UNITED THERAPEUTICS Corp

Notes to Consolidated Financial Statements

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. In 2021, we converted to a Delaware public benefit corporation (PBC), with the express public benefit purpose to provide a brighter future for patients through (a) the development of novel pharmaceutical therapies; and (b) technologies that expand the availability of transplantable organs.

We have approval from the U.S. Food and Drug Administration (FDA) to market the following therapies: Tyvaso DPI® (treprostinil) Inhalation Powder (Tyvaso DPI), Tyvaso® (treprostinil) Inhalation Solution (nebulized Tyvaso), Remodulin® (treprostinil) Injection (Remodulin), Orenitram® (treprostinil) Extended-Release Tablets (Orenitram), Unituxin® (dinutuximab) Injection (Unituxin), and Adcirca® (tadalafil) Tablets (Adcirca). We also derive revenues outside the United States from sales of nebulized Tyvaso, Remodulin, and Unituxin.

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. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of United Therapeutics Corporation and its consolidated subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). All intercompany balances and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates

The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on assumptions regarding historical experience, currently available information, and anticipated developments that we believe are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. Estimates are used for, but not limited to, revenue recognition, share-based compensation, determining the fair value of assets acquired and liabilities assumed in business combinations, marketable investments, fair value measurements (including those related to contingent consideration), inventory reserves, investments in privately-held companies, income taxes, goodwill and other intangible assets, and obligations related to our Supplemental Executive Retirement Plan.

Fair Value Measurements

Fair value is a market-based measurement, not an entity-specific measurement. The objective of a fair value measurement is to estimate the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Such transactions to sell an asset or transfer a liability are assumed to occur in the principal market for that asset or liability, or in the absence of the principal market, the most advantageous market for the asset or liability.

Assets and liabilities subject to fair value measurement disclosures are required to be classified according to a three-level fair value hierarchy with respect to the inputs (or assumptions) used to determine fair value. The level in which an asset or liability is disclosed within the fair value hierarchy is based on the lowest level input that is significant to the related fair value measurement in its entirety. The guidance under the fair value measurement framework applies to other existing accounting guidance in the Financial Accounting Standards Board (FASB) codification that requires or permits fair value measurements. See related disclosures in Note 5—Fair Value Measurements.

Cash Equivalents

Cash equivalents consist of highly liquid investments with maturities of three months or less from the date of acquisition.

Marketable Investments

Our marketable investments are primarily debt securities that we classify as available-for-sale. If we have both the positive intent and the ability to hold the securities until maturity, we have the option to classify the securities as held-to-maturity. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. Available-for-sale debt securities are recorded at fair value, with the portion of the unrealized gains and losses that are not credit-related included as a component ofaccumulated other comprehensive income (loss) in stockholders’ equity, until realized. Held-to-maturity debt securities are recorded at amortized cost, adjusted for the amortization of discounts or premiums. Related discounts and premiums are amortized over the term of these securities as an adjustment to the yield using the effective interest method. Marketable investments are classified as either current ornon-current assets in our consolidated balance sheets based on their contractual maturity dates.

We monitor our available-for-sale debt securities for impairment quarterly or more frequently if circumstances warrant. In the event that the carrying value of a debt security exceeds its fair value, we evaluate whether any impairment is a result of credit loss or other factors. For investments in an unrealized loss position, we determine whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, the investment issuer’s financial condition and business outlook, and reasonable and supportable forecasts of economic conditions. An allowance for credit losses would be recorded in our consolidated statements of operations in the event the decline in the investment’s fair value was a result of credit loss, and unrealized losses not related to credit losses would be recorded inother comprehensive income (loss).

Our marketable investments also include investments in publicly-traded companies. The equity securities we own in these companies are recorded at fair value. Changes in the fair value of publicly-traded equity securities are recorded in our consolidated statements of operations within other (expense) income, net.

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):

Goodwill and Other Intangible Assets

The carrying amount of goodwill is not amortized but is subject to annual impairment testing. We conduct our impairment testing of goodwill annually during the fourth quarter, or more frequently if impairment indicators exist. Initially, we evaluate various pertinent qualitative factors to assess whether it is more likely than not that the fair value of a reporting unit to which goodwill has been assigned is less than its carrying value. Such qualitative factors can include, among others: (1) industry and market conditions; (2) present and anticipated sales and cost factors; and (3) overall financial performance. If we conclude based on our qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we then measure the fair value of the reporting unit and compare its fair value to its carrying value. The impairment charge is limited to the amount of goodwill allocated to the reporting unit. We performed a qualitative assessment for our goodwill impairment testing for 2023, 2022, and 2021. During the years ended December 31, 2023, 2022, and 2021 our evaluation of goodwill didnot result in any impairment losses.

Indefinite-lived intangible assets are not amortized but are evaluated annually or more frequently for impairment if impairment indicators exist. Our indefinite-lived intangible assets include purchased in-process research and development (IPR&D) assets, which were measured at their estimated fair values as of their acquisition dates. There wereno impairment losses related to indefinite-lived intangible assets during the years ended December 31, 2023 and December 31, 2022. During the year ended December 31, 2021, we recognized IPR&D impairment charges of $113.4 million related to our decision to discontinue the U.S. development of Trevyent® and our decision to discontinue our research and development efforts related to biomechanical lungs.

Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Impairment losses are measured and recognized to the extent the carrying value of such assets exceeds their fair value. We recordedno impairment losses during the years ended December 31, 2023, 2022, and 2021 related to intangible assets subject to amortization.

Goodwill and other intangible assets comprise the following (in millions):

For more information related to changes in the current year, see Note 16—Acquisitions.

Related amortization expense for the years ended December 31, 2023, 2022, and 2021, was $0.3 million, $0.1 million and $0.1 million, respectively. As of December 31, 2023, aggregate amortization expense related to definite-lived intangible assets for each of the five succeeding years and thereafter is estimated at less than $1.0 million per year.

Property, Plant, and Equipment

Property, plant, and equipment (PP&E) is recorded at cost and depreciated over its estimated useful life using the straight-line method. The estimated useful lives of PP&E by major category are as follows:

PP&E consists of the following (in millions):

Depreciation expense for the years ended December 31, 2023, 2022, and 2021, was $52.9 million, $51.2 million, and $49.8 million, respectively.

Buildings under construction consists of direct costs related to our construction projects.

For the years ended December 31, 2023 and 2022, we recorded $3.6 million and $11.2 million of PP&E impairment charges in the aggregate, respectively, which were recorded within selling, general, and administrative in our consolidated statements of operations. For the year ended December 31, 2021, we recorded $19.2 million of PP&E impairment charges in the aggregate, of which $16.7 million was recorded within research and development in our consolidated statements of operations and $2.5 million was recorded within selling, general, and administrative in our consolidated statements of operations.

Investments in Privately-Held Companies

We measure our non-controlling equity investments in privately-held companies using the measurement alternative because the fair values of these investments are not readily determinable. Under this alternative, the investments are measured at cost, less any impairment, adjusted for any observable price changes. We monitor these investments individually for any observable price changes or impairment indicators. We adjust the measurement of these investments for observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We consider relevant transactions, including any potential funding opportunities, which occur on or before the balance sheet date in evaluating whether any observable price changes have occurred. When a relevant transaction is identified, a review of the attendant rights and obligations, such as voting rights, liquidation preferences, and protective provisions, is necessary to evaluate whether such transaction is deemed to be a similar or identical investment. When a transaction is identified as similar or identical to our investment, we assess the fair value of our investment using various inputs, such as the discount rate, time to a liquidation event, and volatility, in a valuation model or analysis. We include our investments in privately-held companies within other non-current assets in 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 FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements. At each reporting date, we review these investments individually for impairment by evaluating whether events or circumstances have occurred that may have a significant adverse effect on the fair value of the investments. If such events or circumstances have occurred, we will estimate the fair value of the investment. In such cases, we determine the estimated fair value of the investment using unobservable inputs including assumptions by the company’s management.

Treasury Stock

Repurchased treasury stock is recorded at cost, including commissions and fees. The cost of treasury shares sold or reissued is determined using the first-in, first-out method. Related gains and losses on sales of treasury stock are recognized as adjustments to stockholders’ equity.

Revenue Recognition

We determine revenue recognition for our contractual arrangements with customers based on the following five steps: (1) identify each contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to our performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy the relevant performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

Revenues are generated from the sale of our commercially approved products: Tyvaso DPI, nebulized Tyvaso, Remodulin, Orenitram, Unituxin, and Adcirca. We recognize revenue when we transfer control of our product to our distributors, which is generally when the product is shipped or delivered to the distributor. Future revenue from delivery of our products will be based on purchase orders provided to us by our distributors.

See Note 13—Segment Information, for information on revenues disaggregated by commercial products and other, geographic area, and customer.

Gross-to-Net Deductions

As is customary in the pharmaceutical industry, our product sales are recorded net of various forms of gross-to-net deductions. These deductions vary the consideration to which we are entitled in exchange for the sale of our products to our distributors, and include reserves for: (1) rebates and chargebacks; (2) prompt payment discounts; (3) allowance for sales returns; and (4) distributor fees and other allowances. We estimate these reserves in the same period that we recognize revenue for product sales to distributors. The net product sales amount recognized represents the amount we believe will not be subject to a significant future reversal of revenue.

Estimating gross-to-net deductions involves the use of significant assumptions and judgments, as well as information obtained from external sources. For our rebate and chargeback liabilities, in particular, the time lag experienced in the payment of the rebate or chargeback may result in revisions of these accruals in future periods. However, based on our significant history and experience estimating these accruals and our development of these accruals based on the expected value method, we do not believe there will be significant changes to our estimates recorded during the period of sale. We recognized aggregate increases in our net product sales of $5.4 million, $7.4 million, and $2.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, related to changes in these estimates of revenue recognized from product sales in prior periods.

Rebates and chargebacks. Allowances for rebates include mandated discounts due to our participation in various government health care programs, contracted rebates to certain domestic distributors, and contracted discounts with commercial payers. We estimate our rebate liability on a product-by-product basis, considering actual revenue, contractual discount rates, expected utilization under each contract, and historical payment experience. We also consider changes in our product pricing and information regarding changes in program regulations and guidelines. Our chargebacks represent contractual discounts payable to distributors for the difference between the invoice price paid to us by the distributor for a particular product and the contracted price that the distributor’s customer pays for that product. We estimate our chargeback liability on a product-by-product basis, primarily considering historical payment experience. Although we accrue a liability for rebates and chargebacks in the same period the product is sold, third-party reporting and payment of the rebate or chargeback amount occur on a time lag, with the majority of rebates and chargebacks paid withinsix months from date of sale. Our liability for rebates and chargebacks is included in accounts payable and accrued expenses in our consolidated balance sheets. As of December 31, 2023 and 2022, our accrued rebates and chargebacks were $108.4 million and $81.3 million, respectively. In addition, during the years ended December 31, 2023, 2022, and 2021, we recognized $275.5 million, $198.5 million, and $218.6 million, respectively, in revenue deductions associated with rebates and chargebacks.

Prompt payment discounts. We offer prompt pay discounts to many of our distributors, typically for payments made within 30 days. Prompt pay discounts are estimated in the period of sale based on our experience with sales to eligible distributors. Our domestic distributors have routinely taken advantage of these discounts and we expect them to continue to do so. Prompt pay discounts are recorded as a deduction to the accounts receivable balance presented in our consolidated balance sheets.

Product returns. The sales terms for Adcirca and Unituxin include return rights that extend throughout the distribution channel. For Adcirca, we recognize an allowance for returns as customers have the right to return expired product for up to 12 months after the product’s expiration date (generally 18 to 36 months after the initial sale). Returned product is destroyed. Regulatory exclusivity for Adcirca expired in May 2018, and generic versions of Adcirca became available for purchase beginning in the third quarter of 2018. Due to the availability of the generic versions, we experienced a significant decline in Adcirca demand, resulting in inventory held by distributors and other downstream customers expiring unsold. Our allowance for product returns for Adcirca as of December 31, 2023 and 2022 is $1.5 million and $2.4 million, respectively. We record our allowance for product returns inother current andnon-current liabilities in our consolidated balance sheets. We developed our returns liability as of December 31, 2023 and 2022 based on historical return rates accumulated since the expiration of the regulatory exclusivity in 2018.

For Unituxin, we ship product with expiration dates that are generally nine to 14 months after the initial sale. Unituxin product returns for each of the years ended December 31, 2023 and 2022 were not material. For sales of our other commercial products, we do not offer our customers a general right of return.

Distributor fees. Distributor fees include distribution and other service fees paid to certain distributors. These fees are based on contractual amounts or rates applied to purchases of our product or units of service provided in a given period. Our liability for distributor fees is included inaccounts payable and accrued expenses in our consolidated balance sheets.

Trade Receivables

We invoice and receive payment from our customers after we recognize revenue, resulting in receivables from our customers that are presented asaccounts receivable in our consolidated balance sheets. Accounts receivable consist of short-term amounts due from our distributors (generally 30 to 90 days) and are stated at the amount we expect to collect. We establish an allowance for doubtful accounts, if deemed necessary, based on our assessment of the collectability of specific distributor accounts. We did not recognize any impairment losses for accounts receivable for each of the years ended December 31, 2023 and 2022. Changes in accounts receivable are primarily due to the timing and magnitude of orders of our products, the timing of when control of our products is transferred to our distributors, and the timing of cash collections.

Adcirca

Adcirca is manufactured for us by Lilly and distributed through its pharmaceutical wholesaler network on our behalf. Specifically, Lilly handles all of the administrative functions associated with the sale of Adcirca on our behalf, including the receipt and processing of customer purchase orders, shipment to customers, and invoicing and collection of customer payments. We recognize sales of Adcirca on a gross basis (net of reserves for gross-to-net deductions) based on our determination that we are acting as a principal due to our control of the product prior to its transfer to our customers. Our control is evidenced by our substantive ownership of product inventory, the fact that we bear all inventory risks, our primary responsibility for the acceptability of the product to our customers, and our ability to influence net product sales through our contracting decisions with commercial payers and participation in governmental-funded programs.

Research and development costs are expensed as incurred except for payments made in advance of services to be provided to us. Related expenses consist of internal labor and overhead, costs to acquire pharmaceutical products and product rights for development, materials used in clinical trials, amounts paid to third parties for services, and materials related to drug development and clinical trials.

As part of our business strategy, we may in-license the rights to develop and commercialize product candidates. For each in-license transaction, we evaluate whether we have acquired processes or activities along with inputs that would be sufficient to constitute a “business” as defined under GAAP. As defined under GAAP, a “business” consists of inputs and processes

applied to those inputs that have the ability to create outputs. Although businesses usually have outputs, outputs are not required for an integrated set of activities to qualify as a business. When we determine that we have not acquired sufficient processes or activities to constitute a business, any up-front payments, as well as pre-commercial milestone payments, are immediately expensed as acquired IPR&D in the period in which they are incurred. Milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.

We recognize the following costs, among others, as research and development expense in the period related costs are incurred:

•costs associated with in-house or contracted manufacturing activities prior to receiving FDA approval for such facilities, or for major unproven changes to our manufacturing processes;

•costs incurred in-licensing the rights to technologies in the research and development stage that have no alternative future use; and

•up-front payments made in connection with arrangements to obtain license and distribution rights to pharmaceutical product candidates prior to regulatory approval, absent any alternative future use.

Generally, the fair value of a stock option grant is measured on its grant date and related compensation expense is recognized ratably over the requisite service period. We issue new shares of our common stock upon the exercise of stock options. Certain executives have stock options that vest upon achievement of specific performance conditions. Share-based compensation expense for all stock option awards is recorded ratably over their vesting period, depending on the specific terms of the award and achievement of the specified performance conditions. Forfeitures are recognized as they occur. See Note 8—Share-Based Compensation.

We measure the fair value of restricted stock units using the stock price on the date of grant and related compensation expense is recognized ratably over the vesting period. Each restricted stock unit entitles the holder to receiveone share of our common stock upon vesting. We issue new shares of our common stock upon the vesting of restricted stock units. Certain executives have restricted stock units that vest upon achievement of specific performance conditions. Share-based compensation expense for restricted stock units is recorded ratably over their vesting period, depending on the specific terms of the award and achievement of any specified performance conditions.

Awards under our share tracking awards plan require cash settlement upon exercise and are classified as a liability. Accordingly, the fair value of related cash-settled awards is re-measured at each reporting date until awards are exercised or are otherwise no longer outstanding. Related changes in the fair value of outstanding cash-settled awards at each financial reporting date are recognized as adjustments to share-based compensation expense.

We measure the fair value of stock to be purchased through our employee stock purchase plan at the beginning of an offering period, or grant date, and recognize related compensation expense ratably over the requisite service period (the offering period). We issue new shares of our common stock upon the end of each offering period, or exercise date.

Income Taxes

We account for income taxes in accordance with the asset and liability method. Under this method, we determine deferred tax assets and liabilities based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect for years in which the temporary differences are expected to reverse. We apply a valuation allowance against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We recognize the benefit of an uncertain tax position that has been taken or that we expect to take on income tax returns only if such tax position is more likely than not to be sustained. We recognize the benefit in an amount equal to the largest amount that we determine has a greater than 50 percent likelihood of being realized upon settlement. The ultimate resolution of uncertain tax positions could result in amounts different from those recognized in our consolidated financial statements.

We have elected to account for the tax on Global Intangible Low-Taxed Income as a component of tax expense in the period in which the tax is incurred.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, adjusted for the potential dilutive effect of our outstanding stock options, outstanding RSUs, and shares issuable under the ESPP, as if the RSUs were vested, the stock options were exercised, and the shares expected to be issued under the ESPP at the end of the then-current offering period were issued. During periods in which we incur net losses, both basic and diluted loss per common share are calculated by dividing the net loss by the weighted average shares outstanding. Potentially dilutive securities are excluded from the calculation because their effect would be anti-dilutive.

Concentration of Credit Risk

Financial instruments that are exposed to credit risk consist of cash, money market funds, certificates of deposit, marketable debt securities, and trade receivables. We maintain our cash and money market funds with financial institutions that are federally insured. While balances deposited in these institutions often exceed Federal Deposit Insurance Corporation limits, we have not experienced any losses on related accounts to date. Furthermore, we limit our risk exposure by maintaining funds in financial institutions that we believe are creditworthy and financially sound. Our investments in marketable debt securities have been issued by corporate entities and government-sponsored enterprises with high credit ratings. We mitigate investment risks by investing in highly-rated securities with relatively short maturities that we believe do not subject us to undue investment or credit risk. In addition, our investment policy does not provide for investments in complex or structured financial instruments. At any given time, our trade receivables are concentrated among a small number of principal customers. If any of these financial institutions, issuers, or customers fail to perform their obligations under the terms of these financial instruments, our maximum exposure to potential losses would be equal to amounts reported in our consolidated balance sheets.

3. Recently Issued Accounting Standards

Accounting Standards Adopted

None.

Accounting Standards Not Yet Adopted

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. This ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment profit or loss used by the CODM when deciding how to allocate resources. This ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance requires retrospective application to all prior periods presented in the financial statements. We are currently assessing the timing and impact of adopting the updated provisions.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the required disclosures primarily related to the income tax rate reconciliation and income taxes paid. This ASU requires an entity’s income tax rate reconciliation to provide additional information for reconciling items meeting a quantitative threshold, and to disclose certain selected categories within the income tax rate reconciliation. This ASU also requires entities to disclose the amount of income taxes paid, disaggregated by federal, state and foreign taxes. This ASU is effective for annual periods beginning after December 15, 2024, though early adoption is permitted. We are currently evaluating the impact of this guidance on the consolidated financial statements.

4. Investments

Marketable Investments

Available-for-Sale Debt Securities

Available-for-sale debt securities are recorded at fair value, with the portion of the unrealized gains and losses that are not credit-related included as a component ofaccumulated other comprehensive loss in stockholders’ equity, until realized. Available-for-sale debt securities consisted of the following (in millions):

(1)Total excludes $21.0 million related to available-for-sale debt securities that matured on December 31, 2023, although cash proceeds were not received until January 2, 2024. We recorded the $21.0 million receivable within other current assets in our consolidated balance sheets as of December 31, 2023.

(2)Total excludes $70.0 million related to available-for-sale debt securities that matured on December 31, 2022, although cash proceeds were not received until January 3, 2023. We recorded the $70.0 million receivable within other current assets in our consolidated balance sheets as of December 31, 2022.

The following tables present gross unrealized losses and fair value for those available-for-sale debt securities that were in an unrealized loss position as of December 31, 2023 and December 31, 2022, aggregated by investment category and length of time that the individual securities have been in a continuous loss position (in millions):

As of December 31, 2023 and December 31, 2022, we held 385 and 411 available-for-sale debt securities, respectively, that were in an unrealized loss position. In assessing whether the decline in fair value as of December 31, 2023 of any of these securities resulted from a credit loss, we consulted with our investment managers and reviewed the credit ratings for each security. We believe that these unrealized losses are a direct result of the current interest rate environment and do not represent an indication of credit loss. We do not intend to sell the investments in unrealized loss positions prior to their maturity and it is not more likely than not that we will be required to sell these investments before recovery of their amortized cost basis. There wereno impairments due to credit loss on our available-for-sale debt securities during the years ended December 31, 2023 and 2022.

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.

Investments in Equity Securities with Readily Determinable Fair Values

We held investments in equity securities with readily determinable fair values of $14.9 million and $30.7 million as of December 31, 2023 and 2022, respectively, which are included incurrent marketable investments in our consolidated balance sheets. Changes in the fair value of publicly-traded equity securities are recorded in our consolidated statements of operations within other (expense) income, net. See Note 5—Fair Value Measurements.

During the years ended December 31, 2023, 2022, and 2021, we received zero, $3.8 million, and $111.5 million, respectively, in cash from the sale of investments in equity securities. During 2022, we sold a portion of our investment in a publicly-traded company and realized a gain of $0.9 million. During 2021, we sold our investments in two publicly-traded companies and realized a gain of $92.6 million. The gains were recorded within other (expense) income, net in our consolidated statements of operations for the years ended December 31, 2022 and 2021.

Investments in Privately-Held Companies

As of December 31, 2023 and 2022, we maintained non-controlling equity investments in privately-held companies of $28.5 million in the aggregate within other non-current assets in our consolidated balance sheets. We made a payment of $1.5 million for an investment in a privately-held company during the year ended December 31, 2022. No such payments were made during the years ended December 31, 2023 and 2021.

When an observable price transaction occurs that is identified as similar or identical to our investment, we perform a valuation analysis to assess the fair value of our investment using various inputs, such as the discount rate, expected time to a liquidation event, and price volatility of peer company stocks. We adjust the fair value of our investment based on the valuation analysis and recognize the gain or loss in the period in which the observable price change occurred. During the years ended December 31, 2023, 2022, and 2021, there wereno aggregate increases in the value of our investments.

During 2022, a privately-held company in which we held an investment was acquired. We received $8.6 million in cash as a result of the acquisition and realized a gain of $6.2 million. The gain was recorded within other (expense) income, net in our consolidated statements of operations.

During 2022, we identified an indicator of impairment forone of the private companies in which we hold an investment and recognized an impairment charge of $1.7 million. During 2021, we identified an indicator of impairment fortwo of the private companies in which we held investments and recognized aggregate impairment charges of $2.3 million. These impairment charges were recorded within impairments of investments in privately-held companies in our consolidated statements of operations.

For non-controlling equity investments in privately-held companies in which we held an investment as of December 31, 2023, cumulative impairments and downward fair value adjustments were $5.1 million and cumulative upward fair value adjustments were $1.9 million.

Variable Interest Entities (VIEs)

We evaluate our interests in VIEs and will consolidate any VIE in which we have a controlling financial interest and are deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both of the characteristics are met, we are considered to be the primary beneficiary and therefore will consolidate that VIE into our consolidated finan cial statements.

Unconsolidated VIE

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 reimburse all of the affiliate’s costs to manufacture and supply the Remunity Pump. We determined that the affiliate is a VIE as we are the

primary 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 December 31, 2023 and 2022, our consolidated balance sheets included $7.1 million and $9.2 million of assets, respectively, related to the supply agreement. As of December 31, 2023 and 2022, our consolidated balance sheets included a $2.7 million and $2.0 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 December 31, 2023 as a result of our involvement with the affiliate is $7.1 million, the amount of assets related to the supply agreement noted above.

Consolidation of VIEs

In August 2019 and July 2022, we entered into operating agreements and trust agreements related to the contribution of assets to newly created trusts of which we are the beneficiary. The trusts were created for legal and administrative purposes and are not expected to make future purchases. As the operator of the assets, we are required to incur all future expenses related to the operation and maintenance of the assets. Accordingly, the trusts are deemed VIEs because they rely on our capital to sustain future operating expenses. We are deemed the primary beneficiary of the VIEs because we are the sole provider of financial support and can unilaterally remove the trustee without cause. Accordingly, we consolidate the VIE’s balance sheet and results of operations.

As of December 31, 2023, our consolidated balance sheets included $67.2 million of assets due to the consolidation of these VIEs included within property, plant, and equipment, net. Upon consolidating the VIEs, which were not deemed a business as defined in ASC 805, Business Combinations, no gain or loss was recognized. These VIEs have no recourse against our assets and general credit, and the VIEs’ assets cannot be used to settle the VIEs’ liabilities. Our total risk of loss is the $67.2 million of assets we contributed, as noted above.

5. Fair Value Measurements

Assets and liabilities subject to fair value measurements are required to be disclosed within a fair value hierarchy. The fair value hierarchy ranks the quality and reliability of inputs used to determine fair value. Accordingly, assets and liabilities carried at, or permitted to be carried at, fair value are classified within the fair value hierarchy in one of the following categories based on the lowest level input that is significant in measuring fair value:

Level 1—Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets and liabilities.

Level 2—Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets and liabilities in inactive markets. Related inputs can also include those used in valuation or other pricing models such as interest rates and yield curves that can be corroborated by observable market data.

Level 3—Fair value is determined by using inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgment.

We account for certain assets and liabilities at fair value and classify these assets and liabilities within the fair value hierarchy. Ourother current assets andother current liabilities have fair values that approximate their carrying values. Assets and liabilities subject to fair value measurements are as follows (in millions):

(1)Included incash and cash equivalents in our consolidated balance sheets.

(2)Included incash and cash equivalents andcurrent andnon-current marketable investments in our consolidated balance sheets. See Note 4—Investments—Marketable Investments—Available-for-Sale Debt Securities for further information. The fair value of these securities is principally measured or corroborated by trade data for identical securities for 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 incurrent marketable investments in our consolidated balance sheets. The fair value of these securities is based on quoted market prices for identical instruments in active markets. During the years ended December 31, 2023 and 2022, we recognized $15.8 million and $35.9 million of net unrealized losses in the aggregate and net unrealized and realized losses in the aggregate, respectively, on these securities. We recorded these gains and losses in our consolidated statements of operations within other (expense) income, net. See Note 4—Investments—Marketable Investments—Investments in Equity Securities with Readily Determinable Fair Values.

(4)Included inother current assetsand other non-current assets in 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 the probability of completing certain milestones during a specified period of time. The fair value of our contingent consideration assets decreased by $0.1 million from December 31, 2022 to December 31, 2023. The loss was recorded within other (expense) income, net in our consolidated statements of operations.

(5)Included inother current liabilitiesand other non-current liabilities in 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 fair value of our contingent consideration liabilities increased by $1.4 million from December 31, 2022 to December 31, 2023. The loss was recorded within research and development in our consolidated statements of operations. The increase includes a $1.1 million contingent consideration liability related to the Miromatrix acquisition. See Note 16—Acquisitions—Business Combinationfor further information.

Fair Value of Financial Instruments

The carrying amounts ofcash and cash equivalents, accounts receivable, and 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. See Note 4—Investments. The carrying value of our debt is a reasonable estimate of the fair value of the outstanding debt based on the variable interest rate of the debt.

6. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following by major categories (in millions):

7. Debt

2022 Credit Agreement

In March 2022, we entered into a credit agreement (the 2022 Credit Agreement) with Wells Fargo Bank, National Association (Wells Fargo), as administrative agent and a swingline lender, and various other lender parties, which provides for: (1) an unsecured revolving credit facility of up to $1.2 billion; and (2) a second unsecured revolving credit facility of up to $800.0 million (which facilities may, at our request, be increased by up to $500.0 million in the aggregate subject to obtaining commitments from existing or new lenders for such increase and other conditions). In accordance with the terms of the 2022 Credit Agreement, in March 2023, we extended the maturity date of the 2022 Credit Agreement byone year, to March 2028. The lenders may extend the maturity date byone additional year to March 2029 if we request such an extension.

At our option, amounts borrowed under the 2022 Credit Agreement bear interest at either an adjusted Term Secured Overnight Finance Rate (Term SOFR) 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 2022 Credit Agreement). To date, we have elected to calculate interest on the outstanding balance at an adjusted Term SOFR plus an applicable margin.

On March 31, 2022, we borrowed $800.0 million under the 2022 Credit Agreement, and used the funds to repay outstanding indebtedness under the 2018 Credit Agreement as discussed below under 2018 Credit Agreement.

As of December 31, 2022, our outstanding aggregate principal balance under the 2022 Credit Agreement was $800.0 million. During the year ended December 31, 2023, we paid down $100.0 million of our balance under the 2022 Credit Agreement, which brought our aggregate outstanding balance down to $700.0 million as of December 31, 2023. Although our credit facility matures in 2028, we reclassified $400.0 million of the outstanding balance as a current liability on our consolidated balance sheet as of December 31, 2023, as we intend to repay this amount within one year.

The 2022 Credit Agreement contains customary events of default and customary affirmative and negative covenants. As of December 31, 2023, we were in compliance with these covenants.

The interest expense reported in our consolidated statements of operations for each of the years ended December 31, 2023, 2022, and 2021, related to our borrowings under the 2022 Credit Agreement and 2018 Credit Agreement.

2018 Credit Agreement

In June 2018, we entered into a credit agreement (the 2018 Credit Agreement) with 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.

On March 31, 2022, we terminated the 2018 Credit Agreement and entered into the 2022 Credit Agreement. We repaid in full all our obligations under the 2018 Credit Agreement in connection with the termination of the 2018 Credit Agreement and our entry into the 2022 Credit Agreement. There were no penalties associated with the early termination of the 2018 Credit Agreement.

8. Share-Based Compensation

As of December 31, 2023, we havetwo 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 12,500,000 shares of our common stock pursuant to awards granted under the 2015 Plan, which includes 1,000,000 shares added pursuant to an amendment and restatement of the 2015 Plan approved by our shareholders in June 2023. No further awards will be granted under the 1999 Plan. We also haveone 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 may grant RSUs to newly-hired employees under the 2019 Inducement Plan. See the sections entitled Stock Options and RSUs below for additional information regarding these equity-based awards.

In March 2023, we issued stock options and RSUs to certain executives with vesting conditions tied to the achievement of specified performance criteria through the end of 2025. Throughout the performance period, we reassess the estimated performance and update the number of performance-based awards that we believe will ultimately vest. Estimating future performance requires the use of judgment. Upon the conclusion of the performance period, the performance level achieved and the ultimate number of options or shares, as applicable, that vest are determined. Share-based compensation expense for these awards is recorded ratably over their vesting period, depending on the specific terms of the award and anticipated achievement of the specified performance criteria.

We previously issued awards under the United Therapeutics Corporation 2011 Share Tracking Awards Plan (the STAP). We refer to awards outstanding under the STAP as STAP awards. See the section entitled STAP Awards below for additional information regarding STAP awards. 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. See the section entitled ESPP below for additional information regarding the ESPP.

The following table reflects the components of share-based compensation expense recognized in our consolidated statements of operations (in millions):

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.

During the year ended December 31, 2023, in addition to time-based stock options, we granted 0.4 million performance-based stock options with a total grant date fair value of $35.6 million, calculated based on the assumed achievement of maximum performance of the relevant financial performance condition. During the year ended December 31, 2023, we recorded $8.3 million of share-based compensation expense related to performance-based stock options, calculated based on the assumed level of performance achievement.

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, 2023, 2022, and 2021, 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, see the STAP Awards 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 offive 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 iszero.

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, 2023, 2022, and 2021:

A summary of the activity and status of stock options under our equity incentive plans during the year ended December 31, 2023 is presented below:

The weighted average fair value of a stock option granted during each of the years in the three-year period ended December 31, 2023, was $85.39, $75.87, and $56.69, respectively. The total fair value of stock options that vested for each of the years in the three-year period ended December 31, 2023, was $54.9 million, $16.3 million, and $50.4 million, respectively.

Total share-based compensation expense related to stock options is recorded as follows (in millions):

As of December 31, 2023, unrecognized compensation cost relating to stock options was $25.4 million. Unvested outstanding stock options as of December 31, 2023 had a weighted average remaining vesting period of 2.1 years.

Stock option exercise data is summarized below (dollars in millions):

(1)We recognize these tax benefits in our consolidated statements of operations within income tax expense.

RSUs

We issue RSUs to employees and non-employee directors. Each RSU entitles the recipient toone 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 RSUs is recorded ratably over their vesting period.

During the year ended December 31, 2023, in addition to time-based RSUs, we granted 0.2 million performance-based RSUs with a total grant date fair value of $32.2 million, calculated based on the assumed achievement of maximum performance of the relevant financial and non-financial performance conditions. During the year ended December 31, 2023, we recorded $4.7 million of share-based compensation expense related to performance-based RSUs, calculated based on the assumed levels of performance achievement.

A summary of the activity with respect to, and status of, RSUs during the year ended December 31, 2023 is presented below:

Total share-based compensation expense related to RSUs is recorded as follows (in millions):

As of December 31, 2023, unrecognized compensation cost related to the grant of RSUs was $133.2 million. Unvested outstanding RSUs as of December 31, 2023 had a weighted average remaining vesting period of 3.0 years.

STAP Awards

STAP awards convey the right to receive in cash an amount equal to the appreciation of our common stock, which is measured as the increase in the closing price of our common stock between the dates of grant and exercise. STAP awards expire on thetenth anniversary of the grant date, and in most cases, they vest in equal increments on each anniversary of the grant date over afour-year period. We discontinued the issuance of STAP awards in June 2015.

The aggregate liability balance associated with outstanding STAP awards was $35.4 million and $80.8 million as of December 31, 2023 and 2022, 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. See 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 full weighted average 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:

The closing price of our common stock was $219.89, $278.09, and $216.08 on December 31, 2023, 2022, and 2021, respectively.

A summary of the activity and status of STAP awards during the year ended December 31, 2023 is presented below:

Share-based compensation (benefit) expense recognized in connection with STAP awards is as follows (in millions):

Cash paid to settle STAP awards exercised during the years ended December 31, 2023, 2022, and 2021 was $14.7 million, $68.2 million, and $81.1 million, respectively.

ESPP

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 consecutivesix-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.

9. Stockholders’ Equity

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period, adjusted for the potential dilutive effect of our outstanding stock options, outstanding RSUs, and shares issuable under the ESPP, as if the RSUs were vested, the stock options were exercised, and the shares expected to be issued under the ESPP at the end of the current offering period were issued.

The components of basic and diluted earnings per common share comprised the following (in millions, except per share amounts):

(1)Calculated using the treasury stock method.

(2)The common shares underlying certain stock options and RSUs have been excluded from the computation of diluted earnings per share because their impact would be anti-dilutive.

Accumulated Other Comprehensive Loss

The following table includes changes in accumulated other comprehensive loss by component, net of tax (in millions):

(1)See Note 11—Employee Benefit Plans—Supplemental Executive Retirement Plan, which identifies the captions within our consolidated statements of operations where reclassification adjustments were recognized and their associated tax impact.

10. Income Taxes

Components of income tax expense consist of the following (in millions):

Presented below is a reconciliation of income tax expense computed at the statutory federal tax rate of 21 percent in 2023, 2022, and 2021 to income tax expense as reported (in millions):

Components of the net deferred tax assets are as follows (in millions):

As of December 31, 2023, we had gross federal, foreign, and state net operating loss carryforwards, including those obtained through acquisitions, of $60.3 million, $6.7 million, and $130.5 million, respectively, which either expire at various dates beginning in 2025 or have no expiration date. As of December 31, 2023, we had federal and state research credit carryforwards, including those obtained through acquisitions, of $6.0 million and $4.3 million, respectively, which expire at various dates beginning in 2028. We expect that certain of these carryforwards will expire unused, so we have established valuation allowances for that portion of the related deferred tax assets.

The Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the period incurred beginning in 2022 and requires amortization over five or fifteen years. This change increased our cash paid for income taxes for 2023 and our deferred tax assets as of December 31, 2023.

We are subject to federal and state taxation in the United States and various foreign jurisdictions. We are no longer subject to income tax examinations by the Internal Revenue Service and all other major jurisdictions for tax years prior to 2014.

As of December 31, 2023 and 2022, we had $24.0 million and $15.1 million of unrecognized tax benefits, excluding interest and penalties, that would impact our effective tax rate if recognized. The total amount of unrecognized tax benefits relating to our tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. Given the uncertainty of these future events, it is reasonably possible that the balance of unrecognized tax benefits could change significantly over the next 12 months. However, due to the number of years remaining that are subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.

The following table represents a reconciliation of the total unrecognized tax benefit liability, excluding interest and penalties, for the years ended December 31, 2023, 2022, and 2021 (in millions):

We record interest and penalties related to uncertain tax positions as a component of income tax expense. As of December 31, 2023 and 2022, our liability for unrecognized tax benefits included approximately $1.6 million and $0.7 million, respectively, for the accrual of interest and penalties. As of December 31, 2023, 2022, and 2021, we recorded an approximately $0.9 million expense, $0.4 million expense, and $0.1 million benefit, respectively, for the accrual of interest and penalties in our consolidated statement of operations.

11. Employee Benefit Plans

Supplemental Executive Retirement Plan

We maintain the United Therapeutics Corporation Supplemental Executive Retirement Plan (SERP) to provide retirement benefits to certain senior members of our management team.

Participants who retire at age 60 or older are eligible to receive either monthly payments or a lump sum payment based on an average of their total gross base salary over the last 36 months of active employment, subject to certain adjustments. Related benefit payments commence on the first day of thesixth month after retirement. Participants who elect to receive monthly payments will continue to receive payments through the remainder of their life. Alternatively, participants who elect to receive a lump sum distribution will receive a payment equal to the present value of the estimated monthly payments that would have been received upon retirement. As of December 31, 2023 and 2022, all SERP participants had elected to receive a lump sum distribution. Participants who terminate employment for any reason other than death, disability, or change in control prior to age 60 will not be entitled to receive any benefits under the SERP.

Because we do not fund the SERP, we recognize a liability equal to the projected benefit obligation as measured at the end of each fiscal year.

A reconciliation of the beginning and ending balances of the projected benefit obligation is presented below (in millions):

(1)This amount represents the benefit obligation due to participants who are eligible to retire and whose benefit payments could commence withinone year of the respective balance sheet date.

The following weighted average assumptions were used to measure the SERP obligation:

The components of net periodic pension cost recognized in our consolidated statements of operations consisted of the following (in millions):

The service cost component is reported within operating expenses and the other components are reported inother (expense) income, net in our consolidated statements of operations.

Amounts related to the SERP that have been recognized in other comprehensive income (loss) are as follows (in millions):

The table below presents amounts related to the SERP included in accumulated other comprehensive loss that have not yet been recognized as a component of net periodic pension cost in our consolidated statements of operations (in millions):

The accumulated benefit obligation, a measure that does not consider future increases in participants’ salaries, was $44.0 million and $47.0 million as of December 31, 2023 and 2022, respectively.

Future estimated benefit payments, based on current assumptions, including election of lump-sum distributions and expected future service, are as follows (in millions):

Employee Retirement Plan

We maintain a Section 401(k) Salary Reduction Plan which is open to all eligible full-time employees. Under the 401(k) Plan, eligible employees can make pre-tax or after-tax contributions up to statutory limits. Currently, we make discretionary matching contributions to the 401(k) Plan equal to 40 percent of a participant’s elected salary deferral. Matching contributions vest immediately for participants who have been employed forthree-years; otherwise, matching contributions vest annually, in one-third increments over athree-year period until thethree-year employment requirement has been met.

12. Commitments and Contingencies

Leases

We lease facilities and equipment under operating lease arrangements that have terms expiring at various dates through 2043. Certain lease arrangements include renewal options and escalation clauses. In addition, various lease agreements to which we are party require that we comply with certain customary covenants throughout the term of these leases. If we are unable to comply with these covenants and cannot reach a satisfactory resolution in the event of noncompliance, these agreements could terminate.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2023, are as follows (in millions):

Total operating lease expense was $5.7 million, $4.8 million, and $3.6 million for the years ended December 31, 2023, 2022, and 2021, respectively. The amounts recorded in operating lease expense include short-term leases, which are immaterial.

In August 2021, we entered into a commercial supply agreement (Supply Agreement) with MannKind Corporation (MannKind), which was later amended. Pursuant to the Supply Agreement, MannKind is responsible for manufacturing and supplying Tyvaso DPI to us on a cost-plus basis. Unless earlier terminated, the initial term of the Supply Agreement continues until December 31, 2031 and will thereafter be renewed automatically for additional, successivetwo-year terms unless either party provides notice of non-renewal. We determined that the Supply Agreement contains certain lease components and have elected the expedient to combine lease and non-lease components as a single lease component. All payment obligations under the Supply Agreement are variable in nature and we incurred costs of $130.4 million and $51.2 million during the years ended December 31, 2023 and 2022, respectively.

In September 2022, we entered into an agreement (Lease Agreement) to lease the entirety of a building. The Lease Agreement modified and replaced several of our pre-existing leases of portions of the same building, and has an initial term expiring in July 2027, with five renewal options offive years each, exercisable in our sole discretion. As a result, we remeasured the lease liability at our incremental borrowing rate, using a lease term that assumed we exerciseone renewal option, due to our financing of significant leasehold improvements necessary for the research and development activities being performed at this location. Upon remeasurement, we determined that the lease remains an operating lease. As of December 31, 2023, our consolidated balance sheets included a right-of-use asset of $11.0 million and lease liability for the building of $11.4 million. We incurred leasehold improvements of $32.3 million as of December 31, 2023.

Milestone Payments and Royalty Obligations

We are party to certain license agreements pursuant to which we have in-licensed or acquired intellectual property rights covering our commercial and/or development-stage products. Generally, these agreements require that we make milestone payments in cash upon the achievement of certain product development and commercialization goals and payments of royalties upon commercial sales. In addition, we sometimes acquire companies under terms that include earn-out consideration tied to future activities. The following table outlines our financial obligations under certain of these agreements:

13. Segment Information

We operate asone operating segment with a focus on the development and commercialization of products to address the unmet needs of patients with chronic and life-threatening conditions. Our Chief Executive Officer, as our CODM, manages and allocates resources to the operations of our company on a consolidated basis. This enables our Chief Executive Officer to assess our overall level of available resources and determine how best to deploy these resources across functions, therapeutic areas, and research and development projects in line with our long-term company-wide strategic goals.

Total revenues, cost of sales, and gross profit (loss) for each of our commercial products and other sources of revenues were as follows (in millions):

(1)Total revenues and cost of sales include both the drug product and the respective inhalation device.

(2)Total revenues and cost of sales include sales of infusion devices including the Remunity Pump.

Geographic revenues are determined based on the country in which our customers (distributors) are located. Total revenues from external customers in the United States and rest-of-world (ROW) for each of our commercial products were as follows (in millions):

We recorded revenue from three distributors in the United States that exceeded ten percent of total revenues. Revenue from these three distributors as a percentage of total revenues is as follows:

Long-lived assets, including PP&E and right-of-use assets, located by geographic area are as follows (in millions):

14. Litigation

Sandoz Litigation

In April 2019, Sandoz Inc. (Sandoz) and its marketing partner RareGen, LLC (now known as Liquidia PAH, LLC, a subsidiary of Liquidia Corporation) (RareGen), filed a complaint in the U.S. District Court for the District of New Jersey against us and Smiths Medical ASD, Inc. (Smiths Medical), alleging that we and Smiths Medical engaged in anticompetitive conduct in connection with plaintiffs’ efforts to launch their generic version of Remodulin. In particular, the complaint alleged that we and Smiths Medical unlawfully impeded competition by entering into an agreement to produce CADD-MS®3 (MS-3) cartridges specifically for the administration of subcutaneous Remodulin for our patients, without making these cartridges available for the administration of Sandoz’s generic treprostinil injection. In March 2020, the plaintiffs filed an amended complaint to add a count alleging that we breached our earlier patent settlement agreement with Sandoz by refusing to grant Sandoz access to cartridges purchased for our patients.

Smiths Medical was dismissed from the case in November 2020, based on a settlement resolving the disputes between the plaintiffs and Smiths Medical. As part of this settlement, Smiths Medical paid the plaintiffs $4.25 million, disclosed and made available to the plaintiffs certain specifications and other information related to the MS-3 cartridges, and granted to the plaintiffs a non-exclusive, royalty-free license in the United States to Smiths Medical’s patents and copyrights associated with the MS-3 cartridges and certain other information related to the MS-3 pumps and cartridges.

In March 2022, the court granted our motion for summary judgment with respect to all claims brought by the plaintiffs except the breach of contract claim. As a result, all antitrust claims, all claims under state competition laws, and the common law tortious interference claim have been resolved in our favor. These were the only claims in the case that gave rise to any potential for trebling of damages, punitive damages, and/or the award of attorneys’ fees. The court also denied plaintiffs’ request for injunctive relief.

The court granted Sandoz’s motion for summary judgment with respect to Sandoz’s breach of contract claim. The issue of what, if any, damages Sandoz is entitled to based on the contract claim will proceed to trial. Trial is scheduled to commence on April 29, 2024, and will be limited to determining the amount of damages under the breach of contract claim. RareGen has no claim for breach of contract and, as a result, has no remaining claims in the litigation. The parties will have the right to appeal the summary judgment decisions and the result of the trial, upon entry of final judgment following the trial.

We intend to continue to vigorously defend ourselves against the claims made in this litigation. Among other things, we believe that plaintiffs, who were on notice that Smiths Medical would discontinue the MS-3 system, failed to fulfill their duty to properly mitigate their exposure as a result of such discontinuation, and any damages they incurred are the result of their own failure to properly plan their own product launch. However, due to the uncertainty inherent in any litigation, we cannot guarantee that an outcome adverse to us will not result. Any litigation of this nature could involve substantial cost, and an adverse outcome could result in substantial monetary damages. We currently are not able to reasonably estimate a range of potential losses due to the number of variables that may affect the outcome of the damages trial and any potential appeals, including potential damages amounts sought, the strength of our defenses, the variety of potential legal and factual determinations yet to be made by the court, the rulings that may be subject to appeal, and the inherent unpredictability of any outcome associated with these issues.

Litigation with Liquidia Technologies, Inc.

In March 2020, Liquidia Technologies, Inc. (Liquidia) filedtwo petitions forinter partes review (IPR) with the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO). In its petitions, Liquidia sought to invalidate U.S. Patent Nos. 9,604,901 (the’901 patent) and 9,593,066 (the’066 patent), both of which relate to a method of making treprostinil, the active pharmaceutical ingredient in Tyvaso DPI, nebulized Tyvaso, Remodulin, and Orenitram. These patents were issued in March 2017 and are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations publication, also known as the Orange Book, for Tyvaso DPI, nebulized Tyvaso, Remodulin, and Orenitram. In October 2020, the PTAB declined to institute IPR proceedings on the ’066 patent because Liquidia failed to establish a reasonable likelihood of prevailing on any claim relating to the ’066 patent. The PTAB instituted IPR proceedings on the ’901 patent in October 2020 and issued a final written decision in October 2021. The final written decision found that Liquidia had proven the invalidity ofseven of the claims of the ‘901 patent but failed to prove the invalidity oftwo other claims. The parties have each appealed portions of the final written decision adverse to them, and those appeals are pending. No cancellation of claims takes effect until resolution of any appeals.

In January 2020, Liquidia submitted an NDA to the FDA for approval of Yutrepia™, a dry powder inhalation formulation of treprostinil, to treat PAH. This NDA was submitted under the 505(b)(2) regulatory pathway with nebulized Tyvaso as the reference listed drug. In November 2021, the FDA granted tentative approval of Liquidia’s NDA.

In April 2020, we received a Paragraph IV Certification Notice Letter (Notice Letter) from Liquidia, stating that it intends to market Yutrepia before the expiration of all patents listed in the Orange Book for nebulized Tyvaso. The Notice Letter stated that Liquidia’s NDA for Yutrepia contains a Paragraph IV certification alleging that these patents are not valid, not enforceable, and/or will not be infringed by the commercial manufacture, use, or sale of Yutrepia.

In June 2020, we filed a lawsuit in the U.S. District Court for the District of Delaware against Liquidia for infringement of the ’901 patent and the ’066 patent, both of which expire in December 2028. We filed our lawsuit within 45 days of receipt of notice from Liquidia of its NDA filing. As a result, under the Hatch-Waxman Act, the FDA was precluded by regulation from approving Liquidia’s NDA for up to 30 months or until the resolution of the litigation, whichever occurs first. In July 2020, Liquidia filed an answer to our complaint that included counterclaims alleging, among other things, that the patents at issue in the litigation are not valid and will not be infringed by the commercial manufacture, use, or sale of Yutrepia.

In July 2020, the USPTO issued a new patent to us related to Tyvaso. The new patent, U.S. Patent No. 10,716,793 (the’793 patent), expires in May 2027, and is listed in the Orange Book for Tyvaso DPI and nebulized Tyvaso. In July 2020, we filed an amended complaint against Liquidia to include a claim for infringement of the ’793 patent. The ’793 patent relates to a method of administering treprostinil via inhalation and includes claims covering the dosing regimen used to administer Tyvaso DPI and nebulized Tyvaso. In December 2021, we filed a stipulation that the ’901 patent would not be infringed by Liquidia based on the court’s claim construction ruling.

Trial took place during March 2022, and the court issued its decision in August 2022. The court found that Liquidia’s product would infringe the ’793 patent and that Liquidia had not proved that any claim of that patent is invalid. The court also determined that Liquidia had proved certain claims of the ’066 patent were invalid and that we had not proved Liquidia’s infringement of another ’066 patent claim. Accordingly, the court issued a final judgment that bars the FDA from approving Yutrepia until expiration of the ’793 patent in May 2027. The parties appealed portions of the decision adverse to each of them, and on July 24, 2023, the appellate court issued its decision affirming the district court decision in its entirety. The court subsequently denied the parties’ requests for rehearing, so the appellate court decision is now final. On January 23, 2024, Liquidia filed a petition for writ of certiorari seeking review by the U.S. Supreme Court, and that petition was denied on

February 20, 2024. Meanwhile, Liquidia filed a motion with the district court seeking to modify the portion of the judgment that bars the FDA from finally approving Yutrepia until expiration of the ’793 patent, and we opposed that motion. The court has not yet ruled on that motion.

In January 2021, Liquidia filed another petition for IPR with the PTAB. In its petition, Liquidia sought to invalidate the ’793 patent. In July 2022, the PTAB issued a final written decision finding all claims of the ’793 patent to be unpatentable. We filed a request for rehearing and for precedential opinion panel review. On October 26, 2022, the PTAB denied our request for precedential opinion panel review, but “determine[d] that the Board’s Final Written Decision did not address adequately whether the [references relied upon as the basis for canceling claims] qualify as prior art.” Thus, the PTAB directed the original panel “in its consideration on rehearing, to clearly identify whether the … references qualify as prior art.” The original panel issued its decision on our request for rehearing in February 2023. The original panel agreed that it had overlooked our arguments and that its rationale for determining that certain references are prior art was erroneous. Nonetheless, the original panel determined the references qualify as prior art under a new rationale. Thus, the original panel maintained that the claims of this patent are not valid. We appealed this decision, and the appellate court affirmed the PTAB decision. On January 19, 2024, we filed a petition for rehearing, and that petition is pending. All claims of this patent remain valid until any IPR appeals are exhausted.

Liquidia could obtain final FDA approval for its proposed product prior to May 2027 in two circumstances: (1) Liquidia could prevail on appeal, either from the district court judgment or IPRs, such that it is not found to infringe any valid claims of our patents; or (2) the district court could modify the order barring FDA approval based on the appellate decision with respect to the ‘793 patent IPR.

On September 5, 2023, we filed a lawsuit in the U.S. District Court for the District of Delaware against Liquidia for infringement of the ’793 patent based on Liquidia’s efforts to obtain FDA approval for a PH-ILD indication for Yutrepia. On November 30, 2023, we filed an amended complaint to assert a new patent: U.S. Patent No. 11,826,327 (the’327 patent). The claims of the ’327 patent generally cover improving exercise capacity in patients suffering from PH-ILD by inhaling treprostinil at specific dosages. On January 22, 2024, we filed a stipulation withdrawing the ’793 patent from the case. As a result, the only patent at issue in the case is the ’327 patent. Liquidia answered the complaint asserting a variety of defenses. The case is pending, and the court has not yet set a schedule for the case. As noted below under FDA Litigation, we believe this lawsuit could entitle us to a 30-month stay, preventing the FDA from approving Yutrepia for the treatment of PH-ILD until the resolution of this lawsuit, or the expiration of the 30-month period following receipt of a Paragraph IV notice, whichever occurs first.

In June 2021, we filed a motion in the patent case in the U.S. District Court for the District of Delaware to file an amended complaint adding trade secret misappropriation claims against Liquidia and a former Liquidia employee, Dr. Robert Roscigno. The court denied the motion based on a finding that adding the additional claims would impact the case schedule. Thus, we filed those claims as a separate case against Liquidia and Robert Roscigno in North Carolina state court. Discovery is underway in that case. We filed a motion for leave to file an amended complaint against Liquidia and Dr. Roscigno to make additional claims based on information we learned during discovery and request additional relief. In July 2023, the court granted in part, and denied in part, our motion to amend. Fact discovery is complete, and expert discovery is underway.

We plan to vigorously enforce our intellectual property rights related to Tyvaso DPI and nebulized Tyvaso.

FDA Litigation Regarding Yutrepia

On February 20, 2024, we filed an action against the FDA in the U.S. District Court for the District of Columbia regarding the FDA’s review of Liquidia’s efforts to obtain a PH-ILD indication for its Yutrepia product. Liquidia submitted an amendment to its pending Yutrepia NDA to pursue approval for a PH-ILD indication. The suit alleges that FDA rules, precedents, and procedures require that such a new indication be pursued in a new NDA rather than as an amendment to a pending NDA. Thus, we’ve asked FDA to require Liquidia to submit a new NDA if it wishes to further pursue approval for a PH-ILD indication.

If Liquidia is required to submit a new NDA, we believe that we would be entitled to a 30-month stay of any PH-ILD approval based on our asserting the ’327 patent against Liquidia as discussed under Litigation with Liquidia Technologies, Inc. That is, Liquidia could not obtain final approval for a PH-ILD indication until the earlier of the expiration of the 30-month stay or a district court decision in Liquidia’s favor.

MSP Recovery Litigation

In July 2020, MSP Recovery Claims, Series LLC; MSPA Claims 1, LLC; and Series PMPI, a designated series of MAO-MSO Recovery II, LLC filed a “Class Action Complaint” against Caring Voices Coalition, Inc. (CVC) and us in the U.S. District Court for the District of Massachusetts. The complaint alleged that we violated the federal Racketeer Influenced and Corrupt Organizations (RICO) act and various state laws by coordinating with CVC when making donations to a PAH fund so that those donations would go towards copayment obligations for Medicare patients taking drugs manufactured and marketed by us. Plaintiffs claim to have received assignments from various Medicare Advantage health plans and other insurance entities that allow them to bring this lawsuit on behalf of those entities to recover allegedly inflated amounts they paid for our drugs. In April 2021, the court granted our motion to transfer the case to the U.S. District Court for the Southern District of Florida.

In October 2021, we filed a motion for judgment on the pleadings, seeking to dismiss the plaintiffs’ claims in this litigation. On that same day, plaintiffs filed an amended complaint that includes state antitrust claims based on alleged facts similar to those raised by Sandoz and RareGen in the matter described above. The amended complaint added MSP Recovery Claims Series 44, LLC as a plaintiff and Smiths Medical and CVC as defendants. As a result of the amended complaint, the court ruled that our motion for judgment on the pleadings was moot. In December 2021, we filed a motion to dismiss all of the plaintiffs’ claims in the amended complaint, including the new antitrust claims. Smiths Medical also filed a motion to dismiss the plaintiffs’ claims against Smiths Medical. In September 2022, the court dismissed all of the plaintiffs’ claims against us and Smiths Medical without prejudice.

In October 2022, the plaintiffs filed a motion seeking clarification or reconsideration of the court’s order dismissing the complaint without prejudice and argued that the court should allow the plaintiffs an opportunity to amend. That same day, the plaintiffs filed a motion for leave to amend the complaint and attached a proposed second amended complaint. In addition to the claims previously asserted, the proposed second amended complaint adds federal antitrust claims and consumer protection claims under other states’ laws. The second amended complaint also names Accredo Health Group, CVS Health Corporation, Express Scripts, Inc., and Express Scripts Holding Company (collectively, the Specialty Pharmacies), and the Adira Foundation as additional defendants. In October 2022, the court granted plaintiffs’ motion for leave to amend, and denied as moot plaintiffs’ motion seeking clarification. On that same day, plaintiffs filed the second amended complaint. We filed a motion to reconsider the court’s decision to allow plaintiffs to amend their complaint, and that motion was denied. In February 2023, Plaintiffs moved to supplement their second amended complaint, but that motion was denied in March 2023. Plaintiffs have lodged an objection with the court regarding that ruling, and that objection is pending. In March 2023, we filed our motion to dismiss the second amended complaint. That motion was fully briefed as of June 30, 2023. The Specialty Pharmacies filed their own motion to dismiss, as did Smiths Medical. Allthree motions to dismiss are pending with the court.

We intend to vigorously defend ourselves against the claims made in this lawsuit.

Litigation with Humana and United Healthcare

Humana Inc. and United Healthcare Services, Inc. filed separate lawsuits against us in the U.S. District Court for the District of Maryland in December 2022 and November 2022, respectively. Each of these lawsuits includes allegations similar to those in the MSP Recovery matter discussed above concerning our charitable contributions to CVC. In particular, these lawsuits allege that our donations to CVC violated RICO and various state laws. We filed motions to dismiss both of these lawsuits in March 2023. Our motions are fully briefed and are pending with the court.

We intend to vigorously defend ourselves against the claims made in these lawsuits.

340B Program Litigation

We participate in the Public Health Service’s 340B drug pricing program (the 340B program), through which we have agreed to sell our products to covered entities at no more than a statutory ceiling price, including through pharmacies that have contracts with such covered entities (340B contract pharmacies). Increasing use of 340B contract pharmacies, coupled with a lack of oversight and transparency, has resulted in increased risks of 340B statutory violations related to the diversion of 340B-purchased drugs to individuals who are not patients of the 340B covered entity, and to prohibited “duplicate discounts” when a Medicaid rebate is triggered on 340B-purchased drugs. In November 2020, we notified the U.S. Health Resources and Services Administration (HRSA) that we would begin implementing narrowly-tailored 340B contract pharmacy policies with the goal of stemming abuses of the 340B program without upsetting the status quo or creating hardship for covered entities or their patients. At around the same time, a number of other manufacturers also announced their own contract pharmacy policies.

In December 2020, the U.S. Department of Health and Human Services (HHS) General Counsel issued a non-binding Advisory Opinion (the Advisory Opinion) concluding that, among other things, pharmaceutical manufacturers are obligated to sell their drugs at the 340B discounted price to an unlimited number of 340B contract pharmacies. In May 2021, HRSA sent a letter to us stating that our 340B contract pharmacy policies violated the 340B statute. HRSA also sent materially similar letters to other pharmaceutical manufacturers. We responded to that letter by clarifying our policies and requesting additional information from HRSA. To date, HRSA has not responded.

The federal government’s pronouncements regarding the use of 340B contract pharmacies have triggered a variety of litigation. In one of those cases, the court concluded that the Advisory Opinion was “legally flawed,” and in response HHS withdrew the Advisory Opinion. Notwithstanding the withdrawal of the Advisory Opinion, HRSA has made clear that it is not withdrawing its May 2021 letter to us and the threat of enforcement action.

In June 2021, we commenced litigation against HRSA and HHS in the U.S. District Court for the District of Columbia seeking to vindicate the lawfulness of our 340B program contract pharmacy policies. Despite the litigation, in September 2021, HRSA sent to us, along with the other manufacturers challenging HRSA’s 340B interpretation, letters stating that HRSA is referring “this issue to the HHS Office of the Inspector General (OIG)” for potential enforcement action. We have not received any communication from the OIG regarding our 340B contract pharmacy policy. Meanwhile, the parties submitted and fully

briefed cross-motions for summary judgment, and the court heard oral argument on those motions, and also similar motions in a related case involving Novartis, in October 2021. In November 2021, the court granted our motion for summary judgment in part, and issued a decision holding that the HRSA letters threatening enforcement action “contain legal reasoning that rests upon an erroneous reading of Section 340B.” The court explained that “[t]he statute’s plain language, purpose, and structure do notprohibit drug manufacturers from attaching any conditions to the sales of covered drugs through contract pharmacies. Nor do they permit all conditions. Accordingly, any future enforcement action must rest on a new statutory provision, a new legislative rule, or a well-developed legal theory that Section 340B precludes the specific conditions at issue here.”

HRSA and HSS appealed to the U.S. Court of Appeals for the District of Columbia Circuit in December 2021. Oral argument took place in October 2022, and the court’s decision is pending.

Litigation involving other manufacturers is also moving forward in parallel with our case, and some of the decisions issued in those cases have reached different conclusions regarding HRSA’s and HHS’s interpretation of the 340B statute than our case.

We intend to vigorously defend our 340B program contract pharmacy policies.

15. Priority Review Voucher

In December 2020, we entered into an agreement to acquire a rare pediatric disease priority review voucher for $105.0 million. In January 2021, we closed the transaction and expensed the $105.0 million within research and developmentin our consolidated statements of operations for the year ended December 31, 2021. We redeemed the voucher in connection with our submission of the NDA for Tyvaso DPI in April 2021.

16. Acquisitions

Asset Acquisition

In October 2023, we acquired all of the outstanding equity of IVIVA, an early-stage company focused on developing manufactured kidney products, in exchange for an upfront cash payment of approximately $50.0 million. In addition to the upfront payment, the transaction consideration includes potential earnout consideration, payable in cash, structured as atwo percent royalty on net sales of IVIVA’s kidney products, subject to certain reductions. The transaction was accounted for as an asset acquisition as substantially all of the fair value was concentrated in a single IPR&D asset we acquired. We allocated $46.0 million of the purchase price to the IPR&D and recorded the expense within research and development in our consolidated statements of operations for the year ended December 31, 2023. For tax purposes, the purchase price allocated to the IPR&D is not deductible and was capitalized into the tax basis of the equity acquired. We also recorded an intangible asset of $1.3 million related to the asset acquisition and recorded the amount within goodwill and other intangible assets, net in our consolidated balance sheet as of December 31, 2023.

Business Combination

On October 29, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Miromatrix Medical Inc. (Miromatrix), a publicly traded company developing bioengineered kidney and liver products. On December 13, 2023, we completed the transactions contemplated by the Merger Agreement and Miromatrix became a wholly-owned subsidiary of United Therapeutics. Pursuant to the terms of the Merger Agreement, we paid former Miromatrix shareholders $3.25 per share in cash at closing, representing cash consideration paid to former Miromatrix shareholders of $89.1 million. Former Miromatrix shareholders also received one contractual contingent value right per share, representing the right to receive a contingent payment of $1.75 per share in cash (an aggregate of approximately $54.0 million) upon the first implantation of Miromatrix’s development-stage, fully-implantable kidney product known as mirokidney into a living human patient by the end of 2025 in a clinical trial meeting requirements set forth in the form of the Contingent Value Rights Agreement attached to the Merger Agreement (the Milestone). In addition to the cash consideration above, the aggregate purchase price included $1.1 million that we ascribed to the contingent value rights as of the closing date.

Purchase Price Allocation

The merger met the definition of a business combination in accordance with ASC 805, Business Combinations, and as such we applied the acquisition method to account for the transaction, which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the closing date. The aggregate purchase price was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values at the closing date using primarily Level 2 and Level 3 inputs. These Level 2 and Level 3 valuation inputs included an estimate of future cash flows and discount rates. Additionally, estimated fair values were based, in part, upon third-party valuations of certain assets, which included specifically-identified intangible assets.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the closing date) as additional information concerning final asset and liability valuations is obtained. The primary elements of this preliminary purchase price allocation that are not yet finalized relate to the forecast of future cash flows utilized in the valuation of the acquired IPR&D intangible asset and the contingent value rights, as well as our assessment of tax attributes. The following table summarizes the consideration transferred for the acquisition and the amounts of the assets acquired and liabilities assumed as of the closing date.

(1)The goodwill is not deductible for income tax purposes.

We determined the fair value of the IPR&D using the multi-period earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the required return on other assets to sustain those cash flows. The multi-period earnings method is a Level 3 fair value measurement. Significant assumptions inherent in determining fair value of the IPR&D included annual net cash flows over a period of time and a discount rate applied to those cash flows to reflect the overall risk of the asset.

We ascribed $1.1 million to the contingent value rights as of the closing date based on a probability weighted discounted cash flow model, utilizing probability adjusted expectations for achieving the Milestone. In making this determination, we considered expectations regarding the timing and probability of achieving the Milestone by the end of 2025.

Following the acquisition, the operating results of Miromatrix have been included in our consolidated financial statements. The acquisition did not have a material impact on our consolidated financial statements, and therefore, historical and pro forma disclosures have not been presented.

Costs incurred to complete the acquisition and integrate Miromatrix into our business were expensed as incurred and included within selling, general and administrative in our consolidated statements of operations. During the year ended December 31, 2023, we recognized $3.5 million of acquisition-related costs. These costs represented transaction costs, legal fees, and professional third-party service fees.

Schedule II—Valuation and Qualifying Accounts

Years Ended December 31, 2023, 2022, and 2021

(1)Other additions relate to valuation allowances on certain tax attributes obtained through acquisitions. Deductions relate to state net operating losses.

(2)Deductions relate primarily to changes in capital investments.