Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-based compensation expense for options granted, restricted stock awards (“RSAs”), RSAs with non-market performance and service conditions (“PSAs”), restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) is reflected in the condensed consolidated statements of operations and comprehensive loss as follows:


	THREE MONTHS ENDED MARCH 31,
(in thousands)	2021		2020
Cost of goods sold	$	507	$	497
Selling, general and administrative	6,255		6,908
Pre-approval commercial manufacturing	—		294
Research and development	1,987		2,830
Total	$	8,749	$	10,529

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 the year ended December 31, 2017 to increase the equity awards that may be issued by an additional 874,500 shares. On December 5, 2019, the Inducement Award Plan was further amended by the Company’s Board of Directors to increase the number of shares issuable under the plan by 100,000 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, 2020	8,588,614	$	27.36
Granted	421,280	17.50
Exercised	(63,370)	0.76
Canceled	(226,156)	38.78
Options outstanding at March 31, 2021	8,720,368	$	26.78	5.9	$	23,551
Options exercisable at March 31, 2021	6,464,439	$	26.66	4.9	$	21,828

As of March 31, 2021, the Company had $39.2 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 2.1 years as of March 31, 2021.

Restricted Stock Awards

The following table summarizes the RSA, including PSA, activity under the Plans:


	NUMBER OF SHARES	WEIGHTED AVERAGE FAIR VALUE PER SHARE
Non-vested RSAs at December 31, 2020	809,527	$	29.03
Granted	94,132	17.61
Vested	(160,259)	44.62
Canceled	(29,395)	23.86
Non-vested RSAs at March 31, 2021	714,005	$	24.23

As of March 31, 2021, the Company had $15.0 million of unrecognized compensation expense related to unvested RSAs. This expense is expected to be recognized over the weighted average period of 2.4 years as of March 31, 2021.

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 RSAs with non-market performance conditions (PSAs) that vest upon the satisfaction of certain performance conditions and service conditions. As of the second quarter of 2020, all PSAs were vested.

Restricted Stock Units

The following table summarizes the RSU activity under the Plans:


	NUMBER OF SHARES	WEIGHTED AVERAGE FAIR VALUE PER SHARE
Non-vested RSUs at December 31, 2020	107,182	$	14.43
Granted	1,407	19.18
Vested	(11,035)	19.25
Canceled	(2,316)	14.34
Non-vested RSUs at March 31, 2021	95,238	$	13.95

As of March 31, 2021, the associated unrecognized compensation expense totaled $2.1 million. This expense is expected to be recognized over the weighted average period of 2.6 years as of March 31, 2021.

Stock Appreciation Rights

The following table summarizes the SAR 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, 2020	212,044	$	32.28
Granted	5,000	18.68

Canceled	(13,801)	28.43
SARs outstanding at March 31, 2021	203,243	$	32.20	3.3	$	280
SARs exercisable at March 31, 2021	66,546	$	45.16	2.5	$	3

Holders of the SARs are entitled under the terms of the Plans to receive cash payments calculated based on the excess of Aerie’s common stock price over the exercise 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.