XML 41 R20.htm IDEA: XBRL DOCUMENT

Share-Based Compensation

12 Months Ended

Dec. 31, 2023

12. Share-Based Compensation

Theravance Biopharma Equity Plans

The Company has three equity compensation plans — the 2013 Equity Incentive Plan (the “2013 EIP”), the 2013 Employee Share Purchase Plan (the “2013 ESPP”) and the 2014 New Employee Equity Incentive Plan (the “2014 NEEIP”).

The 2013 EIP provides for the issuance of share-based awards, including restricted shares, restricted share units (“RSUs), options, share appreciation rights (“SARs”) and other equity-based awards, to Company employees, officers, directors, and consultants. Options may be granted with an exercise price not less than the fair market value of the ordinary shares on the grant date. Under the terms of the 2013 EIP, options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. The Company may grant options with different vesting terms from

time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will generally be forfeited at the end of three months or the expiration of the option, whichever is earlier.

At the Company’s Annual General Meeting of Shareholders on May 2, 2023, the Company’s shareholders approved an amendment and restatement of the 2013 EIP to effect the following material changes to the existing plan: (i) extend the term of the 2013 EIP by an additional ten years; (ii) eliminate the provision that provided for automatic annual increases in the number of shares available for issuance under the 2013 EIP; (iii) reduce the number of shares reserved for issuance by 3,808,287 shares; (iv) eliminate the Company’s ability to reprice options and share appreciation rights without first obtaining shareholder approval; and (v) remove certain provisions no longer necessary since the repeal of the exemption from the annual deduction limitation imposed by Section 162(m) of the Internal Revenue Code for performance-based compensation.

Under the 2013 ESPP, the Company’s officers and employees may purchase ordinary shares through payroll deductions at a price equal to 85% of the lower of the fair market value of the ordinary share at the beginning of the offering period or at the end of each applicable purchase period. As of January 1 of each year, commencing on January 1, 2015 and ending on (and including) January 1, 2033, the aggregate number of ordinary shares that may be issued under the 2013 ESPP shall automatically increase by a number equal to the least of 1% of the total number of ordinary shares outstanding on December 31 of the prior year, 571,428 ordinary shares or a number of ordinary shares determined by the Company’s board of directors. The ESPP generally provides for consecutive and overlapping offering periods of 24 months in duration, with each offering period generally composed of four consecutive six-month purchase periods. The purchase periods end on either May 15 or November 15. ESPP contributions are limited to a maximum of 15% of an employee’s eligible compensation, up to applicable regulatory limits. The 2013 ESPP also includes a feature that provides for the existing offering period to terminate and for participants in that offering period to automatically be enrolled in a new offering period when the fair market value of an ordinary share at the beginning of a subsequent offering period falls below the fair market value of an ordinary share on the first day of such offering period.

The 2014 NEEIP provides for the issuance of share-based awards, including restricted shares, RSUs, non-qualified options and SARs to the Company’s employees. Options may be granted with an exercise price not less than the fair market value of the ordinary shares on the grant date. Under the terms of the 2014 NEEIP, options granted to employees generally have a maximum term of 10 years and vest over a four-year period from the date of grant; 25% vest at the end of one year, and 75% vest monthly over the remaining three years. The Company may grant options with different vesting terms from time to time. Unless an employee’s termination of service is due to disability or death, upon termination of service, any unexercised vested options will generally be forfeited at the end of three months or the expiration of the option, whichever is earlier.

As of December 31, 2023, the total number of shares available for future issuance under each of the plans were:


2013 EIP		5,339,942
2013 ESPP		2,453,502
2014 NEEIP		346,281
Total		8,139,725

Market and Performance-Contingent Awards

The Company periodically grants market-based share awards to employees. For the year ended December 31, 2023, the Company granted 165,000 market-based restricted share units (“RSUs”). The 165,000 RSUs had a fair value of $1.4 million on the grant date that vest upon the Company’s ordinary shares meeting certain market-based price targets followed by a service period. The fair value of these market-based RSUs is being recognized through February 2027. For the year ended December 31, 2023, the Company recognized $0.7 million of share-based compensation expense related to the awards. There were no market-based RSUs granted or expensed for the year ended December 31, 2022.

Separate from the market-based RSUs described above, the Company granted 367,000 and 43,000 of performance-contingent RSUs for the year ended December 31, 2023 and 2022, respectively. The 367,000 and 43,000 RSUs had a fair value of $3.7 million and $0.4 million, respectively, on grant date with performance vesting dates through February 2026. As of December 31, 2023, the Company concluded that 59,000 of the RSUs were probable of achievement, and as a result, the Company recognized $0.4 million of cumulative catch-up share-based compensation expense for the year ended December 31, 2023.

Share-Based Compensation Modifications

As a result of the Company’s corporate restructuring announcement in September 2021, the Board of Directors’ Compensation Committee approved the acceleration of certain equity awards for employees affected by the restructuring. The Company accounted for this acceleration as a Type III modification (improbable to probable). In 2022, the Company completed the 2021 restructuring that resulted in an equity award Type III modification fair value of $2.5 million which was recorded in “Restructuring and related expenses” within the consolidated statements of operations for the year ended December 31, 2022. The total cumulative compensation cost previously recognized for these modified awards of $0.8 million was reversed in the year ended December 31, 2022 within “Research and development” and “Selling, general and administrative” expenses. The acceleration resulted in a net incremental share-based compensation expense of $1.7 million for the year ended December 31, 2022 and impacted approximately 40 terminated employees that met the conditions of the acceleration.

Share-Based Compensation Expense

Share-based compensation expense included in the consolidated statements of operations was recognized as follows:


	Year Ended December 31,
(In thousands)	2023		2022
Research and development	$	8,048	$	12,888
Selling, general and administrative		16,966		19,848
Restructuring and related expenses		357		6,998
Total share-based compensation expense	$	25,371	$	39,734

Share-based compensation expense included in the consolidated statements of operations by award type was as follows:


	Year Ended December 31,
(In thousands)	2023		2022
Options	$	2,294	$	2,998
RSUs		21,817		35,726
Performance RSUs		1,087		237
ESPP		173		773
Total share-based compensation expense	$	25,371	$	39,734

As of December 31, 2023, the unrecognized share-based compensation cost, net of actual forfeitures, and the estimated weighted-average amortization period, using the straight-line attribution method, was as follows:


	Unrecognized		Weighted‑Average
	Compensation		Amortization Period
(In thousands, except amortization period)	Cost		(Years)
Options	$	2,600	1.88
RSUs		30,404	2.36
Performance RSUs ⁽¹⁾		849	1.26
ESPP		504	1.05
Total	$	34,357

(1)	Represents unrecognized share-based compensation cost associated with the Company’s market-based and performance-contingent awards described above that are probable of vesting.

Compensation Awards

The following table summarizes option activity under the 2013 EIP and 2014 NEEIP for the year ended December 31, 2023:


			Weighted-Average
	Number of Shares	Weighted-Average	Exercise Price of			Aggregate
	Subject to	Remaining Contractual	Outstanding Options			Intrinsic Value
	Outstanding Options	Term (Years)	(in dollars)			(in thousands)
Outstanding at December 31, 2022	2,411,893		$	19.53
Granted	262,386			10.84
Exercised	—			-
Forfeited	(368,403)			18.85
Outstanding at December 31, 2023	2,305,876	5.32		18.65	$	859
Exercisable at December 31, 2023		4.48				487
Vested and expected to vest at December 31, 2023		5.32				859

The following table summarizes additional information for options under the 2013 EIP and 2014 NEEIP.


	2023		2022
Weighted average fair value of options (in dollars)	$	5.74	$	5.33
Total intrinsic value of options exercised (in thousands)	$	—	$	—

The following table summarizes total RSU activity (including market-based and performance-contingent RSUs) for the year ended December 31, 2023:


	Number of Shares	Number of Shares
	Subject to	Outstanding Subject to
	Outstanding RSUs	Performance Conditions (RSAs)
Outstanding at December 31, 2022	4,109,847	—
Granted	2,228,184	—
Released	(1,651,141)	—
Forfeited	(691,140)	—
Outstanding at December 31, 2023	3,995,750	—

The total estimated fair value of RSUs vested was $17.3 million and $37.2 million in 2023 and 2022, respectively.

Valuation Assumptions

The range of assumptions used to estimate the fair value of options granted and rights granted under the 2013 ESPP was as follows:


	Year Ended December 31,
	2023		2022
Options
Risk-free interest rate		3.46% - 4.18%		1.5% - 3.8%
Expected term (in years)		5.3 - 6.5		5.3 - 6.1
Volatility		53% - 55%		55% - 70%
Dividend yield		—		—
Weighted-average estimated fair value	$	5.74	$	5.33
2013 ESPP
Risk-free interest rate		4.06% - 5.39%		1.5% - 4.57%
Expected term (in years)		0.5 - 2.0		0.5 - 2.0
Volatility		32% - 58%		41% - 72%
Dividend yield		—		—
Weighted-average estimated fair value	$	3.46	$	3.86