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Share-Based Compensation
 6 Months Ended
Jun. 30, 2022
Share-Based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based Compensation
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 June 30,Six Months Ended June 30,
2022202120222021
Research and development expenses$16,624 $9,273 $50,577 $29,331 
Selling, general and administrative expenses23,643 16,313 71,518 44,981 
Total non-cash share-based compensation expense$40,267 $25,586 $122,094 $74,312 
Less: Share-based compensation expense attributable to non-controlling interests498 540 996 900 
Share-based compensation expense attributable to Biohaven Pharmaceutical Holding Company Ltd.$39,769 $25,046 $121,098 $73,412 
Share-based compensation expense capitalized to inventory was $962 for the six months ended June 30, 2022. The Company did not capitalize material share-based compensation expense to inventory during the three months ended June 30, 2022 or the three and six months ended June 30, 2021.
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.
Under the terms of the Merger Agreement and the Distribution Agreement, upon the Pfizer merger, each post-spin Company stock option that is outstanding immediately prior to the effective time of the change in control, whether or not then vested, will be cancelled in exchange for the right to receive an amount in cash equal to the product of (i) the excess of the change in
control consideration over the exercise price per Company share for such Company stock option; and (ii) the total number of Company shares subject to such Company stock option, less any withholding taxes.
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 June 30, 2022.
As of June 30, 2022, the Company's unrecognized compensation expense related to unvested stock options totaled $95,791, which the Company expects to be recognized over a weighted-average period of 2.07 years, which does not consider the impact of a change in control. The Company expects approximately 2,486,094 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 six months ended June 30, 2022:
Number of SharesWeighted Average Exercise Price Weighted Average Remaining Contractual Term (in years)Aggregate Intrinsic Value
Outstanding as of December 31, 20217,089,727 $40.15
Granted1,364,434 $126.36
Exercised(76,161)$57.92
Forfeited(19,375)$80.24
Outstanding as of June 30, 20228,358,625 $53.966.80$766,875 
Options exercisable as of June 30, 20225,872,531 $39.756.12$622,280 
Vested and expected to vest as of June 30, 20228,358,625 $53.936.80$766,875 
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. The Company reassesses the probability of vesting at each reporting period for awards with performance conditions and adjusts compensation expense based on its probability assessment. A cumulative catch-up
adjustment is recorded when it becomes probable that the performance conditions will be achieved. The remaining compensation expense is recognized on a straight-line basis over the remaining 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.
Under the terms of the Merger Agreement and the Distribution Agreement, upon the Pfizer merger, each post-spin Company RSU outstanding immediately prior to the effective time of the change in control, whether or not then vested, will be cancelled in exchange for the right to receive an amount in cash equal to the product of (i) the number of Company shares subject to such Company RSU, with any performance conditions applicable to the Company RSU deemed achieved at 100%; and (ii) the change in control consideration, provided, however, that each Company RSU granted after the date of the Merger Agreement but prior to the effective time of the Pfizer Merger (other than certain Company RSUs that may be granted in exchange for or
in lieu of options to acquire common shares of BioShin) will convert into a cash-based award if held by a continuing Company employee and otherwise will convert into a New Biohaven award.
As of June 30, 2022, there was $150,261 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 2.25 years, which does not consider the impact of a change in control. The total fair value of RSUs vested during the six months ended June 30, 2022 was $60,161.
The following table is a summary of the RSU and PSU activity for the six months ended June 30, 2022:
Number of SharesWeighted Average Grant Date Fair Value
Unvested as of December 31, 20211,218,070 $78.98
Granted1,184,787 $127.32
Forfeited(30,530)$99.69
Vested(637,728)$94.32
Unvested as of June 30, 20221,734,599 $106.00