Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Stockholders' Equity

8.Stockholders’ Equity

Stock Option and Incentive Plans

Under the Company’s current 2018 Stock Option and Incentive Plan (the “2018 Plan”), the number of shares of the Company’s common stock that are reserved and available for issuance is 2,778,000, plus the number of shares of common stock available for issuance under the Company’s previous equity plans. The shares of common stock underlying any awards under the 2018 Plan and previous equity plans (together, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan. At June 30, 2022, 1,948,381 shares were available for future grants under the 2018 Plan.

Stock-Based Compensation

For each of the three months ended June 30, 2022 and 2021, the Company recorded stock-based compensation expense of $7.0 million and $7.1 million, respectively, for share-based awards granted under the Plans. For the six months ended June 30, 2022 and 2021, the Company recorded stock-based compensation expense of $14.9 million and $13.7 million, respectively. The following table presents stock-based compensation expense in the Company’s consolidated statements of comprehensive income:

	Three Months Ended  June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Amounts in thousands)
Cost of product revenue	$	615	$	449	$	1,237	$	955
Research and development		622		795		1,421		1,511
Selling, general and administrative		5,748		5,899		12,242		11,218
Total stock-based compensation	$	6,985	$	7,143	$	14,900	$	13,684

The 2018 Plan allows for the granting of incentive and nonqualified options to purchase shares of common stock, restricted stock and other equity awards. Employee grants under the Plans generally vest over a three to five-year period, with 20%-33% vesting on the first anniversary of the date of grant and the remainder vesting in equal yearly installments thereafter.

Nonqualified options issued to non-employee directors under the Plans generally vest over one year. In the first quarter of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation awards to its Chief Executive Officer, which consisted of both stock options and restricted stock units (“RSUs”) that are subject to time-based vesting over nine years. Options granted under the Plans have a maximum term of ten years from the date of grant and generally, the exercise price of the stock options equals the fair market value of the Company’s common stock on the date of grant. At June 30, 2022, options to purchase 648,546 shares and 551,029 stock units were outstanding under the Plans.

Stock Options

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date, and the Company uses the value of the common stock as of the grant date to value RSUs. The Company measures stock-based compensation costs for stock options at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. The Company recognizes stock-based compensation expense for options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.

Information regarding option activity for the six months ended June 30, 2022 under the Plans is summarized below:

	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2021		625,107		$	54.15		6.29	$	131,707
Granted		47,838		$	180.82
Exercised		(16,399	)	$	28.20
Forfeited/expired/cancelled		(8,000	)	$	193.86
Options outstanding at June 30, 2022		648,546		$	62.42		6.09	$	67,377
Options exercisable at June 30, 2022		381,399		$	46.21		5.49	$	44,750
Vested and expected to vest at June 30, 2022(1)		632,147					6.08	$	65,687

(1)Represents the number of vested options as of June 30, 2022 plus the number of unvested options expected to vest as of June 30, 2022 based on the unvested outstanding options at June 30, 2022 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on June 30, 2022, the last business day of the second quarter of 2022, of $162.40 per share and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on June 30, 2022. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2022 and 2021 was $2.4 million and $6.0 million, respectively.

The weighted average grant date fair value of options granted during the six months ended June 30, 2022 and 2021 was $76.64 and $86.96, respectively. The total fair value of stock options that vested during the six months ended June 30, 2022 and 2021 was $2.7 million and $2.5 million, respectively.

Stock Units

The fair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved. Information regarding stock unit activity, which includes activity for RSUs and performance stock units, for the six months ended June 30, 2022 under the Plans is summarized below:

	Shares			Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2021		606,685			3.07	$	160,674
Awarded		144,845
Vested		(175,647	)
Forfeited/expired/cancelled		(24,854	)
Unvested at June 30, 2022		551,029			3.00	$	89,487
Vested and expected to vest at June 30, 2022(1)		535,061			2.63	$	86,894

(1)Represents the number of vested stock units as of June 30, 2022 plus the number of unvested stock units expected to vest as of June 30, 2022 based on the unvested outstanding stock units at June 30, 2022 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (equal to the closing price of the common stock on June 30, 2022, the last business day of the second quarter of 2022, of $162.40 per share, as stock units do not

have an exercise price) that would have been received by the stock unit holders had all holders exercised on June 30, 2022. The aggregate intrinsic value of stock units vested during the six months ended June 30, 2022 and 2021 was $37.5 million and $35.8 million, respectively.

The weighted average grant date fair value of stock units granted during the six months ended June 30, 2022 and 2021 was $191.09 and $206.15, respectively. The total fair value of stock units that vested during the six months ended June 30, 2022 and 2021 was $17.9 million and $9.6 million, respectively.

As of June 30, 2022, there was $70.4 million of total unrecognized compensation cost related to unvested share-based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 3.01 years. The Company expects 1,790,901 unvested options and stock units to vest over the next five years.