Stockholders' Equity

3 Months Ended

Mar. 31, 2019

Stockholders’ Equity

Stock Option and Incentive Plans

At our 2018 annual meeting of shareholders held on May 16, 2018, our shareholders approved the 2018 Stock Option and Incentive Plan (the “2018 Plan”). Under the 2018 Plan the number of shares of our 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 our Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan”). The shares of common stock underlying any awards under the 2018 Plan, 2012 Plan and the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan,” and together with the 2018 Plan and 2012 Plan, 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 March 31, 2019, 2,747,792 shares were available for future grant under the 2018 Plan.

Stock-Based Compensation

For the three months ended March 31, 2019 and 2018, the Company recorded stock-based compensation expense of $3.3 million and $2.3 million, respectively, for share-based awards granted under the Plans. The following table presents stock-based compensation expense in the Company’s consolidated statements of comprehensive income:

	Three Months Ended March 31,
	2019		2018
	(Amounts in thousands)
Cost of product revenue	$	324	$	266
Research and development		321		170
Selling, general and administrative		2,606		1,832
Total stock-based compensation	$	3,251	$	2,268

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 and consultants 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 consisting 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 March 31, 2019, options to purchase 1,027,831 shares and 680,549 RSUs were outstanding under the Plans.

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 cost 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. In the third quarter of 2017, the Company issued performance stock units to certain employees related to the Spectrum Acquisition which were tied to the achievement of certain 2018 revenue and gross margin metrics and the passage of time. Additionally, in the first quarter of 2018, the Company issued performance stock units to certain individuals which are tied to the achievement of certain 2018 revenue metrics and the passage of time. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved. 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 three months ended March 31, 2019 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, 2018		998,226		$	27.54
Granted		31,498		$	59.52
Exercised		(1,893	)	$	22.35
Forfeited/expired/cancelled		—		$	—
Options outstanding at March 31, 2019		1,027,831		$	28.53		7.04	$	31,469
Options exercisable at March 31, 2019		540,600		$	21.66		5.54	$	20,231
Vested and expected to vest at March 31, 2019 (1)		985,138					6.96	$	30,511

(1)

Represents the number of vested options as of March 31, 2019 plus the number of unvested options expected to vest as of March 31, 2019 based on the unvested outstanding options at March 31, 2019 adjusted for estimated forfeiture rates of

% for awards granted to non-executive level employees and

% 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 March 29, 2019, the last business day of the first quarter of 2019, of $59.08 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 March 31, 2019. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2019 and 2018 was $0.1 million and $0.2 million, respectively.

The weighted average grant date fair value of options granted during the three months ended March 31, 2019 and 2018 was $30.21 and $18.27, respectively. The total fair value of stock options that vested during the three months ended March 31, 2019 and 2018 was $2.2 million and $1.3 million, respectively.

Information regarding RSU activity for the three months ended March 31, 2019 under the Plans is summarized below:

	Shares			Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2018		705,413
Awarded		147,474
Vested		(154,837	)
Forfeited/expired/cancelled		(17,501	)
Unvested at March 31, 2019		680,549			3.88	$	40,207
Vested and expected to vest at March 31, 2019 (1)		622,851			3.54	$	36,798

(1)

Represents the number of vested RSUs units as of March 31, 2019 plus the number of unvested RSUs expected to vest as of March 31, 2019 based on the unvested outstanding RSUs at March 31, 2019 adjusted for estimated forfeiture rates of

% for awards granted to non-executive level employees and

% 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 March 29, 2019, the last business day of the first quarter of 2019, of $59.08 per share, as RSUs do not have an exercise price) that would have been received by the RSU holders had all holders exercised on March 31, 2019. The aggregate intrinsic value of RSUs vested during the three months ended March 31, 2019 and 2018 was $9.5 million and $3.2 million, respectively.

The weighted average grant date fair value of RSUs vested during the three months ended March 31, 2019 and 2018 was $31.79 and $33.80, respectively. The total fair value of RSUs that vested during the three months ended March 31, 2019 and 2018 was $4.9 million and $2.6 million, respectively.

As of March 31, 2019, there was $33.2 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 4.29 years. The Company expects 1,067,389 unvested options and RSUs to vest over the next five years.