Share-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-Based Compensation

Share-Based Compensation

9. Share-Based Compensation

Share-Based Compensation Expense Allocation

The allocation of share-based compensation expense included in the condensed consolidated statements of operations was as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2019		2018		2019		2018
Research and development	$	6,458	$	6,294	$	18,338	$	19,757
Selling, general and administrative		6,561		5,452		18,200		19,842
Total share-based compensation expense	$	13,019	$	11,746	$	36,538	$	39,599

Performance-Contingent Awards

In the first quarter of 2016, the Compensation Committee of the Company’s board of directors (“Compensation Committee”) approved the grant of 1,575,000 performance-contingent restricted share awards (“RSAs”) and 135,000 performance-contingent restricted share units (“RSUs”) to senior management. The vesting of such awards is dependent on the Company meeting its critical operating goals and objectives during the five-year period from 2016 to December 31, 2020, as well as, continued employment. The goals that must be met in order for the performance-contingent RSAs and RSUs to vest are strategically important for the Company, and the Compensation Committee believes the goals, if achieved, will increase shareholder value. The awards have dual triggers of vesting based upon the achievement of these goals and continued employment. As of September 30, 2019, there were 776,250 of these performance-contingent RSAs and 101,250 of these performance-contingent RSUs outstanding, and as of September 30, 2018, there were 978,750 of these performance-contingent RSAs and 101,250 of these performance-contingent RSUs outstanding.

Expense associated with these awards is broken into three separate tranches and may be recognized during the years 2016 to 2020 depending on the probability of meeting the performance conditions. Compensation expense relating to awards subject to performance conditions is recognized if it is considered probable that the performance goals will be achieved. The probability of achievement is reassessed at each quarter-end reporting period. Previously recognized expense is reversed in the period in which it becomes probable that the requisite service period will not be rendered.

The performance conditions associated with the first tranche of these awards were completed in the second quarter of 2018, and the Company recognized $1.8 million of share-based compensation expense for the nine months ended September 30, 2018 associated with the first tranche of these awards.

The performance conditions associated with the second tranche of these awards were completed in the first quarter of 2019. For the three and nine months ended September 30, 2019, the Company recognized $0.7 million and $1.2 million, respectively, of share-based compensation expense related to the second tranche of these awards. The maximum remaining expense associated with the second tranche is $1.1 million (allocated as $0.4 million for research and development expense and $0.7 million for selling, general and administrative expense). For the three and nine months ended September 30, 2018, the Company recognized $47,000 and $1.8 million, respectively, of share-based compensation expense related to the second tranche of these awards.

As of September 30, 2019, the Company determined that the remaining third tranche was not probable of vesting and, as a result, no compensation expense related to the third tranche has been recognized to date. The maximum potential expense associated with the remaining third tranche could be up to $12.8 million (allocated as $4.4 million for research and development expense and $8.4 million for selling, general and administrative expense) if the performance conditions are achieved.

In the fourth quarter of 2018, the Compensation Committee approved a grant of 3,000 performance-contingent RSUs to an employee. These RSUs expire by December 31, 2020 and have a maximum share-based compensation expense of $75,000 which will be recognized when its single performance milestone is deemed to be probable of achievement. As of September 30, 2019, the Company determined that the performance milestone was not probable of achievement and, as a result, no compensation expense related to these RSUs has been recognized to date.

In the first quarter of 2019, the Compensation Committee approved a grant of 60,000 performance-contingent RSUs to an employee. These RSUs have dual triggers of vesting based upon the achievement of certain performance milestones in specified timeframes, as well as a requirement for continued employment. The compensation expense related to these awards is broken into two separate performance milestones and recognized when the associated performance milestones are deemed to be probable of achievement. The maximum share-based compensation expense associated with the 60,000 performance-contingent RSUs’ first and second performance milestones are $0.8 million each for a total of $1.6 million, and the RSUs expire by December 31, 2021. In the third quarter of 2019, the Company determined that a portion of performance milestone associated with the first tranche was probable of achievement and recognized $0.3 million of share-based compensation expense. The Company determined that the second tranche was not probable as of September 30, 2019 and, as a result, no compensation expense related to these RSUs has been recognized to date.

In the third quarter of 2019, the Compensation Committee approved a grant of 60,000 performance-contingent RSUs to an employee. These RSUs have dual triggers of vesting based upon the achievement of certain performance milestones in specified timeframes, as well as a requirement for continued employment. The compensation expense related to these RSUs is broken into three separate performance milestones and will be recognized when the associated performance milestones are deemed to be probable of achievement. The maximum share-based compensation expense associated with the 60,000 performance-contingent RSUs’ three performance milestones are approximately $0.3 million each for a total of $1.0 million, and the 60,000 performance-contingent RSUs expire by June 30, 2022. As of September 30, 2019, the Company determined that the performance milestones were not probable of achievement and, as a result, no compensation expense related to these RSUs has been recognized to date.