Stockholders' Equity

6 Months Ended

Jun. 30, 2024

Equity [Abstract]

Stockholders' Equity

9.Stockholders’ Equity

Stock Option and Incentive Plans

Under the Company’s current 2018 Stock Option and Incentive Plan (the “2018 Plan”), the number of shares of the Company’s common stock that were reserved and available for issuance is 2,778,000, plus the number of shares of common stock that were available for issuance under the Company’s previous equity plans. The shares of common stock underlying any awards under the 2018 Plan and previous equity plans (together, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan. At June 30, 2024, 1,523,889 shares were available for future grants under the 2018 Plan.

Chief Executive Officer Accounting Modifications

On June 12, 2024, upon approval by the Board, the Company entered into the Fourth Amended and Restated Employment Agreement (the “Transition Agreement”) with the Company's Chief Executive Officer (“CEO”), Tony J. Hunt, which amends and restates Mr. Hunt's Third Amended and Restated Employment Agreement with the Company dated as of May 26, 2022. Under the terms of the Transition Agreement, Mr. Hunt will relinquish his position as the Company's CEO effective September 1, 2024 (the “Transition Date”) and will transition to a new role as Executive Chair of the Board beginning on the Transition Date (the “CEO Transition”). It is anticipated that Mr. Hunt will continue to be involved in the business as the Executive Chair of the Board until March 2026 and will continue to be employed by the Company as an advisor thereafter, until March 2027.

Under the terms of the Transition Agreement and the award agreements governing Mr. Hunt’s outstanding equity awards, Mr. Hunt’s unvested stock awards will continue to vest in accordance with their original terms. Furthermore, on June 28, 2024, the Company entered into an amendment (the “2024 Award Amendment”) to the equity awards granted to Mr. Hunt in 2024, which consisted of a stock option, restricted stock units (“RSUs”) and performance stock units (“PSUs” and together the “2024 Grants”). Pursuant to the terms of the 2024 Award Amendment, two-thirds of the 2024 Grants were forfeited, which equates to 32,776 shares of the Company’s common stock.

Although Mr. Hunt’s unvested equity awards continue to vest in accordance with their original terms and there has been no amendment to Mr. Hunt’s outstanding equity awards other than the 2024 Award Amendment, the Company determined that under ASC 718, ”Compensation - Stock Compensation”, the CEO Transition represents a significant reduction in Mr. Hunt’s operating role with the Company for accounting purposes. This determination resulted in a Type III accounting modification of certain of Mr. Hunt’s unvested stock awards (improbable to probable) under ASC 718 (the “Equity Modification”) on June 12, 2024. As a result, for accounting purposes only, Mr. Hunt’s unvested awards were deemed cancelled and a new grant issued for his unvested shares with the value of these awards recalculated using a price of $136.00 per share, which was the opening stock price of the first day of trading following the public announcement of the CEO Transition.

As a result of the Equity Modification, the Company will recognize stock-based compensation expense for the modified awards of $22.4 million over the remaining requisite service period, which the Company determined to be between June 13, 2024 and September 1, 2024 and represents the remaining service period of Mr. Hunt’s role as CEO.

The Company determined that the PSUs granted to Mr. Hunt in 2022 and 2023 should be accounted for as a Type IV accounting modification (improbable to improbable) in accordance with ASC 718, because vesting conditions before and after June 12, 2024 were improbable of being achieved.

As a result of the Equity Modification and the forfeiture of the pro-rata portion of Mr. Hunt’s 2024 Grants, the Company recognized $4.4 million of incremental stock-based compensation expense for the three and six months ended June 30, 2024.

Stock Issued for Earnout Payments

In April 2024, the Company issued 28,638 shares of its common stock to former securityholders of Avitide to satisfy the contingent consideration obligation established under the Agreement and Plan of Merger and Reorganization (the “Avitide Agreement”) which the Company entered into as part of the acquisition of Avitide in September 2021.

In March 2024, the Company issued 2,770 shares of its common stock to former securityholders of FlexBiosys to satisfy the contingent consideration obligation established under the FlexBiosys Agreement, which the Company entered into as part of the acquisition of FlexBiosys in April 2023.

See Note 4, “Acquisitions”, included in Part II, Item 8, “Financial Statements and Supplementary Data,” to the Company’s Form 10-K for additional information on the acquisitions of Avitide and FlexBiosys and the contingent consideration. The shares issued to FlexBiosys represent 20% of the earnout consideration earned in the First Earnout Year (as defined in the FlexBiosys Agreement) and the shares issued to Avitide represents 50% of the earnout consideration earned in the Second Earnout Year (as defined in the Avitide Agreement).

Stock-Based Compensation

The following table presents stock-based compensation expense in the Company’s condensed consolidated statements of comprehensive income (loss):

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(Amounts in thousands)
Cost of goods sold	$	498	$	522	$	1,102	$	1,113
Research and development		503		608		1,447		1,395
Selling, general and administrative(1)		8,213		4,353		15,441		10,229
Total stock-based compensation	$	9,214	$	5,483	$	17,990	$	12,737

(1)Selling, general and administrative stock-based compensation for the three and six months ended June 30, 2024 includes $4.4 million of expense related to the Equity Modification discussed above.

Stock Options

Information regarding option activity for the six months ended June 30, 2024 under the Plans is summarized below:

	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2023		649,130		$	85.97
Granted		60,736		$	184.66
Exercised		(26,661	)	$	67.08
Forfeited/expired/cancelled(1)		(22,027	)	$	192.07
Options outstanding at June 30, 2024		661,178		$	92.26
Options exercisable at June 30, 2024		413,411		$	74.55
Vested and expected to vest at June 30, 2024(2)		655,251		$	91.51		5.41	$	35,463

(1)Includes 13,057 options forfeited pursuant to the 2024 Award Amendment discussed above under “Chief Executive Officer Accounting Modifications”.

(2)Represents the number of vested options as of June 30, 2024 plus the number of unvested options expected to vest as of June 30, 2024 based on the unvested outstanding options at June 30, 2024 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on June 28, 2024, the last business day of the second quarter of 2024, of $126.06 per share and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on June 30, 2024. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2024 and 2023 was $2.6 million and $0.7 million, respectively.

The weighted average grant date fair value of options granted during the six months ended June 30, 2024 and 2023 was $93.65 and $86.30, respectively.

Stock Units

The fair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved. Information regarding stock unit activity, which includes activity for restricted stock units and performance stock units, for the six months ended June 30, 2024 under the Plans is summarized below:

	Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2023		474,320		$	155.59
Awarded		178,252		$	188.57
Vested		(125,820	)	$	143.87
Forfeited/cancelled(1)		(69,442	)	$	189.15
Unvested at June 30, 2024		457,310		$	166.59
Vested and expected to vest at June 30, 2024(2)		397,312		$	164.77

(1)Includes 13,146 RSUs and 6,573 PSUs forfeited pursuant to the 2024 Award Amendment discussed above under ”Chief Executive Officer Accounting Modifications”.

(2)Represents the number of vested stock units as of June 30, 2024 plus the number of unvested stock units expected to vest as of June 30, 2024 based on the unvested outstanding stock units at June 30, 2024 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value of stock units vested during the six months ended June 30, 2024 and 2023 was $23.5 million and $29.6 million, respectively.

The weighted average grant date fair value of stock units granted during the six months ended June 30, 2024 and 2023 was $188.57 and $176.86, respectively.

As of June 30, 2024, there was $73.3 million of total unrecognized compensation cost related to unvested share-based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 2.59 years. The Company expects 2,267,696 unvested options and stock units to vest over the next five years.