Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-based compensation expense for options granted, RSAs, performance stock awards (“PSAs”), SARs and stock purchase rights is reflected in the condensed consolidated statements of operations and comprehensive loss as follows:



	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
(in thousands)	2019		2018		2019		2018
Selling, general and administrative	$	7,091	$	7,126	$	16,212	$	13,340
Pre-approval commercial manufacturing	834		634		1,683		1,104
Research and development	2,770		2,558		5,420		4,593
Total	$	10,695	$	10,318	$	23,315	$	19,037

Equity Plans

The Company maintains three equity compensation plans, the 2005 Aerie Pharmaceutical Stock Plan (the “2005 Plan”), the 2013 Omnibus Incentive Plan (the “2013 Equity Plan”), which was amended and restated as the Aerie Pharmaceuticals, Inc. Second Amended and Restated Omnibus Incentive Plan (the “Second Amended and Restated Equity Plan”), as described below, and the Aerie Pharmaceuticals, Inc. Inducement Award Plan (the “Inducement Award Plan”), as described below. The 2005 Plan, the Second Amended and Restated Equity Plan and the Inducement Award Plan are referred to collectively as the “Plans.” The 2005 Plan was frozen in 2013 and no additional awards have been or will be made under the 2005 Plan.

On June 7, 2018, Aerie’s stockholders approved the adoption of the Second Amended and Restated Equity Plan to increase the number of shares issuable under the plan by 4,500,000. The Second Amended and Restated Equity Plan provides for the granting of up to 10,229,068 equity awards in respect of Aerie common stock.

On December 7, 2016, Aerie’s Board of Directors approved the Inducement Award Plan which provides for the granting of up to 418,000 equity awards in respect of common stock of Aerie and was subsequently amended during 2017 to increase the equity awards that may be issued by an additional 874,500 shares. Awards granted under the Inducement Award Plan are intended to qualify as employment inducement awards under NASDAQ Listing Rule 5635(c)(4).

Options to Purchase Common Stock

The following table summarizes the stock option activity under the Plans:



	NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	AGGREGATE INTRINSIC VALUE (000’s)
Options outstanding at December 31, 2018	6,935,119		$	28.97
Granted	914,790		43.32
Exercised	(124,034	)	30.94
Canceled	(211,607	)	53.52
Options outstanding at June 30, 2019	7,514,268		$	29.99	6.6	$	63,671
Options exercisable at June 30, 2019	5,145,383		$	21.98	5.6	$	61,881

As of June 30, 2019, the Company had $73.3 million of unrecognized compensation expense related to options granted under its equity plans. This expense is expected to be recognized over a weighted average period of 2.7 years as of June 30, 2019.

Restricted Stock Awards

The following table summarizes the RSAs, including PSAs, activity under the Plans:



	NUMBER OF SHARES		WEIGHTED AVERAGE FAIR VALUE PER SHARE
Non-vested RSAs at December 31, 2018	572,706		$	48.18
Granted	392,784		45.55
Vested	(203,077	)	45.12
Canceled	(33,708	)	50.55
Non-vested RSAs at June 30, 2019	728,705		$	47.53

As of June 30, 2019, the Company had $29.1 million of unrecognized compensation expense related to unvested RSAs, including PSAs. This expense is expected to be recognized over the weighted average period of 2.9 years as of June 30, 2019.

The vesting of the RSAs is time and service based with terms of one to four years. During the year ended December 31, 2017, the Company granted 98,817 PSAs with non-market performance conditions that vest upon the satisfaction of certain performance conditions and service conditions. During the six months ended June 30, 2019, vesting for the remaining PSAs was deemed probable to occur. As of June 30, 2019, 69,171 PSAs were vested.

Stock Appreciation Rights

The following table summarizes the SARs activity under the Plans:



	NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	AGGREGATE INTRINSIC VALUE (000’s)
SARs outstanding at December 31, 2018	91,000		$	53.75
Granted	57,851		43.40
Exercised	—		—
Canceled	(19,445	)	50.87
SARs outstanding at June 30, 2019	129,406		$	49.55	4.1	$	—
SARs exercisable at June 30, 2019	18,000		$	54.19	3.7	$	—

Holders of the SARs are entitled under the terms of the Plans to receive cash payments calculated based on the excess of the Company’s common stock price over the target price in their award; consequently, these awards are accounted for as liability-classified awards and the Company measures compensation cost based on their estimated fair value at each reporting date, net of actual forfeitures, if any.