UNITED THERAPEUTICS CORP – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated
financial statements and related notes to our consolidated financial statements.
All statements in this filing are made as of the date this Report is filed with
the U.S. Securities and Exchange Commission (SEC). We undertake no obligation to
publicly update or revise these statements, whether as a result of new
information, future events or otherwise.

The following Management's Discussion and Analysis of Financial Condition and
Results of Operations and other sections of this Report contain forward-looking
statements made pursuant to the safe harbor provisions of Section 21E of the
Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act
of 1995. These statements, which are based on our beliefs and expectations about
future outcomes and on information available to us through the date this Report
on Form 10-K is filed with the SEC, include, among others, statements related to
the following:

•Expectations of revenues, expenses, profitability, cash flows, and growth in
the number of patients being treated with our products, including anticipated
growth in the number of Tyvaso patients as a result of the expansion of its
label to include pulmonary hypertension associated with interstitial lung
disease (PH-ILD) and anticipated growth in revenues following the recent
commercial launch of Tyvaso DPI;

•The sufficiency of our cash on hand to support operations;

•Our ability to obtain financing on terms favorable to us or at all;

•Our ability to obtain and maintain domestic and international regulatory
approvals;

•Our ability to maintain attractive pricing and reimbursement levels for our
products, in light of increasing competition, including from generic products,
pressure from government and other payers to decrease the costs associated with
healthcare, including the potential impact of the Inflation Reduction Act of
2022 (IRA) on our business;

•The expected volume and timing of sales of our commercial products, as well as
potential future commercial products, including the anticipated effect of
various research and development efforts on sales of these products;

•The timing and outcome of clinical studies, other research and development
efforts, and related regulatory filings and approvals;

•The outcome of pending and potential future legal and regulatory actions by the
U.S. Food and Drug Administration (FDA) and other regulatory and government
enforcement agencies, and the anticipated duration of regulatory exclusivity for
our products;

•The timing and outcome of ongoing litigation, including the lawsuit filed
against us by Sandoz, Inc. and Liquidia PAH, LLC (formerly known as RareGen,
LLC); our patent and trade secret litigation with Liquidia Technologies, Inc.
(Liquidia) related to its new drug application (NDA) for Yutrepia; our
litigation with Humana Inc., United Healthcare Services, Inc., MSP Recovery
Claims, Series LLC, and related entities; and our litigation with the U.S.
Department of Health and Human Services and the U.S. Health Resource Services
Administration related to the Public Health Service's 340B drug pricing program;

•The impact of competing therapies on sales of our commercial products,
including the impact of generic versions of Adcirca and Remodulin; established
therapies such as Uptravi; and newly-developed therapies such as Merck's
sotatercept and Liquidia's Yutrepia;

•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 effect of our recent conversion to a Delaware public benefit corporation;

•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.

We caution you that these statements are not guarantees of future performance
and are subject to numerous evolving risks and uncertainties that we may not be
able to accurately predict or assess, and that may cause our actual results to
differ materially from anticipated results, including the risks and
uncertainties we describe in Part I, Item 1A-Risk Factors of this Report and
factors described in other cautionary statements, cautionary language, and risk
factors set forth in our other filings with the SEC.

46 United Therapeutics, a public benefit corporation

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Overview of Marketed Products

We market and sell the following commercial products:

•Tyvaso and Tyvaso DPI. Tyvaso is an inhaled formulation of the prostacyclin
analogue treprostinil, approved by the FDA and regulatory authorities in
Argentina, Israel, and Japan to improve exercise ability in patients with
pulmonary arterial hypertension (PAH). Tyvaso was also approved by the FDA in
March 2021 and by regulators in Israel in December 2022 to improve exercise
ability in patients with PH-ILD. In May 2022, we also obtained FDA approval of
Tyvaso DPI to treat PAH and PH-ILD, and we initiated commercial shipments of
Tyvaso DPI to our distributors in June 2022.

•Remodulin, a continuously-infused formulation of treprostinil, approved by the
FDA for subcutaneous and intravenous administration to diminish symptoms
associated with exercise in patients with PAH. Remodulin has also been approved
in various countries outside of the United States. In February 2021, we launched
U.S. sales of the Remunity Pump, a new subcutaneous delivery system for
Remodulin.

•Orenitram, a tablet dosage form of treprostinil, approved by the FDA to delay
disease progression and improve exercise capacity in PAH patients.

•Unituxin, a monoclonal antibody approved in the United States, Canada, and
Japan for treatment of high-risk neuroblastoma.

•Adcirca, an oral PDE-5 inhibitor approved by the FDA to improve exercise
ability in PAH patients.

For additional detail regarding our commercial products, see Part I,
Item 1-Business-Our Commercial Products.

Research and Development

We are engaged in research and development of new indications and delivery
devices for our existing products. We recently developed a new pump for
Remodulin, called the Remunity Pump, and are currently developing a new version
of the Remunity Pump. We are also working with a medical device manufacturer to
develop new delivery systems for Remodulin. We are studying Tyvaso in patients
with idiopathic pulmonary fibrosis (the TETON studies).

In addition, we are developing new products to treat PAH (RemoPro and
ralinepag). 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, and ex vivo lung
perfusion. For additional detail regarding our research and development
programs, see Part I, Item 1-Business-Research and Development.

Revenues

Our total revenues consist primarily of sales of the commercial products noted
above, together with associated sales of delivery devices (in the case of
Remodulin, Tyvaso, and Tyvaso DPI). We have entered into separate, non-exclusive
distribution agreements with Accredo Health Group, Inc. and its affiliates and
Caremark, L.L.C. to distribute Tyvaso, Tyvaso DPI, Remodulin, the 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
also sell Tyvaso, Remodulin, and Unituxin to distributors internationally. We
sell Adcirca through the pharmaceutical wholesale 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.

We require our specialty pharmaceutical distributors to maintain reasonable
levels of inventory reserves for our treprostinil-based therapies because the
interruption of these therapies can be life threatening. Our specialty
pharmaceutical distributors typically place monthly or semi-monthly orders based
on current utilization trends and contractual minimum and maximum inventory
requirements. As a result, sales of our treprostinil-based therapies can vary
depending on the timing and magnitude of these orders and do not precisely
reflect changes in patient demand.

Operating Expenses

We devote substantial resources to our various clinical trials and other
research and development efforts, which are conducted both internally and
through third parties. From time to time, we also license or acquire additional
technologies and compounds to be incorporated into our development pipeline. Our
operating expenses include the costs described below.

Cost of Sales

Our cost of sales primarily includes costs to manufacture our products, royalty
and sales-based 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

2022 Annual Report 47

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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.

Research and Development

Our research and development expenses primarily include costs associated with
the research and development of products and post-marketing research
commitments. These costs also include share-based compensation and
salary-related expenses for research and development functions, professional
fees for preclinical and clinical studies, costs associated with clinical
manufacturing, facilities-related expenses, regulatory costs, and costs
associated with payments to third-party contract 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 do not track
fully-burdened research and development expenses by individual product
candidate.

Selling, General, and Administrative

Our selling, general, and administrative expenses primarily include costs
associated with the commercialization of approved products and general and
administrative costs to support our operations. Selling expenses also include
share-based compensation, salary-related expenses, product marketing and sales
operations costs, and other costs incurred to support our sales efforts. General
and administrative expenses also include our core corporate support functions
such as human resources, finance and legal, and external costs to support our
core business such as insurance premiums, legal fees, and other professional
service fees.

Share-Based Compensation

Historically, we granted stock options under our Amended and Restated Equity
Incentive Plan and awards under our Share Tracking Awards Plan (the STAP).
Issuance of awards under both of 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 (as
amended to date, the 2015 Plan), which provides for the issuance of up to
11,500,000 shares of our common stock, including the 500,000 shares added
pursuant to an amendment and restatement of the 2015 Plan approved by our
shareholders in June 2022. 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 grant equity-based awards to
Unitherians and members of our Board of Directors in the form of stock options
and restricted stock units under the 2015 Plan, and we may grant restricted
stock units to 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.

The fair value of STAP awards and stock options 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. Although we
no longer grant STAP awards, we had approximately 0.6 million STAP awards
outstanding as of December 31, 2022. 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 liability associated with outstanding STAP
awards as a result of such re-measurements are recorded as adjustments to
share-based compensation expense (benefit) 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) 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 liability and related compensation expense, while decreases in our stock
price will generally result in a reduction in our liability and related
compensation expense); and (2) decreases in the number of outstanding awards.

Future Prospects

We anticipate that overall revenue growth over the near-term will be driven
primarily by: (1) growth in sales of Tyvaso as a result of the expansion of its
label to include PH-ILD; (2) growth in sales of the newly-launched Tyvaso DPI;
(3) continued growth in the number of patients prescribed Orenitram following
our expansion of the Orenitram label to reflect the results of the FREEDOM-EV
study; and (4) modest price increases for some of our products; partially offset
by further generic erosion of Adcirca sales. We believe that additional revenue
growth in the medium- and longer-term will be driven by new products and new
indications for existing products being developed in our pipeline, as described
above under Part I, Item 1-Business-Research and Development.

Our ability to achieve our 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
approval 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, including the impact on such prices
and reimbursement amounts as a result of the IRA; (5) the competition we face
within our industry,

48 United Therapeutics, a public benefit corporation

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including competition from generic 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; and (8) the risks identified in Part I, Item 1A-Risk Factors, included
in this Report.

We operate in a highly competitive market in which a small number of large
pharmaceutical companies control a majority of available PAH therapies. These
pharmaceutical companies are well established in the market and possess greater
financial, technical, and marketing resources than we do. In addition, there are
a number of investigational products in late-stage development that, if
approved, may erode the market share of our existing commercial therapies and
make market acceptance more difficult to achieve for any therapies we attempt to
market in the future.

Results of Operations

This section of this Report generally discusses 2022, 2021, and 2020 items and
year-to-year comparisons between 2022 and 2021. Discussions of year-to-year
comparisons between 2021 and 2020 that are not included in this Report can be
found in Part II, Item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations-Results of Operations of our Form 10-K filed
on February 24, 2022 (our 2021 Annual Report).

Revenues

The table below presents the components of total revenues (dollars in millions):

                                               Year Ended December 31,                                  Dollar Change                              Percentage Change
                                          2022               2021               2020           2022 v. 2021           2021 v. 2020            2022 v. 2021        2021 v. 2020
Net product sales:
Tyvaso(1)                         $   873.0          $   607.5          $   483.3          $       265.5          $       124.2                      44  %               26  %
Remodulin(2)                          500.2              513.7              516.7                  (13.5)                  (3.0)                     (3) %               (1) %
Orenitram                             325.1              306.1              293.1                   19.0                   13.0                       6  %                4  %
Unituxin                              182.9              202.3              122.9                  (19.4)                  79.4                     (10) %               65  %
Adcirca                                41.3               55.9               67.3                  (14.6)                 (11.4)                    (26) %              (17) %
Other                                  13.8                  -                  -                   13.8                      -                      NM(3)               NM(3)

Total revenues                    $ 1,936.3          $ 1,685.5          $ 1,483.3          $       250.8          $       202.2                      15  %               14  %

(1) Net product sales include both the drug product and the respective
inhalation devices for both Tyvaso and Tyvaso DPI.

(2) Net product sales include sales of infusion devices, such as the Remunity
Pump.

(3) Calculation is not meaningful.

Net product sales from our treprostinil-based products (Tyvaso, Remodulin, and
Orenitram) grew by $271.0 million in 2022, as compared to 2021.

Tyvaso net product sales increased in 2022, as compared to 2021, primarily due
to an increase in quantities sold and, to a lesser extent, the impact of a price
increase and lower gross-to-net deductions. The increase in quantities sold was
driven by the commercial launch of Tyvaso DPI in June 2022 and continued growth
in the number of patients following the PH-ILD label expansion in March 2021.

Remodulin net product sales decreased in 2022, as compared to 2021, due to a
$15.9 million decrease in U.S. Remodulin net product sales, partially offset by
a $2.4 million increase in international Remodulin net product sales. The
decrease in U.S. Remodulin net product sales was driven by a decrease in
quantities sold, partially offset by lower gross-to-net deductions.

Orenitram net product sales increased in 2022, as compared to 2021, primarily
due to a price increase and lower gross-to-net deductions.

Unituxin net product sales decreased in 2022, as compared to 2021, primarily due
to a decrease in quantities sold, partially offset by a price increase.

Adcirca net product sales decreased in 2022, as compared to 2021, due to a
decline in quantities sold as a result of generic competition for Adcirca and
higher gross-to-net deductions.

2022 Annual Report 49

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Gross-to-Net Deductions

We recognize revenues net of: (1) rebates and chargebacks; (2) prompt pay
discounts; (3) allowance 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 as well as contractual and statutory
requirements. We currently estimate our allowance for sales returns using
reports from our distributors and available industry data, including our
estimate 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, 2022

                                                   Rebates &            Prompt Pay           Allowance for
                                                 Chargebacks             Discounts           Sales Returns           Distributor Fees             Total
Balance, January 1, 2022                   $         67.8          $        3.8          $          6.3          $             7.9          $   85.8
Provisions attributed to sales in:
Current period                                      202.8                  43.2                     2.3                       34.5             282.8
Prior periods                                        (4.3)                 (0.5)                   (3.1)                       0.5              (7.4)
Payments or credits attributed to
sales in:
Current period                                     (121.1)                (38.9)                   (0.7)                     (23.6)           (184.3)
Prior periods                                       (63.9)                 (3.2)                   (1.5)                      (8.4)            (77.0)
Balance, December 31, 2022                 $         81.3          $        4.4          $          3.3          $            10.9          $   99.9


                                                                                  Year Ended December 31, 2021
                                                   Rebates &            Prompt Pay          Allowance for
                                                 Chargebacks             Discounts          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 &            Prompt Pay          Allowance for
                                                 Chargebacks             Discounts          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


50   United Therapeutics, a public benefit corporation

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Cost of Sales

The table below summarizes cost of sales by major category (dollars in
millions):

                                               Year Ended December 31,                               Dollar Change                              Percentage Change
                                            2022             2021             2020           2022 v. 2021          2021 v. 2020            2022 v. 2021        2021 v. 2020
Category:
Cost of sales                       $   146.7          $ 116.7          $ 101.0          $        30.0          $       15.7                      26  %               16  %
Share-based compensation expense(1)       4.9              5.8              7.1                   (0.9)                 (1.3)                    (16) %              (18) %
Total cost of sales                 $   151.6          $ 122.5          $ 108.1          $        29.1          $       14.4                      24  %               13  %

(1)Refer to Share-Based Compensation section below for discussion.

Cost of sales, excluding share-based compensation. The increase in cost of sales
for the year ended December 31, 2022, as compared to the same period in 2021,
was primarily due to an increase in royalty expense and product costs for Tyvaso
DPI following the commercial launch of the product in June 2022.

Research and Development

The table below summarizes the nature of research and development expense by
major expense category (dollars in millions):

                                                 Year Ended December 31,                                Dollar Change                              Percentage Change
                                              2022             2021             2020           2022 v. 2021           2021 v. 2020            2022 v. 2021        2021 v. 2020
Category:
External research and development(1)  $   168.8          $ 156.7          $ 177.4          $        12.1          $       (20.7)                      8  %              (12) %
Internal research and development(2)      131.4            117.2            111.3                   14.2                    5.9                      12  %                5  %
Share-based compensation expense(3)        23.8             24.4             29.5                   (0.6)                  (5.1)                     (2) %              (17) %
Impairments(4)                                -            130.0              0.5                 (130.0)                 129.5                    (100) %               NM(6)
Other(5)                                   (1.1)           111.8             39.0                 (112.9)                  72.8                    (101) %              187  %
Total research and development
expense                               $   322.9          $ 540.1          $ 357.7          $      (217.2)         $       182.4                     (40) %               51  %

(1)External research and development primarily includes fees paid to third
parties (such as clinical trial sites, contract research organizations, and
contract laboratories) for preclinical and clinical studies and payments to
third-party contract manufacturers before FDA approval of the relevant product.

(2)Internal research and development primarily includes salary-related expenses
for research and development functions, internal costs to manufacture product
candidates before FDA approval, and internal facilities-related expenses,
including depreciation, related to research and development activities.

(3)Refer to Share-Based Compensation section below for discussion.

(4)Impairments primarily includes impairment charges to write-down the carrying
value of in-process research and development (IPR&D) and of certain property,
plant, and equipment as a result of research and development activities.

(5)Other primarily includes upfront fees and milestone payments to third parties
under license agreements related to development-stage products, adjustments to
the fair value of our contingent consideration obligations, and a one-time
expense associated with the redemption of a pediatric disease priority review
voucher in 2021.

(6)Calculation is not meaningful.

Research and development, excluding share-based compensation. The decrease in
research and development expense for the year ended December 31, 2022, as
compared to the same period in 2021, was due to: (1) a $107.3 million IPR&D
impairment charge related to our March 2021 decision to discontinue the U.S.
development of Trevyent; (2) a $105.0 million purchase of a pediatric disease
priority review voucher in January 2021, which we redeemed upon submission of
our NDA for Tyvaso DPI; and (3) impairment charges related to property, plant,
and equipment during 2021.

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Selling, General, and Administrative

The table below summarizes selling, general, and administrative expense by major
category (dollars in millions):

                                                  Year Ended December 31,                               Dollar Change                              

Percentage Change

                                               2022             2021             2020           2022 v. 2021          2021 v. 2020            2022 v. 2021        2021 v. 2020
Category:
General and administrative             $   333.2          $ 294.3          $ 241.8          $        38.9          $       52.5                      13  %               22  %
Sales and marketing                         70.8             64.4             54.9                    6.4                   9.5                      10  %               17  %
Share-based compensation expense(1)         78.1            108.3            127.2                  (30.2)                (18.9)                    (28) %              (15) %
Total selling, general, and
administrative expense                 $   482.1          $ 467.0          $ 423.9          $        15.1          $       43.1                       3  %               10  %

(1)Refer to Share-Based Compensation section below for discussion.

General and administrative, excluding share-based compensation. The increase in
general and administrative expense for the year ended December 31, 2022, as
compared to the same period in 2021, was primarily due to: (1) an increase in
branded prescription drug fee expense associated with sales of Tyvaso; and (2)
impairment charges related to property, plant, and equipment. The branded
prescription drug fee is a required fee imposed under the Patient Protection and
Affordable Care Act of 2010, which became applicable to Tyvaso in 2021, and is
now applicable to Tyvaso DPI, as a result of their approval for treatment of
PH-ILD, an indication that currently does not have orphan designation from the
FDA.

Share-Based Compensation

The table below summarizes share-based compensation expense by major category
(dollars in millions):

                                                Year Ended December 31,                                Dollar Change                              Percentage Change
                                             2022             2021             2020           2022 v. 2021           2021 v. 2020            2022 v. 2021        2021 v. 2020
Category:
Stock options                        $    22.6          $  25.4          $  44.0          $        (2.8)         $       (18.6)                    (11) %              (42) %
Restricted stock units                    35.7             24.7             20.5                   11.0                       4.2                   45  %               20  %
STAP awards                               46.7             86.6             97.8                  (39.9)                 (11.2)                    (46) %              (11) %
Employee stock purchase plan               1.8              1.8              1.5                      -                       0.3                    -  %               20  %
Total share-based compensation
expense                              $   106.8          $ 138.5          $ 163.8          $       (31.7)         $       (25.3)                    (23) %              (15) %

The table below summarizes share-based compensation expense by line item in our
consolidated statements of operations (dollars in millions):

                                                  Year Ended December 31,                                Dollar Change                              Percentage Change
                                               2022             2021             2020           2022 v. 2021           2021 v. 2020            2022 v. 2021        2021 v. 2020
Cost of sales                          $     4.9          $   5.8          $   7.1          $        (0.9)         $        (1.3)                    (16) %              (18) %
Research and development                    23.8             24.4             29.5                   (0.6)                  (5.1)                     (2) %              (17) %
Selling, general, and administrative        78.1            108.3            127.2                  (30.2)                 (18.9)                    (28) %              (15) %

Total share-based compensation expense $ 106.8 $ 138.5 $ 163.8 $ (31.7) $ (25.3)

                    (23) %              (15) %


The decrease in share-based compensation expense for the year ended December 31,
2022, as compared to the same period in 2021, was primarily due to: (1) a
decrease in STAP expense driven by a 29 percent increase in our stock price
during 2022, as compared to a 42 percent increase in our stock price during
2021; and (2) a decrease in stock option expense due to fewer awards granted and
remaining outstanding in 2022, as compared to the same period in 2021, partially
offset by an increase in restricted stock unit expense. Refer to Note
8-Share-Based Compensation, to our consolidated financial statements for more
information.

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Other (Expense) Income, Net

The change in other (expense) income, net for the year ended December 31, 2022,
as compared to the same period in 2021, was primarily due to net unrealized and
realized gains and losses on equity securities. Refer to Note 4-Investments and
Note 5-Fair Value Measurements, to our consolidated financial statements for
more information.

Income Tax Expense

Income tax expense was $223.3 million for the year ended December 31, 2022, as
compared to $118.1 million for the same period in 2021. For the years ended
December 31, 2022 and 2021, our effective income tax rates (ETR) were
approximately 23 percent and 20 percent, respectively. Our ETR for the year
ended December 31, 2022 increased, as compared to our ETR for the year ended
December 31, 2021, primarily due to an increase in valuation allowance in the
current year compared to a decrease in the prior year, and an increase in the
reserve for uncertain tax positions, partially offset by an increase in excess
tax benefits from share-based compensation. For additional details, refer to
Note 10-Income Taxes to our consolidated financial statements.

Financial Condition, Liquidity, and Capital Resources

We have funded our operations principally through sales of our commercial
products and, from time-to-time, third-party financing arrangements. We believe
that our current sources of liquidity are sufficient to fund ongoing operations
and future business plans as we expect aggregate growth in revenues from our
commercial 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 March 2022, we entered into a credit agreement (the 2022 Credit
Agreement), which provides for unsecured revolving credit facilities of up to
$2.0 billion in the aggregate. Our aggregate outstanding balance under the 2022
Credit Agreement, which matures in 2027, was $800.0 million and classified as a
non-current liability in our consolidated balance sheets as of December 31,
2022. See Unsecured Revolving Credit Facilities below for further details.

For information regarding the fluctuation explanations between 2021 and 2020,
refer to our 2021 Annual Report.

Cash and Cash Equivalents and Marketable Investments

Cash and cash equivalents and marketable investments comprise the following
(dollars in millions):

                                                               Year Ended December 31,                 Dollar Change          Percentage Change
                                                                       2022               2021            2022 v. 2021              2022 v. 2021
Cash and cash equivalents                              $       961.2              $   894.8          $         66.4                         7  %
Marketable investments-current                               1,877.5                1,035.9                   841.6                        81  %
Marketable investments-non-current                           1,316.2                1,649.9                  (333.7)                      (20) %
Total cash and cash equivalents and marketable
investments                                            $     4,154.9              $ 3,580.6          $        574.3                        16  %


Cash Flows

Cash flows comprise the following (dollars in millions):

                                                 Year Ended December 31,                                Dollar Change                             

Percentage Change

                                            2022              2021              2020           2022 v. 2021           2021 v. 2020           2022 v. 2021       2021 v. 2020
Net cash provided by operating
activities                           $  802.5          $  598.2          $  755.7          $       204.3          $      (157.5)                    34  %             (21) %
Net cash used in investing
activities                           $ (811.5)         $ (486.9)         $ (738.5)         $      (324.6)         $       251.6                    (67) %              34  %
Net cash provided by (used in)
financing activities                 $   75.4          $   44.8          $  (16.9)         $        30.6          $        61.7                     68  %             365  %


Operating Activities

Our operating assets and liabilities consist primarily of accounts receivable,
inventories, accounts payable, accrued expenses, liabilities for our STAP
awards, and tax-related payables and receivables.

The increase of $204.3 million in net cash provided by operating activities for
the year ended December 31, 2022, as compared to the year ended December 31,
2021, was primarily due to: (1) a $105.0 million purchase of a pediatric disease
priority review voucher during the year ended December 31, 2021; and (2) a $12.9
million decrease in cash paid to settle STAP awards. The remainder of the
increase in cash provided by operating activities was due to other changes in
assets and liabilities.

  2022 Annual Report   53

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Investing Activities

The increase of $324.6 million in net cash used in investing activities for the
year ended December 31, 2022, as compared to the year ended December 31, 2021,
was primarily due to: (1) a $317.2 million increase in cash used for total
purchases, sales, and maturities of marketable investments; and (2) a $18.0
million increase in cash paid to purchase property, plant, and equipment.

Financing Activities

The increase of $30.6 million in net cash provided by financing activities for
the year ended December 31, 2022, as compared to the year ended December 31,
2021, was primarily due to a $38.4 million increase in proceeds from the
exercise of stock options, partially offset by a $7.5 million increase in
payments of debt issuance costs related to the 2022 Credit Agreement.

Unsecured Revolving Credit Facilities

In March 2022, we entered into the 2022 Credit Agreement, which provides for
unsecured revolving credit facilities of up to $2.0 billion in the aggregate. On
March 31, 2022, we borrowed $800.0 million under the facilities and used the
funds to repay outstanding indebtedness under our then-existing credit agreement
(the 2018 Credit Agreement). The aggregate balance of $800.0 million under our
2022 Credit Agreement remained outstanding as of both December 31, 2022 and
February 22, 2023. Refer to Note 7-Debt, to our consolidated financial
statements.

Contractual Obligations

As of December 31, 2022, we had the following contractual obligations (in
millions):

                                                                                            Payments Due by Period
                                                                                 Less than                                               More than 5
                                                                  Total             1 year           2-3 Years           4-5 Years             Years

Operating lease obligations                                $    31.7        

$ 3.9 $ 7.0 $ 7.1 $ 13.7
Long-term debt obligations(1)

                                1,014.2               50.4               100.8               863.0                 -
Obligations under the STAP(2)                                   76.4               76.4                   -                   -                 -
Obligations under the SERP(3)                                   67.7               19.5                18.1                   -              30.1
Purchase obligations(4)                                        654.4              464.4               150.5                25.3              14.2
Total(5) (6)                                               $ 1,844.4          $   614.6          $    276.4          $    895.4          $   58.0


(1)Long-term debt obligations include future principal and interest payments on
our adjusted variable rate obligations under the 2022 Credit Agreement, assuming
contractual maturity of the 2022 Credit Agreement. The 2022 Credit Agreement
will mature in March 2027. As of December 31, 2022, we have classified the
entire $800.0 million outstanding balance as a non-current liability because we
do not intend to repay any portion of this amount within one year. Refer to
Note 7-Debt to our consolidated financial statements for further details.

(2)Estimated based on the intrinsic value of exercisable outstanding STAP awards
as of December 31, 2022. Refer to Note 8-Share-Based Compensation-STAP Awards to
our consolidated financial statements for further details.

(3)Consists of actuarially derived, undiscounted, estimated future payouts of
benefits. Refer to Note 11-Employee Benefit Plans-Supplemental Executive
Retirement Plan to our consolidated financial statements for further details.

(4)Purchase obligations primarily include: (1) commitments related to research
and development (including clinical trials) for new and existing products;
(2) open purchase orders for capital expenditures primarily related to our
continued investment in construction of additional facilities to support the
development and commercialization of our products and technologies; and (3) open
purchase orders for the acquisition of goods and services in the ordinary course
of business. The timing and amount of our obligations may differ based on
certain future events.

(5)In addition to amounts in the table above, we are contractually obligated to
make 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 in
our consolidated balance sheets. Refer to Note 12-Commitments and Contingencies
to our consolidated financial statements for further details.

(6)As of December 31, 2022, our other non-current liabilities in our
consolidated balance sheets includes a liability of $15.9 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 are 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 consolidated financial
statements for further details.

54 United Therapeutics, a public benefit corporation

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Obligations Under License Agreements

We pay Lilly a royalty equal to ten percent of our net product sales of Adcirca,
as well as milestone payments of $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 agreements 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
products covered by the license agreements. Refer to Note 12-Commitments and
Contingencies to our consolidated financial statements for further details.

Off-Balance Sheet Arrangements

We hold an interest in an unconsolidated variable interest entity (VIE). We
determined that we are not the primary beneficiary of this entity. As a result,
we do not consolidate this VIE. Refer to Note 4-Investments-Variable Interest
Entities. We do not have any other off-balance sheet arrangements within the
meaning of Item 303(a)(4) of Regulation S-K.

Summary of Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with generally
accepted accounting principles in the United States (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.

Revenue Recognition

We generate revenues from the sale of our commercial products: Tyvaso, Tyvaso
DPI, Remodulin, 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 to our consolidated
financial statements.

The following category of gross-to-net deductions involves the use of
significant estimates and judgments and information obtained from external
sources.

Rebates and Chargebacks

Our most significant rebates relate to our participation in state Medicaid
programs, contractual rebates to certain of our domestic distributors, and
contractual rebates offered to managed care organizations covering Medicare Part
D and commercial plans. Chargebacks relate to our participation in programs with
the U.S. Department of Veterans Affairs and 340B covered entities. Although we
accrue for our allowance for rebates and chargebacks in the same period that we
recognize revenue, the actual rebate or chargeback on the sale of our product to
a distributor is not invoiced to us until a future period, generally within six
months from the date of sale. Due to this time lag, we must estimate the amount
of rebates and chargebacks to accrue. As of December 31, 2022 and 2021, we had a
liability of $81.3 million and $67.8 million, respectively, related to rebates
and chargebacks.

Estimates associated with our participation in state Medicaid programs are
particularly susceptible to adjustment given the extensive time lag that may
occur between our recording of an accrual and its ultimate invoicing by
individual state Medicaid programs, which can occur up to several years after
the sale of our product. Because of the time lag for Medicaid and other rebates,
in any particular quarter, our adjustments may incorporate revisions of accruals
for prior quarters. Historically, adjustments to our estimates to reflect actual
results or updated expectations have not been material to our overall financial
results. Provisions attributed to sales in prior periods have been less than one
percent of our total revenues for each of the years ended December 31, 2022,
2021, and 2020.

For a roll-forward of the liability accounts associated with our gross-to-net
deductions, see the section above entitled Results of Operations-Gross-to-Net
Deductions.

  2022 Annual Report   55

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Share-Based Compensation

Our share-based awards are classified as either liabilities (STAP awards) or as
equity (stock options, restricted stock units, and rights to purchase stock
under our employee stock purchase plan). We recognize related share-based
compensation expense based on (1) the fair value of outstanding STAP awards on
the grant date and at the end of each reporting period; (2) the grant date fair
value of stock options and restricted stock 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 the assumptions used in the Black-Scholes-Merton valuation model,
see Note 8-Share-Based Compensation, to our consolidated financial statements.

Recently Issued Accounting Standards

See Note 3-Recently Issued Accounting Standards, to our consolidated financial
statements for information on our anticipated adoption of recently issued
accounting standards.