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Share-Based Compensation
 12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based CompensationAs of December 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 (as amended to date, the 2015 Plan). The 2015 Plan provides for the issuance of up to 11,000,000 shares of our common stock pursuant to awards granted under the 2015 Plan, which includes the 1,000,000 shares added pursuant to an amendment and restatement of the 2015 Plan approved by our shareholders in June 2021. No further awards will be granted under the 1999 Plan. We also have one equity incentive plan, the United Therapeutics Corporation 2019 Inducement Stock Incentive Plan (the 2019 Inducement Plan), that has not been approved by our shareholders, as permitted by the Nasdaq Stock Market rules. The 2019 Inducement Plan was approved by our Board of Directors in February 2019 and provides for the issuance of up to 99,000 shares of our common stock under awards granted to newly-hired employees. Currently, we grant equity-based awards to employees and members of our Board of Directors in the form of stock options and restricted stock units (RSUs) under the 2015 Plan, and we grant RSUs to newly-hired employees under the 2019 Inducement Plan. Refer to the sections entitled Stock Options and RSUs 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.
The following table reflects the components of share-based compensation expense recognized in our consolidated statements of operations (in millions):
 Year Ended December 31,
 202120202019
Stock options$25.4 $44.0 $70.5 
RSUs24.7 20.5 13.3 
STAP awards86.6 97.8 (39.7)
Employee stock purchase plan1.8 1.5 1.3 
Total share-based compensation expense before tax$138.5 $163.8 $45.4 
Share-based compensation capitalized as part of inventory$1.0 $1.0 $0.7 
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.
In March 2017 and March 2018, we issued stock options with performance conditions to certain executives with vesting conditions tied to the achievement of specified performance criteria, which had target performance levels that span from one to three years. Upon the conclusion of the performance period, the performance level achieved was measured and the ultimate number of shares that may vest was determined. Share-based compensation expense for these awards was recorded ratably over their vesting periods, depending on the specific terms of the award and anticipated achievement of the specified performance criteria. As of December 31, 2021, the performance period for these awards had ended, and the awards granted in March 2017 and March 2018 had vested. During 2021 and 2020, we did not grant stock options with performance vesting conditions.
A description of the key inputs, requiring estimates, used in determining the fair value of stock options are provided below:
Expected term—The expected term reflects the estimated time period we expect an award to remain outstanding. For the years ended December 31, 2021, 2020, and 2019, we used the simplified approach to develop this input for our stock options as we do not have sufficient historical data related to stock option exercises. Under the simplified approach, the expected term reflects the weighted average midpoint between the vesting date and the expiration date of the awards. For the expected term input related to our STAP awards, refer to the Share Tracking Awards Plans section below.
Expected volatility—Volatility is a measure of the amount the price of our common stock has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. We use historical volatility based on weekly price observations of our common stock during the period immediately preceding an award that is equal to its expected term up to a maximum period of five years. We believe that the volatility in the price of our common stock over the preceding five years generally provides a reliable projection of future long-term volatility.
Risk-free interest rate—The risk-free interest rate is the average interest rate consistent with the yield available on a U.S. Treasury note with a term equal to the expected term of an award.
Expected dividend yield—We do not pay cash dividends on our common stock and do not expect to do so in the future. Therefore, the dividend yield is zero.
The following weighted average assumptions were used in estimating the fair value of stock options granted to employees during the twelve months ended December 31, 2021, 2020, and 2019:
 Year Ended December 31,
 202120202019
Expected term of awards (in years)5.75.65.8
Expected volatility32.5 %33.4 %33.8 %
Risk-free interest rate1.0 %0.5 %2.4 %
Expected dividend yield0.0 %0.0 %0.0 %
A summary of the activity and status of stock options under our equity incentive plans is presented below:
 Number of OptionsWeighted Average Exercise PriceWeighted Average Remaining
Contractual Term (in Years)		Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 20217,680,194 $126.27   
Granted43,653 177.33   
Exercised(405,536)123.47   
Forfeited(333)146.03   
Outstanding at December 31, 20217,317,978 $126.73 4.6$653.9 
Exercisable at December 31, 20215,592,698 $125.92 4.4$504.2 
Unvested at December 31, 20211,725,280 $129.34 5.3$149.7 
The weighted average fair value of a stock option granted during each of the years in the three-year period ended December 31, 2021, was $56.69, $34.56, and $39.63, respectively. The total fair value of stock options that vested for each of the years in the three-year period ended December 31, 2021, was $50.4 million, $73.5 million, and $37.4 million, respectively.
Total share-based compensation expense related to stock options is recorded as follows (in millions):
 Year Ended December 31,
 202120202019
Cost of product sales$0.1 $0.5 $0.8 
Research and development0.5 2.0 3.7 
Selling, general, and administrative24.8 41.5 66.0 
Share-based compensation expense before taxes25.4 44.0 70.5 
Related income tax benefit(0.8)(3.1)(16.0)
Share-based compensation expense, net of taxes$24.6 $40.9 $54.5 
As of December 31, 2021, unrecognized compensation cost relating to stock options was $25.7 million. Unvested outstanding stock options as of December 31, 2021 had a weighted average remaining vesting period of 1.2 years.
Stock option exercise data is summarized below (dollars in millions):
 Year Ended December 31,
 202120202019
Number of options exercised405,536 466,731 191,508 
Cash received from options exercised$50.0 $33.8 $9.9 
Total intrinsic value of options exercised$26.6 $22.9 $11.5 
Tax benefits realized from options exercised(1)
$5.3 $5.4 $2.6 
(1)We recognize these tax benefits in our consolidated statements of operations within income tax (expense) benefit.
RSUs
In June 2016, we began issuing RSUs to our non-employee directors. In October 2017, we also began issuing RSUs to our employees. Each RSU entitles the recipient to one share of our common stock upon vesting. We measure the fair value of RSUs using the stock price on the date of grant. Share-based compensation expense for the RSUs is recorded ratably over their vesting period.
A summary of the activity with respect to, and status of, RSUs during year ended December 31, 2021 is presented below:
 Number of RSUsWeighted Average Grant Date Fair Value
Unvested at January 1, 2021440,528 $102.40 
Granted188,378 166.19 
Vested(210,676)106.23 
Forfeited/canceled(27,691)121.33 
Unvested at December 31, 2021390,539 $129.76 
Total share-based compensation expense relating to RSUs is recorded as follows (in millions):
 Year Ended December 31,
 202120202019
Cost of product sales$2.1 $1.6 $1.0 
Research and development8.2 7.0 4.4 
Selling, general, and administrative14.4 11.9 7.9 
Share-based compensation expense before taxes24.7 20.5 13.3 
Related income tax benefit(5.9)(4.8)(3.0)
Share-based compensation expense, net of taxes$18.8 $15.7 $10.3 
As of December 31, 2021, unrecognized compensation cost related to the grant of RSUs was $31.5 million. Unvested outstanding RSUs as of December 31, 2021 had a weighted average remaining vesting period of 1.8 years.
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, and in most cases they vest in equal increments on each anniversary of the grant date over a four-year period.
The aggregate STAP liability balance was $102.4 million and $96.8 million at December 31, 2021 and 2020, respectively, all of which was classified as a current liability in 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. Refer to the descriptions of these key inputs, requiring estimates, used in determining the fair value of the awards in the Stock Options section above. A description of the expected term input for STAP awards is provided below:
Expected term—The expected term reflects the estimated time period we expect an award to remain outstanding. We use the weighted average midpoint of the remaining contractual term to calculate the expected term of outstanding STAP awards.
The table below includes the weighted-average assumptions used to measure the fair value of the outstanding STAP awards:
 As of December 31,
 202120202019
Expected term of awards (in years)1.31.72.0
Expected volatility30.0 %34.8 %29.1 %
Risk-free interest rate0.4 %0.1 %1.6 %
Expected dividend yield0.0 %0.0 %0.0 %
The closing price of our common stock was $216.08, $151.79, and $88.08 on December 31, 2021, 2020, and 2019, respectively.
A summary of the activity and status of STAP awards during the year ended December 31, 2021 is presented below:
 Number of AwardsWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (in Years)Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 20212,121,860 $118.48   
Granted— —   
Exercised(1,027,738)112.72   
Forfeited(562)145.30   
Outstanding at December 31, 20211,093,560 $123.89 2.5$100.8 
Exercisable at December 31, 20211,083,560 $124.55 2.6$99.2 
Unvested at December 31, 202110,000 $52.57 0.9$1.6 
Share-based compensation expense (benefit) recognized in connection with STAP awards is as follows (in millions):
Year Ended December 31,
 202120202019
Cost of product sales$3.5 $4.9 $(1.7)
Research and development15.0 19.9 (8.2)
Selling, general, and administrative68.1 73.0 (29.8)
Share-based compensation expense (benefit) before taxes86.6 97.8 (39.7)
Related income tax (benefit) expense(14.7)(19.3)9.0 
Share-based compensation expense (benefit), net of taxes$71.9 $78.5 $(30.7)
Cash paid to settle STAP exercises during the years ended December 31, 2021, 2020, and 2019 was $81.1 million, $26.1 million, and $7.6 million, respectively.
Employee Stock Purchase Plan
In June 2012, our shareholders approved the ESPP, which is structured to comply with Section 423 of the Internal Revenue Code. The ESPP provides eligible employees with the right to purchase shares of our common stock at a discount through elective accumulated payroll deductions at the end of each offering period. Offering periods, which began in 2012, occur in consecutive six-month periods commencing on September 5th and March 5th of each year. Eligible employees may contribute up to 15 percent of their base salary, subject to certain annual limitations as defined in the ESPP. The purchase price of the shares is equal to the lower of 85 percent of the closing price of our common stock on either the first or last trading day of a given offering period. In addition, the ESPP provides that no eligible employee may purchase more than 4,000 shares during any offering period. The ESPP has a 20-year term and limits the aggregate number of shares that can be issued under the ESPP to 3.0 million.