Share-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Non-Cash Share-Based Compensation Expense

Non-cash share-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award (generally three to four years) using the straight-line method. Non-cash share-based compensation expense, consisting of expense for stock options, Restricted Share Units ("RSUs"), Performance Share Units ("PSU"), and Employee Share Purchase Plan ("ESPP"), was classified in the condensed

consolidated statements of operations and comprehensive loss as follows:


	Three months ended March 31,
	2022		2021
Research and development expenses	$	33,953	$	20,058
Selling, general and administrative expenses	47,875		28,668
Total non-cash share-based compensation expense	$	81,828	$	48,726
Less: Share-based compensation expense attributable to non-controlling interests	498		360
Share-based compensation expense attributable to Biohaven Pharmaceutical Holding Company Ltd.	$	81,330	$	48,366

Share-based compensation expense capitalized to inventory during the three months ended March 31, 2022 and 2021 was $962 and $0, respectively.

Stock Options

All stock option grants are awarded at fair value on the date of grant. The fair value of stock options is estimated using the Black-Scholes option pricing model and stock-based compensation is recognized on a straight-line basis over the requisite service period. Stock options granted generally become exercisable over a three-year or four-year period from the grant date. Stock options generally expire 10 years after the grant date.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common shares for those stock options that had exercise prices lower than the fair value of the Company's common shares at March 31, 2022.

As of March 31, 2022, the Company's unrecognized compensation expense related to unvested stock options totaled $105,422, which the Company expects to be recognized over a weighted-average period of 2.23 years. The Company expects approximately 2,592,919 of the unvested stock options to vest over the requisite service period.

The following table is a summary of the Company's stock option activity for the three months ended March 31, 2022:


	Number of Shares	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2021	7,089,727	$40.15
Granted	1,243,000	$128.09
Exercised	(46,665)	$60.06
Forfeited	(3,750)	$63.01
Outstanding as of March 31, 2022	8,282,312	$53.22	7.01	$	553,426
Options exercisable as of March 31, 2022	5,689,393	$38.82	6.31	$	456,699
Vested and expected to vest as of March 31, 2022	8,282,312	$53.22	7.01	$	553,426

Restricted Share Units and Performance Share Units

The Company’s RSUs are considered nonvested share awards and require no payment from the employee. For each RSU, employees receive one common share at the end of the vesting period. The employee can elect to receive the one common share net of taxes or pay for taxes separately and receive the entire share. Compensation cost is recorded based on the market price of the Company’s common shares on the grant date and is recognized on a straight-line basis over the requisite service period.

The Company’s PSUs contain performance vesting conditions in addition to a service vesting condition. Vesting of the Company’s PSUs is dependent upon the degree to which the Company achieves its performance goals, which are generally set for a three-year performance period and are approved at the time of grant by the Compensation Committee. The fair value of PSUs granted with service and performance vesting conditions is based on the market price of the Company's common stock on the grant date. Compensation expense is recognized on a straight-line basis over the vesting period, beginning when the accomplishment of the performance vesting conditions become probable. Certain of the PSUs also contain a market vesting condition based on the performance of the Company's common shares relative to a comparator group. The fair value of these PSUs is determined using a Monte Carlo simulation as of the grant date and is recognized over the vesting period.

As of March 31, 2022, there was $159,189 of total unrecognized compensation cost related to Company RSUs and PSUs that are expected to vest. These costs are expected to be recognized over a weighted-average period of 2.43 years. The total fair value of RSUs vested

during the three months ended March 31, 2022 was $52,844.

The following table is a summary of the RSU and PSU activity for the three months ended March 31, 2022:


	Number of Shares	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2021	1,218,070	$78.98
Granted	1,064,917	$127.95
Forfeited	(14,085)	$97.19
Vested	(561,296)	$94.12
Unvested as of March 31, 2022	1,707,606	$104.39