Share-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Equity Instruments and Share-Based Compensation

Share-Based Compensation 

Compensation expense included in the Company’s consolidated statements of income (loss) for all share-based compensation arrangements was as follows for the periods ended December 31, 2020, 2019 and 2018, respectively:

Share-based Compensation Expense:	2020		2019		2018
Research and development	$	139	$	429	$	880
Selling, general and administrative	3,281		2,154		6,972
Restructuring costs	(421)		(2,064)		—
Total share-based compensation expense	$	2,999	$	519	$	7,852

As of December 31, 2020, the Company expects $12,322 of unrecognized expense related to granted, but non-vested share-based compensation arrangements to be incurred in future periods. This expense is expected to be recognized over a weighted average period of 3.4 years. 

The excess tax benefit related to share-based compensation recorded by the Company was not material for the years ended December 31, 2020, 2019 and 2018.

Upon exercise of stock options, or upon the issuance of restricted share awards or performance share unit awards, the Company issues new shares. 

At December 31, 2020, there were 4,122,315 shares authorized for stock option grants, restricted share award grants, and performance share unit award grants in subsequent periods. 

Determining the Fair Value of Stock Options

The Company measures the total fair value of stock options on the grant date using the Black-Scholes option-pricing model and recognizes each grant’s fair value as compensation expense over the period that the option vests. Options are granted to employees of the Company and become exercisable ratably over four years following the grant date and expire ten years after the grant date. The Company issues stock options to our Board of Directors as compensation for services rendered and generally become exercisable ratably over three years following the grant date, and expire ten years after the grant date.

The weighted-average assumptions under the Black-Scholes option-pricing model for stock option grants as of December 31, 2020, 2019 and 2018, are as follows:   

Stock Option Assumptions:	2020		2019		2018
Stock option grants:
Expected term (years)	6.08		6.25		6.25
Expected volatility	75.76	%	56.48	%	56.59	%
Risk-free interest rate	0.72	%	2.52	%	2.68	%
Expected dividend yield	—		—		—

Expected term: The expected term of the options represents the period of time between the grant date and the time the options are either exercised or forfeited, including an estimate of future forfeitures for outstanding options. Given the limited historical data, the simplified method has been used to calculate the expected life. 

Expected volatility: The expected volatility is calculated based on an average of the historical volatility of the Company’s stock price for a period approximating the expected term. 

Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and a maturity that approximates the expected term. 

Expected dividend yield: We have not distributed any dividends since our inception and have no plan to distribute dividends in the foreseeable future. 

Stock Options 

A summary of the combined stock option activity and other data for the Company’s stock option plans for the year ended December 31, 2020 is as follows:   

Stock Option Activity and Other Data:	Number of Stock Options	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Stock options outstanding, January 1, 2020	5,121	$	7.51
Granted	2,551	6.90
Exercised	(403)	5.08
Forfeited	(566)	3.24
Expired	(805)	13.37
Stock options outstanding, December 31, 2020	5,898	$	7.02	7.96 years	$	7,115
Stock options exercisable, December 31, 2020	2,172	$	9.48	5.58 years	$	1,841

The aggregate intrinsic value of options exercisable at December 31, 2020, 2019 and 2018 was $1,841, $572, and $0, respectively.

The weighted average grant date fair value of options granted during the years ended December 31, 2020, 2019 and 2018 was $4.63, $1.24 and $3.60 per share, respectively. 

Warrants 

A summary of the combined warrant activity and other data for the year ended December 31, 2020 is as follows:   

Warrant Activity and Other Data:	Number of Warrants	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Warrants outstanding, January 1, 2020	291	$	13.59
Granted	—	—
Exercised	—	—
Forfeited	—	—
Expired	(291)	13.59
Warrants outstanding, December 31, 2020	—	$	—	0.00 years	$	—
Warrants exercisable, December 31, 2020	—	$	—	0.00 years	$	—

All outstanding warrants expired in August 2020. Each of the above warrants was convertible into one ordinary share. There was no aggregate intrinsic value of warrants exercised during the years ended December 31, 2020, 2019 and 2018. 

There were no warrants granted during the years ended December 31, 2020, 2019 and 2018.

Restricted Share Awards 

Restricted share awards represent Company shares issued free of charge to employees of the Company as compensation for services rendered. The Company measures the total fair value of restricted share awards on the grant date using the Company’s stock price at the time of the grant. Restricted share awards granted during and after 2017 vest over a three-year period; two-thirds (2/3) vesting on the second anniversary of the grant date and the remaining one-third (1/3) vesting on the third anniversary of the grant date.  In 2018, the Company issued restricted share awards to our Board of Directors vesting over a three-year period; one-third (1/3) vesting on each of the three anniversaries of the grant date. Compensation expense for such awards granted during and after 2017 is recognized over the applicable vesting period. 

A summary of the Company’s restricted share awards as of December 31, 2020, and changes during the year then ended, is reflected in the table below. 

Restricted Share Activity and Other Data:	Number of Restricted Share Awards	Weighted Average Grant Date Fair Value
Non-vested restricted share awards outstanding, January 1, 2020	347	$	4.73
Granted	186	7.69
Vested	(115)	6.01
Forfeited	(71)	4.83
Non-vested restricted share awards outstanding, December 31, 2020	347	$	5.87

The weighted average grant date fair value of restricted share awards granted during the years ended December 31, 2020, 2019 and 2018 was $7.69, $2.47 and $5.87, respectively.

Performance Share Units Awards

Performance share units awards (“PSUs”) represent Company shares issued free of charge to employees of the Company as compensation for achieving various results. The Company measures the total fair value of performance share unit awards on the grant date using the Company’s stock price at the time of the grant. In 2020, the Company granted performance share awards, of which 50% vest upon the achievement of certain regulatory milestones related to FT218 and the other 50% vest one year following achievement of those milestones. The Company has not yet recognized any PSU-related stock-based compensation expense as the regulatory milestones have not yet been met; however, in the event the performance conditions are met before a certain date, approximately 150% of the outstanding shares, or $2,734 of compensation expense will be recognized by the Company for the PSUs outstanding as of December 31, 2020.

A summary of the Company’s performance share units awards as of December 31, 2020, and changes during the year then ended, is reflected in the table below.

Performance Unit Share Activity and Other Data	Number of Performance Share Awards	Weighted Average Grant Date Fair Value
Non-vested performance share awards outstanding, January 1, 2020	—	$	—
Granted	257	7.09
Vested	—	—
Forfeited	—	—
Non-vested performance share awards outstanding, December 31, 2020	257	$	7.09

The weighted average grant date fair value of performance share awards granted during the year ended December 31, 2020 was $7.09 per share.

Employee Share Purchase Plan

In 2017, the Board of Directors approved of the Avadel Pharmaceuticals plc 2017 Avadel Employee Share Purchase Plan (“ESPP”). The total number of Company ordinary shares, nominal value $0.01 per share, or ADSs representing such ordinary shares (collectively, “Shares”) which may be issued under the ESPP is 1,000. The purchase price at which a Share will be issued or sold for a given offering period will be established by the Compensation Committee of the Board (“Committee”) (and may differ among participants, as determined by the Committee in its sole discretion) but will in no event be less than 85% of the lesser of: (a) the fair market value of a Share on the offering date; or (b) the fair market value of a Share on the purchase date. During the years ended December 31, 2020 and 2019, the Company issued 49 and 54 ordinary shares to employees, respectively. Expense related to the ESPP for the years ended December 31, 2020, 2019 and 2018 was immaterial.