Share-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Equity Incentive Plan

The Company has a stock option plan (the "Stock Option Plan") for the benefit of employees, directors, officers and consultants of the Company. In May 2013 the Company's Board of Directors adopted the 2013 Equity Incentive Plan (the "2013 Plan"). The 2013 Plan was approved by the Company's shareholders in connection with the Arrangement. The Company's Board of Directors and shareholders approved an amendment to the 2013 Plan in 2019 to, among other things, increase the aggregate number of shares of common stock authorized for issuance under the 2013 Plan by 2.5 million shares. The 2013 Plan is a continuation of and successor to the Stock Option Plan and no further grants will be made under the Stock Option Plan. As of December 31, 2020, there were approximately 1.5 million shares available to be granted from the 2013 Plan.

In December 2019, the Company's Board of Directors adopted the Inducement Plan, reserving 417,343 shares of the Company's common stock for issuance of stock options and other equity-based awards to new employees who satisfy the standards for inducement grants in accordance with the Nasdaq Stock Market LLC listing rules. As of December 31, 2020, there were 246,728 shares available to be issued from the Inducement Plan.

As of December 31, 2020, share-based compensation awards under both the Stock Option Plan and the 2013 Plan consist of incentive and non-qualified stock options, and restricted stock units. Stock options granted under each of the plans must have an exercise price equal to at least 100% of the fair market value of the Company's common stock on the date of grant and generally vest over four years. Stock options granted under the Stock Option Plan have a contractual term of seven years and stock options granted under the 2013 Plan have a contractual term of ten years.

Stock Options

The following table summarizes the Company's stock option activity and related information for the year ended December 31, 2020:


	Number of options	Weighted average exercise price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Balance outstanding as of December 31, 2019	5,287,977	$	44.10
Granted	901,094	$	115.83
Exercised	(1,318,963)	$	34.79
Canceled/forfeited	(440,619)	$	70.64
Balance outstanding as of December 31, 2020	4,429,489	$	58.82	7.3	$	712.5
Options exercisable at December 31, 2020	2,374,753	$	33.62	6.2	$	441.7

The total intrinsic value of stock options exercised was $121.5 million, $38.6 million and $18.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. The Company received total cash of $45.9 million, $8.5 million and $9.7 million for the exercise of options for the years ended December 31, 2020, 2019 and 2018, respectively. The total fair value of options vested during the years ended December 31, 2020, 2019 and 2018 was $52.1 million, $20.4 million and $8.2 million, respectively. Upon option exercise, the Company issues new shares of its common stock.

The fair value of options granted is estimated at the date of grant using the Black-Scholes option pricing model. Forfeitures are accounted for as incurred as a reversal of any share-based compensation expense related to options that will not vest. The assumptions used for the specified reporting periods and the resulting estimates of weighted-average estimated fair value per share of options granted during those periods are as follows:


	Year Ended December 31,
	2020	2019	2018
Risk-free interest rate	1.1%	2.2%	2.6%
Dividend yield	—%	—%	—%
Volatility factor	81.5%	82.1%	94.3%
Expected term (in years)	5.6	5.6	6.0
Weighted average estimated fair value per share	$77.92	$52.03	$24.39

Risk-Free Interest Rate - The risk-free interest rate is the rate for periods equal to the expected term of the stock option based on U.S. Treasury zero-coupon bonds.

Dividend Yield - The dividend yield is based on the Company’s history and expectation of dividend payouts. The Company has not paid, and does not intend to pay dividends.

Volatility Factor - The expected volatility assumption was determined by examining the historical volatility of the Company's stock.

Expected Term - The expected term represents the weighted average period the stock options are expected to be outstanding. Prior to 2019, the Company utilized the simplified method for estimating the expected term as provided by the Securities and Exchange Commission, as the average time-to-vesting and the contractual life of the options. However, given the Company's increase in option exercise activity in recent years, the Company believes it has sufficient history to determine an expected term based on past exercise activity. Starting in 2019, the Company utilized historical exercise activity to estimate the expected term. The change in calculation of the expected term did not have a material impact on the Company's consolidated financial statements or related financial statement disclosures.

The total compensation cost not yet recognized as of December 31, 2020 related to non-vested option awards was $61.4 million which will be recognized over a weighted-average period of 1.2 years.

Restricted Stock Units ("RSUs")

The Company began issuing RSUs during the year ended December 31, 2020. The RSUs generally vest annually over four years and are subject to continued service. A summary of the Company's RSU activity for the year ended December 31, 2020 is as follows:


	Number of RSUs	Weighted average grant date fair value		Aggregate Intrinsic Value (millions)
Balance outstanding as of December 31, 2019	—	$	—
Granted	487,569	$	113.91
Releases	(938)	$	113.20
Canceled/forfeited	(21,371)	$	109.00
Balance outstanding as of December 31, 2020	465,260	$	114.14	$	102.2

The total vest date fair value of RSUs that vested during the year ended December 31, 2020 was $0.1 million. The total compensation cost not yet recognized as of December 31, 2020 related to non-vested RSUs was $31.4 million, which will be recognized over a weighted-average period of 1.7 years.

Total share-based compensation expense by consolidated statement of operations and comprehensive loss classification is presented below (in thousands):


	Year ended December 31,
	2020		2019		2018
Research and development expense	$	48,044	$	31,024	$	7,232
General and administrative expense	37,803		24,513		8,622
	$	85,847	$	55,537	$	15,854

For the years ended December 31, 2020, 2019 and 2018, no share-based compensation expense was capitalized and there were no recognized tax benefits associated with the share-based compensation charge.

2013 Employee Stock Purchase Plan

In May 2013, the Company's Board of Directors adopted the 2013 Employee Stock Purchase Plan (the "ESPP"). The ESPP was approved by the Company's shareholders in connection with the Arrangement. In December 2014, the ESPP became effective and the first purchase period began. The ESPP permits eligible employees to make payroll deductions to purchase up to $25,000 of the Company’s common stock on regularly scheduled purchase dates at a discount. Offering periods under the ESPP are not more than six months in duration and shares are purchased at 85% of the lower of the closing price for the Company’s common stock on the first day of the offering period or the date of purchase. The ESPP initially authorized the issuance of 300,000 shares of the Company’s common stock pursuant to rights granted to employees for their payroll deductions. As of December 31, 2020, 171,564 shares have been issued out of the plan.