Share-Based Compensation

9 Months Ended

Sep. 30, 2025

Share-Based Payment Arrangement [Abstract]

As of September 30, 2025, we have one shareholder-approved equity incentive plan: the United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan (the 2015 Plan). The 2015 Plan provides for the issuance of up to 14,770,000 shares of our common stock pursuant to awards granted under the 2015 Plan, which includes 950,000 shares that were added pursuant to an amendment and restatement of the 2015 Plan approved by our shareholders in June 2025. We also have one equity incentive plan, the United Therapeutics Corporation 2019 Inducement Stock Incentive Plan (the 2019 Inducement Plan), that has not been approved by our shareholders, as permitted by the Nasdaq Stock Market rules. The 2019 Inducement Plan was approved by our Board of Directors in February 2019 and provides for the issuance of up to 99,000 shares of our common stock under awards granted to newly-hired employees. Currently, we grant equity-based awards to employees and members of our Board of Directors in the form of stock options and restricted stock units (RSUs) under the 2015 Plan, and we 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.

During the nine months ended September 30, 2025 and 2024, we issued stock options and RSUs to certain executives with vesting conditions tied to the achievement of specified performance criteria through the end of 2027 and 2026, respectively. Additionally, during the nine months ended September 30, 2025 we issued RSUs to certain other employees with vesting conditions tied to the achievement of specified performance criteria through the end of 2026 and 2028. 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 stock options and RSUs that may 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 discontinued the issuance of STAP awards in June 2015 and all remaining outstanding STAP awards were exercised during the first quarter of 2025. See the section entitled STAP Awards below for additional information regarding STAP awards.

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):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Stock options	$	11.3	$	8.0	$	30.9	$	21.8
RSUs	27.1		27.2		76.5		61.9
STAP awards	—		5.9		(0.8)		31.7
ESPP	0.7		0.6		2.1		1.6
Total share-based compensation expense before tax	$	39.1	$	41.7	$	108.7	$	117.0

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 nine months ended September 30, 2025 and 2024, in addition to time-based stock options, we granted 0.3 million and 0.5 million performance-based stock options with a total grant date fair value of $38.0 million and $50.2 million, respectively, in each case, calculated based on the assumed achievement of maximum performance of the relevant financial performance condition. During the three and nine months ended September 30, 2025 we recorded $10.3 million and $28.3 million of share-based compensation expense, respectively, related to performance-based stock options, calculated based on the assumed levels of performance achievement, as compared to $7.2 million and $19.1 million for the same periods in 2024.

The following weighted average assumptions were used in estimating the fair value of stock options granted to employees during the nine months ended September 30, 2025 and 2024:


	September 30, 2025		September 30, 2024
Expected term of awards (in years)	5.1		6.5
Expected volatility	32.1	%	31.6	%
Risk-free interest rate	4.1	%	4.3	%
Expected dividend yield	0.0	%	0.0	%

A summary of the activity and status of stock options under the 2015 Plan during the nine-month period ended September 30, 2025 is presented below:


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2025	5,571,545	$	148.62
Granted	377,716	307.19
Exercised	(570,521)	131.47
Forfeited	(150)	217.50
Outstanding as of September 30, 2025	5,378,590	$	161.57	3.2	$	1,385.7
Exercisable as of September 30, 2025	4,054,614	$	132.57	1.8	$	1,162.2
Unvested as of September 30, 2025	1,323,976	$	250.38	7.7	$	223.5

The weighted average fair value of a stock option granted during each of the nine-month periods ended September 30, 2025 and September 30, 2024 was $110.21 and $98.06, respectively. These stock options have an aggregate grant date fair value of $41.6 million and $54.1 million, respectively. The total grant date fair value of stock options that vested during the nine-month periods ended September 30, 2025 and September 30, 2024 was $3.4 million and $3.5 million, respectively.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Cost of sales	$	—	$	—	$	—	$	—
Research and development	0.1		0.1		0.3		0.3
Selling, general, and administrative	11.2		7.9		30.6		21.5
Share-based compensation expense before taxes	11.3		8.0		30.9		21.8
Related income tax benefit	(0.2)		(0.1)		(0.6)		(0.6)
Share-based compensation expense, net of taxes	$	11.1	$	7.9	$	30.3	$	21.2

As of September 30, 2025, unrecognized compensation cost related to stock options was $64.1 million. Unvested outstanding stock options as of September 30, 2025 had a weighted average remaining vesting period of 1.8 years.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Number of options exercised	300,521		255,583		570,521		980,999
Cash received	$	40.2	$	32.5	$	74.9	$	126.8
Total intrinsic value of options exercised	$	77.4	$	52.9	$	130.2	$	140.9

RSUs

Each RSU entitles the recipient to one share of our common stock upon vesting. We measure the fair value of RSUs using the stock price on the date of grant. Share-based compensation expense for RSUs is recorded ratably over their vesting period.

During the nine-month periods ended September 30, 2025 and 2024, in addition to time-based RSUs, we granted 0.1 million and 0.2 million performance-based RSUs to certain executives with a total grant date fair value of $38.0 million and $47.5 million, respectively, calculated based on the assumed achievement of maximum performance of the relevant financial and non-financial performance conditions. Additionally, during the nine months ended September 30, 2025, in addition to time-based RSUs, we granted 0.1 million performance-based RSUs to certain other employees with a total grant date fair value of $29.3 million, calculated based on the assumed achievement of maximum performance of the relevant financial and non-financial performance conditions. During the three and nine months ended September 30, 2025, we recorded $11.2 million and $29.3 million of share-based compensation expense, respectively, related to performance-based RSUs, calculated based on the assumed levels of performance achievement as compared to $12.7 million and $19.9 million for the same periods in 2024.

A summary of the activity with respect to, and status of, RSUs during the nine-month period ended September 30, 2025 is presented below:


	Number of RSUs	Weighted Average Grant Date Fair Value
Unvested as of January 1, 2025	1,219,654	$	225.40
Granted	380,678	326.43
Vested	(156,870)	220.18
Forfeited	(22,289)	251.62
Unvested as of September 30, 2025	1,421,173	$	252.63

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Cost of sales	$	0.9	$	1.1	$	3.0	$	3.1
Research and development	8.0		6.1		22.3		17.5
Selling, general, and administrative	18.2		20.0		51.2		41.3
Share-based compensation expense before taxes	27.1		27.2		76.5		61.9
Related income tax benefit	(4.2)		(3.4)		(12.3)		(10.2)
Share-based compensation expense, net of taxes	$	22.9	$	23.8	$	64.2	$	51.7

As of September 30, 2025, unrecognized compensation cost related to the grant of RSUs was $187.3 million. Unvested outstanding RSUs as of September 30, 2025 had a weighted average remaining vesting period of 2.2 years.

STAP Awards

STAP awards conveyed the right to receive in cash an amount equal to the appreciation of our common stock, which was measured as the increase in the closing price of our common stock between the dates of grant and exercise. STAP awards expired on the tenth anniversary of the grant date, and in most cases, they vested in equal increments on each anniversary of the grant date over a four-year period. We discontinued the issuance of STAP awards in June 2015 and all remaining outstanding STAP awards were exercised during the first quarter of 2025.

The aggregate liability balance associated with outstanding STAP awards was zero and $11.0 million as of September 30, 2025 and December 31, 2024, respectively.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Cost of sales	$	—	$	0.2	$	(0.1)	$	1.2
Research and development	—		0.8		(0.2)		3.8
Selling, general, and administrative	—		4.9		(0.5)		26.7
Share-based compensation expense (benefit) before taxes	—		5.9		(0.8)		31.7
Related income tax (benefit) expense	—		(0.5)		0.2		(4.2)
Share-based compensation expense (benefit), net of taxes	$	—	$	5.4	$	(0.6)	$	27.5

Cash paid to settle STAP awards exercised during the nine-month periods ended September 30, 2025 and September 30, 2024 was $10.2 million and $37.7 million, respectively.

ESPP

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. 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 expires in June 2032 and limits the aggregate number of shares that can be issued under the ESPP to 3.0 million.

UNITED THERAPEUTICS Corp 10-Q