Stock-Based Compensation Expense

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

14. Stock-Based Compensation Expense

In May 2023, the Company’s stockholders, upon recommendation of the Company’s board of directors, approved an amendment to the Company’s 2018 Equity Incentive Plan (the "2018 Plan") to increase the number of shares of common stock that may be issued under the 2018 Plan by 25,000,000 shares.

During the six months ended June 30, 2023, the Company granted the following awards (in shares):


	Three Months Ended March 31,			Three Months Ended June 30,			Six Months Ended June 30,
	2023			2023			2023
Employee awards:
RSUs		179,905	(1)		2,660,721	(2)		2,840,626
Market RSUs		—			1,445,000	(3)		1,445,000
Non-employee director RSUs		—			319,904	(4)		319,904
Total awards issued		179,905			4,425,625			4,605,530

_________________________

(1)

RSUs had a weighted average grant date fair value of $4.16 per share, of which 91,900 RSUs had a cliff vesting period of three years, 42,000 RSUs had a cliff vesting period of two years, and 46,005 RSUs had a vesting period of 25% annually over four years.

(2)

RSUs had a weighted average grant date fair value of $4.56 per share, of which 2,598,971 RSUs had a vesting period of 25% annually over four years, and 61,750 RSUs had a cliff vesting period of 3 years.

(3)

Market RSUs had a grant date fair value of $9.40 per share and will vest on July 15, 2026 provided the closing price of the Company’s common stock on June 30, 2026 is not less than the closing price on July 1, 2023. The number of shares delivered on the vesting date is determined by the percentile ranking of MannKind total shareholder return (TSR) over the period from July 1, 2023 until July 30, 2026 relative to the TSR of the Russell 3000 Pharmaceutical & Biotechnology Index over the same three-year period, as follows: less than 25th percentile=0% of target, 25th percentile=50% of target, 50th percentile=100% of target, 75th percentile=200% of target, 90th percentile or higher=300% maximum. Payout values will be interpolated between the percentile rankings above.

(4)

RSUs had a weighted average grant date fair value of $4.55 per share and vested immediately upon the grant date; however, the underlying shares of common stock will not be delivered until there is a separation of service such as resignation, retirement or death.

As of June 30, 2023, unrecognized stock-based compensation expense was $0.2 million related to options and PNQs which is expected to be recognized over a weighted average period of 2.93 years as well as $24.0 million and $20.9 million related to RSUs

and Market RSUs, respectively, which is expected to be recognized over weighted average periods of approximately 2.73 and 2.07 years, respectively.

Total stock-based compensation expense recognized in the condensed consolidated statements of operations as cost of goods sold, cost of revenue – collaborations and services, R&D, selling and general and administrative expense was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
RSUs and options	$	5,404	$	4,239	$	8,882	$	6,883
Employee stock purchase plan		176		183		353		345
Total	$	5,580	$	4,422	$	9,235	$	7,228

Employee Stock Purchase Plan

The Company provides all employees, including executive officers, the ability to purchase common stock at a discount under the Company’s 2004 the ESPP. The ESPP is designed to comply with Section 423 of the Internal Revenue Code and provides all employees with the opportunity to purchase up to $25,000 worth of common stock (based on the undiscounted fair market value at the commencement of the offering period) each year at a purchase price that is the lower of 85% of the fair market value of the common stock on either the date of purchase or the commencement of the offering period. An employee may not purchase more than 5,000 shares of common stock on any purchase date. The executives’ rights under the ESPP are the same as those of all other employees.

In May 2023, the Company’s stockholders, upon recommendation of the Company’s board of directors, approved an amendment to the Company’s ESPP to increase the number of shares of common stock authorized for issuance under the ESPP by an additional 3,000,000 shares.

There were approximately 3.1 million shares of common stock available for issuance under the ESPP as of June 30, 2023.