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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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the Securities Exchange Act of 1934 (Amendment No.      )

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United Therapeutics Corporation
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About United Therapeutics

Our company was founded 25 years ago with the challenge of finding a way to cure or treat a rare, life-threatening illness suffered by our CEO's daughter. That mission continues today, has grown to encompass a variety of rare diseases, and drives everything that we do. Early on, we developed a roadmap to success based on five strategic objectives:

Develop the best medicines possible from our intellectual property
Conduct the most insightful clinical trials of our medicines
Achieve superior communication and awareness of our products among physicians
Grow our business to be in the top quintile of our peers
Achieve our goals by doing the right thing and using the highest ethical standards

Our Commitment to Corporate
Social Responsibility
            AWARDS AND
RECOGNITION

PATIENT-CENTRIC APPROACH

The parents of a child with pulmonary arterial hypertension founded United Therapeutics, so we take our commitment to patients personally. Through our relentless pursuit of life-changing therapies, medical devices, and transplantation technologies, and our patient support and assistance programs, we are striving to improve the lives of patients with PAH and other life-threatening diseases.

Fortune’s 2020
Great Places to Work

The Washington Post’s
2020 Top Places To Work

Triangle Business Journal
2020 Best Places to Work

ENVIRONMENTAL STEWARDSHIP

We take sustainability seriously, as we believe that reducing our carbon footprint is a responsibility shared by all. Through our focus on constructing site net zero energy and LEED-certified buildings, we are taking a leadership role in driving the use of sustainable technologies forward.

OUR PEOPLE

We couldn't be the creative company we are without attracting, enabling, and valuing diverse, hard-working, team-playing employees we call "Unitherians". We have a company-wide minimum living wage, on-site subsidized day care, and a suite of health and wellness benefits to take care of our Unitherians holistically. Our Board and management teams lead our racial, ethnic, gender, and professional diversity initiatives.



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LEAD INDEPENDENT DIRECTOR’S LETTER

To Our Fellow Shareholders,

No company can command its people to deliver the creativity, loyalty, and drive that create biotechnology magic and shareholder value. But since our founding, we have worked to set ourselves apart as a caring, daring, and happily different team that enables its people to give their best — and get our best.

Think this is corporate hype? Think again.

United Therapeutics was founded to find treatments for pulmonary arterial hypertension (PAH), following the PAH diagnosis of the daughter of our Founder, Chairperson, and CEO. Patient-centricity is real here.

We didn’t need the brutal events leading to the renewed focus on social justice to understand the value of a diverse team, both in creativity and in leadership. Our twelve-member board includes five women, three directors who self-identify as under-represented minorities, and one who self identifies as a member of the LGBTQ+ community. Our management team is similarly diverse — 47% female and 29% identify as racial or ethnic minorities.

That’s just the beginning. We adhere to a minimum “living wage,” enable every employee to become a shareholder, and provide an array of health, savings, education, work-life integration, family, and other benefits to treat our employees holistically and turn jobs into careers.

That isn’t all. Not only did we not lay off, furlough, or reduce the pay of any Unitherians as a result of the pandemic, despite initially having to stop enrollment of our clinical trials and put other projects on hold, we gave every employee multiple additional bonuses in 2020 to help them face the sometimes major challenges that new work protocols and family changes created.

Even that isn’t all. Later this year we will be asking you, our shareholders, to support our conversion into a public benefit corporation (PBC) to match the legal status of our subsidiary Lung Biotechnology PBC. We believe our charter should align with our values — and how we already run the company — and not the other way around.

And is all this working for our shareholders? We now have four approved therapies to treat PAH plus a drug for a rare pediatric cancer; we recently obtained FDA approval for the first-ever treatment of pulmonary hypertension associated with interstitial lung disease; we have a strong pipeline of studies in various fibrotic diseases; and we have exciting programs in the organ transplant space — including organ printing. The combination of our steady revenue streams, conservative budgeting, exceptional leadership, and a powerhouse of creative Unitherians helped us deliver a 72% stock price increase during 2020.

I am proud to be the Lead Independent Director of United Therapeutics, honored to be a member of our exceptional Board and team, and unabashed about asking for your voting support on the items described in this Proxy Statement so we can continue to redefine the biotech norm and deliver for you, our patients, our Unitherians, and our stakeholders.

Onward!


CHRISTOPHER PATUSKY, J.D., M.G.A.
Lead Independent Director
Vice Chair of the Board
Chair of the Compensation Committee

       

The combination of our steady revenue streams, conservative budgeting, exceptional leadership, and a powerhouse of creative Unitherians helped us deliver a 72% stock price increase during 2020.

2021 Proxy Statement     1


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United Therapeutics at a Glance

United Therapeutics at a Glance

WHAT IS UNITED THERAPEUTICS?

United Therapeutics is a profitable, 25-year old, $9B+ market cap, dare-to-be-different biotechnology company that is building on its expertise and success developing therapies for PAH to address other chronic, life-threatening medical conditions ranging from pulmonary fibrosis, to pediatric cancer, to organ manufacturing and transplantation. Our profit margins are among the strongest in the entire biotechnology industry.

WHAT DID WE DO IN 2020?

We continued to deliver strong operating results from our four PAH therapies and our pediatric cancer treatment, yielding revenues of ~$1.5 billion and net income of over $500 million. But this solid result was by no means a given.

Like many companies, we felt the impact of the COVID-19 pandemic. It delayed the launch of the Remunity® Pump for Remodulin® until February 2021. Enrollment of our clinical trials was temporarily paused as hospitals shut down. We felt pressure on our revenues, as it became difficult for patients to start advanced therapies, and our staff was limited to virtual interactions with healthcare providers. Our product development teams, however, quickly found ways to adapt clinical trial protocols and expand clinical site activation efforts, and we worked hard to ensure patients had uninterrupted access to our therapies.

We obtained approval of the Remunity Pump for Remodulin in 2020, and launched the product in February 2021. We believe this product will help us maintain and grow Remodulin revenues going forward. We submitted a supplemental new drug application for Tyvaso® in patients with pulmonary hypertension due to interstitial lung disease (PH-ILD), which the FDA approved in March 2021 following the results of an exciting study published in the New England Journal of Medicine.

We also continued to listen to our shareholders — twice reaching out to those representing over 70% of our shares to offer engagement with our Board members — and steadily increased the detailed information we provide on our sustainability efforts, Board refreshment, and compensation practices. And we amended our certificate of incorporation to begin the destaggering of our Board of Directors.

HOW DID WE DO IN 2020?

Our solid 2020 results in the midst of a pandemic are a testament to the value of our focus on being a built-to-last, long-focused, and people-focused company. Successful R&D efforts led to a return to revenue growth in 2020, and strong revenues coupled with conservative budgeting generated substantial free cash flow. These contributed to our strong financial condition, including $3.0 billion in cash, cash equivalents, and marketable securities as of December 31, 2020 ($2.2 billion net of $800 million in indebtedness).

This execution led to a significant rebound in our stock price. During 2020, our stock price grew by 72%, outperforming the 26% return generated by the Nasdaq Biotechnology Index.

WHERE ARE WE HEADING?

In addition to the already-launched label expansion for Tyvaso in PH-ILD and the Remunity Pump for Remodulin, both in 2021, we are striving toward additional potential product approvals/launches such as Tyvaso DPI™ and the Implantable System for Remodulin.

We expect to continue to grow revenue from our treprostinil-based therapies through label expansions, new indications, new formulations, and the introduction of new delivery devices. We are also working on a number of entirely new therapies to treat PAH and other rare diseases that we hope to launch over the next several years. Longer-term, we have set the ambitious goal of solving the acute shortage of transplantable organs through our innovative organ manufacturing programs, including ex-vivo lung perfusion, xenotransplantation, regenerative medicine, and organ printing.

Our conservative balance sheet not only places our company in a very strong position to weather successfully the continued economic effects of the pandemic, but also gives us strategic flexibility to continue to seek out and drive down "corridors of indifference" to help patients with PAH and other orphan lung diseases in need.

Finally, we started the process, which we hope our shareholders will approve later in 2021, to amend our charter to become a Delaware public benefit corporation, which is already the legal status of our subsidiary Lung Biotechnology PBC. We believe this step will align our charter with our existing values and operating model.

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UNITED THERAPEUTICS CORPORATION

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

DATE AND TIME        LOCATION               WHO CAN VOTE        
Friday, June 25, 2021
10:30 a.m. Eastern Time
    virtualshareholdermeeting.com/
UTHR2021
    Shareholders as of April 30, 2021 are entitled to notice of, and to vote at, our 2021 Annual Meeting of Shareholders

Voting Items

Company Proposals Board Vote Recommendation For Further Details
1 Election of the five directors named in the Proxy Statement “FOR” each director nominee Page 20
2 Advisory resolution to approve executive compensation “FOR” Page 41
3 Approval of the amendment and restatement of the United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan       “FOR”       Page 74
4 Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021 “FOR” Page 83

Shareholders will also consider and act upon such other business as may properly come before the Annual Meeting of Shareholders and any adjournment or postponement thereof. Proxy materials or a Notice of Internet Availability are being distributed to shareholders on or about May 7, 2021. This year’s Annual Meeting will be conducted solely virtually via live audio webcast. Our Board reached this decision after careful consideration and in light of ongoing developments related to COVID-19. A virtual format will enable shareholders to participate from any location and at no cost, while safeguarding the health of our shareholders, management, and Board. To attend the meeting online, vote your shares electronically, or submit questions, go to the website listed above. The Annual Meeting will begin at 10:30 a.m. Eastern Time on Friday, June 25, 2021, and you are encouraged to login early to avoid any delay due to technical issues. Please review the information in the Proxy Statement for additional information. Whether or not you expect to attend the meeting virtually, you are requested to vote your shares as promptly as possible so that your shares are represented at the meeting. All shareholders are extended a cordial invitation to attend this meeting. Our list of shareholders as of the Record Date will also be available for inspection for the ten days prior to the Annual Meeting. To inspect the list, please email our Investor Relations department at IR@unither.com.

By Order of the Board of Directors,


PAUL A. MAHON
Corporate Secretary
April 29, 2021

How to Vote

INTERNET             TELEPHONE            MAIL                
Before the meeting, go to proxyvote.com
During the meeting, go to
virtualshareholdermeeting.com/UTHR2021
    (800) 690-6903     Mark, sign, date, and promptly mail the enclosed proxy card in the postage-paid envelope
Important Notice Regarding the Availability of Proxy Materials for United Therapeutics Corporation’s 2021 Annual Meeting of Shareholders to Be Held on Friday, June 25, 2021: United Therapeutics Corporation’s Proxy Statement and Annual Report on Form 10-K are available at: ir.unither.com/annual-and-proxy

2021 Proxy Statement     3


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FORWARD-LOOKING STATEMENTS

This Proxy Statement contains forward-looking statements made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995 (PSLRA). These statements, which are based on our beliefs and expectations as to future outcomes, include, among others, statements about our future operating results, business plans, objectives, pipeline advancements, benefits of our products, and any other statements that contain the words believe, seek, expect, anticipate, forecast, project, intend, estimate, should, could, may, will, plan, or similar expressions, and any other statements contained or incorporated by reference into this Proxy Statement that are not historical facts. These forward-looking statements are subject to certain risks and uncertainties, such as those described in our periodic reports filed with the Securities and Exchange Commission (SEC), as well as risks stemming from COVID-19, that could cause actual results to differ materially from anticipated results. These statements may also be based on standards for measuring progress that are still developing and on assumptions that are subject to change in the future. Consequently, such forward-looking statements are qualified by the cautionary statements, cautionary language, and risk factors set forth in our periodic reports and documents filed with the SEC, including our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. We claim the protection of the safe harbor contained in the PSLRA for forward-looking statements. We are providing this information as of April 29, 2021, and assume no obligation to update or revise the information contained in this Proxy Statement whether as a result of new information, future events, or any other reason.

WEBSITE REFERENCES

Website references included throughout this Proxy Statement are provided for convenience. The content on the referenced websites are not incorporated herein and are not part of this Proxy Statement.

LEAD INDEPENDENT DIRECTOR’S LETTER         1
UNITED THERAPEUTICS AT A GLANCE 2
NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS 3
BUSINESS OVERVIEW 6
Our Business 6
2020 Performance in Review 9
CORPORATE RESPONSIBILITY 10
PROXY SUMMARY 13
Voting Matters 13
Governance Highlights 14
Executive Compensation Highlights 17
OUR CORPORATE GOVERNANCE 20
PROPOSAL 1: Election of Directors 20
Selecting Directors 20
How We Select Our Director Nominees 21
Board Diversity 22
Board Skills 23
Proxy Access 23
Majority Voting 23
Policy on Overboarding 24
Board Declassification 24
Stock Ownership Guidelines 24
Board of Directors and Nominees 25
Nominees for Election at our 2021 Annual Meeting of Shareholders 25
Class II Directors Continuing in Office with Terms Ending in 2022 28
Class III Directors Continuing in Office with Terms Ending in 2023 31
Director Independence 32
Board Structure 33
Board Leadership 33
Committees of our Board of Directors 33
Corporate Governance Guidelines and Committee Charters 34
Board Roles and Responsibilities 35
Risk Oversight 35
Shareholder Engagement 36
Board Education 37
Meetings of our Board of Directors and Board Attendance at Annual Meetings of Shareholders 37
Shareholder Communication with Directors 37
Non-Employee Director Compensation 38
Overview 38
Equity-Based Awards 39
2020 Non-Employee Director Compensation 40

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EXECUTIVE COMPENSATION         41
PROPOSAL 2: Advisory Resolution to Approve Executive Compensation 41
Letter from Our Compensation Committee 42
Compensation Discussion and Analysis 43
Overview 43
Company Introduction 44
Our Named Executive Officers 44
2020 Performance Highlights 45
Shareholder Outreach and Responsiveness to our 2020 Say-on-Pay Vote 45
Overview of our 2020 Executive Compensation Program 47
Pay Element Overview 48
2020 Compensation Decisions 49
2020 Compensation Program Design 56
Key Governance Features of our Executive Compensation Program 60
Other Executive Compensation Policies and Practices 60
Compensation Committee Report 62
Compensation Tables 63
Summary Compensation Table 63
Grants of Plan-Based Awards in 2020 64
Narratives to Summary Compensation Table and Grants of Plan-Based Awards in 2020 Table 64
Outstanding Equity Awards at 2020 Fiscal Year-End 66
Option Exercises and Stock Vested in 2020 68
Pension Benefits in 2020 68
Supplemental Executive Retirement Plan 68
Potential Payments Upon Termination or Change in Control 70
Pay Ratio 72
PROPOSAL 3: Approval of The Amendment and Restatement of The United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan 74
AUDIT MATTERS 83
PROPOSAL 4: Ratification of The Appointment of Ernst & Young LLP as United Therapeutics Corporation’s Independent Registered Public Accounting Firm for 2021 83
Report of our Audit Committee 83
Principal Accountant Fees and Services 84
Policy on Audit Committee Pre-Approval of Audit Services and Permissible Non-Audit Services of our Independent Auditors 84
OTHER MATTERS 85
Certain Relationships and Related Party Transactions 85
Beneficial Ownership of Common Stock 86
Delinquent Section 16(a) Reports 87
Shareholder Proposals and Director Nominations 88
Other Business 89
Shareholders Sharing the Same Address 89
Annual Report 89
INFORMATION ABOUT THE MEETING, VOTING, AND PROXIES 90
Attending the Annual Meeting 90
General 90
Record Date and Outstanding Shares 90
Internet Availability of Proxy Materials 90
Solicitation 91
Voting Rights and Quorum 91
Proxy 91
ANNEX A - United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan A-1
ANNEX B - Non-GAAP Financial Information B-1

2021 Proxy Statement     5


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BUSINESS OVERVIEW

Our Business

We market four products for PAH and one product for pediatric high-risk neuroblastoma (NB). One of our PAH products, Tyvaso, has recently been approved to treat PH-ILD, making it the only approved therapy to treat this life threatening disease that we believe impacts at least 30,000 patients in the United States.

PAH Portfolio NB Product
     

Innovation and Revenue Growth Despite Generic Challengers

Three of our PAH products are prostacyclin analogues based on the molecule treprostinil: Remodulin (delivered parenterally, via intravenous (IV) or subcutaneous (subQ) pumps), Tyvaso (an inhaled product), and Orenitram® (an oral tablet). Our fourth PAH product is Adcirca®, a PDE-5 inhibitor. Unituxin® is a monoclonal antibody for treatment of high-risk NB.

In 2018, generic versions of Adcirca were introduced, leading to a sharp decline in our revenue for this product, which is typical of the generic erosion curve for a small-molecule oral product. In addition, we saw the market entry of a generic version of Remodulin used in IV pumps in March 2019. Although many analysts predicted sharp declines for Remodulin, we expected and saw a resilient response, with relatively few U.S. patients choosing the generic version over branded Remodulin. Our U.S. Remodulin revenues have remained strong, and our overall revenues from our treprostinil-based products grew by 5% in 2020 compared to 2019. Revenues from two of our treprostinil-based products (Orenitram and Tyvaso) grew by 30% and 16%, respectively.

Going forward, we are actively working to improve the treprostinil molecule and each of its delivery systems to enhance convenience, safety, and patient outcomes. We are also actively studying additional indications for Tyvaso. We expect these efforts will result in revenue growth for each of our treprostinil-based products.

Remodulin: Next-Generation Parenteral Pump Systems

Our next-generation IV and subQ treprostinil pump systems are designed to improve patient convenience and potentially serve some of the 30-40% of PAH patients who refuse parenteral therapy because of site pain, the inconvenience of current pump designs or interference with lifestyle choices. We made substantial progress with our next-generation pump systems in 2020; the FDA cleared the pharmacy-filled Remunity Pump for Remodulin in February 2020 and we launched the Remunity Pump commercially in February 2021.

 

IMPLANTABLE SYSTEM FOR REMODULIN

Ease of use and reduced risk of bloodstream infections
Once-monthly refills or longer
1             3

REMOLIFE

Next-generation ambulatory infusion pump with smartphone compatibility
Development-stage program

FDA APPROVED(2)

                     
                     
 

REMUNITY

Small, lightweight, durable subQ pump with disposable cartridges
Flexible dosing via an acoustic volume sensing technology
2

30-40%
OF PAH PATIENTS REFUSE PARENTERAL THERAPY BECAUSE OF CONCERNS AROUND IV USE, SUBQ PAIN, OR LIFESTYLE INTERFERENCE(1)

LAUNCHED FEBRUARY 2021
(1) Based on UT market research
(2)

The FDA requires that certain conditions of Medtronic’s PMA approval of the Implantable System for Remodulin (ISR) must be satisfied prior to launch or sale of the ISR; accordingly, ISR labeling may be revised in the process of satisfying such conditions of approval

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Business Overview

Orenitram: FREEDOM-EV Label Expansion

In October 2019, the FDA approved a label expansion for Orenitram that incorporated the results of our FREEDOM-EV study. The FREEDOM-EV study showed that Orenitram, when taken with an oral PAH background therapy, decreased the risk of a clinical worsening event versus placebo by 25% (p=0.0391), driven by a 61% decrease in the risk of disease progression for patients taking Orenitram, when compared to placebo (p=0.0002). Orenitram is now indicated to delay disease progression and improve exercise capacity. We believe this will drive continued growth in Orenitram revenues.

Tyvaso: INCREASE, PERFECT, and TETON Studies in New Indications

In 2020, we announced the successful results of the INCREASE study of our Tyvaso inhaled treprostinil therapy in PH-ILD, and the FDA approved the addition of PH-ILD to the Tyvaso label in March 2021. We estimate there are over 30,000 U.S. patients with PH-ILD, who until now have had no approved therapies to treat their condition. In addition, we are conducting a pivotal study of Tyvaso in patients with PH associated with chronic obstructive pulmonary disease (PH-COPD) called the PERFECT study, and have recently commenced the TETON study of Tyvaso to treat idiopathic pulmonary fibrosis (IPF). We believe there are approximately 100,000 PH-COPD and 100,000 IPF patients in the United States. Presently, there are no FDA-approved therapies indicated to PH-COPD, and treatment options for IPF patients are extremely limited.

Treprostinil Label Expansion Efforts

Potential U.S. Population 45,000 30,000 100,000 100,000
Data Read-Out Study ongoing Study startup
FDA Approval TBD TBD

Tyvaso DPI

We are developing a dry powder formulation of treprostinil called Tyvaso DPI for the treatment of PAH, under a license from MannKind Corporation (MannKind). Tyvaso DPI incorporates the dry powder formulation technology and Dreamboat® inhalation device technology used in MannKind’s Afrezza® (insulin human) Inhalation Powder product, which was approved by the FDA in 2014. We believe this product, which is a small, pocket-sized inhaler that does not need electricity, will have significant convenience advantages over current inhaled prostacyclin alternatives, which rely on the use of lengthy breathing sessions with nebulizers that need to be plugged in. Following successful pivotal development studies that demonstrated biocomparabilty between Tyvaso DPI and Tyvaso Inhalation Solution, we submitted an NDA to the FDA to approve this new therapy in April 2021 to treat both PAH and PH-ILD. We anticipate an expedited eight-month FDA review of this NDA as a result of our use of a priority review voucher we purchased in January 2021.

Prodrug Development: RemoPro™ and OreniPro™

We are conducting a series of phase 1 studies to develop a new prodrug of treprostinil called RemoPro, which is intended to enable subcutaneous delivery of treprostinil therapy without the site pain currently associated with subcutaneous Remodulin. As a prodrug, RemoPro is designed to be inactive in the subcutaneous tissue, which should decrease or eliminate site pain, and to metabolize into treprostinil once it is absorbed into the blood. We are also developing an oral prodrug version of Orenitram we call OreniPro, in order to provide increased tolerability and convenience through a once-daily dosing regimen.

2021 Proxy Statement     7


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Business Overview

United Therapeutics Treprostinil Historical Annual Net Sales


We’re Moving Beyond Treprostinil…

We believe that treprostinil will be one of the standards of care in PAH for some time to come and anticipate significant growth through label expansions (such as PH-ILD for Tyvaso) and new formulations and delivery devices. In addition, we are working on programs beyond treprostinil that we think could have an outsized impact on patients with PAH and other lung diseases.

Ralinepag in PAH. Ralinepag is a next-generation, oral, selective, and potent prostacyclin receptor agonist in development for the treatment of PAH. We are conducting two phase 3 studies of ralinepag: (1) ADVANCE OUTCOMES, which is an event-driven study of ralinepag in PAH patients with a primary endpoint of time to first clinical event; and (2) ADVANCE CAPACITY, which studies the effect of ralinepag on exercise capacity in PAH patients with a primary endpoint of change in peak oxygen uptake via a cardiopulmonary exercise test. Both of these studies are global, multi-center, placebo-controlled trials of patients on approved oral background PAH therapies. We believe ralinepag’s once-daily dosing will make it highly competitive with the existing approved oral prostacyclin agonist, selexipag, which is a competitor’s product that generated U.S. revenues of more than $1.0 billion in 2020.

Aurora-GT™. We’re conducting a clinical study (called SAPPHIRE) of a gene therapy product called Aurora-GT, in which a PAH patient’s own endothelial progenitor cells are isolated, transfected with the gene for human endothelial nitric oxide synthase, expanded ex-vivo, and then delivered to the same patient. This product is intended to rebuild the blood vessels in the lungs that are destroyed by PAH. This is a registration stage study in Canada sponsored by Northern Therapeutics, Inc., a Canadian entity in which we have a 49.7 percent voting stake and a 71.8 percent financial stake. We have the exclusive right to pursue this technology in the United States.

…and Seeking a Cure

We believe that the ultimate solution for PAH patients and patients with many other life-threatening diseases is a cure through transplantation. Each year, end-stage organ failure kills millions of people. A significant number of these patients could have benefited from an organ transplant. Unfortunately, the number of usable, donated organs available for transplantation has not grown significantly over the past half century, while the need has soared. Our long-term goals are aimed at addressing this shortage. With advances in technology, we believe that creating an unlimited supply of tolerable manufactured organs is now principally an engineering challenge, and we are dedicated to finding engineering solutions.

We are heavily engaged in the early-stage research and development of a number of organ transplantation-related technologies including regenerative medicine, organ bio-printing, xenotransplantation, and ex-vivo lung perfusion.

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Business Overview

2020 Performance in Review

STRONG REVENUE PERFORMANCE DESPITE COVID-19 INDUSTRY-LEADING PROFITABILITY
Overall revenue grew in 2020 compared to 2019
U.S. treprostinil-based revenues reached an all-time high
Orenitram revenue grew by 30% compared to 2019, with the FREEDOM-EV label expansion
Tyvaso revenue grew by 16% in 2020 compared to 2019
Over $500 million in net income for 2020; diluted EPS of $11.54, and non-GAAP Diluted EPS* of $14.46
34.7% net profit margin and 57.1% EBITDASO margin*, compared to -3.2% average net profit margin and 16.3% average EBITDASO margin for our compensation peer group
$1.6 million in 2020 revenue per employee, which ranks 5th among the companies in our compensation peer group (the top 25 companies, by revenue, in the Nasdaq Biotechnology Index)
     
CONTINUED INNOVATION AND R&D PROGRESS STRONG BALANCE SHEET POISED FOR
FUTURE INVESTMENT
Readout of positive INCREASE study results, February 2020
Continued progress on clinical studies supporting Tyvaso DPI, leading to April 2021 NDA submission with FDA
FDA clearance of the pharmacy-filled Remunity Pump, February 2020
Continued progress on phase 3 ralinepag clinical study, despite pandemic
$3.0 billion in cash, cash equivalents, and marketable investments at December 31, 2020
$800 million in debt outstanding at December 31, 2020
Strong balance sheet well-positioned to endure economic instability, and pursue strategic R&D and business development initiatives
* A reconciliation of our non-GAAP measures and other information relating to such measures can be found in Annex B.

Steady Performance During 2020 Despite COVID-19

The COVID-19 pandemic presented a number of challenges, causing us to pause enrollment of all of our clinical trials and delay the launch of the Remunity Pump, and making it more difficult to sell our therapies. We felt pressure on our revenues, as it became difficult for patients to start advanced therapies, and our staff was only able to interact virtually with healthcare providers. Our solid balance sheet and conservative budgeting algorithm mitigated these impacts, and we made no pandemic-related reductions in staffing, employee compensation, or research and development programs. Many of our employees were forced to adapt to a new work-from-home environment, while others continued to work in-person to keep our manufacturing and research and development efforts on track to ensure an uninterrupted supply of our therapies to patients. We are very proud of the work of our employees, and grateful for their efforts during these challenging times. Our many accomplishments in 2020 have put our company on a solid footing for an exciting year in 2021 and beyond.

2021 Proxy Statement     9


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Corporate Responsibility

Corporate Responsibility

Mission and Unitherian Culture

At United Therapeutics, we are crystal clear about our purpose and talk about it often — developing innovative therapies for unmet needs, with the ultimate objective of finding a cure for end-stage organ diseases by creating an unlimited supply of transplantable organs. We maintain a vibrant, entrepreneurial culture, instilling our employees with a sense of ownership and meaning that we believe gives us a competitive advantage in achieving our mission.

Our Patients

Innovation: In 2020, we reported the results of the first-ever successful pivotal study of a therapy in patients with PH-ILD, a condition impacting over 30,000 patients in the U.S. with no approved therapies until our Tyvaso therapy was approved in that indication this year.

Patient Safety: Nearly 1,800 volunteers participated in 19 of our clinical trials in 2019. We are subject to external audits by health authorities who verify that we are complying with applicable laws, regulations, and ethical standards. No regulatory inspections of our clinical trials resulted in required, voluntary, or official actions or monetary fines in 2019.

Patient Support, Education, and Financial Assistance: We rolled out our first copay assistance care program for patients taking Adcirca in 2010. During the past ten years, over 20,000 patients have enrolled in our ASSIST programs and received help in filling over 240,000 dispensed prescriptions.


Our People

Diversity & Inclusion: We are fully committed to diversity, equity, and inclusion — see details below.

Communication: Recent surveys showed that 93% of our participating employees “have a high degree of trust, are likely to be retained, and are highly engaged.”

People Programs: Our people programs are designed to demonstrate how much we value our employees, and to enable all employees to participate in our financial success. For example, all full-time domestic employees receive minimum annual compensation of $75,000, including salary and bonus eligibility. We also provide meaningful opportunities for employees to share in our success by making every full-time employee a shareholder through our long-term incentive programs. We offer market-leading benefit programs and provide access to a variety of health and wellness facilities and programs, such as on-site childcare centers and state-of-the-art fitness centers, and access to 24/7 employee assistance programs.

COVID-19 Response: We worked hard to support our employees during the pandemic, as discussed further below.


Our Planet and Communities

Environmental Stewardship: We operate eleven solar arrays that generate over 20% of the electricity that we consume on an annual basis. We also buy renewable energy credits to offset 100% of the electrical consumption at our Silver Spring, MD campus other than our site net zero Unisphere facility.

Historical Environmental Data: We provide information about our environmental footprint. As we expand our environmental, social, and governance (ESG) reporting efforts, we remain committed to taking groundbreaking steps to diminish our climate impact and enhance our disclosures.

Our Community Programs: In 2019, we held our annual Community Service Day events at both our RTP and Silver Spring locations. We had over 280 employees participate in our half and full day experiences which benefit local organizations in our communities. In 2020, in light of the pandemic we held a virtual Community Service Day where each employee was provided a cash stipend to donate to the non-profit charity of their choosing, and employees shared the details of their chosen organizations and any related service activities on our internal social media platform.

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Corporate Responsibility

Our Principles & Other Priorities

Ethics & Compliance: Our Compliance Principles, based on our key tenet of "Do the Right Thing," outline how we expect all Unitherians to behave.

Workplace Safety: We had 8 recordable/reportable incidents for our U.S. operations in 2020, with an overall incidence rate of 0.9 per 100 full-time workers. This is significantly below the incidence rate of 1.7 per 100 full-time workers for our industry.

Supply Chain Management: United Therapeutics maintains a rigorously compliant GxP Quality & Compliance program covering those aspects of our supply chain that could impact the quality and safety of our products. We use more than 700 pre-qualified raw material vendors and service providers to support clinical and commercial business operations.

For more details about our commitment to Corporate Responsibility, download our 2020 Corporate Responsibility report at corporateresponsibility.unither.com. The information on the sustainability website and in the 2020 Corporate Responsibility report are not incorporated by reference into, and do not form part of, this Proxy Statement.

Diversity, Equity, and Inclusion

Over the course of 2020, we strengthened our focus on Diversity, Equity & Inclusion (DE&I) at the Board level and throughout our company. We paused, listened to our employees, and took stock of where we are, and where we want to take DE&I together as an organization. Our goal is to ensure that DE&I continues to be ingrained into our DNA. To this end, in 2020 we:

Engaged with an external consultant that specializes in fostering DE&I in workplaces
Met with Unitherians across the organization in small group sessions to hear their voices, perspectives, and ideas about DE&I
Established an Inclusion Advisory Group and a DE&I Executive Council, two working groups comprised of Unitherians whose purpose is to provide input, education, and oversight for our ongoing DE&I initiatives
Enhanced our public disclosures with the publication of our first Corporate Responsibility Report in November 2020
Developed a multi-year, company-wide training initiative designed to promote and enrich awareness of important diversity, equity, and inclusion topics. In 2020, all of our employees participated in these training sessions.

All Employees Management

Support for Our Employees During the Pandemic

During the COVID-19 pandemic we have remained committed to supporting the health and wellness of our employees who are working hard to ensure we are able to maintain a continuous supply of medicines to our patients. Early in the pandemic we provided personal protective supply kits to all employees, and we moved quickly to transition all employees who could work remotely to a work-from-home model. For those employees required to come to our facilities, we remain focused on providing the safest possible working environment. To further support our employees during this challenging time, we provided all employees with multiple cash bonuses to supplement their regular salaries and bonuses, which have not been impacted by the pandemic, and provided our employees with paid leave when they have been unable to work due to COVID-19 related issues. Throughout the pandemic, we have maintained consistent contact with our employees to keep them informed and feeling connected. We are committed to ensuring the safest possible work environment and acknowledging our employees’ contributions during this unprecedented time.

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Creating a Sustainable Public Benefit Corporation

In 2021, we plan to seek shareholder approval to convert our company from a traditional Delaware corporation into a Delaware public benefit corporation (PBC). We believe this change will help align our legal form with our longstanding commitment to serve our patients; enhance our ability to recruit and retain top talent; reinforce our standing and credibility with regulators and stakeholders; attract more of the rapidly growing pools of duration, impact, and ESG-screened capital; and therefore enhance our ability to create excellent and sustainable value for our shareholders.

The fiduciaries of public benefit corporations must identify the specific public benefit mission they will pursue alongside their creation of shareholder value. They must also report on their promotion of this specific public benefit mission.

This proposed conversion is a logical extension for us. In 2015, we formed the first-ever PBC subsidiary of a public biopharmaceutical company, called Lung Biotechnology PBC, chartered in Delaware with the express purpose of “address[ing] the acute national shortage of transplantable lungs and other organs with a variety of technologies that either delay the need for such organs or expand the supply.” These technologies include xenotransplantation, regenerative medicine, organ bioprinting, and ex-vivo lung perfusion.

After operating our PBC subsidiary for six years, we are convinced that the time is right to convert United Therapeutics into a PBC. We have seen growing understanding and acceptance of the PBC form, most recently in the successful conversion of Veeva Systems Inc., a public company, to a PBC, following overwhelming approval by its shareholders.

We will seek shareholder approval during the fourth quarter of 2021 of a Board-approved PBC conversion, which we will effect by amending our charter to include a PBC purpose. We will provide more details as they develop, but we anticipate that our PBC purpose will be patient-focused, along the lines of the public benefit purpose of our Lung Biotechnology PBC subsidiary noted above. We plan to engage with shareholders and other stakeholders to discuss our plans to convert to a PBC in the coming weeks and months.

Our shareholders have expressed a keen interest in learning how United Therapeutics is working to both create a sustainable company and to address our ESG objectives, and we are steadily increasing the amount and granularity of our disclosures to meet these needs. See corporateresponsibility.unither.com. With a PBC conversion, we aim to continue our leadership in this area by becoming the first publicly traded biopharmaceutical company organized as a PBC. As a PBC we will be required to post reports on our progress toward fulfilling our PBC mission, which we believe will further enhance our disclosures and relationships with employees, stakeholders, patients, and shareholders.

What is a Public Benefit Corporation?

A Delaware PBC is a for-profit corporation. There are two primary differences between a PBC and a traditional Delaware for-profit corporation:

A corporation organized as a Delaware PBC identifies in its certificate of incorporation one or more specific public benefits that it will seek to promote in addition to shareholders' financial interests. The public benefits are actions or goals that are intended to have positive effects on a category of persons, entities, interests, or communities.
In making decisions, directors of a PBC have an obligation to balance the financial interests of shareholders, the interests of stakeholders materially affected by the PBC’s conduct, and pursuit of the corporation’s public benefit purpose.

A Delaware PBC must also provide its shareholders with a statement, at least every other year, as to the PBC’s assessment of the success of its efforts to promote its public benefit purpose and the best interests of those materially affected by the PBC's conduct.

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PROXY SUMMARY

Voting Matters

Shareholders will be asked to vote on the following matters at the Annual Meeting:

1 Election of Directors
This year at our Annual Meeting, Professor Katherine Klein, Mr. Ray Kurzweil, Dr. Linda Maxwell, Dr. Martine Rothblatt, and Dr. Louis Sullivan are nominees for election as directors to serve one-year terms until our 2022 Annual Meeting of Shareholders or until their successors are duly elected and qualified or their office is otherwise vacated.
Our Board recommends a vote FOR each director nominee. See page 20

2 Advisory Resolution to Approve Executive Compensation
We are asking our shareholders to vote on an advisory resolution, commonly known as a “Say-on-Pay” proposal, to approve executive compensation as reported in this Proxy Statement.
Our Board recommends a vote FOR this proposal. See page 41

3 Approval of the Amendment and Restatement of The United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan (the Plan)

The Amendment and Restatement makes the following changes to the Plan:

Increases the maximum number of shares of our common stock that may be issued under the Plan by 1,000,000 shares
Extends the expiration date of the Plan to April 29, 2031
Expressly prohibits the payment of dividends on unvested awards for all equity types
Our Board recommends a vote FOR this proposal. See page 74

4 Ratification of the Appointment of Ernst & Young LLP as United Therapeutics Corporation’s Independent Registered Public Accounting Firm for 2021
The Audit Committee of our Board has appointed Ernst & Young LLP as our independent registered public accounting firm for the year 2021. We ask that our shareholders vote to ratify this appointment.
Our Board recommends a vote FOR this proposal. See page 83

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Proxy Summary

Governance Highlights

Board of Directors

               Director
Since
Committee Membership
Name and Primary Occupation       Age       AC CC NGC
Katherine Klein, Ph.D. IND 64 2014
Professor of Management, The Wharton School
Vice Dean, Wharton Social Impact Initiative
Ray Kurzweil IND 73 2002
A Director of Engineering, Google
 
Linda Maxwell, M.D., M.B.A. IND 47 2020
Head and Neck Surgeon, Private Practice
Founding and Executive Director, Biomedical Zone (Toronto)
 
Martine Rothblatt, Ph.D., J.D., M.B.A. 66 1996
Founder, Chairperson, and Chief Executive Officer, United
Therapeutics
Louis Sullivan, M.D. IND 87 2002
President Emeritus, Morehouse School of Medicine
Former Secretary, U.S. Department of Health and Human Services
 
                                            
Christopher Causey, M.B.A. IND 58 2003
Principal, Causey Consortium
 
Richard Giltner IND 57 2009
Former Portfolio Manager, Lyxor Asset Management
 
Nilda Mesa, J.D. IND 61 2018
Adjunct Professor, Columbia University
Former Director, NYC Mayor’s Office of Sustainability
Judy Olian, Ph.D. IND 69 2015
President, Quinnipiac University
Former Dean, UCLA Anderson School of Management
 
 
Raymond Dwek, C.B.E., F.R.S. IND 79 2002
Professor Emeritus and Director
of the Glycobiology Institute, University of Oxford
Christopher Patusky, J.D., M.G.A. IND 57 2002
Founder, Patusky Associates, LLC
Vice Chair and Lead Independent Director, United Therapeutics
Governor Tommy Thompson, J.D. IND 79 2010
Former Governor of Wisconsin
Former Secretary, U.S. Department of Health and Human Services

AC – Audit Committee

Member

CC – Compensation Committee

Chair

NGC – Nominating and Governance Committee

IND

Independent

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Proxy Summary

Board Snapshot

Independence Board Diversity

Public Company Board Experience (non-UT)       International
5/12 6/12
Executive Management Experience       Science / Medicine
8/12 5/12
Financial Expertise       Healthcare Industry Experience
10/12 7/12
Legal Environmental, Social, and Governance
4/12 11/12
Government / Regulatory Experience
6/12

Our Governance Best Practices

We have taken great strides over recent years to implement best corporate governance practices, often acting ahead of the curve in terms of our industry peers and the Russell 3000.

MAJORITY VOTING BOARD DESTAGGERING DIVERSITY AND REFRESHMENT
       

In 2015, we adopted a majority voting standard with a director resignation policy

Only 47.4% of other Russell 3000 companies* have adopted majority voting for uncontested director elections
Only 21.6% of our industry peers** have adopted majority voting for uncontested director elections and a director resignation policy

In 2020, we amended our Certificate of Incorporation to commence a destaggering process. Going forward, directors will be elected to one-year terms

Diversity and refreshment are also key areas of focus where we are largely in-line with our peers or ahead of the curve. For example, our Board is 42% female, compared with 19% for the Russell 3000. In 2020, we refreshed our Board committees and enhanced our Board's diversity with the addition of Dr. Linda Maxwell. Since 2014, we have added four new directors, all of whom are female and two of whom self-identify as members of a racial or ethnic minority


PROXY ACCESS SHAREHOLDER FEEDBACK ENHANCED DISCLOSURE
       

In 2015, we also adopted a market-standard form of proxy access

Only 21.3% of Russell 3000 companies* provide their shareholders a similar right
Only 7.3% of our industry peers** provide their shareholders with proxy access

Our Nominating and Governance Committee has taken shareholder feedback on governance seriously — even commissioning external experts to study these issues and advise the Committee

In 2020, we issued our first corporate sustainability report. In this year's proxy statement, we are providing enhanced disclosure concerning our Board's skills and diversity

* Source: 2020 FactSet Research Systems Inc. database
** Industry peers are defined as U.S.-domiciled, NYSE- or Nasdaq-listed companies with the same first two primary Standard Industrial Classification code digits as our company (28: Chemicals and Allied Products), but excluding our company from peer results

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Proxy Summary

Committee Refreshment

In 2020, we substantially refreshed the composition of our Board Committees, as follows:

Compensation: Christopher Patusky and Raymond Dwek joined the Committee; Christopher Patusky was appointed Chair; Christopher Causey (formerly Chair) cycled off the Committee
Nominating and Governance: Nilda Mesa joined the Committee; Christopher Causey was appointed Chair
Audit: Christopher Causey and Judy Olian joined the Committee

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Proxy Summary

Executive Compensation Highlights

Extensive Shareholder Engagement Resulted in Meaningful Compensation Program Changes

We actively and regularly engage with our shareholders on compensation matters, and have made significant changes to our compensation programs over the past several years as a result of those discussions. 2020 was no different. We engaged with shareholders before our 2020 Annual Meeting, reaching out to 38 of our largest shareholders that collectively held over 70% of our outstanding shares, and had discussions with shareholders representing over 30% of our outstanding shares. We also conducted engagement outreach following our 2020 Annual Meeting, again offering to engage with shareholders that collectively held over 70% of our outstanding shares (37 of our largest shareholders) and had discussions with ten shareholders that collectively held approximately 23% of our outstanding shares. During 2020 we reached out to 47 shareholders in aggregate that collectively held 74% of our outstanding shares and had discussions with 15 shareholders that collectively held 35% of our outstanding shares. Following our 2020 Annual Meeting, several shareholders declined our invitation for further discussions because they already shared their feedback during our spring shareholder outreach campaign just before our 2020 Annual Meeting.

The purpose of these meetings was to gather feedback regarding our executive compensation and governance policies, and to understand their say-on-pay votes in 2020. Our Compensation Committee Chair led the calls, along with our head of investor relations and a member of our human resources department. During the spring 2020 outreach, our Nominating and Governance Committee Chair joined the calls as well.

Aggregate 2020 Engagement       2020 Post-Annual Meeting
         
offered engagements (47 shareholders) offered engagements (37 shareholders)
74% 71%
         
held discussions (15 shareholders) held discussions (10 shareholders)
35% 23%

During our post-Annual Meeting outreach in 2020, we discussed specific proposed actions and disclosures that the Compensation Committee believed would be responsive to shareholders’ concerns regarding executive compensation. Following these discussions with shareholders, and in direct response to their feedback, the Compensation Committee implemented the proposed actions, as described in this Proxy Statement. Importantly, when we discussed our proposed actions and disclosures with shareholders following the 2020 Annual Meeting, every shareholder we spoke with confirmed that these actions and disclosures were appropriately responsive to their feedback.

As detailed in our Compensation Discussion and Analysis, we believe that changes implemented following our shareholder engagement are directly responsive to feedback we have received from shareholders. Please see the details of the feedback received and specific actions we have taken on page 46.

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Proxy Summary

Total Compensation Mix — Pay for Performance

The following charts illustrate the extent to which pay for our Chief Executive Officer and our other Named Executive Officers (as defined below under Compensation Discussion and Analysis—Our Named Executive Officers) is “at risk”, meaning payout levels are based entirely on performance due to the use of performance targets, in the case of our cash incentive program, or an inherent stock price performance criterion, in the case of stock options. For each chart, the amounts shown represent 2020 base salary (on an annualized basis, following the February 2020 salary increases), 2020 target cash bonus opportunity, and the annualized grant-date fair value of long-term incentive awards granted in March 2019, which was a four-year grant covering the period 2019-2022.

2020 CEO and Other NEOs Pay Mix

CEO

     

Other NEOs

No Equity Awards Granted to NEOs in 2020

We implemented a new long-term incentive compensation program in 2019, awarding a four-year equity grant to our Named Executive Officers, which was granted instead of annual equity awards for the performance years 2019 through 2022. The four-year awards were granted in March 2019 and were divided equally into the following two forms of stock options:

Premium-Priced Performance Stock Options. 50% of each Named Executive Officer’s equity award covering grants for 2019-2022 was granted with a premium-priced performance condition by virtue of an exercise price equal to 115% of our closing stock price on the date of the grant. Therefore, our stock price will have to grow by more than 15% above the share price on the grant date before our Named Executive Officers can realize any value from the award. These stock options will not vest (i.e., “cliff” vest) until the fourth anniversary of the grant date, promoting retention and a long-term view.
Market-Priced Stock Options. 50% of each Named Executive Officer’s equity award covering grants for the period of 2019-2022 was granted with an exercise price equal to our closing stock price on the date of grant. These awards will vest in equal thirds on the second, third, and fourth anniversaries of the date of the grant, as a retention incentive.

While only the premium-priced options may count as "performance based" according to some, we view both of these tranches as performance-based, as both require significant and sustained stock price growth in order to enable our Named Executive Officers to realize any value from them. Both tranches have an eight-year term, which means they will need to grow and sustain the stock price more quickly than would be the case with a more typical ten-year term.

These awards are intended to compensate our Named Executive Officers over the four-year period of our current business plan. In response to shareholder feedback, we commit to not making any additional equity grants during this four-year period (2019-2022) to our existing Named Executive Officers. When viewed on an annualized basis, these awards meaningfully decreased overall compensation and decreased overall dilution when compared with the results if we had continued our previous program for four additional years. On an annualized basis, this program reduced our Chief Executive Officer’s total target direct compensation from the top quartile in 2018 to approximately the 50th percentile of our peer group.

The four-year awards are designed to incentivize and retain our Named Executive Officers over this critical four-year period, which aligns with a four-year business plan intended to drive substantial revenue growth despite generic competition, while reducing compensation on an annualized basis in response to requests by our shareholders.

Because we did not grant any equity awards in 2020, compensation to our Chief Executive Officer as reported in the Summary Compensation Table has been drastically reduced by 89%, to $4.8 million, compared to 2019.

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Proxy Summary

Robust Goal-Setting

We continue to set difficult goals under our annual Company-Wide Milestone Program, which governs short-term cash bonuses for our Named Executive Officers. As one example, the chart below shows our revenue targets for the past three years, our actual revenue performance, and how this compares to the expectations of Wall Street analysts following our company, which is one of many factors considered when goals are set. Even as we managed through revenue declines in 2018-2019, we continued to set goals well above external expectations, and to deliver against those goals. As you can see below, we set our 2020 revenue target above 2019 target and actual revenues, and well above analyst consensus. In response to shareholder feedback following our 2020 Annual Meeting, we are including below additional prospective disclosure for 2021, demonstrating our commitment to incentivizing significant revenue growth in 2021.



A Look Ahead: 2021 Revenue Milestone — Incentivizing Significant Revenue Growth

In response to shareholder feedback, we are providing the following information regarding our 2021 revenue target. While we do not provide the actual target in advance because we do not provide formal financial guidance, we want to make clear that our executive compensation program incentivizes significant revenue growth in 2021:

Threshold/minimum performance set above 2020 actual performance, directly responsive to shareholder feedback — no revenue-based bonus unless revenue grows in 2021 compared to 2020
Threshold/minimum performance set above analyst consensus for 2021 revenues
Target performance represents significant revenue growth compared to 2020 actual results
Maximum performance for 2021 represents 18% revenue growth compared to 2020

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OUR CORPORATE GOVERNANCE

1

Election of Directors

Our Board consists of twelve members and is in the process of declassifying. Currently it is divided into three classes, and historically one class was elected at each Annual Meeting to a three-year term. This year at our Annual Meeting, Professor Katherine Klein, Mr. Ray Kurzweil, Dr. Linda Maxwell, Dr. Martine Rothblatt, and Dr. Louis Sullivan are nominees for election as director to serve one-year terms until our 2022 Annual Meeting of Shareholders or until their successors are duly elected and qualified or their office is otherwise vacated. Each nominee other than Dr. Maxwell was previously elected by shareholders at our 2018 Annual Meeting to serve a three-year term as Class I directors. Dr. Maxwell was appointed to our Board in September 2020. Please see Board Declassification below for further details regarding our declassification process.

Directors are elected by a majority of votes cast at our Annual Meeting. A majority of votes cast means that the number of votes cast for the director nominee’s election must exceed the number of votes cast against that director nominee’s election. Broker non-votes and abstentions are not considered votes cast and therefore have no impact on the election of directors. Cumulative voting is not permitted in the election of directors. Proxies may not be voted for more than five nominees.

Each of our director nominees has consented to be named in this Proxy Statement and to continue to serve on our Board of Directors, if elected. We do not anticipate that any nominee will become unable or unwilling to accept their nomination or election. If such an event should occur, the persons named on the proxy card intend to vote for the election of such other person as is selected by our Board in such nominee’s stead. In the alternative, the persons named on the proxy card may simply vote for the remaining nominees, leaving a vacancy that may be filled at a later date by our Board of Directors, or our Board of Directors may reduce the size of our Board.

Our Board of Directors recommends that you vote FOR the election of each of the nominees.

Selecting Directors

We believe that our directors should possess the highest personal and professional ethics, integrity, and values, and should be committed to representing the best interests of our shareholders. We also endeavor to have a Board of Directors that, as a whole, represents a range of experiences in business, government, education, and technology and in other areas that are relevant to our business activities. As reflected in our Corporate Governance Guidelines, our Board and our Nominating and Governance Committee seek to achieve a diversity of occupational and personal backgrounds on the Board, including with respect to gender, race, and ethnic diversity. We assess the effectiveness of our efforts in this respect during the annual evaluation process conducted by our Nominating and Governance Committee. In addition, our Nominating and Governance Committee seeks to recommend director candidates who will enhance the quality of our Board’s deliberations and decisions, take their duties seriously, and promote the values and ethics to which we subscribe. Our Board also believes there are certain attributes every director should possess, which are described in the Director Nominations and Diversity section below. In evaluating incumbent directors for re-nomination to our Board, the members of our Nominating and Governance Committee consider a variety of factors. These include each director’s independence, financial literacy, personal and professional accomplishments, tenure on and contributions to our Board, and experience in light of our business goals.

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Our Corporate Governance

How We Select Our Director Nominees

Succession Planning

     

Our Nominating and Governance Committee considers current and long-term needs of our evolving business and seeks potential director candidates in light of emerging needs, our current Board structure, tenure, skills, diversity, and experience

Identification of Candidates

Our Nominating and Governance Committee engages in a search process for director candidates, led by its Chair

Our Nominating and Governance Committee considers candidates recommended by members of our Board, executive officers, shareholders, and other sources, and evaluates shareholder nominees using the same criteria as it uses to evaluate all other candidates

A shareholder who wishes to recommend a prospective nominee for our Nominating and Governance Committee’s consideration should submit the candidate’s name and qualifications to our Corporate Secretary at the address set forth under Shareholder Communication with Directors below

Qualifications Sought

To be considered, each director candidate must meet the following minimum criteria:

Personal and professional integrity
A record of exceptional ability and judgment
Ability and willingness to participate fully and work constructively in Board activities, including active participation in meetings of our Board and any committees to which they are assigned
Interest, capacity and willingness, in conjunction with the other members of our Board, to serve the interests of our shareholders
Reasonable knowledge of the fields of our operations, as well as familiarity with the principles of corporate governance
Expertise needed to serve on one or more committees of our Board
Independence, including the absence of any personal or professional relationships that would adversely affect the candidate's ability to serve our best interests and those of our shareholders

In addition, our Nominating and Governance Committee is interested in candidates who possess the following skills:

The ability to contribute to the variety of opinions, perspectives, personal and professional experiences and backgrounds, as well as other characteristics that differ among members of our Board
A desire to contribute positively to the existing tone and collaborative culture among our Board members
Professional and personal experiences and expertise relevant to achievement of our strategic objectives

Meeting with Candidates

Once our Nominating and Governance Committee identifies a potential director nominee, it screens the candidate, performs reference checks, and conducts interviews with the assistance of our General Counsel and our Chairperson and Chief Executive Officer

If the outcome of that process is favorable, our Nominating and Governance Committee may recommend the candidate to our Board for consideration

Decision and Nomination

Our Nominating and Governance Committee recommends, and our full Board approves, the director candidates who are best qualified to serve the interest of our shareholders. Our Nominating and Governance Committee’s evaluation of director nominees considers their ability to contribute these qualities and skills to our Board

Election

Each year, shareholders consider and elect directors at our Annual Meeting of Shareholders. In addition, our Board may appoint directors to fill vacancies upon the recommendation of our Nominating and Governance Committee during the year, if deemed in the best interests of the company and our shareholders

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Our Corporate Governance

Re-Nomination Process

Our Nominating and Governance Committee appreciates the importance of critically evaluating individual directors and their contributions to our Board in connection with re-nomination decisions.

In considering whether to recommend re-nomination of a director for election at our Annual Meeting, our Nominating and Governance Committee conducts a detailed review, considering factors such as:

The extent to which the director’s judgment, skills, qualifications, and experience (including those gained due to tenure on our Board) continue to contribute to our Board’s success
Attendance and participation at, and preparation for, Board and committee meetings
Independence
Shareholder feedback, including the support received by those director nominees elected at our most recent Annual Meeting
Outside board and other affiliations, including any actual or perceived conflicts of interest
The extent to which the director continues to contribute to our Board’s diversity

Board Diversity

We believe it is important that our Board is composed of individuals reflecting the diversity represented by our employees, our patients, and our communities. In recent years, our Nominating and Governance Committee has taken this priority to heart in its nominations process, and the diversity of our Board has grown significantly. With the addition of Dr. Linda Maxwell in 2020, we have continued to expand the diversity of our Board, which is among the most diverse of our peers. In response to feedback from shareholders, we provide below enhanced disclosure regarding the diversity of our Board, utilizing the template included in a pending Nasdaq rule proposal.

Board Diversity Matrix (As of April 29, 2021)
Board Size:
Total Number of Directors 12
Gender:       Male       Female             Non-Binary       Gender
Undisclosed
Number of directors based on gender identity 7 5 0 0
Number of directors who identify in any of the categories below:
       African American or Black 1 1 0 0
       Alaskan Native or American Indian 0 0 0 0
       Asian 0 0 0 0
       Hispanic or Latinx 0 1 0 0
       Native Hawaiian or Pacific Islander 0 0 0 0
       White 6 5 0 0
       Two or More Races or Ethnicities 0 2 0 0
       LGBTQ+ 1
       Undisclosed 0

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Our Corporate Governance

Board Skills

In addition to the qualifications described above, we seek to maintain a diverse set of skills on our Board. In response to shareholder feedback, we are providing additional disclosure below regarding our Board members' skills:

Public Company Board Experience (non-UT)       International
5/12 6/12
Executive Management Experience       Science / Medicine
8/12 5/12
Financial Expertise       Healthcare Industry Experience
10/12 7/12
Legal Environmental, Social, and Governance
4/12 11/12
Government / Regulatory Experience
6/12

Board Skill         Why This Skill is Important to Our Board
Public Company Board Experience Public companies face heightened public scrutiny and legal, regulatory, and accounting requirements unlike those faced by private companies
Executive Management Experience Management of large organizations such as United Therapeutics can be extremely complex and challenging, and experience with executive management can help provide the context needed for overseeing our executive officers
Financial Expertise It is extremely important that we manage our company in a fiscally conservative manner, and present our financial results in a clear, accurate, and reliable manner, navigating the complexity of evolving accounting standards and regulatory requirements
Legal In our business we encounter extremely complex legal issues and challenges, including threatened and actual litigation
Government / Regulatory Experience There are fewer industries more heavily regulated than the biopharmaceutical and medical device industries. Regulatory expertise helps ensure appropriate oversight of our compliance and regulatory functions, which are critical to our success
International While most of our operations are U.S.-based, we conduct clinical trials and commercial distribution of our products worldwide
Science / Medicine Our success is heavily dependent on our ability to successfully conduct insightful research and development efforts often involving cutting-edge technologies, and to manufacture our products using highly complex technologies
Healthcare Industry Experience The healthcare sector presents unique challenges, and given our patient-centric mission experience in the healthcare field is extremely valuable
Environmental, Social, and Governance We believe that ESG issues present important challenges, as well as the opportunity to build sustainable value for shareholders and other key stakeholders. We are committed to pursuing critically important ESG goals, while also delivering excellent financial performance for our shareholders

Proxy Access

We amended our bylaws in 2015 to implement proxy access, which allows shareholders to nominate and include in our Proxy Statement their own director nominees, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our bylaws. Our Board carefully considered feedback we received from our shareholders in creating a thoughtfully designed and balanced approach to proxy access that mitigates the risk of abuse and protects the interests of all of our shareholders, while affording a meaningful proxy access right. Shareholders who wish to nominate directors for inclusion in our Proxy Statement in accordance with the procedures in our bylaws should follow the instructions under Other Matters—Shareholder Proposals and Director Nominations in this Proxy Statement.

Majority Voting

In June 2015, as part of our Board’s ongoing review of our corporate governance policies, we amended our bylaws to provide that director nominees are elected by a majority of votes cast in uncontested director elections. A majority of votes cast means that the number of votes cast for the director nominee’s election must exceed the number of votes cast against that director nominee’s election. In connection with this bylaw amendment, our Board also adopted a director resignation policy set forth in our Corporate Governance Guidelines, providing that any director who is not elected by a majority of the votes cast is expected to tender their resignation to our Nominating and Governance Committee. Our Nominating and Governance Committee will recommend to our Board whether to accept or

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Our Corporate Governance

reject the resignation offer, or whether other action should be taken, considering all factors that the Nominating and Governance Committee believes are relevant. Our Board will act on our Nominating and Governance Committee’s recommendation within 90 days following certification of the election results. Any director who tenders their resignation pursuant to our director resignation policy will not participate in the proceedings of either our Nominating and Governance Committee or our Board with respect to their own resignation offer.

Policy on Overboarding

In 2020, we updated our Corporate Governance Guidelines to reduce our overboarding limit, such that directors are not permitted to serve on more than four public company boards (including our Board). This limit is below the limit of five boards contained in the guidelines of major proxy advisory firms, and satisfies the proxy voting criteria of our largest shareholders. In fact, this action was taken in direct response to feedback received during our shareholder outreach process in 2019. All of our directors satisfy our updated overboarding policy.

Board Declassification

At our 2020 Annual Meeting of Shareholders, our shareholders approved an amendment to our Amended and Restated Certificate of Incorporation to eliminate the classification of our Board. As a result, the classified nature of our Board is being phased out. As the term of each class of directors expires, they will be subject to re-election (if re-nominated by our Board) to a one-year term, instead of a three-year term. This year, all five Class I directors have been nominated for re-election to one-year terms.

Stock Ownership Guidelines

In 2011, our Board adopted Stock Ownership Guidelines applicable to our directors and our Named Executive Officers in order to further align the financial interests of our directors and Named Executive Officers with those of our shareholders, to foster a long-term management orientation, and to promote sound corporate governance. For non-employee members of our Board, our Stock Ownership Guidelines provide an ownership target equal to the lesser of 5,000 shares or a value equivalent to five times the annual cash Board retainer. The policy includes procedures for granting exemptions in the case of hardship. Ownership targets for our Named Executive Officers (including those serving on our Board) are described below under Compensation Discussion and Analysis—Other Executive Compensation Policies and Practices—Stock Ownership Guidelines.

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Board of Directors and Nominees

The following presents information concerning persons nominated for election as directors at our Annual Meeting and for those of our directors whose terms of office will continue after our Annual Meeting, including their age as of the date of this Proxy Statement, membership on committees of our Board, principal occupations or affiliations during the last five years or more, director qualifications, and certain other directorships held. For additional information concerning the director nominees, including stock ownership and compensation, see the section entitled Non-Employee Director Compensation and the Other Matters—Beneficial Ownership of Common Stock table below.

Nominees for Election at our 2021 Annual Meeting of Shareholders

Each nominee was previously elected by shareholders at the 2018 Annual Meeting, except for Dr. Maxwell, who was appointed to the Board in September 2020 to fill a newly-created vacancy.

      Katherine Klein, Ph.D.
Age: 64 Committees:
Director Since: 2014


None

Background

Professor Klein has served as the Vice Dean of the Wharton Social Impact Initiative since July 2012, and as The Wharton School’s Edward H. Bowman Professor of Management since 2005. She also served as Professor of Management of The Wharton School from 2004 to 2005. Prior to joining Wharton, Professor Klein was on the faculty of the University of Maryland and a visiting professor at the Stanford Graduate School of Business. She received her B.A. from Yale University, and her Ph.D. in Community Psychology from the University of Texas at Austin. An award-winning organizational psychologist, Professor Klein has conducted extensive field research regarding a range of topics including team leadership, climate, conflict, social networks, and effectiveness; organizational change and technology implementation; employee diversity; and employee responses to stock ownership. She has taught executive education and consulted with and studied a variety of for profit and non-profit organizations including Charles Schwab, Rohm and Haas, North American Scientific, Medtronic, The Baltimore Shock Trauma Center, Penn Vet, the U.S. Census Bureau, and the Korean Management Association. Her research has been published in numerous top journals including Administrative Science Quarterly, Journal of Applied Psychology, the Academy of Management Journal, and the Academy of Management Review. She is also a former associate editor of the Journal of Applied Psychology and Administrative Science Quarterly. Professor Klein is a Fellow of the Academy of Management, the Society for Industrial and Organizational Psychology, the American Psychological Association, and the Association for Psychological Science.

Director Qualifications

As a professor and Vice Dean at one of the world’s leading business schools, Professor Klein brings valuable expertise in organizational behavior, social impact, and employee ownership culture, topics that are of vital importance to a growing biotech company like United Therapeutics. As we adapt to the needs of a larger company while balancing our goal of maintaining an entrepreneurial culture designed to foster continued high growth and innovation, Professor Klein provides valuable insight to our Board. Additionally, as Vice Dean of the Wharton Social Impact Initiative, Professor Klein is highly qualified to help guide United Therapeutics’ thinking about the social impact of its business operations.

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      Ray Kurzweil
Age: 73 Committees:
Director Since: 2002



None

Background

Mr. Kurzweil is an inventor, entrepreneur, and author, and has created several important technologies in the artificial intelligence field. He has received the National Medal of Technology, the MIT Lemelson Prize, twenty-one honorary doctorates, a Grammy award for his contributions to music technology, and honors from three U.S. Presidents. In 2002, Mr. Kurzweil was inducted into the National Inventors Hall of Fame. Since 1995, Mr. Kurzweil has served as the Chief Executive Officer of Kurzweil Technologies, Inc., a technology development firm. Since January 2013, he has also served as a Director of Engineering for Google, a global technology and Internet search company.

Director Qualifications

Mr. Kurzweil brings to our Board extensive technological experience as an inventor and technology developer. His technical experience in the areas of artificial intelligence, telemedicine, and pharmaceutical research and development, and his experience in building businesses around his inventions, provide our Board with perspective in evaluating current and proposed technologies and business opportunities. Mr. Kurzweil also brings to our Board substantial corporate leadership experience from his role as Chief Executive Officer of Kurzweil Technologies, Inc.


     

Linda Maxwell, M.D., M.B.A.

Age: 47 Committees:
Director Since: 2020



None

Background

Dr. Maxwell has been a head and neck surgeon in private practice since 2006, and is a medical educator, a published scientific author, and a health technology entrepreneur and innovator. Dr. Maxwell is Adjunct Professor of Surgery at the University of Toronto, Distinguished Visiting Professor at Ryerson University, and Associate Scientist at the Li Ka Shing Knowledge Institute in Toronto. She served as Founding and Executive Director of the Biomedical Zone in 2015 — Canada’s first and only hospital-embedded, physician-led business incubator for emerging health technology companies — and has guided a wide variety of startup companies through clinical development, capitalization, and commercialization. Dr. Maxwell also managed a life sciences tech transfer portfolio at the University of Oxford and the UK National Health Service, executing patent strategy, spin-out company formation, and early stage capital raising. She has also served as a healthcare innovation expert to various Canadian federal, provincial, and local government entities, as a member of the Department Audit Committee of the Public Health Agency of Canada, and as an advisor to the Canadian Medical Association and the Canadian Space Agency. She is a graduate of Harvard College and Yale Medical School, and holds an MBA from Oxford University. Dr. Maxwell completed surgical training at the University of Toronto and is double board certified in Otolaryngology-Head Neck Surgery and Facial Plastic Reconstructive Surgery. She holds an ICD.D designation, awarded by the Institute of Corporate Directors, University of Toronto, School of Management.

Other Public Company Boards

Profound Medical Inc. (through November 2020)
ImmuneBio, Inc.

Director Qualifications

Dr. Maxwell brings to our Board important expertise as a medical doctor, as a health technology entrepreneur, and innovator, and as an expert in corporate governance. Her experience in guiding emerging health technology companies through clinical development and commercialization is highly valued to an entrepreneurial biotech company like United Therapeutics. In addition, our Canadian operations have become increasingly important in recent years, so Dr. Maxwell's knowledge of the Canadian regulatory environment will be very valuable to us.

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Martine Rothblatt, Ph.D., J.D., M.B.A.

Age: 66 Committees:
Director Since: 1996
Chairperson of the Board
Chief Executive Officer


None

Background

Dr. Rothblatt founded United Therapeutics in 1996 and has served as Chairperson and Chief Executive Officer since its inception. Previously, she created the satellite radio company SiriusXM. She is a co-inventor on eight of our patents. Her pioneering book, Your Life or Mine: How Geoethics Can Resolve the Conflict Between Private and Public Interests in Xenotransplantation, anticipated the need both for global virus bio-surveillance and a greatly expanded supply of transplantable organs.

Director Qualifications

Dr. Rothblatt brings to our Board extensive leadership and business experience at technology companies, as well as in depth knowledge of our company from her service as our founder, Chairperson and Chief Executive Officer. She also has substantial knowledge of medical ethics, having obtained her Ph.D. in medical ethics from the University of London.


     

Louis Sullivan, M.D.

Age: 87 Committees:
Director Since: 2002



Compensation
Nominating and Governance

Background

Dr. Sullivan was the founding President of Morehouse School of Medicine, from 1981 to 1989, served as President again from 1993 to 2002, and has served as President Emeritus since 2002. Dr. Sullivan was also one of the founders and served as Chair of Medical Education for South African Blacks, Inc., a member of the National Executive Council for the Boy Scouts of America, and a member of the Board of Trustees of Little League of America. Dr. Sullivan served as Secretary of the U.S. Department of Health and Human Services from 1989 to 1993. He is a physician certified in internal medicine with a sub-specialty certification in hematology. Dr. Sullivan currently serves on the board of directors of Emergent BioSolutions, Inc. (since 2005), a publicly-traded company. He also serves as Co-Chair of the Henry Schein Cares Foundation. Dr. Sullivan previously served on the boards of directors of a wide range of public companies, including General Motors Company, BioSante Pharmaceuticals, Inc., Bristol Myers Squibb Company, Cigna Corporation, 3M Company, Henry Schein, Inc., Household International (now HSBC), Equifax, and Georgia Pacific Corporation.

Other Public Company Boards

Emergent BioSolutions, Inc.

Director Qualifications

Dr. Sullivan brings to our Board extensive experience in the healthcare industry as a public official from his service as Secretary of the U.S. Department of Health and Human Services, a physician certified in internal medicine, and a professor and an administrator at Morehouse School of Medicine. He also has substantial public company board experience gained from his service as a director of Emergent BioSolutions, Inc., as well as his extensive previous public company board service.

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Class II Directors Continuing in Office with Terms Ending in 2022

Each Class II director was previously elected by shareholders at the 2019 Annual Meeting.

     

Christopher Causey, M.B.A.

Age: 58 Committees:
Director Since: 2003



Nominating and Governance (Chair)
Audit

Background

Mr. Causey has served as the Principal of the Causey Consortium, a professional services organization providing business strategy and marketing counsel to the healthcare industry, since 2002. Previously, Mr. Causey served as a senior marketing officer for a variety of healthcare companies. From 2001 to 2002, Mr. Causey served as Chief Marketing Officer for Definity Health Incorporated. He was also a member of the board of directors of Data Sciences International, Inc., a private company that develops wireless physiological monitoring solutions, from 2008 to 2013.

Director Qualifications

Drawing upon nearly 30 years of experience in strategic planning and marketing for health care delivery, financing and biotechnology organizations, including as Principal of Causey Consortium, Mr. Causey brings to our Board substantial experience in the health care and biotech industries. Our Board benefits from Mr. Causey’s extensive leadership experience as a senior health care marketing executive. Our Board of Directors has determined that Mr. Patusky meets the financial sophistication requirements of Nasdaq’s listing standards.


      Richard Giltner
Age: 57 Committees:
Director Since: 2009



Audit (Chair)
Nominating and Governance

Background

From 2009 until his retirement in 2010, Mr. Giltner was a portfolio manager at Lyxor Asset Management, an asset management group at the French bank Société Générale. From 2006 until 2009, he served as a managing director of Société Générale Asset Management, an international fund management firm, and head of the European office for its fund of hedge funds group. From 2003 to 2006, Mr. Giltner was the global head of foreign exchange options for the investment banking arm of Société Générale. He also held various other managerial positions within Société Générale from 1991 until 2003. Mr. Giltner has been a private investor since his retirement from Société Générale in 2010.

Director Qualifications

Mr. Giltner brings to our Board decades of experience in the financial sector, including international financial markets, financial derivatives, alternative investments and asset management. As our business continues to grow and expand, our Board benefits from Mr. Giltner’s global business and financial experience and his perspective as an institutional investor, as well as his leadership experience in international finance from his service in various management roles at Société Générale. Our Board of Directors has determined that Mr. Giltner is an audit committee financial expert as defined under the rules and regulations of the SEC and meets the financial sophistication requirements of Nasdaq’s listing standards.

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      Nilda Mesa, J.D.
Age: 61 Committees:
Director Since: 2018



Compensation
Nominating and Governance

Background

Professor Mesa has had a long and innovative career in environment, energy, and sustainability at the city, state, national, and global levels, and now writes and presents extensively on climate, energy, equity and urban systems relating to them. From 2014 to 2016, Professor Mesa served as Director of the New York City Mayor’s Office of Sustainability, where she led the pathbreaking OneNYC long term sustainability plan for the city. As chief sustainability officer for New York City, she oversaw programs in climate, energy, sustainability, air quality and public health, waste, green buildings, transportation, public education, and other initiatives. In 2016, she returned to Columbia University as an adjunct professor at the School of International and Public Affairs, as well as Director of the Urban Sustainability and Equity Planning Program with Columbia’s Center for Sustainable Urban Development at the Earth Institute, positions she continues to hold today. In 2006, she founded Columbia’s Office of Environmental Stewardship, one of the first in the United States for a university. She also served as Chief Administrative Officer at the Columbia Journalism School from 2012 to 2014. Before joining Columbia, Professor Mesa served in environmental leadership roles at the White House Council on Environmental Quality, the U.S. Air Force, the U.S. Environmental Protection Agency, and the California Attorney General’s office, and practiced law in both the public and private sectors. Her work has involved extensive international experience, including most recently a 2018 to 2020 appointment as a visiting professor and lecturer at the Paris Institute of Political Studies (Sciences Po), an international research university in France. She is the co-author of a book to be published next year on climate and collaboration, as well as a contributor to the recently published “Smarter New York City: How City Agencies Innovate.” (Columbia University Press). She is a graduate of Harvard Law School and Northwestern University.

Director Qualifications

Professor Mesa brings to our Board extensive executive leadership experience, particularly in the area of environmental stewardship. As we continue to operate and grow our business in an environmentally sustainable fashion, we expect Professor Mesa’s insights to be extremely valuable. In addition, our Board benefits from her experience working in a variety of scientific, academic, government, legal, and international settings.

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Judy Olian, Ph.D.

Age: 69 Committees:
Director Since: 2015



Audit

Background

Dr. Olian has served as President of Quinnipiac University since July 2018. Previously, she served as dean of the UCLA Anderson School of Management and the John E. Anderson Chair in Management from 2006 to 2018. Her research and business expertise centers on aligning organizational strategies and design with human resource systems and incentives, and managing top management teams. She began her UCLA appointment after serving as dean and professor of management at the Smeal College of Business Administration at Pennsylvania State University. Earlier, she served in various faculty and executive roles at the University of Maryland and its Robert H. Smith School of Business. Dr. Olian serves or has been a member of various advisory boards (including the U.S. Studies Centre at the University of Sydney, Peking University Business School’s International Advisory Board, the Connecticut Governor’s Workforce Council, the Business-Higher Education Forum, New Haven Promise, and Catalyst, a leading global think tank for women in business) and served as Chair of the Loeb Awards for Business Journalism. Born and raised in Australia, Dr. Olian received her B.S. in Psychology from the Hebrew University, Jerusalem and her M.S. and Ph.D. in Industrial Relations from the University of Wisconsin, Madison. She was the Chair of AACSB International, the premier thought leadership and accreditation organization for leading global business schools, and currently serves on the board of directors of Ares Management, L.P., a publicly traded global alternative asset management firm, and Mattel, Inc., a publicly traded multinational toy manufacturing company.

Other Public Company Boards

Ares Management, L.P.
Mattel, Inc.

Director Qualifications

As the president of a prestigious university and former dean of one of the world’s leading business schools, Dr. Olian brings valuable expertise in managing and leading a large organization. Her academic expertise, which centers on the alignment of organizational strategies with human resource systems and incentives, provides valuable insight to a growing biotech company like United Therapeutics. In addition, her service as a director of Ares Management and Mattel provides valuable public company board experience. Our Board of Directors has determined that Dr. Olian meets the financial sophistication requirements of Nasdaq’s listing standards.

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Class III Directors Continuing in Office with Terms Ending in 2023

Each Class III director was previously elected by shareholders at the 2020 Annual Meeting.

     

Raymond Dwek, C.B.E., F.R.S.

Age: 79 Committees:
Director Since: 2002



Compensation

Background

Professor Dwek is a Fellow of the Royal Society, London, and has served as Director of the Glycobiology Institute at the University of Oxford since 1988. He also served as Professor of Glycobiology at the University of Oxford from 1988 through 2009, and currently serves as Professor Emeritus. He was President of the Institute of Biology (a professional organization) from 2008 through 2010. From 2000 to 2006, Professor Dwek served as head of the Department of Biochemistry at the University of Oxford. Professor Dwek has been serving in various positions at the University of Oxford since 1966. In 1988, Professor Dwek was the scientific founder of Oxford GlycoSciences PLC, which was publicly traded on the London Stock Exchange and Nasdaq, and he served as a member of its Board of Directors until its sale in 2003. He was the 2007 Kluge Chair of Technology and Society at the U.S. Library of Congress. Professor Dwek is the founder of glycobiology, the study of the structure, biosynthesis, and biology of sugar chains attached to proteins.

Director Qualifications

Professor Dwek has extensive scientific experience as both the head of the Department of Biochemistry at the University of Oxford, one of the world’s largest biochemistry departments, and as a biotechnology innovator at organizations such as the Glycobiology Institute and Oxford GlycoSciences PLC. In evaluating existing and potential new programs, our Board benefits from his scientific insight and experience in pharmaceutical research and development.


     

Christopher Patusky, J.D., M.G.A.

Age: 57 Committees:
Director Since: 2002
Vice Chair of the Board
Lead Independent Director
Compensation (Chair)
Audit
Nominating and Governance

Background

Mr. Patusky has more than 30 years of experience in the private, public and nonprofit sectors. After graduating from Harvard Law School, he clerked and practiced law from 1988 to 2000, focusing on litigation, intellectual property, and business startup. His legal work included co-leading a team that obtained the first approval from the Federal Communications Commission and the United Nation's International Telecommunications Union of the use of stratospheric stations for delivery of telecommunication services worldwide. After receiving a master’s degree in governmental administration from the University of Pennsylvania in 2001, Mr. Patusky served from 2002 to 2007 as the Executive Director and member of the faculty of the University of Pennsylvania’s Fels Institute of Government. At Fels, he created and led the implementation of a first of its kind performance management system for the 270 schools of the Philadelphia School District, which was awarded an IBM Business of Government Award. From 2007 to 2011, Mr. Patusky was the Director of the Office of Real Estate and as a member of the Senior Policy Team at the Maryland Department of Transportation where he served on the Secretary's sustainability committee while focusing his efforts on the Governor's Transit Oriented Development (TOD) policy initiative, including drafting and lobbying passage of the Maryland TOD law, the authority he then used to advance real estate developments adjacent to Maryland's transit stations. Since 2012, Mr. Patusky has served as the founding principal of Patusky Associates, LLC, which serves as a personal investment vehicle, and as an executive manager of Slater Run Vineyards, LLC, his family’s farm-based vineyard and winery.

Director Qualifications

Mr. Patusky brings to our Board extensive legal, regulatory, business, governance, financial, and international experience from his varied career. Our Board of Directors has determined that Mr. Patusky meets the financial sophistication requirements of Nasdaq’s listing standards.

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Tommy Thompson, J.D.

Age: 79 Committees:
Director Since: 2010



Audit

Background

Before entering the private sector in 2005, Governor Thompson enjoyed a long and distinguished career in public service. As Secretary of the U.S. Department of Health and Human Services from 2001 to 2005, he was a leading advocate for the health and welfare of all Americans. He also served four terms as Governor of Wisconsin from 1987 to 2001. Governor Thompson currently serves as Interim President of the University of Wisconsin System, a position he has held since July 2020. Governor Thompson served as a partner at the law firm of Akin Gump Strauss Hauer & Feld LLP in Washington, D.C. from 2005 until January 2012, and as an Adjunct Senior Advisor from 2017 to 2020. From 2005 to 2009, he also served as the Independent Chair of the Deloitte Center for Health Solutions, which researches and develops solutions to some of our nation’s most pressing health care and public health related challenges. He is currently a member of the boards of directors of the following public companies: Centene Corporation, Physicians Realty Trust (as Chair), and TherapeuticsMD, Inc. (as Chair). He previously served on the boards of various other public companies, including Cancer Genetics Inc., CareView Communications, Inc., CNS Response, Inc., C.R. Bard, Inc., Cytori Therapeutics, Inc., SpectraScience, Tyme Technologies, Inc., and X Shares Advisors, and as the Chair of the board of directors of AGA Medical Holdings, Inc. from 2005 to 2010. Our Board has determined that Governor Thompson meets the financial sophistication requirements of Nasdaq’s listing standards.

Other Public Company Boards

Centene Corporation
Physicians Realty Trust
TherapeuticsMD

Director Qualifications

Governor Thompson brings to our Board significant experience in the healthcare industry, both as a public official (former Secretary of the U.S. Department of Health and Human Services) and in the private sector (Deloitte Center for Health Solutions), as well as public company board experience and knowledge of legislative affairs. Governor Thompson’s legal experience from his private practice at Akin Gump also is useful in our Board’s oversight of our legal and regulatory compliance.

Director Independence

Our Board has made the following independence determinations:

General Independence: Christopher Causey, Raymond Dwek, Richard Giltner, Katherine Klein, Ray Kurzweil, Linda Maxwell, Nilda Mesa, Judy Olian, Christopher Patusky, Louis Sullivan, and Tommy Thompson are independent in accordance with the Nasdaq listing standards
Management Director: Martine Rothblatt is not independent due her employment as our Chief Executive Officer
Audit Committee Standards: Christopher Causey, Richard Giltner, Judy Olian, Christopher Patusky, and Tommy Thompson meet the heightened independence standards for audit committee members set forth in rules promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act)
Compensation Committee Standards: Raymond Dwek, Nilda Mesa, Christopher Patusky, and Louis Sullivan meet the heightened independence standards for compensation committee members under the Nasdaq listing standards
Nominating and Governance Committee Standards: Christopher Causey, Richard Giltner, Nilda Mesa, and Christopher Patusky meet the independence standards for nominating committee members under the Nasdaq listing standards

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Board Structure

Board Leadership

Our Board believes that it is important to evaluate and determine the most appropriate Board leadership structure so that our Board can both provide effective, independent oversight of management and facilitate its understanding of our business. To carry out this responsibility, our Corporate Governance Guidelines empower our Board to periodically evaluate and determine the appropriate leadership structure for our Board. In doing so, our Board has the flexibility to consider our specific circumstances and evolving needs at any given time.

Our Board has determined that at this time, the leadership structure best suited to support the dynamic demands of our business is to have Dr. Rothblatt, who founded our company, serve as Chairperson of our Board and Chief Executive Officer, and to appoint a Lead Independent Director with robust, well-defined responsibilities. Our Board believes that Dr. Rothblatt serving in the combined roles of Chairperson and Chief Executive Officer provides an efficient and effective leadership model for a growing entrepreneurial company like ours, as it fosters clear accountability, effective decision-making, and alignment on corporate strategy. In addition, because our Board works closely with our executive officers and members of senior management, there is a natural synergy in the combined Chairperson and Chief Executive Officer roles that facilitates our Board’s guidance of management. The Board will continue to monitor the appropriateness of this structure.

Our Board also believes that independent leadership is an important aspect of our Board’s leadership structure. As a result, the independent directors on our Board have designated Mr. Patusky as Lead Independent Director.

Lead Independent Director

Our Lead Independent Director is selected annually by the independent directors
Among other responsibilities, our Lead Independent Director:
coordinates the activities of our independent directors;
approves Board meeting schedules and agendas;
chairs all meetings of our Board when the Chairperson is not present, including executive sessions of our independent directors; and
serves as principal liaison between our independent directors and our Chairperson and senior management
Our Lead Independent Director also has the authority to call executive sessions of the independent directors and is available for consultation and communication with major shareholders

A more detailed description of the responsibilities of the Lead Independent Director is included in our Corporate Governance Guidelines, which are available on our website at ir.unither.com/corporate-governance

Committees of our Board of Directors

Our Board has three standing committees. A summary of each committee’s duties and each committee’s current composition can be found below. Additional detail on each committee’s duties can be found in each committee’s charter. Each committee’s charter provides that it may delegate responsibilities to subcommittees if it determines such a delegation would be in the best interest of our company. Committee charters can be found on our website at ir.unither.com/corporate-governance.

Audit Committee

Members:

Richard Giltner (Chair)
Christopher Causey
Judy Olian
Christopher Patusky
Tommy Thompson

Meetings in 2020: 5

     

Primary Responsibilities

Representing and assisting our Board in its oversight responsibilities regarding our accounting and financial reporting processes, the audits of our financial statements, and system of internal controls over financial reporting, including the integrity of our financial statements, and the qualifications and independence of Ernst & Young LLP, our independent registered public accounting firm
Retaining and terminating our independent auditors
Approving in advance all audit and non-audit services to be performed by our independent auditors
Approving related party transactions
General oversight of risks related to our financial statements, internal controls, financial reporting processes, information technology, cybersecurity, and compliance with federal securities laws

For additional information regarding the processes and procedures used by our Audit Committee, see the section entitled Report of our Audit Committee below.

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Compensation Committee

Members:

Christopher Patusky (Chair)
Raymond Dwek
Nilda Mesa
Louis Sullivan

Meetings in 2020: 7

     

Our Compensation Committee oversees our compensation plans and policies, reviews and approves compensation for our executive officers, oversees the administration of our equity incentive and share tracking awards plans and our Supplemental Executive Retirement Plan, and reviews and approves grants of stock options to our executive officers and the methodology and formulae for granting stock options and restricted stock units to other employees.

Primary Responsibilities

Creating a system for awarding long-term and short-term performance-oriented incentive compensation to attract and retain senior management, and reviewing our compensation plans to confirm that they are appropriate, competitive, and properly reflect our goals and objectives while managing risk
Assisting our Board in discharging its responsibilities regarding compensation of our executive officers
Evaluating our CEO and setting our CEO's compensation
Overseeing human capital issues and diversity, equity, and inclusion matters

For additional information regarding the processes and procedures used by our Compensation Committee, see the section entitled Compensation Discussion and Analysis below.


Nominating and Governance Committee

Members:

Christopher Causey (Chair)
Christopher Patusky
Richard Giltner
Nilda Mesa
Louis Sullivan

Meetings in 2020: 7

     

Primary Responsibilities

In addition to the responsibilities described in the section entitled How We Select Our Director Nominees above, our Nominating and Governance Committee’s primary responsibilities include:

Proposing nominees for election to our Board
Proposing nominees to fill vacancies on our Board and newly created directorships
Reviewing candidates for election to our Board recommended to us by our shareholders
Recommending committee membership and committee chairs
Reviewing management succession plans
Evaluating and overseeing issues and developments with respect to corporate governance, and making recommendations to our Board regarding corporate governance
Overseeing our compliance program and our enterprise risk management program
Overseeing our ESG disclosure program

Corporate Governance Guidelines and Committee Charters

Upon the recommendation of our Nominating and Governance Committee, our Board maintains Corporate Governance Guidelines as a framework for the governance of our company. These guidelines are reviewed annually by our Nominating and Governance Committee, which recommends any changes to be submitted to the full Board for approval. Most recently, in March 2020, our Corporate Governance Guidelines were updated to, among other things, reduce the limit on the number of public company boards our directors may serve on, from five to four (including our Board). This change was made in direct response to shareholder feedback. Our Corporate Governance Guidelines, along with the charter for each Board committee, are available electronically in the Corporate Governance section of the Investors page of our website, located at ir.unither.com/corporate-governance, or by writing to us at United Therapeutics Corporation, Attention: Corporate Secretary, 1735 Connecticut Avenue N.W., Washington, D.C. 20009.

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Board Roles and Responsibilities

Risk Oversight

Our Board is responsible for overseeing the risks facing our company. Our Board works directly with our executive officers and other members of our senior management team in carrying out its risk oversight function. Our directors take a proactive, interested, and detailed approach to their service on our Board and set expectations to promote our success through the achievement of business objectives while maintaining high standards of responsibility and ethics.

BOARD
At its regularly scheduled meetings, our Board receives reports from our Chairperson and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, and General Counsel, and may also receive reports from the Committee Chairs, outside consultants, and other members of senior management, among others. These presentations often include identification and assessment of risks our company currently faces or may face in the future.
Our Board is able to ask questions, discuss and provide guidance to management on the risks presented, as well as any risks that our Board identifies
Our Board implements its risk oversight function both as a whole and through delegation to various committees. These committees meet regularly and report back to the full Board
AUDIT COMMITTEE
Our Audit Committee’s responsibilities include general oversight of our company’s practices with respect to financial risk assessment and management, as well as the responsibility to review and discuss the company’s practices with respect to risk assessment and risk management, and risks related to matters including the company’s financial statements and financial reporting processes, and information technology and cybersecurity.
COMPENSATION COMMITTEE
Our Compensation Committee’s duties include overseeing an assessment of the incentives and risks arising from or related to our compensation policies and practices, including but not limited to those applicable to our executive officers, and evaluating whether those incentives and risks are appropriate
NOMINATING AND GOVERNANCE COMMITTEE
Our Nominating and Governance Committee’s responsibilities include oversight of our company’s practices with respect to legal and regulatory compliance risk, as well as oversight of our enterprise risk management program
MANAGEMENT
Our senior management team is responsible for assessing risk on a daily basis. Our Board expects that our senior management team continually identifies, assesses, and manages the short-term and long-term risks faced by our company. If members of our senior management team identify risks that are material to United Therapeutics, our Board may convene a special meeting to discuss, assess, and address such risks

In April 2021, our Compensation Committee reviewed a risk assessment conducted by management and our Compensation Committee’s independent compensation consultant, Radford, to determine whether the design of our employee compensation programs and the amounts and components of employee compensation might create incentives for excessive risk taking by our employees. Based on this review, our Compensation Committee concluded that the risks arising from our employee compensation programs are not reasonably likely to have a material adverse effect on our company. Our Compensation Committee believes that our compensation programs encourage employees, including our executives, to remain focused on a balance of the short-term and long-term operational and financial goals of our company, thereby reducing the potential for actions that involve an excessive level of risk. See the section entitled Compensation Discussion and Analysis below for information regarding certain risk mitigating features of our compensation programs.

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Our Corporate Governance

Shareholder Engagement

How We Engage

Investor Relations and Senior Management
We provide institutional investors with many opportunities to provide feedback to our Board and senior management. We participate in investor conferences throughout the year, and regularly meet with our shareholders.
     
Board Involvement
Directors regularly and actively engage with our shareholders. For several years, our Compensation Committee Chair has actively sought to engage with our top 25+ shareholders at least once, and usually twice, per year. Our Nominating and Governance Committee Chair also engages with our shareholders on other governance topics.
2020 Engagement
We engaged with shareholders before our 2020 Annual Meeting, reaching out to 38 of our largest shareholders that collectively held over 70% of our outstanding shares and holding discussions with shareholders that collectively held over 30% of our outstanding shares. We also conducted engagement outreach following the Annual Meeting, again offering to engage with shareholders that collectively held over 70% of our outstanding shares (37 of our largest shareholders) and holding discussions with shareholders that collectively held approximately 23% of our outstanding shares. Overall, during 2020 we reached out to 47 shareholders that collectively held 74% of our outstanding shares and spoke with 15 of them that collectively held 35% of our outstanding shares. We note that following the 2020 Annual Meeting, several shareholders declined our invitation for further discussion because they had already shared their feedback during our spring shareholder outreach campaign just before our 2020 Annual Meeting.
Outcomes from Shareholder Engagement
We have considered shareholder feedback carefully, and modified our governance practices, executive compensation program, and disclosures to respond to this feedback. Some of the actions we have taken in response to shareholder feedback over the past several years include:
Governance
Adoption of majority voting (2015)
Adoption of proxy access (2015)
Board declassification (2020)
Stricter overboarding limits for directors (2020)
ESG
Commenced ESG disclosure program, resulting in the creation of our corporate responsibility website and our first annual corporate sustainability report (2020)
Launched effort to convert into the first-ever public biopharmaceutical company organized as a public benefit corporation (2021)
Executive Compensation
Renegotiated our Chief Executive Officer’s employment agreement to eliminate her entitlement to an annual stock option grant based on a market capitalization formula, and to eliminate an excise tax gross-up provision (2015)
Shifted to 100% performance-based equity compensation program for our Named Executive Officers (2017)
Reduced annualized total direct compensation for our CEO to approximately the 50th percentile of our peer group (2019)
Reduced compensation for our CEO by 89% in 2020, compared to 2019 (2020)
Addressed 2020 say-on-pay result through responsive changes and disclosures, as described under Compensation Discussion and Analysis (2021)
Enhanced Disclosure
Complete revamp of our proxy statement, to enhance readability (2020)
Added significant additional disclosure concerning our executive compensation decisions, and how they tie into our business strategy (2020 and 2021)
Added disclosure concerning Board skills and diversity (2021)

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Our Corporate Governance

Board Education

Our Board participates in a number of educational activities. Key members of management regularly provide scientific and business presentations to our Board to increase its understanding of the science behind our pipeline and our business activities. Experts regularly provide training sessions on key topics, particularly in complex legal, regulatory, and compliance areas. We joined the National Association of Corporate Directors, and encourage our Board members to take advantage of its numerous educational resources and programs.

Meetings of our Board of Directors and Board Attendance at Annual Meetings of Shareholders

Our full Board held six meetings during 2020. In addition, during 2020, our Audit Committee held five meetings, our Compensation Committee held seven meetings, and our Nominating and Governance Committee held seven meetings. Every director attended more than 75% of the total number of meetings of our Board and the committees on which they served during 2020, with 99% attendance on average. In accordance with applicable Nasdaq listing standards, the independent members of our Board met without management present four times during 2020.

Our Board encourages all of its members to attend our Annual Meeting of Shareholders, although attendance is not mandatory. All of our directors attended our 2020 Annual Meeting of Shareholders.

Shareholder Communication with Directors

Shareholders are encouraged to address any director communications to our Corporate Secretary by overnight or certified mail, signature acceptance or return receipt required, at: United Therapeutics Corporation, Attention: Corporate Secretary, 1735 Connecticut Avenue N.W., Washington, D.C. 20009. Our Corporate Secretary has the authority to disregard or take other reasonable action with respect to any inappropriate shareholder communications. After confirming the stock ownership of the author of the communication, our Corporate Secretary will review the appropriateness of a shareholder communication based on the relevance of the communication to Board duties and responsibilities. If deemed an appropriate communication, our Corporate Secretary will submit the shareholder communication to our Lead Independent Director, who may share it with the Nominating and Governance Committee or the full Board.

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Our Corporate Governance

Non-Employee Director Compensation

Overview

In 2020, our non-employee director compensation program was comprised of three main elements:

an annual cash retainer (payable quarterly) for service as a member of our Board

additional annual cash retainers (payable quarterly) for service on Board committees and for service as Lead Independent Director

stock options or restricted stock units (in either case, granted initially upon joining our Board, and thereafter on an annual basis) for service as a member of our Board

Directors may also be compensated for special assignments from our Board. In July 2019, at our request, Christopher Causey joined the board of a private company in which we own a minority equity interest. United Therapeutics pays him a stipend of $35,000 per year for this special assignment, which was approved by our Compensation Committee without his participation. Employee directors do not receive any compensation for service on our Board in addition to their regular compensation as employees.

Our Compensation Committee generally reviews non-employee director compensation levels approximately once every two years, and final decisions with respect to any changes in non-employee director compensation levels are made by our Board upon the recommendation of our Compensation Committee. In 2019, our Compensation Committee’s independent consultant reviewed the market competitiveness of our non-employee director compensation program relative to our compensation peer group and did not recommend any changes. Our current non-employee director compensation levels were established by our Board in February 2016. The following table outlines the non-employee director compensation levels in effect for 2020:

Value of Equity
Based Awards
(3)
       Annual Cash        Initial        Annual
Board Membership $60,000 $400,000 $400,000
Lead Independent Director(1) $35,000
Committee Chair(2):
Audit Committee $25,000
Compensation Committee $25,000
Nominating and Governance Committee $25,000
Committee Membership(2):
Audit Committee $15,000
Compensation Committee $15,000
Nominating and Governance Committee $15,000
(1)

Compensation for service as Lead Independent Director is paid in addition to amounts paid for membership on our Board and for any committee chair or membership

(2)

Committee chairs receive the compensation indicated for committee chair in lieu of the compensation for committee membership. Compensation for committee chair and committee membership is paid in addition to amounts paid for Board membership

(3)

Annual awards are generally granted once per year on the date of the first meeting of our Board following our Annual Meeting of Shareholders or for newly appointed directors, on or shortly following appointment to our Board

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Equity-Based Awards

Non-employee directors are eligible to receive equity-based awards under the United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan (the 2015 SIP), as follows:

Form of Awards: Initial grants and annual grants are paid in the form of stock options, restricted stock units (RSUs), or a combination of the two. For each grant, directors may elect to receive awards in any one of the following forms:

100% stock options

100% RSUs

50% stock options / 50% RSUs

Value of Awards: The aggregate value of each director’s annual equity-based award is $400,000. The aggregate value of an initial equity-based award upon joining our Board is $400,000, plus a pro rata portion of the annual equity-based award value based on the number of months remaining in our Board service year at the date of grant.

Deferral for RSUs: For directors who elect RSUs, our Compensation Committee has implemented a deferral program enabling directors to defer delivery of shares of common stock following vesting of the RSUs

Calculation Methodology: Our Compensation Committee also sets the methodology for determining the precise numbers of stock options and/or RSUs for each grant. For the annual grants, generally occurring in June of each year, the following applies (subject to modification by our Compensation Committee in its discretion):

Stock Options: The number of stock options is calculated by dividing the equity value ($400,000, or $200,000, if the director has elected 50% options and 50% RSUs) by the fair value of each stock option, calculated in accordance with the Black Scholes Merton methodology utilized in calculating share-based compensation for financial reporting purposes. Black Scholes Merton inputs are the same as those used in our most recent quarterly report on Form 10-Q, except that the stock price input is the average closing price of our common stock over a recent time period prior to the date of grant (May 10 through June 10, in the case of annual grants).

RSUs: The number of RSUs is calculated by dividing the equity value ($400,000, or $200,000, if the director has elected 50% options and 50% RSUs) by the average closing price of our common stock over a recent time period prior to the date of grant (May 10 through June 10, in the case of annual grants)

Rounding: The resulting number of stock options or RSUs, calculated as above, is rounded to the nearest 10 shares

The grant-date fair value of RSUs and stock options reported in the Non-Employee Director Compensation table each year often varies from the $400,000 target for each director, because the methodology used to calculate the number of RSUs and/or stock options delivered is based on an average stock price over a specified, predetermined one-month period prior to the date of grant, whereas the amount reported in the table represents the grant date fair value of the RSUs and stock options on the date of grant. See 2020 Non-Employee Director Compensation below.

Exercise Price: Stock options granted to non-employee directors have an exercise price equal to the closing price of our common stock as reported on the Nasdaq Global Select Market on the date of grant, or on the preceding trading day if the award is granted on a date when the Nasdaq is not open.

Grant Timing:

The date of grant for a new non-employee director’s initial award, consisting of the initial membership award and a prorated amount of the annual award for the remainder of the board service year, is the date of a director’s appointment or election to our Board

The date of grant for annual awards is the date of the first meeting of our Board following our Annual Meeting of Shareholders in the year of grant

Vesting: Non-employee director awards fully vest on the one year anniversary of the grant date, but only if the director attends at least 75% of the regularly scheduled meetings of our Board and their committee meetings from the date of grant until the date of our next Annual Meeting of Shareholders

Previously, non-employee directors were also eligible to receive awards under the 2011 United Therapeutics Corporation Share Tracking Awards Plan (collectively with its predecessor plan adopted in 2008, the STAP), which settle only in cash. However, since the approval of the 2015 SIP on June 26, 2015, all equity-based awards for non-employee directors have been granted in the form of stock options and RSUs.

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Our Corporate Governance

2020 Non-Employee Director Compensation

The following table lists the compensation earned in 2020 by each non-employee director:

Name        Fees
Earned or
Paid in
Cash(1)
       Restricted
Stock
Units(2)
       Stock
Options(2)
       All Other
Compensation
       Total
Christopher Causey $      100,000 $      $      390,199 $        35,000 (3) $      525,199
Raymond Dwek $ 67,706 $ 402,394 $ $ $ 470,100
Richard Giltner $ 100,000 $ 402,394 $ $ $ 502,394
Katherine Klein $ 60,000 $ 201,197 $ 195,100 $ $ 456,297
Ray Kurzweil $ 60,000 $ 201,197 $ 195,100 $ $ 456,297
Linda Maxwell $ 18,424 $ $ 658,658 $ $ 677,082
Nilda Mesa $ 79,606 $ 201,197 $ 195,100 $ $ 475,903
Judy Olian $ 64,606 $ 402,394 $ $ $ 467,000
Christopher Patusky $ 142,706 $ 201,197 $ 195,100 $ $ 539,003
Louis Sullivan $ 90,000 $ 201,197 $ 195,100 $ $ 486,297
Tommy Thompson $ 75,000 $ 201,197 $ 195,100 $ $ 471,297

(1)

Includes (as applicable) annual cash retainer and fees for serving on our Board, the committees of our Board, as a committee chair, and as Lead Independent Director.

(2)

On June 26, 2020, each of our non-employee directors (other than Dr. Maxwell, who was appointed to the Board on September 10, 2020) was granted stock options and/or RSUs. Each stock option had an exercise price of $119.76 per share and a grant date fair value of $37.81 per share, and each RSU had a grant date fair value of $119.76 per share. Upon her appointment to the Board on September 10, 2020, Dr. Maxwell received an equity award consisting entirely of stock options. Each stock option had an exercise price of $102.44 per share and a grant date fair value of $31.85 per share. Dr. Maxwell received 11,542 stock options for her new director sign-on grant, and 9,138 stock options reflecting a pro rata portion of her annual equity grant for the year in which she joined our Board. Amounts shown in these columns represent the aggregate grant date fair value of the stock options and RSUs granted in 2020, which were the only awards granted to non-employee directors in 2020, computed in accordance with applicable accounting standards. For a discussion of the valuation assumptions for stock options, see Note 8—Share-Based Compensation to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

The grant-date fair value of RSUs and stock options presented in this table differs from the $400,000 target for each director due to the methodology used to calculate the number of RSUs and/or stock options delivered, which is based on an average stock price over a specified one-month period prior to the date of grant.

(3)

Consists of compensation paid to Mr. Causey in 2020 for his service on the board of directors of a private company in which we maintain a minority equity interest, excluding a portion that was paid retroactively in 2020 for his 2019 service.

Each non-employee director held the following number of stock options, STAPs and RSUs as of December 31, 2020:

Name        Stock
Options
       STAP
Awards
       RSUs
Christopher Causey 51,380 6,000
Raymond Dwek 15,000 53,000 3,360
Richard Giltner 15,000 50,000 3,360
Katherine Klein 60,240 29,375 1,680
Ray Kurzweil 40,210 33,750 1,680
Linda Maxwell 20,680
Nilda Mesa 18,030 1,680
Judy Olian 45,930 3,360
Christopher Patusky 44,830 27,000 1,680
Louis Sullivan 35,590 30,000 1,680
Tommy Thompson 46,510 53,059 1,680

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EXECUTIVE COMPENSATION

2

Advisory Resolution to Approve Executive Compensation

We are asking our shareholders to vote on an advisory resolution, commonly known as a “Say-on-Pay” proposal, to approve executive compensation as reported in this Proxy Statement. Our Board and our Compensation Committee strongly value the opinions of our shareholders, and we have made substantial modifications to our executive compensation program specifically to address concerns raised by shareholders in previous years. Our Compensation Committee, which is responsible for designing and administering our executive compensation program, has designed our executive compensation program to provide a competitive and internally equitable compensation and benefits package that reflects company performance, job complexity, and the value provided, while also promoting long term retention, motivation, and alignment with the long-term interests of our shareholders.

As described elsewhere in this Proxy Statement, we have evolved our compensation practices significantly in recent years, in large part in response to shareholder feedback. We were therefore very disappointed that shareholders did not approve our 2020 Say-on-Pay proposal following shareholder feedback in 2019 that we believed would lead to its support. Based upon our shareholder outreach efforts in both the spring and fall of 2020, we believe the changes and commitments disclosed below, which were made after the 2020 Annual Meeting and as a result of shareholder feedback, address the concerns evidenced by our negative Say-on-Pay outcome in 2020. Shareholders with which we engaged following our 2020 Annual Meeting of Shareholders confirmed that the actions and disclosures described below are responsive to their concerns underlying our negative Say-on-Pay outcome in 2020.

In connection with your vote on this proposal, we urge you to read the Letter from Our Compensation Committee, the Compensation Discussion and Analysis section of this Proxy Statement, the Summary Compensation Table, and other related compensation tables and narratives that follow, which provide detailed information on the compensation of our Named Executive Officers. Our Compensation Committee and our Board of Directors believe that the policies and procedures articulated in these sections of this Proxy Statement, including the modifications we have made to our executive compensation programs, are effective in achieving our goals, and that the compensation of our Named Executive Officers reported in this Proxy Statement has supported and contributed to both our recent and long term success.

In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking shareholders to approve the following advisory resolution at the Annual Meeting:

RESOLVED, that the shareholders of United Therapeutics Corporation (our “Company”) approve, on an advisory basis, the compensation of our Company’s Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for our Company’s 2021 Annual Meeting of Shareholders.

This advisory resolution is non-binding on our Board of Directors. Although non-binding, our Board and our Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. Based on the results of our 2017 shareholder advisory vote on the preferred frequency of holding future advisory votes to approve executive compensation, our Board of Directors has adopted a policy providing for an annual advisory resolution to approve executive compensation. Unless our Board modifies its policy on the frequency of future “Say-on-Pay” advisory votes, the next “Say-on-Pay” advisory vote will be held at our 2022 Annual Meeting of Shareholders. The affirmative vote of the holders of a majority of the outstanding shares of common stock present, online or by proxy, at our Annual Meeting, and entitled to vote on the matter, is required for approval of this proposal. Abstentions have the same effect as an “against” vote. Broker non-votes, if any, have no impact on the vote.

Our Board of Directors recommends that you vote FOR the advisory resolution to approve executive compensation.

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Letter from our Compensation Committee

Dear Fellow United Therapeutics Shareholders:

STRONG PERFORMANCE, REVENUE GROWTH, AND COMMITMENT TO OUR EMPLOYEES, PATIENTS, AND SHAREHOLDERS

2020 will unquestionably be a year to remember for all of us. United Therapeutics began this year with excitement, as we continued executing our strategy to grow our treprostinil-based revenues and better serve our patients through the development of expanded and improved therapies, devices, and technologies.

The COVID-19 pandemic brought unexpected and unimaginable challenges to the world. United Therapeutics responded quickly and decisively, ensuring our patients were not at risk of a disrupted supply of medicine, our employees were able to continue working seamlessly with the resources and support they needed, and our workplaces remained safe for essential employees who continued to report to worksites daily. For more insights on our pandemic response, see pages 9 and 11.

In the face of these challenges, United Therapeutics delivered — exceeding our overall revenue goal, delivering top quintile profitability, working hard to keep our manufacturing operations intact to ensure our patients had uninterrupted access to their critical medicines, advancing our development programs even with pandemic restrictions in place, and working hard to support our employees. Wall Street clearly recognized the company’s performance, as our stock price grew by 72% in 2020, compared to return from the Nasdaq Biotechnology Index of only 26%.

WE ARE ENGAGED, LISTENING, AND RESPONDING TO OUR SHAREHOLDERS

We seek and value the feedback and input of our shareholders. Over the past several years, we have conducted extensive and ongoing engagement with shareholders, and have greatly benefited from and appreciated this dialogue as we continue to evolve our compensation, ESG, and governance programs.

We were incredibly disappointed with our negative Say-on-Pay result last year. By way of background, our 2019 executive compensation program included a four-year, front-loaded equity award comprised of stock options. Although we felt this program was well-designed, and would address prior concerns raised by shareholders, our 2020 Say-on-Pay result revealed that further changes were needed, and we conducted significant outreach to learn more.

Throughout 2020, including both before and after our 2020 Annual Meeting, we reached out to 47 of our largest shareholders, collectively holding 74% of our outstanding shares, and had meetings with 15 shareholders collectively holding 35% of our outstanding shares. Additionally, we held discussions with the two largest proxy advisory firms to gather feedback. These efforts were led by the Chair of our Compensation Committee. Two key themes emerged from the shareholder feedback we heard during our 2020 shareholder outreach efforts (both before and after the 2020 Annual Meeting). First, shareholders were concerned about the structure of the four-year equity grant awarded to our Named Executive Officers in 2019, including concerns about our level of commitment not to grant additional equity during the ensuing four-year period (2019-2022). Second, shareholders wanted more transparency about our goal-setting process for short-term incentives. Our Compensation Committee discussed this feedback at multiple meetings, and ultimately took specific actions in response. These include a clear and firm commitment not to grant additional equity-based awards to our current Named Executive Officers until 2023, commitments regarding our next equity grants to our Named Executive Officers in 2023, and commitments concerning the robustness of our 2021 revenue goal. Shareholders we met with following the 2020 Annual Meeting gave us positive feedback about these changes and confirmed that the actions we are taking are responsive to their feedback and concerns. Please see the detailed discussion of our response to shareholders on page 46.

WE APPRECIATE YOUR SUPPORT

We have worked hard to address shareholder feedback regarding our executive compensation programs, and we want to personally thank those shareholders with which we had the opportunity to meet in 2020. We very much value the dialogue and look forward to continuing the conversation. Please review the Compensation Discussion and Analysis beginning on the following page for further information and detail about our executive compensation program. We look forward to your continued support of United Therapeutics generally, and your support of our Say-on-Pay proposal this year.

Sincerely,

                 
             

Raymond Dwek
Compensation Committee
Member

Nilda Mesa
Compensation Committee
Member

Louis Sullivan
Compensation Committee
Member

Christopher Patusky
Compensation Committee
Chair

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation objectives and policies set by our Compensation Committee for our Named Executive Officers, including executive pay decisions and processes and all elements of our executive compensation program. In this Compensation Discussion and Analysis and elsewhere in this Proxy Statement, the term Compensation Committee refers to the Compensation Committee of our Board of Directors, and the terms we and our refer to United Therapeutics.

Overview

Below is a summary of introductory highlights regarding key 2020 compensation outcomes, performance metrics, and other achievements.

UTHR: Industry leading 2020 total shareholder return (TSR)


Compared to 2020 NBI* TSR

Returned to revenue growth trajectory

2% growth overall
16% growth for Tyvaso
30% growth for Orenitram
Continued to exceed analyst consensus revenue estimates
Record number of U.S. treprostinil patients on therapy

Industry-leading profitability

35% Net Income Margin, 57% EBITDASO margin
EBITDASO margin was 2nd among our compensation peer group

$1.6 million revenue per employee

5th highest in our compensation peer group






* NBI = Nasdaq Biotechnology Index

     

Pipeline execution

Successful INCREASE clinical study in a new indication with no approved therapies
Filed sNDA to expand Tyvaso labeling to include PH-ILD
FDA clearance of pharmacy-filled Remunity Pump for Remodulin
   

Strong performance despite COVID-19 challenges

No COVID-19 based layoffs, furloughs, or pay reductions; provided COVID-related time-off programs and additional cash bonuses to support our employees

Expanded and strengthened our commitment to diversity and inclusion at the Board level and throughout the company, with leadership by our Compensation Committee

Board-level diversity — 5 of 12 directors are women; 3 of 12 identify as under-represented minorities

Commenced ESG transparency program, with new website and first corporate responsibility report

No discretionary adjustments to executive compensation program as a result of COVID-19 or any other reasons

Responsiveness to 2020 Say-on-Pay results

Extensive shareholder outreach after the 2020 Annual Meeting (reached out to holders of 70+% of our outstanding shares)
89% reduction in reported CEO compensation
Annualized CEO total target direct compensation remained at approximately the 50th percentile of our peer group (when the 2019 four-year equity grant is annualized)
Firm commitment to no additional NEO equity awards until 2023
Additional responsive measures (see page 46)

CEO Compensation at a Glance

Our CEO's compensation is predominantly at-risk, performance-based (90%), when the 2019 four-year grant is viewed on an annualized basis
Actual reported CEO compensation reduced by approximately 89% from 2019 to 2020
2020 total target direct compensation remained positioned at the 50th percentile, when the value of the four-year grant awarded in 2019 is viewed on an annualized basis
During 2020, our CEO received:
A modest increase in base salary (3.5%), below the average salary increase for the rest of the company
No equity grants
No COVID-19 adjustments to incentive program targets, and no other discretionary adjustments in short-term or long-term incentives

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Company Introduction

We were formed in 1996 to find a cure or treatment for a rare disease afflicting the daughter of our Founder, Chairperson and CEO. We now market and sell five therapies for rare diseases, including four commercial therapies to treat pulmonary arterial hypertension (PAH): Remodulin® (treprostinil) Injection (Remodulin); Tyvaso® (treprostinil) Inhalation Solution (Tyvaso), which includes the Tyvaso Inhalation System; Orenitram® (treprostinil) Extended-Release Tablets (Orenitram); and Adcirca® (tadalafil) Tablets (Adcirca). We also market and sell an oncology product, Unituxin® (dinutuximab) Injection (Unituxin), which is approved for the treatment of high-risk neuroblastoma, and the Remunity® Pump for Remodulin. We are actively advancing a pipeline of research and development projects that includes new indications, formulations, and delivery devices for our existing products, as well as new products to treat PAH, pulmonary fibrosis, and other conditions.

Through our wholly-owned subsidiary, Lung Biotechnology PBC, we are focused on addressing the acute national shortage of transplantable lungs and other organs with a variety of technologies that either delay the need for such organs or expand the supply. Lung Biotechnology PBC is the first public benefit corporation subsidiary of a public biotechnology or pharmaceutical company.

Our Named Executive Officers

Our 2020 Named Executive Officers (or NEOs) are:

Martine Rothblatt, Ph.D., J.D., M.B.A.
66, Founder Chairperson, Chief Executive Officer, and Director

Dr. Rothblatt founded United Therapeutics in 1996 and has served as Chairperson and Chief Executive Officer since its inception. Previously, she created the satellite radio company SiriusXM. She is a co-inventor on eight of our patents. Her pioneering book, Your Life or Mine: How Geoethics Can Resolve the Conflict Between Private and Public Interests in Xenotransplantation, anticipated the need both for global virus bio-surveillance and a greatly expanded supply of transplantable organs.

Michael Benkowitz
49, President and Chief Operating Officer

Mr. Benkowitz joined United Therapeutics in 2011 as our Executive Vice President, Organizational Development. In this role, he was responsible for most companywide administrative functions, including human resources, and information technology, among others, and was also responsible for many of our business development efforts and oversight of several of our key collaborations. He was promoted to President and Chief Operating Officer in June 2016, when he also became responsible for all of our commercial and medical affairs activities.

James C. Edgemond
53, Chief Financial Officer and Treasurer

Mr. Edgemond joined United Therapeutics in January 2013 as Treasurer and Vice President, Strategic Financial Planning. Mr. Edgemond was promoted to Chief Financial Officer and Treasurer in March 2015. Prior to joining United Therapeutics, he was Vice President, Corporate Controller and Treasurer of Clark Construction Group from 2008 through January 2013. He also served in a variety of roles at The Corporate Executive Board Company from 1998 to 2008, serving as Executive Director, Finance from 2005 to 2008. He began his career as a public accountant at KPMG Peat Marwick LLP, from 1990 through 1998, where he served in a variety of roles, including as a Senior Manager prior to his departure.

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Paul A. Mahon, J.D.
57, Executive Vice President, General Counsel and Corporate Secretary

Mr. Mahon has served as General Counsel and Corporate Secretary of United Therapeutics since its inception in 1996. In 2001, Mr. Mahon joined United Therapeutics full-time as Senior Vice President, General Counsel and Corporate Secretary. In 2003, Mr. Mahon was promoted to Executive Vice President, General Counsel and Corporate Secretary. Prior to 2001, he served United Therapeutics, beginning with its formation in 1996, in his capacity as principal and managing partner of a law firm specializing in technology and media law.

2020 Performance Highlights

2020 continued the strategic transformation for United Therapeutics with several important milestones for our patients and our shareholders, including:

$1.48 billion in revenues, marking a return to revenue growth despite generic competition and COVID-19 $1.6 million in revenue per employee, which ranked 5th out of companies in our compensation peer group

     

We advanced our key pipeline programs during 2020, including:

FDA clearance of the Remunity Pump for Remodulin
Successful completion of the phase 3 INCREASE study of Tyvaso in patients with PH-ILD, an indication with no approved therapies
Progressed our phase 3 BREEZE study for Tyvaso DPI, a drug device combination product being developed for treatment of PAH and PH-ILD
Continued preparation for the launch of the Implantable System for Remodulin for PAH, pending Medtronic satisfying certain regulatory conditions
Continued progress on additional clinical trials despite industry-wide COVID-19 related challenges

We reached record numbers of PAH patients in the United States being treated with our treprostinil-based therapies — once again reaching more patients than ever before

72% TSR, compared to 26% TSR for the NBI

These efforts in 2020 have already led to FOUR key developments in early 2021:

Commercial Launch of the Remunity Pump for Remodulin. In February 2021, we launched commercial sales of this new subcutaneous delivery system for Remodulin
FDA Approval of Tyvaso for PH-ILD. In April 2021, the FDA approved our supplemental new drug application (sNDA) adding pulmonary hypertension associated with interstitial lung disease (PH-ILD). Tyvaso is the first therapy ever approved by the FDA to treat this condition, which affects at least 30,000 patients in the United States alone.
Launched TETON Study in IPF. Based on data from the INCREASE study, we launched a new phase 3 study of Tyvaso in patients with idiopathic pulmonary fibrosis (IPF), a condition impacting about 100,000 patients in the United States
Submitted Tyvaso DPI NDA. In April 2021, we submitted a new drug application (NDA) to the FDA for approval of Tyvaso DPI, a dry powder inhalation form of treprostinil, to treat both PAH and PH-ILD. We anticipate an FDA decision by the end of 2021, under an accelerated review as a result of our use of a priority review voucher we purchased in January 2021 for $105.0 million.

Shareholder Outreach and Responsiveness to our 2020 Say-on-Pay Vote

At our 2020 Annual Meeting, our shareholders did not approve our Say-on-Pay proposal, with only approximately 34% of the votes cast in favor of the proposal. We understand that there were elements of the structure and design of the four-year grant we made to NEOs in March 2019 that did not align with shareholder preferences, along with a perceived lack of commitment not to issue more equity during the four-year period the grant replaced. We have taken clear action to address and respond to the concerns we heard in 2020.

In the aggregate in 2020, we reached out to 47 shareholders that collectively held approximately 74% of our outstanding shares, and had discussions with 15 shareholders that collectively held over 35% of our outstanding shares. These discussions took place across two engagement efforts, one just before our 2020 Annual Meeting, and one following our 2020 Annual Meeting. Following our 2020 Annual Meeting, we offered to engage with shareholders that collectively held approximately 71% of our outstanding shares (37 shareholders), and had discussions with shareholders that collectively held approximately 23% of our outstanding shares (10 shareholders). These meetings were led by Christopher Patusky, our Lead Independent Director, who took on the role of Compensation Committee Chair in mid-2020 as part of our committee refreshment process. Where appropriate, participants also included representatives of our human

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resources, investor relations, and legal departments. The purpose of these meetings was to gather feedback regarding our executive compensation and general governance policies, understand any concerns or feedback about our executive compensation programs and their Say-on-Pay vote, and gather feedback on actions and disclosures our Compensation Committee was considering in response to shareholder feedback. We also held meetings with the two largest proxy advisory firms in the fall of 2020, discussing similar topics.

Following these calls, our Compensation Committee met and discussed the feedback received and considered possible actions and enhanced disclosures in order to respond to shareholder feedback. The following chart summarizes the feedback received, and the actions and disclosures intended to address shareholder feedback. Shareholders we met with in our post-Annual Meeting outreach confirmed that they found these actions and disclosures to be responsive to their concerns.

In addition to the following actions, we have refreshed our Compensation Committee by adding Christopher Patusky as its chair, and Raymond Dwek as a member of the Committee.

Aggregate 2020 Engagement       2020 Post-Annual Meeting

     
What we heard: Compensation Committee action following engagement:
Shareholders were concerned with the structure of our 2019 four-year equity grant, including a perceived lack of commitment not to issue more equity during the four-year period covered by this grant
Issued no equity awards to NEOs in 2020, resulting in an 89% decrease in reported compensation for our CEO
Disclosed a firm commitment that there will be no new equity grants to our current NEOs until 2023 (see page 55)
Disclosed a commitment to resume issuing equity awards annually in 2023 (i.e., granting one year of equity in 2023) (see page 55)
Disclosed commitment that the 2023 equity grant will respond to shareholder feedback and will have the following guardrails (see page 55):
The 2023 equity award will be at least 50% performance-based
The performance-based equity award will include one or more performance conditions other than stock price appreciation
The 2023 award will include a mix of equity vehicles, including the use of performance shares*
Shareholders expressed the need for more transparency in the goal setting process, especially when using goals set lower than prior year actual performance
The 2020 revenue goal was set above 2019 actual performance (see page 52 for a discussion of the 2020 revenue goal)
Advance commitments regarding our 2021 revenue goal (see pages 52-53):
Our 2021 revenue goal has been set significantly above our 2020 actual performance
Our minimum revenue performance level (i.e., threshold) for our CEO and other NEOs to receive any payout based on 2021 revenue performance has been set above our 2020 actual performance
Enhanced disclosure about how our goals are set, including the methodology behind setting a cash profit-margin goal aligned with top quintile profitability (see pages 50-54)

* Performance shares are awards of either restricted stock or restricted stock units that include one or more performance-based vesting criteria.

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Overview of our 2020 Executive Compensation Program

Compensation Program Objectives

Our executive compensation program is designed to retain and motivate our executive team, while achieving four critical objectives: pay-for-performance (with at-risk pay representing approximately 90% of overall Chief Executive Officer pay and approximately 83% of our other Named Executive Officers’ pay, when the 2019 four-year grant is viewed on an annualized basis); incentivize alignment with shareholder interests based on delivering operating performance and stock appreciation; balancing incentives over the short-term and long-term; and market competitiveness.

Sustainable, Long-Term Shareholder Value Creation
Pay-for-Performance      Shareholder Alignment      Balance Short- and
Long-Term Perspectives
      Market Competitiveness

Pay Program Elements

We accomplish these objectives through the following compensation elements, as summarized below:

Objective
Compensation Element      Pay-for-
Performance
     Shareholder
Alignment
     Balance Short-
and Long-Term
Perspectives
      Market
Competitiveness
Base Salary
Cash Incentive Awards
Long-Term Incentives (Stock Options)
Benefits/Perquisites
Supplemental Executive Retirement Plan (SERP)
Severance/Change-of-Control Benefits
Stock Ownership Guidelines

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Pay Element Overview

Our compensation program is broken into three elements: base salary, annual short-term incentive (cash bonus), and a long-term incentive program. A significant portion of target total compensation for our CEO and other NEOs is structured as “at risk” compensation, comprised of the annual short-term incentive cash bonus and long-term incentives in the form of stock options. In March 2019, our CEO and other NEOs were granted a one-time, four-year equity award which covered all equity awards for the years 2019-2022. The Compensation Committee will not grant any additional equity to our current NEOs during this four-year period. As such, our NEOs were not granted any additional equity in 2020. The below chart displays the breakdown of fixed and at-risk pay based on the annualized value of the four-year stock award granted in March 2019.

                        Element / Percent of TDC       Why We Pay This Element       Key Characteristics       How We Determine Amount

Base Salary

Provides market competitive levels of fixed pay to attract and retain our NEOs
Cash
Annual
Market rate, internal pay equity, experience and critical skills

Bonus

Provides competitive incentives to achieve difficult, annual company-wide performance criteria
Pay-for-Performance
Shareholder Alignment
Strategic alignment balancing a focus on patients through manufacturing and inventory performance, and advancement of clinical programs with driving revenue and profitability
Cash
Performance-Based
Annual
50% Financial
25% Cash Profits
25% Revenues
50% Operational
25% Manufacturing
25% R&D
Payout 0-150% of target

Stock Options

Strategic alignment incentivizing achievement of four-year business plan toward multiple-fold increase in revenues, driving shareholder value.
Pay-for-Performance
Shareholder Alignment
At-Risk
Performance-Based
Four-Year Grant covering 2019-2022, with no other equity awarded during this period
50% premium-priced cliff vesting at year 4
50% market-priced ratable vesting at years 2, 3 and 4
No intrinsic value unless stock price grows
Market rate, internal pay equity, experience and critical skills
Substantial reduction in market positioning on an annualized basis

The following charts illustrate the extent to which pay for our Chief Executive Officer and our other Named Executive Officers is at risk, as payout levels are based entirely on performance. For each chart, the amounts shown represent 2020 base salary (on an annualized basis, following the February 2020 salary increases), 2020 target cash bonus, and the annualized grant-date fair value of long-term incentive awards granted in March 2019, which were granted 50% in the form of premium-priced performance stock options and 50% in the form of market-priced stock options.

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CEO Target Pay Mix      Other NEO Target Pay Mix

2020 Compensation Decisions

Summary of 2020 Compensation

The components of our Named Executive Officers’ target total direct compensation are base salary and variable compensation, including cash incentives and long-term incentive compensation in the form of stock options. In 2020, we kept our commitment not to grant any additional equity to our CEO or other NEOs, based on the March 2019 grant which was designed to cover the 2019-2022 time-period (a four-year equity grant).

Summary 2020 Target Total Direct Compensation

NEO       2020 Base
Salary
(1)
     % Increase
Over
2019
Base
Salary
      2020 Cash
Incentive
Bonus Target
as % of Base
Salary
      Change in
Cash
Incentive
Bonus
Target %(2)
     2020
Long-Term
Incentive
Award Target(3)
     2020
Total Target
Direct
Compensation
Martine Rothblatt $1,320,000 3.5% 110% 0% $ $2,772,000
James Edgemond $700,000 3.7% 75% 0% $ $1,225,000
Michael Benkowitz $915,000 3.4% 85% 0% $ $1,692,750
Paul Mahon $880,000 3.5% 65% 0% $ $1,452,000
(1) Reflects increases in annual base salaries effective February 24, 2020 and first reflected in pay on March 13, 2020
(2) Represents the difference in cash incentive award target as a percentage of salary, between 2019 and 2020
(3) Reflects the fact that no equity was awarded in 2020 to our Named Executive Officers

Base Salary

Base salary is the fixed element of the compensation packages for our Named Executive Officers. Our Compensation Committee reviews and establishes base salary levels for our Named Executive Officers each year taking into consideration one or more of the following factors, depending on the circumstances: (1) a qualitative evaluation of individual performance, including contribution to the advancement of corporate objectives, impact on financial results, and strategic accomplishments; (2) our overall performance, financial condition, and prospects; (3) the annual compensation received by executives holding comparable positions at our peers; (4) our annual company-wide budget for salary increases; and (5) the input of our Chief Executive Officer (in the case of the other Named Executive Officers). Base salaries are also typically reviewed when there is a material change in the executive’s responsibilities during the year.

In early 2020, our Compensation Committee approved salary increases for our Named Executive Officers, as shown in the table above, effective February 2020. Salary increases were determined based on a review of competitive pay positioning, taking into consideration internal pay equity among Named Executive Officers and approximate the company-wide salary increases for our employees.

Cash Incentive Award Program

Each year, our Compensation Committee establishes cash incentive award targets for each of our Named Executive Officers, taking into consideration the same factors it uses to determine base salaries (other than our company-wide budget for salary increases). For 2020, our Compensation Committee established cash incentive award targets for our Named Executive Officers as a percentage of base salary, at the levels shown in the Summary 2020 Target Total Direct Compensation table above. These percentages were unchanged from 2019.

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These stated incentive targets are comparable to those of executives holding similar roles and levels of responsibility at our peer group companies. Cash incentives are earned for achieving our Company-Wide Milestones (described below) and three of our four Milestones are subject to a threshold, or minimum, level of performance before earning credit for those Milestones. In addition, each of our Named Executive Officers had the opportunity to earn up to 150% of their respective target cash incentive award for 2020, based on above-target performance on our cash profit and revenue-based Milestones. We believe that by setting a threshold level of performance as well as a maximum under the plan we have aligned these policies with market norms and have also responded to feedback from our shareholders.

2020 Company-Wide Milestone Program

The Milestones (or performance goals) under our 2020 Company-Wide Milestone Program are intended to create company-wide incentives relating to significant corporate objectives, falling into two categories: (1) financial metrics, consisting of revenue and profitability targets; and (2) operational metrics, tied to manufacturing and research and development (R&D) objectives. Our Compensation Committee approved the specific goals and weightings based on management input at the beginning of the year and a desire to reflect core performance measures and priorities for the business for the fiscal year, including our commitment to compliance, and to set goals that translate most directly into short-, medium- and long-term value growth.

The goal-setting process for 2020 was rigorous, involving lengthy discussions and a review of multiple data points, including analyst consensus, product expectations, and overall market potential. The Milestone performance targets are difficult to meet and require significant leadership and execution excellence on the part of our Named Executive Officers. Based on these factors, our Compensation Committee established the following Company-Wide Milestones and weightings for 2020:

2020 Company-Wide Milestones       Weighting

Milestone 1—Financial Performance-Cash Profits*: Achieve cash profits in the top quintile of our peer group as measured by a 50% cash profit margin

25%

Milestone 2—Financial Performance-Revenue: Superior financial performance as evidenced by achieving the net revenues for 2020 included in our long-range business plan ($1.46 billion)

25%

Milestone 3—Manufacturing: Adequate manufacturing capabilities, evidenced by a two-year inventory of Remodulin, Tyvaso, and Orenitram finished drug product and passing all GMP-related FDA inspections at our facilities without any issues that prevent the use or approval of any of our drug products

25%

Milestone 4—Research & Development: Conduct insightful research and development programs, taking into account regulatory approvals, label extensions and the quantity and quality of trials that support our business goals

25%

* Cash profit margin is defined as cash profit divided by net revenues. Cash profit is defined as net income for 2020 as reported in our Annual Report on Form 10-K for the year ended December 31, 2020, adjusted to add the following expenses, net of relevant benefits (or subtracted, to the extent the expense item is a net benefit):
Interest expense
Non-cash charges (including, without limitation, amortization, and depreciation)
Tax expense (including penalties and interest)
Extraordinary, non-recurring and unusual items (including without limitation, license fees, milestone payments, gains/losses on acquisition/disposal of assets, asset impairments, restructuring costs, foreign currency adjustments, and discontinued operations)
Legal expenses related to (1) intellectual property prosecution and defense; (2) litigation and government investigation and enforcement proceedings; and (3) amounts paid to settle/resolve legal disputes, litigation and government investigations and enforcement proceedings
Share-based compensation expense

Our Compensation Committee carefully crafted these Milestones, which represent rigorous, objective standards by which to measure company and executive officer performance. Our Compensation Committee believes that all four Milestones are strategically important to our continued success and therefore should be weighted equally in determining incentive awards. Cash profits and revenue objectives are important to maintaining industry-leading financial performance. Our 2020 goals are tied to our long-term strategic objectives, which include aggressive revenue targets over near-term, medium-term and long-term time horizons, and are designed to achieve profitability at the top quintile of our peers. Our financial performance goal was established based on many factors, including market opportunity for each product, analyst expectations, and historical individual product performance. Our Compensation Committee also considered the continued impact of generic competition for Adcirca and Remodulin in setting revenue goals. Our total revenue goal for 2020 was determined by our Compensation Committee to be challenging, and was set at a level that was above analyst consensus expectations and above our 2019 net revenue performance. Our cash profit margin performance Milestone is set at a very high bar, incentivizing top-quintile performance relative to our peers and ensuring thoughtful and disciplined budget and spend management. The shift to a cash profit margin from an absolute cash profit number in 2020 also enhanced the rigor around this Milestone, ensuring that the Milestone objective would keep pace with revenue performance in the event of stronger than expected revenue performance. Our manufacturing Milestone is intended to ensure a continuous supply of our treprostinil-based therapies, which generate the vast majority of our revenues. Our R&D Milestone was intended to ensure that we have a robust pipeline of products capable of delivering future revenues sufficient to drive industry-leading growth.

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The details of our framework for determining 2020 Milestone performance are provided below. As a general matter, under the terms of our Company-Wide Milestone Program, our Compensation Committee has the authority to exercise negative (downward) discretion in the event of partial attainment under any of the Milestones. The financial targets (cash profits and revenues) are set considering the market opportunity for our existing products, potential entrants of generic competition into the market during the performance period, analyst expectations, and our broader business plans. All of our targets were established prior to the COVID-19 pandemic, and no adjustments to these targets were made as the pandemic unfolded.

Financial Performance — Cash Profit Margin

Financial Performance — Revenues

* Stretch goal to provide additional credit for above profit performance is applied based as discussed under Financial Multiplier below

Manufacturing

We award pro rata credit based on the number of quarters for which: (1) pre-specified inventory levels are achieved (i.e., two-year supply of Orenitram, Remodulin, and Tyvaso); and (2) we pass any GMP-related FDA inspections at our facilities without any issues that prevent the use or approval of any of our drug products. A minimum of two quarters is a threshold condition for any credit under this Milestone. Achievement of this Milestone requires operational and manufacturing excellence across multiple interrelated functions. Notably, our objective of maintaining a two-year supply of our PAH therapies has emerged as a critical competency as we successfully navigated the impacts of the COVID-19 pandemic, ensuring the patients we serve did not experience a disruption in drug supply.

Research & Development

Performance under the research and development Milestone is based on a system of R&D points, where expected points (i.e., the goal) are determined at the beginning of the year based on our pipeline, and progress is measured at the end of the year.

Award pro rata credit       100% credit (at target)
< 100% of Goal 100%+ of Goal

Financial Multiplier

For 2020, above-target cash incentive awards were possible (up to 150% of target) through the application of a Financial Multiplier, which is based only on the achievement of financial performance against the pre-established revenue and cash profit margin target and stretch/ maximum goals, as follows:

      Range (Target to Stretch/Maximum)
Cash Profit Margin Performance 50%       55%
Revenue Performance $1.46 billion            $1.6 billion
Multiplier for each Metric* 0% 25%
* The Financial Multiplier is calculated independently for each metric, using linear interpolation between performance levels. Aggregate multiplier of up to 50% is applied to the entirety of the Milestone program attainment after determining individual performance for each individual Milestone.

2020 Milestone Performance

For 2020, our Compensation Committee determined that 100% of the Milestones were achieved, plus an additional 29% multiplier for above-maximum performance under our cash profit and revenue Milestones, as shown below:

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Milestone       Performance       Attainment
Level %
(A)
      Weighting
(B)
      % of Award
Earned
(A × B)

1
(Cash
Profit)

100%

25%

25%

2020 cash profit margin was 62%, representing 124% performance against the target of 50%. Because performance also exceeded the maximum 55% threshold, the full milestone achievement was awarded including a 25% financial multiplier.

2
(Revenue)

100%

25%

25%

2020 net revenues for Remodulin, Tyvaso, Adcirca, Orenitram, and Unituxin were $1.48 billion, representing 102% achievement against target performance of $1.46 billion. As a result, full credit was awarded, plus a 4% financial multiplier for above-target performance.

3
(Mfg)

Maintained greater than two-year inventory of all strengths of Remodulin, Tyvaso and Orenitram and passed all FDA inspections at our facilities without any issues that prevent the use or approval of any of our drug products. Full Milestone achievement was awarded.

100%

25%

25%

4
(R&D)

Achieved the full 25 R&D points (details provided below).

100%

25%

25%

Total

100%

Financial Multiplier (based on above-target cash profit and revenue Milestone performance)

29%

Total (including multiplier)

129%

A word about our financial performance goals in light of generic competition, the COVID-19 pandemic, and shareholder feedback

Revenue. During our shareholder outreach, shareholders have sometimes requested more detail regarding our revenue goal-setting process, particularly in years (such as 2019) where goals were set below the prior year’s financial performance. We are pleased to report that our goals for 2020 and 2021 were set above prior year performance. At the time we established our 2020 Company-Wide Milestones, we were well into the challenges of generic competition for both Adcirca and Remodulin, and believed we could set a very aggressive revenue goal for our management team, far above analyst consensus (as shown below). This goal required strong performance and/or growth for Unituxin, Tyvaso, Orenitram, and Remodulin — despite generic competition for Remodulin — in order to create a revenue target that was higher than 2019 performance. Achievement of this goal would involve absorbing the continued expected revenue loss with Adcirca entering its third year with a generic competitor. While the entry of generic competition directly impacts our revenue performance, we believed at the time the goal was set that we were turning the corner and expected our management team to deliver 2020 revenue above 2019 target and actual performance. We did not alter this goal despite the onset of the COVID-19 pandemic, which made it more difficult for our team members to access physicians’ offices to promote our products, and made it more difficult for patients to see their doctors as needed to initiate and manage their therapy. Despite all these challenges, our team delivered remarkably, pivoting quickly to a new way of working, developing innovative and creative solutions for achieving their objectives, and delivering a revenue result exceeding the aggressive goal that was put in front of them. We believe that our four-year strategy is continuing to deliver, and feel strongly our management team can continue to deliver strong revenue growth in 2021, even as the challenges of the pandemic continue to make our work increasingly difficult and complex. As such, we are disclosing that our 2021 revenue target, if achieved, will result in double-digit revenue growth. Further, in response to shareholder feedback, we are setting the threshold for revenue performance for 2021 above 2020 actual performance — ensuring that our executives will not receive any of their bonus attributable to revenue performance unless they deliver revenue performance that exceeds 2020.

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A Look Ahead: 2021 Revenue Milestone — Incentivizing Significant Revenue Growth

In response to shareholder feedback, we are providing the following information regarding our 2021 revenue target. While we do not provide the actual target in advance because we do not provide formal financial guidance, we want to make clear that our executive compensation program incentivizes significant revenue growth in 2021:

Threshold/minimum performance set above 2020 actual performance, directly in response to shareholder feedback no revenue-based bonus unless revenue grows in 2021 compared to 2020
Threshold/minimum performance set above analyst consensus for 2021 revenues
Target performance represents significant revenue growth compared to 2020 actual results
Maximum performance for 2021 represents 18% revenue growth compared to 2020

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Cash Profit. We have always focused on market and peer leading profitability. This strength has been noted as standout in the face of the COVID-19 pandemic, as our strong free cash flow ensured that we maintained a healthy balance sheet even in the face of the challenges brought by the pandemic. While in previous years, we have set an absolute cash profit number as our goal, the driver of this objective has always been to achieve an industry-leading cash profit margin. In 2020, in order to provide shareholders with better clarity and visibility into the goal-setting process, we adjusted our goal setting from an absolute number to a cash profit margin to tie the performance objective directly to the formula we use to manage our budgeting processes. This also accomplished the objective of ensuring that our goal rigor stayed consistent even if there were an unexpected rise or drop in revenue. Our cash profit margin is a somewhat unique metric, in that it is designed to ensure we adhere closely to a carefully-crafted budgeting algorithm whereby our cash budget each year is set at no more than 50 percent of the prior year’s net revenue. This correlates to our 50 percent cash profit margin goal for 2020. This budgeting algorithm has historically led to top-quintile profitability. For comparative purposes, we have included the chart below to show how our budget discipline translated into top-quintile profitability in 2020. Because not all companies report the same non-GAAP financial measures, the chart below shows how our cash profit performance led to top-quintile performance in 2020 based on a uniform profitability metric: EBITDASO margin, or earnings before interest, taxes, depreciation, amortization, and share-based compensation expense, divided by revenues. The chart below includes all companies within our compensation peer group except for two companies whose EBITDASO margin was a negative number.

Additional detail regarding our research and development performance

In evaluating performance under Milestone 4 (Research and Development), our Compensation Committee reviewed the clinical and registration-stage products being developed within our pipeline, the unmet medical need they are intended to address, and the significance of potential revenues if approved. The following is a list of these programs, several of which represent multi-billion-dollar revenue opportunities, and in some cases address potential indications for which there are no FDA-approved therapies:

FDA Approvals: 12 points (full credit) awarded for achieving one key FDA approval, compared to a goal of one FDA approval. Specifically, the FDA cleared the pharmacy-filled version of the Remunity Pump for Remodulin
Late-Stage Clinical Programs: Ten points (full credit) awarded for progressing seven registration-stage programs (compared to a goal of five programs), listed below:
INCREASE, a phase 3 study of Tyvaso for WHO Group 3 pulmonary hypertension associated with interstitial lung disease
BREEZE, a phase 3 study of Tyvaso DPI
PERFECT, a phase 3 study of Tyvaso for WHO Group 3 pulmonary hypertension associated with chronic obstructive pulmonary disease
TETON, a phase 3 study of Tyvaso for idiopathic pulmonary fibrosis
ADVANCE OUTCOMES, a phase 3 event-based study of ralinepag in PAH patients
ADVANCE CAPACITY, a phase 3 study of the effect of ralinepag on exercise capacity in PAH patients
Registration study of ex-vivo lung perfusion technology to increase the utilization of donated lungs for transplantation

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Earlier-Stage Clinical Programs: Two points (full credit) awarded for progressing one early stage development programs (compared to a goal of one):
Unexisome™, an exosome product for the treatment of bronchopulmonary dysplasia
New Product Candidates: One point (full credit) awarded for progressing one new product candidate into clinical development (compared to a goal of one):
OreniPro, a once-daily prodrug form of Orenitram

2020 Cash Incentive Awards under the Company-Wide Milestone Program

The cash incentive awards earned by our Named Executive Officers and approved by our Compensation Committee for the 2020 performance year were as follows:

NEO      2020
Base Salary
(A)
     2020 Cash
Incentive Award
Target as % of
Base Salary
(B)
     2020 Milestone
Attainment
(C)
     2020 Financial
Multiplier
(D)
     Total Cash
Incentive
Bonus Earned
(A × B × C × D)
Martine Rothblatt $1,320,000 110% 100% 129% $1,873,080
James Edgemond $700,000 75% 100% 129% $677,250
Michael Benkowitz $915,000 85% 100% 129% $1,003,298
Paul Mahon $880,000 65% 100% 129% $737,880

Long-Term Incentive Compensation

2020 Long-Term Incentive Compensation

In light of the equity grants awarded in March 2019 intended to provide long-term equity incentive compensation to our NEOs for the period from 2019-2022, no equity was awarded to our CEO or other NEOs in 2020. We commit that no additional equity will be granted to our CEO or other current NEOs during the time period covered by this award (2019-2022). The next equity granted to our Named Executive Officers will be in 2023. Please see the section below titled A Look Ahead: 2023 Equity Incentive Compensation Program for commitments we are making on key design elements of our next equity incentive compensation program in 2023 in response to shareholder feedback following our 2020 Annual Meeting.

2019-2022 Long-Term Incentive Compensation

Our long-term incentive compensation program is structured to support our pay-for-performance and shareholder alignment objectives. As previously disclosed, we implemented a new long-term incentive compensation program in 2019 designed to motivate and retain our executive leadership team, while carefully and thoughtfully integrating shareholder feedback and alignment. We awarded a four-year grant of stock options to our Named Executive Officers, intended to cover four years of equity awards for the performance years 2019 through 2022, matching our then-current four-year business plan, execution of which was expected to yield significant revenue growth.

With the four-year grant in 2019, we firmly commit not to grant additional equity to our CEO or other current NEOs during the time period this grant is intended to cover (2019-2022), and our next equity grant to these executives will not occur before 2023.

The four-year grant consisted of two forms of stock options under the United Therapeutics Corporation Amended and Restated 2015 Stock Incentive Plan (the 2015 SIP). One-half of these awards were in the form of premium-priced performance stock options, with an exercise price equal to 115% of our closing stock price on the date of grant. The vesting of the four-year awards was heavily weighted toward the end of the four-year period covered by the grant, with no vesting occurring during 2019 or 2020.

A Look Ahead: 2023 Equity Incentive Compensation Program

Based on feedback provided by shareholders during our 2020 shareholder engagements both before and after our 2020 Annual Meeting, we are providing the following commitments or “guardrails” concerning our 2023 equity incentive program. While it is too early to design an incentive compensation program that is two years away, we are committing that our equity incentive program will have the following features in 2023 to address concerns raised by shareholders regarding our 2019 four-year equity grant:

A return to annual equity award granting practices, granting one year of equity in 2023 rather than a front-loaded, multi-year grant
At least 50% of the award will be performance-based
Performance-based awards will include one or more performance metrics other than stock price appreciation
The 2023 equity program will include a mix of equity vehicles, including the use of performance shares

When discussing these commitments with shareholders during our post-Annual Meeting engagements, we received positive feedback and confirmed that these changes, coupled with our commitment not to award additional equity to our current NEOs during the remainder of the four-year period, were responsive to their concerns about our long-term incentive program.

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Vesting of 2018 Long-Term Incentive Awards

In 2018, we awarded performance-based stock options to our Named Executive Officers with a performance vesting condition tied to achieving average cash profit margin of at least 50% over a three-year period (2018-2020). These options were granted on March 15, 2018, with a cliff-vesting feature on the third anniversary of the date of grant, to the extent earned, and will expire on the tenth anniversary of the date of grant. Vesting of this grant was subject to a threshold performance criterion of 45% average cash profit margin, at which one-half of the target number of shares would have vested. Below this threshold, zero shares would have vested and between 45% and 50% average cash profit margin, the number of shares earned would have been determined by linear interpolation. Up to 200% of the target number of shares could be earned if the average cash profit margin equaled or exceeded 55%, with the number of shares earned between target and maximum determined by linear interpolation.

As a result of achieving an average cash profit margin of 59% during the 2018-2020 period, the 2018 long-term incentive award vested at maximum levels as of March 15, 2021, as shown in the table below.

NEO       Threshold       Target       Max       Options
Earned/Vested
Martine Rothblatt 71,276 142,551 285,103 285,103
James Edgemond 18,838 37,675 75,349 75,349
Michael Benkowitz 21,383 42,765 85,531 85,531
Paul Mahon 20,365 40,729 81,458 81,458

2020 Compensation Program Design

Roles of Management, Compensation Committee, and Compensation Consultant

Role of Our Compensation Committee and Management

Our Compensation Committee is composed entirely of independent directors, as defined by Rule 6505(a)(2) of the Nasdaq listing standards. Our Compensation Committee meets as often as it determines necessary to carry out its duties and responsibilities through regularly scheduled meetings and, if necessary, special meetings. Our Compensation Committee also has the authority to take certain actions by written consent of all members. In 2020, our Compensation Committee met seven times. Our Compensation Committee reviews and oversees our compensation policies, plans, and programs and reviews and determines the compensation to be paid to our Named Executive Officers, with the input and advice from its independent compensation consultant. Our Compensation Committee also considers the input of our Chief Executive Officer in making compensation decisions related to our other Named Executive Officers.

Role of Independent Compensation Consultant

Our Compensation Committee has the authority to engage advisors to assist it in carrying out its responsibilities. In accordance with this authority, our Compensation Committee directly engaged Radford, part of the Rewards Solutions practice at Aon, plc, as its compensation consultant during 2020 to provide advice to our Compensation Committee on our executive and non-employee director compensation practices and policies. Our Compensation Committee, in its discretion, may replace its independent compensation consultant or hire additional consultants at any time. Radford performed additional services during 2020, namely consulting services for non-executive employee compensation matters and broad-based compensation survey data, and was paid fees for these services totaling approximately $33,900. In addition, Radford affiliates (Aon plc and its related entities) performed actuarial services relating to our SERP, insurance advisory services, and retirement plan advisory services, along with risk management consulting and insurance brokerage services for United Therapeutics during 2020, for which we paid approximately $469,759 during 2020. Additional insurance premiums and related fees were paid to Aon plc and passed through to insurance companies not affiliated with Aon plc. Our Compensation Committee approved these services and determined that they did not impair Radford’s independence. Our Compensation Committee considered the independence of Radford in light of SEC rules regarding conflicts of interest involving compensation consultants and Nasdaq listing standards regarding compensation consultant independence. Based on its review, our Compensation Committee determined that Radford was independent, and that Radford’s work did not raise any conflicts of interest. In making the foregoing determination, our Compensation Committee considered the following six factors, as well as other factors it deemed relevant: (1) the provision of other services to us by Radford; (2) the amount of fees Radford received from us, as a percentage of their total revenue; (3) the policies and procedures of Radford that are designed to prevent conflicts of interest; (4) the lack of any business or personal relationships of the Radford consultants with any member of our Compensation Committee; (5) the lack of any United Therapeutics stock owned by the Radford consultants performing services for our Compensation Committee; and (6) the lack of any business or personal relationships of the Radford consultants or Radford itself with any of our executive officers. During 2020, we paid Radford $269,107 in fees for determining or recommending the amount and form of compensation to our directors and executive officers.

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Our Compensation Committee engaged Radford during 2020 to review and advise our Compensation Committee on all principal aspects of executive and non-employee director compensation. This included base salaries, cash incentive awards, and long-term incentive awards for our executive officers. Radford performed the following tasks for our Compensation Committee in 2020, among others:

Reviewing and advising on the structure of our compensation arrangements for our Chief Executive Officer and our other Named Executive Officers
Reviewing and advising on the structure of our compensation arrangements for our non-employee directors
Providing recommendations regarding the composition of our peer group
Analyzing publicly available proxy data for companies within our peer group and survey data relating to executive compensation
Conducting pay and performance analyses relative to our peer group
Updating our Compensation Committee on industry trends and best practices with respect to executive long-term incentive compensation program design, including types of long-term incentive compensation awards, size of long-term incentive compensation grants, and aggregate long-term incentive compensation grant usage
Reviewing our equity incentive awards against our design/cost targets and against industry norms
Reviewing the Compensation Discussion and Analysis and other compensation-related disclosures in our Proxy Statement
Advising our Compensation Committee in connection with its risk assessment relating to our compensation programs
Preparing for and attending shareholder engagement sessions
Working on special or ad hoc projects for, or at the request of, our Compensation Committee as they arose

In the course of fulfilling these responsibilities, Radford regularly communicated with our Compensation Committee Chair outside of and prior to most Compensation Committee meetings. Our Compensation Committee regularly invites its independent compensation consultant to attend its meetings. In 2020, Radford representatives attended each of our Compensation Committee’s seven meetings.

While our Compensation Committee considered its independent consultant’s recommendations in 2020, our Compensation Committee’s decisions, including the specific amounts paid to our executive officers and directors, were its own and may reflect factors and considerations in addition to the information and recommendations provided by its independent consultant.

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Compensation Peer Group

On an annual basis, our Compensation Committee reviews Named Executive Officer compensation levels relative to a peer group of industry and labor market competitors. For 2020, we defined our peer group as the top 25 companies other than United Therapeutics, ranked by revenue, in the Nasdaq Biotechnology Index. This was the same peer group selection methodology we used the prior year. Our 2020 peer group was selected in 2019, and was used to develop market data as an input into our compensation program for 2020. This peer group includes only companies that are U.S.-based or based in jurisdictions with similar compensation disclosure requirements as U.S. companies. Our methodology for selecting compensation peers uses an objective metric, which our Compensation Committee believes results in a peer group that includes biopharmaceutical and biotechnology companies that are similar to us in terms of financial performance, shareholder value creation, and drug development and commercialization, and generally reflects the universe of companies from which we recruit, and against which we retain, executive talent.

Each year, a number of peers are added or removed from the list and replaced with other companies for various reasons, including merger and acquisition activities. We have provided below for reference the profile of our compensation peer group for 2020, showing changes made from our 2019 peer group. For clarity, the 2019 peer group was selected in 2018 and used for setting 2019 compensation policies. The 2020 peer group was selected in 2019 and used for setting 2020 compensation policies.

2019 PEER GROUP  

Acorda Therapeutics
Akorn
Alexion Pharmaceuticals
Alkermes
AMAG Pharmaceuticals
Amgen
Biogen
BioMarin
Bio-Techne
Bruker
Celgene
Endo International
Gilead

Horizon Pharma
Illumina
Incyte
Jazz Pharmaceuticals
Mylan N.V.
Myriad Genetics
Neurocrine
Opko Health
PRA Health Sciences
Regeneron
Shire
Syneos
Vertex

ADDITIONS FOR 2020
Exelixis
Ionis Pharmaceuticals


Nektar Therapeutics
Seattle Genetics

 

DELETIONS FOR 2020
Acorda Therapeutics
AMAG Pharmaceuticals


Bruker
Shire

 

2020 PEER GROUP
Akorn Celgene Ionis Pharmaceuticals Regeneron
Alexion Pharmaceuticals Endo International Jazz Pharmaceuticals Seattle Genetics
Alkermes Exelixis Mylan N.V. Syneos Health
Amgen Gilead Sciences Myriad Genetics Vertex
Biogen Horizon Therapeutics Nektar Therapeutics
BioMarin Pharmaceutical Illumina Opko Health
Bio-Techne Incyte PRA Health Sciences

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The following chart shows how United Therapeutics ranks within its 2020 peer group on a variety of metrics. These metrics were based on available data at the time the peer group was approved, generally reflecting the trailing twelve-month period ending March 31, 2019.

      United Therapeutics
($ in millions)
      Percentile       Rank
Revenue $1,601.2 15th of 26
Operating Income ($157.4.) 23rd of 26
Adjusted Operating Income(1) $642.6 8th of 26
Net Income ($149.9) 22nd of 26
Adjusted Net Income(1) $650.1 8th of 26
ROIC(1) 21.7% 9th of 26
Return on Equity(1) 27.7% 9th of 26
Return on Assets(1) 11.9% 6th of 26
Market Cap Per Employee(2) $5.5 15th of 26
(1) In the case of United Therapeutics, each of these figures has been adjusted to reflect a one-time, $800.0 million up-front payment in January 2019 to Arena Pharmaceuticals, Inc.
(2) Market capitalization per employee as of May 2019 when the peer group was approved

Our Compensation Committee’s approach to peer group selection is to apply an objective external measure for selecting companies. This results in a number of peers being larger than United Therapeutics based on revenue as well as a number of peers being smaller. Our goal each year is to place our company within the peer group statistics of the 25th to 75th percentile for revenue as close to the median as possible while managing changes each year due to sector volatility, industry consolidation, and differences in business and organization models. Furthermore, our Compensation Committee views it as critical to measure ourselves against industry-leading peers (including those that are both larger and smaller than we are) because, in addition to being companies with which we compete for talent, many of these larger and smaller companies are also our business competitors. By placing our company at around the 50th percentile of our peer group for revenue, we believe our peer group reflects companies of similar scope and complexity.

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Key Governance Features of our Executive Compensation Program

Our Compensation Committee periodically assesses the effectiveness of our compensation policies and practices in achieving its pay-for-performance objective while aligning the interests of executive officers with those of shareholders, balancing short-term and long-term elements, and maintaining market competitiveness. Our Compensation Committee also reviews risk mitigation and governance items, which are designed to help ensure that our compensation programs are functioning to achieve such objectives. In conjunction with this assessment and review, we have adopted the following best practices:

✓      WHAT WE DO                         ✗      WHAT WE DON’T DO
         
Design our executive compensation program to align pay and performance
Maintain an appropriate balance between short-term and long-term compensation, which discourages short-term risk taking at the expense of long-term results
Grant performance-based long-term incentive awards
Maintain stock ownership guidelines to align executive officer and share ownership with that of our directors and our shareholders
Prohibit hedging and pledging by executives and directors*
Employ a compensation recovery, or clawback, policy**
Conduct annual risk assessments of our compensation policies and practices
Hold Compensation Committee executive sessions without management
Engage an independent compensation consultant who reports directly to the compensation committee
No backdating of stock options
No repricing of stock options without shareholder approval
No liberal share recycling under 2015 Stock Incentive Plan
No vesting prior to the first anniversary of grant, subject to limited exceptions
No discounted or reloaded stock options
No excessive perquisites
No excise tax gross ups
No guaranteed bonus payments

* Pursuant to our insider trading policy, directors, officers, and employees are prohibited from purchasing our securities on margin, engaging in “short” sales of our common stock, or buying or selling puts, calls, futures contracts, or other forms of derivative securities relating to our securities. In addition, our Board has adopted a policy prohibiting our directors and executive officers from pledging of shares of our common stock.
** Our Board has the authority, to the extent permitted by governing law, to make retroactive adjustments to any cash award or equity award-based incentive compensation paid to our Named Executive Officers and certain other senior managers where the payment was predicated upon the achievement of certain financial results that were subsequently the subject of a restatement.

Other Executive Compensation Policies and Practices

Equity Incentive Awards Grant Timing Policy

Our equity incentive award grant timing is designed so that equity-based awards are granted after the market has had an opportunity to react to our announcement of annual earnings. As such, as a general matter equity-based awards to our employees and Named Executive Officers are typically granted on March 15th each calendar year (or the preceding trading day if markets are not open on March 15th). We also believe this timing helps us avoid broad internal communication of highly confidential financial results prior to public announcement of our annual financial results. Our Compensation Committee may also approve equity-based awards at other times, in connection with significant personnel events, such as new hire, promotion, new directorship, achievement of a significant corporate objective, or appointment to a Board committee. In addition, our Compensation Committee is permitted the flexibility to grant awards on the 15th day of any month (or the preceding trading day if markets are not open on the 15th).

All equity incentive awards granted to our Named Executive Officers and other employees have an exercise price equal to at least the closing price of our common stock on the Nasdaq on the date of grant or, if the award is granted on a date when the Nasdaq is not open, an exercise price equal to at least the closing price of our common stock on the Nasdaq on the preceding trading day.

Benefits and Perquisites

The benefits offered to our Named Executive Officers are substantially the same as those offered to all employees, with the exception of the supplemental executive retirement plan (SERP) discussed in the section entitled Supplemental Executive Retirement Plan below. We provide a tax-qualified retirement plan (a 401(k) plan) and medical and other benefits to executives that are generally available to other full-time employees. Under our 401(k) plan, all employees are permitted to contribute up to the maximum amount allowable under applicable law (i.e., $19,500 in 2020 or $26,000 for eligible participants who are age 50 or older). We make matching contributions equal to 40% of eligible employee contributions with such matching contributions vesting 33 1/3% per year based on years of service, not the amount of time an employee has participated in the 401(k) plan. Therefore, once an employee completes three years of service, their

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account is fully vested, and any future matching funds will vest immediately. The 401(k) plan and other generally available benefits programs allow us to remain competitive for executive talent. We also provide limited perquisites to our Named Executive Officers, including participation in either our vehicle lease program, which covers the monthly lease payment and cost of insurance and maintenance on vehicles, or a monthly car allowance of up to $1,000. Our Compensation Committee believes that the availability of these benefit programs generally enhances executive recruitment, retention, productivity, and loyalty to us.

For additional details on certain benefits and perquisites received by our Named Executive Officers, see the Summary Compensation Table below.

Supplemental Executive Retirement Plan

We maintain our SERP for select executives to enhance the long-term retention of individuals who have been and will continue to be vital to our success. Currently, only our Named Executive Officers and two other members of senior management participate in the SERP. The SERP provides each participant with a lifetime annual payment after retirement (or at their election, a lump-sum payment) of up to 100% of final average three-year gross salary less estimated social security benefit, provided that they is employed by us or one of our affiliates until age 60. Participants in the SERP are prohibited from competing with us or soliciting our employees for a period of twelve months following their termination of employment or, if earlier, upon attainment of age 65. Violation of this covenant will result in forfeiture of all benefits under the SERP.

Additional details regarding the SERP, including provisions in connection with a participant’s death or disability or change in control, are provided under the Pension Benefits in 2020 table below.

Post-Employment Obligations for Named Executive Officers

Each of our Named Executive Officers is eligible for certain severance payments in the event their employment terminates under specified circumstances, including in connection with a change in control, as provided in their employment agreements as well as the terms of the SERP, the 1997 United Therapeutics Corporation Amended and Restated Equity Incentive Plan (EIP), the 2015 SIP, and the STAP. These payments vary based on the type of termination but may include cash severance, stock option and STAP vesting acceleration, SERP vesting acceleration, and/or continuation of health and other benefits.

Our Compensation Committee approved these arrangements in order to promote the loyalty and productivity of our Named Executive Officers and to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of our shareholders and our other constituents without undue concern about whether the transaction may jeopardize their employment. Our Compensation Committee wants our Named Executive Officers to be free to think creatively and promote the best interests of our company without worrying about the impact of those decisions on their employment.

Details regarding severance and change in control arrangements for our Named Executive Officers are contained in the text following the Potential Payments Upon Termination or Change in Control table below.

Stock Ownership Guidelines

As noted above under Our Corporate Governance—Selecting Directors—Stock Ownership Guidelines, in 2011 our Board adopted Stock Ownership Guidelines in order to further align the financial interests of our directors and Named Executive Officers with those of our shareholders, to foster a long-term management orientation, and to promote sound corporate governance. Our Stock Ownership Guidelines set targets for each Named Executive Officer according to the lesser of a multiple of base salary or fixed number of shares of common stock as follows:

Title of NEO Ownership Target
Chairperson and Chief Executive Officer Lesser of 6x base salary or 100,000 shares
President and Chief Operating Officer Lesser of 3x base salary or 30,000 shares
Chief Financial Officer and Treasurer Lesser of 3x base salary or 20,000 shares
Executive Vice President and General Counsel Lesser of 3x base salary or 30,000 shares

The policy provides procedures for granting exemptions in the case of hardship.

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Policy Regarding Tax Deductibility of Executive Compensation

For fiscal year 2017 and prior years, Section 162(m) of the Internal Revenue Code (the Code) generally limited the deductibility of compensation to $1 million per year for certain of our Named Executive Officers, unless compensation in excess of the limit qualified as “performance-based compensation.” Following the changes to the tax laws effective as of January 1, 2018 that eliminate the exception for “performance-based compensation,” we expect we will be unable to deduct compensation payable to Named Executive Officers in excess of $1,000,000.

While our Compensation Committee considers the impact of this tax treatment, the primary factor influencing program design is the support of our business objectives. Generally, whether incentive compensation will be deductible under Section 162(m) of the Code will be a consideration, but not the decisive consideration, with respect to our Compensation Committee’s compensation determinations. Accordingly, our Compensation Committee retains flexibility to structure our compensation programs in a manner that is not tax-deductible in order to achieve a strategic result that our Compensation Committee determines to be more appropriate.

Compensation Committee Report

The Compensation Committee of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis contained within this Proxy Statement with management and, based on such review and discussions, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into United Therapeutics’ Annual Report on Form 10-K for the year ended December 31, 2020.

Submitted by the Compensation Committee:

CHRISTOPHER PATUSKY (Chair)
RAYMOND DWEK
NILDA MESA
LOUIS SULLIVAN

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Compensation Tables

Summary Compensation Table

The following table shows compensation information for 2018, 2019, and 2020 for our Named Executive Officers, calculated in accordance with SEC regulations.

Name and Principal Position     Year     Salary(1)
($)
    Stock Options(2)
($)
    Non-Equity
Incentive Plan
Compensation(3)
($)
    Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings(4)
($)
    All Other
Compensation(5)
($)
    Total
($)
Martine Rothblatt
Chairperson and Chief
Executive Officer
2020 1,352,435(6)(7) 1,873,080 1,575,757 10,400 4,811,672
2019 1,218,038(7) 40,010,000 1,753,125 2,643,874 10,000 45,635,037
2018 1,208,447(7) 12,796,803 2,021,250 9,800 16,036,300
James Edgemond
Chief Financial Officer
and Treasurer
2020 722,115(6) 677,250 1,790,415 20,000 3,209,780
2019 645,192 13,003,250 632,813 1,668,041 19,600 15,968,896
2018 645,833 3,382,085 731,250 467,161 16,400 5,242,729
Michael Benkowitz
President and Chief
Operating Officer
2020 944,423(6) 1,003,298 3,160,903 16,994 5,125,618
2019 845,577 15,003,750 940,313 2,829,195 17,171 19,636,006
2018 833,333 3,839,015 1,083,750 835,680 17,480 6,609,258
Paul Mahon
Executive Vice President
and General Counsel
2020 908,077(6) 737,880 2,432,869 22,400 4,101,226
2019 812,692 12,003,000 690,625 3,038,484 22,000 16,566,801
2018 820,000 3,656,242 799,500 21,800 5,297,542
(1) Increases in base salaries for each of our Named Executive Officers became effective on March 1, 2018, February 25, 2019, and February 24, 2020.
(2) Amounts shown represent the aggregate grant date fair value of stock options granted in each reported year, computed in accordance with applicable accounting standards. For a discussion of valuation assumptions for stock options for 2020 see Note 8 — Share Based Compensation to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020. The stock options were awarded under our 2015 SIP. The value of 2018 stock option awards with performance conditions are reported at target, calculated using the Black Scholes Merton value in accordance with GAAP. For awards granted in respect of the 2018 performance years, the number of shares actually earned exceeded target for “stretch” performance, and vested in March 2020 at maximum. If the maximum number of shares were used in calculating the Black Scholes Merton value of these awards, the grant date fair value would be as follows:

       Name       Year       Number of
Shares
(at target)
      Grant-Date
Fair Value
(at target)
      Number of
Shares
(at maximum)
      Grant-Date
Fair Value
(at maximum)
Martine Rothblatt 2018 285,102 $12,796,803 498,930 $22,464,680
James Edgemond 2018 75,350 $3,382,085 131,861 $5,937,136
Michael Benkowitz 2018 85,530 $3,839,015 149,679 $6,739,404
Paul Mahon 2018 81,458 $3,656,242 142,552 $6,418,505
(3) Amounts shown for each year represent the total cash awards earned by each Named Executive Officer under our Company-Wide Milestone Program for the respective year, although the awards were not paid until March of the following year. The payouts were determined based on our attainment of specific, pre-established performance Milestones. For example, the amounts reported for 2020 reflect cash earned in respect of 2020 performance but paid in March 2021. For information on the amounts earned for 2020, see the section entitled Cash Incentive Award Program in the Compensation Discussion and Analysis above.
(4) Amounts shown represent the change in the actuarial present value of retirement benefits under the SERP calculated in accordance with GAAP under SEC requirements. The assumptions used in calculating the change in the actuarial present value of SERP benefits are described in the footnotes to the Pension Benefits in 2020 table below. The change in pension value from year to year as reported in the table will vary based on these assumptions and may not represent the value that a Named Executive Officer will accrue or receive under the SERP. The change in the amounts reported for 2020 compared to 2019 was primarily driven by the decrease in the discount rate and the lump sum interest rate. We note that there were no changes in the terms of our SERP in 2020 versus 2019.
(5) The amounts shown represent the aggregate incremental cost that can be attributed to lease, insurance, and maintenance payments made on vehicles used by a Named Executive Officer or for monthly automobile allowances, travel expenses for family members to our functions

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(collectively, the perquisites), and “matching contributions” under our 401(k) Plan equal to 40% of each participant’s qualifying salary contributions.
(6) We changed pay timing and pay periods in 2019 (from semi-monthly and paying current to bi-weekly and paying one week in arrears). This resulted in less pay actually received in 2019 (there were only 25 pay dates in calendar year 2019 with the change in timing) and with the timing of pay dates in 2020, there are 27 actual pay dates in 2020 rather than 26, which resulted in an increase in reported wages.
(7) Our Canadian subsidiary paid a portion of Dr. Rothblatt’s total base salary in Canadian dollars. The value of this portion in U.S. dollars has been estimated for the purposes of disclosure here by using the average exchange rate for each respective year. In 2018, 2019, and 2020, our Canadian subsidiary paid the equivalent of US$92,614, US$90,436, and US$281,984 of Dr. Rothblatt’s total base salary, respectively.

Grants of Plan-Based Awards in 2020

Name       Grant Date      


Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
      All Other
Option Awards:
Number of
Securities
Underlying
Options(2)
(#)
      Exercise or
Base Price
of Stock
Option
Awards(2)
($/Sh)
      Grant Date
Fair Value
of Stock
Option
Awards(2)
($)
Threshold(1)
($)
      Target(1)
($)
      Maximum(1)
($)
Martine Rothblatt N/A(1) N/A 1,452,000 2,178,000 N/A N/A
James Edgemond N/A(1) N/A 525,000 787,500 N/A N/A
Michael Benkowitz N/A(1) N/A 777,750 1,166,625 N/A N/A
Paul Mahon N/A(1) N/A 572,000 858,000 N/A N/A
(1) Actual cash incentive awards earned under the program in 2020 are reported in the Summary Compensation Table under the column entitled “Non-Equity Incentive Plan Compensation.” While there are threshold performance criteria and payout levels for 75% of the cash incentive program (based on the Milestones related to cash profits, revenues, and manufacturing), there is no threshold performance level for the entirety of the program because the R&D Milestone does not contain threshold / minimum performance criteria.
(2) In light of the four-year equity grant of stock options in March 2019 covering the 2019-2022 period, no equity-based awards were granted to the Named Executive Officers in 2020.

Narratives to Summary Compensation Table and Grants of Plan-Based Awards in 2020 Table

Named Executive Officer Employment Agreements

The material terms of each Named Executive Officer’s employment agreement are described below.

Dr. Rothblatt

In April 1999, we entered into an employment agreement with Dr. Rothblatt. This agreement was amended from time to time and we entered into an Amended and Restated Executive Employment Agreement with Dr. Rothblatt effective January 1, 2009 in order to clarify the effectiveness of certain prior amendments, and to make other immaterial amendments. This agreement was further amended effective January 1, 2015, to remove her entitlement to an annual grant of stock options based on a market capitalization growth formula and to provide us flexibility to grant her incentive-based compensation in a variety of forms at our Compensation Committee’s discretion. The amendment also eliminated Dr. Rothblatt’s right to an Internal Revenue Code Section 280G excise tax gross up payment, among other changes.

Dr. Rothblatt’s employment agreement provides for an initial five-year term, which is automatically extended for an additional year at the end of each year unless either party gives at least six months’ notice of termination. If either party provided such a notice of termination, it would result in a four-year remaining term. We note that this rolling five-year term has no bearing on potential severance payments upon termination, which are described under Potential Payments Upon Termination or Change in Control.

Dr. Rothblatt’s compensation in 2020 was paid pursuant to this employment agreement, which entitles her to a minimum base salary of $180,000, annual cash and long-term incentive compensation and participation in employee benefits generally available to other executives. The level of Dr. Rothblatt’s base salary is subject to annual review and increase by our Compensation Committee. Her annual salary was reviewed in early 2020, and beginning February 24, 2020, was set at $1,320,000. Her employment agreement also requires us to pay the cost of leasing, maintaining, and insuring an automobile for Dr. Rothblatt.

Dr. Rothblatt’s employment agreement prohibits her from engaging in activities competitive with us for five years following her last receipt of compensation from us. She is also subject to a permanent confidentiality obligation. For information regarding severance and change in control arrangements for Dr. Rothblatt, see the text following the Potential Payments Upon Termination or Change in Control table below.

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Mr. Edgemond, Mr. Benkowitz, and Mr. Mahon

We have entered into employment agreements with each of Messrs. Edgemond, Benkowitz, and Mahon. The agreement for Mr. Mahon provides for an initial five-year term, which is automatically extended for an additional year at the end of each year. Either party may terminate the agreement a certain time period prior to an annual renewal, which would result in a four-year remaining term. The agreements for Messrs. Benkowitz and Edgemond provide an initial term of three years, following which the agreement continues from year to year for one-year terms unless either party provides written notice to terminate a certain time period prior to the end of the then current term. Each employment agreement provides for an annual minimum base salary, which is subject to annual review and increase by our Compensation Committee. Annual salaries for each of these executives were reviewed in early 2020, with raises becoming effective February 24, 2020. The following table outlines these details for each executive:

Name       Month/Year of
Agreement
      Minimum Base Salary
under Agreement
      Base Salary as of
February 24, 2020
James Edgemond March 2015 $400,000 $700,000
Michael Benkowitz June 2016 $650,000 $915,000
Paul Mahon June 2001 $300,000 $880,000

Under these agreements, each executive is eligible to participate in our broad-based employee benefit plans. In accordance with our executive automobile policy, Messrs. Edgemond, Benkowitz, and Mahon each receives either a monthly car allowance of $1,000 per month or the use of a company owned or leased vehicle.

Each of these employment agreements prohibits the executive from accepting employment, consultancy or any other business relationships with an entity that directly competes with us or from engaging in the solicitation of our employees on behalf of a competitor for a period of time following his last receipt of compensation from us (two years in the case of Mr. Mahon and one year in the case of Mr. Edgemond and Mr. Benkowitz). Each agreement includes an obligation of confidentiality for three years after termination of the executive’s employment.

Messrs. Edgemond and Benkowitz are each party to a change in control severance agreement providing benefits in the event of his termination following a change in control. In particular, these benefits include a cash severance payment equal to two times base salary, plus two times the highest of (1) the cash incentive award paid to the individual for the year immediately preceding the year in which the change in control occurs, (2) the cash incentive award payable to the individual for the year immediately preceding the year in which the termination of employment occurs, or (3) the individual’s annual target cash incentive award. This cash severance would become payable in lieu of any severance payment under the respective employment agreements unless severance under the employment agreement would result in a greater benefit. The change in control severance agreement also provides for continuation of medical benefits for 24 months following termination, and outplacement benefits with a value of $10,000.

For further information regarding severance and change in control arrangements for these Named Executive Officers, see the text following the Potential Payments Upon Termination or Change in Control table below.

Summary of Terms of Plan-Based Awards

Stock Options under the 2015 SIP

In March 2018 and March 2019, our Named Executive Officers were granted stock options under our 2015 SIP. No equity-based awards were granted to our Named Executive Officers in 2020.

Stock options granted under the 2015 SIP in 2018 vest in one-third increments on the first three anniversaries of the date of grant (in the case of Milestone Performance Options granted with respect to 2018 performance, to the extent earned), or cliff vest on the third anniversary of the date of grant to the extent earned based on performance (in the case of Cash Profit Performance Options as described in our 2019 Proxy Statement), in each case subject to the Named Executive Officer’s continued employment. Each stock option granted in 2018 has a ten-year term. Stock options granted under the 2015 SIP in 2019 cover four years of equity compensation (2019 through 2022), and have been designed such that: (1) overall equity compensation expense on an annualized basis, and overall dilution, are both expected to be lower than if we had continued with the previous equity compensation program for four additional years; (2) the Named Executive Officer will be incented to achieve our business objectives over the four-year period; and (3) vesting is heavily weighted toward the end of the four-year period, in order to aid in retention over that timeframe. 50% of the 2019 option grant was granted with an exercise price equal to the closing price of our common stock on the date of grant, and vests in equal installments on March 15, 2021, 2022 and 2023. The other 50% is has an exercise price equal to 115% of the closing price of our common stock on the date of grant, and cliff vests (100%) on March 15, 2023. All of the 2019 stock options have an expiration date of the eighth anniversary of the date of grant. For information regarding acceleration of vesting upon certain employment termination events, see the text following the Potential Payments Upon Termination or Change in Control table below.

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Outstanding Equity Awards at 2020 Fiscal Year-End

The following table sets forth information regarding unexercised stock options or STAP awards held by each of our Named Executive Officers as of December 31, 2020.

Number of Securities
Underlying Unexercised
Options or STAP Awards
Equity Incentive
Plan Awards:
Number of Securities
Underlying Unexercised
Unearned Options (#)
      Option or
STAP Award
Exercise
Price ($)
      Option or
STAP Award
Expiration
Date
Name and Grant Date       Award Type       (#)
Exercisable
      (#)
Unexercisable
     
Martine Rothblatt
12/31/2012 Stock Option(1) 55,488

53.42

 

12/31/2022

12/31/2013 Stock Option(1)(2) 1,000,000 113.08   12/31/2023
12/31/2014 Stock Option(1)(2) 723,869 129.49   12/31/2024
03/15/2016 Stock Option(1)(2) 294,000 120.26   03/15/2026
03/15/2017 Stock Option(4) 240,000 146.03    03/15/2027
03/15/2017 Stock Option(5) 100,000 146.03   03/15/2027
03/15/2017 Stock Option(7) 150,288 146.03 03/15/2027
03/15/2017 Stock Option(5) 244,122 146.03   03/15/2027
03/15/2018 Stock Option(6) 285,103 111.00   03/15/2028
03/15/2018 Stock Option(7) 142,551 71,276 111.00   03/15/2028
03/15/2019 Stock Option(9) 500,000 135.42   03/15/2027
03/15/2019 Stock Option(10) 500,000 117.76   03/15/2027
James Edgemond
01/14/2013 STAP Award(8) 5,000 52.12   01/14/2023
03/14/2014 STAP Award(3) 2,411 94.96   03/14/2024
03/13/2015 STAP Award(3) 25,000 163.30   03/13/2025
03/13/2015 STAP Award(3) 15,160 163.30   03/13/2025
03/15/2016 Stock Option(3) 49,000 120.26   03/15/2026
03/15/2017 Stock Option(4) 45,000 146.03   03/15/2027
03/15/2017 Stock Option(5) 18,750 146.03   03/15/2027
03/15/2017 Stock Option(7) 32,205 146.03   03/15/2027
03/15/2017 Stock Option(5) 52,312 146.03   03/15/2027
03/15/2018 Stock Option(6) 75,349 111.00   03/15/2028
03/15/2018 Stock Option(7) 37,674 18,838 111.00   03/15/2028
03/15/2019 Stock Option(9) 162,500 135.42   03/15/2027
03/15/2019 Stock Option(10) 162,500 117.76   03/15/2027
Michael Benkowitz
01/02/2013 STAP Award(11) 100,000 53.83   01/02/2023
03/15/2013 STAP Award(3) 18,400 61.06   03/15/2023
03/14/2014 STAP Award(3) 40,000 94.96   03/14/2024
03/13/2015 STAP Award(3) 37,200 163.30   03/13/2025
03/15/2016 Stock Option(3) 39,200 120.26   03/15/2026
06/24/2016 Stock Option(3) 52,500 102.11   06/24/2026
03/15/2017 Stock Option(4) 63,000 146.03   03/15/2027
03/15/2017 Stock Option(5) 26,250 146.03   03/15/2027
03/15/2017 Stock Option(7) 42,940 146.03   03/15/2027
03/15/2017 Stock Option(5) 69,750 146.03   03/15/2027
03/15/2018 Stock Option(6) 85,531 111.00   03/15/2028

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Number of Securities
Underlying Unexercised
Options or STAP Awards
Equity Incentive
Plan Awards:
Number of Securities
Underlying Unexercised
Unearned Options (#)
      Option or
STAP Award
Exercise
Price ($)
      Option or
STAP Award
Expiration
Date
Name and Grant Date       Award Type       (#)
Exercisable
      (#)
Unexercisable
     
03/15/2018 Stock Option(7) 42,765 21,383 111.00 03/15/2028
03/15/2019 Stock Option(9) 187,500 135.42 03/15/2027
03/15/2019 Stock Option(10) 187,500 117.76 03/15/2027
Paul Mahon
03/14/2014 STAP Award(3) 89,500 94.96 03/14/2024
03/13/2015 STAP Award(3) 116,250 163.30 03/13/2025
03/15/2016 Stock Option(3) 122,500 120.26 03/15/2026
03/15/2017 Stock Option(4) 75,000 146.03 03/15/2027
03/15/2017 Stock Option(5) 31,250 146.03 03/15/2027
03/15/2017 Stock Option(7) 42,940 146.03 03/15/2027
03/15/2017 Stock Option(5) 69,750 146.03 03/15/2027
03/15/2018 Stock Option(6) 81,458 111.00 03/15/2028
03/15/2018 Stock Option(7) 40,729 20,365 111.00 03/15/2028
03/15/2019 Stock Option(9) 150,000 135.42 03/15/2027
03/15/2019 Stock Option(10) 150,000 117.76 03/15/2027
(1) These stock options were fully vested upon grant pursuant to Dr. Rothblatt’s employment agreement.
(2) For estate planning purposes, these stock options were held by trusts beneficially owned by Dr. Rothblatt and her spouse as of December 31, 2020. They have since been transferred back to Dr. Rothblatt.
(3) These stock options or STAP awards vest in one-fourth increments on each of the first four anniversaries of the date of grant.
(4) These stock options vest in one-third increments on each of the first three anniversaries of the date of grant.
(5) These stock options were subject to a three-year (2017-2019) performance threshold tied to average cash profit margin. These stock options were fully earned as of December 31, 2019 and vested at March 15, 2020.
(6) These stock options were subject to a three-year (2018-2020) performance threshold tied to average cash profit margin. These stock options were fully earned as of December 31, 2020 and vested at March 15, 2021.
(7) These stock options were subject to a one-year performance threshold tied to Company-Wide Milestone Performance. Once earned, shares vest in equal installments over a three-year period. The number of shares shown reflect the number of shares earned based on actual performance.
(8) One-time STAP award granted upon Mr. Edgemond’s commencement of employment, which vested in full on February 28, 2015.
(9) These stock options cliff vest (100%) on the fourth anniversary of the date of grant.
(10) These stock options vest in one-third increments on the second, third and fourth anniversaries of the date of grant.
(11) These STAP awards cliff vested (100%) on the fifth anniversary of the date of grant.

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Option Exercises and Stock Vested in 2020

The following table shows (1) the number of shares of our common stock acquired upon exercise of stock options; and (2) the number of STAP awards exercised by each of our Named Executive Officers during the year ended December 31, 2020. We did not have any stock awards that vested in 2020.

Option Awards STAP Awards
Name       Number of
Shares
Acquired
on Exercise
(#)
      Value
Realized
on Exercise
($)(1)
      Number of
STAP
Awards
Exercised
(#)
      Value
Realized on
Exercise
($)(1)
Martine Rothblatt 364,834(2) 20,564,777
James Edgemond
Michael Benkowitz 28,200 1,989,816
Paul Mahon 24,000 1,037,520
(1)

Represents the difference between the exercise price of the stock options or STAP award and the fair market value of our common stock on the date of exercise, multiplied by the number of options or STAP awards exercised. STAP awards convey the right to receive an amount in cash equal to the positive difference between the exercise price and the closing price of our common stock on the date of exercise.

(2)

All options exercised by Dr. Rothblatt during 2020 had been held for nearly 10 years, and were nearing their expiration date of December 31, 2020.

Pension Benefits in 2020

The table below describes the present value of the accumulated benefit for our Named Executive Officers under the SERP.

Name       Plan Name       Number of Years
of Credited
Service(1)
      Actual Years of
Service(2)
      Present Value of
Accumulated
Benefit ($)(3)
Martine Rothblatt SERP 15.0 24.5 19,079,967
James Edgemond SERP 8.0 8.0 5,820,039
Michael Benkowitz SERP 9.8 9.7 9,171,542
Paul Mahon SERP 15.0 19.6 15,057,720
(1)

Reflects the number of years (up to the maximum of 15 years under the terms of the SERP) since each Named Executive Officer commenced employment with us, through December 31, 2020.

(2)

Reflects the number of years since each Named Executive Officer commenced employment with us, through December 31, 2020.

(3)

The present values of accumulated benefits are based on assumptions used in the financial disclosures for the year ended December 31, 2020 including a discount rate of 1.49% and a lump sum interest rate of 2.25%. The present value represents the lump sum value of the accrued benefit which is based on service and earnings as of December 31, 2020, and assumes payment at age 60, the normal retirement date under the SERP. No preretirement death, disability, or termination is assumed. For a discussion of valuation assumptions, see Note 11 — Employee Benefit Plans to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Supplemental Executive Retirement Plan

In 2006, our Compensation Committee approved our SERP, which is a non-qualified supplemental defined benefit retirement plan for select key executives intended to enhance the long-term retention of individuals that have been and will continue to be vital to our success. Participants in the SERP generally must remain in the employ of United Therapeutics or one of its affiliates until age 60 to receive a benefit except in the event of death, disability or a change in control. If a participant terminates employment with us for any reason prior to age 60 (other than due to death or disability or following a change in control), no benefit will be paid. The benefit to be paid under the plan is based on when an executive commenced participation in the plan. In general, a participant will be eligible for an unreduced benefit under the plan after 15 years of service. Upon a change in control before a participant reaches age 60, they will immediately vest in and receive a prorated benefit based on years of service to date.

The SERP is administered by our Compensation Committee. Currently, our Named Executive Officers and two other members of senior management participate in the SERP. Each of our Named Executive Officers is eligible, upon retirement after the age of 60, to receive monthly payments equal to the monthly average of the total gross base salary received by the participant over their last 36 months of active employment (the Final Average Compensation), reduced by the participant’s estimated social security benefit (determined as provided under the SERP), for the remainder of the participant’s life (the aggregate amount of such payments, the Normal Retirement Benefit), commencing on the first day of the sixth month after retirement. For executives who began participating in the plan after July 1, 2006, the retirement benefit is generally calculated as 100% of the final three year average gross base salary reduced by the estimated

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social security benefit they would receive in retirement, multiplied by a fraction (not to exceed one) the numerator of which is their years of service and the denominator of which is 15 (the Normal Retirement Benefit). This means that for participants who have less than 15 years of service with us, the retirement benefit is prorated by the number of years of actual service divided by 15 years. By age 60, all current participants will have had 15 years of service if they remain employed by us. In the event of termination of employment due to disability prior to the age of 60 or death prior to retirement, a participant or the participant’s beneficiary, as applicable, will be entitled to a percentage of the Normal Retirement Benefit, as determined under the SERP (the aggregate amount of such payments referred to as the Disability Retirement Benefit), commencing on the first day of the sixth month after termination of employment in the event of a Disability and as soon as administratively practicable in the event of death. All of our Named Executive Officers have elected to receive their benefit in the form of a lump sum, although they were also offered a choice of a single life annuity or an actuarially equivalent joint or survivor annuity.

In the event of a change in control, as defined in the SERP, a participant who is actively employed on the date of the change in control will be entitled to a lump sum payment equal to the actuarial equivalent present value of a monthly single life annuity equal to (1) the participant’s Final Average Compensation, reduced by the participant’s estimated future social security benefit (determined as provided under the SERP), multiplied by (2) a fraction (no greater than one), the numerator of which equals the participant’s years of service and the denominator of which equals 15, to be paid as soon as administratively practicable following the change in control. In the event that a participant is entitled to a Normal Retirement Benefit or Disability Retirement Benefit at the time of a change in control, all such payments (or any remaining payments, with respect to any participant who is receiving payments under the SERP at the time of the change in control) will be made in a lump sum as soon as administratively practicable following such change in control. Participants in the SERP will be prohibited from competing with us or soliciting its employees for a period of twelve months following their termination of employment (or, if earlier upon attainment of age 65). Violation of this covenant will result in forfeiture of all benefits under the SERP.

Rabbi Trust

In December 2007, our Compensation Committee adopted the United Therapeutics Corporation Supplemental Executive Retirement Plan Rabbi Trust Document (Rabbi Trust Document), providing for the establishment of a trust (Rabbi Trust), the assets of which will be contributed by us and used to pay benefits under the SERP. We entered into the Rabbi Trust Document with Wilmington Trust Company, which serves as trustee of the Rabbi Trust. The Rabbi Trust is irrevocable, and SERP participants will have no preferred claim on, nor any beneficial ownership interest in, any assets of the Rabbi Trust.

Currently, the Rabbi Trust does not contain any assets. Generally, we may contribute additional assets to the Rabbi Trust at our sole discretion. However, pursuant to the terms of the Rabbi Trust Document, within five days following the occurrence of a potential change in control (as defined in the Rabbi Trust Document), or if earlier, at least five days prior to the occurrence of a change in control (as defined in the Rabbi Trust Document), we will be obligated to make an irrevocable contribution to the Rabbi Trust in an amount sufficient to pay each SERP participant or beneficiary the benefits to which they would be entitled pursuant to the terms of the SERP on the date on which the change in control occurred. The Rabbi Trust will not terminate until the date on which SERP participants or their beneficiaries are no longer entitled to benefits pursuant to the terms of the SERP.

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Potential Payments Upon Termination or Change in Control

Each of our Named Executive Officers is eligible to receive certain payments and benefits if their employment is involuntarily terminated without “Cause”, terminated by the executive for “Good Reason”, terminated by the executive voluntarily with continued status as a “Senior Advisor” to us, terminated due to disability or death, or terminated in connection with a “Change in Control” of our company in accordance with the applicable terms of their respective employment agreements, change in control severance agreements, the SERP, our equity compensation plans (the EIP and 2015 SIP) and related stock option agreements, as reported in the Potential Payments Upon Termination or Change in Control table below and described in the narrative table that follows. The summary of these benefits is qualified in its entirety by the specific language of the various agreements and plans that have been filed with the SEC. The amounts shown in the Potential Payments Upon Termination or Change in Control table below are estimates of the value of these payments and benefits, assuming that such termination or triggering event was effective as of December 31, 2020 (except as otherwise noted below with respect to those Named Executive Officers who terminated during the year). The actual compensation to be paid to a Named Executive Officer can only be determined at the time such Named Executive Officer’s employment is terminated and may vary based on factors such as the timing during the year of any such event, our stock price, the Named Executive Officer’s age, and any changes to our benefit arrangements and policies. In addition to the benefits described below, our Named Executive Officers will be eligible to receive any benefits accrued under our broad-based benefit plans, such as distributions under life insurance and disability benefit plans.

Executive Benefits and
Payments Upon Separation
Involuntary
Termination Without
Cause/Resignation
for Good Reason/
Resignation While
Continuing as
Senior Advisor(1)
Disability Death Termination upon a
Change in Control
      Change In
Control without
Termination of
Employment
Martine Rothblatt                  
Salary and cash incentive       $ 11,508,750 $ 1,320,000 $ 1,320,000 $ 11,508,750 $
Stock option vesting acceleration(2) $             32,952,908 $      32,952,908 $      32,952,908 $            32,952,908 $      32,952,908
Supplemental Executive $ 19,079,967 (3)  $ 19,079,967 $ 12,858,615 $ 19,079,967 $ 19,079,967
Retirement Plan
Health and other benefits(4) $ 129,558 $ $ $ 129,558 $
Total $ 63,671,183 $ 53,352,875 $ 47,131,523 $ 63,671,183 $ 52,032,875
James Edgemond
Salary and cash incentive $ 138,082 $ $ $ 2,665,626 $
Stock option $ $ 10,239,011 $ 10,239,011 $ 10,239,011 $ 10,239,011
vesting acceleration(2)
Supplemental Executive $ $ 5,643,334 $ 3,748,236 $ 5,617,860 $ 5,617,860
Retirement Plan
Health and other benefits(5) $ $ $ 72,231 $
Total $ 138,082 $ 15,882,345 $ 13,987,247 $ 18,594,728 $ 15,856,871
Michael Benkowitz
Salary and cash incentive $ 443,712 $