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Securities and Exchange Commission
Washington, DC 20549
Form 10-K

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-26301

UNITED THERAPEUTICS CORPORATION
-------------------------------
(Exact name of Registrant as specified in its charter)



Delaware 52-1984749
- ----------------------------------------------- ------------------------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)

1110 Spring Street
Silver Spring, MD 20910
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(Address of principal executive offices) (zip code)


Registrant's telephone number, including area code: (301) 608-9292

Securities registered under Section 12(b) of the Exchange Act:
None.

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
and associated preferred stock purchase rights
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in PART III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The number of shares outstanding of the registrant's Common Stock, par
value $0.01 per share, as of March 15, 2001 was 20,741,419 shares. The
aggregate market value of the Common Stock held by non-affiliates of the
registrant, based on the average bid and asked prices on March 15, 2001 as
reported by the Nasdaq National Market was approximately $264,525,372.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for the
registrant's 2001 annual shareholders meeting are incorporated by reference in
Part III of this Form 10-K.


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PART I

ITEM 1. BUSINESS

United Therapeutics is a biotechnology company focused on combating
cardiovascular, inflammatory, and infectious diseases with unique therapeutic
products. These products include pharmaceuticals, arginine products and
telemedicine services. The company was incorporated in June 1996 in Delaware
under the name Lung Rx, Inc. The company changed its name to United Therapeutics
Corporation in December 1997.

UNITED THERAPEUTICS' PRODUCTS

The following table summarizes United Therapeutics' product portfolio.



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PRODUCT MODE OF DELIVERY INDICATION CLINICAL TRIAL STATUS UT TERRITORY
- ------- ---------------- ---------- --------------------- ------------



Remodulin(TM) Subcutaneous Advanced pulmonary hypertension NDA filed Worldwide

Remodulin(TM) Subcutaneous Late-stage peripheral vascular disease Phase II Worldwide

Beraprost Oral Early-stage peripheral vascular disease Phase III U.S./Canada

Beraprost Oral Early-stage pulmonary hypertension Phase III U.S./Canada

Beraprost SR Oral Cardiovascular disease Phase I U.S./Canada


Arginine Medical Food Vascular Disease Commercial Worldwide

CardioPAL(R) Telemedical Arrhythmia and Angina Commercial Worldwide

Unipeg Inhalation Cardiovascular Preclinical Worldwide

Unisense Inhalation Chronic obstructive pulmonary disease and
pulmonary hypertension Preclinical Worldwide

Iminosugars Oral Hepatitis B and C; dengue; JEV Preclinical Worldwide

Preventis
(30 percent) Vaccine Human immunodeficiency virus (HIV) Preclinical Worldwide
- -----------------------------------------------------------------------------------------------------------------------------------


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REMODULIN

In December 1996 and January 1997, United Therapeutics obtained
worldwide rights for all indications to Remodulin (also known as UT-15 and
formerly known as Uniprost(TM)) from Glaxo Wellcome, Inc. and Pharmacia & Upjohn
Company. In October 1999, United Therapeutics acquired all the outstanding stock
of SynQuest, Inc., manufacturer of Remodulin.

Pulmonary Hypertension

United Therapeutics has focused primarily on developing Remodulin as its
lead product for treating advanced pulmonary hypertension. Pulmonary
hypertension is a vascular disease which affects the blood vessels between the
heart and lungs known as the pulmonary blood vessels. Pulmonary hypertension is
characterized by the degradation of the blood-vessel wall lining, the
aggregation of platelets and the disruption of smooth muscle cell function.
These conditions cause blockages and affect the ability of the blood vessels to
dilate and then constrict as blood flows to the lungs. The resulting elevated
pulmonary blood pressure causes increasing strain on the right side of the heart
as it tries to pump blood to the lungs.

Pulmonary hypertension is primarily caused by reduced production of the
natural compound prostacyclin in the pulmonary blood vessels. Prostacyclin
appears to dilate blood vessels where necessary, prevent platelet aggregation,
and prevent proliferation of smooth muscle cells surrounding the vessels. The
only currently FDA-approved treatment for pulmonary hypertension is Flolan(R),
an artificial form of prostacyclin delivered continuously by an external pump
through a surgically implanted intravenous catheter. Remodulin is a
significantly longer lived and more stable synthetic form of prostacyclin which
United Therapeutics believes will provide patients with a convenient and
non-intravenous life-long prostacyclin therapy.

In contrast to Flolan, Remodulin is stable at room temperature for up to
five years and is significantly longer lived in the human body than Flolan.
These attributes allow for a safer and more convenient delivery of Remodulin to
patients. Specifically, Remodulin is delivered by subcutaneous infusion with a
pager-sized MiniMed, Inc. microinfusion device. Subcutaneous delivery of
Remodulin also eliminates the risk of sepsis infection and related
hospitalization associated with the Flolan catheter. Remodulin's extended life
in the body also greatly reduces the risk of death in cases of treatment
interruption, from an abrupt recurrence of hypertension known as rebound
hypertension. The stability of Remodulin also allows it to be prepackaged, thus
eliminating the need to reconstitute the drug one or more times daily under
completely sterile conditions, as is the case with Flolan.

In March 2000, United Therapeutics completed an international,
randomized, placebo-controlled, double-blind, study of Remodulin involving a
total of 470 patients with pulmonary hypertension. Half of the patients received
Remodulin subcutaneously for 12 weeks, while the other half received a placebo.
Based on analyses of the unblinded data, the study data show that patients who
received Remodulin had statistically significant improvement in exercise
capacity, pulmonary blood pressure and in the signs and symptoms of the disease.
All patients in the pivotal study had the option to continue or commence
Remodulin in an open-label study after completion of the 12-week study.
Approximately 600 patients are now being treated with the drug, including
additional patients who enrolled directly into the open-label study.

The initial sections of the New Drug Application (NDA) were filed on
August 14, 2000 with the U.S. Food and Drug Administration. Those sections
included the nonclinical and manufacturing portions of the NDA. On October 16,
2000, United Therapeutics filed the remaining sections of the NDA for Remodulin
and was notified that the FDA's pre-approval inspection of United Therapeutics'
manufacturing facility was successfully completed. On October 19, 2000, the FDA
informed United Therapeutics that a six month Priority Review had been granted
for the NDA. On February 2, 2001, United Therapeutics submitted a Marketing
Authorization Application in France for approval of Remodulin for pulmonary
arterial hypertension.



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Peripheral Vascular Disease

United Therapeutics is also developing Remodulin for late-stage
peripheral vascular disease. Peripheral vascular disease is a vascular disease
that affects the blood vessels in the legs. While the precise cause of
peripheral vascular disease is unknown, diabetes, obesity, smoking and lack of
exercise are associated with the disease. Peripheral vascular disease appears to
be similar to pulmonary hypertension in that there is a reduction in natural
prostacyclin in the affected blood vessels. In September 1998, United
Therapeutics completed a Phase II study which assessed the safety and blood flow
effects of Remodulin administered intravenously to patients with late-stage
peripheral vascular disease. The study demonstrated that Remodulin can be
administered safely to patients with late-stage peripheral vascular disease and
that Remodulin substantially increased blood flow in the affected areas of the
legs. United Therapeutics is planning a Phase III pivotal study of Remodulin for
late-stage peripheral vascular disease to commence in 2001.

BERAPROST

In September 1998, United Therapeutics obtained an exclusive license
from Toray Industries, Inc. for the immediate release formulation of beraprost
for the treatment of pulmonary hypertension in the United States and Canada. In
March 1999, United Therapeutics obtained an additional exclusive license from
Toray for the immediate release formulation of beraprost for the treatment of
peripheral vascular disease in the United States and Canada. In June 2000,
United Therapeutics obtained from Toray the exclusive right to develop and
market beraprost in the sustained release formulation (beraprost SR) in the
United States and Canada for the treatment of all vascular indications
(including cardiovascular indications).

Beraprost is an oral form of prostacyclin that is chemically stable.
Like natural prostacyclin and Remodulin, beraprost dilates blood vessels,
prevents platelet aggregation and prevents proliferation of smooth muscle cells
surrounding blood vessels. United Therapeutics believes beraprost may be an
important treatment for early-stage peripheral vascular disease and for
early-stage pulmonary hypertension. Intermittent oral doses of beraprost do not,
however, provide consistent levels of the drug in the blood necessary to treat
advanced stages of pulmonary hypertension or peripheral vascular disease.

Beraprost has proven to be safe and effective for the treatment of
peripheral vascular disease in clinical studies conducted outside the United
States and has been approved for treatment of peripheral vascular disease in
Japan since 1994. Aventis Pharma S.A. (formerly Hoechst) has licensed rights to
beraprost in Europe and has conducted extensive clinical research with
beraprost, including a controlled study showing beraprost is effective in
treating patients with early-stage peripheral vascular disease. A Japanese study
presented at the 1998 American Heart Association meeting suggests that beraprost
may improve survival in patients with pulmonary hypertension as well. United
Therapeutics is conducting a Phase III clinical trial program for beraprost to
treat early-stage peripheral vascular disease and a Phase III clinical trial
program for beraprost to treat early-stage pulmonary hypertension.

ARGININE

In December 2000, United Therapeutics expanded into the fields of angina
and coronary artery disease by acquiring the assets and certain liabilities of
Cooke Pharma, Inc., the exclusive maker of the HeartBar(R), the first and only
medical food for angina and other cardiovascular conditions. HeartBar is
currently sold as an over-the-counter product in the United States. Medical
foods are regulated by the FDA. Cooke Pharma is the only company that owns the
patent rights to use HeartBar's key ingredient, arginine, for cardiovascular
diseases. Two HeartBars per day deliver 6 grams of arginine. Although arginine
is broadly sold as a nutritional supplement in pill form, there are no existing
arginine products, other than HeartBar, that deliver sufficient levels of
arginine to achieve a therapeutic benefit. The HeartBar, which is included in
the Physicians Desk Reference, increases the relaxing effect of nitric oxide
produced by blood vessels. This produces relief from the symptoms of heart
disease by increasing the diameter of blood vessels and thereby increasing blood
flow. Clinical studies conducted by Cooke Pharma demonstrated the ability of the
HeartBar to reduce painful symptoms of cardiovascular disease, increase exercise
tolerance and improve the quality of life.




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TELEMEDICINE SERVICES

Pulmonary hypertension patients require periodic monitoring of certain
bodily measurements such as heart and lung function. Much of this monitoring can
be achieved with less expense and inconvenience by using telemedicine devices
that enable physicians to monitor patients remotely. United Therapeutics intends
to provide telemedicine services for a fee to patients and physicians using and
prescribing United Therapeutics' products. United Therapeutics also intends to
utilize its experience with pulmonary hypertension telemedicine to explore the
development of similar Internet-based services for other chronic diseases. In
December 2000, United Therapeutics expanded into arrhythmia and ischemic
monitoring by acquiring all the assets of Medicomp, Inc. and Telemedical
Procedures, LLC (Medicomp), related telemedicine companies based in Florida.
These companies specialize in providing cardiac Holter and event monitoring
analyses services remotely via proprietary peer-to-peer networks using telephone
dial-up and Internet connections. These services are designed to address the
needs of patients suspected of suffering from cardiac arrhythmias and other
abnormalities such as ischemic events and are delivered via Medicomp's
proprietary PM 350 Holter and CardioPAL(R) event monitor. Cardiac arrhythmias
and ischemic heart disease afflict an estimated 20 million Americans, and
possibly ten times as many people worldwide. If left undetected and untreated,
they can result in heart attacks and death. Treatment of cardiac arrhythmias and
ischemia with pharmaceuticals requires careful titration based upon life-long
repeat cardiac monitoring. This technology is expected to be instrumental for
United Therapeutics' pulmonary hypertension monitoring services.

UNIPEG

In September 1999, United Therapeutics entered into an agreement with
Shearwater Polymers, Inc. This agreement grants to United Therapeutics the
exclusive right to Shearwater's know-how for the design, development, production
and use of a technology known as pegylation to develop and produce sustained
release Remodulin for the possible treatment of pulmonary hypertension,
peripheral vascular disease, stroke, heart disease, cancer, and related diseases
worldwide. During 2000, Shearwater and United Therapeutics achieved pegylation
of the Remodulin molecule. It is expected that this pegylation product, known as
Unipeg, would be delivered via inhalation. United Therapeutics is conducting
preclinical studies and is planning a Phase I clinical study of Unipeg in
pulmonary arterial hypertension.

UNISENSE

In 1998, United Therapeutics entered into a drug development agreement
with the William Harvey Research Institute to develop an inhaleable antisense
therapy for various pulmonary and respiratory disorders. The project is expected
to be in the clinical phase in 2002.

IMINOSUGARS

In March 2000, Unither Pharmaceuticals, Inc., a wholly owned subsidiary
of United Therapeutics, entered into a license agreement with Synergy
Pharmaceuticals, Inc. to obtain from Synergy the exclusive worldwide rights to
certain patents relating to anti-viral compounds. These compounds are
iminosugars that may be effective as an oral therapy for hepatitis B and C
infections, as well as dengue and Japanese encephalitis virus. The compounds are
currently in the preclinical stage of development.

PREVENTIS

In 1999, United Therapeutics co-founded Preventis, Inc. to develop
vaccines and anti-microbial drugs for the treatment and prevention of infectious
diseases. Preventis holds a co-exclusive license from the French Health Research
agency, INSERM, in a patent important to the development of an HIV vaccine and
has exclusive rights to patents relating to vaccine manufacture and urinary
tract infections. Preventis' current projects involve the development of a
therapeutic HIV/AIDS vaccine and the development of a vaccine to prevent bladder




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and kidney infections known as urinary tract infections. Preventis' therapeutic
HIV/AIDS vaccine has already demonstrated specific antibody response in
preclinical animal studies. Crucial to the development of an effective HIV
vaccine is a drug that targets all twelve strains of the virus; Preventis has
identified a universal characteristic of HIV and is targeting that element. For
this reason, Preventis believes that it can develop both a therapeutic and a
preventive vaccine for the treatment of HIV globally. United Therapeutics owns
30% of Preventis, Inc.

STRATEGY

United Therapeutics' objective is to become a leader in the development
and commercialization of drugs and other therapies focused on combatting
cardiovascular, inflammatory and infectious diseases with unique therapeutic
products. To achieve this objective, United Therapeutics is pursuing the
following strategies:

Capitalize on United Therapeutics' Expertise in Vascular Medicine.
United Therapeutics believes that it has assembled the preeminent group of
scientists and clinicians in the field of vascular medicine. Members of United
Therapeutics' scientific advisory board have won the Nobel Prizes for the
discovery and characterization of prostacyclin and for the biochemistry of
vasodilation.

Establish United Therapeutics' Prostacyclin Products as the Standard of
Care for Cardiovascular Disease. United Therapeutics is seeking to establish
Remodulin and beraprost, its stable analogs of prostacyclin, as the worldwide
standards of care for the treatment of pulmonary hypertension and peripheral
vascular disease. United Therapeutics is also seeking to establish arginine as a
basic component of cardiovascular disease therapies. United Therapeutics
believes that its scientific advisory board, network of clinical investigators
and management team can demonstrate and communicate to physicians the benefits
of treating pulmonary hypertension and peripheral vascular disease patients with
United Therapeutics' approved products.

Minimize Fixed Costs and Corporate Overhead Through Outsourcing and
Partnering Where Cost Effective. United Therapeutics maintains a streamlined
corporate infrastructure focused on strategic business management. United
Therapeutics contracts with FDA-approved manufacturers for the manufacture of
some of its products and with established drug sales organizations for marketing
and distribution of its products. United Therapeutics has partnered with MiniMed
Inc., the worldwide leader in subcutaneous continuous-flow microinfusion device
systems, to design, develop and implement the delivery of Remodulin therapies
for pulmonary hypertension using MiniMed products. By outsourcing many non-core
aspects of its business, United Therapeutics believes that it will substantially
reduce fixed overhead and capital investment, accelerate commercialization of
its products and reduce its business risk.

THE MINIMED STRATEGIC ALLIANCE

MiniMed has agreed to provide its pager-sized microinfusion pump for
delivery of Remodulin continuously and subcutaneously. United Therapeutics
entered into an agreement with MiniMed, Inc. in September 1997, which was
implemented in a detailed set of guidelines adopted in November 1999, to
collaborate in the design, development and implementation of therapies to treat
pulmonary hypertension utilizing MiniMed products and Remodulin. The term of the
agreement commenced on September 3, 1997 and continues for seven years after the
FDA grants a new drug approval for Remodulin. The agreement will be
automatically extended for additional 12-month periods unless otherwise
terminated. The agreement is subject to early termination in the event of a
material breach or bankruptcy of either party. United Therapeutics and MiniMed
have established a Management Committee comprised of two representatives from
each company to implement the agreement.

The guidelines implementing the agreement provide that United
Therapeutics will purchase the pumps and supplies from MiniMed at a discount to
MiniMed's 1999 list prices (subject to consumer price index adjustments
annually). In the event that there are any discoveries or improvements arising
out of work performed under the agreement, the parties will have joint ownership
of those discoveries or improvements. The guidelines require United Therapeutics
to purchase its Remodulin infusion pumps exclusively from MiniMed unless
MiniMed's infusion pumps fail to receive certain government approvals.



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PRIORITY HEALTHCARE AND GENTIVA HEALTH SERVICES STRATEGIC ALLIANCES

To provide for marketing, promotion and distribution of Remodulin in the
United States, United Therapeutics entered into non-exclusive distribution
agreements with Priority Healthcare Corporation and Gentiva Health Services,
Inc. on February 9, 2000 and March 21, 2000, respectively. United Therapeutics
will sell Remodulin and MiniMed products to Priority and Gentiva at a discount
from an average wholesale price set by United Therapeutics. Priority and Gentiva
will be responsible for assisting patients with obtaining reimbursement and
other support services. The terms of the agreements commenced on signing and
continue for two years following FDA approval of Remodulin in the case of
Priority and three years following the launch of Remodulin in the case of
Gentiva. The agreements will be automatically renewed thereafter for additional
two-year periods in the case of Priority and one-year periods in the case of
Gentiva unless one party provides notice of termination. The agreements are
subject to early termination in the event of a material breach or bankruptcy of
either party or upon 180 day advance notice of termination.

PATENTS AND PROPRIETARY RIGHTS

United Therapeutics' success will depend in part on its ability to
obtain and maintain patent protection for its products, preserve trade secrets,
prevent third parties from infringing upon its proprietary rights and operate
without infringing upon the proprietary rights of others, both in the United
States and internationally.

GLAXO WELLCOME ASSIGNMENT

In January 1997, Glaxo Wellcome Inc. assigned to United Therapeutics
patents and patent applications for the use of the stable prostacyclin analog
known as UT-15 for the treatment of pulmonary hypertension and congestive heart
failure. United Therapeutics now refers to its UT-15 product as Remodulin. Glaxo
Wellcome has a right to negotiate a license from United Therapeutics if United
Therapeutics decides to license any part of the marketing rights to a third
party. Glaxo Wellcome waived this right with respect to the agreement with
MiniMed. Under the agreement, Glaxo Wellcome is entitled to certain royalties
from United Therapeutics for a period of 10 years from the date of the first
commercial sale of any product containing Remodulin . If United Therapeutics
grants to a third party any license to Remodulin , Glaxo Wellcome is also
entitled to a percentage of all consideration payable to United Therapeutics by
such licensee.

For pulmonary hypertension, the patent does not expire in the United
States until October 2009 and until various dates from September 2009 to August
2013 in nine other countries. For congestive heart failure, the patent does not
expire until May 2011 in the United States and from May 2011 to March 2012 in
five other countries. United Therapeutics is responsible for all patent
prosecution and maintenance for the Remodulin patent portfolio.

PHARMACIA & UPJOHN LICENSE

In December 1996, Pharmacia & Upjohn Company exclusively licensed to
United Therapeutics patents and a patent application for the composition and
production of the stable prostacyclin analog known as UT-15 (now referred to as
Remodulin). United Therapeutics filed a U.S. patent application for a new
synthesis and production method for UT-15 in October 1997. United Therapeutics
believes that its method is a substantial improvement over the Pharmacia &
Upjohn method. United Therapeutics intends to use its improved and unique
synthesis method rather than the licensed Pharmacia & Upjohn method for the
production of the Remodulin product.

TORAY INDUSTRIES LICENSES

In September 1998, United Therapeutics entered into an agreement with
Toray Industries, Inc. obtaining the exclusive right to develop and market
beraprost in the existing immediate-release oral form in the United States and
Canada for the treatment of pulmonary hypertension and other pulmonary vascular
diseases, plus certain additional rights of first refusal for other products,
therapies or territories. In exchange, United Therapeutics paid Toray cash and
166,666



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shares of common stock, and granted Toray an option to purchase an additional
166,666 shares of common stock at an exercise price of $9.00 per share. United
Therapeutics also agreed to pay Toray milestone payments of up to $750,000. In
March 1999, United Therapeutics entered into an agreement with Toray obtaining
the exclusive right to develop and market beraprost in the existing
immediate-release oral form in the United States and Canada for the treatment of
peripheral vascular disease. United Therapeutics paid Toray cash and 500,000
shares of common stock and agreed to pay Toray milestone payments of up to
$750,000.

In June 2000, United Therapeutics entered into a separate agreement with
Toray obtaining the exclusive right to develop and market beraprost in the
sustained release formulation in the United States and Canada for the treatment
of all vascular indications (including cardiovascular indications). In exchange,
United Therapeutics paid Toray $1.0 million in cash and 200,000 shares of common
stock. In addition, United Therapeutics agreed to grant Toray an option to
purchase 500,000 shares of common stock upon Toray's delivery of clinical trial
material (expected in 2001) with an exercise price based on the average of
closing market prices during the month preceding delivery of clinical trial
material. United Therapeutics also agreed to pay Toray milestone payments of up
to $750,000.

Pursuant to the agreements, United Therapeutics has agreed to pay all
costs and expenses associated with undertaking clinical trials, obtaining
regulatory approvals and commercializing beraprost in the United States and
Canada for the treatment of pulmonary hypertension, peripheral vascular disease
and all vascular and cardiovascular indications. Toray has retained all
manufacturing rights for beraprost. United Therapeutics has agreed to purchase
beraprost solely from Toray at specified prices based on volume. The agreements
each set forth a product development schedule. In the event that development by
United Therapeutics falls significantly behind the schedule specified in either
agreement, Toray may terminate that agreement. Furthermore, United Therapeutics
is responsible under the agreements for achieving minimum annual product net
sales as determined in advance by mutual agreement and in the case of the first
two years of commercial sales, minimum net sales of $2.5 million and $5 million.
In the event that United Therapeutics is unable to meet any minimum annual net
sales requirement for two consecutive years, Toray may convert the exclusive
license to a non-exclusive license. United Therapeutics would then be required
to share any product marketing rights approved by the FDA with a third-party
licensee chosen by Toray. Each agreement expires 10 years following FDA approval
of beraprost for the particular disease indication. United Therapeutics may
extend each agreement for unlimited one-year periods with Toray's consent.

The United States patents licensed by United Therapeutics cover the
compound beraprost in the existing immediate-release oral form and its method of
synthesis and will expire in January 2003 and April 2010. The licensed Canadian
patent expires in January 2003. Toray has also applied for patents covering the
new sustained release formulations of beraprost. There are no issued patents
covering methods of treating any disease, including pulmonary hypertension and
peripheral vascular disease, using beraprost. Toray is responsible for
prosecuting and maintaining beraprost patents with United Therapeutics'
reasonable assistance.

SHEARWATER POLYMERS, INC. AGREEMENT

In September 1999, United Therapeutics entered into an agreement with
Shearwater Polymers, Inc. This agreement grants to United Therapeutics the
exclusive right to Shearwater's know-how for the design, development, production
and use of a technology known as pegylation to develop and produce sustained
release prostacyclin molecules for the possible treatment of pulmonary
hypertension, peripheral vascular disease, stroke, heart disease, cancer, and
related diseases worldwide. In exchange, United Therapeutics paid Shearwater
$100,000 in cash and agreed to pay Shearwater milestone payments of up to
$2,900,000. Milestone payments will come due upon the achievement of certain
product development goals set forth in the agreement and are expected to be paid
over a period of approximately six years. United Therapeutics also agreed to pay
royalties ranging from two to four percent of net sales from developed products.
Minimum annual royalties of $1,000,000 are required commencing with the
thirteenth month following government approval of a developed product.

Under United Therapeutics' agreement with Shearwater, any inventions
that relate to the combination of prostacyclin and the pegylation technology,
including production methods and therapeutic methods for the treatment of any
indication, will be owned solely by United Therapeutics, and any inventions
relating to non-prostacyclin pegylation methods such as drug formulation or
delivery will be owned solely by Shearwater. Both



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United Therapeutics and Shearwater have filed for U.S. patent applications
relating to their respective inventions and each is responsible for prosecuting
and maintaining its patent portfolio.

SYNERGY PHARMACEUTICALS, INC.

In March 2000, Unither Pharmaceuticals, Inc. (Unither), a wholly owned
subsidiary of United Therapeutics, entered into a license agreement with Synergy
Pharmaceuticals, Inc. (Synergy) to obtain from Synergy the exclusive worldwide
rights to certain patents relating to anti-viral compounds known as iminosugars.
Unither paid Synergy a $100,000 license fee. The agreement requires that Unither
pay Synergy milestone payments of up to $22.2 million for each FDA-approved
product plus royalties ranging from 6 percent to 12.25 percent, subject to
reductions, based on net sales. Additionally, Unither acquired 15 percent of the
outstanding stock of Synergy for a total of $5 million. The purchase price was
paid with $3.0 million in cash and 21,978 shares of common stock of United
Therapeutics valued at approximately $2.0 million. As part of these
transactions, Unither received an exclusive option to purchase the remaining
stock of Synergy at its fair value to be determined in the future in accordance
with the terms of the contract.

In November 2000, Unither and Synergy amended the exclusive license
agreement to include the development of new analogs of the licensed compounds.
As part of the amendments, Unither and Synergy agreed to reduce the milestone
and royalty payments by one-half for any approved products which may result from
the new analogs. Additionally, Synergy granted to Unither a warrant to purchase
up to approximately 10 percent of the outstanding stock of Synergy exercisable
for six years at $0.001 per share.

Synergy is also providing contract research services to Unither for research
related to United Therapeutics' iminosugar program based on these licenses.


OXFORD UNIVERSITY AND THOMAS JEFFERSON UNIVERSITY RESEARCH AGREEMENTS AND
LICENSES

In November 2000, as part of the amendment to Unither's exclusive
license agreement with Synergy, Unither agreed to directly assume Synergy's role
in funding ongoing research being conducted by the University of Oxford and
Thomas Jefferson University (TJU) into analogs of the anti-viral compounds being
developed by Unither and Synergy. Unither has committed up to $1.8 million in
funding for research to be conducted by the institutions through September 2002
in exchange for an exclusive license to all inventions arising from such
research. The license agreement requires Unither to pay the institutions
milestone payments of $300,000 subject to reduction depending on Unither
contributions to inventions, and royalties of 1.5% subject to reduction for
third-party royalties, but not less than 0.75% for Oxford and 0.50% for TJU.
(Note 5)

STANFORD UNIVERSITY AND NEW YORK MEDICAL COLLEGE LICENSES

In 1997, 1999 and 2000, United Therapeutics' newly acquired subsidiary,
Cooke Pharma, Inc., exclusively licensed patents related to amino acid based
dietary supplements to enhance the level of endogenous nitric oxide in the
vascular system from Stanford University and New York Medical College. The
licenses cover worldwide territories and are valid for the life of the patents
(ranging from 2010 to 2018). Cooke Pharma will own all rights to all new
products that may be or are derived from these licenses. In return, Cooke
Pharma, Inc. has agreed to pay royalties equal to one percent of net sales of
amino acid based medical foods to each licensor respectively, subject to
reductions. Minimum annual royalties of $10,000 are due to each licensor.

NORTHERN THERAPEUTICS CORPORATION SUBSIDIARY

In December 2000, Lung Rx, a subsidiary of United Therapeutics, formed a
new company, Northern Therapeutics Corporation, a Canada based company, with the
inventor of a new form of gene therapy for pulmonary hypertension and other
conditions. United Therapeutics owns 59% of Northern Therapeutics. The purpose
of Northern Therapeutics is to develop the gene therapy and also to distribute
Lung Rx's second



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generation prostacyclin analog, Unipeg, and HeartBar(R) in Canada and, upon the
consent of Toray Industries, Inc., to distribute beraprost in Canada. The new
form of gene therapy is referred to as autologous cell-based gene therapy. The
autologous cell-based gene therapy inserts needed genes into a person's cells
after those cells have been extracted from the body, and then injects the
genetically modified cells back into the person's body. The approach avoids the
need to use viral vectors to bring new genes into the body, which give rise to
toxic immunoreactivity and other health problems. The autologous cell-based gene
therapy has been successfully proven in studies of animals with pulmonary
hypertension.

PATENT TERM EXTENSIONS

United Therapeutics believes that some of the patents to which it has
rights may be eligible for extensions of up to five years based upon patent term
restoration procedures in Europe and in the United States under the Waxman-Hatch
Act. For instance, under Waxman-Hatch, the Toray U.S. patent relating to the
compound beraprost could be extended by up to five years, giving the product
patent protection until as late as January 2008 if approval in the United States
is received before expiration of the original patent term in 2003. In addition,
patent extensions are available under similar laws in Europe. United
Therapeutics is considering which patents it will seek to extend under
Waxman-Hatch and similar laws of other jurisdictions. See "-- Government
Regulation."

ORPHAN DRUG STATUS AND GRANTS

In June 1997, United Therapeutics was notified by the FDA that Remodulin
for primary pulmonary hypertension qualified for orphan drug status. In November
1999, United Therapeutics was notified that the FDA had approved an amendment to
the orphan designation for Remodulin from the treatment of primary pulmonary
hypertension to the treatment of "pulmonary arterial hypertension" (a
designation which includes both primary pulmonary hypertension and advanced
secondary pulmonary hypertension). The company believes that if Remodulin is
approved by the FDA, no other non-oral treatment for primary pulmonary
hypertension using prostacyclin will be approved by the FDA for seven years,
unless such other treatment is significantly safer or more effective than
Remodulin. In November 1998, United Therapeutics received a $415,000 grant from
the FDA's orphan drug grant program for the development of Remodulin for the
treatment of primary pulmonary hypertension, all of which has been recognized as
revenue through December 31, 2000.

In April 1999, United Therapeutics was notified by the FDA that
beraprost for advanced pulmonary hypertension qualified for orphan drug status.
United Therapeutics believes that if beraprost is approved by the FDA, no other
oral treatment for advanced pulmonary hypertension using prostacyclin will be
approved by the FDA for seven years, unless such other treatment is
significantly safer or more effective than beraprost.

CLINICAL INVESTIGATOR NETWORK

United Therapeutics has established a multi-center clinical
investigation network with approximately 100 leading medical centers. This
network consists of pulmonologists and cardiologists from centers in North
America, Europe, Australia and Israel who collectively treat a majority of
patients with primary pulmonary hypertension, a substantial number of patients
with secondary pulmonary hypertension as well as patients with peripheral
vascular disease. These physicians understand and have extensive experience in
clinical research of severe pulmonary and vasculardiseases. United Therapeutics
is continually expanding its clinical investigator network by adding
professionals who have demonstrated success in conducting clinical research
required for regulatory approval.

MANUFACTURING AND SUPPLY

United Therapeutics manufactures Remodulin and has contracted with
qualified Toray Industries, Inc. to produce beraprost.

Cook Imaging Corporation continues to formulate the bulk active
ingredient in Remodulin for United Therapeutics. An analytical testing
laboratory, Magellan Laboratories Inc., tests the purity and stability of each
batch of manufactured Remodulin for compliance with FDA standards.



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11

HeartBar(R) is manufactured by a contract nutritional food manufacturer
in California, Nellson Nutraceuticals. Holter and event monitors are
manufactured by Medicomp at its facility in Florida.

MARKETING AND SALES

In accordance with the implementation of United Therapeutics' strategic
alliance with MiniMed, United Therapeutics and MiniMed will jointly handle
aspects of distribution of the Remodulin therapy. United Therapeutics will have
primary sales and marketing responsibility. United Therapeutics' marketing
strategy will rely upon existing chronic care specialty pharmacy distributors to
handle doctor and patient requests for Remodulin on a non-exclusive basis in the
United States. To further this strategy, United Therapeutics has entered into
two non-exclusive distributor agreements with Gentiva Health Services, Inc. and
Priority Healthcare Corporation for the United States. These specialty
distributors are experienced in the sales, distribution and reimbursement of
chronic therapies. Outside of the United States, six exclusive distributor
agreements are in place for Canada, Europe, Australia, South America and Israel.
United Therapeutics will sell Remodulin and MiniMed products to its distributors
in the United States and Canada at a discount from an average wholesale price
set by United Therapeutics and to its international distributors at a transfer
price set by United Therapeutics. The distributors will be responsible for
assisting patients with obtaining reimbursement.

Presently, HeartBar(R) is sold as an over-the-counter product at retail
chain pharmacies across the United States. Cooke Pharma relies on a third party
distributor and contract sales organizations to market and distribute the
product to pharmacies.

Holter and event monitor analysis services are marketed to physicians,
hospitals, and managed care providers directly by Medicomp's internal sales
force.

COMPETITION

Many drug companies engage in research and development to commercialize
products to treat cardiovascular, infectious and inflammatory diseases. United
Therapeutics competes with these companies for funding, access to licenses,
personnel, third-party collaborators and product development. Almost all of
these companies have substantially greater financial, marketing, sales,
distribution and technical resources, and more experience in research and
development, clinical trials and regulatory matters, than United Therapeutics.
United Therapeutics is aware of one existing treatment already approved for
pulmonary hypertension that Remodulin will have to compete with and two existing
treatments already approved for peripheral vascular disease that beraprost will
have to compete with. In addition, competitors may develop and commercialize
additional products that compete with United Therapeutics' products and may do
so more rapidly than United Therapeutics.

Holter and event monitor analysis services are provided by many local
and regional competitors and a few national competitors.

GOVERNMENTAL REGULATION

The research, development, testing, manufacture, promotion, marketing
and distribution of drug products are extensively regulated by government
authorities in the United States and other countries. Drugs are subject to
rigorous regulation by the FDA in the United States and similar regulatory
bodies in other countries. The steps ordinarily required before a new drug may
be marketed in the United States, which are similar to steps required in most
other countries, include:

o Preclinical laboratory tests, preclinical studies in animals and
formulation studies and the submission to the FDA of an
investigational new drug application for a new drug or
antibiotic;

o Adequate and well-controlled clinical trials to establish the
safety and efficacy of the drug for each



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indication;

o The submission of a new drug application to the FDA; and

o FDA review and approval of the new drug application prior to any
commercial sale or shipment of the drug.

Preclinical tests include laboratory evaluation of product chemistry
toxicity and formulation, as well as animal studies. The results of preclinical
testing are submitted to the FDA as part of an investigational new drug
application. A 30-day waiting period after the filing of each investigational
new drug application is required prior to the commencement of clinical testing
in humans. At any time during this 30-day period or at any time thereafter, the
FDA may halt proposed or ongoing clinical trials until the FDA authorizes trials
under specified terms. The investigational new drug application process may be
extremely costly and substantially delay development of United Therapeutics'
products. Moreover, positive results of preclinical tests will not necessarily
indicate positive results in clinical trials.

Clinical trials to support new drug applications are typically conducted
in three sequential phases, but the phases may overlap. During Phase I, the
initial introduction to the drug into healthy human subjects or patients, the
drug is tested to assess metabolism, pharmacokinetics and pharmacological
actions and safety, including side effects associated with increasing doses.
Phase II usually involves studies in a limited patient population to:

o Assess the efficacy of the drug in specific, targeted
indications;

o Assess dosage tolerance and optimal dosage; and

o Identify possible adverse effects and safety risks.

If a compound is found to be potentially effective and to have an
acceptable safety profile in Phase II evaluations, Phase III trials, also called
pivotal studies, major studies or advanced clinical trials, are undertaken to
further demonstrate clinical efficacy and to further test for safety within an
expanded patient population at geographically dispersed clinical study sites.

After successful completion of the required clinical testing, generally
a new drug application is submitted. The FDA may request additional information
before accepting a new drug application for filing, in which case the
application must be resubmitted with the additional information. Once the
submission has been accepted for filing, the FDA has 180 days to review the
application and respond to the applicant. The review process is often
significantly extended by FDA requests for additional information or
clarification. The FDA may refer the new drug application to an appropriate
advisory committee for review, evaluation and recommendation as to whether the
application should be approved, but the FDA is not bound by the recommendation
of an advisory committee.

If FDA evaluations of the new drug application and the manufacturing
facilities are favorable, the FDA may issue either an approval letter or an
approvable letter. An approvable letter will usually contain a number of
conditions that must be met in order to secure final approval of the new drug
application and authorization of commercial marketing of the drug for certain
indications. The FDA may refuse to approve the new drug application or issue a
not approvable letter, outlining the deficiencies in the submission and often
requiring additional testing or information.

The FDA may designate a product as an "orphan drug" if the drug is a
drug intended to treat a rare disease or condition. A disease or condition is
considered rare if it affects fewer than 200,000 people in the United States, or
if it affects more than 200,000 people but will be sold for less money than it
will cost to develop. If a sponsor obtains the first FDA marketing approval for
a certain orphan drug, the sponsor will have a seven-year exclusive right to
market the drug for the orphan indication.



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If regulatory approval of Remodulin or any of United Therapeutics' other
products is granted, it will be limited to certain disease states or conditions.
The manufacturers of approved products and their manufacturing facilities will
be subject to continual review and periodic inspections. In addition,
identification of certain side effects or the occurrence of manufacturing
problems after any of its drugs are on the market could cause subsequent
withdrawal of approval, reformulation of the drug, additional preclinical
testing or clinical trials, and changes in labeling of the product.

The Waxman-Hatch Act provides that patent terms may be extended during
the FDA regulatory review period for the related product. This period is
generally one-half the time between the effective date of an investigational new
drug application and the submission date of a new drug application, plus the
time between the submission date of a new drug application and the approval of
that application, subject to a maximum extension of five years. Similar patent
term extensions are available under European laws.

Outside the United States, United Therapeutics' ability to market its
products will also be contingent upon receiving marketing authorizations from
the appropriate regulatory authorities. The foreign regulatory approval process
may include some or all of the risks associated with FDA approval set forth
above. The requirements governing the conduct of clinical trials and marketing
authorization vary widely from country to country. At present, foreign marketing
authorizations are applied for at a national level, although within Europe
procedures are available to companies wishing to market a product in more than
one European Union member state.

Under a new regulatory system in the EU, marketing authorizations may be
submitted at either a centralized, a decentralized or a national level. The
centralized procedure is mandatory for the approval of biotechnology products
and high technology products and available at the applicant's option for other
products. The centralized procedure provides for the grant of a single marketing
authorization that is valid in all EU member states. The decentralized procedure
is available for all medicinal products that are not subject to the centralized
procedure. The decentralized procedure provides for mutual recognition of
national approval decisions, changes existing procedures for national approvals
and establishes procedures for coordinated EU actions on products, suspensions
and withdrawals. Under this procedure, the holder of a national marketing
authorization for which mutual recognition is sought may submit an application
to one or more EU member states, certify that the dossier is identical to that
on which the first approval was based or explain any differences and certify
that identical dossiers are being submitted to all member states for which
recognition is sought. Within 90 days of receiving the application and
assessment report, each EU member state must decide whether to recognize
approval. The procedure encourages member states to work with applicants and
other regulatory authorities to resolve disputes concerning mutual recognition.
Lack of objection of a given country within 90 days automatically results in
approval of the EU country.

United Therapeutics intends to secure European regulatory approval for
the use of Remodulin for pulmonary hypertension under the decentralized
procedure and filed its first Marketing Authorization Application in France in
February 2001. Regulatory approvals for the use of Remodulin for pulmonary
hypertension in Canada and other EU member states will follow. United
Therapeutics also intends to secure European and Canadian regulatory approval
for the use of Remodulin for peripheral vascular disease in parallel with its
United States regulatory filings. The company has contracted with Quintiles (UK)
Ltd., a contract research organization, to assist with its European clinical
development and regulatory actions.

The HeartBar is subject to FDA regulation as a medical food. The current
product labeling was submitted to the FDA and future labeling changes are
subject to FDA review. The HeartBar is manufactured at a cGMP facility.
Telemedical products are subject to FDA regulation as medical devices. The
devices manufactured and sold by Medicomp have received marketing approval
from the FDA under Section 510(k) of the Food, Drug and Cosmetic Act.



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PRODUCT LIABILITY INSURANCE

United Therapeutics owns a Products/Clinical Trials Liability Insurance
Policy which it believes to be adequate for its needs. In addition, United
Therapeutics owns policies covering clinical trials in Austria, France, Spain
and Italy. United Therapeutics believes this insurance also is adequate for its
needs.

EMPLOYEES

United Therapeutics had 110 employees as of March 23, 2001. The company
also maintains active independent contractor relationships with various
individuals with whom it has month-to-month consulting contracts. The company
believes its employee relations are excellent. None of United Therapeutics'
employees is subject to a collective bargaining agreement.

REVENUES AND INDUSTRY SEGMENTS

The information required by Regulation S-K Items 101(b) and 101(d)
related to financial information about segments and financial information about
sales is contained in the audited financial statements, which are included in
this Annual Report.

RISK FACTORS

This annual report on Form 10-K contains forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These statements involve risks and uncertainties and United
Therapeutics' actual results may differ materially from the results discussed in
these forward-looking statements. Factors that may cause such a difference
include, but are not limited to, those discussed below.

IF UNITED THERAPEUTICS' PRODUCTS FAIL IN CLINICAL STUDIES, UNITED THERAPEUTICS
WILL BE UNABLE TO OBTAIN FDA APPROVAL AND WILL NOT BE ABLE TO SELL THOSE
PRODUCTS.

In order to sell its products, United Therapeutics must receive
regulatory approval for its products. To obtain those approvals, United
Therapeutics must conduct clinical studies demonstrating that the drug and the
delivery mechanism for the drug are safe and effective. If United Therapeutics
cannot obtain FDA approval for a product, that product cannot be sold and United
Therapeutics' revenues will suffer. United Therapeutics has completed its
pivotal Phase III clinical study for Remodulin for advanced pulmonary
hypertension and has started Phase II clinical studies for Remodulin for
late-stage peripheral vascular disease. United Therapeutics has commenced a
Phase III clinical trial program to treat early-stage peripheral vascular
disease with beraprost and has commenced a Phase III clinical trial program to
treat early-stage pulmonary hypertension with beraprost. United Therapeutics is
still developing studies for its other products and has only completed
pre-clinical studies for a recently acquired drug delivery mechanism. United
Therapeutics' ongoing clinical studies might be delayed or halted for various
reasons, including:

o The drug is not effective, or physicians think that the drug is
not effective;

o Patients experience severe side effects during treatment;

o Patients die during the clinical study because their disease is
too advanced or because they experience medical problems that
are not related to the drug being studied;

o Patients do not enroll in the studies at the rate United
Therapeutics expects; and

o Drug supplies are not sufficient to treat the patients in the
studies.



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15

In addition, the FDA and foreign regulatory authorities have substantial
discretion in the approval process. The FDA and foreign regulatory authorities
may not agree that United Therapeutics has demonstrated that its products are
safe and effective.

IF UNITED THERAPEUTICS CANNOT MAINTAIN REGULATORY APPROVALS FOR ITS PRODUCTS, IT
CANNOT SELL THOSE PRODUCTS AND ITS REVENUES WILL SUFFER.

The process of obtaining and maintaining regulatory approvals for new
drugs is lengthy, expensive and uncertain. The manufacturing, distribution,
advertising and marketing of these products are subject to extensive regulation.
Any new product approvals United Therapeutics receives in the future could
include significant restrictions on the use or marketing of the product. Product
approvals, if granted, can be withdrawn for failure to comply with regulatory
requirements or upon the occurrence of adverse events following commercial
introduction of the products. If approvals are withdrawn for a product, United
Therapeutics cannot sell that product and its revenues will suffer. In addition,
governmental authorities could seize United Therapeutics' products or force
United Therapeutics to recall its products. Finally, United Therapeutics and its
officers and directors could be subject to civil and criminal penalties for
failure to comply with these regulatory requirements.

UNITED THERAPEUTICS HAS A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE.

United Therapeutics has lost money since its inception in 1996, and its
accumulated deficit was approximately $124.9 million at December 31, 2000.
United Therapeutics expects to incur substantial additional losses over the next
several years, whether or not it generates revenue, as it expands clinical
studies and continues to develop its products. United Therapeutics expects its
quarterly and annual operating results to fluctuate, depending primarily on the
following factors:

o Timing of regulatory approvals and commercial sales of its
products;

o Level of patient demand for its products;

o Timing of payments to licensors and corporate partners; and

o Timing of investments in new technologies.

Substantially all of United Therapeutics' products are in clinical
studies and the related regulatory approval process, and United Therapeutics is
not yet selling any of its pharmaceutical products. United Therapeutics might
not obtain regulatory approvals for its pharmaceutical products, including its
lead products, Remodulin and beraprost, and may not be able to sell its
pharmaceutical products commercially. Even if United Therapeutics sells its
products, United Therapeutics may not ever be profitable and may not be able to
sustain any profitability it achieves.

DISCOVERIES OR DEVELOPMENTS OF NEW TECHNOLOGIES BY OTHERS MAY MAKE UNITED
THERAPEUTICS' PRODUCTS OBSOLETE.

Other companies may conduct research, make discoveries or introduce new
products that render all or some of United Therapeutics' technologies and
products obsolete or not commercially viable. Researchers are continually making
new discoveries that may lead to new technologies to treat the diseases United
Therapeutics' products are intended for. In addition, alternative approaches to
treating chronic diseases, such as gene therapy, may make United Therapeutics'
products obsolete or noncompetitive.



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UNITED THERAPEUTICS' PRODUCTS MAY NOT BE COMMERCIALLY SUCCESSFUL BECAUSE
PHYSICIANS AND PATIENTS MAY NOT ACCEPT THEM.

Even if regulatory authorities approve United Therapeutics' products,
those products may not be commercially successful. United Therapeutics expects
that most of its products, including Remodulin, will be very expensive. Patient
acceptance of and demand for United Therapeutics' products will depend largely
on the following factors:

o Acceptance by physicians and patients of United Therapeutics'
products as safe and effective therapies;

o Reimbursement of drug and treatment costs by third-party payors;

o Pricing of alternative products;

o Convenience and ease of administration of United Therapeutics'
products; and

o Prevalence and severity of side effects associated with United
Therapeutics' products.

UNITED THERAPEUTICS MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE THE BUSINESSES OF
MEDICOMP, COOKE PHARMA OR ANY OTHER COMPANY IT MAY ACQUIRE

United Therapeutics recently acquired Medicomp and Cooke Pharma and may
make additional acquisitions. The successful integration of the acquired
businesses will require:

- Definition and alignment of the management teams;

- Coordination of geographically separate organizations

- Integration of product offerings

- Coordination of sales and marketing and research and development
efforts

- Alignment of corporate cultures and management philosophies;

- Management focus on transitional activities.

Management may not be able to accomplish the integration of acquired
businesses successfully or within planned periods. Any difficulties encountered
in the transition process could adversely affect the revenues and operating
results of the businesses acquired. If United Therapeutics fails to integrate
acquired businesses quickly and efficiently, it may incur unanticipated costs or
be unable to successfully advance the business objectives of the acquisition.

IF THIRD-PARTY PAYORS WILL NOT REIMBURSE PATIENTS FOR UNITED THERAPEUTICS' DRUG
PRODUCTS, SALES WILL SUFFER.

United Therapeutics' commercial success will depend in part on
third-party payors agreeing to reimburse patients for the costs of United
Therapeutics' pharmaceutical products. Third-party payors frequently challenge
the pricing of new drugs. United Therapeutics expects that its products will be
very expensive. Third-party payors may not approve United Therapeutics' products
for reimbursement. If third-party payors do not approve a United Therapeutics'
product for reimbursement, sales will suffer as patients will opt for a
competing product that is approved for reimbursement.



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UNITED THERAPEUTICS RELIES ON THIRD PARTIES TO DEVELOP, MARKET, DISTRIBUTE AND
SELL ITS PRODUCTS AND THOSE THIRD PARTIES MAY NOT PERFORM.

United Therapeutics does not have the ability to independently conduct
clinical studies, obtain regulatory approvals, market, distribute or sell most
of its products and intends to rely substantially on experienced third parties
to perform all of those functions. United Therapeutics may not locate acceptable
contractors or enter into favorable agreements with them. If third parties do
not successfully carry out their contractual duties or meet expected deadlines,
United Therapeutics will be unable to get marketing approvals and will be unable
to sell its products. MiniMed Inc. is United Therapeutics' exclusive partner for
the subcutaneous delivery of Remodulin using the MiniMed Inc. microinfusion
device in the field of pulmonary hypertension. United Therapeutics is relying on
MiniMed's experience, expertise and performance. Similarly, United Therapeutics
is relying on Gentiva Health Services Inc. and Priority Healthcare Corporation
to market, distribute, and sell Remodulin once it has been approved by the FDA.
If United Therapeutics' partners are unsuccessful in their efforts, United
Therapeutics' revenues will suffer.

UNITED THERAPEUTICS HAS LIMITED EXPERIENCE WITH MANUFACTURING AND DEPENDS ON
THIRD PARTIES, WHO MAY NOT PERFORM, TO SYNTHESIZE AND MANUFACTURE MANY OF ITS
PRODUCTS.

United Therapeutics itself has limited experience with manufacturing. In
October 1999, United Therapeutics acquired SynQuest, Inc., a company that
manufactured Remodulin for United Therapeutics. In December 2000, SynQuest was
dissolved and merged into United Therapeutics as its synthesis and manufacturing
division. Prior to the acquisition of SynQuest, United Therapeutics had no
experience with manufacturing. Although in connection with the acquisition of
SynQuest United Therapeutics retained the employees and managers of SynQuest,
United Therapeutics may be unsuccessful in maintaining drug manufacturing
operations.

United Therapeutics relies on third parties for the manufacture of all
other products other than Remodulin. United Therapeutics is relying on Cook
Imaging Corporation for the formulation of Remodulin. United Therapeutics relies
on Magellan Laboratories Incorporated to test the purity and stability of each
batch of Remodulin. United Therapeutics relies exclusively on Toray Industries,
Inc. to manufacture beraprost. United Theapeutics relies on Nellson
Nutraceuticals to manufacture the HeartBar. United Therapeutics' manufacturing
strategy presents the following risks:

o The manufacturing processes for some of United Therapeutics'
products have not been tested in quantities needed for
commercial sales;

o Delays in scale-up to commercial quantities could delay clinical
studies, regulatory submissions and commercialization of United
Therapeutics' products;

o A long lead time is needed to manufacture Remodulin, and the
manufacturing process is complex;

o United Therapeutics and manufacturers of United Therapeutics'
products are subject to the FDA's good manufacturing practices
regulations and similar foreign standards, and although United
Therapeutics controls compliance issues with respect to the work
conducted by SynQuest, the company does not have control over
compliance with these regulations by its third-party
manufacturers;

o If United Therapeutics has to change to another manufacturing
contractor or abandon its captive manufacturing operations, FDA
and comparable foreign regulators would require new testing and
compliance inspections and the new manufacturer would have to be
educated in the processes necessary for the production of the
affected product;

o Without satisfactory long-term agreements with its
manufacturers, United Therapeutics will not be able to develop
or commercialize its products, other than Remodulin, as planned
or at all and will



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have to rely solely on the manufacturing capacity the company
acquired through SynQuest;

o Without substantial experience in operating a manufacturing
facility, United Therapeutics may not be able to successfully
manufacture Remodulin; and

o United Therapeutics may not have intellectual property rights,
or may have to share intellectual property rights, to many
improvements in the manufacturing processes or new manufacturing
processes for its products.

Any of these factors could delay clinical studies or commercialization
of United Therapeutics' products, entail higher costs and result in United
Therapeutics being unable to effectively sell its products.

IF THE LICENSES UNITED THERAPEUTICS DEPENDS ON ARE BREACHED OR TERMINATED,
UNITED THERAPEUTICS WOULD LOSE ITS RIGHT TO DEVELOP AND SELL THE PRODUCTS
COVERED BY THE LICENSES.

United Therapeutics acquires or licenses drugs which have been
discovered and initially developed by others. In addition, United Therapeutics
has obtained and will be required to obtain licenses to third-party technology
to conduct its business, including licenses for its products and a license for
the MiniMed microinfusion device. This dependence on licenses has the following
risks:

o United Therapeutics may not be able to obtain future licenses at
a reasonable cost or at all;

o If any of United Therapeutics' licenses are terminated, United
Therapeutics will lose its rights to develop and market some or
all of its products;

o The licenses that United Therapeutics holds generally provide
for termination by the licensor in the event United Therapeutics
breaches the license agreement, including by failing to pay
royalties and other fees on a timely basis;

o In the event that Glaxo Wellcome or Pharmacia & Upjohn terminate
their agreements, United Therapeutics will have no further
rights to utilize their patents or trade secrets to develop and
commercialize Remodulin; and

o If licensors fail to maintain the intellectual property licensed
to United Therapeutics as required by most of United
Therapeutics' license agreements, United Therapeutics may lose
its rights to develop and market some or all of its products and
may be forced to incur substantial additional costs to maintain
the intellectual property itself or force the licensor to do so.

IF UNITED THERAPEUTICS' PATENT AND OTHER INTELLECTUAL PROPERTY PROTECTION IS
INADEQUATE, UNITED THERAPEUTICS' SALES AND PROFITS COULD SUFFER OR COMPETITORS
COULD FORCE UNITED THERAPEUTICS' PRODUCTS COMPLETELY OUT OF THE MARKET.

The U.S. patent for the method of treating pulmonary hypertension with
Remodulin expires in 2009. The U.S. patents for the beraprost composition of
matter and synthesis expire in 2003 and 2010. United Therapeutics may not be
able to extend these or any other patents. Competitors may develop products
based on the same active ingredients as United Therapeutics' products, including
Remodulin, and market those products after the patents expire, or may design
around United Therapeutics' existing patents. If this happens, United
Therapeutics' sales would suffer and United Therapeutics' profits could be
severely impacted.

The issued beraprost patents do not cover methods of treating any
disease, including pulmonary hypertension or peripheral vascular disease, using
beraprost. Patents may be issued to others which prevent the manufacture or sale
of United Therapeutics' products. United Therapeutics may have to license those
patents and



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pay significant fees or royalties to the owners of the patents in order to keep
marketing its products. This would cause profits on sales to suffer.

United Therapeutics has filed a patent application in the United States
for the synthesis of Remodulin, but this and other patent applications which
have been or may be filed by United Therapeutics may not issue. The scope of any
patent that issues may not be sufficient to protect United Therapeutics'
technology. The laws of foreign jurisdictions in which United Therapeutics
intends to sell its products may not protect the company's rights to the same
extent as the laws of the United States.

In addition to patent protection, United Therapeutics also relies on
trade secrets, proprietary know-how and technology advances. United Therapeutics
enters into confidentiality agreements with its employees and others, but these
agreements may not be effective in protecting the company's proprietary
information. Others may independently develop substantially equivalent
proprietary information or obtain access to United Therapeutics' know-how.

Litigation, which is very expensive, may be necessary to enforce or
defend United Therapeutics' patents or proprietary rights and may not end
favorably for United Therapeutics. Any of United Therapeutics' licenses, patents
or other intellectual property may be challenged, invalidated, canceled,
infringed or circumvented and may not provide any competitive advantage to
United Therapeutics.

UNITED THERAPEUTICS MAY NOT HAVE, OR MAY HAVE TO SHARE RIGHTS TO, FUTURE
INVENTIONS ARISING FROM ITS OUTSOURCING AGREEMENTS AND MAY LOSE POTENTIAL
PROFITS OR SAVINGS.

Pursuant to United Therapeutics' agreement with MiniMed concerning the
subcutaneous delivery of Remodulin, any new inventions or intellectual property
that arise from United Therapeutics' activities with MiniMed will be owned
jointly by United Therapeutics and MiniMed. Under United Therapeutics' agreement
with Shearwater Polymers, Inc. concerning pegylation, any inventions that relate
to a non-prostacyclin pegylation method will be owned by Shearwater Polymers. If
United Therapeutics does not have rights to new developments or inventions that
arise during the terms of these agreements, or United Therapeutics has to share
the rights with others, United Therapeutics will lose the benefit of the new
rights which may mean a loss of future profits or savings generated from
improved technology.

IF UNITED THERAPEUTICS' HIGHLY QUALIFIED MANAGEMENT AND TECHNICAL PERSONNEL
LEAVE THE COMPANY, ITS BUSINESS MAY SUFFER.

United Therapeutics is dependent on its current management. United
Therapeutics does not maintain key person life insurance. United Therapeutics'
success will depend in part on retaining the services of its existing management
and key personnel and attracting and retaining new highly qualified personnel.
Expertise in the field of pulmonary and vascular disease is not generally
available in the market, and competition for qualified management and personnel
is intense.

UNITED THERAPEUTICS MAY NOT SUCCESSFULLY COMPETE WITH ESTABLISHED DRUG
COMPANIES.

United Therapeutics competes with established drug companies during
product development for, among other things, funding, access to licenses,
personnel and third-party collaborators. United Therapeutics will also compete
with these companies following approval of its products. Almost all of these
companies have substantially greater financial, marketing, sales, distribution
and technical resources, and more experience in research and development,
clinical trials and regulatory matters, than United Therapeutics. United
Therapeutics is aware of existing treatments that will compete with its
products. If United Therapeutics cannot successfully compete with new or
existing products, United Therapeutics' marketing and sales will suffer and it
may not ever be profitable.



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IF UNITED THERAPEUTICS NEEDS ADDITIONAL FINANCING AND CANNOT OBTAIN IT, PRODUCT
DEVELOPMENT AND SALES MAY BE LIMITED.

United Therapeutics may need to spend more money than currently expected
because it may need to change its product development plans or product offerings
to address difficulties with clinical studies or preparing for commercial sales.
United Therapeutics may not be able to obtain additional funds on commercially
reasonable terms or at all. If additional funds are not available, United
Therapeutics may be compelled to delay clinical studies, curtail operations or
obtain funds through collaborative arrangements that may require it to
relinquish rights to certain of its products or potential markets.

UNITED THERAPEUTICS MAY NOT HAVE ADEQUATE INSURANCE AND MAY HAVE SUBSTANTIAL
EXPOSURE TO PAYMENT OF PRODUCT LIABILITY CLAIMS.

The testing, manufacture and marketing of human drugs involves product
liability risks. Although United Therapeutics has product liability insurance,
United Therapeutics may not be able to maintain this product liability insurance
at an acceptable cost, if at all, and this insurance may not provide adequate
coverage against potential losses. If claims or losses exceed United
Therapeutics' liability insurance coverage, United Therapeutics may go out of
business.

UNITED THERAPEUTICS' STOCK PRICE COULD BE VOLATILE AND COULD DECLINE.

The market prices for securities of drug companies are highly volatile,
and there are significant price and volume fluctuations in the market that may
be unrelated to particular companies' operating performances. United
Therapeutics' stock price could decline suddenly due to the following factors:

o Results of clinical trials;

o Timing of regulatory approvals;

o Fluctuations in operating results;

o Announcements by United Therapeutics or others of technological
innovations or new products;

o Failure to meet estimates or expectations of securities
analysts;

o Rate of product acceptance;

o Developments in patent or other proprietary rights;

o Public concern as to the safety of products developed by United
Therapeutics or by others;

o Future sales of substantial amounts of common stock by existing
United Therapeutics stockholders; and

o General market conditions.

FUTURE SALES OF SHARES MAY DEPRESS THE STOCK PRICE.

If the stockholders sell a substantial number of shares of United
Therapeutics' common stock in the public market, or investors become concerned
that substantial sales might occur, the market price of the common stock could
decrease. Such a decrease could make it difficult for United Therapeutics to
raise capital by selling stock or to pay for acquisitions using stock. To the
extent outstanding options or warrants are exercised or additional shares of
capital stock are issued, existing stockholders may incur additional dilution.



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21

EXISTING DIRECTORS AND EXECUTIVE OFFICERS OF UNITED THERAPEUTICS OWN A
SUBSTANTIAL BLOCK OF STOCK AND MIGHT BE ABLE TO DIRECT THE OUTCOME OF MATTERS
REQUIRING STOCKHOLDER APPROVAL.

United Therapeutics' directors and named executive officers beneficially
own approximately 26 percent of its outstanding common stock. Accordingly, these
stockholders as a group might be able to direct the outcome of matters requiring
approval by United Therapeutics' stockholders, including the election of its
directors. Such stockholder control could delay or prevent a change of control
of United Therapeutics.

BECAUSE OF THE RIGHTS AGREEMENT AND "ANTI-TAKEOVER" PROVISIONS IN UNITED
THERAPEUTICS' CERTIFICATE OF INCORPORATION AND BYLAWS, A THIRD PARTY MAY BE
DISCOURAGED FROM MAKING A TAKEOVER OFFER WHICH COULD BE BENEFICIAL TO UNITED
THERAPEUTICS AND THE PUBLIC STOCKHOLDERS.

On December 14, 2000, United Therapeutics adopted a shareholder rights
plan. The effect of this rights plan and of certain provisions of United
Therapeutics' Amended and Restated Certificate of Incorporation and Amended and
Restated By-Laws, and the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, could delay or prevent a third party from
acquiring United Therapeutics or replacing members of the United Therapeutics
board of directors, even if the acquisition or the replacements would be
beneficial to United Therapeutics' stockholders. These factors could also reduce
the price that certain investors might be willing to pay for shares of the
common stock and result in the market price being lower than it would be without
these provisions.

IF STOCKHOLDERS DO NOT RECEIVE DIVIDENDS, STOCKHOLDERS MUST RELY ON STOCK
APPRECIATION FOR ANY RETURN ON THEIR INVESTMENT IN UNITED THERAPEUTICS.

United Therapeutics has never declared or paid cash dividends on any of
its capital stock. United Therapeutics currently intends to retain its earnings
for future growth and therefore does not anticipate paying cash dividends in the
future.



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EXECUTIVE OFFICERS OF THE REGISTRANT

The following is a list, as of March 15, 2001, setting forth certain
information regarding the executive officers of United Therapeutics. Each
executive officer's term will end pursuant to the terms of his or her employment
contract (or in the case of Dr. Kanarek and Mr. Mahon who do not have employment
contracts, the next annual meeting of the Board of Directors) or upon his or her
earlier resignation or the appointment of a successor. As discussed below, Dr.
James W. Crow will retire as President and Chief Operating Officer in 2001 to
become President Emeritus. Dr. Roger Jeffs will replace Dr. Crow as President
and Chief Operating Officer in 2001.



NAME AGE POSITION TERM ENDING
- ------------------------------- --- ---------------------------------------------------- -----------

Martine A. Rothblatt 46 Chairman, Chief Executive Officer and Director 2006
James W. Crow, Ph.D. 56 President, Chief Operating Officer and Director 2001
Gilles Cloutier, Ph.D. 55 Executive Vice President, Business Development, Treasurer and Director 2003
Shelmer D. Blackburn, Jr. 40 Executive Vice President for Medical Affairs, Secretary and Director 2003
Roger Jeffs, Ph.D. 39 Vice President for Clinical, Scientific & Medical Affairs 2006
David Walsh, Ph.D. 55 Chief Operating Officer for Production and Executive Vice President 2001
Barry B. Kanarek, M.D., Ph.D. 54 President and Chief Operating Officer, Unither Pharmaceuticals, Inc. 2001
Ricardo Balda 59 Chief Executive Officer, Medicomp, Inc. 2006
Darlene Walley, Ph.D. 42 President, Cooke Pharma Inc. 2003
Fred T. Hadeed 36 Chief Financial Officer 2006
Paul A. Mahon 37 Assistant Secretary and General Counsel 2001



Martine A. Rothblatt, J.D., M.B.A., started United Therapeutics after
having successfully launched three satellite communications companies (PanAmSat,
Sirius and WorldSpace). She has served as Chairman of its Board of Directors and
Chief Executive Officer since its inception in 1996. Since 1995, Ms. Rothblatt
has been active in efforts to find cures for pulmonary hypertension, which
afflicts one of her daughters. Ms. Rothblatt also serves as Chairman of the Law
and Medicine Committee of the International Bar Association and President of the
William Harvey Medical Research Foundation.

James W. Crow, Ph.D., is a co-founder of United Therapeutics and has
served as President and Chief Operating Officer and as a member of its Board of
Directors since its inception in 1996. Prior to 1996, Dr. Crow worked for more
than 18 years at Glaxo Wellcome Inc., formerly Burroughs Wellcome Co., in
positions such as International Project Leader, Associate Medical Director and
Senior Clinical Research Scientist. While he was associate director of the
Pulmonary II Section, Dr. Crow led the team that developed and obtained FDA
approval for Flolan for the treatment of primary pulmonary hypertension patients
in September 1995. After successful completion of FDA approval for Remodulin,
Dr. Crow will retire as President and Chief Operating Officer in order to serve
as President Emeritus. As President Emeritus, he will continue providing advice
and support on United Therapeutics' prostacyclin programs.

Gilles Cloutier, Ph.D., is a co-founder of United Therapeutics and has
served as Executive Vice President, Business Development and Treasurer and as a
member of its Board of Directors since its inception in 1996. He also served as
Chief Financial Officer from December 1997 to January 2000. Prior to 1996, Dr.
Cloutier served as President of CatoPharma Canada, Inc. from April 1992 to
February 1997. From April 1990 to April 1992, Dr. Cloutier was the Vice
President of Clinical Operations at Quintiles Transnational Corp. Dr. Cloutier
has more than 24 years of experience in all phases of the drug development
process in the United States, Canada and other



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23

international locations.

Shelmer D. Blackburn, Jr., B.A., is a co-founder of United Therapeutics
and has served as Director of Operations, Secretary and a member of its Board of
Directors since its inception in 1996. In 1999, Mr. Blackburn was promoted to
Vice President of Operations and in 2000 to Vice President for Medical Affairs.
Prior to 1996, Mr. Blackburn worked for eight years at Glaxo Wellcome, formerly
Burroughs Wellcome, where he was responsible for the design and management of
clinical trials for Flolan, as well as for an artificial surfactant for the
treatment of neonatal patients with respiratory distress syndrome.

Roger Jeffs, Ph.D., joined United Therapeutics in September of 1998 as
Director of Research, Development and Medical. Dr. Jeffs was promoted to VP of
Research, Development and Medical in July 2000. Prior to 1998, Dr. Jeffs worked
at Amgen as Manager of Clinical Affairs and Associate Director of Clinical
Research from 1995 to 1998, where he served as the worldwide clinical leader of
the Infectious Disease Program. Dr. Jeffs worked at Burroughs Wellcome Co. from
1992 to 1995 as a Clinical Research Scientist in the Cardiopulmonary Section,
and assisted with the Flolan NDA. Dr. Jeffs also has experience in patent
prosecution from his tenure as a Technical Expert with Cushman, Darby, and
Cushman. Dr. Jeffs will succeed Dr. Crow as President and Chief Operating
Officer upon Dr. Crow's retirement.

David Walsh, Ph.D., was promoted to Executive Vice President and Chief
Operating Officer of Production of United Therapeutics in 2001. From 1999, Dr.
Walsh had served as Vice President of Operations of SynQuest, Inc., now a
division of United Therapeutics. Prior to joining SynQuest, Dr. Walsh served as
Vice President of Operations of Gem Pharmaceuticals, Inc. from 1997 to 1999.
From 1992 to 1997, Dr. Walsh worked with BioCryst Pharmaceuticals, Inc. and
served as its Vice President of Drug Development and Quality Management from
1996 to 1997. During this time, Dr. Walsh synthesized bromfenac (Duract), and
worked on commercial manufacturing processes for amfenac (Fenazox), aspartame
(Nutrasweet), peldesine and triprostinol (Remodulin).

Barry B. Kanarek, M.D., Ph.D., was appointed President and Chief
Operating Officer of Unither Pharmaceuticals, Inc., a subsidiary of United
Therapeutics, in 2000. Prior to joining Unither Pharmaceuticals, Dr. Kanarek
served as Senior Vice President of Medical and Regulatory Affairs and Chief
Medical Officer of Emisphere Technology from 1998 to 2000, and Executive Vice
President of Global Medical Operations and Chief Medical Officer of ClinTrials
Research from 1997 to 1998. From 1990 to 1997, Dr. Kanarek served as Senior Vice
President of Medical Affairs and Chief Medical Officer of GlaxoWellcome.

Ricardo Balda, M.S., was appointed as the Chief Executive Officer of
Medicomp, Inc. upon its acquisition by Unither Pharmaceuticals, Inc. in December
2000. Mr. Balda also serves on the United Therapeutics Board of Directors. For
the five years prior to the Medicomp acquisition, Mr. Balda served as Chairman
and President of Medicomp. In 1998, Mr. Balda founded Telemedical Procedures,
LLC, which was also acquired by Unither Pharmaceuticals in December 2000. Mr.
Balda also serves on the Board of Advisors of the Florida Institute of
Technology.

Darelene Walley, Ph.D., is the President and Chief Executive Officer of
Cooke Pharma, Inc., a subsidiary of Unither Pharmaceuticals, Inc. acquired in
December 2000. Dr. Walley first joined Cooke Pharma in 1997 and was appointed
its President in 1998 and Chief Executive Officer in 1999. Prior to joining
Cooke Pharma, Dr. Walley served as Chief Operating Officer of HillTop Research
from 1995 to 1997.

Fred T. Hadeed, B.S., C.P.A., has served as Chief Financial Officer of
United Therapeutics since January 2000. Prior to joining United Therapeutics,
Mr. Hadeed practiced public accounting from 1989 to 2000 at KPMG LLP, where he
most recently served in their life sciences practice.

Paul A. Mahon, J.D., has served as General Counsel and Assistant
Secretary of United Therapeutics since its inception in 1996. He has been a
principal and managing partner of Mahon Patusky Rothblatt & Fisher, Chartered
since its formation in 1993.




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ITEM 2. PROPERTIES

United Therapeutics currently maintains several leased and owned
facilities. The company owns its corporate office in Silver Spring, Maryland.
The company leases its clinical development office in Research Triangle Park,
North Carolina. The company leases laboratory and office space in Chicago,
Illinois. The company's subsidiary, Unither Telemedicine Services Corporation,
leases office space in the District of Columbia and Satellite Beach, Florida.
The company's subsidiary, Medicomp, Inc., leases manufacturing and office space
in Melbourne, Florida. The company's subsidiary, Cooke Pharma, Inc., leases
office and warehouse space in Belmont, California. United Therapeutics'
subsidiary, United Therapeutics Europe Ltd., leases office space in London,
England. United Therapeutics also owns a building adjacent to its corporate
office in Silver Spring, Maryland, which is leased to tenants until various
dates through 2002. United Therapeutics believes these facilities are adequate
for its current and planned operations.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.



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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON EQUITY

United Therapeutics' common stock began trading on the Nasdaq Stock
Market's Nasdaq National Market on June 17, 1999 under the symbol "UTHR." Prior
to that time, there had been no public market for the common stock. The table
below sets forth the high and low closing bid prices for the common stock for
the periods indicated:




2000 1999
-------------------------- -------------------------
High Low High Low
---- --- ---- ---

January 1 - March 31........................... $100.00 $52.00 $ _ $ _
April 1 - June 30.............................. 108.31 40.00 $12.25 $11.63
July 1 - September 30.......................... 128.50 73.00 $29.88 $12.00
October 1 - December 31....................... 82.00 13.00 $46.00 $28.25


As of March 19, 2001, there were 127 holders of record of common stock.
The company estimates that included within the holders of record are
approximately 3,300 beneficial owners of common stock. As of March 22, 2001, the
closing bid price for the common stock was $15.81.

DIVIDEND POLICY

United Therapeutics has never paid and does not intend to pay any
dividends on the common stock in the foreseeable future but intends to retain
any earnings for use in the company's business operations.

RECENT SALES OF UNREGISTERED SECURITIES

In October 1999, United Therapeutics acquired SynQuest, Inc. A portion
of the consideration to the sellers was paid with United Therapeutics common
stock and placed in escrow. United Therapeutics and SynQuest subsequently agreed
to decrease the number of shares of United Therapeutics' common stock held in
escrow by 5,198 shares. Accordingly, in December 2000, United Therapeutics
canceled 5,198 shares of common stock.

In December 2000, United Therapeutics issued an aggregate of 294,635
shares of its common stock to the stockholders of Cooke Pharma, Inc. in
connection with an acquisition of all of Cooke Pharma's assets and certain
liabilities, pursuant to Section 4(2) of the Securities Act of 1933.

In December 2000, United Therapeutics issued an aggregate of 257,142
shares of its common stock to the stockholders of Medicomp, Inc. and Telemedical
Procedures, LLC in connection with an acquisition of all of the assets, pursuant
to Section 4(2) of the Securities Act of 1933.

INITIAL PUBLIC OFFERING USE OF PROCEEDS

United Therapeutics registered 4,500,000 shares of its common stock, par
value $.01 per share, and an additional 675,000 shares of its common stock for
sale to the underwriters exclusively to cover over-allotments, on Registration
Statement on Form S-1, Commission File No. 333-76409. The Securities and


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26

Exchange Commission declared United Therapeutics' registration statement
effective on June 17, 1999. The net proceeds to United Therapeutics from the
offering of the 5,175,000 shares, after deducting expenses was approximately
$56.4 million.

Since the completion of the initial public offering in June 1999 and the
exercise of the over-allotment shares in July 1999, the net offering proceeds
have been applied to the following uses in the following approximate amounts:
$32.8 million for research and development, $766,000 to purchase machinery,
equipment and leasehold improvements, $5.7 million for working capital and
general corporate purposes (including compensation to employees, officers, and
directors in accordance with their standard agreements), $313,000 to purchase
SynQuest, Inc., $3.1 million to purchase a 15 percent interest in Synergy
Pharmaceuticals, Inc., $1.0 million to purchase a 59 percent interest in
Northern Therapeutics, Inc., $8.1 million to purchase Medicomp, Inc. and
Telemedical Procedures, LLC, $200,000 to purchase Cooke Pharma, Inc. and
$493,000 to repay debt. United Therapeutics has temporarily invested the $3.9
million balance of the offering proceeds in short-term investments. The
short-term investments consist primarily of high credit quality debt instruments
of corporations and financial institutions with maturities of three months or
less when purchased. Except as indicated, all of the payments described above
were direct or indirect payments to entities or persons other than directors,
officers, or greater than 10% owners of any equity securities of United
Therapeutics.

SHAREHOLDER RIGHTS PLAN

On December 14, 2000, the Board of Directors approved the adoption of a
Shareholder Rights Plan, in which a dividend of one preferred share purchase
right (a "Right") for each outstanding share of United Therapeutics' common
stock was declared, payable to stockholders of record on December 29, 2000. The
Rights will be exercisable only if a person or group acquires 15% or more of the
common stock of United Therapeutics or announces a tender offer which would
result in ownership of 15% or more of the common stock. The Rights entitle the
holder to purchase one one-thousandth of a share of Series A Junior
Participating Preferred Stock, par value $0.01 per share of United Therapeutics
at a price of $129.50 per one one-thousandth of a share of Preferred Stock,
subject to adjustment. The Rights will expire on December 29, 2010.

Following the acquisition of 15% or more of the common stock of United
Therapeutics by a person or group without the prior approval of the Board of
Directors, the holders of the Rights (other than the acquiring person) will be
entitled to purchase shares of common stock (or common stock equivalents) of
United Therapeutics at one-half the then current market price of the common
stock or, at the election of the Board of Directors, to exchange each Right for
one share of common stock (or common stock equivalent) of United Therapeutics.
In the event of a merger or other acquisition of United Therapeutics without the
prior approval of the Board of Directors, each Right will entitle the holder
(other than the acquiring person), to buy shares of common stock of the
acquiring entity at one-half of the market price of those shares. United
Therapeutics will be able to redeem the Rights at $0.01 per Right at any time
until a person or group acquires 15% or more of United Therapeutics' common
stock.

The holders of Series A Junior Participating Preferred Stock, in
preference to the holders of shares of United Therapeutics' common stock and any
other junior stock, shall be entitled to receive dividends, when, as and if
declared by the Board of Directors out of funds legally available therefor.




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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with United Therapeutics' consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Form 10-K. The historical
results are not necessarily indicative of results to be expected for future
periods.





PERIOD FROM JUNE
26, 1996
YEAR ENDED DECEMBER 31, (INCEPTION) TO
--------------------------------------------------------------------- DECEMBER 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenues $ 2,049 $ 436 $ 54 $ 116 $ 154
Operating expenses:
Research and development 70,188 30,715 11,015 2,027 100
General and administrative 11,719 4,978 2,366 1,006 85
Sales and marketing 17 ----- ----- ----- -----
Cost of sales 1,626 164 ----- ----- -----
-------------- ------------- ------------- ------------- -------------
Total operating expenses 83,550 35,857 13,381 3,033 185
Loss from operations (81,501) (35,421) (13,327) (2,917) (31)
Other income (expense):
Interest income 10,693 1,925 510 135 1
Interest expense (120) (58) (15) (8) -----
Write-down of investment (4,790) ----- ----- (111) -----
Other, net 109 50 ----- ----- -----
-------------- ------------- ------------- ------------- -------------
Total other income, net 5,892 1,917 495 16 1
Net loss before income tax (75,609) (33,504) (12,832) (2,901) (30)
Income tax ----- (3) (3) ----- -----
-------------- ------------- ------------- ------------- -------------

Net loss $ (75,609) $ (33,507) $ (12,835) $ (2,901) $ (30)
============== ============= ============= ============= =============

Net loss per common share --
basic and diluted (1) $ (3.93) $ (2.51) $ (1.54) $ (0.87) $ (0.02)
============== ============= ============= ============= =============

Weighted average number of common
shares outstanding - basic and diluted 19,237 13,374 8,322 3,339 1,667
============== ============= ============= ============= =============



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AS OF DECEMBER 31,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET
DATA:

Cash, cash equivalents and
short-term investments $215,419 $51,596 $16,802 $5,018 $94
Total assets 250,645 59,943 18,747 5,074 102
Notes and leases payable (2) 1,907 1,841 314 ----- -----
Accumulated deficit (124,882) (49,273) (15,767) (2,931) (30)
Total stockholders' equity 234,738 53,566 16,676 4,617 70


(1) See Note 2 of Notes to Consolidated Financial Statements for a description
of the computation of basic and diluted net loss per share.
(2) Includes current portion of notes and leases payable.



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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
financial statements and related notes appearing elsewhere in this annual
report. The following discussion contains forward-looking statements concerning
the expectation of continued losses, cash needed for current research and
product development contract obligations during 2001, the funding for such
expenses, expectations concerning milestone and royalty payments in 2001, the
use of net operating loss carryforwards and business tax credit carryforwards,
the completion of IPR&D products in 2002, the level of working capital required
for existing research and development and general and administrative programs,
and the adequacy of United Therapeutics' resources to fund operations through
2004. These forward-looking statements reflect the plans and estimated beliefs
of management as of the date of this report. Actual results could differ
materially from those anticipated in the forward-looking statements. Factors
that could cause or contribute to such differences include those discussed
below and elsewhere in this Annual Report, particularly in "Risk Factors."

OVERVIEW

United Therapeutics is a biotechnology company focused on innovative
products to treat cardiovascular, inflammatory and infectious disease. United
Therapeutics commenced operations in June 1996 and, since its inception, has
devoted substantially all of its resources to its research and development
programs. United Therapeutics' lead products in development are Remodulin and
beraprost. United Therapeutics has generated no pharmaceutical product revenues,
but has generated grant revenues and revenues from its manufacturing subsidiary
and from the resale of certain medical supplies used for its pharmaceutical
products. United Therapeutics has funded its operations primarily from the
proceeds of the sale of its equity securities. United Therapeutics operates with
a minimal number of employees and has contracted with qualified third parties
for substantially all pharmaceutical development activities, including certain
key aspects of clinical trials. In December 2000, United Therapeutics acquired
Cooke Pharma, Inc., the owner and developer of intellectual property rights to
use arginine for vascular disease, and Medicomp, Inc. and Telemedical
Procedures, LLC, related telemedicine companies.

United Therapeutics has incurred net losses each year since inception
and had an accumulated deficit of $124.9 million at December 31, 2000. United
Therapeutics expects to continue to incur net losses and cannot provide
assurances that, in the future, it will have pharmaceutical product sales or
become profitable.

United Therapeutics has contracted with various companies and research
organizations to coordinate and perform clinical trials and to provide other
activities related to the development of its lead products, Remodulin and
beraprost, and other products. It is anticipated that approximately $14.0
million in cash will be used during 2001 under these agreements. These expenses
will be funded from existing working capital.

FINANCIAL POSITION

On January 22, 2000, United Therapeutics closed on the sale of 2.5
million shares of common stock at $32 per share in a private placement and
received net proceeds, after deducting underwriting commissions and offering
expenses, of approximately $74.8 million. On July 20, 2000, United Therapeutics
closed on the sale of 1.3 million shares of its common stock at $110.00 per
share in a private placement. Net proceeds, after deducting commissions and
offering expenses, were approximately $134.3 million.

Cash, cash equivalents and short-term investments at December 31, 2000
were $215.4 million as compared to $51.6 million at December 31, 1999. The
increase of approximately $163.8 million is due to receipt of the net proceeds
from the private placement sales of common stock which closed in January 2000
and July 2000, less amounts used in operations during the year ended December
31, 2000.



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30

On December 28, 2000, the company acquired all the assets and certain
liabilities of Cooke Pharma, Inc., (Cooke Pharma) the owner and developer of the
intellectual property rights to use arginine for vascular disease. The total
cost of this acquisition was approximately $15.9 million, including transaction
costs. United Therapeutics issued 294,635 shares of the company's common stock
valued at $15.7 million to the sellers as consideration. On December 29, 2000,
the company acquired all the assets of Medicomp, Inc. and Telemedical
Procedures, LLC, related telemedicine companies (Medicomp). The total cost of
this acquisition was approximately $20.0 million, including transaction costs.
United Therapeutics paid $8.0 million in cash and issued 257,142 shares of the
company's common stock valued at $11.9 million to the sellers as consideration.
At December 31, 2000, goodwill and other intangible assets were approximately
$17.5 million net of accumulated amortization of approximately $756,000 as
compared to $2.7 million and $154,000 at December 31, 1999, respectively.

Accounts payable at December 31, 2000 were $5.3 million as compared to
$2.3 million at December 31, 1999. This increase in accounts payable is
primarily due to clinical trial activities. The notes payable as of December 31,
2000 totaled $1.9 million as compared to $1.8 million as of December 31, 1999.

Common stock and additional paid-in capital at December 31, 2000
increased as compared to amounts at December 31, 1999. This increase of
approximately $260.9 million was due primarily to the net proceeds from the
private placement sales of common stock which closed in January 2000 and July
2000, the issuance of 200,000 shares of common stock valued at approximately
$18.8 million in exchange for an exclusive license agreement in June 2000, and
common stock issued to purchase Cooke Pharma and Medicomp totaling $27.5
million.

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2000 AND 1999

Revenues for the year ended December 31, 2000 were approximately $2.0
million, as compared to approximately $436,000 for the year ended December 31,
1999. Approximately $1.1 million of these revenues was earned by United
Therapeutics' synthesis and manufacturing division (formerly, SynQuest, Inc.)
for the synthesis and manufacture of complex molecules for third parties.
Approximately $740,000 of these revenues was earned from the resale of pumps and
supplies to distributors in connection with United Therapeutics' lead product,
Remodulin. Approximately $150,000 of these revenues was earned under the "orphan
drug" grant awarded by the FDA related to United Therapeutics' development of
Remodulin for the treatment of primary pulmonary hypertension.

Research and development expenses consist primarily of costs to acquire
pharmaceutical products and product rights for development and amounts paid to
contract research organizations, hospitals and laboratories for the provision of
services and materials for drug development and clinical trials. Research and
development expenses were $70.2 million for the year ended December 31, 2000, as
compared to $30.7 million for the year ended December 31, 1999. The increase of
approximately $39.5 million was due primarily to the expenditure of
approximately $19.8 million in licensing fees (consisting of $1.0 million in
cash and common stock valued at $18.8 million) in June 2000 to obtain the
exclusive rights to develop sustained release formulations of beraprost in the
United States and Canada, increased expenses of approximately $7.3 million
related to patient enrollment in United Therapeutics' clinical trials, increased
expenses of approximately $16.9 million related to the acquisition of in-process
research and development (see In-Process Research & Development), and increased
expenses of approximately $4.1 million related to other research. The increase
was offset by the prior year expenditure of $9.1 million in licensing fees
(consisting of $100,000 in cash and common stock valued at $9.0 million) in 1999
to obtain the exclusive rights to develop the immediate release formulation of
beraprost in the United States and Canada.

General and administrative expenses consist primarily of salaries,
office expenses and professional fees. General and administrative expenses were
$11.7 million for the year ended December 31, 2000, as compared to $5.0 million
for the year ended December 31, 1999. This increase was due primarily to
nonrecurring grants of approximately $2.5 million of stock and options and
increased expenses of



29
31

approximately $3.2 million related to professional fees, increased staffing and
related travel to support expanded operations.

The write-down of investment totaled $4.8 million during the year ended
December 31, 2000 as compared to zero for the year ended December 31, 1999. The
write-down related to United Therapeutics' investment in Synergy
Pharmaceuticals, Inc.

Interest income for the year ended December 31, 2000 was $10.7 million,
as compared to approximately $1.9 million for the year ended December 31, 1999.
This increase was attributable primarily to an increase in the amount of cash
available for investing resulting from sales of common stock since December 31,
1999, less amounts used for operations.

YEARS ENDED DECEMBER 31, 1999 AND 1998

Total revenues for the year ended December 31, 1999 were approximately
$436,000, as compared to $54,000 for the year ended December 31, 1998.
Approximately $211,000 of these revenues were earned under the "orphan drug"
grant awarded by the FDA related to United Therapeutics' development of
Remodulin for the treatment of primary pulmonary hypertension. The FDA may
designate a product as an "orphan drug" if the drug is one intended to treat a
rare disease or condition. Approximately $225,000 of these revenues were earned
by SynQuest, United Therapeutics' wholly owned subsidiary, for the synthesis and
manufacture of complex molecules.

Research and development expenses consist primarily of costs to acquire
pharmaceutical products for development and amounts paid to contract research
organizations, hospitals and laboratories for the provision of services and
materials for drug development and clinical trials. Research and development
expenses were $30.7 million for the year ended December 31, 1999, as compared to
$11.0 million for the year ended December 31, 1998. Approximately $7.1 million
of the increase in research and development expenses is related to increased
levels of patient enrollment in United Therapeutics' clinical trials of
Remodulin. Approximately, $9.1 million of the increase is related to the payment
in March 1999 of an up-front licensing fee consisting of common stock valued at
$9.0 million and $100,000 in cash to obtain the exclusive rights to develop
beraprost, an oral form of prostacyclin, to treat peripheral vascular disease in
the United States and Canada. Additionally, $1.7 million of the increase is
related to the development of beraprost and other products.

General and administrative expenses consist primarily of personnel
salaries, office expenses and professional fees. General and administrative
expenses were $5.0 million for the year ended year ended December 31, 1999, as
compared to $2.4 million for the year ended year ended December 31, 1998. This
increase was due primarily to increased staffing and related travel to support
expanded operations.

Interest income for the year ended year ended December 31, 1999 was $1.9
million, as compared to $510,000 for the year ended year ended December 31,
1998. This increase was attributable to an increase in the amount of cash
available for investing resulting from sales of common stock during 1999, less
amounts used for operations.

IN-PROCESS RESEARCH & DEVELOPMENT

During 2000, United Therapeutics acquired Cooke Pharma in a purchase
transaction. The write-off of in-process research and development (IPR&D)
related to the acquisition of Cooke Pharma totaled approximately $7.1 million,
which was expensed as a one-time non-recurring charge. The allocation of $7.1
million represents the estimated fair value related to incomplete projects based
on risk adjusted cash flows. At the date of the acquisition, the projects
associated with the in-process research and development efforts had not yet
reached technological feasibility and had no alternative future uses.
Accordingly, these costs were expensed. At the acquisition date, Cooke had more
than 10 potential products in its new products research & development pipeline.
After a thorough review of each product program, it was concluded that two of
these new product areas had moved far enough beyond the concept stage to be
considered significant IPR&D. These potential new products were in the applied
research stage of development where large-scale clinical trials were



30
32

being planned. The projects under development at the valuation date, were
expected to address the coronary artery disease and peripheral arterial disease
markets with a total market potential of 16 million people as well as the market
that is at risk of developing some form of heart disease (estimated at
approximately 60 million people).

At the acquisition date, the technologies under development were between
29% and 32% complete, based on project man-months and costs. Cooke had spent
approximately $2.8 million on the IPR&D projects and expected to spend
approximately $6.2 million to complete the IPR&D projects. It is anticipated
that research and development related to these projects would be completed by
early 2002, after which time the economic benefits from the value of the
completed IPR&D would begin to be yielded.

Also during 2000, United Therapeutics acquired Medicomp in a purchase
transaction. The write-off of in-process research and development related to the
acquisition of Medicomp totaled approximately $9.8 million, which was expensed
as a one-time non-recurring charge. The allocation of approximately $9.8 million
represents the estimated fair value based on risk-adjusted cashflows related to
the incomplete research and development projects. At the date of acquisition,
the development of these projects had not yet reached technological feasibility,
and the research and development in progress had no alternative future uses.
Accordingly, these costs were expensed as of the acquisition date.

At the acquisition date, Medicomp was conducting design, development,
engineering and testing activities associated with the completion of a number of
new technological innovations that were integral to Medicomp's plan to launch a
first generation wireless heart monitoring system aimed at the consumer (as
opposed to the institutional) market.

At the acquisition date, the technologies related to the complete system
under development was approximately 59 percent complete based on project
man-months and costs. Medicomp had spent approximately $1.6 million on the IPR&D
projects, and expected to spend approximately $1.1 million to complete the
research and development. Anticipated completion dates ranged from 9 to 12
months, at which time United Therapeutics expects to begin benefiting from the
developed technologies.

LIQUIDITY AND CAPITAL RESOURCES

Until June 1999, United Therapeutics financed its operations principally
through various private placements of common stock. On June 17, 1999, United
Therapeutics completed an initial public offering of 4.5 million shares of
common stock at $12.00 per share. Net proceeds to United Therapeutics, after
deducting underwriting commissions and offering expenses, were approximately
$48.9 million. On July 16, 1999, United Therapeutics closed on the sale of
675,000 over-allotment shares to its underwriters and received net proceeds,
after deducting underwriting commissions and offering expenses, of approximately
$7.5 million. On January 18, 2000, United Therapeutics closed on the sale of 2.5
million shares of common stock at $32.00 per share in a private placement and
received net proceeds, after deducting underwriting commissions and offering
expenses, of approximately $74.8 million. On July 20, 2000, United Therapeutics'
closed on the sale of 1.3 million shares of its common stock at $110.00 per
share in a private placement and received net proceeds, after deducting
underwriting commissions and offering expenses, of approximately $134.3 million.

United Therapeutics' working capital at December 31, 2000 was $210.6
million, as compared with $48.1 million at December 31, 1999. Current
liabilities at December 31, 2000 were approximately $11.5 million, as compared
with $4.6 million at December 31, 1999. United Therapeutics' debt at December
31, 2000 was $1.9 million, as compared with $1.8 million at December 31, 1999
and consisted of equipment leases and two mortgage notes, one secured by a
certificate of deposit, and both secured by the buildings and property owned by
United Therapeutics located at 1106 - 1110 Spring Street in Silver Spring,
Maryland. Both mortgages are due in monthly installments over 30 years.

Net cash used in operating activities was approximately $31.1 million
and $23.7 million for the years ended December 31, 2000 and 1999, respectively.
The increase resulted from the expansion of United Therapeutics' operations,
particularly with respect to increased costs for Remodulin, beraprost and other



31
33

product trials. For the years ended December 31, 2000 and 1999, United
Therapeutics invested approximately $640,000 and $2.0 million respectively, in
cash for property, plant and equipment. Net cash provided by financing
activities was approximately $206.6 million and $59.3 million for the years
ended December 31, 2000 and 1999, respectively. Cash flows from financing
activities for the year ended December 31, 2000 were derived primarily from the
private placements of common stock in January 2000 and July 2000. Cash flows
from financing activities for the year ended December 31, 1999 were derived
primarily from private equity financings in the first quarter, the initial
public offering in June, and the sale of the overallotment shares to the
underwriter in July.

United Therapeutics has contracted with various companies and research
organizations to coordinate and perform clinical trials and to provide other
services related to the development of Remodulin and other products. It is
anticipated that approximately $14.0 million in cash will be used during 2001
under these agreements. These expenses will be funded from existing working
capital. United Therapeutics expects to make milestone payments of up to
approximately $3.2 million during 2001. United Therapeutics expects to make
royalty payments relating to sales of Remodulin, if approved by the FDA, and
HeartBar products during 2001. The royalties will range from 1% to 10% of sales
from these products. United Therapeutics anticipates that its existing research
and development and general and administrative programs will require similar
levels of working capital as has been used in recent quarters.

United Therapeutics expects that existing capital resources will be
adequate to fund its operations through 2004. United Therapeutics' future
capital requirements and the adequacy of its available funds will depend on many
factors, including:

o Regulatory approval of Remodulin and beraprost;

o Size and scope of its development efforts for existing and
additional products;

o Future milestone and royalty payments;

o Cost, timing and outcomes of regulatory reviews;

o Rate of technological advances;

o Status of competitive products;

o Defending and enforcing intellectual property rights;

o Development of manufacturing resources or the establishment,
continuation or termination of third-party manufacturing
arrangements;

o Development of sales and marketing resources or the
establishment, continuation or termination of third-party sales
and marketing arrangements;

o Establishment of additional strategic or licensing arrangements
with other companies; and

o Amount, cost and risks associated with potential acquisitions.

As of December 31, 2000, United Therapeutics had available approximately
$52.0 million in net operating loss carryforwards and $18.2 million in business
tax credit carryforwards for federal income tax purposes that expire at various
dates through 2019. A portion of these carryforward items is subject to certain
limitations. United Therapeutics does not believe that the limitations will
cause the net operating loss and general business credit carryforwards to expire
unused.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." United Therapeutics is required to adopt
SFAS No. 133, as amended by SFAS Nos. 137 and 138, for fiscal quarters beginning
January 1, 2001. SFAS No. 133 established methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. Because United Therapeutics holds no
derivative financial instruments and does not engage in hedging activities,
adoption of SFAS No. 133 is not expected to have a material impact on United
Therapeutics' financial condition or results of operations.



32
34

In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements." SAB No. 101 was implemented
by United Therapeutics in the quarter ending December 31, 2000. The adoption of
SAB No. 101 did not have a material impact on United Therapeutics' revenue
recognition policies.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

United Therapeutics does not have significant exposure to market risks
associated with changes in interest rates related to its corporate and
government debt securities held as of December 31, 2000. The interest rates on
these securities are fixed, the maturities are short and United Therapeutics
holds the securities until maturity.




33
35

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

UNITED THERAPEUTICS CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of KPMG LLP, Independent Auditors.................................................................................... F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999................................................................ F-3

Consolidated Statements of Operations for the three years ended December 31, 2000........................................... F-4

Consolidated Statements of Stockholders' Equity for the three years ended December 31, 2000................................. F-5

Consolidated Statements of Cash Flows for the three years ended December 31, 2000........................................... F-8

Notes to Consolidated Financial Statements.................................................................................. F-9





F-1
36



INDEPENDENT AUDITORS' REPORT



The Board of Directors
United Therapeutics Corporation:


We have audited the accompanying consolidated balance sheets of United
Therapeutics Corporation and subsidiaries (the Company) as of December 31, 2000
and 1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three year period ended
December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United
Therapeutics Corporation and subsidiaries as of December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.


KPMG LLP


McLean, Virginia
February 28, 2001

F-2
37


UNITED THERAPEUTICS CORPORATION

CONSOLIDATED BALANCE SHEETS



DECEMBER 31,

2000 1999
---- ----

ASSETS
Current assets:
Cash and cash equivalents $200,935,244 $18,279,883
Investments (note 9) 14,483,637 33,315,914
Accounts receivable, net of allowance of $98,281 for 2000
and none for 1999 2,351,100 362,268
Prepaid expenses 1,077,608 79,981
Inventory 2,896,469 259,861
Other current assets 376,046 358,456
------------ -----------
Total current assets 222,120,104 52,656,363
------------ -----------

Property, plant, and equipment, net 5,939,036 3,791,517

Certificate of deposit 571,445 539,545
Goodwill and other intangible assets, net (note 11) 17,549,224 2,690,533
Deferred offering costs - 159,418
Investment in affiliate (note 11) 4,348,693 -
Other 116,482 105,759
------------ -----------

Total assets $250,644,984 $59,943,135
============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,273,445 $2,348,090
Accounts payable to affiliate (note 3) 678,897 _
Accrued expenses (note 13) 4,522,550 2,107,805
Payroll taxes withheld - 64,537
Current portion of notes and leases payable (note 8) 70,803 56,786
Due to affiliate (note 11) 946,497 -
------------ -----------

Total current liabilities 11,492,192 4,577,218

Notes and leases payable, excluding current portion (note 8) 1,835,960 1,783,705
Due to affiliate (note 11) 2,385,229 -
Other liabilities 193,821 16,662
------------ -----------

Total liabilities 15,907,202 6,377,585
------------ -----------

Commitments and contingencies (notes 5 and 10)

Stockholders' equity (note 6):
Preferred stock, par value $.01, 10,000,000 shares authorized
at December 31, 2000 and 1999, no shares issued - -
Series A junior participating preferred stock, par value $ .01,
100,000 and none authorized at December 31, 2000 and
1999, respectively, no shares issued - -
Common stock, par value $.01, 100,000,000
shares authorized at December 31, 2000 and 1999, 20,740,086 and
16,003,218 shares issued at December 31, 2000 and 1999,
respectively, 20,434,086 and 16,003,218 shares outstanding
at December 31, 2000 and 1999, respectively 207,401 160,032
Additional paid-in capital 363,484,585 102,678,916
Accumulated deficit (124,881,888) (49,273,398)
Treasury stock at cost, 306,000 shares at December 31, 2000 (4,072,316) -
------------ -----------

Total stockholders' equity 234,737,782 53,565,550
------------ -----------

Total liabilities and stockholders' equity $250,644,984 $59,943,135
============ ===========


See accompanying notes to consolidated financial statements.

F-3
38


UNITED THERAPEUTICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



YEAR ENDED DECEMBER 31,
-----------------------
2000 1999 1998
---- ---- ----

Revenues:
Sales $ 1,483,058 $ 225,245 $ --
Sales to affiliates 416,200 -- --
Grant revenue 150,000 211,250 53,750
-------------- ------------- -------------
Total revenues 2,049,258 436,495 53,750
-------------- ------------- -------------

Operating expenses:
Research and development 70,187,748 30,715,255 11,015,053
General and administrative 11,719,578 4,977,983 2,366,494
Sales and marketing 16,566 -- --
Cost of sales 1,626,051 164,147 --
-------------- ------------- -------------

Total operating expenses 83,549,943 35,857,385 13,381,547
-------------- ------------- -------------

Loss from operations (81,500,685) (35,420,890) (13,327,797)

Other income (expense):
Interest income 10,693,239 1,925,326 510,068
Interest expense (120,035) (57,744) (14,570)
Write-down of investment (note 4) (4,789,592) -- --
Other - net 108,583 50,064 --
-------------- ------------- -------------

Total other income, net 5,892,195 1,917,646 495,498

Net loss before income tax (75,608,490) (33,503,244) (12,832,299)
Income tax (note 7) -- (3,454) (3,100)
-------------- ------------- -------------

Net loss ($75,608,490) ($33,506,698) ($12,835,399)
============== ============= =============
Net loss per common share --
basic and diluted ($3.93) ($2.51) ($1.54)
============== ============= =============

Weighted average number of
common shares outstanding
-- basic and diluted 19,237,473 13,374,294 8,321,749
============== ============= =============




See accompanying notes to consolidated financial statements.

F-4
39


UNITED THERAPEUTICS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



STOCK COMMON ADDITIONAL
------------------- PAID-IN TREASURY ACCUMULATED
SHARES AMOUNT CAPITAL STOCK DEFICIT TOTAL
------ ------ ------- ----- ------- -----

Balance, December 31, 1997 5,882,833 $58,829 $7,489,655 $ -- ($2,931,301) $4,617,183

Issuance of common stock 4,028,404 40,284 22,864,247 -- -- 22,904,531
Stock issued in exchange for services 37,694 376 131,709 -- -- 132,085
Stock issued for exclusive license agreement 166,666 1,667 1,498,333 -- -- 1,500,000
Options and warrants issued for exclusive
license agreements -- -- 353,000 -- -- 353,000
Options issued in exchange for services -- -- 4,426 -- -- 4,426
Net loss -- -- -- -- (12,835,399) (12,835,399)
---------- --------- -------------- ------------ -------------- -------------

Balance, December 31, 1998 10,115,597 101,156 32,341,370 -- (15,766,700) 16,675,826

Issuance of common stock through private sales 111,370 1,114 1,989,251 -- -- 1,990,365
Issuance of common stock through initial
public offering 4,500,000 45,000 48,826,737 -- -- 48,871,737
Issuance of common stock to underwriters for
over-allotment shares 675,000 6,750 7,507,759 -- -- 7,514,509
Stock issued for exclusive license agreement 500,000 5,000 8,995,000 -- -- 9,000,000
Stock issued for acquisition of SynQuest, Inc. 101,251 1,012 2,802,051 -- -- 2,803,063
Options issued in exchange for services -- -- 216,748 -- -- 216,748

Net loss -- -- -- -- (33,506,698) (33,506,698)
---------- --------- -------------- ------------ -------------- -------------

Balance, December 31, 1999 16,003,218 160,032 102,678,916 -- (49,273,398) 53,565,550

Issuance of common stock through private sales 3,800,000 38,000 209,006,858 -- -- 209,044,858
Stock issued for acquisition of Cooke
Pharma, Inc. 294,635 2,946 15,668,984 -- -- 15,671,930
Stock issued for acquisition of Medicomp,
Inc. and Telemedical Procedures, LLC 257,142 2,571 11,860,274 -- -- 11,862,845
Stock issued for investment in Synergy
Pharmaceuticals, Inc. 21,978 220 1,729,449 -- -- 1,729,669
Adjustment to SynQuest, Inc. escrow (5,198) (52) (148,036) -- -- (148,088)
Options issued in exchange for services -- -- 1,310,270 -- -- 1,310,270
Stock issued for exclusive license agreement 200,000 2,000 18,768,000 -- -- 18,770,000
Stock issued in exchange for services 16,249 163 1,071,520 -- -- 1,071,683
Exercise of stock options 152,062 1,521 1,538,350 -- -- 1,539,871
Purchases of treasury stock -- -- -- (4,072,316) -- (4,072,316)
Net loss -- -- -- -- (75,608,490) (75,608,490)
---------- --------- -------------- ------------ -------------- -------------

Balance, December 31, 2000 20,740,086 $ 207,401 $ 363,484,585 ($4,072,316) ($124,881,888) $ 234,737,782
========== ========= ============== ============ ============== =============



See accompanying notes to consolidated financial statements.


40


UNITED THERAPEUTICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



YEAR ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----

Cash flows from operating activities:
Net loss ($75,608,490) ($33,506,698) ($12,835,399)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 913,986 311,150 35,497
Loss on disposals of equipment 24,813 9,168 --
Stock issued for exclusive license agreement 18,770,000 9,000,000 1,500,000
Stock grant to Columbia University 749,967 -- --
Stock and options issued in exchange for services 1,631,986 216,748 136,511
Options and warrants issued for exclusive license
agreements -- -- 353,000
Acquired in-process research and development 16,863,700 -- --
Write-down of investment 4,789,592 -- --
Amortization of discount on investments (993,722) (1,561,899) (23,229)
Changes in operating assets and liabilities, net of
effects of acquisitions:
Accounts receivable (398,193) (79,554) (53,750)
Inventories (2,115,049) -- --
Prepaid expenses (509,131) (69,679) --
Other current assets 242,271 (221,405) --
Other noncurrent assets (10,723) (91,942) (10,214)
Accounts payable 2,530,274 221,710 1,323,601
Accrued expenses 1,908,217 2,068,606 (27,770)
Payroll taxes withheld (64,537) (4,263) 5,716
Other liabilities 160,192 14,903 --
------------ ------------- -----------

Net cash used in operating activities (31,114,847) (23,693,155) (9,596,037)
------------ ------------- -----------

Cash flows from investing activities:
Purchases of property, plant, and equipment (639,875) (1,994,620) (1,033,953)
Proceeds from disposals of property, plant and equipment -- 2,350 --
Investment in Northern Therapeutics, Inc. (1,000,000) -- --
Investment in Synergy Pharmaceuticals, Inc. (3,059,919) -- --
Acquisition of SynQuest, net of cash acquired -- (312,626) --
Acquisition of Cooke Pharma, net of cash acquired 194,023 -- --
Acquisition of Medicomp, net of cash acquired (8,131,432) -- --
Purchases of investments and certificates of deposit (56,658,901) (114,325,864) (10,509,467)
Maturities of investments 76,453,000 92,565,000 --
------------ ------------- -----------

Net cash provided by (used in) investing activities 7,156,896 (24,065,760) (11,543,420)
------------ ------------- -----------

Cash flows from financing activities:
Proceeds from issuance of common stock 209,044,858 58,376,611 22,904,531
Purchases of common stock (4,072,316) -- --
Deferred offering costs 159,418 (159,418) --
Proceeds from exercise of stock options 1,539,871 -- --
Proceeds from notes payable -- 1,798,000 --
Payments of principal on notes payable (16,658) (742,907) (2,771)
Principal payments under capital lease obligations (41,861) (12,555) (1,381)
------------ ------------- -----------

Net cash provided by financing activities 206,613,312 59,259,731 22,900,379
------------ ------------- -----------

Net increase in cash and cash equivalents 182,655,361 11,500,816 1,760,922

Cash and cash equivalents, beginning of year 18,279,883 6,779,067 5,018,145
------------ ------------- -----------

Cash and cash equivalents, end of year $200,935,244 $ 18,279,883 $ 6,779,067
============ ============= ===========



F-6
41

Continued




F-7
42


UNITED THERAPEUTICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED



Supplemental schedule of noncash investing and
financing activities:
Stock issued for investment in Synergy Pharmaceutials, Inc. $ 1,729,669 $ -- $ --
=========== ============ ===========
Stock issued for acquisition of SynQuest $ -- $ 2,803,063 $ --
=========== ============ ===========
Stock issued for acquisition of Cooke Pharma $15,671,930 $ -- $ --
=========== ============ ===========
Stock issued for acquisition of Medicomp $11,862,845 $ -- $ --
=========== ============ ===========
Stock issued for exclusive license agreement $18,770,000 $ -- $ --
=========== ============ ===========
Equipment acquired under a capital lease $ -- $ 16,629 $ --
=========== ============ ===========
Note payable issued for building $ -- $ -- $ 317,130
=========== ============ ===========
Supplemental cash flow information -- cash paid for
interest $ 119,018 $ 57,744 $ 14,570
=========== ============ ===========


See accompanying notes to consolidated financial statements.


F-8
43


UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS DESCRIPTION

United Therapeutics Corporation (the Company) was incorporated on June 26,
1996 under the laws of the State of Delaware. The Company is a biotechnology
company focused on commercialization of unique therapeutic products to treat
patients with cardiovascular, infectious and inflammatory diseases.

On October 16, 2000, the Company filed a New Drug Application (NDA) for its
lead pharmaceutical product, Remodulin for pulmonary hypertension. The FDA
informed the company that a six month Priority Review had been granted for the
NDA. On February 2, 2001, United Therapeutics submitted a Marketing
Authorization Application in France for approval of Remodulin for pulmonary
arterial hypertension. Remodulin has also completed Phase II clinical studies
for late stage peripheral vascular disease. The Company's second lead product,
beraprost, is currently in Phase III clinical trial programs for peripheral
vascular disease and pulmonary hypertension. All other pharmaceutical products
are in preclinical stages of development.

In December 2000, United Therapeutics expanded into angina with a
commercially available non-prescription product and further developed its
telemedicine operations with the acquisition of a cardiac arrhythmia and
ischemic monitoring business.

The Company has four wholly owned subsidiaries: Lung Rx, Inc., Unither
Pharmaceuticals, Inc. (UPI), Unither Telemedicine Services Corporation (UTSC),
and United Therapeutics Europe, Ltd.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
United Therapeutics Corporation and its wholly owned subsidiaries. All
significant intercompany balances and transactions were eliminated in
consolidation.

CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with original
maturities of three months or less. Cash equivalents consist of money market
funds, commercial paper, and certificates of deposit and amount to approximately
$204.2 million and $18.2 million at December 31, 2000 and 1999, respectively.

INVENTORIES

The Company manufactures certain compounds and purchases medical supplies
for use in its ongoing clinical trials. The Company purchases components and
assembles cardiac monitoring equipment. The Company contracts with a third party
manufacturer to make the HeartBar(R). These inventories are accounted for under
the first-in, first-out method. At December 31, 2000 and 1999, inventories
consisted of the following:



DECEMBER 31,
---------------------------------
2000 1999
----- ----

Remodulin (in process) $ 1,775,047 $ 259,861
Medical supplies.... 280,771 -
Raw chemical materials 30,015 -
Cardiac monitoring..
equipment components 485,931 -
HeartBar(R) products 324,705 -
------------ ---------------

$ 2,896,469 $ 259,861
============ ===============



F-9
44


UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Estimated useful lives of the assets are as follows:



Building and improvements......... 39 years
Furniture and equipment........... 3-10 years
Holter and event monitor systems.. 5 years
Leasehold the improvements........ Life of the lease


Property, plant, and equipment at December 31, 2000 and 1999 consisted of
the following:



DECEMBER 31,
--------------------------
2000 1999
---- ----

Land $ 421,431 $ 421,431

Buildings and improvements 2,516,264 2,420,644


Holter and event monitor systems 1,457,248 --

Furniture and equipment 2,035,752 1,152,230
----------- -----------

6,430,695 3,994,305

Less -- accumulated depreciation (491,659) (202,788)
----------- -----------

Property, plant, and equipment, net $ 5,939,036 $ 3,791,517
=========== ===========


RESEARCH AND DEVELOPMENT

Research and product development costs are expensed as incurred. Acquired
in-process research and development is expensed if technological feasibility has
not been demonstrated and there is no alternative use for the in-process
technology.

LICENSED TECHNOLOGY

Costs incurred in obtaining the license rights to technology in the research
and development stage and that have no alternative future uses are expensed as
incurred and in accordance with the specific contractual terms of the applicable
license agreements.

INCOME TAXES

Income taxes are accounted for in accordance with Financial Accounting
Standards Board Statement No. 109 (SFAS No. 109). Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are determined based
on the differences between the financial reporting and the tax bases of assets
and liabilities and are measured using the tax rates and laws that are expected
to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.

INVESTMENTS

The Company's investments are considered held-to-maturity securities.
Held-to-maturity securities are those securities which the Company has the
ability and intent to hold until maturity and are recorded at amortized cost,
adjusted for the amortization or accretion of premiums or discounts. Premiums
and discounts are amortized or accreted over the life of the related
held-to-maturity security as an adjustment to yield using the effective interest
method.


F-10
45

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible and intangible assets of businesses acquired.
Goodwill, resulting from the purchase of SynQuest, Inc. (note 11), is being
amortized using the straight-line method over five years. Goodwill, resulting
from the purchase of Medicomp (note 11), is being amortized using the
straight-line method over twenty years. Other intangible assets resulting from
these purchases relate to covenants not to compete, employment agreements,
technology, patents, and tradenames and were determined on the basis of
independent valuations. The other intangibles are being amortized over three to
eighteen years, consistent with the terms of the underlying agreements. Total
amortization expense was approximately $602,000, $154,000, and none for the
years ended December 31, 2000, 1999, and 1998, respectively.

Periodically, the Company reviews the recoverability of goodwill and other
intangible assets. The measurement of possible impairment is based primarily on
the ability to recover the balance of the goodwill and other intangible assets
from expected future operating cash flows on an undiscounted basis. Impairment
losses are recognized when expected future cash flows are estimated to be less
than the asset's carrying value. In management's opinion, no material impairment
exists at December 31, 2000.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, investments, accounts
receivables, accounts payable, and accrued expenses, approximate fair value due
to their short maturities. The carrying amount of the Company's notes payable
approximate fair value, since they are adjustable rate notes.

LOSS PER COMMON SHARE

Basic loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the year. Common
stock equivalents for the year ended December 31, 2000 consisted of options and
warrants totaling approximately 1.5 million shares. Common stock equivalents are
not included in the calculation as their effect would be anti-dilutive.
Accordingly, diluted loss per common share is the same as basic loss per common
share.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.

STOCK OPTION PLAN

The Company applies the provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, to account for its stock options. SFAS No. 123 allows
companies to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee
stock options granted as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosures of SFAS No. 123. The Company
accounts for non-employee stock option awards in accordance with SFAS No. 123.


F-11
46

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SALES

Sales in 2000 and 1999 resulted primarily from the synthesis and manufacture
of complex compounds by the Company's manufacturing division (formerly known as
SynQuest, Inc.). These sales were generally made under fixed price agreements.
The Company recognizes revenue based on the percentage-of-completion method.
Billings in excess of amounts recognized as revenues are reported as deferred
revenues. Losses on these contracts, if any, are recognized as soon as they are
anticipated.

Sales from HeartBar(R) products are recognized when shipped if no right of
return exists. If the products are consigned, sales are recognized in the period
that the consignee has sold the product. Product sales are recorded net of
allowances for estimated returns and rebates.

Sales of Holter and event monitor systems are recognized when shipped.
Revenue from related monitoring analysis services is recognized when the service
is performed and the analysis has been delivered.

All sales are required to be realizable and earned to be recognized in the
financial statements.

GRANT REVENUE

Grant revenues in 1998, 1999 and 2000 resulted from an orphan drug grant
from the United States Food and Drug Administration (the FDA orphan drug grant)
to fund ongoing research related to Remodulin. The FDA orphan drug grant is a
cost reimbursement award covering a two-year period beginning September 30,
1998. The FDA has committed funding totaling $415,000. This grant has no
milestones or significant deliverables other than the submission of periodic
technical reports. The Company recognizes revenues under the FDA orphan drug
grant when they are realizable and earned and only to the extent allowable
expenses are incurred. Recognized revenues are not contingent upon future
performance obligations and are not refundable to the FDA since they represent
reimbursements for past services and are not dependent on the outcome of the
research. Accounts receivable of $200,000 and $50,000 at December 31, 2000 and
1999, respectively, were for unbilled costs incurred. Amounts billed are subject
to audit by the FDA and could result in potential disallowances. Such
disallowances, if any, are not expected to be material.

DEFERRED OFFERING COSTS

Costs incurred in connection with the Company's planned sale of common stock
in a private placement were deferred and reported as assets in the accompanying
balance sheets. Upon successful completion of the sale, these deferred offering
costs were netted against the additional paid-in capital resulting from the
sale.

TREASURY STOCK

Treasury stock is reported at cost, including commissions and fees.

CONCENTRATIONS OF SUPPLIERS

The Company currently relies on a single supplier to test the purity and
stability of each batch of Remodulin and a single supplier for the delivery
device to administer Remodulin to patients. Although there are a limited number
of companies that could replace each of these suppliers, management believes
that other suppliers could provide similar services and materials. A change in
suppliers, however, could cause a delay in distribution of Remodulin, and in the
conduct of clinical trials, which would adversely affect the Company's research
and development efforts.

The Company relies solely on Toray for the manufacture of beraprost under an
exclusive licensing agreement (see note 4). If this agreement were to terminate,
the Company would have no other source for this compound.

F-12
47

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


The Company relies solely on Nellson Nutraceuticals to manufacture its
HeartBar(R) products. Although there are a limited number of companies that
could replace this supplier, management believes that other suppliers could
provide similar services and materials. A change in supplier, however, could
cause a delay in the manufacture and distribution of HeartBar which would
adversely affect the Company's sales efforts.

3. RELATED PARTY TRANSACTIONS

BUILDING

In 1998, the Company purchased an office building for its corporate
headquarters from Beacon Projects, Inc., an entity owned by the Company's
Chairman and CEO. The purchase price, including related expenses, was
approximately $581,000. This amount was equivalent to the amount incurred by
Beacon Projects, Inc. for the building.

OFFICE LEASES

During 1998, the Company leased office space from Beacon Projects, Inc., a
company owned by the Chairman and CEO of the Company. In August 1998, this lease
was terminated when the Company purchased the office building from the Chairman
and CEO of the Company. Payments made by the Company under this lease totaled
$12,000 for the year ended December 31, 1998.

In March 1999 and December 2000, Unither Telemedicine Services Corporation
leased office space from Beacon Projects, Inc. (see note 10).

LEGAL SERVICES

During 2000, 1999 and 1998, the Company obtained professional services from
a law firm affiliated with the Chairman and CEO and the General Counsel. The
Company incurred expenses of approximately $783,000, $338,000 and $157,000
during the years ended December 31, 2000, 1999, and 1998, respectively, for
services rendered by the law firm. The Chairman and CEO does not receive
compensation from the law firm.

RESEARCH AGREEMENT

During 1998, the Company entered into a cooperative drug discovery agreement
with William Harvey Research Limited (WHR) (see note 5). The Chairman and CEO of
the Company is a volunteer unpaid president of William Harvey Medical Research
Foundation, an affiliate of WHR. Payments made to WHR were approximately
$347,000, $258,000 and $162,000 for the years ended December 31, 2000, 1999 and
1998, respectively.

RECEIVABLE FROM EMPLOYEES

At December 31, 2000 and 1999, the Company had interest and non-interest
bearing advances totaling approximately $210,000 and $199,000, respectively, due
from employees. The advances are classified as other current assets in the
accompanying balance sheets and will be repaid to the Company in 2001.

IMINOSUGAR PROGRAM

The Company reported expenses of approximately $2.4 million to Synergy
Pharmaceuticals, Inc. (see note 4), of which approximately $679,000 was payable
at December 31, 2000, for contract research services during the year ended
December 31, 2000. Additionally, SynQuest, Inc. reported revenues of
approximately $416,000 during the year ended December 31, 2000 for chemical
synthesis and manufacturing services provided to Synergy.

F-13
48

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LICENSE AGREEMENTS

GLAXO WELLCOME ASSIGNMENT

In January 1997, Glaxo Wellcome Inc. assigned to the Company patents and
patent applications for the use of the stable prostacyclin analog UT-15 (now
knows as Remodulin), for the treatment of pulmonary hypertension and congestive
heart failure. Glaxo Wellcome has a right to negotiate a license from the
Company if the Company decides to license any part of the marketing rights to a
third party. Glaxo Wellcome waived this right with respect to the agreement with
MiniMed described below. Under the agreement, Glaxo Wellcome is entitled to
certain royalties from the Company for a period of ten years from the date of
the first commercial sale of any product containing Remodulin (see note 5). If
the Company grants to a third party any license to Remodulin, Glaxo Wellcome is
also entitled to a percentage of all consideration payable to the Company by
such licensee. The Company is responsible for all patent prosecution and
maintenance for Remodulin.

PHARMACIA & UPJOHN LICENSE

In December 1996, Pharmacia & Upjohn Company exclusively licensed to the
Company patents and a patent application for the composition and production of
the stable prostacyclin analog UT-15. Under the agreement, the Company paid an
initial license fee to Pharmacia & Upjohn. United Therapeutics filed a U.S.
patent application for a new synthesis and production method for UT-15 in
October 1997. United Therapeutics believes that its method is a substantial
improvement over the Pharmacia & Upjohn method. United Therapeutics intends to
use its improved and unique synthesis method rather than the licensed Pharmacia
& Upjohn method for the production of the Remodulin product.

MINIMED INC.

The Company entered into an agreement with MiniMed in September 1997 to
collaborate in the design, development, and implementation of therapies to treat
pulmonary hypertension and peripheral vascular disease utilizing MiniMed
products and Remodulin. The term of the agreement is for seven years after the
FDA grants a new drug approval for Remodulin and will be automatically extended
for additional 12-month periods unless otherwise terminated. The agreement is
subject to early termination in the event of a material breach or bankruptcy of
either party. The Company and MiniMed have established a Management Committee
comprised of two representatives from each company to implement the agreement.
The guidelines implementing the agreement provide that the Company will purchase
pumps and supplies from MiniMed at a discount off of MiniMed's list prices from
time to time. In the event that there are any discoveries or improvements
arising out of work performed under the agreement, the parties will have joint
ownership of those discoveries or improvements. The guidelines require the
Company to purchase its Remodulin infusion pumps exclusively from MiniMed unless
MiniMed's infusion pumps fail to receive certain government approvals.

TORAY INDUSTRIES LICENSES

In September 1998, United Therapeutics entered into an agreement with Toray
Industries, Inc. obtaining the exclusive right to develop and market immediate
release formulations of beraprost in the United States and Canada for the
treatment of pulmonary vascular disease, including pulmonary hypertension, plus
certain additional rights of first refusal for other products, therapies or
territories. In exchange, United Therapeutics paid Toray cash and 166,666 shares
of common stock, and granted Toray an option to purchase an additional 166,666
shares of common stock at an exercise price of $9.00 per share (see note 6).
United Therapeutics also agreed to pay Toray milestone payments of up to
$750,000. In March 1999, United Therapeutics entered into an agreement with
Toray obtaining the exclusive right to develop and market immediate release
formulations of beraprost in the United States and Canada for the treatment of
peripheral vascular disease. United Therapeutics paid Toray cash and 500,000
shares of common stock and agreed to pay Toray milestone payments of up to
$750,000.


F-14
49

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


In June 2000, United Therapeutics entered into an agreement with Toray
Industries, Inc. obtaining the exclusive right to develop and market sustained
release formulations of beraprost in the United States and Canada for the
treatment of all vascular indications (including cardiovascular indications). In
exchange, United Therapeutics paid Toray $1.0 million in cash and 200,000 shares
of common stock of United Therapeutics valued at approximately $18.8 million. In
addition, United Therapeutics agreed to grant Toray an option to purchase
500,000 shares of common stock upon Toray's delivery of clinical trial material
(expected in 2001) with an exercise price based on the average of closing market
prices during the month preceding delivery of clinical trial material. United
Therapeutics also agreed to pay Toray milestone payments of up to $750,000.
License fees under these agreements expensed as research and development totaled
$19,770,000, $9,100,000 and $1,785,000 for the years ended December 31, 2000,
1999 and 1998, respectively.

Pursuant to the agreements, United Therapeutics has agreed to pay all costs
and expenses associated with undertaking clinical trials, obtaining regulatory
approvals and commercializing beraprost in the United States and Canada for the
treatment of pulmonary hypertension, peripheral vascular disease and all
vascular and cardiovascular indications. Toray has retained all manufacturing
rights for beraprost. United Therapeutics has agreed to purchase beraprost
solely from Toray at specified prices based on volume. The agreements each set
forth a product development schedule. In the event that development by United
Therapeutics falls significantly behind the schedule specified in either
agreement, Toray may terminate that agreement. Furthermore, United Therapeutics
is responsible under the agreements for achieving minimum annual product net
sales as determined in advance by mutual agreement and in the case of the first
two years of commercial sales, minimum net sales of $2.5 million and $5 million.
In the event that United Therapeutics is unable to meet any minimum annual net
sales requirement for two consecutive years, Toray may convert the exclusive
license to a non-exclusive license. United Therapeutics would then be required
to share any product marketing rights approved by the FDA with a third-party
licensee chosen by Toray. Each agreement expires 10 years following FDA approval
of beraprost for the particular disease indication. United Therapeutics may
extend each agreement for unlimited one-year periods with Toray's consent.

CORTECH LICENSE

In November 1998, United Therapeutics entered into an agreement with
Cortech, Inc. to obtain the exclusive right to develop and market a serine
elastase inhibitor compound, now known as UT-77, for all indications worldwide,
except for certain dermatological uses. In exchange, United Therapeutics made a
cash payment and granted Cortech a warrant to purchase 116,666 shares of common
stock. License fees expensed as research and development totaled $418,000 for
the year ended December 31, 1998. The Company discontinued its UT-77 drug
development project in June 2000. The license and warrants have been terminated.

GLOBAL MEDICAL ENTERPRISES AGREEMENT

In 1999, United Therapeutics entered into agreements with Global Medical
Enterprises Ltd. and Global Medical Enterprises Ltd., LLC to commercialize and
sell Ketotop. The Company contributed initial capital of $2,500 to form Ketotop,
LLC to commercialize Ketotop in Europe. United Therapeutics completed a Phase
III study during 2000. The study showed that key clinical and regulatory
endpoint related to pain reduction did not meet United Therapeutics'
expectations. Based on those results, United Therapeutics discontinued
development of Ketotop. In December 2000, the agreements with Global Medical
were terminated and Ketotop LLC was dissolved. The $2,500 investment in Ketotop,
LLC was written off in 2000.

F-15
50

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


SHEARWATER POLYMERS AGREEMENT

In September 1999, the Company entered into an agreement with Shearwater
Polymers, Inc. The agreement grants to the Company the exclusive right to
Shearwater's know-how for the design, development, production, and use of a
technology known as pegylation to develop and produce sustained release
prostacyclin molecules for the possible treatment of pulmonary hypertension,
peripheral vascular disease, stroke, heart disease, cancer, and related diseases
worldwide. In exchange, the Company paid Shearwater $100,000 in cash and agreed
to pay Shearwater milestone payments of up to $2,900,000. Milestone payments
will come due upon the achievement of certain product development goals set
forth in the agreement and are expected to be paid over a period of
approximately six years. The Company also agreed to pay royalties ranging from 2
to 4 percent of net sales from developed products. Minimum annual royalties of
$1,000,000 are required commencing with the thirteenth month following
government approval of a developed product. License fees expensed as research
and development for the years ended December 31, 2000 and 1999 were none and
$100,000, respectively.

Under United Therapeutics' agreement with Shearwater, any inventions that
relate to the combination of prostacyclin and the pegylation technology,
including production methods and therapeutic methods for the treatment of any
indication, will be owned solely by United Therapeutics, and any inventions
relating to non-prostacyclin pegylation methods such as drug formulation or
delivery will be owned solely by Shearwater. Both United Therapeutics and
Shearwater have filed for U.S. patent applications relating to their respective
inventions and each is responsible for prosecuting and maintaining its patent
portfolio.

SYNERGY PHARMACEUTICALS, INC.

In March 2000, Unither Pharmaceuticals, Inc. (Unither), a wholly owned
subsidiary of United Therapeutics, entered into a license agreement with Synergy
Pharmaceuticals, Inc. (Synergy) to obtain from Synergy the exclusive worldwide
rights to certain patents relating to anti-viral iminosugar compounds. Unither
paid Synergy a $100,000 license fee which was expensed as research and
development. The iminosugar agreement conditionally requires that Unither pay
Synergy milestone payments of up to $22.2 million for each FDA-approved product
plus royalties ranging from 6 percent to 12.25 percent, subject to reductions,
based on net sales. Additionally, Unither acquired 15 percent of the outstanding
stock of Synergy for a total of $5 million. The purchase price was paid with
$3.0 million in cash and 21,978 shares of common stock of United Therapeutics
valued at approximately $2.0 million. As part of these transactions, Unither
received an exclusive option to purchase the remaining stock of Synergy at its
fair value to be determined in the future in accordance with the terms of the
contract. This investment of approximately $4.8 million is being accounted for
under the cost method.

In November 2000, Unither and Synergy amended the exclusive license
agreement to include the development of new analogs of the licensed compounds.
It was determined that new analogs could potentially be developed that had
improved safety and efficacy profiles over the originally licensed compounds. As
part of the amendments, Unither and Synergy agreed to reduce the milestone and
royalty payments by one-half for any approved products which may result from the
new analogs. Additionally, Synergy granted to Unither a warrant to purchase up
to approximately 10 percent of the outstanding stock of Synergy exercisable for
six years at $0.001 per share. As a result of these developments and the
amendments, the investment in Synergy was written down to zero at December 31,
2000.

OXFORD UNIVERITY AND THOMAS JEFFERSON UNIVERSITY

The Company's subsidiary, Unither Pharmaceuticals, Inc., is funding
research up to approximately $1.8 million being conducted by the University of
Oxford and Thomas Jefferson University (TJU) into analogs of the anti-viral
compounds licensed from Synergy Pharmaceuticals. The research agreements expire
in September 2002. Under the agreements, Unither is required to fund the
research and pay the institutions milestone payments for successfully completed
clinical trials, and a royalty equal to a percentage of net sales that Unither
earns from discoveries and products

F-16
51

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


developed by the institutions. The milestone payments and royalties are subject
to reduction depending upon third-party contributions to inventions and/or third
party licenses necessary to develop products.


STANFORD UNIVERSITY AND NEW YORK MEDICAL COLLEGE

The Company's subsidiary, Cooke Pharma, Inc., has exclusively licensed
patents related to amino acid based dietary supplements to enhance the level of
endogenous nitric oxide in the vascular system from Stanford University and New
York Medical College. The licenses cover worldwide territories and are valid for
the life of the patents. In return, Cooke Pharma, Inc. has agreed to pay
royalties equal to one percent of net sales of amino acid based medical foods to
each licensor respectively, subject to reductions. Minimum annual royalties of
$10,000 are due to each licensor.

5. COMMITMENTS

CLINICAL TRIALS AND OTHER RESEARCH

The Company has contracted with universities and research organizations to
perform clinical trials and other research related to Remodulin and other
products. The Company generally pays all expenses incurred in carrying out the
clinical trials and research activities. Total expenses under these agreements
were approximately $16.6 million, $16.6 million, and $7.6 million in 2000, 1999,
and 1998, respectively. Total payments under these agreements in 2001 are not
expected to exceed $14.0 million.

WILLIAM HARVEY RESEARCH LIMITED

In 1998, the Company entered into a cooperative drug discovery agreement
with William Harvey Research Limited (WHR) to identify and develop an antisense
therapy as a potential treatment for pulmonary hypertension. The agreement may
be terminated by the Company after 30 months. Under the agreement, the Company
is required to pay WHR a royalty equal to a percentage of net sales and license
fees that the Company earns from discoveries developed by WHR. This royalty
obligation extends for 15 years or, if later, until any issued patents expire.

IMPERIAL COLLEGE

In 2000, Lung Rx entered into a research and development agreement with
Imperial College of Science, Technology & Medicine and Imperial College
Innovations Limited (collectively Imperial College) to develop lung lobes that
can be transplanted into patients at risk of dying due to lung disease. The
agreement may be terminated by the Company after the 12th and 36th months. It
may also be terminated with 90 days notice by the Company if Imperial College
does not meet a major milestone defined in the agreement. Under the agreement,
the Company is required to pay Imperial College a royalty equal to a percentage
of net sales that the Company earns from discoveries and products developed by
Imperial College. This royalty obligation extends until any issued patents
expire.

MILESTONE AND ROYALTY PAYMENTS

The Company has in-licensed certain products under agreements described in
note 4. These agreements generally include milestone payments to be paid in cash
by the Company upon the achievement of certain product development and
commercialization goals set forth in each agreement.

Total milestone payments under these agreements may come due approximately
as follows:


F-17
52

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



YEAR ENDING DECEMBER 31,

2001..................... $ 3,170,000
2002..................... $ 5,020,000
2003..................... $ 3,170,000
2004..................... $ 5,470,000
2005 and thereafter...... $18,440,000


Additionally, certain agreements described in note 4 require the Company to
pay royalties. The royalties are generally based on a percentage of net sales or
other product fees earned by the Company. Royalties will become due when sales
are generated and will range from 1.0 to 30 percent of net product revenues as
defined in the respective agreements.

EMPLOYMENT AGREEMENT

In April 1999, the Company executed an employment agreement with its CEO. As
amended in December 2000, the agreement establishes minimum compensation and
benefits for a renewing five year period,and requires the Company to issue
options to the CEO at the end of each of the next five years to purchase a
number of shares of common stock equal to .06 percent of the increase in the
Company's market capitalization from its average in December of each year
(commencing December 2000) to its average the following year. The exercise price
of the options will be 110 percent of the fair market value of a share of common
stock on the date of grant, or 100 percent of fair market value if the CEO owns
less than 10 percent of the Company's outstanding common stock on the date of
grant. If the CEO is terminated without cause or leaves with good reason, she
will receive severance equal to three years of base salary plus the value of any
vested options.

6. STOCKHOLDERS' EQUITY

COMMON STOCK

The Company was originally capitalized through the issuance of 1,666,663
shares of common stock for $0.06 per share, with a par value of $0.01. In 1997,
the number of authorized shares of common stock was increased from 20,000,000 to
50,000,000 shares. Also in 1997, 4,209,506 shares of common stock were issued at
prices ranging from $1.20 to $3.00. Of this total, 309,428 shares were issued as
a result of the conversion of a loan and accrued interest thereon from the
Chairman and CEO of the Company totaling $508,334.

On December 7, 1997, the Company's board of directors approved a one-for-two
reverse stock split of the Company's common stock. All common shares and per
share amounts in the accompanying financial statements have been retroactively
adjusted to reflect this reverse stock split. Authorized shares and the par
values of common and preferred stock were not affected.

In 1998, the Company issued 4,028,404 shares of common stock for cash at
prices ranging from $3.00 to $18.00.

In January and February 1999, the Company issued 111,370 shares of common
stock for cash at a price of $18.00 per share.

In April 1999, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission for the sale
of up to 6,000,000 shares of common stock. On June 17, 1999, the Company's
initial public offering, which involved the sale of 4,500,000 shares of common
stock at $12.00 per share, was declared effective by the SEC. The Company closed
the initial public offering on June 22, 1999 and received net proceeds, after
deducting underwriting commissions and offering expenses, of approximately
$48,874,000.

F-18
53

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


In April 1999, the Company's Board of Directors and stockholders approved an
amendment to the Company's Certificate of Incorporation increasing the number of
authorized shares of common stock to 100,000,000 shares. On June 11, 1999, the
Company increased the total number of authorized shares of common stock to
100,000,000.

In April 1999, the Company's Board of Directors approved a one-for-three
reverse stock split of its outstanding common stock which was effected on June
11, 1999. Authorized shares and the par values of common and preferred stock
were not affected by the reverse split. All share and per share amounts in the
accompanying financial statements have been retroactively adjusted to reflect
the reverse stock split for all periods presented.

On July 16, 1999, the Company closed on the sale of 675,000 over-allotment
shares of common stock to its underwriters. The underwriters' over-allotment
option was exercised at the initial public offering price of $12.00 per share.
The net proceeds, after deducting underwriting commissions and offering
expenses, were approximately $7,515,000.

In December 1999, the Company agreed to the sale of 2,500,000 shares of
common stock at $32.00 per share in a private placement. The private placement
closed and settled in January 2000. Net proceeds, after deducting commissions
and offering expenses were approximately $74.8 million. The common stock was
registered for resale with the SEC in a filing that was declared effective on
January 18, 2000.

In July 2000, United Therapeutics agreed to and closed on the sale of
1,300,000 shares of common stock at $110.00 per share in a private placement.
Net proceeds, after deducting commissions and certain offering expenses, were
approximately $134.3 million. The common stock was subsequently registered for
resale with the SEC in a filing that was declared effective on August 4, 2000.

In February 2000, the Company agreed to fund, over two years, a United
Therapeutics Chair in Pulmonary Hypertension at Columbia University with a grant
of the Company's common stock then valued at $1.5 million. The first half of
this grant was funded with the issuance of 9,868 shares of the Company's common
stock valued at $750,000 based on the closing Nasdaq price on February 10, 2000.

PREFERRED STOCK

A total of 10,000,000 shares of preferred stock with a par value of $0.01
were authorized in 1997. No preferred stock has been issued. A total of 100,000
shares of Series A Junior Participating Preferred Stock with a par value of $.01
were authorized in 2000. No Series A Junior Participating Preferred Stock has
been issued.

SHAREHOLDER RIGHTS PLAN

In December 2000, the Company's Board of Directors approved the adoption of a
Shareholder Rights Plan designed to discourage takeovers that involve abusive
tactics or do not provide fair value to its shareholders. The Shareholder Rights
Plan provides for a dividend distribution of one Preferred Stock Purchase Right
(Rights) for each outstanding share of the Company's common stock. The dividend
distribution was made to shareholders of record on December 29, 2000. The Rights
will be exercisable only if a person or group (except for certain exempted
persons or groups) acquires 15 percent or more of the Company's common stock or
announces a tender offer which would result in ownership of 15 percent or more
of the Company's common stock. The Rights entitle each holder of one share to
purchase one one-thousandth of a share of Series A Junior Participating
Preferred Stock (par value $ .01) and will expire on December 29, 2010.

TREASURY STOCK

On December 5, 2000, the Company's Board of Directors approved a stock
repurchase program of up to three million shares of its outstanding stock over
the next six months. The purpose of the stock repurchase program is to

F-19
54

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


help the Company achieve its long term goal of enhancing shareholder value.
During the year ended December 31, 2000, the Company repurchased 306,000 shares
at a total cost of approximately $4.1 million.

STOCK AND OPTIONS ISSUED FOR EXCLUSIVE LICENSE AGREEMENTS AND IN EXCHANGE
FOR SERVICES

In 1998 the Company issued 166,666 shares of common stock and options to
purchase 166,666 shares of common stock in exchange for an exclusive license
agreement. The stock was valued at $1,500,000, based on prices of similar
quantities of stock sold to unrelated parties during the period. The options
have an exercise price of $9.00 per share, are exercisable immediately, and
expire 30 days following the date of the Company's first filing of a New Drug
Application in the United States for the licensed product. The fair value of the
options was estimated on the date of grant at $185,000 using the Black-Scholes
option pricing model with assumptions generally consistent with those used for
employee options. The total of $1,685,000 was expensed as research and
development in 1998.

In 1998, the Company issued warrants to purchase 116,666 shares of common
stock in exchange for an exclusive license agreement. The warrants have an
exercise price of $9.00 per share, are exercisable beginning in November 2000,
and expire in November 2004. The fair value of the warrants was estimated on the
date of grant at $168,000 using the Black-Scholes option pricing model with
assumptions generally consistent with those used for employee options and was
expensed as research and development in 1998.

In 1998, the Company issued a total of 37,694 shares of common stock in
recognition of consulting services rendered during the year. The stock's fair
value and related compensation expense (ranging from $3.00 to $9.00) per share
was estimated based on prices of similar quantities of stock sold to unrelated
parties during the period.

In March 1999 the Company issued 500,000 shares of common stock in exchange
for an exclusive license agreement. The stock was valued at $9,000,000 ($18.00
per share) by the Company based on recent sales at $18.00 per share. The total
of $9,000,000 was expensed as research and development in 1999.

The Company issued options to consultants for services during 2000, 1999 and
1998. A total of 50,299 options to purchase common shares with exercise prices
of $14.48 to $95.37, were granted in 2000. A total of 38,330 options to purchase
common shares, with exercise prices of $16.75 to $30.12, were granted in 1999. A
total of 6,333 options to purchase common shares with exercise prices of $15.00
to $18.00, were granted in 1998.

EMPLOYEE OPTIONS

The Company's Board of Directors adopted an equity incentive plan (the Plan)
effective November 12, 1997. On April 5, 1999 and April 8, 1999, the Company's
Board of Directors and stockholders approved an amendment and restatement of the
Plan to increase the total number of shares of common stock that may be issued
pursuant to the Plan to 14,939,517 shares, including 7,939,517 shares reserved
for issuance to the CEO under her employment agreement (see note 5). The Plan
provides for the grant of awards, including options, stock appreciation rights,
restricted stock awards and other rights as defined in the Plan, to eligible
participants. Options granted under the Plan are not transferable and must
generally be exercised within 10 years. The price of all options granted under
the Plan must be at least equal to the fair market value of the common stock on
the date of grant. With respect to any participant who owns 10 percent or more
of the Company's outstanding common stock on the date of grant, the exercise
price of any incentive stock option granted to that participant must equal or
exceed 110 percent of the fair market value of the common stock on the date of
grant and the option must not be exercisable for longer than five years. During
the year ended December 31, 1998, options to purchase a total of 610,401 shares
were granted under this Plan at exercise prices of $3.00 to $19.80. During the
year ended December 31, 1999, options to purchase a total of 442,907 shares were
granted under this Plan at exercise prices of $12.38 to $35.75. During the year
ended December 31, 2000, options to purchase a total of 1,043,594 shares were
granted under this Plan at exercise prices of $14.48 to $116.38.

F-20
55
UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



Approximately 1,006,000 options were granted to employees during the
year ended December 31, 2000 outside of the Plan with exercise prices ranging
from $14.48 to $116.38 and a term of ten years.

The Company applies APB Opinion No. 25 in accounting for options granted
to employees and, accordingly, no compensation expense has been recognized in
the financial statements with respect to such options. Had the Company
determined compensation expense under SFAS No. 123 based on the fair value at
the grant date for its stock options, the Company's net loss would have been
increased to the pro forma amounts indicated below:




YEAR ENDED DECEMBER 31,
-----------------------

2000 1999 1998
------------------ ---------------- ---------------

Net loss:
As reported................................ $ (75,608,490) $ (33,506,698) $ (12,835,399)
Pro forma.................................. $ (118,084,955) $ (34,819,629) $ (12,989,645)

Basic and diluted loss per common share:
As reported.............................. $ (3.93) $ (2.51) $ (1.54)
Pro forma................................ $ (6.14) $ (2.60) $ (1.56)


The fair value of each option is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions generally used for grants in 2000, 1999, and 1998 were:



YEAR ENDED DECEMBER 31,
-----------------------
2000 1999 1998
----------- ----------- -----------

Dividend yield 0 percent 0 percent 0 percent
Expected volatility 69.75 percent - 84.26 percent 0.10 percent - 76 percent 0.10 percent
Risk free interest rate 4.98 to 6.68 percent 6.0 to 6.55 percent 4.4 to 5.7 percent
Expected lives 5-7.5 years 7.5 years 7.5 years


A summary of the status of the Company's employee stock options as of
December 31, 2000, 1999, and 1998, and changes during the years then ended is
presented below:



2000 1999
---------------------------------- -------------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ ----- ------ -----

Outstanding at beginning of period.... 1,412,724 $ 16.87 878,485 $ 12.69
Granted............................... 2,049,594 48.15 569,573 22.81
Exercised............................. (147,196) 9.76 -- --
Forfeited............................. (158,766) 35.64 (35,334) 8.66
------------ -------------- ----------- -------------
Outstanding at end of period.......... 3,156,356 $ 36.58 1,412,724 $ 16.87
============ ============== =========== =============
Options exercisable at end of
period............................ 1,213,582 $ 49.66 449,145 $ 11.90
============ ============== =========== =============

Weighted-average fair value of
options granted during the period.. $ 31.84 $ 16.69
============ ===========


1998
-------------------------------
WEIGHTED-
AVERAGE
EXERCISE
SHARES PRICE
------ -----

Outstanding at beginning of period....... 274,000 $ 13.77
Granted.................................. 610,401 12.12
Exercised................................ -- --
Forfeited................................ (5,916) 3.00
------------ --------
Outstanding at end of period............. 878,485 $ 12.69
============ ========
Options exercisable at end of
period............................... 180,318 $ 8.28
============ ========

Weighted-average fair value of
options granted during the period..... $ 3.30
============




F-21
56

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



The following table summarizes information about employee stock options
outstanding at December 31, 2000:



OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE REMAINING EXERCISE EXERCISE
PRICES NUMBER CONTRACTUAL LIFE PRICE NUMBER PRICE
- ------------------------- --------- ------------------ ----------- ----------- ----------

$ 3.00 - $ 10.00 243,412 6.4 $ 6.94 196,410 $ 7.52
10.01 - 20.00 1,463,894 8.9 15.88 343,750 16.79
20.01 - 30.00 233,884 8.7 27.59 83,784 28.03
30.01 - 40.00 5,000 8.9 35.75 1,800 35.75
40.01 - 50.00 317,667 9.2 43.25 20,667 46.38
50.01 - 60.00 181,100 9.2 56.84 9,700 51.82
60.01 - 70.00 145,050 9.3 64.35 38,725 64.06
70.01 - 80.00 27,800 9.1 72.19 800 77.59
80.01 - 90.00 526,649 9.5 89.74 514,396 89.86
90.01 - 116.38 11,900 9.3 105.15 3,550 108.85
- ------------------------- --------- ---------- ---------- ----------- ----------

$ 3.00 - $ 116.38 3,156,356 8.9 $ 36.58 1,213,582 $ 49.66
========================= ========= ========== ========== ========== ==========


7. INCOME TAXES

A reconciliation of tax benefit computed at the statutory federal tax
rate on losses from operations before income taxes to the actual income tax
expense is approximately as follows:



YEAR ENDED DECEMBER 31,
-----------------------
2000 1999 1998
------------ ------------- --------------

Federal tax provision
(benefit) computed at
the statutory rate................ $(25,707,000) $(11,391,000) $ (4,363,000)
State tax provision
(benefit), net of
federal tax provision
(benefit)......................... (3,992,000) (2,680,000) (842,000)
Change in the beginning
of the period valuation
allowance for deferred
tax assets allocated to
tax expenses..................... 32,598,000 16,548,000 7,565,000
General business credit
generated........................ (6,734,000) (7,812,000) (3,006,000)
Nondeductible expenses
and other........................ 3,835,000 5,338,000 649,000
------------ ------------ ------------
Total income tax
expense.............................. $ -- $ 3,000 $ 3,000
============ ============ ============


F-22
57

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



Deferred income taxes reflect the net effect of net operating loss
carryforwards and the temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Company's deferred tax assets
as of December 31, 2000 and 1999, respectively, are approximately as follows:



DECEMBER 31,
-----------------------------
2000 1999
-------------- ------------

Deferred tax assets:
Net operating loss carryforwards............. $ 20,411,000 $ 12,326,000
General business credit...................... 17,561,000 11,259,000
Unrealized loss on investment................ 1,881,000 -
Cumulative effect of using cash basis
accounting for income tax purposes......... - 1,503,000
Effect of conversion to accrual basis
accounting for income tax purposes......... (457,000) -
License fees capitalized for tax purposes.... 11,301,000 -
In-process research and development
capitalized for tax purposes............... 6,624,000 _
Furniture and equipment principally due to
differences in depreciation................ (70,000) (47,000)
Nonqualified stock options................... 599,000 211,000
------------ ------------


Total deferred tax assets 57,850,000 25,252,000

Valuation allowance (57,850,000) (25,252,000)
------------ ------------

Net deferred tax assets $ $ -
============ ============



Based on the weight of available evidence, management has determined
that the deferred tax asset amount may not be realized. This is due primarily to
the uncertainty of product approvals, future product sales and profitability.

The valuation allowance for deferred tax assets increased by
approximately $32.6 million and $16.6 million for the years ended December 31,
2000 and 1999, respectively.

At December 31, 2000, the Company had net operating loss carryforwards
of approximately $52.0 million and business tax credit carryforwards of
approximately $18.2 million for federal income tax purposes which expire at
various dates from 2011 through 2019. Business tax credits can offset future tax
liabilities and arise from qualified research expenditures. United Therapeutics'
ability to utilize its net operating loss and general business tax credit
carryforwards may be limited in the future if it is determined that United
Therapeutics experienced an ownership change, as defined in Section 382 of the
Internal Revenue Code, as a result of prior transactions and/or future
transactions. However, these net operating loss and general business tax credit
carryforwards, if subject to limitation arising from an earlier Section 382
ownership change, would be fully available to offset taxable income and taxes,
as applicable, during their carryforward lives.

8. NOTES AND LEASES PAYABLE

On April 29, 1998, the Company purchased an office building from a
company owned by the Chairman and CEO of the Company for approximately $581,000.
At that time, the Company assumed an existing adjustable rate mortgage on the
building of approximately $318,000. In June 1999, the Company refinanced the
note payable. The outstanding principal totaled approximately $315,000 and was
paid in full from the proceeds of a new mortgage note payable. The new mortgage
note payable was issued for $720,000 and is payable in monthly installments.
This 30-year adjustable rate note had an interest rate of 8.25 percent in effect
at December 31, 2000 and is secured by the building and property owned by the
Company located at 1110 Spring Street in Silver Spring, Maryland.



F-23
58

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



In September 1999, the Company purchased a building adjacent to 1110
Spring Street in Silver Spring, Maryland. The total cost of the building was
approximately $1,544,000. The Company issued a mortgage note payable to finance
this purchase. The mortgage note payable was issued for $1,078,000 and is
payable in monthly installments. This 30-year adjustable rate note had an
interest rate of 7.75 percent in effect at December 31, 2000 and is secured by a
certificate of deposit in the amount of $512,000 and the building and property
owned by the Company located at 1106 Spring Street in Silver Spring, Maryland.
The Company also leased certain equipment under capital leases with interest
rates of approximately 6.5 percent and terms up to 4 years.

Future minimum payments under notes and leases payable are as follows:



NOTES CAPITAL
PAYABLE LEASES
------- -------

YEAR ENDING DECEMBER 31,

2001...................... $ 16,731 $ 65,094
2002...................... 18,093 61,681
2003...................... 19,584 25,701
2004...................... 21,197 -
2005...................... 22,943 -
2006 and thereafter....... 1,673,002 -
------------ -----------

1,771,550 152,476
Less amounts representing
interest............... - (17,263)
Less current portion...... (16,731) (54,072)
------------ ------------

$ 1,754,819 $ 81,141
============ ============




9. INVESTMENTS

Investments at December 31, 2000 and 1999 consist of federally sponsored
debt securities. Investments at December 31, 2000 and 1999, are summarized as
follows:



DECEMBER 31,
------------
2000 1999
---- ----


Fair value $ 14,486,811 $ 33,326,436
Amortized cost $ 14,483,637 $ 33,315,914
Gross unrealized holding gains $ 63,683 $ 527,284



10. OPERATING LEASES

The Company leases various office and laboratory space generally under
noncancelable agreements with terms expiring through 2004.

In March 1999 and December 2000, a subsidiary of the Company leased
office space from a company owned by the Chairman and CEO of the Company (see
note 3). The leases expires in 2001 and may be extended for two years. The
subsidiary is responsible for base rentals and its proportionate share of common
utilities and maintenance. The Company also leases automobiles for certain
employees.

In September 1999, the Company purchased a building and property located
at 1106 Spring Street in Silver Spring, Maryland. The building was fully leased
to tenants at the time of the purchase. These leases are expected to continue in
operation until their expiration, which will be at various dates through 2003.




F-24
59


UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



Approximate minimum annual rent payments to be paid and received under
these noncancelable leases are as follows:




RENTS TO RENTS TO
BE PAID BE RECEIVED
------- -----------


YEAR ENDING DECEMBER 31,
2001...................... $ 425,868 $ 122,431
2002...................... 216,022 49,000
2003...................... 139,456 7,605
2004...................... 3,046 -



Total rent expense for the years ended December 31, 2000, 1999, and 1998
was approximately $366,000, $207,000, and $97,000, respectively.

11. ACQUISITIONS AND INVESTMENTS IN AFFILIATES

WONDERCLICK.COM, INC.

In July 1999, a subsidiary of Unither Telemedicine Services Corporation
(UTSC) entered into an agreement to form WonderClick.com, Inc. (formerly
AboveCable.com, Inc.), a Delaware corporation, to provide Internet access via
cable television portals worldwide. This subsidiary received 20 percent of the
initial outstanding common stock of WonderClick.com, Inc. and the exclusive
rights to offer telemedicine and electronic health services at the portal level.
The agreement does not require the UTSC subsidiary to contribute cash or other
capital. WorldSpace Corporation purchased a 50 percent common stock shareholding
in the new company. The Chairman and CEO of WorldSpace is a major stockholder
and Board member of the Company. At December 31, 2000, UTSC's subsidiary's 20
percent investment in WonderClick.com, Inc. had an original cost of zero and was
reported at zero. UTSC's equity in the underlying net assets was approximately
$1,623,000.

SYNQUEST, INC.

On October 7, 1999, the Company acquired all the outstanding stock of
SynQuest, Inc. (SynQuest), an Illinois corporation engaged in the synthesis and
manufacture of complex molecules. SynQuest manufactures Remodulin, the Company's
lead compound. The total cost of this acquisition was approximately $3.2
million, including transaction costs. Cash of $200,000 and 101,251 shares of the
Company's common stock valued at $2.9 million was paid to the sellers as
consideration. A holdback equivalent to $500,000 of the Company's common stock,
which was reduced to $200,000 of the Company's common stock in December 2000, is
being held in escrow for unknown liabilities and will be paid to the sellers
over four years, subject to certain conditions.

Goodwill and other intangible assets resulting from the acquisition
were approximately $2.8 million and are being amortized in a straight-line
manner over periods ranging up to five years. The acquisition was accounted for
as a purchase. SynQuest's operations since October 7, 1999 have been included in
the Company's consolidated financial statements. In December 2000, the Company
dissolved SynQuest, Inc. and merged it into United Therapeutics Corporation.
SynQuest now operates as the synthesis and manufacturing division of United
Therapeutics Corporation. Its activities were unaffected by the dissolution and
merger.

PREVENTIS INC.

In 2000, the Company entered into an agreement to form Preventis Inc.,
a Delaware corporation, to create new vaccine technology and to develop and
commercialize novel therapeutics for infectious disease. The Company received 30
percent of the initial outstanding common stock of Preventis. The agreement does
not require the Company to contribute cash or other capital. A board member of
the Company purchased a 57 percent common


F-25
60

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



stock shareholding in the new company. At December 31, 2000, the Company's 30
percent investment in Preventis had an original cost of zero and was reported at
zero. The subsidiary's equity in the underlying net assets was a deficit of
approximately $324,000.

COOKE PHARMA INC.

On December 11, 2000, the Company agreed to purchase all of assets and
assume certain liabilities of Cooke Pharma Inc., based in California. The
acquisition closed on December 28, 2000. Cooke Pharma Inc. is the exclusive
owner and developer of the intellectual property rights to use arginine for
vascular disease. Medical foods are regulated by the FDA. The total cost of this
acquisition was approximately $15.9 million, including transaction costs. The
Company issued 294,635 shares of common stock, subject to adjustment within a
year, valued at $15.7 million to the sellers and assumed approximately $1.7
million of liabilities as consideration. In addition, the Company agreed to pay
a single-digit cash royalty to Cooke Pharma on sales of Cooke Pharma products up
to an additional $49 million, subject to possible reduction.

The acquisition was structured as a taxable stock-for-assets purchase
with a residual royalty stream. The Company agreed to register all of these
shares for resale by Cooke Pharma in accordance with the terms of the
Registration Rights Agreement dated as of December 15, 2000. Approximately
147,000 of the shares issued to Cooke Pharma are being held in escrow for up to
two years for unknown liabilities, indemnifications, warranties and a stock
adjustment (described below) pursuant to the terms of an Escrow Agreement.

The sellers may receive additional shares from the Company on the first
anniversary of the closing if the average closing price of the Company's common
stock over the 90 calendar days prior to the anniversary is less than $90.00 per
share, in order that the value of all shares issued to Cooke Pharma equals the
value of the shares issued to Cooke Pharma at the closing at $90.00 per share.
If, however, such average closing price is less than $51.65 per share, the
additional shares to be issued to Cooke Pharma shall not exceed a value equal to
the difference between $90.00 and $51.65 per share. If the average anniversary
closing price is greater than $99.00 per share, the number of shares of the
Company's common stock issued as of the date of closing shall be adjusted as if
it had a value of $99.00 at closing (for a total value not to exceed
approximately $29 million), and the Company shall receive the remaining shares
following the adjustment. The consideration given was valued at the fair value
of the 294,635 shares of United Therapeutics' stock issued using an average
NASDAQ closing price of $14.84 which totaled approximately $4.4 million, plus
the value of the potential additional shares that may be issued which totaled
approximately $11.3 million (equivalent to the minimum guaranteed share price of
$90.00 per share less the floor established in the agreement of $51.65
multiplied by 294,635 shares).

Intangible assets resulting from the acquisition were approximately
$7.8 million and are being amortized in a straight-line manner over periods
ranging from three to eighteen years. These intangible assets include the
HeartBar tradename, patents, base technology, and assembled workforce. The
amount attributed to in-process research and development totaling approximately
$7.1 million was charged to expense at the date of acquisition. The fair values
of the intangible assets were based on independent valuations. The acquisition
was accounted for as a purchase. Cooke Pharma's operations since December 11,
2000 have been included in the Company's consolidated financial statements.

The write-off of in-process research and development (IPR&D) related to
the acquisition of Cooke Pharma totaled approximately $7.1 million, which was
expensed as a one-time non-recurring charge. The allocation of $7.1 million
represents the estimated fair value related to incomplete projects based on risk
adjusted cash flows. At the date of the acquisition, the projects associated
with the in-process research and development efforts had not yet reached
technological feasibility and had no alternative future uses. Accordingly, these
costs were expensed. At the acquisition date, Cooke had more than 10 potential
products in its new products research & development pipeline. After a thorough
review of each product program it was concluded that two of these new product
areas had moved far enough beyond the concept stage to be considered significant
IPR&D. These potential new products were in the


F-26
61

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



applied research stage of development where large-scale clinical trials were
being planned. The projects under development at the valuation date, were
expected to address the coronary artery disease and peripheral arterial disease
markets with a total market potential of 16 million people as well as the market
that is at risk of developing some form of heart disease (estimated at
approximately 60 million people).

At the acquisition date, the technologies under development were
between 29% and 32% complete, based on project man-months and costs. Cooke had
spent approximately $2.8 million on the IPR&D projects and expected to spend
approximately $6.2 million to complete the IPR&D projects. It is anticipated
that research and development related to these projects would be completed by
early 2002, after which time United Therapeutics is expected to begin generating
economic benefits from the value of the completed IPR&D.

In allocating the purchase price, the present value calculations of
income, an analysis of project accomplishments and completion costs, an
assessment of overall contributions, and project risks were considered. The
values assigned to IPR&D were determined by estimating the costs to develop the
purchased technology into commercially viable products, estimating the resulting
net cash flows from each project, excluding the cash flows related to the
portion of each project that was incomplete at the acquisition date, and
discounting the resulting net cash flows to their present value. Each of the
project forecasts were based upon future discounted cash flows, taking into
account the state of development of each in-process project, the cost to
complete that project, the expected income stream, the life cycle of the project
ultimately developed and the associated risks.

Aggregate revenue attributable to the IPR&D projects was estimated to
peak, as a percentage of total revenue, in the fourth year following
introduction, assuming the successful completion and market acceptance of the
major research and development programs. For the projects under development,
risk-adjusted discount rates of 40 percent and 55 percent were utilized to
discount projected cash flows of the two new product lines. The discount rates
selected were based on comparable rates of return relative to the stages of
development of each of the product lines.

MEDICOMP, INC. AND TELEMEDICAL PROCEDURES, LLC

On December 29, 2000, the Company acquired all of the assets of
Medicomp, Inc. and Telemedical Procedures, LLC (Medicomp), related cardiac
monitoring companies based in Florida. The total cost of this acquisition was
approximately $20.0 million, including transaction costs. Cash of $8.0 million
and 257,142 shares of the Company's common stock valued at $11.9 million and
subject to adjustment was paid to the sellers as consideration.

The acquisition was structured as a taxable purchase. The Company
agreed to register all of these shares for resale by Medicomp in accordance with
the terms of the Registration Rights Agreement dated as of December 28, 2000.
Approximately 129,000 of the shares issued to Medicomp are being held in escrow
for up to three years for unknown liabilities, indemnifications, warranties and
a stock adjustment (described below) pursuant to the terms of an Escrow
Agreement.

Medicomp may receive additional shares from the Company on the third
anniversary of the closing if the average closing price of the Company's common
stock over the 30 calendar days prior to the anniversary is less than $70.00 per
share, in order that the value of all shares issued to Medicomp equals the value
of the shares issued to Medicomp at the closing at $70.00 per share (subject to
a maximum of 600,000 shares). The stock consideration given was valued at the
fair value of the 257,142 shares of United Therapeutics' stock issued using an
average NASDAQ closing price of $13.84 which totaled approximately $3.6 million,
plus the value of the potential additional shares that may be issued which
totaled approximately $8.3 million (equivalent to the average NASDAQ closing
price of $13.84 per share multiplied by the maximum of 600,000 additional shares
that may be issued in the future).


F-27
62

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


Goodwill and other intangible assets resulting from the acquisition
were approximately $7.8 million and are being amortized in a straight-line
manner over periods ranging from three to twenty years. The other intangible
assets include the assembled workforce and base technology. The amount
attributed to in-process research and development (IPR&D) totaling approximately
$9.8 million was charged to expense at the date of the acquisition. The fair
values of the intangible assets were based on independent valuations. The
acquisition was accounted for as a purchase. Medicomp's operations since
December 29, 2000 have been included in the Company's consolidated financial
statements.

The write-off of IPR&D related to the acquisition of Medicomp totaled
approximately $9.8 million, which was expensed as a one-time non-recurring
charge. The allocation of approximately $9.8 million represents the estimated
fair value based on risk-adjusted cashflows related to the incomplete research
and development projects. At the date of acquisition, the development of these
projects had not yet reached technological feasibility, and the research and
development in progress had no alternative future uses. Accordingly, these costs
were expensed as of the acquisition date.

At the acquisition date, Medicomp was conducting design, development,
engineering and testing activities associated with the completion of a number of
new technological innovations that were integral to Medicomp's plan to launch a
first generation wireless heart monitoring system aimed at the consumer (as
opposed to the institutional) market. The technologies related to the complete
system under development was approximately 59 percent complete based on project
man-months and costs. Medicomp had spent approximately $1.6 million on the IPR&D
projects, and expected to spend approximately $1.1 million to complete the
research and development. Anticipated completion dates ranged from 9 to 12
months, at which time United Therapeutics expects to begin benefiting from the
developed technologies.

In calculating the value of IPR&D, the Company considered present value
calculations of income, an analysis of project accomplishments and completion
costs, an assessment of overall contributions, as well as project risks. The
value assigned to IPR&D was determined by estimating the costs to develop the
acquired technology into commercially viable products, estimating the resulting
net cash flows from the projects, and discounting the net cash flows to their
present value. The revenue projection used to value the IPR&D was based on
estimates of relevant market sizes and growth factors, expected trends in
technology and the nature and expected timing of new product introductions by
Medicomp and its competitors. The resulting net cash flows were based on
estimates of working capital and additional fixed assets requirements, along
with the appropriate capital charges for the use of assets such as patents,
trademarks and workforce.

Aggregate revenues for the IPR&D related product line was estimated to
peak in the third year following introduction, assuming the successful
completion and market acceptance of the major research and development programs.
The estimated revenues for the IPR&D projects were expected to peak within four
years of acquisition after which time Medicomp expects to have the next
generation system in production. For the projects under development a
risk-adjusted discount rate of 55 percent was utilized to discount projected
cash flows. The discount rates selected were based on comparable rates of return
relative to the stages of development of each of the product lines.

PRO FORMA INFORMATION RELATED TO THE COOKE PHARMA AND MEDICOMP
ACQUISITIONS

The following unaudited pro forma financial information presents the
combined approximate results of operations of the Company, Cooke Pharma and
Medicomp as if the acquisitions had occurred as of the beginning of 2000 and
1999, after giving effect to certain adjustments, including amortization of
goodwill and the write-off of acquired in-process research and development
expenses. The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company acquired Cooke
Pharma and Medicomp at the beginning of these periods.



F-28
63

UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)





YEAR ENDED DECEMBER 31,
2000 1999
---- ----
(UNAUDITED)
-----------

Total revenues.............................. $ 6,336,000 $ 3,571,000

Net loss.................................... (85,285,000) (49,980,000)

Loss per share --
basic and diluted......................... $ (4.31) $ (3.59)



NORTHERN THERAPEUTICS CORPORATION

In December 2000, Lung Rx, a subsidiary of the Company, formed a new
company, Northern Therapeutics Corporation (Northern Therapeutics), a Canada
based company, with the inventor of a new form of gene therapy for pulmonary
hypertension and other conditions. The purpose of Northern Therapeutics is to
develop the gene therapy and also to distribute Lung Rx' second generation
prostacyclin analog, Unipeg, and HeartBar(R), in Canada and, upon the consent of
Toray Industries Inc., to distribute beraprost in Canada. Lung Rx received
approximately 59 percent of the initial outstanding common stock of Northern
Therapeutics in exchange for $5.0 million in cash of which $1.0 million was paid
in December 2000. The remaining $4.0 million will be paid in $1.0 million
increments annually over four years. United Therapeutics has agreed to provide
the services of its Chief Executive Officer as Chairman of the Northern
Therapeutics's initial Board and its Executive Vice President Business
Development as the Company's initial CEO.

Northern Therapeutics is intended as a Canadian Controlled Private
Corporation. Lung Rx may appoint only two of the new company's seven board
seats. Substantially all important decisions require unanimous board votes in
favor of the proposal. As a result, Lung Rx does not control Northern
Therapeutics and the equity method of accounting is used to account for Lung Rx'
investment in the new company. At December 31, 2000, Lung Rx' 59 percent
investment in the new company was reported at the original cost of $4.3 million
which is comprised of the $1.0 million paid in cash and the present value of the
additional $4.0 million due over four years. The amounts due at December 31,
2000 totaled approximately $3.3 million and are reported as due to affiliate in
the accompanying consolidated balance sheets. Lung Rx' equity in the underlying
net assets was approximately $3.1 million at December 31, 2000.

12. EMPLOYEES' RETIREMENT PLAN

Effective January 1, 1999, the Company adopted the United Therapeutics
Corporation Employees' Retirement Plan (the Plan), a salary reduction profit
sharing plan. Employees employed on July 15, 1999 are eligible to participate in
the Plan. The Plan provides for annual discretionary employer contributions.
Employees may also contribute to the Plan at their discretion. For the years
ended December 31, 2000 and 1999, no employer contributions were made to the
Plan.

13. ACCRUED EXPENSES

Accrued expenses consisted of the following at December 31, 2000 and
1999:




DECEMBER 31,
2000 1999
---- ----

Professional fees.... $ 20,000 $ 123,396
Research............. 3,842,170 1,851,437
Other................ 660,380 132,972
------------ --------------
$ 4,522,550 $ 2,107,805
------------ --------------




F-29
64
UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



14. SEGMENT INFORMATION

The Company has three reportable business segments. The pharmaceutical
segment includes all activities associated with the research, development,
manufacture and commercialization of pharmaceutical products. Telemedicine
includes all activities associated with the research, manufacture and delivery
of patient monitoring services. The arginine segment includes the manufacture
and sales of arginine products that assist patients in the management of
cardiovascular disease. These segments are managed separately because each
business requires different technology and marketing strategies.

Prior to 2000, the Company was comprised of only the pharmaceutical
segment. Segment information as of and for the year ended December 31, 2000 was
as follows:



PHARMACEUTICAL TELEMEDICINE ARGININE CONSOLIDATED TOTALS
-------------- ------------ -------- -------------------


Revenues $ 2,008,660 $ - $ 40,598 $ 2,049,258

Losses $ (58,533,588) (9,846,688) (7,228,214) $ (75,608,490)

Interest Income $ 10,689,018 654 3,567 $ 10,693,239

Depreciation and
amortization $ 912,716 1,270 $ 913,986

Noncash licensing fees
and write downs
of acquired in process
research and development $ 18,770,000 9,760,000 7,103,700 $ 35,633,700


Total assets $ 229,095,635 $11,194,266 $ 10,355,083 $ 250,644,984


Revenues and expenses of the telemedicine and arginine segments only
included operations from December 11 to December 31, 2000 since these segments
were acquired at various dates in December 2000. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies in note 2. There are no inter-segment transactions.

15. FOURTH QUARTER RESULTS

During the fourth quarter of 2000, the Company acquired all of the
assets and certain liabilities of Cooke Pharma and all of the assets of Medicomp
(note 11). These acquisitions resulted in the recognition of approximately $15.6
million of goodwill and other intangible assets and in the expense of
approximately $16.9 million related to the acquisition of in-process research
and development. Also during the fourth quarter of 2000, the Company wrote off
its investment in Synergy (note 4).

16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following presents certain quarterly financial information for each
of the years ended December 31, 2000 and 1999:





QUARTERS ENDING AS FOLLOWS DURING 2000
--------------------------------------

DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
2000 2000 2000 2000
---- ---- ---- ----


Net sales $ 789,667 $ 353,891 $ 496,303 $ 259,397
Gross profit 82,033 89,344 62,716 39,114
Net loss (31,872,554) (7,014,023) (28,810,316) (7,911,597)
Loss per share - basic
and diluted $ (1.57) $ (0.35) $ (1.55) $ (0.44)




F-30
65


UNITED THERAPEUTICS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)






QUARTERS ENDING AS FOLLOWS DURING 1999
--------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1999 1999 1999 1999
---- ---- ---- ----


Net sales $ 225,245 $ - $ - $ -
Gross profit 61,098 - - -

Net loss (8,821,611) (6,359,977) (6,087,117) (12,237,993)
Loss per share - basic
and diluted $ (0.55) $ (0.40) $ (0.53) $ (1.19)







F-31
66





UNITED THERAPEUTICS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 2000





Additions
Balance at charged to Balance at
December 31, 1999 expenses Deductions December 31, 2000
------------------------------------------------------------------------------------------------------


Allowance for $ -- 98,281 -- $98,281
doubtful accounts
receivable








F-32
67




ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by Item 10 regarding nominees and directors
appearing under "Election of Directors" in United Therapeutics' definitive proxy
statement for its 2001 annual shareholders meeting (the "2001 Proxy Statement")
is hereby incorporated herein by this reference. Information regarding executive
officers of United Therapeutics appears in Part I of this Form 10-K under the
heading "Executive Officers".

Information appearing under "Section 16(a) Beneficial Ownership
Reporting Compliance" in the 2001 Proxy Statement is hereby incorporated herein
by this reference.

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation required by Item 11
appears under "Management" in the 2001 Proxy Statement and is hereby
incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information regarding beneficial ownership of United Therapeutics
capital stock required by Item 12 appears under "Security Ownership of Certain
Beneficial Owners and Management" in the 2001 Proxy Statement and is hereby
incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning related party transactions required by Item 13
appears under "Certain Relationships and Related Transactions" in the 2001 Proxy
Statement and is hereby incorporated herein by this reference.



34
68




PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

(i) Consolidated Balance Sheets as of December 31, 2000 and 1999.

(ii) Consolidated Statements of Operations for the three years ended
December 31, 2000.

(iii) Consolidated Statements of Stockholders' Equity for the three
years ended December 31, 2000.

(iv) Consolidated Statements of Cash Flows for the three years ended
December 31, 2000.

(v) Notes to Consolidated Financial Statements.

Exhibits filed as a part of this Form 10-K:



EXHIBIT NO. DESCRIPTION
- ----------- -----------

3.1 Amended and Restated Certificate of Incorporation of the Registration, incorporated by reference to Exhibit 3.1 of
the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).
3.2 Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant's
Registration Statement (Registration No. 333-76409).
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Registration Rights Agreement, dated as of October 30, 1998, by and among the Registrant, Merrill Lynch KECALP L.P.
1997, and Merrill Lynch KECALP International L.P. 1997, incorporated by reference to Exhibit 4.2 of the Registrant's
Registration Statement on Form S-1 (Registration No. 333-76409).
4.3 Form of Common Stock Purchase Agreement, executed as of March 1998, by and between the Registrant and each of
Community Investment Partners III L.P., LLLP, Mary Ellen and Raul Evelio Perez, Trustees of the Mary Ellen Perez
revocable trust dated October 28, 1993, Edward D. Jones & Co., Oakwood Investors I, L.L.C. and James L. Nouss, Jr.,
incorporated by reference to Exhibit 4.3 of the Registrant's Registration Statement on form S-1 (Registration
No. 333-76409).
4.4 Warrant to purchase shares of United Therapeutics common stock, issued on November 2, 1998 to Cortech, Inc.,
incorporated by reference to Exhibit 4.4 of the Registrant's Registration Statement on form S-1 (Registration
No. 333-76409).
4.5 Stock Option Grant to purchase shares of United Therapeutics' common stock, issued on September 16, 1998, to Toray
Industries, Inc., incorporated by reference to Exhibit 4.5 of the Registrant's Registration Statement on form S-1
(Registration No. 333-76409).
4.6 Registration Rights Agreement, dated as of October 7, 1999, by and among the Registrant and Robert M. Moriarty,
Ph.D., Raju Penmasta, Ph.D., Lian Guo, Ph.D., George W. Davis, Esq. and David Moriarty, incorporated by reference to
Exhibit 10.2 of the Registrant's Form 10-Q for the period ended September 30, 1999.
4.7 Form of Purchase Agreement dated as of December 22, 1999, incorporated by reference to Exhibit 4.6 of the
Registrant's Registration Statement on form S-1 (Registration No. 333-93853).
4.8 Registration Rights Agreement, dated as of June 27, 2000 by and between the Registrant and Toray Industries, Inc.,
incorporated by reference to Exhibit 4.7 of the Registrant's Registration Statement on Form S-3 (Registration No.
333-40598).
4.9 Stock Option Grant issued on June 27, 2000 to Toray Industries, Inc., incorporated by reference to Exhibit 4.8 of
the Registrant's Registration Statement on Form S-3 (Registration No. 333-40598).
4.10 Form of Stock Purchase Agreement dated July 13, 2000 incorporated by reference to Exhibit 99.2 of the Registrant's
Current Report on Form 8-K filed July 14, 2000.
4.11 Registration Rights Agreement, dated as of December 15, 2000 by and between the Registrant and Cooke Pharma, Inc.,
incorporated by reference to Exhibit 2.2 of the Registrant's Form 8-K/A dated December 15, 2000.
4.12 Escrow Agreement, dated as of December 15, 2000 among Registrant, UP Subsidiary Corporation, Cooke Pharma, Inc., and
Mahon, Patusky, Rothblatt & Fisher, Chartered, as escrow agent, incorporated by reference to Exhibit 2.3 of the
Registrant's Form 8-K/A dated December 15, 2000.


35
69



4.13 Registration Rights Agreement, dated as of December 28, 2000 by and between the Registrant and Medicomp, Inc.,
incorporated by reference to Exhibit 2.2 of the Registrant's Form 8-K/A dated December 28, 2000.
4.14 Escrow Agreement, dated as of December 28, 2000 among Registrant, UTSC Sub Acquisition, Inc., Medicomp, Inc., Mahon,
Patusky, Rothblatt & Fisher, Chartered, as escrow agent, and Chicago Title, as successor escrow agent, incorporated
by reference to Exhibit 2.3 of the Registrant's Form 8-K/A dated December 28, 2000.
4.14 Rights Agreement, dated as of December 17, 2000 between Registrant and The Bank of New York, as Rights Agent,
incorporated by reference to Exhibit 4 of Registrant's Form 8-K dated December 17, 2000.
10.1** Amended and Restated Equity Incentive Plan, incorporated by reference to Exhibit 10.1 of the Registrant's
Registration Statement on Form S-1 (Registration No. 333-76409).
10.2 Form of Scientific Advisor Compensation Agreement, incorporated by reference to Exhibit 10.2 of the Registrant's
Registration Statement on Form S-1 (Registration No. 333-76409).
10.3** Executive Employment Agreement (as amended) dated as of April 2, 1999, between the Registrant and Martine A.
Rothblatt, incorporated by reference to Exhibit 10.3 of the Registrant's Registration Statement on Form S-1
(Registration No. 333-76409).
10.4** Employment Agreement dated July 15, 1996, between the Registrant and James W. Crow, incorporated by reference to
Exhibit 10.4 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).
10.5** Employment Agreement dated April 7, 1996, between the Registrant and Gilles Cloutier, incorporated by reference
to Exhibit 10.5 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).
10.6** Employment Agreement dated August 1, 1996, between the Registrant and Shelmer Blackburn, Jr., incorporated by
reference to Exhibit 10.6 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).
10.7 First Flight Venture Lease Agreement dated July 1, 1997, between North Carolina Technological Development Authority,
Inc. and the Registrant, incorporated by reference to Exhibit 10.2 of the Registrant's Registration Statement on
Form S-1 (Registration No. 333-76409).
10.8 Exclusive License Agreement dated as of December 3, 1996, between the Registrant and affiliate of Pharmacia & Upjohn
Company, incorporated by reference to Exhibit 10.8 of the Registrant's Registration Statement on Form S-1
(Registration No. 333-76409).*
10.9 Assignment Agreement dated as of January 31, 1997, between the Registrant and affiliates of Glaxo Wellcome Inc.,
incorporated by reference to Exhibit 10.9 of the Registrant's Registration Statement on Form S-1 (Registration No.
333-76409).*
10.10 Cooperation and Strategic Alliance Agreement dated as of September 3, 1997, between Registrant and MiniMed Inc.,
incorporated by reference to Exhibit 10.10 of the Registrant's Registration Statement on Form S-1 (Registration No.
333-76409).*
10.11 Exclusive License Agreement dated as of September 24, 1998, between the Registrant and Toray Industries, Inc.,
incorporated by reference to Exhibit 10.11 of the Registrant's Registration Statement on Form S-1 (Registration No.
333-76409).*
10.12 Exclusive License Agreement dated as of November 4, 1998, between the Registrant and Cortech, Inc., incorporated by
reference to Exhibit 10.12 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).*
10.13 Exclusive License and Distribution Agreement dated as of February 4, 1999, among the Registrant, Global Medical
Enterprises Ltd. And Global Medical Enterprises Ltd., LLC., incorporated by reference to Exhibit 10.13 of the
Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).*
10.14 Exclusive License Agreement dated as of March 15, 1999, between the Registrant and Toray Industries, Inc.,
incorporated by reference to Exhibit 10.14 of the Registrant's Registration Statement on Form S-1 (Registration No.
333-76409).*
10.15 Manufacturing Agreement dated as of February 11, 1998, between the Registrant and Steroids, Ltd., incorporated by
reference to Exhibit 10.15 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).*
10.16 Agreement and Plan of Merger dated as of October 7, 1999, among the Registrant, SQ Acquisition, Inc., Robert M.
Moriarty, Ph.D., Raju Penmasta, Ph.D., Laing Guo, Ph.D., George W. Davis, Esq., David Moriarty and SynQuest, Inc.,
incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q for the period ended
September 30, 1999.


36
70



10.17 Lease dated as of March 1, 1999, between the Unither Telemedicine Services Corp. and Beacon Projects, Inc.,
incorporated by reference to Exhibit 10.17 of the Registrant's Registration Statement on Form S-1 (Registration
No. 333-76409).
10.18 UAI Technology, Inc. Office Lease dated as of July 1, 1998, between the Registrant and UAI Technology, Inc.,
incorporated by reference to Exhibit 10.18 of the Registrant's Registration Statement on Form S-1 (Registration No.
333-76409).
10.19 Form of Indemnification Agreement between the Registrant and each of its Directors, incorporated by reference to
Exhibit 10.19 of the Registrant's Registration Statement on Form S-1 (Registration No. 333-76409).
10.20 Guidelines to Govern the Strategic Activities, Co-Development and Related Activities of the Parties dated as of
November 1, 1999, between the Registrant and MiniMed, Inc., incorporated by reference to Exhibit 10.20 of the
Registrant's Amended Registration Statement on Form S-1/A (Registration No. 333-93853).*
10.21 Short Form Commercial and Apartment House Real Estate Purchase Agreement, accepted as of August 4, 1999 between the
Registrant and 1106 Spring Street Associates.
10.22 Exclusive License Agreement dated as of June 23, 2000 between the Registrant and Toray Industries, Inc.,
incorporated by reference to Exhibit 10.1 of the Registrant's Registration Statement on Form S-3 (Registration No.
333-40598).
10.23 Asset Purchase Agreement dated as of December 28, 2000 among the Registrant, UTSC Sub Acquisition, Inc., Medicomp,
Inc., and Telemedical Procedures, LLC, incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K/A dated
December 28, 2000.
10.24 Asset Purchase Agreement dated as of December 15, 2000 among the Registrant, UP Subsidiary Corporation, and Cooke
Pharma, Inc., incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K/A dated December 15, 2000.
21 Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP.



- ------------------
* Confidential treatment has been granted with respect to certain portions
of this exhibit pursuant to Rule 406 of the Securities Act of 1933, as
amended.
** Designates management contracts and compensation plans.

(b) Reports on Form 8-K

On December 1, 2000, the Registrant filed a Form 8-K dated December 1,
2000 reporting an Item 5 event.

On December 5, 2000, the Registrant filed a Form 8-K dated December 5,
2000 reporting an Item 5 event.

On December 7, 2000, the Registrant filed a Form 8-K dated December 7,
2000 reporting an Item 5 event.

On December 18, 2000, the Registrant filed a Form 8-K dated December 18,
2000 reporting an Item 5 event.

On December 17, 2000, the Registrant filed a Form 8-K dated December 17,
2000 reporting an Item 5 event.

On December 28, 2000, the Registrant filed a Form 8-K dated December 28,
2000 reporting an Item 5 event.


37
71


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized.

UNITED THERAPEUTICS CORPORATION

By: /s/ MARTINE A. ROTHBLATT
--------------------------------
March 30, 2001 Martine A. Rothblatt
Chairman of the Board and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.



Signatures Title Date
---------- ----- ----



/s/ MARTINE A. ROTHBLATT Chairman of the Board and
- ------------------------------------------------ Chief Executive Officer March 30, 2001
Martine A Rothblatt


/s/ JAMES W. CROW President, Chief Operating
- ------------------------------------------------ Officer and Director March 30, 2001
James W. Crow


/s/ GILLES CLOUTIER Executive Vice President, Treasurer and
- ------------------------------------------------ Director March 30, 2001
Gilles Cloutier


/s/ SHELMER D. BLACKBURN, JR Executive Vice President for Medical
- ------------------------------------------------ Affairs, Secretary and Director March 30, 2001
Shelmer D. Blackburn, Jr.


/s/ FRED T. HADEED
- ------------------------------------------------ Chief Financial Officer March 30, 2001
Fred T. Hadeed


/s/ NOAH A. SAMARA
- ------------------------------------------------ Director March 30, 2001
Noah A. Samara


/s/ DAVID GOORAY
- ------------------------------------------------
David Gooray Director March 30, 2001



/s/ MICHAEL C. MILES
- ------------------------------------------------ Director March 30, 2001
Michael Miles


/s/ H. BEECHER HICKS, III
- ----------------------------------------------- Director March 30, 2001
H. Beecher Hicks, III


/s/ WAYNE ROE
- ------------------------------------------------ Director March 30, 2001
Wayne Roe

/s/ RICARDO BALDA
- ------------------------------------------------ Director March 30, 2001
Ricardo Balda




38