Share-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Compensation

Share-Based Compensation

9.           Share-Based Compensation

The Company maintains several equity compensation plans, including the 2018 Incentive Award Plan (the “2018 Plan”), 2018 Employee Share Purchase Plan (the “2018 ESPP”), and Rilonacept Long-Term Incentive Plan (“RLTIP”) which was approved under the 2018 Plan. Upon the effectiveness of the 2018 Plan, the Company ceased granting awards under its 2015 Equity Incentive Plan (as amended, the “2015 Plan” and together with the 2018 Plan, the “Plans”).

2015 Plan

As of September 30, 2022, there were 2,029,355 Class A common shares subject to outstanding awards under the 2015 Plan and reserved for issuance thereunder pursuant to such awards.

2018 Plan

In May 2018, the Company’s board of directors and shareholders approved the 2018 Plan, which became effective on May 23, 2018. The 2018 Plan provides for the grant of incentive share options, nonqualified share options, share appreciation rights, restricted shares, dividend equivalents, restricted share units (“RSUs”) and other share- or cash- based awards. Pursuant to the 2018 Plan’s evergreen provision, the number of shares available for future issuance under the 2018 Plan, as of January 1, 2022, increased by 2,762,416 Class A common shares. As of September 30, 2022, 4,117,546 shares remained available for future grant under the 2018 Plan.

2018 ESPP

In December 2021, pursuant to the 2018 ESPP’s evergreen provision, the Company’s board of directors approved an increase in the number of shares available for future issuance under the 2018 ESPP, as of January 1, 2022, of 90,000 Class A common shares. As of September 30, 2022, 604,290 Class A common shares were available for future issuance under the 2018 ESPP.

Options

Share option activity under the Plans is summarized as follows:

		Weighted
	Number of	Average
	Shares	Exercise Price
Outstanding as of December 31, 2021	9,226,846	$	14.14
Granted	2,792,460	$	11.22
Exercised	(226,230)	$	5.81
Forfeited	(1,468,620)	$	15.59
Outstanding as of September 30, 2022	10,324,456	$	13.32
Share options exercisable as of September 30, 2022	5,525,898	$	13.52
Share options unvested as of September 30, 2022	4,798,558	$	13.10

As of September 30, 2022, total unrecognized compensation expense related to the unvested share option awards was $40,360 which is expected to be recognized over a weighted average remaining period of 2.73 years.

Restricted Share Units

Beginning in March 2021, the Company began granting RSUs with service conditions (“Time-Based RSUs”) to eligible employees as part of its equity incentive compensation. The Time-Based RSUs vest 25% on each of the first, second, third and fourth anniversaries of the date of grant, subject to continued employment through such dates.

During the years ended December 31, 2020 and 2019, the Company granted the first RSU awards (“First RLTIP RSU Awards”) as part of the RLTIP to eligible employees. During the year ended December 31, 2021, the FDA Milestone (as defined in RLTIP) was achieved (the date of such achievement, the “Achievement Date”) and (1) the number of Class A common shares issuable under the First RLTIP RSU Awards were determined in accordance with the RLTIP and vested in one installment on the first anniversary of the Achievement Date, subject to continued employment through such date, and (2) the Company granted a second set of RSU awards to eligible employees on the Achievement Date with respect to a number of shares determined in accordance with the RLTIP, which will vest on the second anniversary of the Achievement Date, subject to continued employment through such date.

During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense of $1,146 and $838, respectively, related to RSUs including those granted in connection with the RLTIP. During the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense of $2,697 and $2,868, respectively, related to RSUs including those granted in connection with the RLTIP.

The following table summarizes RSU activity, including the RSUs outstanding under the RLTIP for the nine months ended September 30, 2022:

		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
Unvested RSUs as of December 31, 2021	885,021	$	15.72
Granted	1,318,583	$	10.71
Vested	(229,151)	$	15.79
Forfeited	(320,710)	$	14.08
Unvested RSUs as of September 30, 2022	1,653,743	$	13.17

As of September 30, 2022, total unrecognized compensation cost related to the RSU awards was $17,821 which is expected to be recognized over a weighted average remaining period of 3.38 years.

Share-Based Compensation

Share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Cost of goods sold	$	164	$	62	$	456	$	101
Research and development expenses		1,532		1,912		5,116		6,469
Selling, general and administrative expenses		4,345		4,225		13,176		12,472
	$	6,041	$	6,199	$	18,748	$	19,042