Share-based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Centessa Pharmaceuticals plc (Successor) Stock Option and Incentive Plan

In January 2021, the Company’s board of directors approved the 2021 Stock Option and Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the granting of ordinary shares, incentive stock options, non-qualified stock options, restricted share awards, and/or share appreciation rights to employees, directors, and other persons, as determined by the Company’s board of directors. The number of shares authorized under the 2021 Plan was increased in May 2021 at the time of the IPO, whereby the total number of shares authorized under the 2021 Plan was 20,026,816, of which 6,949,243 shares were available for future grants as of December 31, 2021. Beginning on January 1, 2022 and each January 1 thereafter, the number of Shares reserved and available for issuance under the 2021 Plan shall be cumulatively increased by 5% of the number of Shares issued and outstanding on the immediately preceding December 31, or such lesser number as the board of directors may determine.

Share-based Compensation Expense

The Company and the Centessa Predecessor Group recorded share-based compensation expense in the following expense categories in the consolidated and combined statements of operations and comprehensive loss (amounts in thousands):


	Successor			Predecessor
		Period from January 30, 2021 through December 31, 2021		Period from January 1, 2021 through January 29, 2021		Twelve Months Ended December 31, 2020		Twelve Months Ended December 31, 2019
Research and development		$	5,896	$	—	$	336	$	236
General and administrative		8,956		—		—		—
		$	14,852	$	—	$	336	$	236

Centessa Pharmaceuticals plc (Successor) Stock Options

The following table summarizes stock option activity for the period from January 30, 2021 through December 31, 2021:


	Number of Shares	Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value (in million)
Balance at January 30, 2021	—	$	—
Granted	12,872,147	7.92
Exercised	(133,389)	5.84
Forfeited	(1,008,376)	6.41
Balance at December 31, 2021	11,730,382	$	8.07	9.2	$	46.4
Exercisable at December 31, 2021	536,648	$	4.82	7.8	$	3.7
Vested and expected to vest at December 31, 2021	11,730,382	$	8.07	9.2	$	46.4

The weighted-average grant date fair value of options granted was $5.03 per share for the period from January 30, 2021 through December 31, 2021. The Company’s stock options vest based on the terms in each award agreement, generally over four-year periods, and have a contractual term of ten years. As of December 31, 2021, the total unrecognized compensation expense related to unvested stock option awards was $48.6 million, which the Company expects to recognize over a weighted-average period of 2.2 years.

Based on the trading price of $11.26 per ADS, which was the closing price as of December 31, 2021, the aggregate intrinsic value of options as of December 31, 2021 was $46.4 million, of which $3.7 million was related to vested options.

During the period from January 30, 2021 through December 31, 2021, the fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below:


Expected term (in years)	5.9
Expected stock price volatility	66.07	%
Risk-free interest rate	0.89	%
Expected dividend yield	- %

Centessa Pharmaceuticals plc (Successor) Restricted Share Awards

In connection with the acquisition of the Centessa Subsidiaries, the Company issued 379,905 ordinary shares subject to future vesting. For the period subsequent to the acquisition through December 31, 2021, the Company issued an additional 833,897 ordinary shares subject to future vesting to an employee. The fair value of the awards are based upon the estimated fair value of the Company’s ordinary shares at the time of grant. As of December 31, 2021, no shares have been issued.

The following table summarizes ordinary share activity for the period from January 30, 2021 through December 31, 2021:


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Unvested at January 30, 2021	—
Granted	1,213,802	$	15.57
Vested	(230,858)
Unvested at December 31, 2021	982,944

As of December 31, 2021, the total unrecognized compensation expense related to unvested ordinary shares was $14.5 million, which the Company expects to recognize over a weighted-average period of 2.2 years.

Centessa Predecessor Group Share-Based Plans

Prior to their acquisition in 2021, Z Factor and Morphogen-IX granted equity incentive shares, designated as B ordinary shares, to its employees, executives, and consultants and were purchased by the recipient for a nominal amount within one year from grant date. Generally, the awards vested 25% on the first anniversary of the grant date and ratably each quarter thereafter. Upon a change in control event or an initial public offering of the Z Factor and Morphogen-IX’s ordinary shares, the B ordinary shares converted, on a 1:1 basis, into ordinary shares. Z Factor and Morphogen-IX account for B ordinary shares as restricted shares for share-based compensation purposes as the purchase price was nominal.

Centessa Pharmaceuticals plc (Successor) 2021 Employee Share Purchase Plan

In January 2021, the Company’s board of directors approved the 2021 Employee Share Purchase Plan (the “2021 ESPP”). The initial number of shares reserved for issuance under the 2021 ESPP was 860,000. On January 1, 2022 and each January 1 thereafter, the number of Shares reserved and available for issuance under the ESPP shall be cumulatively increased by a number of shares equal to the lesser of: (i) 1% of the number of Shares issued and outstanding on the immediately preceding December 31; (ii) two times the initial number of shares reserved or (iii) such number of Shares as determined by the board of directors.