Stock-based Compensation Expense

9 Months Ended

Sep. 30, 2024

Stock-based Compensation Expense [Abstract]

Stock-based Compensation Expense

9. Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of sales	$	159	$	118	$	609	$	355
Research, development and patent expense		22,120		18,727		67,111		57,543
Selling, general and administrative expense		9,705		7,119		26,332		21,575
Stock-based compensation expense, net of amounts capitalized	$	31,984	$	25,964	$	94,052	$	79,473
Capitalized stock-based compensation expense		506		—		506		—
Total stock-based compensation expense	$	32,490	$	25,964	$	94,558	$	79,473

As of September 30, 2024, total unrecognized estimated stock-based compensation expense related to non-vested stock options, RSUs and PRSUs was $54.1 million, $87.2 million and $12.1 million, respectively. Our actual expenses may differ from these estimates because we will adjust our unrecognized stock-based compensation expense for future forfeitures, including any PRSUs that do not vest. We expect to recognize the cost of stock-based compensation expense related to our non-vested stock options, RSUs and PRSUs over a weighted average amortization period of 1.2 years, 1.5 years and 1.7 years, respectively.

Refer to Part IV, Item 15, Note 1, Organization and Significant Accounting Policies, of our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 for further details on how we determine the fair value of stock options granted, RSUs, PRSUs and stock purchase rights under the ESPP.

For the nine months ended September 30, 2024 and 2023, we used the following weighted-average assumptions in our Black-Scholes calculations:

Employee Stock Options:

	Nine Months Ended September 30,
	2024			2023
Risk-free interest rate		4.1	%		3.7	%
Dividend yield		0.0	%		0.0	%
Volatility		43.8	%		47.1	%
Expected life	6.3 years			6.3 years

Board of Director Stock Options:

	Nine Months Ended September 30,
	2024			2023
Risk-free interest rate		4.5	%		3.8	%
Dividend yield		0.0	%		0.0	%
Volatility		49.8	%		53.0	%
Expected life	7.5 years			7.7 years

ESPP:

	Nine Months Ended September 30,
	2024			2023
Risk-free interest rate		5.2	%		5.3	%
Dividend yield		0.0	%		0.0	%
Volatility		37.8	%		36.0	%
Expected life	6 months			6 months

RSUs:

The weighted-average grant date fair value of RSUs granted to employees for the nine months ended September 30, 2024 and 2023 was $52.08 and $39.78 per share, respectively.

PRSUs:

Under the terms of the PRSUs we granted in 2024 and 2023, 100 percent of the PRSUs may vest at the end of the three-year performance period based on our relative TSR as compared to a peer group of companies and as measured at the end of the performance period. Under the terms of the grants, no number of PRSUs is guaranteed to vest and the actual number of PRSUs that will vest at the end of each performance period may be anywhere from zero to 200 percent of the target number depending on our relative TSR.

The weighted-average grant date fair value of PRSUs we granted to our executive officers for the nine months ended September 30, 2024 and 2023 was $78.41 and $58.99 per share, respectively.