Equity-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Equity-Based Compensation

EQUITY-BASED COMPENSATION

We currently maintain three equity compensation plans; our 2019 Equity Incentive Plan (the “2019 Plan”), which was approved by our stockholders at our 2019 annual meeting and replaced our Fourth Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”), the Lumara Health Inc. Amended and Restated 2013 Incentive Compensation Plan (the “Lumara Health 2013 Plan”) and our 2015 Employee Stock Purchase Plan (“2015 ESPP”). All outstanding stock options granted under each of our equity compensation plans other than our 2015 ESPP have an exercise price equal to the closing price of a share of our common stock on the grant date.

During 2020, we also granted equity through inducement grants outside of our equity compensation plans to certain employees to induce them to accept employment with us (collectively, “Inducement Grants”). The options were granted at an exercise price equal to the fair market value of a share of our common stock on the respective grant dates and will become exercisable in four equal annual installments beginning on the first anniversary of the respective grant dates. The foregoing grants were made pursuant to inducement grants outside of our stockholder approved equity plans as permitted under the NASDAQ Stock Market listing rules. We assessed the terms of these awards and determined there was no possibility that we would have to settle these awards in cash and therefore, equity accounting was applied.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2020:

	2019	2007	Lumara Health	Inducement
	Plan	Plan	2013 Plan	Grants	Total
Outstanding at January 1, 2020	472,412	2,585,466	131,775	696,164	3,885,817
Granted	420,912	—	—	1,000,000	1,420,912
Exercised	(18,487)	—	(1,450)	—	(19,937)
Expired or terminated	(149,863)	(672,295)	(43,250)	(188,098)	(1,053,506)
Outstanding at September 30, 2020	724,974	1,913,171	87,075	1,508,066	4,233,286

Restricted Stock Units

The following table summarizes RSU activity for the nine months ended September 30, 2020:

	2019	2007	Lumara Health	Inducement
	Plan	Plan	2013 Plan	Grants	Total
Outstanding at January 1, 2020	128,742	1,407,305	2,167	41,223	1,579,437
Granted	825,131	—	—	—	825,131
Vested	(78,689)	(460,185)	(899)	(10,862)	(550,635)
Expired or terminated	(209,697)	(591,972)	(534)	(17,169)	(819,372)
Outstanding at September 30, 2020	665,487	355,148	734	13,192	1,034,561

Equity-Based Compensation Expense

Equity-based compensation expense for the three and nine months ended September 30, 2020 and 2019 consisted of the following (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cost of product sales	$	131	$	225	$	438	$	626
Research and development	237		691		260		2,051
Selling, general and administrative	1,854		4,058		7,403		11,039
Total equity-based compensation expense	2,222		4,974		8,101		13,716
Income tax effect	—		—		—		—
After-tax effect of equity-based compensation expense	$	2,222	$	4,974	$	8,101	$	13,716

In addition to the equity-based compensation expense presented in the table above, we incurred $0.7 million of equity-based compensation expense related to restructuring activities during the first quarter of 2019 (as discussed further in Note Q, below), which is classified within restructuring expense on our condensed consolidated statements of operations for the nine months ended September 30, 2019.