STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

12. STOCK-BASED COMPENSATION

The following table summarizes the Company’s stock awards granted for each of the periods indicated:


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2023				2022				2023					2022
	Grants		Weighted Average Grant Date Fair Value		Grants		Weighted Average Grant Date Fair Value		Grants			Weighted Average Grant Date Fair Value		Grants			Weighted Average Grant Date Fair Value
Stock options		50,875	$	66.53		127,100	$	59.84		1,135,799		$	72.23		1,626,220		$	47.54
Restricted stock units		27,539	$	118.05		65,657	$	105.28		1,137,202	(1)	$	153.02		925,167	(2)	$	80.66

(1) Included in restricted stock units (“RSUs”) for the nine months ended September 30, 2023 are 502,225 shares with performance conditions (the “March 2023 PSUs”) which are related to regulatory approval of certain of the Company's product candidates and achievement of a certain financial performance target.

(2) Included in the RSUs for the nine months ended September 30, 2022 are 38,500 shares of PSUs (the “March 2022 PSUs”) with performance conditions related to regulatory approval of the Company's product candidates.

As a result of the regulatory approval of ELEVIDYS in June 2023 and the achievement of the Company's financial performance target during the three months ended September 30, 2023, the Company recorded stock-based compensation expense of $10.3 million and $17.7 million associated with the March 2023 PSUs during the three and nine months ended September 30, 2023, respectively. Vesting of the March 2023 PSUs is contingent on the fulfillment of remaining service conditions. The maximum remaining expense associated with the March 2023 PSUs, excluding forfeitures, is $62.2 million. The associated expense will be recognized over approximately the next 1.5 years.

As of September 30, 2023, the performance conditions for the March 2022 PSUs were deemed as not probable of being achieved and, as such, no stock-based compensation related to these PSUs was recognized. If the performance conditions of the March 2022 PSUs are met within the required time frame, the Company may recognize up to $3.3 million of stock-based compensation expense, excluding forfeitures. Stock options and the remaining RSUs granted during the periods presented in the table have only service-based criteria and vest over four years.

Grant Modification

In June 2017, the Company granted its Chief Executive Officer 3,300,000 options with service and market conditions which were subject to a five-year cliff vesting schedule. On April 19, 2022 (the “Effective Date”), the Company entered into an agreement with its Chief Executive Officer to modify the vesting conditions of the options. Under the agreement, one-third of the options vested (the “Vested Tranche”) on the Effective Date with no required service or market conditions. Subject to the Chief Executive Officer's continued service through each applicable vesting date and the compound annual growth rate of the Company's common stock exceeding that of the Nasdaq Biotech Index in varying percentages, the remaining two-thirds of the options (the “Unvested Tranche”) shall vest in varying increments at any time between the Effective Date and June 26, 2025 (the “Measurement Period”) when (and if) the average of the closing price of the Company’s common stock during any consecutive 20 trading day period during the Measurement Period reaches certain pre-determined target stock prices.

The Unvested Tranche represents awards with market conditions only. Both the pre- and post-modification fair values for the Unvested Tranche are determined by a lattice model with Monte Carlo simulations. The incremental compensation costs related to varying increments of the Unvested Tranche will be recognized as stock-based compensation expense over their respective derived service periods, an output from the Monte Carlo simulation, and will be fully recognized over a 1.3 year period from the Effective Date.

During the nine months ended September 30, 2023, 550,110 options relating to the Unvested Tranche met the conditions for vesting as the average closing price of the Company's common stock exceeded $128.65 during 20 consecutive trading days in March 2023 and the compound annual growth rate of the Company's common stock exceeded that of the Nasdaq Biotech Index by greater than 5%. For the three and nine months ended September 30, 2023, the Company recorded $0.6 million and $13.4 million of stock-based compensation expense in total related to the Chief Executive Officer's awards, respectively. For the three and nine months ended September 30, 2022, the Company recorded $20.5 million and $94.2 million of stock-based compensation expense in total related to the Chief Executive Officer's awards, respectively. As of September 30, 2023, the Company has recognized all incremental compensation costs associated with the Unvested Tranche.

Stock-based Compensation Expense

For the three months ended September 30, 2023 and 2022, total stock-based compensation expense was $48.1 million and $50.4 million, respectively. For the nine months ended September 30, 2023 and 2022, total stock-based compensation expense was $136.7 million and $182.5 million, respectively. The following table summarizes stock-based compensation expense by function included within the unaudited condensed consolidated statements of operations and comprehensive loss:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2023		2022		2023		2022
	(in thousands)
Research and development		$	22,325	$	14,795	$	60,315	$	42,330
Selling, general and administrative			25,736		35,623		76,373		140,178
Total stock-based compensation expense		$	48,061	$	50,418	$	136,688	$	182,508

The following table summarizes stock-based compensation expense by grant type included within the unaudited condensed consolidated statements of operations and comprehensive loss:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2023		2022		2023		2022
	(in thousands)
Stock options		$	17,471	$	35,686	$	62,436	$	141,247
Restricted stock units			28,924		13,321		70,101		37,064
Employee stock purchase plan			1,666		1,411		4,151		4,197
Total stock-based compensation expense		$	48,061	$	50,418	$	136,688	$	182,508