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Share-Based Payments

12 Months Ended

Dec. 31, 2020

11. 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, or the SOP 2015, as amended. With the approval of the 2017 Share Incentive Plan, there were no further options are available for grant 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.

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:

2018

2019

2020

Weighted

average

exercise

Aggregate

price in

intrinsic

Stock Option Plan 2015

Options

$ per share

Options

$ per share

Options

$ per share

value

Outstanding as of January 1,

304,489

83.54

284,291

83.41

229,060

83.27

Granted

—

Exercised

—

Forfeited

(20,198)

84.07

(55,231)

84.01

(26,686)

87.46

Outstanding as of December 31,

284,291

83.41

229,060

83.27

202,374

82.71

—

Vested and exercisable as of December 31,

184,459

80.97

198,491

81.98

198,574

82.51

—

The Company has 202,374 option grants outstanding at December 31, 2020 with exercise prices ranging from $40.60 per share to $110.00 per share and a weighted average remaining contractual life of 5.4 years. Stock-based compensation expense under the SOP 2015 was $3.2 million, $4.0 million and $1.1 million for the years ended December 31, 2018, 2019 and 2020, respectively.

As of December 31, 2020, there was $0.2 million of unrecognized compensation expense, related to unvested options granted under the SOP 2015 Plan, which will be recognized over the weighted average remaining vesting period of 0.2 years.

2017 Share Incentive Plan

On July 26, 2017, the Company’s board of directors adopted the 2017 Share Incentive Plan, or 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. The 2017 Plan permited the award of share options (both incentive and nonstatutory options), share appreciation rights, or SARs, restricted shares, restricted share units, or 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. With the approval of the 2020 Share Incentive Plan, there were no further options are available for grant under the 2017 Plan.

The following table summarizes information regarding our stock option awards under the 2017 Plan at December 31, 2020:

2018

2019

2020

Weighted

average

exercise

Aggregate

price in $

intrinsic

2017 Plan

Options

per share

Options

per share

Options

per share

value

Outstanding as of January 1,

29,410

69.17

239,842

54.14

442,266

35.48

Granted

219,922

52.71

246,330

19.51

129,050

13.50

Exercised

—

Forfeited

(9,490)

67.52

(43,906)

47.87

(128,472)

29.39

Outstanding as of December 31,

239,842

54.14

442,266

35.48

442,844

30.89

—

Vested and exercisable as of December 31,

11,928

68.77

112,028

55.33

228,731

39.02

—

The Company has 442,844 option grants outstanding at December 31, 2020 with exercise prices ranging from $13.50 per share to $81.90 per share and a weighted average remaining contractual life of 8.2 years.

Stock-based compensation expense for stock options granted under the 2017 Plan was $1.8 million, $2.6 million and $2.0 million for the years ended December 31, 2018, 2019 and 2020, respectively. The weighted average fair value of the options granted during years ended December 31, 2018, 2019 and 2020 was $30.64, $11.38 and $7.97 per share, respectively, based on a Black Scholes option pricing model using the following assumptions:


Input parameters	2018	2019	2020
Range of expected volatility	59.8% - 61.4%	61.4% - 63.1%	63.8% - 64.0%
Expected term of options (in years)	6.1	6.0	6.1
Range of risk-free interest rate	2.6% - 3.0%	1.9% - 2.6%	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.

As of December 31, 2020, there was $2.6 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 0.9 years.

Restricted Stock Units, or 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 December 31, 2020:


	2019		2020
		Weighted		Weighted
		average fair		average fair
2017 Plan	RSUs	value in $ per share	RSUs	value in $ per share
Outstanding as of January 1,	122,210	33.10	90,169	27.37
Granted	47,900	19.00	155,730	13.50
Vested and issued	(65,758)	31.80	(51,671)	30.95
Forfeited	(14,183)	27.87	(42,959)	17.23
Outstanding as of December 31,	90,169	27.37	151,269	14.56

Stock-based compensation expense for RSUs granted under the 2017 Plan was $0.2 million, $2.7 million and $1.4 million for the years ended December 31, 2018, 2019 and 2020, respectively.

As of December 31, 2020, there was unrecognized compensation costs of $1.3 million associated with RSUs which are expected to be recognized over the awards average remaining vesting period of 1.1 years. The fair value of RSU’s that vested during the years ended December 31, 2019 and 2020 was $2.1 million and $1.7 million, respectively.

2019 Inducement Share Incentive Plan

On March 12, 2019, the Company’s board of directors adopted the 2019 Inducement Share Incentive Plan, or the 2019 Inducement Plan and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 200,000 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 years ended December 31, 2019 and 2020:


	2019		2020
		Weighted		Weighted
		average		average
		exercise		exercise	Aggregate
		price in $		price in $	intrinsic
2019 Inducement Plan	Options	per share	Options	per share	value
Outstanding as of January 1	—	—	60,565	21.45
Granted	70,315	22.20	18,200	13.50
Exercised	—	—	—	—
Forfeited	(9,750)	26.92	(52,950)	19.59
Outstanding as of December 31	60,565	21.45	25,815	19.04	—
Vested and exercisable as of December 31	—	—	4,396	26.96	—

Stock-based compensation expense under the 2019 Inducement Plan was $77,000 and $38,000 for the years ended December 31, 2019 and 2020, respectively. The weighted average fair value of the options granted during the years ended December 31, 2019 and 2020 was $13.04 and $7.93 per share, respectively. The options granted during the year ended December 31, 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	2019	2020
Range of expected volatility	59.8% - 61.4%	63.7% - 64.0%
Expected term of options (in years)	6.1	6.1
Range of risk-free interest rate	2.55% - 3.03%	0.96% - 1.37%
Dividend yield	–	–

The Company has 25,815 option grants outstanding at December 31, 2020 with exercise prices ranging from $13.50 per share to $29.90 per share and a weighted average remaining contractual life of 8.7 years.

As of December 31, 2020, there was $0.2 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 1.2 years.

Inducement Awards Outside of the 2019 Inducement Plan

In July 2018, the Company granted a non-statutory option to purchase 85,000 of its ordinary shares and 15,000 performance-based RSUs to the Company’s newly appointed Chief Executive Officer, or the CEO. These equity awards were granted outside of the 2017 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 $35.30 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 RSUs 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. If the FDA does not approve an NDA for both lefamulin and CONTEPO by January 31, 2020, the performance-based RSUs will terminate in full. Since CONTEPO was not approved by this date the award was forfeited. The Company also issues non-statutory options to new employees upon the commencement of their employment.

Stock-based compensation expense was $0.4 million and $0.4 million for the year ended December 31, 2019 and December 31, 2020. The performance-based RSUs granted to our CEO, had a grant date fair value of $35.30 per share (although no expense was recognized as FDA approval was not considered probable) and the options granted to our CEO had a grant date fair value of $20.50 per share based on a Black Scholes option pricing model using the following assumptions.


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 December 31, 2020 is 7.6 years.

As of December 31, 2020, there was $0.7 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 0.8 years.

2020 Share Incentive Plan

On March 4, 2020, the Company´s board of directors adopted the 2020 Share Incentive Plan, or the 2020 Plan, which was approved by the Company´s shareholders at the 2020 Annual General Meeting of Shareholders in July 2020, or 2020 AGM. As of the date of the 2020 AGM, the total number of ordinary shares reserved for issuance under the 2020 Plan was for the sum of 930,000 ordinary shares, plus the number of the Company´s 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 the Company´s 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, non-statutory share options, share appreciation rights, restricted share awards, restricted share units, other share-based and cash-based awards and performance awards.

At December 31, 2020, 820,022 ordinary shares were available for future issuance under the 2020 Plan.

The following table summarizes information regarding the Company’s stock option awards under the 2020 Plan for the year ended December 31, 2020:


	2020
		Weighted
		average
		exercise	Aggregate
		price in $	intrinsic
2020 Plan	Options	per share	value
Outstanding as of January 1,	—	—
Granted	317,805	10.24
Exercised	—	—
Forfeited	(21,000)	7.88
Outstanding as of December 31,	296,805	10.18	—
Vested and exercisable as of December 31,	—	—	—

Stock-based compensation expense under the 2020 Plan was $144,000 for the year ended December 31, 2020. The weighted average fair value of the options granted during the year ended December 31, 2020 was $4.40 per share. The options granted in the year ended December 31, 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		2020
Expected volatility		73.0% - 74.4%
Expected term of options (in years)		5.5 - 6.1
Risk-free interest rate		0.34% - 0.51%
Dividend yield		—

The Company has 296,805 option grants outstanding at December 31, 2020 with exercise prices ranging from $2.42 per share to $13.50 per share and a weighted average remaining contractual life of 9.6 years.

As of December 31, 2020, there was $1.3 million of total unrecognized compensation expense related to unvested options granted under the 2020 Plan, which will be recognized over the weighted-average remaining vesting period of 1.6 years.

Restricted Stock Units, or RSUs

During 2020, the Company granted 45,977 RSUs to certain employees that vest in three six-month increments beginning in January 2021 and ending in January 2022, with a grant date fair value of $7.88 per share. Also during 2020, the Company granted 43,125 RSUs to certain employees with a grant date fair value of $5.30 per share, where vesting of the RSUs was subject to individual performance goals. For the year ended December 31, 2020, stock-based compensation expense of $111,000 was recognized for these RSUs. As of December 31, 2020, there was $0.5 million of unrecognized compensation expense related to unvested RSUs, which will be recognized over the weighted-average remaining vesting period of 1.0 years.

Our share-based compensation expense has been allocated to research and development and selling, general and administrative expenses in the consolidated statement of operations as follows:


	Year ended December 31,
(in thousands)	2018		2019		2020
Research and development	$	1,406	$	2,138	$	1,280
Selling, general and administrative		3,748		7,610		3,939
Total	$	5,154	$	9,748	$	5,219

The Company recognizes the impact of forfeitures as they occur and issues new shares to satisfy share based compensation arrangements upon the exercise of stock options or vesting of restricted shares.

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, or the 2018 ESPP. The maximum aggregate number of shares of ordinary shares that may be purchased under the 2018 ESPP is 50,000 shares, or the ESPP Share Pool, subject to adjustment as provided for in the 2018 ESPP. The ESPP Share Pool available as of December 31, 2020, represented less than 0.1% of the total number of shares of ordinary shares outstanding as of December 31, 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.