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Share-Based Compensation
May 15, 2018
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based Compensation
2018 Long Term Incentive Plan
In May 2018, the Company’s shareholders approved the 2018 Long Term Incentive Plan. In May 2020, the Company's shareholders approved an amendment to the 2018 Long Term Incentive Plan (as amended, the “2018 LTIP”) to increase the number of ordinary shares available for issuance under that Plan by 1,500,000 ordinary shares. Under the 2018 LTIP, the number of ordinary shares authorized for issuance under the 2018 LTIP is equal to the sum of (a) 3,300,000 ordinary shares, (b) 1,177,933 ordinary shares that were available for issuance under the 2012 LTIP as of the May 15, 2018, effective date of the 2018 LTIP, and (c) any ordinary shares subject to issued and outstanding awards under the 2012 Long Term Incentive Plan (the “2012 LTIP”) that expire, are cancelled or otherwise terminate following the effective date of the 2018 LTIP; provided, that no more than 2,500,000 ordinary shares may be issued pursuant to the exercise of ISOs. The 2018 LTIP provides for the grant of ISOs, NQSOs, SARs, restricted shares, RSUs, performance bonus awards, performance share units awards, dividend equivalents and other share or cash-based awards to eligible individuals. Options under the 2018 LTIP may be granted for periods up to ten years. All options issued to date have had a ten year life.
Amended and Restated 2012 Long Term Incentive Plan
Prior to the effective date of the 2018 LTIP, employees and consultants of the Company, its subsidiaries and affiliates, as well as members of the Company’s Board of Directors, received equity awards under the 2012 LTIP. Options under the 2012 LTIP were granted for periods up to ten years. All options issued to date have had a ten year life.
2020 Employment Inducement Incentive Plan
On February 25, 2020, the Company's Board of Directors approved the 2020 Employment Inducement Incentive Plan. On April 1, 2020, the Company's Board of Directors approved an amendment to the 2020 Employment Inducement Incentive Plan (as amended, the "2020 EIIP") to increase the ordinary shares available for issuance under that Plan by 120,000 ordinary shares. The 2020 EIIP provides for the grant of NQSOs, SARs, restricted shares, RSUs, performance bonus awards, performance share units awards, or other share or cash-based awards to eligible individuals. Options under the 2020 EIIP may be granted for periods up to ten years. All options issued to date have had a ten year life. As of June 30, 2020, the number of ordinary shares authorized for issuance under the 2020 EIIP was 360,000 and no ordinary shares remained available for future awards under the 2020 EIIP, although the Company's Board of Directors reserves the right to amend the 2020 EIIP to increase the number of ordinary shares available and to make additional awards to key new hires.
Shares Available for Grant
The Company granted 263,500 and 145,000 options during the three months ended June 30, 2020, and 2019, respectively, and 1,718,950 and 997,975 options during the six months ended June 30, 2020 and 2019, respectively, in
aggregate under its equity plans. The Company’s option awards generally vest over four years. As of June 30, 2020, 1,402,179 ordinary shares remained available for grant under the 2018 LTIP, and options to purchase 8,672,205 ordinary shares in aggregate under the Company's equity plans were outstanding with a weighted-average exercise price of approximately $21.09 per share.
Share-based Compensation Expense
The Company estimates the fair value of share-based compensation on the date of grant using an option-pricing model. The Company uses the Black-Scholes model to value share-based compensation, excluding RSUs, which the Company values using the fair market value of its ordinary shares on the date of grant. The Black-Scholes option-pricing model determines the fair value of share-based payment awards based on the share price on the date of grant and is affected by assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the Company’s share price, volatility over the expected life of the awards and actual and projected employee stock option exercise behaviors. Since the Company does not have sufficient historical employee share option exercise data, the simplified method has been used to estimate the expected life of all options. The Company uses its historical volatility for the Company’s stock to estimate expected volatility starting January 1, 2018. Although the fair value of share options granted by the Company is estimated by the Black-Scholes model, the estimated fair value may not be indicative of the fair value observed in a willing buyer and seller market transaction.
As share-based compensation expense recognized in the Condensed Consolidated Financial Statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. Forfeitures were estimated based on estimated future turnover and historical experience.
Share-based compensation expense will continue to have an adverse impact on the Company’s results of operations, although it will have no impact on its overall financial position. The amount of unearned share-based compensation currently estimated to be expensed from now through the year 2024 related to unvested share-based payment awards at June 30, 2020, is $41.8 million. The weighted-average period over which the unearned share-based compensation is expected to be recognized is 2.63 years. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate and/or increase any remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that the Company grants additional equity awards.
Share-based compensation expense recorded in these Condensed Consolidated Financial Statements for the three and six months ended June 30, 2020, and 2019 was based on awards granted under the 2012 LTIP, the 2018 LTIP, and the 2020 EIIP. The following table summarizes share-based compensation expense for the periods presented (in thousands):
Three Months Ended
June 30,		Six Months Ended
June 30,
2020201920202019
Research and development$2,058  $2,100  $4,075  $4,199  
General and administrative 3,629  4,177  7,148  8,283  
Total share-based compensation expense$5,687  $6,277  $11,223  $12,482  
The Company recognized tax benefits from share-based awards of $1.1 million and $1.2 million for the three months ended June 30, 2020, and 2019, and $2.2 million and $2.5 million for the six months ended June 30, 2020 and 2019, respectively.
The fair value of the options granted to employees and non-employee directors during the three and six months ended June 30, 2020, and 2019 was estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:
Three Months Ended
June 30,		Six Months Ended
June 30,
2020201920202019
Expected volatility79.6%81.5%81.2%81.5%
Risk-free interest rate0.4%2.2%1.1%2.5%
Expected dividend yield—%—%—%—%
Expected life (in years)6.06.06.06.0
Weighted average grant date fair value$7.52$6.58$8.19$9.06
The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period for each award. Each of the inputs discussed above is subjective and generally requires significant management judgment to determine.
The following table summarizes the Company’s stock option activity during the six months ended June 30, 2020:
OptionsWeighted
Average
Exercise
Price		Weighted
Average
Remaining
Contractual
Term (years)		Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 20197,008,403  $23.34  7.24$11,901  
Granted1,718,950  11.87  
Exercised(12,852) 11.76  
Forfeited(20,960) 11.44  
Expired(21,336) 33.61  
Outstanding at June 30, 20208,672,205  $21.09  7.37$2,426  
Vested and expected to vest at June 30, 20208,194,918  $21.50  7.27$2,407  
Vested at June 30, 20204,500,202  $26.35  6.04$2,254  
The total intrinsic value of options exercised was approximately none and $103,000 during the three months ended June 30, 2020, and 2019, respectively, and $35,000 and $109,000 during the six months ended June 30, 2020 and 2019, respectively, determined as of the date of exercise.