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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2021
OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                to                 
Commission file number 0-26301
United Therapeutics Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware52-1984749
(State or Other Jurisdiction of(I.R.S. Employer
Incorporation or Organization)Identification No.)
1040 Spring Street, Silver Spring, MD
20910
(Address of Principal Executive Offices)(Zip Code)
(301) 608-9292
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, par value $0.01 per shareUTHRNasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes     No ☒
The number of shares outstanding of the issuer’s common stock, par value $.01 per share, as of April 28, 2021 was 44,796,404.


Table of Contents

TABLE OF CONTENTS
INDEX
  Page
 
 
 
 

2
United Therapeutics

Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
(In millions, except share data)
 March 31, 2021December 31, 2020
 (Unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$832.3 $738.7 
Marketable investments899.0 1,096.3 
Accounts receivable, no allowance for 2021 and 2020
141.1 157.4 
Inventories, net92.2 86.5 
Other current assets49.7 88.3 
Total current assets2,014.3 2,167.2 
Marketable investments1,433.5 1,149.6 
Goodwill and other intangible assets, net44.7 158.1 
Property, plant, and equipment, net713.7 731.6 
Deferred tax assets, net263.6 238.6 
Other non-current assets171.2 169.9 
Total assets$4,641.0 $4,615.0 
Liabilities and Stockholders’ Equity 
Current liabilities:  
Accounts payable and accrued expenses$165.0 $187.0 
Share tracking awards plan107.1 96.8 
Other current liabilities30.3 39.5 
Total current liabilities302.4 323.3 
Line of credit (non-current)800.0 800.0 
Other non-current liabilities93.2 96.5 
Total liabilities1,195.6 1,219.8 
Commitments and contingencies  
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, 71,407,834 and
71,126,314 shares issued, and 44,788,618 and 44,507,098 shares outstanding
at March 31, 2021 and December 31, 2020, respectively
0.7 0.7 
Additional paid-in capital2,173.2 2,148.7 
Accumulated other comprehensive loss(16.8)(14.2)
Treasury stock, 26,619,216 shares at March 31, 2021 and December 31, 2020
(2,579.2)(2,579.2)
Retained earnings3,867.5 3,839.2 
Total stockholders’ equity3,445.4 3,395.2 
Total liabilities and stockholders’ equity$4,641.0 $4,615.0 

See accompanying notes to consolidated financial statements.
Quarterly Report
3

Table of Contents
Part I. Financial Information
Consolidated Statements of Operations
(In millions, except per share data)
 Three Months Ended
March 31,
 20212020
 (Unaudited)
Revenues:  
Net product sales$379.1 $356.3 
Total revenues379.1 356.3 
Operating expenses: 
Cost of product sales23.0 23.4 
Research and development303.7 73.2 
Selling, general, and administrative117.2 93.0 
Total operating expenses443.9 189.6 
Operating (loss) income(64.8)166.7 
Interest income4.7 10.0 
Interest expense(4.6)(8.2)
Other income, net97.2 8.7 
Impairments of investments in privately-held companies (5.6)
Total other income, net97.3 4.9 
Income before income taxes32.5 171.6 
Income tax expense(4.2)(33.9)
Net income$28.3 $137.7 
Net income per common share:  
Basic$0.63 $3.14 
Diluted$0.61 $3.12 
Weighted average number of common shares outstanding:  
Basic44.6 43.9 
Diluted46.4 44.1 

See accompanying notes to consolidated financial statements.
4
United Therapeutics

Table of Contents
Part I. Financial Information
Consolidated Statements of Comprehensive Income
(In millions)
                       Three Months Ended
March 31,
 20212020
(Unaudited)
Net income$28.3 $137.7 
Other comprehensive income:
Defined benefit pension plan:
Actuarial gain arising during period, net of tax0.2 0.2 
Amortization of prior service cost included in net periodic pension cost, net of tax0.1 0.3 
Total defined benefit pension plan, net of tax0.3 0.5 
Unrealized (loss) gain on available-for-sale securities, net of tax(2.9)10.2 
Other comprehensive (loss) income, net of tax(2.6)10.7 
Comprehensive income$25.7 $148.4 

See accompanying notes to consolidated financial statements.
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Consolidated Statements of Stockholders’ Equity
(In millions)
Three Months Ended March 31, 2021
(Unaudited)
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Retained EarningsStockholders’ Equity
 SharesAmount
Balance, January 1, 202171.1 $0.7 $2,148.7 $(14.2)$(2,579.2)$3,839.2 $3,395.2 
Net income— — — — — 28.3 28.3 
Unrealized losses on available-for-sale securities— — — (2.9)— — (2.9)
Defined benefit pension plan— — — 0.3 — — 0.3 
Shares issued under employee stock
purchase plan
0.1 — 2.8 — — — 2.8 
Restricted stock units (RSUs) withheld for taxes
— — (10.2)— — — (10.2)
Common stock issued for RSUs vested0.1 — — — — — — 
Exercise of stock options0.1 — 17.5 — — — 17.5 
Share-based compensation— — 14.4 — — — 14.4 
Balance, March 31, 202171.4 $0.7 $2,173.2 $(16.8)$(2,579.2)$3,867.5 $3,445.4 
Three Months Ended March 31, 2020
(Unaudited)
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Retained EarningsStockholders’ Equity
 SharesAmount
Balance, January 1, 202070.5 $0.7 $2,047.9 $(14.2)$(2,579.2)$3,325.2 $2,780.4 
Net income— — — — — 137.7 137.7 
Unrealized gains on available-for-sale securities— — — 10.2 — — 10.2 
Defined benefit pension plan— — — 0.5 — — 0.5 
Shares issued under employee stock
purchase plan
— — 2.5 — — — 2.5 
RSUs withheld for taxes— — (3.4)— — — (3.4)
Common stock issued for RSUs vested0.1 — — — — — — 
Exercise of stock options— — 0.7 — — — 0.7 
Share-based compensation— — 20.7 — — — 20.7 
Cumulative effect of accounting change— — — — — (0.8)(0.8)
Balance, March 31, 202070.6 $0.7 $2,068.4 $(3.5)$(2,579.2)$3,462.1 $2,948.5 

See accompanying notes to consolidated financial statements.
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Consolidated Statements of Cash Flows
(In millions)
 Three Months Ended March 31,
 20212020
 (Unaudited)
Cash flows from operating activities:  
Net income$28.3 $137.7 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization12.5 12.4 
Share-based compensation expense40.1 30.8 
Impairments of investments in privately-held companies 5.6 
Intangible asset impairment charges113.4  
Impairments of property, plant, and equipment17.0  
Realized gain on sale of equity securities(91.9)(2.0)
Other(8.5)(22.8)
Changes in operating assets and liabilities:
Accounts receivable16.3 1.7 
Inventories(2.2)6.1 
Accounts payable and accrued expenses(25.0)(18.8)
Other assets and liabilities(10.2)63.9 
Net cash provided by operating activities89.8 214.6 
Cash flows from investing activities:  
Purchases of property, plant, and equipment(10.6)(13.0)
Purchases of available-for-sale investments(559.0)(479.2)
Maturities of available-for-sale investments454.4 435.4 
Sales of available-for-sale investments 16.0 
Sales of investments in equity securities108.9 13.2 
Net cash used in investing activities(6.3)(27.6)
Cash flows from financing activities:  
Repayment of line of credit (50.0)
Proceeds from the exercise of stock options17.5 0.7 
Proceeds from the issuance of stock under employee stock purchase plan2.8 2.5 
Restricted stock units withheld for taxes(10.2)(3.4)
Net cash provided by (used in) financing activities10.1 (50.2)
Net increase in cash and cash equivalents$93.6 $136.8 
Cash and cash equivalents, beginning of period738.7 738.4 
Cash and cash equivalents, end of period$832.3 $875.2 
Supplemental cash flow information:  
Cash paid for interest$4.0 $7.5 
Cash received for income taxes$(1.6)$(8.7)
Non-cash investing and financing activities:
Non-cash additions to property, plant, and equipment$5.1 $5.4 

See accompanying notes to consolidated financial statements.
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Part I. Financial Information
Notes to Consolidated Financial Statements
March 31, 2021 (Unaudited) 
1. Organization and Business Description
United Therapeutics Corporation is a biotechnology company focused on the development and commercialization of innovative products to address the unmet medical needs of patients with chronic and life-threatening conditions.
We have approval from the U.S. Food and Drug Administration (FDA) to market the following therapies: Remodulin® (treprostinil) Injection (Remodulin), Tyvaso® (treprostinil) Inhalation Solution (Tyvaso), Orenitram® (treprostinil) Extended-Release Tablets (Orenitram), Unituxin® (dinutuximab) Injection (Unituxin), and Adcirca® (tadalafil) Tablets (Adcirca). Our only significant revenues outside the United States are derived from sales of Remodulin in Europe.
As used in these notes to our consolidated financial statements, unless the context otherwise requires, the terms “we”, “us”, “our”, and similar terms refer to United Therapeutics Corporation and its consolidated subsidiaries.
2. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) for interim financial information. Accordingly, they do not include all of the information required by U.S. generally accepted accounting principles (GAAP) for complete financial statements. 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 other assets and liabilities to the line item realized gain on sale of equity securities to conform with the current period presentation. In the investing activities section of our consolidated statements of cash flows, we reclassified the prior period amount within sales/maturities of available-for-sale investments to the line items maturities of available-for-sale investments and sales of available-for-sale investments to conform with the current period presentation. These consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the accompanying notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 24, 2021.
In our management’s opinion, the accompanying consolidated financial statements contain all adjustments, including normal, recurring adjustments, necessary to fairly present our financial position as of March 31, 2021 and December 31, 2020, and our statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three-month periods ended March 31, 2021 and 2020. Interim results are not necessarily indicative of results for an entire year.
Recently Issued Accounting Standards
Accounting Standards Adopted During the Period
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, Income Taxes, and also improves consistency of application by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020. We adopted the new standard on January 1, 2021, with no material impact on our financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force) (ASU 2020-01), which addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020. We adopted the new standard on January 1, 2021, with no material impact on our financial statements.
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Accounting Standards Not Yet Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04), which provides optional expedients and exceptions to lessen the burden of accounting for contract modifications and hedging relationships that reference LIBOR or other reference rates that could be discontinued due to reference rate reform. ASU 2020-04 became effective immediately and may be applied through December 31, 2022. We are currently evaluating the impact of the expedients and exceptions of this new standard on our accounting for our credit agreement, which references LIBOR.
3. Investments
Marketable Investments
Available-for-Sale Debt Securities
Available-for-sale debt securities are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive loss in stockholders’ equity, until realized. Available-for-sale debt securities consisted of the following (in millions):
As of March 31, 2021Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
U.S. government and agency securities$1,911.5 $7.5 $(0.4)$1,918.6 
Corporate debt securities345.6 2.1 (0.1)347.6 
Total$2,257.1 $9.6 $(0.5)$2,266.2 
Reported under the following captions on our consolidated balance sheets:
Current marketable investments  $832.7 
Non-current marketable investments  1,433.5 
Total  $2,266.2 
As of December 31, 2020Amortized
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 securities331.2 3.2  334.4 
Total$2,233.6 $13.0 $(0.1)$2,246.5 
Reported under the following captions on 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 
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The following table summarizes the contractual maturities of available-for-sale debt securities (in millions). Actual maturities may differ from contractual maturities because the issuers of certain of these debt securities have the right to call the securities or prepay their obligations under the securities with or without penalties.
 As of March 31, 2021
 Amortized CostFair Value
Due within one year$829.1 $832.7 
Due in one to three years1,428.0 1,433.5 
Total$2,257.1 $2,266.2 
Investments in Equity Securities with Readily Determinable Fair Values
We held investments in equity securities with readily determinable fair values of $66.3 million and $78.4 million as of March 31, 2021 and December 31, 2020, respectively, which are included in current marketable investments on our consolidated balance sheets. Changes in the fair value of publicly traded equity securities are recorded on our consolidated statements of operations within other income, net. Refer to Note 4—Fair Value Measurements.
During the three months ended March 31, 2021, we sold our investment in a publicly-traded company. We received $108.9 million in cash from the sale of the investment and realized a gain of $91.9 million. The gain was recorded within other income, net on our consolidated statements of operations.
Investments in Privately-Held Companies
As of March 31, 2021 and December 31, 2020, we maintained non-controlling equity investments in privately-held companies of $84.8 million, in the aggregate. We 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, and adjusted for any observable price changes. We include our investments in privately-held companies within other non-current assets on our consolidated balance sheets. These investments are subject to 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 three months ended March 31, 2020, one of these privately-held companies raised additional capital by issuing equity securities similar to the security that we hold at an increased valuation, which resulted in an increase of $22.5 million in the value of our investment. The gain was recorded within other income, net on our consolidated statements of operations for the three months ended March 31, 2020.
During the three months ended March 31, 2020, we observed an indicator of impairment for our investments in two of these companies, which caused us to recognize impairment charges of $5.6 million. These impairment charges were recorded within impairments of investments in privately-held companies on our consolidated statements of operations for the three months ended March 31, 2020.
Variable Interest Entity
Unconsolidated Variable Interest Entity
In November 2019, we entered into a supply agreement with an affiliate of DEKA Research & Development Corporation (DEKA) to manufacture and supply the Remunity® Pump to us. Under the terms of the supply agreement, we will reimburse all of the affiliate’s costs to manufacture and supply the Remunity Pump. We determined that the affiliate is a variable interest entity as we are currently the only customer of the affiliate and the affiliate currently relies on our reimbursement of its costs to sustain its operations. We have determined we are not the primary beneficiary of the affiliate as we do not have the power to direct or control its significant activities related to the manufacturing of medical devices. Accordingly, we have not consolidated the affiliate’s results of operations and financial position with ours. As of March 31, 2021 and December 31, 2020, our consolidated balance sheets included $12.3 million and $11.7 million of assets, respectively, related to the supply agreement. As of March 31, 2021 and December 31, 2020, our consolidated balance sheets included a $4.6 million and $24.0 million liability, respectively, for our obligation to reimburse costs related to the supply agreement. While the terms of the supply agreement expose us to various future risks of loss given our responsibility to reimburse all costs incurred by the affiliate to manufacture and supply the Remunity Pump, we believe that our maximum exposure to loss as of March 31, 2021 as a result of our involvement with the affiliate is $12.3 million, the amount of assets related to the supply agreement noted above.
4. Fair Value Measurements
We account for certain assets and liabilities at fair value and classify these assets and liabilities within the fair value hierarchy (Level 1, Level 2, or Level 3). Our other current assets and other current liabilities have fair values that approximate their carrying values.
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Assets and liabilities subject to fair value measurements are as follows (in millions):
 As of March 31, 2021
 Level 1Level 2Level 3Balance
Assets    
Money market funds(1)
$390.2 $ $ $390.2 
Time deposits(2)
88.0   88.0 
U.S. government and agency securities(3)
 1,918.6  1,918.6 
Corporate debt securities(3)
 347.6  347.6 
Equity securities(4)
66.3   66.3 
Contingent consideration(5)
  6.0 6.0 
Total assets$544.5 $2,266.2 $6.0 $2,816.7 
Liabilities    
Contingent consideration(6)
  15.1 15.1 
Total liabilities$ $ $15.1 $15.1 
 As of December 31, 2020
 Level 1Level 2Level 3Balance
Assets    
Money market funds(1)
$323.1 $ $ $323.1 
U.S. government and agency securities(3)
 1,912.1  1,912.1 
Corporate debt securities(3)
 334.4  334.4 
Equity securities(4)
78.4   78.4 
Contingent consideration(5)
  4.1 4.1 
Total assets$401.5 $2,246.5 $4.1 $2,652.1 
Liabilities    
Contingent consideration(6)
  17.1 17.1 
Total liabilities$ $ $17.1 $17.1 
(1)Included in cash and cash equivalents on our consolidated balance sheets.
(2)Included in cash and cash equivalents on our consolidated balance sheets. The fair value of these securities is principally measured or corroborated by trade data for identical securities in which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded.
(3)Included in cash and cash equivalents and current and non-current marketable investments on our consolidated balance sheets. Refer to Note 3—InvestmentsMarketable InvestmentsAvailable-for-Sale Debt Securities for further information. The fair value of these securities is principally measured or corroborated by trade data for identical securities for which related trading activity is not sufficiently frequent to be considered a Level 1 input or comparable securities that are more actively traded.
(4)Included in current marketable investments on our consolidated balance sheets. The fair value of these securities is based on quoted market prices for identical instruments in active markets. During the three months ended March 31, 2021 and March 31, 2020, we recognized $96.8 million of net unrealized and realized gains and $6.1 million of net unrealized and realized losses, respectively, on these securities. We recorded these gains and losses on our consolidated statements of operations within other income, net. Refer to Note 3—Investments—Marketable Investments—Investments in Equity Securities with Readily Determinable Fair Values.
(5)Included in other current and other non-current assets on our consolidated balance sheets. We estimated the fair value of contingent consideration using a Monte Carlo simulation. The Monte Carlo simulation incorporates Level 3 inputs including price volatility of peer company stocks and the probability of completing certain milestones during a specified period of time. The fair value of our contingent consideration assets increased by $1.9 million from December 31, 2020 to March 31, 2021. The gain was recorded within other income, net on our consolidated statements of operations.
(6)Included in non-current liabilities on our consolidated balance sheets. The fair value of our contingent consideration obligations has been estimated using probability-weighted discounted cash flow models (DCFs). The DCFs incorporate Level 3 inputs including estimated discount rates that we believe 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 change in the fair value of our contingent consideration obligations for the three months ended March 31, 2021 was the result of our decision in January 2021 to discontinue our research and development efforts related to biomechanical lungs. As a result of the decision, we de-recognized $2.0 million of a related contingent consideration liability during the first quarter of 2021. The gain was recorded within research and development on our consolidated statements of operations.
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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 above within the fair value hierarchy. Refer to Note 3—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.
5. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist of the following, net of reserves (in millions):
 March 31, 2021December 31, 2020
Raw materials$16.0 $18.4 
Work-in-progress31.2 29.5 
Finished goods45.0 38.6 
Total inventories$92.2 $86.5 
6. Goodwill and Other Intangible Assets
Goodwill and other intangible assets comprise the following (in millions):
 As of March 31, 2021As of December 31, 2020
 GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Goodwill$28.0 $— $28.0 $28.0 $— $28.0 
Other intangible assets:     
Technology, patents, and trade names6.7 (5.5)1.2 6.7 (5.5)1.2 
In-process research and development(1) (2)
15.5 — 15.5 128.9 — 128.9 
Total$50.2 $(5.5)$44.7 $163.6 $(5.5)$158.1 
(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 the New Drug Application for Trevyent in light of a Complete Response Letter issued by the FDA in April 2020. We determined this to be a potential indicator of impairment of our in-process research and development (IPR&D) asset related to Trevyent, 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 the first quarter of 2021. The $107.3 million impairment charge was recorded within research and development on our consolidated statements of operations.
(2)In January 2021, we decided to discontinue our research and development efforts related to biomechanical lungs. As a result of the decision, we fully impaired the IPR&D asset related to these efforts, which had a carrying value of $6.1 million, during the first quarter of 2021. The impairment charge was recorded within research and development on our consolidated statements of operations.
7. Property, Plant, and Equipment
Property, plant, and equipment (PP&E) consists of the following (in millions):
 March 31, 2021December 31, 2020
Land and land improvements$75.0 $74.9 
Buildings, building improvements, and leasehold improvements601.7 593.6 
Buildings under construction45.6 47.4 
Furniture, equipment, and vehicles308.6 325.0 
Subtotal1,030.9 1,040.9 
Less—accumulated depreciation(317.2)(309.3)
Property, plant, and equipment, net$713.7 $731.6 
In 2019, we completed construction of a new cell culture and purification facility. During the first quarter of 2021, we decided to repurpose this facility to produce autologous cells that we intend to use to cellularize lung scaffolds for clinical studies. The
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decision to repurpose this facility was an indicator of impairment of the facility which we evaluated during the first quarter of 2021. Based on our impairment assessment, we recorded an $11.6 million impairment charge on the net book value of this facility during the first quarter of 2021. During the first quarter of 2021, we recorded $17.0 million of PP&E impairment charges in the aggregate, of which $15.5 million was recorded within research and development on our consolidated statements of operations and $1.5 million was recorded within selling, general, and administrative on our consolidated statements of operations.
8. Debt
Credit Agreement
In June 2018, we entered into a credit agreement (the Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent and a swingline lender, and various other lender parties, providing for: (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 $300.0 million in the aggregate subject to obtaining commitments from existing or new lenders for such increase and other conditions). In December 2020, we extended the maturity date of the Credit Agreement by one year, to December 2025.
At our option, amounts borrowed under the 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 on our consolidated ratio of total indebtedness to EBITDA (as calculated in accordance with the Credit Agreement). To date, we have elected to calculate interest on the outstanding balance at LIBOR plus an applicable margin. As of March 31, 2021 and December 31, 2020, our outstanding aggregate principal balance under the Credit Agreement was $800.0 million, all of which was classified as a non-current liability because we do not intend to repay any portion of this amount within one year.
The Credit Agreement contains customary events of default and customary affirmative and negative covenants. As of March 31, 2021, we were in compliance with these covenants. Lung Biotechnology PBC is our only subsidiary that guarantees our obligations under the Credit Agreement though, from time to time, one or more of our other subsidiaries may be required to guarantee our obligations.
In connection with the Credit Agreement, we capitalized debt issuance costs, which are being amortized to interest expense over the contractual term of the Credit Agreement. As of March 31, 2021, $2.4 million was recorded in other current assets and $8.7 million in other non-current assets on our consolidated balance sheets.
The interest expense reported on our consolidated statements of operations for the three months ended March 31, 2021 and 2020, related to our borrowings under the Credit Agreement.
9. Share-Based Compensation
As of March 31, 2021, we have two shareholder-approved equity incentive plans: the United Therapeutics Corporation Amended and Restated Equity Incentive Plan (the 1999 Plan) and the United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan (the 2015 Plan). The 2015 Plan provides for the issuance of up to 10,000,000 shares of our common stock pursuant to awards granted under the 2015 Plan. 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 to employees and members of our Board of Directors in the form of stock options and restricted stock units under the 2015 Plan, and we grant restricted stock units to newly-hired employees under the 2019 Inducement Plan. Refer to the sections entitled Stock Options and Restricted Stock Units below.
We previously issued awards under the United Therapeutics Corporation Share Tracking Awards Plan (2008 STAP) and the United Therapeutics Corporation 2011 Share Tracking Awards Plan (2011 STAP). We refer to the 2008 STAP and the 2011 STAP collectively as the “STAP” and awards outstanding under either of these plans as “STAP awards.” Refer to the section entitled Share Tracking Awards Plans below. We discontinued the issuance of STAP awards in June 2015.
In 2012, our shareholders approved the United Therapeutics Corporation Employee Stock Purchase Plan (ESPP), which is structured to comply with Section 423 of the Internal Revenue Code. Refer to the section entitled Employee Stock Purchase Plan below.
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The following table reflects the components of share-based compensation expense recognized in our consolidated statements of operations (in millions):
 Three Months Ended
March 31,
 20212020
Stock options$8.3 $16.4 
Restricted stock units5.7 4.0 
STAP awards25.7 10.1 
Employee stock purchase plan0.4 0.3 
Total share-based compensation expense before tax$40.1 $30.8 
Stock Options
We estimate the fair value of stock options using the Black-Scholes-Merton valuation model, which requires us to make certain assumptions that can materially impact the estimation of fair value and related compensation expense. The assumptions used to estimate fair value include the price of our common stock, the expected volatility of our common stock, the risk-free interest rate, the expected term of stock option awards, and the expected dividend yield.
The following weighted average assumptions were used in estimating the fair value of stock options granted to employees during the three months ended March 31, 2021 and 2020:
March 31, 2021March 31, 2020
Expected term of awards (in years)6.06.0
Expected volatility32.7 %32.4 %
Risk-free interest rate1.1 %0.8 %
Expected dividend yield % %
A summary of the activity and status of stock options under our equity incentive plans during the three-month period ended March 31, 2021 is presented below:
 Number of
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (in Years)
Aggregate
Intrinsic
Value (in millions)
Outstanding at January 1, 20217,680,194 $126.27   
Granted14,603 164.10   
Exercised(132,789)131.83   
Forfeited/canceled(213)146.03   
Outstanding at March 31, 20217,561,795 $126.24 5.4$311.5 
Exercisable at March 31, 20215,801,938 $125.75 5.1$242.2 
Unvested at March 31, 20211,759,857 $127.88 6.1$69.3 
The weighted average fair value of a stock option granted during each of the three-month periods ended March 31, 2021 and March 31, 2020, was $54.63 and $29.85, respectively. These stock options have an aggregate grant date fair value of $0.8 million and $0.5 million, respectively. The total grant date fair value of stock options that vested during the three-month periods ended March 31, 2021 and March 31, 2020 was $48.1 million and $69.8 million, respectively.
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Total share-based compensation expense related to stock options is recorded as follows (in millions):
 Three Months Ended
March 31,
 20212020
Cost of product sales$0.1 $0.2 
Research and development0.2 0.9 
Selling, general, and administrative8.0 15.3 
Share-based compensation expense before taxes8.3 16.4 
Related income tax benefit(0.3)(3.7)
Share-based compensation expense, net of taxes$8.0 $12.7 
As of March 31, 2021, unrecognized compensation cost related to stock options was $41.1 million. Unvested outstanding stock options as of March 31, 2021 had a weighted average remaining vesting period of 1.9 years.
Stock option exercise data is summarized below (dollars in millions):
 Three Months Ended
March 31,
 20212020
Number of options exercised132,789 13,500 
Cash received$17.5 $0.7 
Total intrinsic value of options exercised$4.7 $0.6 
Restricted Stock Units
Each restricted stock unit entitles the recipient to one share of our common stock upon vesting. We measure the fair value of restricted stock units using the stock price on the date of grant. Share-based compensation expense for restricted stock units is recorded ratably over their vesting period. A summary of the activity with respect to, and status of, restricted stock units during the three-month period ended March 31, 2021 is presented below:
 Number of
Restricted Stock Units
Weighted
Average
Grant Date
Fair Value
Unvested at January 1, 2021440,528 $102.40 
Granted171,244 164.16 
Vested(181,297)104.68 
Forfeited/canceled(6,311)116.70 
Unvested at March 31, 2021424,164 $126.15 
Total share-based compensation expense related to restricted stock units is recorded as follows (in millions):
 Three Months Ended
March 31,
 20212020
Cost of product sales$0.5 $0.3 
Research and development1.8 1.4 
Selling, general, and administrative3.4 2.3 
Share-based compensation expense before taxes5.7 4.0 
Related income tax benefit(1.3)(0.9)
Share-based compensation expense, net of taxes$4.4 $3.1 
As of March 31, 2021, unrecognized compensation cost related to the grant of restricted stock units was $50.0 million. Unvested outstanding restricted stock units as of March 31, 2021 had a weighted average remaining vesting period of 2.4 years.
Quarterly Report
15

Table of Contents
Part I. Financial Information
Share Tracking Awards Plans
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. STAP awards expire on the tenth anniversary of the grant date. We discontinued the issuance of STAP awards in June 2015.
The aggregate STAP liability balance was $107.1 million and $96.8 million at March 31, 2021 and December 31, 2020, respectively, all of which was classified as a current liability on our consolidated balance sheets.
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 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.
The fair value of the STAP awards is measured at the end of each financial reporting period because the awards are settled in cash.
The table below includes the weighted average assumptions used to measure the fair value of the outstanding STAP awards:
 March 31, 2021March 31, 2020
Expected term of awards (in years)1.62.0
Expected volatility33.3 %32.5 %
Risk-free interest rate0.2 %0.2 %
Expected dividend yield
 % %
The closing price of our common stock was $167.27 and $94.83 on March 31, 2021 and March 31, 2020, respectively. The closing price of our common stock was $151.79 on December 31, 2020.
A summary of the activity and status of STAP awards during the three-month period ended March 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, 20212,121,860 $118.48   
Granted    
Exercised(194,933)90.06   
Forfeited/canceled(562)145.30   
Outstanding at March 31, 20211,926,365 $121.35 3.2$88.6 
Exercisable at March 31, 20211,916,365 $121.71 3.2$87.4 
Unvested at March 31, 202110,000 $52.57 1.7$1.2 
Share-based compensation expense recognized in connection with STAP awards is as follows (in millions):
 Three Months Ended
March 31,
 20212020
Cost of product sales$1.1 $0.7 
Research and development4.3 2.2 
Selling, general, and administrative20.3 7.2 
Share-based compensation expense before taxes25.7 10.1 
Related income tax benefit(4.9)(2.3)
Share-based compensation expense, net of taxes$20.8 $7.8 
Cash paid to settle STAP exercises during the three-month periods ended March 31, 2021 and March 31, 2020 was $15.4 million and $3.0 million, respectively. 
16
United Therapeutics

Table of Contents
Part I. Financial Information
Employee Stock Purchase Plan
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