discussed below. Unituxin net product sales increased by $8.8 million in 2018, as compared to 2017, primarily due to anincreases. The increase in the number of vialsquantities sold and price increases that were implemented in April and December 2017. During the fourth quarter of 2017, we amended our agreements with one of our U.S. specialty pharmacy distributors, in part to make the monthly minimum inventory requirement consistent across Remodulin, Tyvaso, and Orenitram. This change resulted in a one-time decrease in total net product sales of $4.32021 included $18.4 million as the distributor adjusted to the new contractual inventory requirement levels in the first quarter of 2018. On an individual product basis, net product sales of Remodulin decreased by $4.5 million, net product sales of Tyvaso decreased by $3.5 million, and net product sales of Orenitram increased by $3.7 million.2017 Compared to 2016 Revenues for the year ended December 31, 2017 increased by $126.5 million as compared to the same period in 2016. Remodulin net product sales increased by $68.6 million in 2017 as compared to 2016. International Remodulin net product sales increased by $52.8 million, primarily due to the transfer of additional regulatory and commercial responsibilities to an international distributor in 2017. As a result of this transfer, in 2017 we recognized $47.4 million of net product sales related to the one-time purchaselaunch of Remodulin inventory by that distributor. U.S. Remodulin net product sales increased by $15.8 million, due to an increaseUnituxin in the number of patients being treated with Remodulin. Tyvaso net product sales decreased by $31.7 million in 2017 as compared to 2016. This decrease was primarily due to a net decrease in the number of patients being treated with Tyvaso, which we believe was driven by the availability of oral prostacyclin-class therapies and the increased propensity to treat patients with multiple oral therapies earlier in their disease progression, which can delay the need to prescribe inhaled therapies such as Tyvaso. The remaining decrease resulted from an additional one-time $11.1 million liability for estimated Medicaid rebates recorded in 2017 related to Tyvaso sales prior to January 1, 2017. These decreases were partially offset by a price increase implemented in April 2017. Adcirca net product sales increased by $47.5 million in 2017, as compared to 2016, primarily due to price increases implemented by Lilly in June and December 2016 and May 2017. Orenitram net product sales increased by $28.6 million in 2017, as compared to 2016, primarily due to an increase in the number of patients being treated with Orenitram. Unituxin net product sales increased by $13.5 million in 2017, as compared to 2016, primarily due to an increase in the number of vials sold and price increases implemented in April and December 2017.52 United Therapeutics, a public benefit corporation allowancesallowance for sales returns; and (4) distributor fees. These are referred to as gross-to-net deductions and are primarily based on estimates reflecting historical experiences andas well as contractual and statutory requirements. We currently estimate our allowance for sales returns using reports from our distributorsestimatesestimate of inventory remaining in the distribution channel. The tables below include a reconciliation of the liability accounts associated with these deductions (in millions):Year Ended December 31, 2021 Rebates & Chargebacks Prompt Pay Discounts Allowance for Sales Returns Distributor Fees Total Balance, January 1, 2021 $ 65.3 $ 3.0 $ 12.5 $ 3.7 $ 84.5 Provisions attributed to sales in: Current period 217.0 38.5 — 31.3 286.8 Prior periods 1.6 — (3.9) 0.2 (2.1) Payments or credits attributed to sales in: Current period (151.8) (34.7) — (22.4) (208.9) Prior periods (64.3) (3.0) (2.3) (4.9) (74.5) Balance, December 31, 2021 $ 67.8 $ 3.8 $ 6.3 $ 7.9 $ 85.8 Year Ended December 31, 2020 Rebates & Chargebacks Prompt Pay Discounts Allowance for Sales Returns Distributor Fees Total Balance, January 1, 2020 $ 51.7 $ 2.6 $ 14.2 $ 4.1 $ 72.6 Provisions attributed to sales in: Current period 196.1 32.5 — 20.6 249.2 Prior periods (0.2) — — (0.3) (0.5) Payments or credits attributed to sales in: Current period (139.7) (29.6) — (16.9) (186.2) Prior periods (42.6) (2.5) (1.7) (3.8) (50.6) Balance, December 31, 2020 $ 65.3 $ 3.0 $ 12.5 $ 3.7 $ 84.5 Year Ended December 31, 2019 Rebates & Chargebacks Prompt Pay Discounts Allowance for Sales Returns Distributor Fees Total Balance, January 1, 2019 $ 54.7 $ 3.2 $ 22.4 $ 4.8 $ 85.1 Provisions attributed to sales in: Current period 172.8 31.3 (2.6) 19.0 220.5 Prior periods 5.9 — (3.6) — 2.3 Payments or credits attributed to sales in: Current period (126.1) (28.9) — (15.0) (170.0) Prior periods (55.6) (3.0) (2.0) (4.7) (65.3) Balance, December 31, 2019 $ 51.7 $ 2.6 $ 14.2 $ 4.1 $ 72.6 Year Ended December 31, 2018 Rebates and
Chargebacks Prompt Pay
Discounts Allowance for
Sales Returns Distributor
Fees Total $ 74.0 $ 4.7 $ 7.2 $ 3.4 $ 89.3 232.5 37.7 17.5 19.3 307.0 (8.8 ) — — — (8.8 ) (185.4 ) (34.7 ) — (14.6 ) (234.7 ) (57.6 ) (4.5 ) (2.3 ) (3.3 ) (67.7 ) $ 54.7 $ 3.2 $ 22.4 $ 4.8 $ 85.1 2021 Annual Report 53 Year Ended December 31, 2017 Rebates and
Chargebacks Prompt Pay
Discounts Allowance for
Sales Returns Distributor
Fees Total $ 46.0 $ 4.3 $ 7.7 $ 2.8 $ 60.8 228.2 37.9 0.9 14.5 281.5 13.3 — — (0.2 ) 13.1 (163.1 ) (33.3 ) — (10.9 ) (207.3 ) (50.4 ) (4.2 ) (1.4 ) (2.8 ) (58.8 ) $ 74.0 $ 4.7 $ 7.2 $ 3.4 $ 89.3 Year Ended December 31, 2016 Rebates and
Chargebacks Prompt Pay
Discounts Allowance for
Sales Returns Distributor
Fees Total $ 44.6 $ 3.9 $ 5.3 $ 2.6 $ 56.4 206.3 36.9 3.2 12.6 259.0 4.0 — — — 4.0 (164.7 ) (32.7 ) — (9.8 ) (207.2 ) (44.2 ) (3.8 ) (0.8 ) (2.6 ) (51.4 ) $ 46.0 $ 4.3 $ 7.7 $ 2.8 $ 60.8 Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ 201.9 $ 103.1 $ 72.1 95.8 % 43.0 % (3.2 ) 2.6 0.6 (223.1 )% 333.3 % $ 198.7 $ 105.7 $ 72.7 88.0 % 45.4 % Year Ended December 31, Dollar Change Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 2021 v. 2020 2020 v. 2019 Category: Cost of product sales $ 116.7 $ 101.0 $ 117.4 $ 15.7 $ (16.4) 16 % (14) % 5.8 7.1 0.2 (1.3) 6.9 (18) % Total cost of product sales $ 122.5 $ 108.1 $ 117.6 $ 14.4 $ (9.5) 13 % (8) % Product Sales.product sales, excluding share-based compensation. The increase in cost of product sales of $98.8 million for the year ended December 31, 2018,2021, as compared to the same period in 2017,2020, was primarily attributable to a $96.9 million increaseshipments of the Remunity Pump following launch in royalty expense for Adcirca. As a result of an amendment to our license agreement with Lilly, our royalty rate on net product sales of Adcirca increased from five percent to an effective rate of approximately 42.5 percent effective December 1, 2017. The increase in cost of product sales of $31.0 million for the year ended December 31, 2017, as compared to the same period in 2016, was primarily attributable to a $21.9 million increase in royalty expense for Adcirca noted above. The remaining increase in cost of product sales was primarily attributable to an increase in sales. Expense Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ 370.0 $ 256.4 $ 157.6 44.3 % 62.7 % (12.1 ) 8.2 (10.0 ) (247.6 )% 182.0 % $ 357.9 $ 264.6 $ 147.6 35.3 % 79.3 % Year Ended December 31, Dollar Change Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 2021 v. 2020 2020 v. 2019 Category: Research and development projects $ 515.7 $ 328.2 $ 1,182.2 $ 187.5 $ (854.0) 57 % (72) % 24.4 29.5 0.4 (5.1) 29.1 (17) % Total research and development expense $ 540.1 $ 357.7 $ 1,182.6 $ 182.4 $ (824.9) 51 % (70) % projects.excluding share-based compensation. The increase in research and development project expenses of $113.6 millionexpense for the year ended December 31, 2018,2021, as compared to the same period in 2017,2020, was driven by the continued investment in our product pipeline, which includes multiple phase III clinical trials in cardiopulmonary diseases and oncology as well as programs in regenerative medicine and organ manufacturing. Research and development expense for the treatment of cardiopulmonary diseases increased by $95.9due to: (1) a $107.3 million for the year ended December 31, 2018, as compared to the same period in 2017, due to up-front payments of $55.0 million under our licensing and research agreements with MannKind and $10.0 million under our licensing agreement with Samumed, increased spending of $22.9 million on the development of drug delivery devices, including the Implantable System for Remodulin and RemUnity, and increased spending on several clinical and non-clinical studies. Research and development expense for cancer-related projects increased by $13.9 million for the year ended December 31, 2018, as compared to the same period in 2017, due to an increase in spending on theDISTINCT study. Research and development expenses for organ manufacturing projects increased by$3.9 million for the year ended December 31, 2018, as compared to the same period in 2017, due to increased preclinical work on technologies designed to increase the supply and distribution of transplantable organs and tissues. The increase inin-process research and development projectsimpairment charge related to our March 2021 decision to discontinue the U.S. development of $98.8Trevyent; (2) a $105.0 million forpurchase of a pediatric disease priority review voucher, which we redeemed upon submission of the year ended December 31, 2017, as comparedTyvaso DPI NDA; and (3) an $11.6 million impairment charge related to the same period in 2016, was driven by the expansionrepurposing one of our pipeline programs to treat cardiopulmonary disease and cancer and to develop technologies in organ manufacturing. Research and development expense for the treatment of cardiopulmonary diseases increased by $38.4 million for the year ended December 31, 2017, as compared to the same period in 2016, due to increased spending on several clinical and non-clinical studies, includingFREEDOM-EV,INCREASE andSOUTHPAW, on the development of new drug products, including RemoPro, and drug delivery device developments, including the Implantable System for Remodulin and the RemUnity system. Thefacilities. These increases in research and development expenses were partially offset by a decrease in expenses for esuberaprost formulationmilestone payments under our license and collaboration agreement with MannKind and reduced costs following the relatedBEATcompletion of the phase 3 as the clinical trial was fully enrolledof Unituxin in March 2017. Research and development expense for cancer-related projects increased by $21.3 million for the year ended December 31, 2017, as compared to the same period in 2016, due to an increase in spending on theDISTINCT study. Research and development expenses for organ manufacturing projects increased by $36.3 million for the year ended December 31, 2017, as compared to the same period in 2016, due to increased preclinical work on technologies designed to increase the supply and distribution of transplantable organs and tissues. Expense Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ 217.8 $ 203.1 $ 210.7 7.2 % (3.6 )% 59.1 64.3 84.6 (8.1 )% (24.0 )% (11.1 ) 62.7 21.5 (117.7 )% 191.6 % $ 265.8 $ 330.1 $ 316.8 (19.5 )% 4.2 % Year Ended December 31, Dollar Change Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 2021 v. 2020 2020 v. 2019 Category: General and administrative $ 294.3 $ 241.8 $ 230.7 $ 52.5 $ 11.1 22 % 5 % Sales and marketing 64.4 54.9 60.7 9.5 (5.8) 17 % (10) % 108.3 127.2 44.8 (18.9) 82.4 (15) % 184 % Total selling, general, and administrative expense $ 467.0 $ 423.9 $ 336.2 $ 43.1 $ 87.7 10 % 26 % 54 United Therapeutics, a public benefit corporation administrative.administrative, excluding share-based compensation. The increase in general and administrative expenses of $14.7 millionexpense for the year ended December 31, 2018,2021, as compared to the same period in 2017,2020, was primarily resulted from:due to: (1) a $10.3 millionan increase in litigation expenses; and (2) an increase in consulting expenses; (2) a $4.7 million increase in compensation due to an increase in staffing; and (3) a $4.4 million increase in acquisition and integration costs related to the SteadyMed acquisition. The increase was partially offset by a $7.1 million decrease in legal fees incurred in connection with intellectual property litigation and the DOJ investigation of our support of 501(c)(3) organizations that provide financial assistance to patients. The decrease in general and administrative expenses of $7.6 million for the year ended December 31, 2017, as compared to the same period in 2016, primarily resulted from: (1) a $32.0 million decrease in grants to non-affiliated, non-profit organizations that provide financial assistance to patients with PAH; and (2) a $9.3 million decrease of expenses in connection with the disposition and write down of various properties in 2016. The decrease was partially offset by: (1) a $9.4 million increase in legal fees incurred in connection with intellectual property litigation and the DOJ investigation of our support of 501(c)(3) organizations that provide financial assistance to patients;(2) a $9.2 million increase in compensation due to an increase in staffing; and (3) a $6.5 million increase in consulting expenses. Sales and marketing. The decrease in sales and marketing expenses of $5.2 million for the year ended December 31, 2018, as compared to the same period in 2017, primarily resulted from a decrease in the use of external marketing consultants. The decrease in sales and marketing expenses of $20.3 million for the year ended December 31, 2017, as compared to the same period in 2016, primarily resulted from a $11.3 million decrease in compensation and related costs associated with the 2016 consolidation of our sales and marketing staff.Year Ended December 31, Dollar Change Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 2021 v. 2020 2020 v. 2019 Category: Stock options $ 25.4 $ 44.0 $ 70.5 $ (18.6) $ (26.5) (42) % (38) % Restricted stock units 24.7 20.5 13.3 4.2 7.2 20 % 54 % STAP awards 86.6 97.8 (39.7) (11.2) 137.5 (11) % 346 % Employee stock purchase plan 1.8 1.5 1.3 0.3 0.2 20 % 15 % Total share-based compensation expense $ 138.5 $ 163.8 $ 45.4 $ (25.3) $ 118.4 (15) % 261 % Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ 58.5 $ 43.0 $ 24.8 36.0 % 73.4 % 7.3 2.2 1.1 231.8 % 100.0 % (93.4 ) 27.1 (15.2 ) (444.6 )% 278.3 % 1.2 1.2 1.4 — % (14.3 )% $ (26.4 ) $ 73.5 $ 12.1 (135.9 )% 507.4 % (benefit) expense by line item onin our consolidated statements of operations (dollars in millions): Year Ended December 31, Dollar Change Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 2021 v. 2020 2020 v. 2019 Cost of product sales $ 5.8 $ 7.1 $ 0.2 $ (1.3) $ 6.9 (18) % Research and development 24.4 29.5 0.4 (5.1) 29.1 (17) % Selling, general, and administrative 108.3 127.2 44.8 (18.9) 82.4 (15) % 184 % Total share-based compensation expense $ 138.5 $ 163.8 $ 45.4 $ (25.3) $ 118.4 (15) % 261 % Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ (3.2 ) $ 2.6 $ 0.6 (223.1 )% 333.3 % (12.1 ) 8.2 (10.0 ) (247.6 )% 182.0 % (11.1 ) 62.7 21.5 (117.7 )% 191.6 % $ (26.4 ) $ 73.5 $ 12.1 (135.9 )% 507.4 % Share-based compensation.increasedecrease in share-based compensation benefit of $99.9 millionexpense for the year ended December 31, 2018,2021, as compared to the same period in 2017,2020, was primarily due to a $120.5 million increase in STAP benefit related to a decrease in our stock price during 2018, partially offset by:to: (1) a $15.5 million increasedecrease in stock option expense due to additionalfewer awards granted and outstanding in 2018;2021; and (2) a $5.1 milliondecrease in STAP expense driven by a 42 percent increase in our stock price during 2021, as compared to a 72 percent increase in our stock price during 2020, partially offset by an increase in restricted stock unit expense due to additional awards granted and outstanding in 2018. We began granting restricted stock units in 2016 and expect the share-based compensation for restricted stock units to increase in the future as additional restricted stock units are granted.expense. Refer to Note 108—Share-Based Compensation, to our consolidated financial statements for more information.increasechange in share-based compensationother income, net for the year ended December 31, 2021, as compared to the same period in 2020, was primarily due to the recognition of net unrealized and realized gains on our investments in equity securities and net unrealized gains and losses on our contingent consideration assets. Refer to Note 4—Investments and Note 5—Fair Value Measurements, to our consolidated financial statements for more information.of $61.4was $118.1 million for the year ended December 31, 2017,2021, as compared to $124.1 million for the same period in 2016, was primarily due to: (1) a $42.3 million increase in STAP expense related to an increase in our stock price during 2017 and the continued vesting of outstanding awards; and (2) an $18.2 million increase in stock option expense due to additional awards granted and outstanding in 2017.Settlement of Loss Contingency In December 2017, we entered into a civil Settlement Agreement with the U.S. Government to resolve a DOJ investigation related to our support of 501(c)(3) organizations that provide financial assistance to patients. During the second quarter of 2017, we recorded a $210.0 million accrual related to this matter, and ultimately paid this amount, plus interest, to the U.S. Government upon settlement. This matter is described in more detail in Note 17—Litigation—Department of Justice Subpoena, to our consolidated financial statements.Impairments of Investments in Privately-Held Companies During2020. For the years ended December 31, 20182021 and 2017, we recorded $53.5 million2020, our effective income tax rates ($49.6 million of impairment charges, respectively, related to our investments in privately-held companies. There were no such impairment charges in the year ended December 31, 2016.Income Tax Expense The provision for income taxes was $169.7 million19 percent, respectively. Our ETR for the year ended December 31, 2018,2021 increased, as compared to $351.6 millionour ETR for the same period in 2017. Our 2018 effective tax rate (ETR) decreased compared to 2017 due to the impacts of The Tax Cuts and Jobs Act (Tax Reform) and the nondeductible portion of an accrual in 2017 in connection with a civil settlement with the Department of Justice. For the yearsyear ended December 31, 2018, 2017 and 2016, the effective2020, primarily due to increases in blended state income tax rates were approximately 22 percent, 46 percent and 33 percent, respectively.decreases in tax credits, partially offset by a decrease in the valuation allowance on deferred taxes. For additional details, refer to Note 12—10— Tax Reform has multiple provisions that impacted our tax expense. The significant impacts were a reduction in the U.S. federal corporate tax rate from 35 percent to 21 percent, additional limitations on deductions for executive compensation, a reduction of the Orphan Drug Credit, repeal of the Section 199 deduction for domestic manufacturing activities, and the introduction of the foreign derived intangible income (FDII) deduction. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant did not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of Tax Reform. As a result of changes under Tax Reform, we recognized a provisional amount of $71.0 million of additional tax expense in our consolidated financial statements for the year ended December 31, 2017. The measurement period prescribed under SAB 118 ended on December 22, 2018 and our analysis and accounting for Tax Reform has been completed as of this date. We recognized a reduction of tax expense of $1.8 million for the year ended December 31, 2018 due to refinements that were made during the measurement period to the calculation of the foreign elements of Tax Reform. Going forward, we expect to continue to maintain the lower effective tax rate as a result of Tax Reform, principally driven by the reduced federal corporate tax rate and FDII deduction, and partially offset by the reduction of the Orphan Drug Credit and the repeal of the Section 199 deduction.Share Repurchases In April 2017, our Board of Directors approved a share repurchase program authorizing up to $250.0 million in aggregate repurchases of our common stock. Pursuant to this authorization, in May 2017, we paid $250.0 million upon entering into an accelerated share repurchase agreement (ASR) with Citibank, N.A. (Citibank). Pursuant to the terms of the ASR, in June 2017, Citibank delivered to us approximately 1.7 million shares of our common stock, representing the minimum number of shares we were entitled to receive under the ASR. Upon termination of the ASR in September 2017, Citibank delivered to us approximately 0.3 million additional shares of our common stock.2021 Annual Report 55 long-term demand foraggregate growth in revenues from our commercial products, other than Adcirca, to continue to grow.products. Furthermore, our customer base remains stable and we believe that it presents minimal credit risk. However, any projections of future cash flows are inherently subject to uncertainty and we may seek other forms of financing. In June 2018, we entered into a credit agreement (the 2018 Credit Agreement)Agreement), which provides an unsecured, revolving line of credit of up to $1.0 billion$1.5 billion. Our aggregate outstanding balance under the Credit Agreement, which matures in 2025, was $800.0 million and classified as a second unsecured revolving credit facility of up to $500.0 million (which facilities may, atnon-current liability in our request, be increased by up to $300.0 million in the aggregate subject to obtaining commitments from existing or new lenders for such increase and satisfying other conditions), with a current maturity date of June 2023, of which $250.0 million was drawn and outstandingconsolidated balance sheets as of both December 31, 20182021 and $1,050.0 million was outstanding as of February 27, 2019. SeeUnsecured Revolving Credit Facility below for further details.investmentsinstruments comprise the following (dollars in millions):Year Ended December 31, Percentage Change 2021 2020 2021 v. 2020 Cash and cash equivalents $ 894.8 $ 738.7 21 % Marketable investments—current 1,035.9 1,096.3 (6) % Marketable investments—non-current 1,649.9 1,149.6 44 % Total cash and cash equivalents and marketable investments $ 3,580.6 $ 2,984.6 20 % Year Ended
December 31, Percentage
Change 2018 2017 2018 v. 2017 $ 669.2 $ 705.1 (5.1 )% 746.7 222.3 235.9 % 442.6 502.7 (12.0 )% $ 1,858.5 $ 1,430.1 30.0 % The increase of $428.4 million in our cash and cash equivalents and marketable investments was primarily due to: (1) $778.4 million in cash generated from operations; and (2) $15.6 million of proceeds from the exercise of stock options, partially offset by: (1) $184.4 million in cash paid to purchase property, plant and equipment; (2) $124.1 million in cash paid related to the acquisition of SteadyMed, net of cash acquired; (3) $46.0 million in deposits; (4) $13.2 million in cash paid for debt issuance costs; and (5) $5.0 million in cash paid for an investment in a privately-held company. Year Ended December 31, Percentage Change 2018 2017 2016 2018 v. 2017 2017 v. 2016 $ 778.4 $ 474.2 $ 643.6 64.2 % (26.3 )% $ (820.6 ) $ (835.6 ) $ 48.3 1.8 % NM (1) $ 6.3 $ 43.3 $ (497.7 ) (85.5 )% 108.7 % Year Ended December 31, Percentage Change 2021 2020 2019 2021 v. 2020 2020 v. 2019 Net cash provided by (used in) operating activities $ 598.2 $ 755.7 $ (206.6) (21) % 466 % Net cash used in investing activities $ (486.9) $ (738.5) $ (335.4) 34 % (120) % Net cash provided by (used in) financing activities $ 44.8 $ (16.9) $ 611.2 365 % (103) % (1)Calculation is not meaningful. The increase of $304.2$157.5 million in net cash provided by operating activities for the year ended December 31, 20182021, as compared to the year ended December 31, 20172020, was primarily due to: (1) a $244.2$105.0 million decreasepurchase of a pediatric disease priority review voucher; (2) a $60.5 million increase in cash paid for income taxes; and (2)(3) a $210.0$55.0 million decreaseincrease in cash paid to settle a loss contingency,STAP awards, partially offset by: (1)by a $96.9 million increase in the royalty expense for Adcirca; and (2) $65.0 million of upfront payments under our licensing agreements with MannKind and Samumed. The decrease of $169.4 million in net cash provided by operating activities for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to: (1) a $210.0 million paid to settle a loss contingency; and (2) a $78.4 million net cash outflow due to changes in other operating assets and liabilities. The decrease was partially offset by: (1) a $126.5 million increase in revenues during the year, which resulted in higher cash collections; and (2) a $15.5$4.5 million decrease in cash paid for income taxes due to timing of payments.$15.0$251.6 million in net cash used in investing activities for the year ended December 31, 20182021, as compared to the year ended December 31, 20172020, was primarily due to: (1)to a $236.2$315.5 million decrease in cash used for nettotal purchases, sales, and maturities of available-for-sale, held-to-maturity and other investments; and (2) a $55.4 million decrease in cash paid to purchasemarketable investments, in privately held companies, partially offset by: (1) $124.1 million in net cash paid related to the acquisition of SteadyMed; (2)by a $98.1$61.5 million increase in cash paid to purchase property, plant, and equipment; (3) $46.0 million in deposits; and (4) a $8.3 millionequipment.in cash proceeds from the sale of property, plant and equipment. The increase of $883.9$61.7 million in net cash used in investing activities for the year ended December 31, 2017 compared to the year ended December 31, 2016 was primarily due to: (1) a $826.9 million increase in cash used for net purchases of available-for-sale, held-to-maturity and other investments; (2) a $48.3 million increase in cash paid to purchase property, plant and equipment; and (3) a $24.4 million increase in cash paid to purchase investments held at cost. The increase in cash used was partially offset by $8.3 million in proceeds from the sale of property, plant and equipment.Financing Activities The decrease of $37.0 million in net cash provided by financing activities for the year ended December 31, 20182021, as compared to the year ended December 31, 20172020, was primarily due to: (1) $24.3 million decrease in proceeds from stock option exercises; and (2) $12.5 million increase in paymentsan absence of debt issuance costs primarily related to the 2018 Credit Agreement. The increaserepayments on our line of $541.0 million in net cash provided by financing activities forcredit during the year ended December 31, 20172021, as compared to a $50.0 million repayment on our line of credit during year ended December 31, 2020; and (2) a $16.2 million increase in proceeds from the exercise of stock options during the year ended December 31, 2021, as compared to the year ended December 31, 2016 was primarily due to: (1) a $250.0 million in proceeds from borrowing under our line of credit used to fund the ASR described in Note 8—Debt—Unsecured Revolving Credit Facility—2016 Credit Agreement, to our consolidated financial statements; (2) a $250.0 million decrease in repurchases of our common stock; and (3) a $32.2 million increase in proceeds from stock option exercises. In October 2015, our Board of Directors authorized a new program for the repurchase of up to $500.0 million of our common stock in open or privately negotiated transactions, at our discretion. This program was effective from January 1, 2016 to December 31, 2016. In the aggregate, we repurchased approximately 4.2 million shares of common stock under this program for $500.0 million.56 United Therapeutics, a public benefit corporation a credit agreement (the 2018the Credit Agreement) providingAgreement, which provides for an unsecured revolving credit facility of up to $1.5 billion. On June 27, 2018, we borrowed $250.0 million under this facility and used the funds to repay outstanding indebtedness under the existinga previous credit agreement (the 2016 Credit Agreement).facility that was terminated in 2018. In January 2019, we borrowed an additional $800.0 million under this facility and used the funds for an upfront payment related to the global license agreement with Arena. We did not pay down our balance under the Credit Agreement during the year ended December 31, 2021. We paid down $50.0 million and $200.0 million of our balance under the Credit Agreement during the years ended December 31, 2020 and 2019, respectively. The aggregate balance of $250.0$800.0 million remained outstanding as of both December 31, 2018,2021 and $1,050.0 million was outstanding as of February 27, 2019.24, 2022. Refer to Note 8—7—Debt,—Unsecured Revolving Credit Facility—2018 Credit Agreement,to our consolidated financial statements.2018,2021, we had the following contractual obligations (in millions): Payments Due by Period Total Less than
1 year 2 - 3 Years 4 - 5 Years More than
5 Years $ 11.5 $ 4.7 $ 4.2 $ 2.0 $ 0.6 319.7 13.9 27.9 277.9 — 64.8 64.8 — — — 76.7 19.9 — 5.2 51.6 430.6 298.0 77.9 27.1 27.6 $ 903.3 $ 401.3 $ 110.0 $ 312.2 $ 79.8 Payments Due by Period Total Less than 1 year 2-3 Years 4-5 Years More than 5 Years Operating lease obligations $ 18.9 $ 3.1 $ 5.1 $ 3.5 $ 7.2 863.9 16.0 31.9 816.0 — 99.2 99.2 — — — 86.7 18.2 22.8 6.8 38.9 477.1 342.6 100.6 19.3 14.6 $ 1,545.8 $ 479.1 $ 160.4 $ 845.6 $ 60.7 2018Credit Agreement, assuming contractual maturity of the Credit Agreement. The 2018 Credit Agreement will mature five years afterin December 2025. As of December 31, 2021, we have classified the closing dateentire $800.0 million outstanding balance as a non-current liability, since we have no intention to repay any portion of the agreement.outstanding balance during 2022. Refer to Note 8—7—Debt to our consolidated financial statements for further details.2018.2021. Refer to Note 108—Share-basedShare-Based Compensation to our consolidated financial statements for further details.13—11—Employee Benefit Plans—Supplemental Executive Retirement Plan to our consolidated financial statements for further details.Our obligation to pay certainThe timing and amount of these amountsour obligations may be reduceddiffer based on certain future events.pay additional amountsmake payments upon the achievement of various development, regulatory, and commercial milestones for agreements we have entered into with third parties. These payments are contingent upon the occurrence of various future events, some of which have a high degree of uncertainty of occurring. These contingent payments have not been included in the table above, and, except with respect to the fair value of the contingent consideration obligations, are not recorded onin our consolidated balance sheets. The table above does not include the $800.0 million upfront payment made to Arena in January 2019 related to the global license agreement. Refer to Note 18—Subsequent Events12—Commitments and Contingencies to our consolidated financial statements for further details.Toray License Obligations In 2000, we entered into a license agreement with Toray to obtain exclusive rights to develop and market beraprost, a chemically stable oral prostacyclin analogue, in a sustained release formulation in the United States and Canada for the treatment of all cardiovascular indications. Pursuant to a 2007 amendment to this agreement, we issued Toray 200,000 shares of our common stock. 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. To date, Toray has not notified us that it intends to require us to repurchase these shares. In 2011, we amended this agreement 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. (6)As of December 31, 2015, this obligation was fully satisfied. In March 2017,2021, our other non-current liabilities in our consolidated balance sheets includes a liability of $3.9 million for unrecognized tax benefits, including related interest and penalties. Due to the high degree of uncertainty on the timing of future events that could extinguish these unrecognized tax benefits, we amendedare unable to estimate the period of settlement and therefore we have excluded these unrecognized tax benefits from the table above. Refer to Note 10—Income Taxes to our license agreement with Toray toconsolidated financial statements for further reduce the royalty rate to single digits in exchange for a commitment to make milestone payments to Toray in the event that we do not achieve certain clinical and regulatory events by certain dates.and Assignment Agreements Historically, we paidfiveroyalty equal to ten percent royalty on net product sales of Adcirca. In May 2017, we amended our Adcirca license agreement with Lilly. 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 makeas well as milestone payments to Lilly equal to $325,000 for each $1,000,000 in Adcirca net product sales. We pay a single-digit percentage royalty based on net product sales of Orenitram under our license agreement with Supernus. We also pay The Scripps Research Institute a one percent royalty on sales of Unituxin. We have entered into other license rights arrangementsagreements under which we are required to make milestone payments upon the achievement of certain developmental and commercialization objectives and royalty payments upon the commercialization of related licensed technology.2021 Annual Report 57 (GAAP)(GAAP). GAAP requires that we make estimates and assumptions that affect the amounts and timing reported in our consolidated financial statements. As we become aware of updated information or new developments, these estimates and assumptions may change and materially impact reported amounts. We consider the following accounting policies to be critical to our consolidated financial statements because they require the use of our judgment and estimates (including those that are forward-looking) in their application. Tyvaso, Orenitram, Unituxin, and Adcirca. Revenue is recognized when we transfer control of our products to our distributors, as our contracts have a single performance obligation (delivery of our product). These revenues are subject to various product sales allowances, referred to as gross-to-net deductions, which are deducted from revenues to determine net product sales. For a description of our related accounting policies, refer to Note 2—Summary of Significant Accounting Policies—Revenue Recognition in the to our consolidated financial statements.categoriescategory of gross-to-net deductions involveinvolves the use of significant estimates and judgments and information obtained from external sources.2018,2021 and 2020, we had a $54.7liability of $67.8 million liabilityand $65.3 million, respectively, related to rebates and chargebacks.2018, 20172021, 2020, and 2016.Allowance for Sales Returns The sales terms for Adcirca and Unituxin include return rights; however, we have not recorded an allowance for returns of Unituxin because our historical returns have been insignificant. For our sales of Adcirca, we record an allowance for returns in the same period that we recognize revenue. Return rights extend throughout the distribution channel and allow for returns of expired product for up to 12 months past the product's expiration date. As there are generally 24 to 36 months from the initial sale of Adcirca to its expiration date, we must estimate the amount of product that will be returned. Historically, actual returns have not differed materially from our estimates, and have been less than one percent of our net product sales for each of the years ended December 31, 2018, 2017 and 2016. Following the loss of exclusivity for Adcirca in the second quarter of 2018, we may experience an elevated level of product returns as product inventory remaining in the distribution channel expires.RevenuesGross-to-Net Deductions.period, and based onperiod; (2) the grant date fair value of stock options and restricted stock units.units; and (3) the purchase date fair value of stock under our employee stock purchase plan. With the exception of restricted stock units, we estimate the fair value of all share-based awards using the Black-Scholes-Merton valuation model. We measure the fair value of restricted stock units using the stock price on the grant date. Valuation models, like the Black-Scholes-Merton model, require the use of subjective assumptions that could materially impact the estimation of fair value and related compensation expense to be recognized. These assumptions include the expected volatility of our stock price and the expected term of awards. Developing these assumptions requires the use of judgment. For additional information on the10—8— Effective January 1, 2017, we adopted the provisions of ASU 2016-09,Compensation—Stock Compensation. As part of the adoption, we established an accounting policy election to account for forfeitures of share-based awards when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment resulted in a decrease to retained earnings of $5.8 million, which is net of a $3.2 million tax benefit.Performance-Based Stock Options In March 2017, we began issuing stock options with performance conditions under the 2015 Plan. The awards have vesting conditions tied to the achievement of specified performance conditions. The performance conditions have target performance levels that span from one to three years. Throughout the performance period, we re-assess the estimated performance and update the number of performance-based awards that we believe will ultimately vest. Upon the conclusion of the performance period, the performance level achieved will be measured and the ultimate number of shares that may vest will be determined. The estimation of future performance requires the use of judgment. Share-based compensation expense for these awards is recorded ratably over their vesting period, depending on the specific terms of the award and achievement of the specified performance conditions.In-Process Research and Development As part of our business strategy, we may acquire businesses or in-license the rights to develop and commercialize product candidates. For each in-license transaction, we evaluate whether we have acquired processes or activities along with inputs that would be sufficient to constitute a "business" as defined under GAAP. As defined under GAAP, a "business" consists of inputs and processes applied to those inputs that have the ability to create outputs. Although businesses usually have outputs, outputs are not required for an integrated set of activities to qualify as a business. When we determine that we have not acquired sufficient processes or activities to constitute a business, any up-front payments, as well as pre-commercial milestone payments, are immediately expensed as acquired in-process research and development in the period in which they are incurred. Refer to Note 18—Subsequent Events, to our consolidated financial statements. Milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized over the estimated remaining useful life of the related product. Acquired businesses are accounted for using the acquisition method of accounting. The acquisition purchase price is allocated to the net assets of the acquired business at their respective fair values. Amounts allocated to in-process research and development (IPR&D) are recorded at fair value and are considered indefinite-lived intangible assets subject to annual impairment testing until completion or abandonment of the research and development efforts. Upon completion of a project, the carrying value of the related IPR&D is reclassified to intangible assets and is amortized over the estimated useful life of the asset. Our fair value assessments are highly reliant on various assumptions which are considered Level 3 inputs, including estimates of future cash flows (including long-term growth rates), discount rates and the probability of achieving the estimated cash flows. In August 2018, we completed the acquisition of SteadyMed and acquired IPR&D related to the development of Trevyent. We determined the fair value of the acquired IPR&D was $107.3 million based on our fair value assessment which relied on the various assumptions noted above. Refer to Note 4—Acquisition, to our consolidated financial statements. IPR&D projects acquired in a business combination which have not reached technological feasibility or lack regulatory approval at the time of acquisition are reviewed for impairment annually,whenever events or changes in circumstances indicate that the carrying amount may not be recoverable and upon establishment of technological feasibility or regulatory approval. We determine impairment by comparing the fair value of the asset to its carrying value. If the asset's carrying value exceeds its fair value, an impairment charge is recorded for the difference and its carrying value is reduced accordingly. Estimating future cash flows of an IPR&D product candidate for purposes of an impairment analysis requires us to make significant estimates and assumptions regarding the amount and timing of costs to complete the project and the amount, timing and probability of achieving revenues from the completed product similar to how the acquisition date fair value of the project was determined, as described above. There are often major risks and uncertainties associated with IPR&D projects as we are required to obtain regulatory approvals in order to be able to market these products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods which could have a material adverse effect on our results of operations.Investments in Privately-Held Companies We have investments in several privately-held companies that have a strategic connection to our business, most of which are non-controlling equity investments in the form of preferred stock. Upon adoption of ASU 2016-01 on January 1, 2018, we began to measure these investments using the measurement alternative because the fair values of these investments are not readily determinable. Under the measurement alternative, the investments are measured at cost, less any impairment, adjusted for any observable price changes. We monitor these investments individually for any observable price changes or impairment indicators through our periodic correspondence with the relevant companies. We will adjust the measurement of these investments for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We consider relevant transactions, including any potential funding opportunities, which occur on or before the balance sheet date in evaluating whether any observable price changes have occurred. When a relevant transaction is identified, a careful review of the rights and obligations of the relevant transaction is necessary to evaluate whether the subsequent transaction is deemed to be a similar or identical investment. At each reporting date, we review these investments individually for impairment by evaluating if events or circumstances have occurred that may have a significant adverse effect on their fair value. If such events or circumstances have occurred, we will estimate the fair value of the investment. In such cases, the estimated fair value of the investment is determined using unobservable inputs including assumptions by the company's management. Because several of these companies are in the early startup or development stages, these entities are more likely to be subject to potential changes in cash flows, valuation, and ability to attract new investors which may be necessary for the liquidity needed to support their operations. If we determine that a decline in the value of an investment has occurred, we recognize an impairment loss in the period in which the decline occurs. If facts and circumstances change, we could be required to account for one or more of these investments under the equity method of accounting or consolidate the company's operations for financial accounting purposes. Refer to Note 5—Investments—Investments in Privately-Held Companies, to our consolidated financial statements.Income Taxes Income taxes are accounted for in accordance with the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities, using enacted tax rates in effect for years in which the temporary differences are expected to reverse. A valuation allowance is applied58 United Therapeutics, a public benefit corporation against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We recognize the benefit of an uncertain tax position that has been taken or that we expect to take on income tax returns only if such tax position is more likely than not to be sustained. The benefit recognized is measured as the largest amount that has a greater than 50 percent likelihood of being realized upon settlement. The ultimate resolution of uncertain tax positions could result in amounts different from those recognized in our consolidated financial statements. ITEMQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK2018,2021, we have invested $1.1$2.7 billion in corporate-debtcorporate debt securities and federally-sponsored agencies.U.S. government and agency securities. The market value of these investments varies inversely with changes in prevailing market interest rates. In general, as interest rates increase, the market value of a debt investment would be expected to decrease. Conversely, as interest rates decrease, the market value of a debt investment would be expected to increase. To date, we have not experienced significant volatility in the value of these investments. However, to address market risk, we invest in debt securities with terms no longer than three years and typically hold these investments to maturity so that they can be redeemed at their stated or face value. Many of our investments may be called by their respective issuers prior to maturity. The following table summarizes the expected maturities and weighted average interest rates as of December 31, 20182021 (dollars in millions):Expected Maturity 2022 2023 2024 Available-for-sale investments $ 1,004.8 $ 1,153.4 $ 496.5 Weighted average interest rate 1.1 % 0.6 % 0.8 % Expected Maturity 2019 2020 2021 $ 37.4 $ 2.2 $ — 705.8 373.0 67.4 2.6 % 2.6 % 2.7 % 20182021 and 2017,2020, we had $250.0$800.0 million aggregate principal amounts outstanding onunder our unsecured revolving credit facilityCredit Agreement, which includesbears interest at a variable interest rate component.rate. As a result, we are subject to interest rate risk with respect to such floating-rate debt. A 100 basis point increase in the variable interest rate component of our borrowings would increase our annual interest expense by approximately $2.5$8.0 million or 1843 percent, and $2.5$8.0 million or 2834 percent, for the years ended December 31, 20182021 and 2017,2020, respectively. In January 2019, we borrowed an additional $800.0 million under this facility and used the funds for an upfront payment related to the global license agreement with Arena. Refer to Note 8—7—Debt,—Unsecured Revolving Credit Facility,to our consolidated financial statements. As a result of theincrease in the amount borrowed on our unsecured revolving credit facility, we are subject to increased interest rate risk.20182021 and 2017,2020, we had 2.91.1 million and 4.12.1 million awards outstanding under our Share Tracking Awards Plan,Plans, respectively. These awards are referred to as "STAP awards."STAP awards. STAP awards convey the right to receive in cash an amount equal to the appreciation of our common stock, which is measured as the increase in the closing price of our common stock between the dates of grant and exercise. As of December 31, 20182021 and 2017,2020, the aggregate STAP awards liability balance was $72.2$102.4 million and $241.3$96.8 million, respectively. Estimating the fair value of STAP awards requires the use of certain inputs that can materially impact the determination of fair value and the amount of share-based compensation expense (benefit) we recognize. Inputs used in estimating fair value include the price of our common stock, the expected volatility of the price of our common stock, the risk-free interest rate, the expected term of STAP awards, and the expected dividend yield. As of December 31, 20182021 and 2017,2020, a one dollar change in our stock price would, holding other factors constant, increase or decrease the fair value of our STAP awards liability by approximately $1.8$1.0 million and $3.4$1.6 million, respectively.2021 Annual Report 59 ITEMFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA UNITED THERAPEUTICS CORPORATIONINDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Index to Consolidated Financial Statements2018, 20172021, 2020, and 20162018, 20172021, 2020, and 2016F-1 United Therapeutics, a public benefit corporation CorporationCompany)Company) as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations, comprehensive income, stockholders'stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018,2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the "consolidatedconsolidated financial statements"statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with U.S. generally accepted accounting principles.(PCAOB)(PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(2013 framework) and our report dated February 27, 2019,24, 2022, expressed an unqualified opinion thereon.Adoption of ASU No. 2014-09 As discussed in Note 2 to the consolidated financial statements, the Company changed its method for accounting for revenue in 2018 due to the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14, 2016-08, 2016-10, 2016-12, 2016-20 and 2017-14.Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.2021 Annual Report F-2 Revenue Reductions — Accounting for Rebates Description of
the MatterHow We Addressed
the Matter in
Our AuditCompany'sCompany’s auditor since 2003.
Tysons, Virginia
February 27, 201924, 2022F-3 United Therapeutics, a public benefit corporation CorporationoverOver Financial ReportingCorporation'sCorporation’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria)criteria). In our opinion, United Therapeutics Corporation (the Company)Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on the COSO criteria. As indicated in the accompanying Management Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of SteadyMed Ltd., which is included in the 2018 consolidated financial statements of the Company and constituted four percent of total assets as of December 31, 2018, and zero percent and one percent, respectively, of revenues and operating expenses for the year ended December 31, 2018. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of SteadyMed, Ltd.(PCAOB)(PCAOB), the consolidated balance sheets of the Company as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations, comprehensive income, stockholders'stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 20182021 and the related notes and financial statement schedule of the Company listed in the Index at Item 15(a)(2) and our report dated February 27, 2019,24, 2022, expressed an unqualified opinion thereon.Company'sCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management'sManagement’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that: (1) pertain to thecompany'scompany’s assets that could have a material effect on the financial statements.
February 27, 201924, 20222021 Annual Report F-4
(In millions, except share and per share data) December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 894.8 $ 738.7 Marketable investments 1,035.9 1,096.3 Accounts receivable, no allowance for 2021 and 2020 198.7 157.4 Inventories, net 93.8 86.5 Other current assets 100.4 88.3 Total current assets 2,323.6 2,167.2 Marketable investments 1,649.9 1,149.6 Goodwill and other intangible assets, net 44.6 158.1 Property, plant, and equipment, net 780.9 731.6 Deferred tax assets, net 261.9 238.6 Other non-current assets 108.2 169.9 Total assets $ 5,169.1 $ 4,615.0 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable and accrued expenses $ 174.6 $ 187.0 Share tracking awards plan 102.4 96.8 Other current liabilities 28.4 39.5 Total current liabilities 305.4 323.3 Line of credit 800.0 800.0 Other non-current liabilities 104.8 96.5 Total liabilities 1,210.2 1,219.8 Commitments and contingencies—Note 12 0 0 Stockholders’ equity: Preferred stock, par value $.01, 10,000,000 shares authorized, no shares issued — — Common stock, par value $.01, 245,000,000 shares authorized, 71,727,021 and 71,126,314 shares issued, and 45,107,805 and 44,507,098 shares outstanding at December 31, 2021 and 2020, respectively 0.7 0.7 Additional paid-in capital 2,245.4 2,148.7 Accumulated other comprehensive loss (23.0) (14.2) Treasury stock, 26,619,216 shares at December 31, 2021 and 2020 (2,579.2) (2,579.2) Retained earnings 4,315.0 3,839.2 Total stockholders’ equity 3,958.9 3,395.2 Total liabilities and stockholders’ equity $ 5,169.1 $ 4,615.0 December 31, 2018 2017 $ 669.2 $ 705.1 746.7 222.3 175.7 297.1 101.0 107.9 75.4 115.5 1,768.0 1,447.9 442.6 502.7 170.8 45.6 699.7 545.7 95.7 113.4 224.2 224.1 $ 3,401.0 $ 2,879.4 $ 166.1 $ 171.1 72.2 240.1 38.3 33.5 276.6 444.7 250.0 250.0 66.6 63.7 593.2 758.4 19.2 19.2 — — — — 0.7 0.7 1,940.2 1,854.3 (7.9 ) (19.6 ) (2,579.2 ) (2,579.2 ) 3,434.8 2,845.6 2,788.6 2,101.8 $ 3,401.0 $ 2,879.4 F-5 United Therapeutics, a public benefit corporation
(In millions, except per share data)Year Ended December 31, 2021 2020 2019 Revenues: Net product sales $ 1,685.5 $ 1,483.3 $ 1,448.8 Total revenues 1,685.5 1,483.3 1,448.8 Operating expenses: Cost of product sales 122.5 108.1 117.6 Research and development 540.1 357.7 1,182.6 Selling, general, and administrative 467.0 423.9 336.2 Total operating expenses 1,129.6 889.7 1,636.4 Operating income (loss) 555.9 593.6 (187.6) Interest income 16.7 28.6 44.2 Interest expense (18.6) (23.5) (44.2) Other income, net 42.2 49.3 22.6 Impairments of investments in privately-held companies (2.3) (9.1) — Total other income, net 38.0 45.3 22.6 Income (loss) before income taxes 593.9 638.9 (165.0) Income tax (expense) benefit (118.1) (124.1) 60.5 Net income (loss) $ 475.8 $ 514.8 $ (104.5) Net income (loss) per common share: Basic $ 10.60 $ 11.65 $ (2.39) Diluted $ 10.06 $ 11.54 $ (2.39) Weighted average number of common shares outstanding: Basic 44.9 44.2 43.8 Diluted 47.3 44.6 43.8 Year Ended December 31, 2018 2017 2016 $ 1,627.8 $ 1,725.3 $ 1,598.8 1,627.8 1,725.3 1,598.8 198.7 105.7 72.7 357.9 264.6 147.6 265.8 330.1 316.8 — 210.0 — 822.4 910.4 537.1 805.4 814.9 1,061.7 28.6 10.9 3.5 (13.9 ) (9.0 ) (3.9 ) (7.7 ) 2.3 (1.1 ) (53.5 ) (49.6 ) — (46.5 ) (45.4 ) (1.5 ) 758.9 769.5 1,060.2 (169.7 ) (351.6 ) (346.5 ) $ 589.2 $ 417.9 $ 713.7 $ 13.54 $ 9.50 $ 16.29 $ 13.39 $ 9.31 $ 15.25 43.5 44.0 43.8 44.0 44.9 46.8 2021 Annual Report F-6
(In millions) Year Ended December 31, 2021 2020 2019 Net income (loss) $ 475.8 $ 514.8 $ (104.5) Other comprehensive (loss) income: Defined benefit pension plan: Actuarial gain (loss) arising during period, net of tax 5.6 (8.0) (10.6) Amortization of actuarial gain and prior service cost included in net periodic pension cost and settlement, net of tax 0.6 1.3 (1.7) Total defined benefit pension plan, net of tax 6.2 (6.7) (12.3) Unrealized (loss) gain on available-for-sale securities, net of tax (15.0) 6.7 6.0 Other comprehensive (loss) income, net of tax (8.8) — (6.3) Comprehensive income (loss) $ 467.0 $ 514.8 $ (110.8) Year Ended December 31, 2018 2017 2016 $ 589.2 $ 417.9 $ 713.7 — 0.2 (3.0 ) 10.7 (1.7 ) 6.0 1.4 0.6 0.6 12.1 (1.1 ) 6.6 (0.4 ) (1.9 ) — 11.7 (2.8 ) 3.6 $ 600.9 $ 415.1 $ 717.3 F-7 United Therapeutics, a public benefit corporation Stockholders'Stockholders’ Equity
(In millions) Common Stock Additional
Paid-in
CapitalAccumulated
Other
Comprehensive
LossTreasury
StockRetained Earnings Stockholders’ Equity Shares Amount Balance, December 31, 2018 70.2 $ 0.7 $ 1,940.2 $ (7.9) $ (2,579.2) $ 3,434.8 $ 2,788.6 Net loss — — — — — (104.5) (104.5) Unrealized gains on available-for-sale securities — — — 6.0 — — 6.0 Defined benefit pension plan — — — (12.3) — — (12.3) Shares issued under employee stock purchase plan — — 4.1 — — — 4.1 0.1 — — — — — — RSUs withheld for taxes — — (2.1) — — — (2.1) Exercise of stock options 0.2 — 9.9 — — — 9.9 Share-based compensation — — 85.1 — — — 85.1 Cumulative effect of accounting change — — — — — (5.1) (5.1) — — 10.8 — — — 10.8 Deconsolidation of variable interest entity — — (0.1) — — — (0.1) Balance, December 31, 2019 70.5 $ 0.7 $ 2,047.9 $ (14.2) $ (2,579.2) $ 3,325.2 $ 2,780.4 Net income — — — — — 514.8 514.8 Unrealized gains on available-for-sale securities — — — 6.7 — — 6.7 Defined benefit pension plan — — — (6.7) — — (6.7) Shares issued under employee stock purchase plan 0.1 — 4.7 — — — 4.7 Common stock issued for RSUs vested 0.1 — — — — — — RSUs withheld for taxes — — (3.7) — — — (3.7) Exercise of stock options 0.4 — 33.8 — — — 33.8 Share-based compensation — — 66.0 — — — 66.0 Cumulative effect of accounting change — — — — — (0.8) (0.8) Balance, December 31, 2020 71.1 $ 0.7 $ 2,148.7 $ (14.2) $ (2,579.2) $ 3,839.2 $ 3,395.2 Net income — — — — — 475.8 475.8 Unrealized losses on available-for-sale securities — — — (15.0) — — (15.0) Defined benefit pension plan — — — 6.2 — — 6.2 Shares issued under employee stock purchase plan 0.1 — 5.6 — — — 5.6 Common stock issued for RSUs vested 0.1 — — — — — — RSUs withheld for taxes — — (10.8) — — — (10.8) Exercise of stock options 0.4 — 50.0 — — — 50.0 Share-based compensation — — 51.9 — — — 51.9 Balance, December 31, 2021 71.7 $ 0.7 $ 2,245.4 $ (23.0) $ (2,579.2) $ 4,315.0 $ 3,958.9 Common Stock Accumulated
Other
Comprehensive
Loss Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Stockholders'
Equity Shares Amount 69.0 $ 0.7 $ 1,790.6 $ (20.4 ) $ (1,902.1 ) $ 1,719.8 $ 1,588.6 — — — — — 713.7 713.7 — — — (3.0 ) — — (3.0 ) — — — 6.6 — — 6.6 — — 4.3 — — — 4.3 0.1 — 7.6 — (7.5 ) — 0.1 — — 0.1 — — — 0.1 — — (30.0 ) — 30.0 — — — — — — (500.0 ) — (500.0 ) 0.2 — 7.7 — — — 7.7 — — 5.9 — — — 5.9 — — 27.3 — — — 27.3 69.3 0.7 1,813.5 (16.8 ) (2,379.6 ) 2,433.5 1,851.3 — — — — — 417.9 417.9 — — — 0.2 — — 0.2 — — — (1.9 ) — — (1.9 ) — — — (1.1 ) — — (1.1 ) 0.1 — 4.1 — — — 4.1 — — (53.2 ) — 53.2 — — — — 2.8 — (252.8 ) — (250.0 ) 0.5 — 39.9 — — — 39.9 — — 46.4 — — — 46.4 — — 0.7 — — (5.8 ) (5.1 ) — — 0.1 — — — 0.1 69.9 0.7 1,854.3 (19.6 ) (2,579.2 ) 2,845.6 2,101.8 — — — — — 589.2 589.2 — — — (0.4 ) — — (0.4 ) — — — 12.1 — — 12.1 — — 3.9 — — — 3.9 — — (0.1 ) — — — (0.1 ) 0.3 — 15.6 — — — 15.6 — — 66.5 — — — 66.5 70.2 $ 0.7 $ 1,940.2 $ (7.9 ) $ (2,579.2 ) $ 3,434.8 $ 2,788.6 2021 Annual Report F-8
(In millions) Year Ended December 31, 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ 475.8 $ 514.8 $ (104.5) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 49.9 49.9 45.9 Share-based compensation expense 138.5 163.8 45.4 Impairments of investments in privately-held companies 2.3 9.1 — Impairments of property, plant, and equipment 19.2 5.4 17.2 Intangible asset impairment charges 113.4 — — Realized gain on sale of equity securities (92.6) (3.4) (2.6) Other 65.9 (47.0) (29.7) Changes in operating assets and liabilities: Accounts receivable (41.3) (6.0) 24.4 Inventories (7.5) 10.3 12.9 Accounts payable and accrued expenses (12.5) 38.6 (16.3) Other assets and liabilities (112.9) 20.2 (199.3) Net cash provided by (used in) operating activities 598.2 755.7 (206.6) Cash flows from investing activities: Purchases of property, plant, and equipment (120.8) (59.3) (83.7) Proceeds from sale of property, plant, and equipment — 2.4 — Sales/maturities of held-to-maturity investments — — 39.7 Purchases of available-for-sale debt securities (1,895.3) (2,308.8) (1,271.5) Maturities of available-for-sale debt securities 1,370.1 1,523.4 799.2 Sales of available-for-sale debt securities 47.6 76.5 180.9 Sales of investments in equity securities 111.5 27.3 20.5 Purchases of investments in privately-held companies — — (8.0) Decrease in cash due to deconsolidation of variable interest entity — — (12.5) Net cash used in investing activities (486.9) (738.5) (335.4) Cash flows from financing activities: Proceeds from line of credit — — 800.0 Repayment of line of credit — (50.0) (200.0) Payments of debt issuance costs — (1.7) (0.7) Proceeds from the exercise of stock options 50.0 33.8 9.9 Proceeds from the issuance of stock under employee stock purchase plan 5.6 4.7 4.1 Restricted stock units withheld for taxes (10.8) (3.7) (2.1) Net cash provided by (used in) financing activities 44.8 (16.9) 611.2 Net increase in cash and cash equivalents $ 156.1 $ 0.3 $ 69.2 Cash and cash equivalents, beginning of year 738.7 738.4 669.2 Cash and cash equivalents, end of year $ 894.8 $ 738.7 $ 738.4 Supplemental cash flow information: Cash paid for interest $ 16.2 $ 20.7 $ 41.0 Cash paid for income taxes $ 153.3 $ 92.8 $ 120.2 Non-cash investing and financing activities: Non-cash additions to property, plant, and equipment $ 3.7 $ 3.5 $ 54.5 Year Ended December 31, 2018 2017 2016 $ 589.2 $ 417.9 $ 713.7 35.9 31.0 31.6 (26.4 ) 73.5 12.1 53.5 49.6 — 1.8 (19.4 ) 9.5 — — (5.9 ) 121.4 (82.7 ) (21.7 ) 9.3 (0.5 ) (24.5 ) (11.0 ) 66.2 0.6 4.7 (61.4 ) (71.8 ) 778.4 474.2 643.6 (184.4 ) (86.3 ) (38.0 ) — 8.3 — (46.0 ) — — (99.3 ) (51.8 ) (0.8 ) 88.6 52.9 130.4 (762.7 ) (718.4 ) — 312.3 20.0 — (5.0 ) (60.4 ) (36.0 ) — — (2.1 ) — 0.1 — (124.1 ) — (5.2 ) (820.6 ) (835.6 ) 48.3 250.0 250.0 — (250.0 ) — — — — (8.8 ) (13.2 ) (0.7 ) (6.8 ) — (250.0 ) (500.0 ) 15.6 39.9 7.7 3.9 4.1 4.3 — — 5.9 6.3 43.3 (497.7 ) — 0.2 (3.0 ) (35.9 ) (317.9 ) 191.2 705.1 1,023.0 831.8 $ 669.2 $ 705.1 $ 1,023.0 $ 9.4 $ 7.5 $ 1.5 $ 102.7 $ 346.9 $ 362.4 $ — $ 210.0 $ — $ 11.5 $ 11.5 $ 2.9 $ — $ — $ 7.5 F-9 United Therapeutics, a public benefit corporation (FDA)(FDA) to market the following therapies: Remodulin® (treprostinil) Injection (Remodulin), Tyvaso®Tyvaso® (treprostinil) Inhalation Solution (Tyvaso)(Tyvaso), Adcirca® (tadalafil) Tablets (Adcirca)Remodulin® (treprostinil) Injection (Remodulin), Orenitram®Orenitram® (treprostinil) Extended-Release Tablets (Orenitram) and Unituxin®(Orenitram), Unituxin® (dinutuximab) Injection (Unituxin)(Unituxin), and Adcirca® (tadalafil) Tablets (Adcirca). Our only significantWe also derive revenues outside the United States are derived from sales of Tyvaso, Remodulin, in Europe.theour consolidated financial statements, unless the context otherwise requires, the terms "we"“we”, "us"“us”, "our"“our”, and similar terms refer to United Therapeutics Corporation and its consolidated subsidiaries.wholly ownedconsolidated subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (GAAP)(GAAP). All intercompany balances and transactions have been eliminated in consolidation.
other assets and liabilities to the line item realized gain on sale of equity securities to conform with the current period presentation.theour consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on assumptions regarding historical experience, currently available information, and anticipated developments that we believe are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. Estimates are used for, but not limited to, revenue recognition, share-based compensation, determining the fair value of assets acquired and liabilities assumed in business combinations, marketable investments, fair value measurements (including those related to contingent consideration), inventory reserves, investments in privately-held companies, income taxes, goodwill and other intangible assets, and obligations related to our Supplemental Executive Retirement Plan.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)(FASB)(6—5—Fair Value Measurements.Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short maturities. The fair values of our marketable investments and contingent consideration are reported in Note 5—Investments and Note 6—Fair Value Measurements, respectively.2021 Annual Report F-10 available-for-sale or held-to-maturity.available-for-sale. If we have both the positive intent and the ability to hold the securities until maturity, the securities are classified as held-to-maturity. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. Available-for-sale debt securities are recorded at fair value, with the portion of the unrealized gains and losses that are not credit-related included as a component of accumulated other comprehensive income (loss) in stockholders'stockholders’ equity, until realized. Held-to-maturity debt securities are recorded at amortized cost, adjusted for the amortization of discounts or premiums. Related discounts and premiums are amortized over the term of these securities as an adjustment to the yield using the effective interest method. Marketable investments are classified as either current or non-current assets on in our consolidated balance sheets based on their contractual maturity dates.investment portfolioavailable-for-sale investments for impairment quarterly or more frequently if circumstances warrant. In the event that the carrying value of a debt security exceeds its fair value, and the declinewe evaluate whether any impairment is a result of credit loss or other factors. For investments in value is determined to be other-than-temporary,an unrealized loss position, we record an impairment charge within earnings attributable to the estimated credit loss. In determiningdetermine whether a decline incredit loss exists by considering information about the valuecollectibility of an investment is other-than-temporary, we evaluate currently available factors that may include, among others: (1) generalthe instrument, current market conditions; (2) the duration and extent to which fair value has been less than the carrying value; (3)conditions, the investment issuer'sissuer’s financial condition and business outlook;outlook, and (4)reasonable and supportable forecasts of economic conditions. An allowance for credit losses would be recorded in our assessment asconsolidated statements of operations in the event the decline in the investment’s fair value was a result of credit loss, and unrealized losses not related to whether it is more likely than not thatcredit losses would be recorded in other comprehensive income (loss).will be required to sell a security prior to recoveryown in these companies are recorded at fair value. Changes in the fair value of its amortized cost basis.Tablepublicly-traded equity securities are recorded in our consolidated statements of ContentsUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)
other income, net. As of December 31, 2021 2020 Raw materials $ 17.6 $ 18.4 Work-in-progress 31.9 29.5 Finished goods 44.3 38.6 Total inventories $ 93.8 $ 86.5 As of
December 31, 2018 2017 $ 24.3 $ 27.9 28.0 24.1 48.7 55.9 $ 101.0 $ 107.9 If the carrying amountFollowing adoption of the reporting unit exceeds its fair value, then the amount of an impairment loss, if any, is measured as the excess of the recorded amount of goodwill over its implied fair value (StepASU 2017-04 on January 1, 2020, we are no longer required to perform Step 2 of the goodwill impairment test).test. The impairment charge is limited to the amount of goodwill allocated to the reporting unit, thus, the new standard eliminates the requirement to calculate a goodwill impairment charge using Step 2. We usedperformed a qualitative assessment for our goodwill impairment testing for 20182021 and 2017. Our evaluation of goodwill completed during2020. During the years ended December 31, 20182021 and 2017, resulted2020, our evaluation of goodwill did not result in noany impairment losses.(IPR&D) projects,(IPR&D) assets, which were measured at their estimated fair values as of their acquisition dates. We used a qualitative assessment forDuring the year ended December 31, 2021, we recognized IPR&D impairment charges of $113.4 million related to our indefinite-lived intangible assetdecision to discontinue the U.S. development of Trevyent® and our decision to discontinue our research and development efforts related to biomechanical lungs, described in footnotes 1 and 2, respectively, to the Goodwill table below. There were no impairment testing. Our evaluation oflosses related to indefinite-lived intangible assets completed during the yearsyear ended December 31, 2018 and 2017, resulted2020. During the year ended December 31, 2019, we recognized an impairment charge of $8.8 million related to an IPR&D asset associated with our terminated license agreement with a variable interest entity, as discussed in no impairment losses.F-11 United Therapeutics, a public benefit corporation 20182021, 2020, and 2017.UNITED THERAPEUTICS CORPORATIONNotes2019 related to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)consist ofcomprise the following (in millions): As of December 31, 2021 As of December 31, 2020 Gross Accumulated Amortization Net Gross Accumulated Amortization Net Goodwill $ 28.0 $ — $ 28.0 $ 28.0 $ — $ 28.0 Other intangible assets: Technology, patents, and trade names 6.7 (5.6) 1.1 6.7 (5.5) 1.2 15.5 — 15.5 128.9 — 128.9 Total $ 50.2 $ (5.6) $ 44.6 $ 163.6 $ (5.5) $ 158.1 As of December 31, 2018 As of December 31, 2017 Gross Accumulated
Amortization Net Gross Accumulated
Amortization Net $ 31.5 $ — $ 31.5 $ 13.7 $ — $ 13.7 6.7 (5.1 ) 1.6 6.5 (5.0 ) 1.5 137.7 — 137.7 30.4 — 30.4 $ 175.9 $ (5.1 ) $ 170.8 $ 50.6 $ (5.0 ) $ 45.6 For more information(1)In March 2021, we decided to discontinue the U.S. development of Trevyent due to written comments provided by the FDA in February 2021. The FDA provided these written comments following a meeting between us and the FDA to discuss our planned resubmission of our NDA for Trevyent in light of a complete response letter issued by the FDA in April 2020. We determined this decision to be a potential indicator of impairment of our IPR&D asset related to changesTrevyent, which had a carrying value of $107.3 million as of December 31, 2020. Based on our decision to discontinue the U.S. development of Trevyent, we fully impaired the IPR&D asset related to Trevyent during 2021. The $107.3 million impairment charge was recorded within research and development in our consolidated statements of operations.current year, referdecision, we fully impaired the IPR&D asset related to Note 4—Acquisition.2018, 20172021, 2020, and 2016,2019, was $0.1 million, $0.5$0.2 million, and $0.6$0.2 million, respectively. As of December 31, 2018,2021, aggregate amortization expense related to definite-lived intangible assets for each of the five succeeding years and thereafter is estimated at less than $1.0 million per year.Land improvements 15 Years Buildings 25 - 3925-39 YearsBuilding improvements 10 - 3910-39 YearsFurniture, equipment, and vehicles 3 - 253-25 YearsLeasehold improvements Remaining lease term, or the estimated useful life of the improvement, whichever is shorter As of December 31, 2021 2020 Land and land improvements $ 132.6 $ 74.9 Buildings, building improvements, and leasehold improvements 612.7 593.6 Buildings under construction 55.1 47.4 Furniture, equipment, and vehicles 322.9 325.0 Subtotal 1,123.3 1,040.9 Less—accumulated depreciation (342.4) (309.3) Property, plant, and equipment, net $ 780.9 $ 731.6 As of December 31, 2018 2017 $ 69.0 $ 60.5 533.3 408.0 126.5 119.8 205.5 159.9 934.3 748.2 (234.6 ) (202.5 ) $ 699.7 $ 545.7 2018, 20172021, 2020, and 2016,2019, was $35.8$49.8 million, $30.5$49.7 million, and $31.0$45.7 million, respectively.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)2021 Annual Report F-12 stockholders'stockholders’ equity. On January 1, 2018, we adopted Topic 606 using the modified retrospective approach applied to those contracts in effect as of January 1, 2018. Under this transition method, results for reporting periods beginning after January 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605,Revenue Recognition. See Note 3—Recently Issued Accounting Standards for further discussion of the adoption of Topic 606, including the impact on our 2018 financial statements. Tothat we determine are within the scope of Topic 606, we performwith customers based on the following five steps: (1) identify each contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to our performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. We generate revenuesfive5 commercially approved products: Tyvaso, Remodulin, Tyvaso, Orenitram, Unituxin, and Adcirca. We recognize revenue when we transfer control of our productsproduct to our distributors, as our contracts have a single performance obligation (delivery of our product). Except for Adcirca sales, the performance obligationwhich is generally satisfied when our products arethe product is shipped or delivered to the distributor's designated location. We recognize revenue from Adcirca sales upon shipment from an Eli Lilly and Company (Lilly) distribution center.distributor. Future revenue from delivery of our products will be based on purchase orders provided to us by our distributors. We are not required to disclose the value of unsatisfied performance obligations as our contracts have a non-cancelable duration of one year or less.15—13—Segment Information, for information on revenues disaggregated by commercial product, geographic area, and customer.allowancesallowance for sales returns; and (4) distributor fees and other allowances. We estimate these reserves in the same period that we recognize revenue for productF-13 United Therapeutics, a public benefit corporation UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)$8.8$2.1 million increase in our net product sales for the year ended December 31, 20182021, an aggregate $0.5 million increase in our net product sales for the year ended December 31, 2020, and an aggregate $13.1$2.3 million decrease in our net product sales for the year ended December 31, 2017,2019, related to revenue recognized from product sales in prior periods. In 2018 we recorded a change in estimate that resulted in the reversal of an estimated liability for Medicaid rebates of $13.6 million, which had initially been recorded in 2017. Additional adjustments to accruals for prior periods primarily related to our participation in state Medicaid programs and contracts with commercial payers.chargebacks.chargebacks. Allowances for rebates include mandated discounts due to our participation in various government health care programs, contracted rebates to certain domestic distributors, and contracted discounts with commercial payers. We estimate our rebate liability on a product-by-product basis, considering actual revenue, contractual discount rates, expected utilization under each contract, and historical payment experience. We also consider changes in our product pricing and information regarding changes in program regulations and guidelines. Our chargebacks represent contractual discounts payable to distributors for the difference between the invoice price paid to us by the distributor for a particular product and the contracted price that the distributor'sdistributor’s customer pays for that product. Our chargebacks primarily relate to sales of Adcirca. We estimate our chargeback liability on a product-by-product basis, primarily considering historical payment experience. Although we accrue a liability for rebates and chargebacks in the same period the product is sold, third-party reporting and payment of the rebate or chargeback amount occur on a time lag, with the majority of rebates and chargebacks paid within six months from date of sale. Our liability for rebates and chargebacks is included in accounts payable and accrued expenses onin our consolidated balance sheets.discounts.discounts. We offer prompt pay discounts to many of our distributors, typically for payments made within 30 days. Prompt pay discounts are estimated in the period of sale based on our experience with sales to eligible distributors. Our domestic distributors have routinely taken advantage of these discounts and we expect them to continue to do so. Prompt pay discounts are recorded as a deduction to the accounts receivable balance presented onin our consolidated balance sheets.returns.returns.The sales terms for Adcirca and Unituxin include return rights that extend throughout the distribution channel. For Adcirca, we recognize an allowance for returns as customers have the right to return expired product for up to 12 months pastafter the product'sproduct’s expiration date (generally 24 to 36 months after the initial sale). Returned product is destroyed. Regulatory exclusivity for Adcirca expired in May 2018, and a generic versionversions of Adcirca became available for purchase beginning in the third quarter of 2018. Due to the availability of the generic version,versions, we have experienced a significant decline in Adcirca demand, which could result in inventory held by distributors and other downstream customers expiring unsold. As a result, we increased ourOur allowance for product returns for Adcirca from $7.2 million as of December 31, 2017 to $22.42021 and 2020 is $6.3 million as of December 31, 2018.and $12.5 million, respectively. We record our allowance for product returns in other current and non-current liabilities on in our consolidated balance sheets. We developed our returns liability as of December 31, 2018,2021 and 2020, based on our estimate of theUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)dispensed to patients, using forecasted salessold by distributors and demand estimates.other downstream customers. The estimates were developed using reports from our distributors and other third-party data, including estimates of Adcirca dispenses and the historical impact of generic entrants on other branded products that we deemed comparable to Adcirca.9nine to 14 months after the initial sale. However, our historical returns have not been material and, therefore, we do not record a returns allowance for Unituxin. For sales of our other commercial products, we do not offer our customers a general right of return.allowances.allowances. Distributor fees include distribution and other service fees paid to certain distributors. These fees are based on contractual amounts or rates applied to purchases of our product or units of service provided in a given period. Our liability for distributor fees is included in accounts payable and accrued expenses on in our consolidated balance sheets. on in our consolidated balance sheets. Accounts receivable consist of short-term amounts due from our distributors (generally 30 to 90 days) and are stated at the amount we expect to collect. We establish an allowance for doubtful accounts, if deemed necessary, based on our assessment of the collectability of specific distributor accounts. We did not recognize any impairment losses for accounts receivable for each of the years endingended December 31, 20182021 and 2017.2020. Changes in accounts receivable are primarily due to the timing and magnitude of orders of our products, the timing of when control of our products is transferred to our distributors, and the timing of cash collections.2021 Annual Report F-14 network.network on our behalf. Specifically, Lilly handles all of the administrative functions associated with the sale of Adcirca on our behalf, including the receipt and processing of customer purchase orders, shipment to customers, and invoicing and collection of customer payments. We recognize sales of Adcirca on a gross basis (net of reserves for gross-to-net deductions) based on our determination that we are acting as a principal due to our control of the product prior to its transfer to our customers. Our control is evidenced by our substantive ownership of product inventory, the fact that we bear all inventory risks, our primary responsibility for the acceptability of the product to our customers, and our ability to influence net product sales through our contracting decisions with commercial payers and participation in governmental-funded programs. refundable payments made in advance of services to be provided to us. Related expenses consist of internal labor and overhead, costs to acquire pharmaceutical products and product rights for development, materials used in clinical trials, and amounts paid to third parties for services, and materials related to drug development and clinical trials.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)"business"“business” as defined under GAAP. As defined under GAAP, a "business"“business” consists of inputs and processes applied to those inputs that have the ability to create outputs. Although businesses usually have outputs, outputs are not required for an integrated set of activities to qualify as a business. When we determine that we have not acquired sufficient processes or activities to constitute a business, any up-front payments, as well as pre-commercial milestone payments, are immediately expensed as acquired in-process research and developmentIPR&D in the period in which they are incurred. Milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.10—8—Share-Based Compensation.one1 share of our common stock upon vesting. We issue new shares of our common stock upon the vesting of restricted stock units.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)2. Summary of Significant Accounting Policies (Continued)F-15 United Therapeutics, a public benefit corporation isare calculated by dividing the net loss by the weighted average shares outstanding. Potentially dilutive securities are excluded from the calculation because their effect would be anti-dilutive.onin our consolidated balance sheets.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued) During 2018May 2014,December 2019, the Financial Accounting Standards Board (FASB)(FASB) issued ASU No. 2014-09,Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The new standard supersedes the revenue recognition requirements in Topic 605,Revenue Recognition (Topic 605), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers. Revenue is recognized in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We adopted the new standard on January 1, 2018, using the modified retrospective approach, applied only to contracts in effect as of January 1, 2018. Upon adoption, we changed the timing of revenue recognition for sales of Adcirca to recognize revenue when control of Adcirca is transferred to a distributor, which occurs at the time Adcirca is shipped from a Lilly distribution center. Previously, we recognized sales of Adcirca when Adcirca was delivered to distributors. This change did not result in an adjustment to amounts previously recognized as revenue under Topic 605 as all shipments had reached the distributor as of December 31, 2017. Overall, adoption of the new standard did not have a material impact on the amounts reported in our financial statements and there were no other significant changes impacting the timing or measurement of our revenue or our business processes and controls. We have included additional disclosures related to our adoption of Topic 606 in Note 2—Summary of Significant Accounting Policies—Revenue Recognition. In January 2016, the FASB issued ASU No. 2016-01,Financial Instruments—Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01), which requires equity investments to be measured at fair value through net income. Equity investments that are accounted for under the equity method are not impacted. ASU 2016-01 provides a new measurement alternative for equity investments without readily determinable fair values. These investments are measured at cost, less any impairment, adjusted for observable price changes. ASU 2016-01 requires separate presentation of the financial assets and liabilities by category and form. ASU 2016-01 should be applied prospectively and is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. We adopted the new standard on January 1, 2018, with no material impact to our financial statements. Effective January 1, 2018, we elected to record our equity investments in privately-held companies that do not have readily determinable fair values using the measurement alternative method. In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which reduces existing diversity in the classification of certain cash receipts and cash payments on the statements of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. We adopted the new standard on January 1, 2018, with no material impact to our financial statements. In October 2016, the FASB issued ASU No. 2016-16,Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), which requires that an entity recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017. We adopted the new standard on January 1, 2018, with no material impact to our financial statements.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)3. Recently Issued Accounting Standards (Continued) In January 2017, the FASB issued Update (2017-01,Business Combinations—Clarifying the Definition of a Business (ASU 2017-01). This update narrows the definition of a business by providing a screen to determine when an integrated set of assets and activities is not a business. The screen specifies that an integrated set of assets and activities is not a business if substantially all of the fair value of the gross assets acquired or disposed of is concentrated in a single asset or a group of similar identifiable assets. ASU 2017-01 should be applied prospectively and is effective for annual reporting periods beginning after December 15, 2017, and for interim periods within those fiscal years. We adopted the new standard on January 1, 2018, with no material impact to our financial statements. In March 2017, the FASB issued ASU No. 2017-07,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), which requires the service cost component to be reported separately from the other components of net pension cost. Service cost will be presented in the same line item as other employer compensation costs within operating expenses. The other components of net pension cost are required to be presented outside of operations and will be presented in "Other, net" on our consolidated statements of operations. Only the service cost component will be eligible for asset capitalization. Companies are required to apply the change in income statement presentation retrospectively, and the change in capitalized benefit cost prospectively. We adopted the new standard on January 1, 2018, with no material impact to our financial statements.Accounting Standards Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02,Leases (ASU 2016-02), which requires that assets and liabilities arising under leases be recognized on the balance sheet. ASU 2016-02 also requires additional quantitative and qualitative disclosures that provide the amount, timing, and uncertainty of cash flows related to lease arrangements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018. In July 2018, the FASB issued ASU No. 2018-11,Leases (Topic 842)—Targeted Improvements (ASU 2018-11). ASU 2018-11 allows entities to elect an optional transition method, allowing for application of ASU 2016-02 at the adoption date, with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We adopted the standard on January 1, 2019 utilizing the simplified transition method. We have identified all leases involved in the relevant timeframe. On January 1, 2019, we elected the practical expedient package permitted under the transition guidance within the new standard, which among other things, allows us to carry forward the historical lease classification. We also elected the simplified approach practical expedient, allowing us to not restate comparative periods and apply ASC 842 on a prospective basis beginning on January 1, 2019. We elected the lessee component election, allowing us to account for the lease and non-lease components as a single lease component. As the majority of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We made an accounting policy election to keep leases with an initial term of 12 months or less off of the consolidated balance sheet. We will recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. We also expect most of our build-to-suit leases to be de-recognized upon adoption as our current build-to-suit leases will no longer qualify for build-to-suit accounting and will instead be recognized as operating leases under ASC 842. We have updated our internal controls, business processes, and accounting policies related to both the implementation of, and ongoing compliance with, the new guidance. Although we are still finalizing our evaluation of the standard update and the quantification of its impact, we do not expect its adoption will have a materialUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)3. Recently Issued Accounting Standards (Continued)impact to our financial statements. We will include expanded quantitative and qualitative disclosures about our lease arrangements beginning in the first quarter of 2019. In January 2017, the FASB issued ASU No. 2017-04,Intangibles—Goodwill and Other: 2019-12, TestAccounting for Goodwill Impairment (ASU 2017-04)Income Taxes (ASU 2019-12), which simplifies how an entity is required to test goodwillthe accounting for impairment. A goodwill impairment will be measuredincome taxes by the amount by which a reporting unit's carrying value exceeds its fair value, with the amount of impairment not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years, and must be adopted on a prospective basis. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on our financial statements. In February 2018, the FASB issued ASU No. 2018-02,Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The standard provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect (or portion thereof) of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (Tax Reform) is recorded. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. We do not expect the adoption of this guidance to have a material impact on our financial statements. In August 2018, the FASB issued ASU No. 2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changesremoving certain exceptions to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14). The standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.general principles of Topic 740, Income Taxes, and also improves consistency of application by clarifying and amending existing guidance. ASU 2018-142019-12 is effective for fiscal years beginning after December 15, 2020. Early adoptionWe adopted the new standard on January 1, 2021, with no material impact on our financial statements.permitted.effective for fiscal years beginning after December 15, 2020. We do not expectadopted the new standard on January 1, 2021, with no material impact on our financial statements.2021 Annual Report F-16 statements.4. AcquisitionSteadyMed Merger On April 29, 2018, we entered into an Agreement and Plan of Merger (Merger Agreement) with SteadyMed Ltd. (SteadyMed) and Daniel 24043 Acquisition Corp Ltd., our wholly-owned subsidiary (Merger Sub). The Merger Agreement providesstatements as the guidance will ease, if warranted, the requirements for accounting for the merger of Merger Sub with and into SteadyMed (the Merger), with SteadyMed surviving the Merger as our wholly-owned subsidiary. On August 30, 2018 (the Closing Date), we completed the Merger. At the effective timefuture effects of the Merger, each SteadyMed ordinary share was converted intorate reform.right to receive (1) $4.46 in cash, representing aggregate consideration payable to former holders of SteadyMed securities of approximately $141 million; and (2) one contingent value right, representing the right to receive $2.63 in cash upon the achievement of a milestone defined as 3,000 patients initiating treatment using SteadyMed's Trevyent® product on a commercial basis on or before August 30, 2023 (the Milestone). Aggregate contingent consideration of $75.0 million will become payable if the Milestone is achieved. Trevyent is a post-phase III, development-stage drug-device combination product that combines SteadyMed's two-day, single-use, disposable PatchPump® technology with treprostinil, for the subcutaneous treatment of pulmonary arterial hypertension (PAH).UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)4. Acquisition (Continued) Following the acquisition, the operating results of SteadyMed have been included in our consolidated financial statements. For the period from the Closing Date through December 31, 2018, SteadyMed contributed revenues and loss before income taxes of zero and $6.2 million, respectively.Purchase Price Allocation The Merger meets the definition of a business combination in accordance with ASC 805,Business Combinations, and we applied the acquisition method to account for the transaction, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values asportion of the closing date. The aggregate purchase price noted above was allocated to the major categories of assets acquiredunrealized gains and liabilities assumed based upon their estimated fair values at the closing date using primarily Level 2 and Level 3 inputs. These Level 2 and Level 3 valuation inputs included an estimate of future cash flows and discount rates. Additionally, estimated fair values are based, in part, upon third-party valuations of certain assets, including specifically-identified intangible assets. The purchase price allocation is considered complete as of December 31, 2018. The following table summarizes the consideration paid for the acquisition and the amounts of the assets acquired and liabilities assumed as of the Closing Date: Fair Value
(in millions) $ 17.1 107.3 17.8 0.2 6.2 0.4 $ 149.0 4.3 3.5 $ 7.8 $ 141.2 (1)We expect the full amount of goodwill to be deductible for income tax purposes over the next 15 years. We determined the fair value of in-process research and development (IPR&D) using the multi-period earnings method under the income approach. This method reflects the present value of the projected cash flowslosses that are expected to be generated by the IPR&D, less charges representing the required return onnot credit-related included as a component of assets to sustain those cash flows. The multi-period earnings method is a Level 3 fair value measurement. Significant assumptions inherentcomprehensive loss in determining fair value of theUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)4. Acquisition (Continued)IPR&D included annual net cash flows over a period of time and a discount rate applied to those cash flows to reflect the overall risk of the asset. We ascribed no value to the contingent value rights based on a probability-weighted discounted cash flow model, utilizing probability adjusted expectations for achieving the Milestone. In making this determination we considered expectations regarding the timing and probability of FDA approval of Trevyent, the potential patient population, and estimates of product penetration and uptake by August 30, 2023. As of December 31, 2018, there have been no material changes in assumptions used as of the closing date and, therefore, no changes to the value of the contingent consideration.Acquisition-related costs Costs incurred to complete the Merger and integrate SteadyMed into our business were expensed as incurred and included within selling, general and administrative costs on our consolidated statements of operations. During the year ended December 31, 2018, we recognized $5.4 million of acquisition-related costs. These costs represented transaction costs, legal fees and professional third-party service fees.5. InvestmentsMarketable InvestmentsAvailable-for-Sale Investments Marketable investments classified as available-for-salestockholders’ equity, until realized. Available-for-sale debt securities consisted of the following (in millions):As of December 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government and agency securities $ 2,178.9 $ 2.0 $ (7.3) $ 2,173.6 Corporate debt securities 482.5 0.6 (2.0) 481.1 Total $ 2,661.4 $ 2.6 $ (9.3) $ 2,654.7 Reported under the following captions in our consolidated balance sheets: Cash and cash equivalents $ 39.3 Current marketable investments 965.5 Non-current marketable investments 1,649.9 Total $ 2,654.7 As of December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value U.S. government and agency securities $ 1,902.4 $ 9.8 $ (0.1) $ 1,912.1 Corporate debt securities 331.2 3.2 — 334.4 Total $ 2,233.6 $ 13.0 $ (0.1) $ 2,246.5 Reported under the following captions in our consolidated balance sheets: Cash and cash equivalents $ 79.0 Current marketable investments 1,017.9 Non-current marketable investments 1,149.6 Total $ 2,246.5 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 1,077.4 $ 0.7 $ (3.9 ) $ 1,074.2 72.3 — (0.3 ) 72.0 3.7 — (0.2 ) 3.5 $ 1,153.4 $ 0.7 $ (4.4 ) $ 1,149.7 $ — 709.3 440.4 $ 1,149.7 UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)5. Investments (Continued) Amortized
Cost Gross
Unrealized
Losses Fair
Value $ 726.5 $ (3.0 ) $ 723.5 13.9 — 13.9 $ 740.4 $ (3.0 ) $ 737.4 $ 41.7 194.6 501.1 $ 737.4 marketable investmentsdebt securities (in millions): As of December 31, 2021 Amortized Cost Fair Value Due within one year $ 1,003.8 $ 1,004.8 Due in one to three years 1,657.6 1,649.9 Total $ 2,661.4 $ 2,654.7 As of
December 31, 2018 Amortized
Cost Fair
Value $ 708.2 $ 705.8 441.5 440.4 $ 1,149.7 $ 1,146.2 F-17 United Therapeutics, a public benefit corporation Held-to-Maturity Our current and long-term marketable in Equity Securities with Readily Determinable Fair Valuesincluded $39.6in equity securities with readily determinable fair values of $70.4 million and $29.3$78.4 million of investments classified as held-to-maturity as of December 31, 20182021 and 2017, respectively. Marketable investments classified as held-to-maturity2020, respectively, which are comprised of government-sponsored enterprises and corporate notes and bonds. We do not intend to sell these securities, nor is it more likely than not that we will be required to sell them prior to the recovery of their amortized cost basis. Furthermore, we do not believe that these securities expose us to undue market risk or counterparty credit risk. As such, we do not consider these securities to be other than temporarily impaired. The following table summarizes the contractual maturities of held-to-maturityincluded in (in millions): As of
December 31, 2018 Amortized
Cost Fair
Value $ 37.4 $ 37.4 2.2 2.2 $ 39.6 $ 39.6 ContentsUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)5. Investments (Continued)2018,2021 and 2020, we maintained non-controlling equity investments in privately-held companies of $135.5$31.1 million and $84.8 million, respectively, in the aggregate. Upon adoption of ASU 2016-01 on January 1, 2018, we began to measure these investments using the measurement alternative because the fair values of these investments are not readily determinable. Under this alternative, the investments are measured at cost, less any impairment, adjusted for any observable price changes. We made payments of $5.0 million and $60.4$8.0 million for investments in privately-held companies during the year ended December 31, 2019. No such payments were made during the years ended December 31, 20182021 and 2017, respectively. We include our investments in privately-held companies within other non-current assets on our consolidated balance sheets. These investments are subject2020. a periodic impairment review and if impaired, the investment is measured and recorded at fair value in accordance with ASC 820,Fair Value Measurements. During the quarter ended September 30, 2018, one of the privately-held companies in which we have invested underwent a significant change in management and a change in business outlook and strategy, all of which triggered our review of the recoverability of our investment, in the company. We determinedwe perform a valuation analysis to assess the fair value of our investment using an income approach based onvarious inputs, such as the company's discounted projected cash flows, which is considereddiscount rate, time to a Level 3 fair value measurement.liquidation event, and price volatility of peer company stocks. We corroborated the implied revenue multiples from the income approach with the observed revenue multiples of comparable public companies. We concluded thatadjust the fair value of our investment was lower than its carryingbased on the valuation analysis and recognize the gain or loss in the period in which the observable price change occurred. During the years ended December 31, 2021, 2020, and 2019, we recorded an aggregate increase of zero, $25.5 million, and $1.2 million, respectively, in the value resultingof our investments. These gains were recorded within chargefor our investments in 2 of $12.4the private companies in which we invested, which caused us to recognize aggregate impairment charges of $2.3 million. During the fourth quarter of 2018, the same privately-held company had significant liquidity concerns. We performed a qualitative evaluation of our investment concluding that there were additional indicators of impairment present at December 31, 2018. We then determined the fair value of the investment using an income approach based on the company's updated discounted projected cash flows. The carrying value was in excess of the fair value, resulting in an impairment charge of $41.1 million during the fourth quarter of 2018. During the yearyears ended December 31, 2017,2020 and 2019, we recorded $49.6$9.1 million and zero, respectively, of impairment charges related to our investments in privately-held companies.2021 Annual Report F-18 Agreement)Agreement) with this company. The License Agreement entitlesentitled us to control rights sufficient to require us to regard the company as a VIE and to consolidate itsthe company’s balance sheet and results of operations as the primary beneficiary of this company.control rights relatetermination of the License Agreement caused us to additional impair an associated IPR&D asset during 2019 and recognize an impairment charge of $8.8 million, which is included within research and development funding that in our consolidated statements of operations. Upon effectiveness of the termination of the License Agreement in 2019, we may provide to this company over a period of six years. We are also entitled to representation on a joint development committee that approves the company's use of funding provided by us. In 2018, we provided $8.2 million of financial support to the company. Weno longer have the right, at any time and for any reason,power to cease our fundingdirect the entity’s activities. Consequently, we deconsolidated the entity in 2019. Our deconsolidation of this company's activities. As of December 31, 2018, our consolidatedthe entity’s balance sheet, which included $12.3 million of cash maintained by this company that can only be used to settle its obligations. Additionally, our consolidated balance sheets included an $8.8 million in-process research and development intangible asset, $3.4$3.5 million of goodwill and $8.3$8.4 million of preferred stock duetemporary equity, resulted in a net deconsolidation loss of $2.0 million. We have no further obligations to fund the entity. In 2021, we recognized an impairment charge equal to the consolidationentire value of our equity investment in this company. The preferred stock isprivately-held company of $1.3 million and recorded the impairment charge within temporary equity onprivately-held companies in our consolidated balance sheets.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued) Investments (Continued) During the year ended December 31, 2018, this company incurred a net loss of $8.8 million. This company's creditors have no recourse against our assets and general credit.6. Fair Value MeasurementsF-19 United Therapeutics, a public benefit corporation rankclassify these assets and liabilities within the fair value hierarchy. OtherOur other current assets and other current liabilities have fair values that approximate their carrying values. As of December 31, 2021 Level 1 Level 2 Level 3 Balance Assets $ 516.7 $ — $ — $ 516.7 — 2,173.6 — 2,173.6 — 481.1 — 481.1 70.4 — — 70.4 — — 1.2 1.2 Total assets $ 587.1 $ 2,654.7 $ 1.2 $ 3,243.0 Liabilities — — 20.8 20.8 Total liabilities $ — $ — $ 20.8 $ 20.8 As of December 31, 2018 Level 1 Level 2 Level 3 Balance $ 247.6 $ — $ — $ 247.6 — 35.9 — 35.9 — 1,074.2 — 1,074.2 — 75.7 — 75.7 3.5 — — 3.5 $ 251.1 $ 1,185.8 $ — $ 1,436.9 — — 13.4 13.4 $ — $ — $ 13.4 $ 13.4 As of December 31, 2020 Level 1 Level 2 Level 3 Balance Assets $ 323.1 $ — $ — $ 323.1 — 1,912.1 — 1,912.1 — 334.4 — 334.4 78.4 — — 78.4 — — 4.1 4.1 Total assets $ 401.5 $ 2,246.5 $ 4.1 $ 2,652.1 Liabilities — — 17.1 17.1 Total liabilities $ — $ — $ 17.1 $ 17.1 UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)6. Fair Value Measurements (Continued) As of December 31, 2017 Level 1 Level 2 Level 3 Balance $ 217.9 $ — $ — $ 217.9 — 25.2 — 25.2 — 723.5 — 723.5 — 18.0 — 18.0 $ 217.9 $ 766.7 $ — $ 984.6 — — 12.8 12.8 $ — $ — $ 12.8 $ 12.8 on the accompanying in our consolidated balance sheets. on the accompanying in our consolidated balance sheets. Refer to Note 4—Investments—Marketable Investments—Available-for-Sale Debt Securities for further information. The fair value of these securities is principally measured or corroborated by trade data for identical securities infor which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded.non-currentcurrent marketable investments on the accompanying in our consolidated balance sheets. The fair value of these securities is based on quoted market prices for identical instruments in active markets. on the accompanying in our consolidated balance sheets. The fair value of our contingent consideration obligations has been estimated using probability-weighted discounted cash flow models (DCFs)(DCFs). The DCFs incorporate Level 3 inputs including estimated discount rates that we believe that market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, in part, based on the requirements specific to each acquisition agreement. The fair value of our contingent consideration liabilities increased by $3.7 million from December 31, 2020 to December 31, 2021. The loss was recorded within research and development in our consolidated statements of operations.5—4—Investments. The carrying value of our debt is a reasonable estimate of the fair value of the outstanding debt based on the variable interest rate of the debt.2021 Annual Report F-20 As of December 31, 2021 2020 Accounts payable $ 3.8 $ 4.1 Accrued expenses: Sales-related (royalties, rebates, and fees) 85.3 84.5 Payroll-related 53.6 47.9 Research and development-related 19.0 27.8 Other 12.9 22.7 Total accrued expenses $ 170.8 $ 182.9 Total accounts payable and accrued expenses $ 174.6 $ 187.0 As of
December 31, 2018 2017 $ 23.1 $ 8.4 81.0 104.6 37.9 34.6 24.1 23.5 $ 143.0 $ 162.7 $ 166.1 $ 171.1 8. DebtUnsecured Revolving Credit Facility—2018 Credit Agreement2018 Credit Agreement)Agreement) with Wells Fargo Bank, National Association (Wells Fargo)(Wells Fargo), as administrative agent and a swingline lender, and various other lender parties, providing forfor: (1) an unsecured revolving credit facility of up to $1.0 billion; and (2) a second unsecured revolving credit facility of up to $500.0 million (which facilities may, at our request, be increased by up to $300$300.0 million in the aggregate subject to obtaining commitments from existing or new lenders for such increase and satisfying other conditions). The facilities will mature five years afterIn December 2020, we extended the closingmaturity date of the 2018 Credit Agreement subject to the lenders' ability to extend the maturity date by one year, if we request such an extension in accordance with the terms of the 2018 Credit Agreement, up to a maximum of two such extensions. 2018 Credit Agreement bear interest at either the LIBOR rate or a fluctuating base rate, in each case, plus an applicable margin determined on a quarterly basis based onin our consolidated ratio of total indebtedness to EBITDAearnings before interest, taxes, depreciation, and amortization (as calculated in accordance with the 2018 Credit Agreement). On June 27, 2018, To date, we borrowed $250.0 million under the 2018 Credit Agreement, and used the fundshave elected to repay outstanding indebtedness under the 2016 Credit Agreement as discussed below underUnsecured Revolving Credit Facility—2016 Credit Agreement. As we no longer intend to repay the full outstanding balance within one year,calculate interest on the outstanding balance has been reclassified from short-term to long-term within the consolidated balance sheet. We elected to have interest on this draw calculated at LIBOR plus an applicable margin. During the year endedAs of December 31, 2018, we recorded $6.8 million of interest expense related to2021 and 2020, our outstanding aggregate principal balance under the credit facility. On January 24, 2019, we paid an upfront payment ofCredit Agreement was $800.0 million, relatedall of which was classified as a non-current liability because we do not intend to the global license agreement with Arena Pharmaceuticals, Inc. (Arena) and funded the payment by borrowing $800.0 million under the 2018 Credit Agreement. Refer to Note 18—Subsequent Events. 2018 Credit Agreement contains customary events of default and customary affirmative and negative covenants. As of December 31, 2018,2021, we were in compliance with suchthese covenants. Lung Biotechnology PBC is our only subsidiary that guarantees our obligations under the 2018 CreditUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)8. Debt (Continued)2018 Credit Agreement, we incurredcapitalized debt issuance costs, of $13.2 million. We capitalized $12.6 million of these costs. These issuance costswhich are being amortized to interest expense over the contractual term of the 2018 Credit Agreement. As of December 31, 2018, $2.52021, $2.4 million iswas recorded in other current assets and $8.8$6.9 million in other non-current assets on in our consolidated balance sheet.Unsecured Revolving Credit Facility—2016 Credit Agreement In January 2016, we entered into a credit agreement (the 2016 Credit Agreement) with Wells Fargo, as administrative agent and a swingline lender, and various other lender parties, providing for an unsecured revolving credit facility of up to $1.0 billion. On June 1, 2017, we borrowed $250.0 million under this facility and used the funds to initiate an accelerated share repurchase program. Refer to Note 11—Stockholders' Equity—Share Repurchase. On June 27, 2018, we repaid in full all our obligations under the 2016 Credit Agreement in connection with the termination of the 2016 Credit Agreement and our entry into the 2018 Credit Agreement. There were no penalties associated with the early termination of the 2016 Credit Agreement.Convertible Note Hedge and Warrant Transactions In October 2011, we issued $250.0 million in aggregate principal value 1.0 percent Convertible Senior Notes due September 15, 2016 (Convertible Notes). Upon maturity of the Convertible Notes in September 2016, we fulfilled all remaining settlement and repayment obligations. In connection with the issuance of the Convertible Notes, we sold to Deutsche Bank AG London (DB London) warrants to acquire up to approximately 5.2 million shares of our common stock at a strike price of $67.56 per share. sheets. warrants expired incrementally on a series of expiration dates during December 2016 and January 2017. The warrants were settled on a net-share basis. As the price of our common stock exceeded the strike price of the warrants on each of the series of related incremental expiration dates, we delivered 2.8 million shares of common stock previously held as treasury stock to DB London, including 1.7 million shares that were delivered during the first quarter of 2017.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)8. Debt (Continued)Interest Expense Details of interest expense presented onreported in our consolidated statements of operations are as follows (in millions): Year Ended
December 31, 2018 2017 2016 $ 13.9 $ 7.1 $ 3.2 — — 0.1 — 1.9 0.6 $ 13.9 $ 9.0 $ 3.9
Agreement.(1)Represents interest expensefor each of the years ended December 31, 2021, 2020, and 2019, related to debt and amortization of issuance costs associated with our 2018 and 2016borrowings under the Credit Agreements.9. Temporary Equity Temporary equity includes securities that: (1) have redemption features that are outside our control; (2) are not classified as an asset or liability; (3) are excluded from permanent stockholders' equity; and (4) are not mandatorily redeemable. Amounts included in temporary equity relate to securities that are redeemable at a fixed or determinable price. Components comprising the carrying value of temporary equity include the following (in millions): As of
December 31, 2018 2017 $ 10.9 $ 10.9 8.3 8.3 $ 19.2 $ 19.2 (1)In connection with our license agreement with Toray Industries Inc. (Toray), we issued 200,000 shares of our common stock (which have since split into 400,000 shares) to Toray in 2007, and provided Toray the right to require us to repurchase the shares at a price of $27.21 per share.(2)The preferred stock issued by the variable interest entity we consolidate includes rights that allow the holders to redeem the preferred stock at the original issuance price in exchange for cash. Refer to Note 5—Investments—Variable Interest Entity for more information.10.8. Share-Based Compensation2018,2021, we have two2 shareholder-approved equity incentive plans: the United Therapeutics Corporation Amended and Restated Equity Incentive Plan (the 1999 Plan)Plan) and theUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued)(the (as amended to date, the Plan)Plan). The 2015 Plan was approved by our shareholders in June 2015 and providedprovides for the issuance of up to 6,150,00011,000,000 shares of our common stock pursuant to awards granted under the 2015 Plan. On June 26, 2018, our shareholders approvedPlan, which includes the 1,000,000 shares added pursuant to an amendment and restatement of the 2015 Plan to increase the maximum number of shares ofapproved by our common stock that may be issued under the 2015 Plan by 2,900,000 shares. As a result of the approval of the 2015 Plan, noshareholders in June 2021. No further awards will be granted under the 1999 Plan. We also have one equity incentive plan, the United Therapeutics Corporation 2019 Inducement Stock Incentive Plan (the 2019 Inducement Plan), that has not been approved by our shareholders, as permitted by the Nasdaq Stock Market rules. The 2019 Inducement Plan was approved by our Board of Directors in February 2019 and provides for the issuance of up to 99,000 shares of our common stock under awards granted to newly-hired employees. Currently, we grant equity-based awards includingto employees and members of our Board of Directors in the form of stock options and restricted stock units (RSUs) under the 2015 Plan, and we grant RSUs to newly-hired employees under the 2019 Inducement Plan. Refer to the sections entitledEmployee Stock Options andRestricted Stock Units RSUs below.F-21 United Therapeutics, a public benefit corporation (2008 STAP)(2008 STAP) and the United Therapeutics Corporation 2011 Share Tracking Awards Plan (2011 STAP)(2011 STAP). We refer to the 2008 STAP and the 2011 STAP collectively as the "STAP"STAP and awards outstanding under either of these plans as "STAP awards."STAP awards. Refer to the section entitledShare Tracking Awards Plans below. We discontinued the issuance of STAP awards in June 2015.(ESPP)(ESPP), which is structured to comply with Section 423 of the Internal Revenue Code. Refer to the section entitledEmployee Stock Purchase Plan section below.(benefit) recognized in our consolidated statements of operations (in millions): Year Ended December 31, 2021 2020 2019 Stock options $ 25.4 $ 44.0 $ 70.5 RSUs 24.7 20.5 13.3 STAP awards 86.6 97.8 (39.7) Employee stock purchase plan 1.8 1.5 1.3 Total share-based compensation expense before tax $ 138.5 $ 163.8 $ 45.4 Share-based compensation capitalized as part of inventory $ 1.0 $ 1.0 $ 0.7 Year Ended December 31, 2018 2017 2016 $ 58.5 $ 43.0 $ 24.8 7.3 2.2 1.1 (93.4 ) 27.1 (15.2 ) 1.2 1.2 1.4 $ (26.4 ) $ 73.5 $ 12.1 $ 0.7 $ 0.4 $ 0.2 As a result of the adoption of ASU 2016-09, we established an accounting policy election to account for forfeitures of share-based awards and STAPs when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment decreased retained earnings by $5.8 million, net of tax.Employee Stock Optionsbegan issuingissued stock options with performance conditions to certain executives. The stock options haveexecutives with vesting conditions tied to the achievement of specified performance criteria,UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued)havehad target performance levels that span from one to three years. Upon the conclusion of the performance period, the performance level achieved iswas measured and the ultimate number of shares that may vest iswas determined. Share-based compensation expense for these awards iswas recorded ratably over their vesting period,periods, depending on the specific terms of the award and anticipated achievement of the specified performance criteria. As of December 31, 2021, the performance period for these awards had ended, and the awards granted in March 2017 and March 2018 had vested. During 2018,2021 and 2020, we granted 0.9 milliondid not grant stock options with performance vesting conditions with a grant date fair value of $23.7 million based on achievement of target performance levels. During the years ended December 31, 2018 and 2017, we recorded $39.9 million and $16.7 million, respectively, of share-based compensation expense related to the 2017 and 2018 performance-based grants.Employee Stock Optionsstock options are provided below:2018, 20172021, 2020, and 2016,2019, we used the simplified approach to develop this input for our stock options as we do not have sufficient historical data related to stock option exercises. Under the simplified approach, the expected term reflects the weighted average midpoint between the vesting date and the expiration date of the awards. For the expected term input related to our STAP awards, refer to theShare Tracking Awards PlanPlans section below.zero.2021 Annual Report F-22 weighted-averageweighted average assumptions were used in estimating the fair value of stock options granted to employees during the twelve months ended December 31, 2018, December 31, 2017,2021, 2020, and December 31, 2016: Year Ended
December 31, 2018 2017 2016(1) 6.3 6.1 5.8 36.2 % 35.7 % 34.8 % 2.7 % 2.2 % 1.6 % 0.0 % 0.0 % 0.0 % Year Ended December 31, 2021 2020 2019 Expected term of awards (in years) 5.7 5.6 5.8 Expected volatility 32.5 % 33.4 % 33.8 % Risk-free interest rate 1.0 % 0.5 % 2.4 % Expected dividend yield 0.0 % 0.0 % 0.0 % (1)Prior to the adoption of ASU 2016-09 on January 1, 2017, the weighted-average expected forfeiture rate used in estimating the fair value of stock options granted to employees was 5.4 percent in 2016.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued) Number of Options Weighted Average Exercise Price Weighted Average Remaining
Contractual Term (in Years)Aggregate Intrinsic Value (in millions) Outstanding at January 1, 2021 7,680,194 $ 126.27 Granted 43,653 177.33 Exercised (405,536) 123.47 Forfeited (333) 146.03 Outstanding at December 31, 2021 7,317,978 $ 126.73 4.6 $ 653.9 Exercisable at December 31, 2021 5,592,698 $ 125.92 4.4 $ 504.2 Unvested at December 31, 2021 1,725,280 $ 129.34 5.3 $ 149.7 Options Weighted-
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term
(in Years) Aggregate
Intrinsic
Value
(in millions) 5,878,323 $ 119.61 996,775 111.05 (289,393 ) 53.99 (285,902 ) 130.28 6,299,803 $ 120.78 6.8 $ 32.7 3,441,138 $ 113.74 5.4 $ 32.5 2,858,665 $ 129.26 8.4 $ 0.2 2018,2021, was $45.01, $56.07$56.69, $34.56, and $42.59,$39.63, respectively. The total fair value of stock options that vested for each of the years in the three-year period ended December 31, 2018,2021, was $33.9$50.4 million, $13.1$73.5 million, and $19.9$37.4 million, respectively. Year Ended December 31, 2021 2020 2019 Cost of product sales $ 0.1 $ 0.5 $ 0.8 Research and development 0.5 2.0 3.7 Selling, general, and administrative 24.8 41.5 66.0 Share-based compensation expense before taxes 25.4 44.0 70.5 Related income tax benefit (0.8) (3.1) (16.0) Share-based compensation expense, net of taxes $ 24.6 $ 40.9 $ 54.5 Year Ended December 31, 2018 2017 2016 $ 0.9 $ 1.3 $ 0.5 3.7 3.7 1.4 53.9 38.0 22.9 58.5 43.0 24.8 (13.3 ) (15.8 ) (9.1 ) $ 45.2 $ 27.2 $ 15.7 2018, the2021, unrecognized compensation cost relating to stock options was $78.6$25.7 million. Unvested outstanding stock options as of December 31, 20182021 had a weighted average remaining vesting period of 1.71.2 years.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued) Year Ended December 31, 2018 2017 2016 289,393 461,465 243,624 $ 15.6 $ 39.9 $ 7.7 $ 17.0 $ 29.3 $ 21.9 $ — $ — $ 5.9 Year Ended December 31, 2021 2020 2019 Number of options exercised 405,536 466,731 191,508 Cash received from options exercised $ 50.0 $ 33.8 $ 9.9 Total intrinsic value of options exercised $ 26.6 $ 22.9 $ 11.5 $ 5.3 $ 5.4 $ 2.6
operations within income tax (expense) benefit.On January 1, 2017, we adopted ASU 2016-09. Upon adoption of ASU 2016-09, we began toWe recognize excessthese tax benefits as income tax benefits onin our consolidated statements of operations.Restricted Stock UnitsF-23 United Therapeutics, a public benefit corporation restricted stock unitsRSUs to our non-employee directors. In October 2017, we also began issuing restricted stock unitsRSUs to our employees. Each restricted stock unitRSU entitles the recipient to one1 share of our common stock upon vesting. We measure the fair value of restricted stock unitsRSUs using the stock price on the date of grant. Share-based compensation expense for the restricted stock unitsRSUs is recorded ratably over their vesting period.restricted stock units under the 2015 PlanRSUs during year ended December 31, 2021 is presented below: Number of RSUs Weighted Average Grant Date Fair Value Unvested at January 1, 2021 440,528 $ 102.40 Granted 188,378 166.19 Vested (210,676) 106.23 Forfeited/canceled (27,691) 121.33 Unvested at December 31, 2021 390,539 $ 129.76 Number of
Restricted
Stock Units Weighted-
Average
Grant
Price Weighted
Average
Remaining
Contractual
Term (Years) Aggregate
Intrinsic
Value
(in millions) 23,040 $ 128.98 198,888 112.34 (19,051 ) 131.79 (16,622 ) 111.46 186,255 $ 112.48 9.3 $ 20.3 UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued)relatedrelating to restricted stock unitsRSUs is recorded as follows (in millions): Year Ended December 31, 2021 2020 2019 Cost of product sales $ 2.1 $ 1.6 $ 1.0 Research and development 8.2 7.0 4.4 Selling, general, and administrative 14.4 11.9 7.9 Share-based compensation expense before taxes 24.7 20.5 13.3 Related income tax benefit (5.9) (4.8) (3.0) Share-based compensation expense, net of taxes $ 18.8 $ 15.7 $ 10.3 Year Ended
December 31, 2018 2017 2016 $ 0.5 $ — $ — 1.7 — — 5.1 2.2 — 7.3 2.2 — (1.7 ) (0.8 ) — $ 5.6 $ 1.4 $ — 2018,2021, unrecognized compensation cost related to the grant of restricted stock unitsRSUs was $15.3$31.5 million. Unvested outstanding restricted stock unitsRSUs as of December 31, 20182021 had a weighted average remaining vesting period of 2.21.8 years.tenthtenth anniversary of the grant date, and in most cases they vest in equal increments on each anniversary of the grant date over a four-year period. The STAP liability includes vested awards and awards that are expected to vest.$72.2$102.4 million and $241.3$96.8 million at December 31, 20182021 and 2017,2020, respectively, all of which zero and $1.2 million, respectively, have beenwas classified as other non-current liabilities ona current liability in our consolidated balance sheets based on their vesting terms.Employee Stock Options section above. A description of the expected term input for STAP awards is provided below:For the years ended December 31, 2017 and 2016 and for the nine months ended September 30, 2018, we used historical data to develop this input for our STAP awards. As of December 31, 2018, we no longer believed historical exercise data was a reasonable approach to determine the expected exercise behavior of outstanding STAPs given the prolonged volatility of the price of our common stock. As such, we determined the expected term assumption as of December 31, 2018 usingWe use the weighted average midpoint of the remaining contractual term for outstanding awards.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued)The midpoint method resulted in a remaining weighted average expected term of 2.5 years, which is longer than the remaining weighted averaged expected term of 1.0 year calculated under our historical approach. We believe the midpoint method represents the best estimate ofcalculate the expected term of outstanding STAP awards. The application of the midpoint method during the fourth quarter of 2018 resulted in an increase to the STAP liability of approximately $22.7 million, holding other factors constant.2021 Annual Report F-24 As of December 31, 2018 2017 2016(1) 2.5 1.8 2.5 30.9 % 31.7 % 36.1 % 2.5 % 1.8 % 1.4 % 0.0 % 0.0 % 0.0 % As of December 31, 2021 2020 2019 Expected term of awards (in years) 1.3 1.7 2.0 Expected volatility 30.0 % 34.8 % 29.1 % Risk-free interest rate 0.4 % 0.1 % 1.6 % Expected dividend yield 0.0 % 0.0 % 0.0 % (1)Prior to the adoption of ASU 2016-09 on January 1, 2017, the weighted-average expected forfeiture rate used in estimating the fair value of STAP awards granted to employees was 8.8 percent in 2016.$108.90, $147.95,$216.08, $151.79, and $143.43$88.08 on December 31, 2018, 20172021, 2020, and 2016,2019, respectively.and activity of STAP awards during the STAPyear ended December 31, 2021 is presented below: Number of Awards Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value (in millions) Outstanding at January 1, 2021 2,121,860 $ 118.48 Granted — — Exercised (1,027,738) 112.72 Forfeited (562) 145.30 Outstanding at December 31, 2021 1,093,560 $ 123.89 2.5 $ 100.8 Exercisable at December 31, 2021 1,083,560 $ 124.55 2.6 $ 99.2 Unvested at December 31, 2021 10,000 $ 52.57 0.9 $ 1.6 Number of
Awards Weighted-
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term
(Years) Aggregate
Intrinsic
Value
(in millions) 4,096,394 $ 95.60 — — (1,116,643 ) 57.99 (111,772 ) 156.97 2,867,979 $ 107.85 4.9 $ 65.4 2,646,723 $ 103.77 4.8 $ 64.8 221,256 $ 156.73 6.1 $ 0.6 UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)10. Share-Based Compensation (Continued) expense recognized in connection with the STAP awards is as follows (in millions):Year Ended December 31, 2021 2020 2019 Cost of product sales $ 3.5 $ 4.9 $ (1.7) Research and development 15.0 19.9 (8.2) Selling, general, and administrative 68.1 73.0 (29.8) Share-based compensation expense (benefit) before taxes 86.6 97.8 (39.7) Related income tax (benefit) expense (14.7) (19.3) 9.0 Share-based compensation expense (benefit), net of taxes $ 71.9 $ 78.5 $ (30.7) Year Ended December 31, 2018 2017 2016 $ (4.7 ) $ 1.2 $ — (17.9 ) 4.1 (11.8 ) (70.8 ) 21.8 (3.4 ) (93.4 ) 27.1 (15.2 ) 21.3 (10.0 ) 5.6 $ (72.1 ) $ 17.1 $ (9.6 ) 2018, 20172021, 2020, and 20162019 was $75.7$81.1 million, $63.4$26.1 million, and $69.5$7.6 million, respectively.United Therapeutics Corporation Employee Stock Purchase Plan (ESPP),ESPP, which is structured to comply with Section 423 of the Internal Revenue Code. The ESPP provides eligible employees with the right to purchase shares of our common stock at a discount through elective accumulated payroll deductions at the end of each offering period. Offering periods, which began in 2012, occur in consecutive six-month periods commencing on September 5th and March 5th of each year. Eligible employees may contribute up to 15 percent of their base salary, subject to certain annual limitations as defined in the ESPP. The purchase price of the shares is equal to the lower of 85 percent of the closing price of our common stock on either the first or last trading day of a given offering period. In addition, the ESPP provides that no eligible employee may purchase more than 4,000 shares during any offering period. The ESPP has a 20-year term and limits the aggregate number of shares that can be issued under the ESPP to 3.0 million.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)11. Stockholders'F-25 United Therapeutics, a public benefit corporation Year Ended December 31, 2018 2017 2016 $ 589.2 $ 417.9 $ 713.7 43.5 44.0 43.8 — 0.1 2.3 0.5 0.8 0.7 44.0 44.9 46.8 $ 13.54 $ 9.50 $ 16.29 $ 13.39 $ 9.31 $ 15.25 4.7 3.3 5.2 Year Ended December 31, 2021 2020 2019 Numerator: Net income (loss) $ 475.8 $ 514.8 $ (104.5) Denominator: Weighted average outstanding shares — basic 44.9 44.2 43.8 Stock options, RSUs, and employee stock purchase plan 2.4 0.4 — 47.3 44.6 43.8 Net income (loss) per common share: Basic $ 10.60 $ 11.65 $ (2.39) Diluted $ 10.06 $ 11.54 $ (2.39) 0.1 6.6 7.2 Certain convertible notes,restricted stock units and warrantsRSUs have been excluded from the computation of diluted earnings per share because their impact would be anti-dilutive. UnderFor the convertible note hedge agreementyear ended December 31, 2019, we entered into in connection withhad a net loss, and as such, all outstanding stock options, RSUs, and shares issuable under the ESPP were excluded from our Convertible Notes, we were entitled to receive shares required to be issued to investors upon conversioncalculation of our Convertible Notes. Since related shares used to compute dilutivediluted earnings per share would be anti-dilutive, they have been excluded from the calculation above.share.Share Repurchases In April 2017, our Board of Directors approved a share repurchase program authorizing up to $250.0 million in aggregate repurchases of our common stock. Pursuant to this authorization, in May 2017, we paid $250.0 million to enter into an accelerated share repurchase agreement (ASR) with Citibank, N.A. (Citibank). Pursuant to the terms of the ASR, in June 2017, Citibank delivered to us approximately 1.7 million shares of our common stock, representing the minimum number of shares we were entitled to receive under the ASR. Upon termination of the ASR in September 2017, Citibank delivered to us approximately 0.3 million additional shares of our common stock. The ASR was accounted for as an equity transaction and the shares we repurchased under the ASR were included in treasury stock when the shares were received.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)11. Stockholders' Equity (Continued)Shareholder Rights Plan In June 2008, we entered into an Amended and Restated Rights Agreement with The Bank of New York as Rights Agent (the Plan), which amended and restated our original Rights Agreement dated December 17, 2000. The Plan, as amended and restated, extended the expiration date of the Preferred Share Purchase Rights (Rights) from December 29, 2010 to June 26, 2018, and increased the purchase price of each Right from $64.75 to $400.00, respectively. Each Right entitled holders to purchase one one-thousandth of a share of our Series A Junior Participating Preferred Stock. Rights were exercisable only upon our acquisition by another company, or commencement of a tender offer that would result in ownership of 15 percent or more of the outstanding shares of our voting stock by a person or group (as defined under the Plan) without our prior express written consent. The Plan expired on June 26, 2018 in accordance with its terms. As of December 31, 2018, we have not issued any shares of our Series A Preferred Stock.Foreign Currency Translation Losses Unrealized Gains and (Losses) on Available-for-Sale Securities Total Balance, January 1, 2021 $ (6.7) $ (17.9) $ 10.4 $ (14.2) Other comprehensive (loss) income before reclassifications 5.6 — (15.0) (9.4) Amounts reclassified from accumulated other comprehensive loss 0.6 — — 0.6 Net current-period other comprehensive (loss) income 6.2 — (15.0) (8.8) Balance, December 31, 2021 $ (0.5) $ (17.9) $ (4.6) $ (23.0) Defined
Benefit
Pension
Plan(1) Foreign
Currency
Translation
Losses Unrealized
Gains and
(Losses) on
Available-for-
Sale
Securities Total $ 0.2 $ (17.9 ) $ (1.9 ) $ (19.6 ) 10.7 — (0.4 ) 10.3 1.4 — — 1.4 12.1 — (0.4 ) 11.7 $ 12.3 $ (17.9 ) $ (2.3 ) $ (7.9 ) 2021 Annual Report F-26 UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)11. Stockholders' Equity (Continued) Defined
Benefit
Pension
Plan(1) Foreign
Currency
Translation
Losses Unrealized
Gains and
(Losses) on
Available-for-
Sale
Securities Total $ 1.3 $ (18.1 ) $ — $ (16.8 ) (1.7 ) 0.2 (1.9 ) (3.4 ) 0.6 — — 0.6 (1.1 ) 0.2 (1.9 ) (2.8 ) $ 0.2 $ (17.9 ) $ (1.9 ) $ (19.6 ) Foreign Currency Translation Losses Unrealized Gains and (Losses) on Available-for-Sale Securities Total Balance, January 1, 2020 $ — $ (17.9) $ 3.7 $ (14.2) Other comprehensive (loss) income before reclassifications (8.0) — 6.7 (1.3) Amounts reclassified from accumulated other comprehensive loss 1.3 — — 1.3 Net current-period other comprehensive (loss) income (6.7) — 6.7 — Balance, December 31, 2020 $ (6.7) $ (17.9) $ 10.4 $ (14.2) 13—11—Employee Benefit Plans—Supplemental Executive Retirement Plan, which identifies the captions within our consolidated statementstatements of operations where reclassification adjustments were recognized and their associated tax impact.12. Tax Reform has multiple provisions that impacted our tax expense. The significant impacts were a reduction in the U.S. federal corporate tax rate from 35 percent to 21 percent, additional limitations on deductions for executive compensation, a reduction of the Orphan Drug Credit, repeal of the Section 199 deduction for domestic manufacturing activities, and the introduction of the foreign derived intangible income deduction. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of Tax Reform. As a result of changes under Tax Reform, we recognized a provisional amount of $71.0 million of additional tax expense in our consolidated financial statements for the year ended December 31, 2017. The additional tax expense was primarily due to the revaluing of our ending net deferred tax assets at December 31, 2017 because of the reduction in the U.S. corporate income tax rate under Tax Reform. The measurement period prescribed under SAB 118 ended on December 22, 2018 and our analysis and accounting for Tax Reform has been completed as of this date. We recognized a reduction of tax expense of $1.8 million for the year ended December 31, 2018 due to refinements that were made during the measurement period to the calculation of the foreign elements of Tax Reform.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)12. Income Taxes (Continued) Year Ended December 31, 2021 2020 2019 Current: Federal $ 112.3 $ 114.6 $ 63.1 State 24.6 20.0 9.4 Total current 136.9 134.6 72.5 Deferred Federal (10.1) 1.6 (120.1) State (8.7) (12.1) (12.9) Total deferred (18.8) (10.5) (133.0) Total income tax expense (benefit) $ 118.1 $ 124.1 $ (60.5) Year Ended December 31, 2018 2017 2016 $ 136.6 $ 261.3 $ 311.9 17.4 23.9 24.1 154.0 285.2 336.0 12.7 67.2 8.3 3.0 (0.8 ) 2.2 15.7 66.4 10.5 $ 169.7 $ 351.6 $ 346.5 20182021, 2020, and 35 percent in both 2017 and 20162019 to income tax expense (benefit) as reported (in millions): Year Ended December 31, 2021 2020 2019 Federal taxes at the statutory rate $ 124.7 $ 134.2 $ (34.7) Change in valuation allowance (18.7) (3.1) (5.7) State taxes, net of federal benefit 14.6 7.0 (3.1) Nondeductible compensation 11.8 11.5 6.3 General business credits (11.5) (24.0) (21.3) Deduction for foreign-derived intangible income (2.8) (2.2) (3.3) Uncertain tax positions (1.0) 4.8 (0.3) Other 1.0 (4.1) (1.6) Foreign income adjustment — — 5.1 Deconsolidation of VIE — — (1.9) Total income tax expense (benefit) $ 118.1 $ 124.1 $ (60.5) Effective tax rate 20 % 19 % 37 % Year Ended December 31, 2018 2017 2016 $ 159.4 $ 269.2 $ 371.1 15.3 14.2 17.1 (14.9 ) (15.1 ) (10.5 ) 11.2 17.5 1.1 2.1 1.8 (11.4 ) (1.9 ) (4.5 ) — (1.8 ) 71.0 — 0.3 1.3 1.1 — (22.8 ) (22.0 ) — 19.0 — $ 169.7 $ 351.6 $ 346.5 F-27 United Therapeutics, a public benefit corporation UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)12. Income Taxes (Continued)
Components of the net deferred tax assets are as follows (in millions): As of December 31, 2021 2020 Deferred tax assets: Intangible assets $ 186.1 $ 176.0 Share-based compensation 73.4 73.1 Reserves and accrued liabilities 18.3 18.8 SERP 10.9 10.9 NOLs 8.3 9.7 Basis differences in investments 1.4 7.4 Other 5.0 5.6 Total deferred tax assets 303.4 301.5 Less: Valuation allowance (11.5) (35.5) Total net deferred tax assets 291.9 266.0 Deferred tax liabilities: Plant and equipment principally due to differences in depreciation (28.2) (26.1) Other (1.8) (1.3) Total deferred tax liabilities (30.0) (27.4) Total deferred tax assets, net $ 261.9 $ 238.6 As of
December 31, 2018 2017 $ 43.2 $ 34.3 36.5 24.6 34.3 2.4 23.1 11.6 20.7 10.0 13.8 47.7 10.7 12.6 9.3 6.2 191.6 149.4 (20.2 ) (13.6 ) (24.8 ) — (8.3 ) (5.5 ) 138.3 130.3 (42.6 ) (16.9 ) $ 95.7 $ 113.4 Unrecognized tax benefits as ofAt December 31, 20182021, we had gross federal, foreign, and 2017, were $0.5state net operating loss carryforwards of zero, $4.3 million, and included $0.3$131.3 million, respectively, which either expire at various dates beginning in 2030 or have no expiration date. We expect that a significant amount of tax benefits that, if recognized, would impact our ETR. We record interest and penalties related to uncertain tax positions as a component of income tax expense. As of December 31, 2018 and 2017,these carryforwards will expire unused, so we have not accrued any material interest expenseestablished valuation allowances for the related to uncertaindeferred tax positions. We are unaware of any material positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months.2011. At2013.2018,2021 and 2020, we had $3.6 million and $4.5 million of unrecognized tax benefits, excluding interest and penalties, that would impact our effective tax rate if recognized. The total amount of unrecognized tax benefits relating to our tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Given the uncertainty of potential adjustments from examination, it is reasonably possible that the balance of unrecognized tax benefits could change significantly over the next 12 months. However, due to the number of years remaining that are subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits. Year Ended December 31, 2021 2020 2019 Unrecognized tax benefits, beginning of the period $ 4.5 $ — $ 0.5 Gross decreases related to prior period tax positions (0.1) — (0.5) Gross increases related to prior period tax positions — 3.8 — Gross increases related to current period tax positions 0.7 0.7 — Gross decreases as a result of settlements during the current period (1.5) — — Unrecognized tax benefits, end of the period $ 3.6 $ 4.5 $ — 2021 Annual Report F-28 gross federal, foreign and state net operating loss carryforwards of $15.9 million, $133.1 million and $68.0 million, respectively, whichno assurance that the requirement to amortize will either expire at various datesbe repealed or otherwise modified. If the requirement is not repealed or delayed, it will increase our cash paid for income taxes beginning in 2030 or have no expiration date. We expect that a significant amount of these carryforwards will expire unused, so we have established valuation allowances for the related deferred tax assets. Certain of our investments in privately-held companies have been impaired and have associated deferred tax assets. We expect that the benefit of any potential tax losses related to the impairments will ultimately not be recognized due to their capital nature, so we have established valuation allowances for the full amount of the deferred tax assets.2022.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)13.(SERP)(SERP) to provide retirement benefits to certain senior members of our management team.sixthsixth month after retirement. Participants who elect to receive monthly payments will continue to receive payments through the remainder of their life. Alternatively, participants who elect to receive a lump sum distribution will receive a payment equal to the present value of the estimated monthly payments that would have been received upon retirement. As of December 31, 20182021 and 2017,2020, all SERP participants had elected to receive a lump sum distribution. Participants who terminate employment for any reason other than death, disability, or change in control prior to age 60 will not be entitled to receive any benefits under the SERP. Year Ended
December 31, 2018 2017 $ 55.9 $ 49.5 2.4 2.2 1.6 1.6 (0.2 ) — (12.9 ) 2.6 $ 46.8 $ 55.9 $ 19.9 $ 16.4 $ 26.9 $ 39.5 Year Ended December 31, 2021 2020 Projected benefit obligation at the beginning of the year $ 68.6 $ 56.1 Service cost 3.4 2.8 Interest cost 0.9 1.3 Benefits paid — — Net actuarial (gain) loss (5.8) 8.4 Projected benefit obligation at the end of the year $ 67.1 $ 68.6 $ 18.2 $ 19.1 Amount included in Other non-current liabilities $ 48.9 $ 49.5 During the fourth quarter of 2018, a participant in the SERP departed before retirement age under the terms of the SERP. As a result, we recorded a $7.0 million reduction to the benefit obligation as of December 31, 2018.(2)UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)13. Employee Benefit Plans (Continued)weighted-averageweighted average assumptions were used to measure the SERP obligation:Year Ended December 31, 2021 2020 Discount rate 2.05 % 1.49 % Salary increases 4.00 % 4.00 % Lump-sum interest rate 2.75 % 2.25 % Year Ended
December 31, 2018 2017 3.92 % 3.36 % 4.00 % 4.00 % 4.50 % 3.75 % F-29 United Therapeutics, a public benefit corporation onin our consolidated statements of operations consisted of the following (in millions):Year Ended December 31, 2021 2020 2019 Service cost $ 3.4 $ 2.8 $ 2.2 Interest cost 0.9 1.3 1.4 Amortization of prior service cost 0.7 1.3 1.5 Amortization of net actuarial gain — — (2.2) Settlement — — (1.9) Total $ 5.0 $ 5.4 $ 1.0 Year Ended
December 31, 2018 2017 2016 $ 2.4 $ 2.2 $ 2.7 1.6 1.6 1.5 1.5 1.5 1.4 (0.2 ) (0.6 ) (0.4 ) $ 5.3 $ 4.7 $ 5.2 For the year ended December 31, 2018, theThe service cost component is reported within "Operating expenses"operating expenses and the other components are reported in "Other, net" on theother income, net in our consolidated statements of operations. For the years ended December 31, 2017 and 2016, all components of net periodic pension cost are reported within "Operating expenses" on the consolidated statements of operations. We did not reclassify prior year amounts to conform with current year presentation as these amounts were not material to our financial statements. See Note 3—Recently Issued Accounting Standards for further discussion of our adoption of ASC 2017-07. (loss) are as follows (in millions):Year Ended December 31, 2021 2020 2019 Net actuarial gain (loss) $ 5.8 $ (8.4) $ (12.9) Prior service cost 0.7 1.3 1.5 Settlement — — (1.9) Total recognized in other comprehensive (loss) income 6.5 (7.1) (13.3) Tax (expense) benefit (0.3) 0.4 1.0 Total, net of tax $ 6.2 $ (6.7) $ (12.3) Year Ended December 31, 2018 2017 2016 $ 12.7 $ (3.2 ) $ 11.0 1.5 1.5 (0.6 ) 14.2 (1.7 ) 10.4 (2.1 ) 0.6 (3.8 ) $ 12.1 $ (1.1 ) $ 6.6 UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)13. Employee Benefit Plans (Continued)onin our consolidated statements of operations (in millions):Year Ended December 31, 2021 2020 2019 Net actuarial (gain) loss $ (2.0) $ 3.8 $ (4.5) Prior service cost 1.3 2.0 3.3 Total included in accumulated other comprehensive loss (0.7) 5.8 (1.2) Tax expense 1.2 0.9 1.2 Total, net of tax $ 0.5 $ 6.7 $ — Year Ended December 31, 2018 2017 2016 $ (19.3 ) $ (6.6 ) $ (9.8 ) 4.7 6.2 7.7 (14.6 ) (0.4 ) (2.1 ) 2.3 0.2 0.8 $ (12.3 ) $ (0.2 ) $ (1.3 ) Estimated amounts included in accumulated other comprehensive loss as of December 31, 2018, that are expected to be recognized as components of net periodic pension cost on our consolidated statements of operations for the year ended December 31, 2019, comprise the following (in millions): $ 1.5 (2.4 ) $ (0.9 ) participants'participants’ salaries, was $39.8$59.1 million and $44.8$58.7 million at December 31, 20182021 and 2017,2020, respectively.Year Ended December 31, 2022 $ 18.2 2023 6.3 2024 16.5 2025 6.8 2026 — Thereafter 38.9 Total $ 86.7 $ 19.9 — — — 5.2 51.6 $ 76.7 participant'sparticipant’s elected salary deferral. Matching contributions vest immediately for participants who have been employed for three years;three-years; otherwise, matching contributions vest annually, in one-third increments over a three-year period until the three-year employment requirement has been met.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)14.2021 Annual Report F-30 Operating 2024.2031. Certain lease arrangements include renewal options and escalation clauses. In addition, various lease agreements to which we are party require that we comply with certain customary covenants throughout the term of these leases. If we are unable to comply with these covenants and cannot reach a satisfactory resolution in the event of noncompliance, these agreements could terminate.2018,2021, are as follows (in millions):Year Ending December 31, 2022 $ 3.1 2023 2.7 2024 2.4 2025 1.7 2026 1.8 Thereafter 7.2 Total $ 18.9 $ 4.7 2.3 1.9 1.4 0.6 0.6 $ 11.5 rentoperating lease expense was $4.2$3.6 million, $4.8$3.5 million, and $4.4$4.9 million for the years ended December 31, 2018, 20172021, 2020, and 2016,2019, respectively. agreements and acquisition agreements pursuant to which we have in-licensed or acquired intellectual property rights covering our commercial and/or development-stage products. Generally, these agreements require that we make milestone payments in cash upon the achievement of certain product development and commercialization goals and payments of royalties upon commercial sales. The following table outlines our financial obligations under certain of these agreements:Counterparty Relevant Product Our Financial Obligation Orenitram Single-digit royalty on net product sales of Orenitram, through the second quarter of 2026 Adcirca AdcircaFive percent royalty on net product sales of Adcirca through November 2017; from December 1, 2017 through December 31, 2020, tenNaN percent royalty on net sales, plus milestone payments of $325,000 for each $1,000,000 in net product salesUNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)14. Commitments and Contingencies (Continued)CounterpartyRelevant ProductOur Financial ObligationUnituxin UnituxinOneNaN percent royalty on net product sales of UnituxinTorayRemunity Pump EsuberaprostSingle-digitProduct fees and single-digit royalty on net product sales of esuberaprost, certain developmental milestone payments and additional contingent milestone payments in the event we do not achieve certain clinical and regulatory events by certain datesMedtronicImplantable System forRemodulinTen percent royalty on net product sales of Remodulin delivered via the Implantable System for Remodulin. Reimbursement of Medtronic's development costs and costs incurred in providing commercialization supportDEKARemUnityProduct fees and single-digit royalties on net product sales of the RemUnity systemRemunity Pump and on net sales of Remodulin for use with the system; reimbursement of DEKA'sDEKA’s development and manufacturing costsSamumedTyvaso DPI SM04646royalties on SM04646 net product sales and up to $340.0 million in developmental milestone paymentsMannKindTreprostinilTechnosphereLow double-digit royaltiesroyalty on net product sales of Treprostinil TechnosphereTyvaso DPI and up to $50.0 million in developmental milestone paymentsRalinepag Ralinepagroyaltiesroyalty on net product sales of ralinepag (any route of administration); a one-time payment of $250.0 million upon FDA approval of an inhaled formulation of ralinepag to treat PAH; and a one-time payment of $150.0 million upon approval in certain non-USnon-U.S. jurisdictions of an oral version of ralinepag to treat any indicationAcquisition Agreement Under our Merger Agreement with SteadyMed, we are obligated to pay $75.0 million in aggregate additional consideration to former SteadyMed securityholders if 3,000 patients initiate treatment usingF-31 United Therapeutics, a public benefit corporation currently operate as one1 operating segment with a focus on the development and commercialization of products to address the unmet needs of patients with chronic and life-threatening conditions. Our Chief Executive Officer, as our chief operating decision maker, manages and allocates resources to the operations of our company on a consolidated basis. This enables our Chief Executive Officer to assess theour overall level of available resources available and determine how best to best deploy these resources across functions, therapeutic areas, and research and development projects that are in line with our long-term company-wide strategic goals.Year Ended December 31, 2021 Orenitram Unituxin Adcirca Total Net product sales $ 607.5 $ 513.7 $ 306.1 $ 202.3 $ 55.9 $ 1,685.5 Cost of product sales 26.8 37.9 19.7 14.2 23.9 122.5 Gross profit $ 580.7 $ 475.8 $ 286.4 $ 188.1 $ 32.0 $ 1,563.0 Year Ended December 31, 2020 Net product sales $ 483.3 $ 516.7 $ 293.1 $ 122.9 $ 67.3 $ 1,483.3 Cost of product sales 24.5 23.2 18.7 12.6 29.1 108.1 Gross profit $ 458.8 $ 493.5 $ 274.4 $ 110.3 $ 38.2 $ 1,375.2 Remodulin Tyvaso Adcirca Orenitram Unituxin Total $ 599.0 $ 415.2 $ 323.7 $ 205.1 $ 84.8 $ 1,627.8 14.1 17.3 139.8 13.2 14.3 198.7 $ 584.9 $ 397.9 $ 183.9 $ 191.9 $ 70.5 $ 1,429.1 $ 670.9 $ 372.9 $ 419.7 $ 185.8 $ 76.0 $ 1,725.3 15.9 18.5 43.1 15.3 12.9 105.7 $ 655.0 $ 354.4 $ 376.6 $ 170.5 $ 63.1 $ 1,619.6 $ 602.3 $ 404.6 $ 372.2 $ 157.2 $ 62.5 $ 1,598.8 10.5 19.6 21.4 13.7 7.5 72.7 $ 591.8 $ 385.0 $ 350.8 $ 143.5 $ 55.0 $ 1,526.1 Year Ended December 31, 2019 Net product sales $ 415.6 $ 587.0 $ 225.3 $ 113.7 $ 107.2 $ 1,448.8 Cost of product sales 19.6 21.1 15.0 15.7 46.2 117.6 Gross profit $ 396.0 $ 565.9 $ 210.3 $ 98.0 $ 61.0 $ 1,331.2 2018 2017 2016 $ 1,528.2 $ 1,536.8 $ 1,461.9 99.6 188.5 136.9 $ 1,627.8 $ 1,725.3 $ 1,598.8 Year Ended December 31, 2021 2020 2019 United States $ 1,564.2 $ 1,412.1 $ 1,323.2 Rest-of-World 121.3 71.2 125.6 Total $ 1,685.5 $ 1,483.3 $ 1,448.8 (1)Primarily Europe.two specialty pharmaceuticalthree distributors comprising 51 percent and 18in the United States that exceeded ten percent of total revenues in 2018, 46 percent and 15 percentrevenues. Revenue from these three distributors as a percentage of total revenues in 2017, and 50 percent and 14 percent of total revenues in 2016, respectively. All of our revenues for Adcirca are distributed through Lilly's pharmaceutical wholesaler network.Year Ended December 31, 2021 2020 2019 Distributor 1 50 % 55 % 54 % Distributor 2 29 % 28 % 22 % Distributor 3 11 % 8 % 8 % UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)15. Segment Information (Continued)Year Ended December 31, 2021 2020 2019 United States $ 768.1 $ 717.3 $ 723.1 Rest-of-World 12.8 14.3 15.4 Total $ 780.9 $ 731.6 $ 738.5 2018 2017 2016 $ 684.0 $ 544.5 $ 481.1 15.7 1.2 8.2 $ 699.7 $ 545.7 $ 489.3 2021 Annual Report F-32 16. Quarterly Financial Information (Unaudited) Summarized quarterly financialF-33 United Therapeutics, a public benefit corporation 2021 Annual Report F-34 U.S. Patent No. Expiration Date 8,252,839 May 2024 9,050,311 May 2024 9,278,901 May 2024 7,544,713 July 2024 7,417,070 July 2026 8,497,393 December 2028 9,604,901 December 2028 9,592,066 December 2028 8,747,897 October 2029 8,410,169 February 2030 8,349,892 January 2031 years ended December 31, 2018 and 2017 are as follows (in millions, except per share amounts): Quarter Ended December 31,
2018 September 30,
2018 June 30,
2018 March 31,
2018 $ 381.4 $ 412.7 $ 444.5 $ 389.2 31.9 51.9 61.7 53.2 349.5 360.8 382.8 336.0 65.3 106.5 172.9 244.5 $ 1.50 $ 2.44 $ 4.01 $ 5.65 $ 1.48 $ 2.42 $ 3.98 $ 5.57 Quarter Ended December 31,
2017 September 30,
2017 June 30,
2017 March 31,
2017 $ 464.7 $ 445.5 $ 444.6 $ 370.5 53.0 19.5 18.9 14.3 411.7 426.0 425.7 356.2 19.0 276.3 (56.0 ) 178.6 $ 0.44 $ 6.37 $ (1.25 ) $ 4.01 $ 0.43 $ 6.27 $ (1.25 ) $ 3.89 (1)Operating resultspatents noted above. Under the Hatch-Waxman Act, the FDA is automatically precluded from approving ANI’s ANDA for up to 30 months from receipt of ANI’s notice letter or until the entry by a U.S. District Court of a final judgment that is adverse to us on all patents that form the basis of the stay, whichever occurs first. The court has set a schedule for the quarters ended December 31, 2018, September 30, 2018,case with trial set to start on May 8, 2023, and the parties are currently engaged in discovery and addressing claim construction.30, 20182027. If ANI is successful in the pending litigation, it could potentially accelerate Actavis’ launch date. We do not know whether Actavis obtained and, March 31, 2018 included $(10.3) million, $24.8 million, $2.1 millionif so, retained, 180 days of exclusivity from other generic competition based on its first-to-file status.$(88.7) million, nettransparency, has resulted in increased risks of tax, for STAP340B statutory violations related share-based compensation (benefit) expense, respectively.(2)Operating results forto the quarters ended December 31, 2017, September 30, 2017, June 30, 2017diversion of 340B-purchased drugs to individuals who are not patients of the 340B covered entity, and March 31, 2017 included $66.2 million, $(24.1) million, $(9.4) million and $(15.6) million, net of tax, for STAP related share-based compensation expense (benefit), respectively.UNITED THERAPEUTICS CORPORATIONNotes to Consolidated Financial Statements (Continued)17. LitigationDepartment of Justice Subpoena In May 2016,prohibited “duplicate discounts” when 340B-purchased drugs are also billed to Medicaid. On November 13, 2020, we received a subpoena fromnotified the U.S. DepartmentHealth Resources and Services Administration (HRSA) that we would begin implementing narrowly-tailored 340B contract pharmacy policies with the goal of Justice (DOJ) requesting documents regarding our supportstemming abuses of 501(c)(3) organizations that provide financial assistance tothe 340B program without upsetting the status quo or creating hardship for covered entities or their patients. Other companies received similar inquiries as partAt around the same time, a number of a DOJ investigation regarding whether that support may violate the Federal Anti-Kickback Statute and the Federal False Claims Act. other manufacturers also announced their own policies aimed at stemming 340B program abuses.19, 2017, we entered into a civil Settlement Agreement with30, 2020, the DOJ and the Office of Inspector General (OIG) of theU.S. Department of Health and Human Services (collectively(HHS) General Counsel issued a non-binding Advisory Opinion (the Advisory Opinion) concluding that, among other things, pharmaceutical manufacturers are obligated to sell their drugs at the "United States Government"). 340B discounted price to an unlimited number of 340B contract pharmacies. On May 17, 2021, HRSA sent a letter to us stating that our 340B contract pharmacy policies violated the 340B statute. HRSA also sent materially similar letters to 5 other pharmaceutical manufacturers. We responded to that letter by clarifying our policies and requesting additional information from HRSA. To date, HRSA has not responded.Settlement Agreementfederal government’s pronouncements regarding the use of 340B contract pharmacies have triggered a variety of litigation. In one of those cases, the court concluded that the Advisory Opinion was “legally flawed,” and in response HHS withdrew the Advisory Opinion. Notwithstanding the withdrawal of the Advisory Opinion, HRSA has made clear that it is neither an admissionnot withdrawing its May 17, 2021 letter to us and the threat of facts nor liability, nor a concession byenforcement action.United States GovernmentU.S. District Court for the District of Columbia seeking to vindicate the lawfulness of our 340B program contract pharmacy policies. Despite the litigation, on September 22, 2021, HRSA sent to us, along with the other manufacturers challenging HRSA’s 340B interpretation, letters stating that its contentions are not well-founded. Under the Settlement Agreement, we paidHRSA is referring “this issue to the United States GovernmentHHS Office of the sum of approximately $210.0 million. During 2017, we recorded a $210.0 million accrual related to this matter. In connection with the civil settlement, we also entered into a Corporate Integrity Agreement withInspector General (OIG)” for potential enforcement action. We have not received any communication from the OIG effective asregarding our 340B contract pharmacy policy. Meanwhile, the parties submitted and fully briefedF-35 United Therapeutics, a public benefit corporation 18, 2017, which requires us28, 2021, and the appeal is pending.maintainvigorously defend our corporate compliance340B program and to undertake a set of defined corporate integrity obligations for a period of five years, ending in December 2022.18. Subsequent EventsPharmaceuticals, Inc.a globalan exclusive license agreement with Arena related to ralinepag, a next-generation, oral, selective, and potent prostacyclin receptor agonist in developmentbeing developed for the treatment of PAH. On January 24, 2019, in connection with the closing of the transactions contemplated by the license agreement,agreement: (1) Arena granted to us perpetual, irrevocable, and exclusive rights throughout the universe to develop, manufacture, and commercialize ralinepag; (2) Arena transferred to us certain other assets related to ralinepag, including, among others, related domain names and trademarks, permits, certain contracts, inventory, regulatory documentation, Investigational New Drug (IND)(IND) Application No. 109021 (related to ralinepag), and non-clinical, pre-clinicalnonclinical, preclinical, and clinical trial data; (3) we assumed certain limited liabilities from Arena, including, among others, all obligations arising after the closing under the assumed contracts and the IND described above; and (4) we paid Arena an upfront payment of $800.0 million, which was expensed as acquired in-process research and development and included within research and development expenses in our consolidated statements of operations in the first quarter of 2019. We will also pay ArenaArena: (1) a one-time payment of $250.0 million for the first, if any, marketing approval we receive in the United States for an inhaled version of ralinepag to treat pulmonary arterial hypertension;PAH; (2) a one-time payment of $150.0 million for the first, if any, marketing approval we receive in any of Japan, France, Italy, the UK,United Kingdom, Spain, or Germany for an oral version of ralinepag to treat any indication; and (3) low double-digit, tiered royalties on net sales of any pharmaceutical product containing ralinepag as an active ingredient, subject to certain adjustments for third partythird-party license payments. We$800.0$105.0 million upfront payment to Arena as acquired in-process within research and development and will include within research and development expenses onin our consolidated statements of operations for the year ended December 31, 2021. We redeemed the voucher in connection with our submission of the first quarter of 2019.NDA for Tyvaso DPI in April 2021.2021 Annual Report F-36
Years Ended December 31, 2018, 20172021, 2020, and 2016
2019
(In millions) Valuation Allowance on Deferred Tax Assets Balance at
Beginning
of Year Additions
Charged to
Expense Other
Additions Deductions Balance at
End of Year $ 16.9 $ 14.9 $ 11.0 $ (0.2 ) $ 42.6 $ 4.7 $ 11.8 $ 1.6 $ (1.2 ) $ 16.9 $ 3.4 $ 1.3 $ — $ — $ 4.7 Valuation Allowance on Deferred Tax Assets Balance at Beginning of Year Additions Charged to Expense Other Additions Deductions Balance at End of Year $ 35.5 $ 4.4 $ — $ (28.4) $ 11.5 $ 36.6 $ — $ 3.0 $ (4.1) $ 35.5 $ 42.6 $ 1.9 $ 0.9 $ (8.8) $ 36.6 Other Additions consists of valuation allowances relatedDeductions relate to the acquisition of SteadyMed, SteadyMed dual consolidated loss limitation, and changes in deferred taxes related tocapital investments and our investment in a variable interest entity that were not charged to expense.consists of valuation allowances relatedrelate to changes in our investment in a variable interestforeign entity. Deductions relate primarily to changes in capital investments and state net operating losses. Inventory Reserves Balance at Beginning of Year Additions Charged to Expense Deductions Balance at End of Year Year Ended December 31, 2021 $ 16.8 $ 10.0 $ (11.1) $ 15.7 Year Ended December 31, 2020 $ 20.9 $ 7.7 $ (11.8) $ 16.8 Year Ended December 31, 2019 $ 26.0 $ 8.4 $ (13.5) $ 20.9 Inventory Reserves Balance at
Beginning
of Year Additions
Charged to
Expense Deductions Balance at
End of Year $ 25.1 $ 11.7 $ (10.8 ) $ 26.0 $ 17.5 $ 12.1 $ (4.5 ) $ 25.1 $ 12.1 $ 8.2 $ (2.8 ) $ 17.5 F-37 United Therapeutics, a public benefit corporation ITEMCHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ITEMCONTROLS AND PROCEDURESChairmanChairperson and Chief Executive Officer and Chief Financial Officer and Treasurer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2018.2021. Based on that evaluation, our ChairmanChairperson and Chief Executive Officer and Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures were effective as of December 31, 2018. As permitted by the SEC's guidance with respect to newly acquired entities, the scope of management's assessment of the effectiveness of the design and operation of our disclosure controls and procedures includes all of our consolidated operations except for those disclosure controls and procedures of SteadyMed that are subsumed by internal control over financial reporting.Management's2021.2018,2021, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control—Integrated Framework (2013). Management'sManagement’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this assessment, our management concluded that, as of December 31, 2018,2021, our internal control over financial reporting was effective. We are in the process of evaluating the existing controls and procedures of SteadyMed and integrating SteadyMed into our internal control over financial reporting. In accordance with SEC Staff guidance permitting a company to exclude an acquired business from management's assessment of the effectiveness of internal control over financial reporting for the year in which the acquisition is completed, we have excluded SteadyMed from our assessment of the effectiveness of internal control over financial reporting as of December 31, 2018. SteadyMed represented four percent of our total assets as of December 31, 2018, and zero percent of our revenues and one percent of our operating expenses for the year ended December 31, 2018."Report“Report of Independent Registered Public Accounting Firm"Firm” and incorporated herein by reference.20182021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We are currently evaluating SteadyMed's internal control over financial reporting. Any changes resulting from this evaluation that materially affect or are reasonably likely to materially affect our internal control over financial reporting will be disclosed as required by applicable law. ITEMOTHER INFORMATION On February 25, 2019, we entered into a commercialization agreement with Medtronic, Inc. relating to the commercialization of the Implantable System for Remodulin in the United States. For details, seeOther Information2021 Annual Report 60 I—Business—Patents and Other Proprietary Rights, Strategic Licenses and Market Exclusivity—Medtronic Agreements.
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ITEMDIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE20192022 annual meeting of shareholders currently scheduled for June 26, 201927, 2022 (the 20192022 Proxy Statement)Statement) is hereby incorporated herein by reference. Information regarding our executive officers appears inItem 1 of this Report under the headingInformation about our Executive Officers of the Registrant. Information regarding theour Audit Committee and theour Audit Committee'sCommittee’s financial expert appearing under the headingCommittees of our Board of Directors—Audit Committee in our 20192022 Proxy Statement is hereby incorporated herein by reference.Beneficial Ownership Reporting ComplianceReports in our 20192022 Proxy Statement is hereby incorporated herein by reference. Principal, Causey Consortium
Former Consultant and Healthcare Executiveof theOxford Glycobiology Institute, and Professor Emeritus,Oxford University of Oxfordportfolio managerPortfolio Manager at Lyxor Asset Management, an asset management group at Société Générale, S.A.61 United Therapeutics, a public benefit corporation Chairman2021 Annual Report 62 ITEMEXECUTIVE COMPENSATIONSummaryand Executive Compensation Table and Grants of Plan-Based Awards in 2018, Narratives to Summary Compensation Table and Grants of Plan-Based Awards Table, Summary of Terms of Plan-Based Awards, Supplemental Executive Retirement Plan, Rabbi Trust, Potential Payments Upon Termination or Change in Control, and Director CompensationData in our 20192022 Proxy Statement and is incorporated herein by reference.20192022 Proxy Statement and is incorporated herein by reference. ITEMSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20192022 Proxy Statement and is incorporated herein by reference.2018,2021, regarding our securities authorized for issuance under equity compensation plans: Number of securities to be
issued upon exercise of
outstanding options and
restricted stock units
(a)(2) Weighted average exercise
price of outstanding options
(b)(3) Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)(4) 6,486,058 $ 120.78 7,080,024 6,486,058 $ 120.78 7,080,024 Plan category 7,701,852 $ 126.73 5,964,775 6,665 — 75,768 Total 7,708,517 $ 126.73 6,040,543 (the 1999 Plan) and 2015 (the 2015 Plan). All2015. The majority of outstanding restricted stock units (RSUs)RSUs were issued under the 2015 Plan. In addition, our employees have outstanding rights to purchase our common stock at a discount as part of our Employee Stock Purchase Plan (ESPP). Information regarding these plans is containedESPP, which was approved by security holders in Note 10—Share-Based Compensation to our consolidated financial statements. Aside from stock options issued under the 1999 Plan, stock options and RSUs issued under the 2015 Plan, and shares issued under the ESPP, we do not have any outstanding stock options, warrants or rights that are outstanding or available for issuance as described in Regulation S-K Item 201(d).2011. No further awards will be issued under the 1999 Plan.6,299,8037,317,978 shares of our common stock issuable upon the exercise of outstanding stock options issued under the 1999 and 2015 Plan and 186,255Plan; 383,874 shares issuable upon the vesting of outstanding RSUs issued under the 2015 Plan; and 6,665 shares issuable upon the vesting of outstanding RSUs issued under the 2019 Inducement Plan. The 2015 Plan usesand 2019 Inducement Plan use a share counting formula for determining the number of shares available for issuance under the plan.plans. In accordance with this formula, each option issued under the 2015 Plan counts as one share, while each RSU issued under the 2015 Plan and the 2019 Inducement Plan counts as 1.35 shares and 2.14 shares.shares, respectively. The number under column (a) represents the actual number of shares issuable under our outstanding awards without giving effect to the share counting formula.(3)weighted-averageweighted average exercise price of the outstanding stock options only. The outstanding RSUs are not included in this calculation because they do not have an exercise price.(4)4,335,4392,581,300, 3,383,475, and 2,744,58575,768 of shares available for future issuance under the ESPP, the 2015 Plan, and ESPP,the 2019 Inducement Plan, respectively. Under the ESPP, employees may purchase shares based upon a 6-monthsix-month offering period at an amount equal to the lesser of (1) 85 percent of the closing market price of the Common Stock on the first day of the offering period,period; or (2) 85 percent of the closing market price of the Common Stock on the last day of the offering period. Refer to Note 108—Share-Based Compensation—Employee Stock Purchase Plan for more information. The number under column (c) assumes that all 186,255390,539 outstanding RSUs included in column (a) vest. Each RSU is only counted as one share in column (a) sincebecause only one share is issuable upon vesting.(2)(3) above.63 United Therapeutics, a public benefit corporation ITEMCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCECommittees, Corporate Governance—and Nominees—Director Independence, and Our Corporate Governance—Board Structure—Committees of ourOur Board of Directors in our 20192022 Proxy Statement and is incorporated herein by reference. ITEMPRINCIPAL ACCOUNTING FEES AND SERVICESCommittee'sCommittee’s pre-approval policies and procedures, will appear under the headingReport of the Audit Committee and Information on our Independent AuditorsMatters in our 20192022 Proxy Statement and is incorporated herein by reference. ITEMEXHIBITS, FINANCIAL STATEMENT SCHEDULESfactualfacts or disclosuredisclose any other information about United Therapeutics or the other parties to the agreements. The agreements contain representations and warranties made by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement, and: (1) should not be treated as categorical statements of fact, but rather as a way of allocating risk between the parties; (2) have in some cases been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (3) may apply standards of materiality in a way that is different from what may be material to investors; and (4) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.SEC'sSEC’s website athttp://www.sec.gov.(a)(1) (a)(1)Our financial statements filed as part of this report on Form 10-K are set forth in the Index to Consolidated Financial Statements under Part II, Item 8 of this Form 10-K. (a)(2) (a)(2)theour consolidated statements or notes thereto.(a)(3) (a)(3)
2021 Annual Report3.264Exhibit No.Description10.7** 10.7**
10.8**10.8**
10.9**10.9**
10.10**10.10**
10.11**10.11**
10.12**10.12**
10.13**10.13**
10.14**10.14**
10.15**10.15**
10.16**10.16**
10.17**10.17**
10.18**10.18**Exhibit No.Description10.19** 10.19**
10.2010.20
6510.21United Therapeutics, a public benefit corporation**Exhibit No. Description 10.21**
10.22**10.22**
10.23**10.23**
10.24**10.24**
10.25**10.25**
10.26**10.26**
10.27**10.27**
10.28**10.28**
10.2910.29
10.30**10.30**Exhibit No.Description10.31** 10.31**
10.32**10.32**
10.33**10.33**
10.34**10.34**
10.35**10.35**
10.36**10.36**
10.37**10.37**
10.38**10.38**
10.39**10.39**
10.40**10.40**
2021 Annual Report10.4166**Exhibit No. Description 10.41**
10.42**10.42**Exhibit No.Description10.43** 10.43**
10.44**10.44**
10.45**10.45**(***)
10.46**10.4610.47** *10.48*
10.4910.47***
10.5010.48***
10.51*10.49***+
10.52+10.5010.53+ 10.54+ 10.55+ 10.56 10.57+*** 67 United Therapeutics, a public benefit corporation Exhibit No. Description 10.58
10.5910.51*Settlement Agreement, dated September 29, 2015, between the Registrant and Sandoz Inc., incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.10.52
10.6010.5310.61 10.62 Exhibit No.Description10.63 10.54
21***10.55***Commercialization Agreement, dated February 25, 2019, by and between the Registrant and Medtronic Inc.21***
23.1***23.1***
31.1***31.1***
31.2***31.2***
32.1***32.1***
32.2***32.2***
101***101***
The following financial information from our Annual Report on Form 10-K10‑K for the year ended December 31, 2018,2021, filed with the SEC on February 27, 2019,24, 2022, formatted in Inline Extensible Business Reporting Language (XBRL)(iXBRL): (i)(1) our Consolidated Balance Sheets as of December 31, 20182021 and 2017, (ii)2020, (2) our Consolidated Statements of Operations for each of three years in the period ended December 31, 2018, (iii)2021, (3) our Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2018, (iv)2021, (4) our Consolidated Statements of Stockholders'Stockholders’ Equity for each of the three years in the period ended December 31, 2018, (v)2021, (5) our Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2018,2021, and (vi)(6) the Notes to our Consolidated Financial Statements.104*** Cover Page Interactive Data File (embedded within the iXBRL document) Confidential treatment Certain identified information has been requested with respect to certain portions ofomitted from this exhibit pursuant to Rule 24b-2 of the Securities Act of 1934, as amended. The omitted portions of this document have been filed with the Securitiesbecause it is both (1) not material and Exchange Commission. Exhibits and schedules to this agreement have been omitted pursuant to the rules of the Securities and Exchange Commission. We will submit copies of such exhibits and schedules to the Securities and Exchange Commission upon request.24b-224b‑2 of the Securities Act of 1934, as amended. The omitted portions of this document have been filed with the Securities and Exchange Commission.Registrant'sRegistrant’s previously filed reports with the Securities and Exchange Commission are filed under File No. 000-26301.000‑26301.2021 Annual Report 68 ITEMFORMForm 10-K SUMMARYUNITED THERAPEUTICS CORPORATION By: /s/ MARTINE ROTHBLATT February 24, 2022 UNITED THERAPEUTICS CORPORATION
69By:/s/ MARTINE A. ROTHBLATTMartine A. Rothblatt, Ph.D.February 27, 2019Chairman and Chief Executive OfficerUnited Therapeutics, a public benefit corporationSignatures Title Date /s/ MARTINE ROTHBLATT Chairperson, Chief Executive Officer and Director
(Principal Executive Officer)February 24, 2022 Martine Rothblatt /s/ JAMES C. EDGEMOND Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)February 24, 2022 James C. Edgemond /s/ CHRISTOPHER CAUSEY Director February 24, 2022 Christopher Causey /s/ RAYMOND DWEK Director February 24, 2022 Raymond Dwek /s/ RICHARD GILTNER Director February 24, 2022 Richard Giltner /s/ KATHERINE KLEIN Director February 24, 2022 Katherine Klein /s/ RAYMOND KURZWEIL Director February 24, 2022 Raymond Kurzweil /s/ LINDA MAXWELL Director February 24, 2022 Linda Maxwell /s/ NILDA MESA Director February 24, 2022 Nilda Mesa /s/ JUDY D. OLIAN Director February 24, 2022 Judy D. Olian /s/ CHRISTOPHER PATUSKY Director February 24, 2022 Christopher Patusky /s/ LOUIS W. SULLIVAN Director February 24, 2022 Louis W. Sullivan /s/ TOMMY G. THOMPSON Director February 24, 2022 Tommy Thompson SignaturesTitleDate/s/ MARTINE A. ROTHBLATTMartine A. Rothblatt2021 Annual ReportChairman and Chief Executive Officer (Principal Executive Officer)February 27, 2019/s/ JAMES C. EDGEMONDJames C. EdgemondChief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)February 27, 2019/s/ CHRISTOPHER CAUSEYChristopher CauseyDirectorFebruary 27, 2019/s/ RAYMOND DWEKRaymond DwekDirectorFebruary 27, 2019/s/ RICHARD GILTNERRichard GiltnerDirectorFebruary 27, 2019/s/ KATHERINE KLEINKatherine KleinDirectorFebruary 27, 2019/s/ RAYMOND KURZWEILRaymond KurzweilDirectorFebruary 27, 2019/s/ NILDA MESANilda MesaDirectorFebruary 27, 2019/s/ JUDY D. OLIANJudy D. OlianDirectorFebruary 27, 2019/s/ CHRISTOPHER PATUSKYChristopher PatuskyDirectorFebruary 27, 201970SignaturesTitleDate/s/ LOUIS W. SULLIVANLouis W. SullivanDirectorFebruary 27, 2019/s/ TOMMY G. THOMPSONTommy ThompsonDirectorFebruary 27, 2019