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Share-Based Payments
9 Months Ended
Sep. 30, 2017
Share-Based Payments  
Share-Based Payments

 

7.            Share-Based Payments

 

Stock Option Plan 2007

 

On September 12, 2007 the Company’s management and supervisory boards resolved to implement a stock option plan (“SOP 2007”) for all employees (including members of the management board) with open-ended contracts of employment with the Company and for selected members of the supervisory board of the Company and further participants. The stock option plan became effective on September 28, 2007. In connection with the Redomiciliation Transaction, the SOP 2007 was amended to take account of certain requirements under Irish law and assumed by Nabriva Ireland, with each option to acquire one Nabriva Austria common share becoming an option to acquire ten ordinary shares of Nabriva Ireland on the same terms and conditions. As of September 27, 2017, all outstanding options under the SOP 2007 automatically terminated and were forfeited.

 

Stock-based compensation expense under the SOP 2007 was $10,000 and $40,000 for the three and nine months ended September 30, 2017, respectively.

 

Stock Option Plan 2015

 

On April 2, 2015, the Company’s shareholders, management board and supervisory board adopted the Stock Option Plan 2015 (the “SOP 2015”) and the shareholders approved an amended and restated version of the SOP 2015 on June 30, 2015. An amendment to the amended and restated SOP 2015 was approved by the shareholders on July 22, 2015. SOP 2015 became effective on July 3, 2015 upon the registration with the commercial register in Austria of the conditional capital increase approved by the shareholders on June 30, 2015. The SOP 2015 initially provided for the grant of options for up to 95,000 Nabriva Austria common shares to the Company’s employees, including members of the management board, and to members of the supervisory board. Following the closing of the initial public offering of the Company, the overall number of options increased to 177,499 Nabriva Austria common shares. Following approval by the Company’s shareholders at its 2016 annual general meeting, the number of shares available for issuance under the SOP 2015 was increased to 346,235 Nabriva Austria common shares. In connection with the Redomiciliation Transaction, the SOP 2015 was amended to take account of certain requirements under Irish law and assumed by Nabriva Ireland, with each option to acquire one Nabriva Austria common share becoming an option to acquire ten ordinary shares of Nabriva Ireland on the same terms and conditions.

 

Each vested option grants the beneficiary the right to acquire one share in the Company. The vesting period for the options is four years following the grant date. On the last day of the last calendar month of the first year of the vesting period, 25% of the options attributable to each beneficiary are automatically vested. During the second, third and fourth years of the vesting period, the remaining 75% of the options vest on a monthly pro rata basis (i.e. 2.083% per month). Options granted under the SOP 2015 have a term of no more than ten years from the beneficiary’s date of participation.

 

Movements in the number of share options outstanding and their related weighted average exercise prices under the SOP 2015 are as follows:

 

 

 

2017

 

Stock Option Plan 2015

 

Options

 

Weighted
average
exercise
price in $
per share

 

Aggregate
intrinsic value

 

Outstanding as of January 1, 2017

 

1,794,360

 

7.83

 

 

Granted

 

1,458,300

 

9.02

 

 

Exercised

 

 

 

 

Forfeited

 

(110,900

)

8.92

 

 

 

 

 

 

 

 

 

 

Outstanding as of September 30, 2017

 

3,141,760

 

8.34

 

$

 

 

 

 

 

 

 

 

 

 

Vested and exercisable as of September 30, 2017

 

897,159

 

7.67

 

$

1,630

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense under the SOP 2015 was approximately $1.6 million and $4.5 million for the three and nine months ended September 30, 2017, respectively. The weighted average fair value of the options granted during the nine months ended September 30, 2017 was $5.05, per share. The 1,458,300 options granted in the nine months ended September 30, 2017, were valued based on a Black Scholes option pricing model using the following assumptions. The significant inputs into the model were as follows:

 

Input parameters

 

 

 

Range of expected volatility

 

55.6% - 62.0%

 

Expected term of options (in years)

 

6.1

 

Range of risk-free interest rate

 

1.8% - 2.1%

 

Dividend yield

 

 

 

The expected price volatility is based on historical trading volatility for the publicly traded peer companies under consideration of the remaining life of the options. The weighted average remaining contractual life of the options as of September 30, 2017 is 8.7 years.

 

As of September 30, 2017, there was $11.7 million of total unrecognized compensation expense, related to unvested options granted under the SOP 2015, which will be recognized over the weighted-average remaining vesting period of 1.4 years.

 

2017 Share Incentive Plan

 

On July 26, 2017, the Company’s board of directors adopted the 2017 Share Incentive Plan (the “2017 Plan”) and the shareholders approved the 2017 Plan at the Company’s Extraordinary General Meeting of Shareholders on September 15, 2017. Following shareholder approval of the 2017 Plan, the Company ceased making awards under the SOP 2015, and future awards will be made under the 2017 Plan.  However, all outstanding awards under SOP 2015 will remain in effect and continue to be governed by the terms of the SOP 2015. The 2017 Plan permits the award of share options (both incentive and nonstatutory options), share appreciation rights (“SARs”), restricted shares, restricted share units (“RSUs”), and other share-based awards to the Company’s employees, officers, directors, consultants and advisers. The 2017 Plan is administered by the Company’s board of directors.

 

Under the 2017 Plan, the number of ordinary shares that will be reserved for issuance will be the sum of (1) 3,000,000 ordinary shares; plus (2) a number of ordinary shares (up to 3,438,990 ordinary shares) which is equal to the sum of the number of the Company’s ordinary shares then available for issuance under the SOP 2015 and the number of ordinary shares subject to outstanding awards under the SOP 2015 that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year beginning in the fiscal year ending December 31, 2018 and continuing until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 2,000,000 ordinary shares, (ii) 4% of the number of outstanding ordinary shares on such date and (iii) an amount determined by the board of directors.

 

At September 30, 2017, 3,438,990 ordinary shares were available for issuance under the 2017 Plan.

 

Options and SARs granted will be exercisable at such times and subject to such terms and conditions as the board may specify in the applicable option agreement; provided, however, that no option or SAR will be granted with a term in excess of ten years. The board will also determine the terms and conditions of restricted shares and RSUs, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.

 

The following table summarizes information regarding our stock option awards under the 2017 Plan at September 30, 2017:

 

 

 

2017

 

2017 Plan

 

Options

 

Weighted
average
exercise
price in $
per share

 

Aggregate
intrinsic value

 

Outstanding as of January 1, 2017 

 

 

 

 

Granted

 

150,600

 

7.69

 

 

Exercised

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding as of September 30, 2017 

 

150,600

 

7.69

 

$

76

 

 

 

 

 

 

 

 

 

 

Vested and exercisable as of September 30, 2017 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense under the 2017 Plan was approximately $14,000 for the three and nine months ended September 30, 2017, respectively. The weighted average fair value of the options granted during the nine months ended September 30, 2017 was $4.40, per share. The 150,600 options granted in the nine months ended September 30, 2017, were valued based on a Black Scholes option pricing model using the following assumptions. The significant inputs into the model were as follows:

 

Input parameters

 

 

 

Range of expected volatility

 

59.5% - 63.0%

 

Expected term of options (in years)

 

5.9

 

Range of risk-free interest rate

 

1.9% - 2.0%

 

Dividend yield

 

 

 

The expected price volatility is based on historical trading volatility for the publicly traded peer companies under consideration of the remaining life of the options. The weighted average remaining contractual life of the options as of September 30, 2017 is 10.0 years.

 

As of September 30, 2017, there was $0.6 million of total unrecognized compensation expense, related to unvested options granted under the 2017 Plan, which will be recognized over the weighted-average remaining vesting period of 1.7 years.