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Share-Based Payments

6 Months Ended

Jun. 30, 2020

8. Share-Based Payments

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. The 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.

The following table summarizes information regarding the Company’s stock option awards under the SOP 2015 for the six months ended June 30, 2020:


		Weighted
		average
		exercise	Aggregate
		price in	intrinsic
Stock Option Plan 2015	Options	$ per share	value
Outstanding as of January 1, 2020	2,290,594	8.33
Granted	—	—
Exercised	—	—
Forfeited	63,179	9.02
Outstanding as of June 30, 2020	2,227,415	8.31	$	—
Vested and exercisable as of June 30, 2020	2,073,469	8.23	$	—

Stock-based compensation expense under the SOP 2015 was $0.7 million and $1.6 million for the three and six months ended June 30, 2019, respectively, and $0.3 million and $0.6 million for the three and six months ended June 30, 2020, respectively.

The weighted average remaining contractual life of the options as of June 30, 2020 is 5.9 years.

As of June 30, 2020, there was $0.8 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 0.5 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. 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 ended 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 June 30, 2020, 1,829,811 ordinary shares were available for future 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 the Company’s stock option awards under the 2017 Plan for the six months ended June 30, 2020:


		Weighted
		average
		exercise		Aggregate
		price in $		intrinsic
2017 Plan	Options	per share		value
Outstanding as of January 1, 2020	4,422,664	3.55
Granted	1,290,500	1.35
Exercised	—	—
Forfeited	(748,874)	2.56
Outstanding as of June 30, 2020	4,964,290	3.13	$	—
Vested and exercisable as of June 30, 2020	1,968,950	4.21	$	—

Stock-based compensation expense for stock options granted under the 2017 Plan was $0.8 million and $1.3 million for the three and six months ended June 30, 2019 and $0.5 million and $1.1 million for the three and six months ended June 30, 2020, respectively. The weighted average fair value of the options granted during the six months ended June 30, 2020 was $0.80 per share. The options granted in the six months ended June 30, 2020 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		63.8% - 64.0%
Expected term of options (in years)		6.1
Range of risk-free interest rate		0.8% - 1.5%
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 risk-free interest rate is based on the average of five and seven-year market yield on U.S. treasury securities in effect at the time of grant.

The weighted average remaining contractual life of the options as of June 30, 2020 is 8.7 years.

As of June 30, 2020, there was $3.9 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 1.1 years.

Restricted Stock Units (“RSUs”)

Under the 2017 Plan, the Company granted RSUs which vest over a period of four years with 25% vesting upon the first anniversary of the grant date and on a monthly pro rata basis thereafter over the remaining three years. The Company also granted RSUs to certain employees that vest over a period of four years with 25% vesting upon the first anniversary of the grant date and on a monthly pro rata basis thereafter over the remaining three years.

During 2018, the Company granted RSUs to certain employees where vesting of the RSUs was subject to FDA approval of an NDA for XENLETA. Fifty percent (50%) of each RSU award vested upon FDA approval, and the remaining fifty percent (50%) will vest on the one- year anniversary of such approval. In connection with the FDA approval that was received in August 2019, the Company started recognizing compensation expense, as there was no compensation expense recognized on these awards prior to the FDA approval as it was determined that approval was not probable since it was outside of the Company’s control. Also during 2018, the Company granted RSUs to certain employees that have vested in three six-month increments beginning in May 2019 and ending in May 2020. Lastly, the Company granted RSUs in 2018 to certain employees where vesting of the RSUs is subject to FDA approval of an NDA for CONTEPO. Fifty percent (50%) of each RSU award will vest upon FDA approval, and the remaining fifty percent (50%) will vest on the one- year anniversary of such approval.

The following table summarizes information regarding our restricted stock unit awards under the 2017 Plan at June 30, 2020:


		Weighted
		average fair
2017 Plan	RSUs	value per share
Outstanding as of January 1, 2020	901,686	3.69
Granted	1,557,300	1.35
Vested and issued	(334,210)	2.03
Forfeited	(230,792)	1.83
Outstanding as of June 30, 2020	1,893,984	1.83

For the three and six months ended June 30, 2019, $0.4 million and $0.6 million, respectively, of stock-based compensation expense was recognized for RSUs. Stock-based compensation expense for RSUs granted under the 2017 Plan was $0.4 million and $1.0 million for the three and six months ended June 30, 2020, respectively.

The Company has total unrecognized compensation costs of $2.6 million associated with RSUs which are expected to be recognized over the awards average remaining vesting period of 1.3 years. The fair value of RSU’s that vested during the six months ended June 30, 2020 was $0.4 million.

2019 Inducement Share Incentive Plan

On March 12, 2019, the Company’s board of directors adopted the 2019 Inducement Share Incentive Plan (the “2019 Inducement Plan”) and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 2,000,000 ordinary shares for issuance pursuant to equity awards granted under the 2019 Inducement Plan. In accordance with Nasdaq Listing Rule 5635(c)(4), awards under the 2019 Inducement Plan may only be made to individuals who were not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company.

On April 28, 2020, the board of directors resolved not to make any further awards under the 2019 Inducement Plan.

The following table summarizes information regarding the Company’s stock option awards under the 2019 Inducement Plan for the six months ended June 30, 2020:


		Weighted
		average
		exercise	Aggregate
		price in $	intrinsic
2019 Inducement Plan	Options	per share	value
Outstanding as of January 1, 2020	605,650	2.14
Granted	182,000	1.35
Exercised	—	—
Forfeited	(392,000)	2.02
Outstanding as of June 30, 2020	395,650	1.96	$	—
Vested and exercisable as of June 30, 2020	40,224	2.64		—

Stock-based compensation expense under the 2019 Inducement Plan was less than $0.1 million for both the three and six months ended June 30, 2019 and less than $0.1 million for the three and six months ended June 30, 2020, respectively. The weighted average fair value of the options granted during the six months ended June 30, 2020 was $0.79 per share. The options granted in the six months ended June 30, 2020 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
Expected volatility		63.7% - 64.0%
Expected term of options (in years)		6.1
Risk-free interest rate		1.0% - 1.4%
Dividend yield		—

The weighted average remaining contractual life of the options as of June 30, 2020 is 9.2 years.

As of June 30, 2020, there was $0.4 million of total unrecognized compensation expense, related to unvested options granted under the 2019 Inducement Plan, which will be recognized over the weighted-average remaining vesting period of 1.5 years.

Inducement Awards Outside of the 2019 Inducement Plan

On July 25, 2018, the Company granted a non-statutory option to purchase 850,000 of its ordinary shares and 150,000 performance-based RSUs to the Company’s newly appointed Chief Executive Officer (the “CEO”). These equity awards were granted outside of the 2017 Plan and the 2019 Inducement Plan, were approved by the Company’s compensation committee and board of directors and were made as an inducement material to the CEO entering into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). The exercise price per share for the share option is $3.53 per share, and the option award has a ten-year term and will vest over a four-year period, with 25% of the shares underlying the award vesting on the first anniversary of the grant date and the remaining 75% of the shares underlying the option award to vest monthly over the subsequent 36-month period. The performance-based restricted share units are subject to vesting as follows: 50% will vest upon certification by the board of directors of the receipt of approval by the FDA of an NDA for each of lefamulin and CONTEPO for any indication, and 50% will vest on the first anniversary of such certification by the board of directors, provided, in each case, the CEO is performing services to the Company on the applicable vesting dates. Since the FDA did not approve an NDA for both XENLETA and CONTEPO by January 31, 2020, the award was forfeited and the performance-based restricted share units terminated in full. The Company also issues non-statutory options to new employees upon the commencement of their employment

Stock-based compensation expense for the inducement awards granted outside of the 2019 Inducement Plan was $0.1 million and $0.2 million for the three and six months ended June 30, 2019, respectively, and $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively. The performance-based RSUs had a grant date fair value of $3.53 per share and the options had a grant date fair value of $2.05 per share based on a Black Scholes option pricing model using the following assumptions. No expense has been recognized to date on the performance based RSUs. The significant inputs into the model were as follows:


Input parameters
Expected volatility	59.8	%
Expected term of options (in years)	6.1
Range of risk-free interest rate	2.9	%
Dividend yield	—

The weighted average remaining contractual life of the options as of June 30, 2020 is 8.1 years.

As of June 30, 2020, there was $0.9 million of total unrecognized compensation expense, related to unvested inducement award options granted, which will be recognized over the weighted-average remaining vesting period of 1.1 years.

2020 Share Incentive Plan

On March 4, 2020, the Company´s board of directors, adopted the 2020 Share Incentive Plan (the “2020 Plan”), which was approved by the Company´s shareholders at the 2020 Annual General Meeting of Shareholders in July 2020 (“AGM”). As of the date of the 2020 AGM, plus the total number of ordinary shares reserved for issuance under the 2020 Plan was for the sum of 9,300,000 ordinary shares, the number of our ordinary shares that remained available for grant under the 2017 Plan as of immediately prior to the AGM and the number of ordinary shares subject to awards granted under the 2017 Plan and our Amended and Restated Stock Option Plan 2015, that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right. Following shareholder approval of the 2020 Plan, no further awards will be made under the 2017 Plan.

The 2020 Plan provides for the grant of incentive share options, nonstatutory share options, share appreciation rights, restricted share awards, restricted share units, other share-based and cash-based awards and performance awards.

During the six months ended June 30, 2020, option awards to purchase 1,837,500 ordinary shares with an exercise price of $1.35 per share were granted under the 2020 Plan. Such awards would have automatically converted to cash-settled share appreciation rights if our shareholders did not approve the 2020 Plan at our AGM. As a result, the grants awarded under the 2020 Plan were liability classified until such shareholder approval was obtained. Stock-based compensation expense for the option awards under the 2020 Plan was $51 thousand and $65 thousand for the three and six months ended June 30, 2020, respectively.

Employee Stock Purchase Plan

The Company’s board of directors adopted, and in August 2018 Company’s stockholders approved, the 2018 employee stock purchase plan (the “2018 ESPP”). The maximum aggregate number of shares of ordinary shares that may be purchased under the 2018 ESPP is 500,000 shares, (the “ESPP Share Pool”), subject to adjustment as provided for in the 2018 ESPP. The ESPP Share Pool available as of June 30, 2020, represented 0.1% of the total number of shares of ordinary shares outstanding as of June 30, 2020. The 2018 ESPP allows eligible employees to purchase shares at a 15% discount to the lower of the closing share price at the beginning and end of the six-month offering periods commencing November 1 and ending April 30 and commencing May 1 and ending October 31 of each year. As of the date of this filing, the Company has suspended the 2018 ESPP until further notice.