11. Share-Based Payments

Stock Option Plan 2015

On April 2, 2015, the Company’s shareholders, management board and supervisory board adopted the Stock Option Plan 2015 (the “SOP 2015”) and the shareholders approved an amended and restated version of the SOP 2015 on June 30, 2015. An amendment to the amended and restated SOP 2015 was approved by the shareholders on July 22, 2015. SOP 2015 became effective on July 3, 2015 upon the registration with the commercial register in Austria of the conditional capital increase approved by the shareholders on June 30, 2015. The SOP 2015 initially provided for the grant of options for up to 95,000 Nabriva Austria common shares to the Company’s employees, including members of the management board, and to members of the supervisory board. Following the closing of the initial public offering of the Company, the overall number of options increased to 177,499 Nabriva Austria common shares. Following approval by the Company’s shareholders at its 2016 annual general meeting, the number of shares available for issuance under the SOP 2015 was increased to 346,235 Nabriva Austria common shares.

Each vested option grants the beneficiary the right to acquire one share in the Company. The vesting period for the options is four years following the grant date. On the last day of the last calendar month of the first year of the vesting period, 25% of the options attributable to each beneficiary are automatically vested. During the second, third and fourth years of the vesting period, the remaining 75% of the options vest on a monthly pro rata basis (i.e. 2.083% per month). Options granted under the SOP 2015 have a term of no more than ten years from the beneficiary’s date of participation.

The following table summarizes information regarding our stock option awards under the SOP 2015:


	2017		2018		2019
		Weighted		Weighted		Weighted
		average		average		average
		exercise		exercise		exercise	Aggregate
		price in		price in		price in	intrinsic
Stock Option Plan 2015	Options	$ per share	Options	$ per share	Options	$ per share	value
Outstanding as of January 1	1,794,360	7.83	3,044,899	8.35	2,842,913	8.34
Granted	1,458,300	9.02	—	—	—	—
Exercised	—	—	—	—	—	—
Forfeited	(207,761)	8.60	(201,986)	8.41	(552,319)	8.40
Outstanding as of December 31,	3,044,899	8.35	2,842,913	8.34	2,290,594	8.33	$	—
Vested and exercisable as of December 31,	989,656	7.68	1,844,590	8.10	1,984,911	8.20	$	—

No options were exercised during the years ended December 31, 2017, 2018 or 2019.

The Company has 2,290,594 option grants outstanding at December 31, 2019 with exercise prices ranging from $4.06 per share to $11.00 per share and a weighted average remaining contractual life of 6.4 years.

Stock-based compensation expense under the SOP 2015 was $5.6 million, $3.2 million and $4.0 million for the years ended December 31, 2017, 2018 and 2019, respectively. The weighted average fair value of the options granted during the year ended December 31, 2017 was $5.05 per share. No options have been awarded during the years ended December 31, 2018 or 2019.

The grant date fair value of each option grant was estimated throughout the year using the Black-Scholes option-pricing model using the following assumptions:


Input parameters		2017
Expected volatility		55.6% ‑ 62.0%
Expected term of options		6.1 years
Risk-free interest rate		1.9% ‑ 2.1%
Expected dividend yield		—

Due to the limited trading history for the Company's shares, the expected price volatility was based on historical trading volatility for a set of publicly traded peer companies under consideration of the remaining life of the options. The risk free interest is based on the average yield on U.S. treasury securities that corresponds to the expected term of the options in effect at the time of grant.

As of December 31, 2019, there was $1.6 million of unrecognized compensation expense, related to unvested options granted under the SOP 2015 Plan, which will be recognized over the weighted average remaining vesting period of 1.3 years.

2017 Share Incentive Plan

On July 26, 2017, the Company’s board of directors adopted the 2017 Share Incentive Plan (the “2017 Plan”) and the shareholders approved the 2017 Plan at the Company’s Extraordinary General Meeting of Shareholders on September 15, 2017. Following shareholder approval of the 2017 Plan, the Company ceased making awards under the SOP 2015, and future awards will be made under the 2017 Plan. However, all outstanding awards under SOP 2015 will remain in effect and continue to be governed by the terms of the SOP 2015. The 2017 Plan permits the award of share options (both incentive and nonstatutory options), share appreciation rights (“SARs”), restricted shares, restricted share units (“RSUs”), and other share-based awards to the Company’s employees, officers, directors, consultants and advisers. The 2017 Plan is administered by the Company’s board of directors.

Under the 2017 Plan, the number of ordinary shares that will be reserved for issuance will be the sum of (1) 3,000,000 ordinary shares; plus (2) a number of ordinary shares (up to 3,438,990 ordinary shares) which is equal to the sum of the number of the Company’s ordinary shares then available for issuance under the SOP 2015 and the number of ordinary shares subject to outstanding awards under the SOP 2015 that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year beginning in the fiscal year ending December 31, 2018 and continuing until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 2,000,000 ordinary shares, (ii) 4% of the number of outstanding ordinary shares on such date and (iii) an amount determined by the board of directors.

At December 31, 2019, 1,634,766 ordinary shares were available for future issuance under the 2017 Plan.

Options and SARs granted will be exercisable at such times and subject to such terms and conditions as the board may specify in the applicable option agreement; provided, however, that no option or SAR will be granted with a term in excess of ten years. The board will also determine the terms and conditions of restricted shares and RSUs, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

The following table summarizes information regarding our stock option awards under the 2017 Plan at December 31, 2019:


	2017		2018		2019
		Weighted		Weighted		Weighted
		average		average		average
		exercise		exercise		exercise	Aggregate
		price in $		price in $		price in $	intrinsic
2017 Plan	Options	per share	Options	per share	Options	per share	value
Outstanding as of January 1	—	—	294,100	6.92	2,398,425	5.41
Granted	294,100	6.92	2,199,225	5.27	2,463,300	1.95
Exercised	—	—	—	—	—	—
Forfeited	—	—	(94,900)	6.75	(439,061)	4.79
Outstanding as of December 31,	294,100	6.92	2,398,425	5.41	4,422,664	3.55	—
Vested and exercisable as of December 31,	—	—	119,287	6.88	1,120,280	5.53	—

There were no options exercised during the years ended December 31, 2017, 2018 and 2019.

The Company has 4,422,664 option grants outstanding at December 31, 2019 with exercise prices ranging from $1.46 per share to $8.35 per share and a weighted average remaining contractual life of 8.7 years.

Stock-based compensation expense under the 2017 Plan was $0.1 million, $1.8 million and $2.6 million for the years ended December 31, 2017, 2018 and 2019, respectively. The weighted average fair value of the options granted during years ended December 31, 2017, 2018 and 2019 was $3.98, $3.06 and $1.14 per share, respectively, based on a Black Scholes option pricing model using the following assumptions:


Input parameters	2017	2018	2019
Range of expected volatility	59.5% ‑ 63.0%	59.8% - 61.4%	61.4% - 63.1%
Expected term of options (in years)	6	6.1	6.0
Range of risk-free interest rate	1.9% ‑ 2.3%	2.6% - 3.0%	1.9% - 2.6%
Dividend yield	—	–	—

As of December, 2019, there was $4.9 million of total unrecognized compensation expense, related to unvested options granted under the 2017 Plan, which will be recognized over the weighted-average remaining vesting period of 2.7 years.

Restricted Stock Units (“RSUs”)

During 2019, the Company granted RSUs to certain employees that vest over a period of four years with 25% vesting upon the first anniversary of the grant date and on a monthly pro rata basis thereafter over the remaining three years. As of December 31, 2019, there were 479,000 of such RSUs outstanding. For the year ended December 31, 2019, $0.2 million of stock-based compensation expense was recognized for these RSUs.

During 2018, the Company granted RSUs to certain employees where vesting of the RSUs was subject to FDA approval of an NDA for XENLETA. Fifty percent (50%) of each RSU award vested upon FDA approval, and the remaining fifty percent (50%) will vest on the one- year anniversary of such approval. As of December 31, 2019, a total of 170,400 RSUs have vested and were issued and there were 161,175 of such RSUs outstanding. In connection with the FDA approval that was received in August 2019, the Company recognized compensation expense of $1.4 million during the year ended December 31, 2019. No compensation expense was recognized on these awards prior to this date as it was determined that approval was not probable since it was outside of the Company’s control.

Also during 2018, the Company granted RSUs to certain employees that will vest in three six-month increments beginning in May 2019 and ending in May 2020. As of December 31, 2019, a total of 487,181 RSUs have vested and were issued and there were 225,911 of such RSUs outstanding. During the years ended December 31, 2018 and 2019, $0.2 million and $1.1 million of compensation expense was recognized for these RSUs.

The Company also granted 35,600 RSUs in 2018 to certain employees where vesting of the RSUs is subject to FDA approval of an NDA for CONTEPO. Fifty percent (50%) of each RSU award will vest upon FDA approval, and the remaining fifty percent (50%) will vest on the one- year anniversary of such approval. As of December 31, 2019, a total of 35,600 of such RSUs are outstanding.

The following table summarizes information regarding our restricted stock unit awards under the 2017 Plan at December 31, 2019:


	2018		2019

		weighted		weighted
		average fair		average fair
2017 Plan	RSUs	value per share	RSUs	value per share
Outstanding as of January 1	—	—	1,222,100	3.31
Granted	1,241,450	3.36	479,000	1.90
Vested and issued	—	—	(657,581)	3.18
Forfeited	(19,350)	6.47	(141,833)	2.79
Outstanding as of December 31	1,222,100	3.31	901,686	3.69

The Company has total unrecognized compensation costs of $2.4 million associated with RSUs which are expected to be recognized over the awards average remaining vesting period of 0.8 years. The fair value of RSU’s that vested during the year ended December 31, 2019 was $2.1 million.

2019 Inducement Share Incentive Plan

On March 12, 2019, the Company’s board of directors adopted the 2019 Inducement Share Incentive Plan (the “2019 Inducement Plan”) and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 2,000,000 ordinary shares for issuance pursuant to equity awards granted under the 2019 Inducement Plan. In accordance with Nasdaq Listing Rule 5635(c)(4), awards under the 2019 Inducement Plan may only be made to individuals who were not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company.

At December 31, 2019, 1,394,350 ordinary shares were available for future issuance under the 2019 Inducement Plan.

The following table summarizes information regarding the Company’s stock option awards under the 2019 Inducement Plan for the year ended December 31, 2019:


		Weighted
		average
		exercise		Aggregate
		price in $		intrinsic
2019 Plan	Options	per share		value
Outstanding as of January 1, 2019	—	—
Granted	703,150	2.22
Exercised	—	—
Expired
Forfeited	(97,500)	2.69
Outstanding as of December 31, 2019	605,650	2.14	$	—
Vested and exercisable as of December 31, 2019	—	—	$	—

Stock-based compensation expense under the 2019 Inducement Plan was $77,000 for the year ended December 31, 2019. The weighted average fair value of the options granted during the year ended December 31, 2019 was $1.30 per share. The options granted during the year ended December 31, 2019 were valued based on a Black Scholes option pricing model using the following assumptions. The significant inputs into the model were as follows:


Input parameters
Range of expected volatility		61.6% - 63.7%
Expected term of options (in years)		6.1
Range of risk-free interest rate		1.4% - 2.3%
Dividend yield		—

The weighted average remaining contractual life of the options as of December 31, 2019 is 9.6 years.

As of December 31, 2019, there was $0.7 million of total unrecognized compensation expense, related to unvested options granted under the 2019 Inducement Plan, which will be recognized over the weighted-average remaining vesting period of 3.3 years.

Inducement Awards Outside of the 2019 Inducement Plan

In July 2018, the Company granted a non-statutory option to purchase 850,000 of its ordinary shares and 150,000 performance-based RSUs to the Company’s newly appointed Chief Executive Officer (the “CEO”). These equity awards were granted outside of the 2017 Plan, were approved by the Company’s compensation committee and board of directors and were made as an inducement material to the CEO entering into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). The exercise price per share for the share option is $3.53 per share, and the option award has a ten-year term and will vest over a four-year period, with 25% of the shares underlying the award vesting on the first anniversary of the grant date and the remaining 75% of the shares underlying the option award to vest monthly over the subsequent 36-month period. The performance-based RSUs are subject to vesting as follows: 50% will vest upon certification by the board of directors of the receipt of approval by the FDA of an NDA for each of lefamulin and CONTEPO for any indication, and 50% will vest on the first anniversary of such certification by the board of directors, provided, in each case, the CEO is performing services to the Company on the applicable vesting dates. If the FDA does not approve an NDA for both lefamulin and CONTEPO by January 31, 2020, the performance-based RSUs will terminate in full. Since CONTEPO was not approved by this date the award was forfeited. The Company also issues non-statutory options to new employees upon the commencement of their employment.

Stock-based compensation expense was $0.2 million and $0.4 million for the year ended December 31, 2018 and December 31, 2019. The performance-based RSUs granted to our CEO had a grant date fair value of $3.53 per share (although no expense was recognized as FDA approval was not considered probable) and the options granted to our CEO had a grant date fair value of $2.05 per share based on a Black Scholes option pricing model using the following assumptions.


Input parameters
Expected volatility	59.8	%
Expected term of options (in years)	6.1
Range of risk-free interest rate	2.9	%
Dividend yield	—

The weighted average remaining contractual life of the options as of December 31, 2019 is 8.6 years.

As of December 31, 2019, there was $1.1 million of total unrecognized compensation expense, related to unvested inducement award options granted, which will be recognized over the weighted-average remaining vesting period of 2.6 years.

Our share-based compensation expense has been allocated to research and development and selling, general and administrative expenses in the Consolidated Statement of Operations and Comprehensive Loss as follows:


	Year ended December 31,
(in thousands)	2017		2018		2019
Research and development	$	2,128	$	1,406	$	2,138
Selling, general and administrative		3,604		3,748		7,610
Total	$	5,732	$	5,154	$	9,748

The Company recognizes the impact of forfeitures as they occur and issues new shares to satisfy share based compensation arrangements upon the exercise of stock options or vesting of restricted shares.

Employee Stock Purchase Plan

The Company’s board of directors adopted, and in August 2018 Company’s stockholders approved, the 2018 employee stock purchase plan (the “2018 ESPP”). The maximum aggregate number of shares of ordinary shares that may be purchased under the 2018 ESPP is 500,000 shares, (the “ESPP Share Pool”), subject to adjustment as provided for in the 2018 ESPP. The ESPP Share Pool represented 0.75% of the total number of shares of ordinary shares outstanding as of December 31, 2018. The 2018 ESPP allows eligible employees to purchase shares at a 15% discount to the then current market price of the Company’s ordinary shares during certain offering periods, which will be six -month periods commencing November 1 and ending April 30 and commencing May 1 and ending October 31 of each year. The first offering under the 2018 ESPP commenced on November 1, 2018. Expense recorded under the ESPP was not material for the year ended December 31, 2018 and was $0.1 million for the year ended December 31, 2019.