In June 2013, the Company’s stockholders approved the 2013 Employee Stock Purchase Plan (the “2013 ESPP”) which authorized 0.3 million shares of common stock available to be issued. In June 2016, 2019 and 2023, the Company’s stockholders approved an additional 0.3 million, 0.5 million and 0.3 million shares, respectively, of common stock available for issuance under the 2013 ESPP. As of December 31, 2023, 0.3 million shares of common stock remain available for future grant under the 2013 ESPP.

In September 2014, the Company initiated the 2014 Employment Commencement Incentive Plan (the “2014 Plan”). The 2014 Plan, which authorized 0.6 million shares of common stock to be issued and allows for the grant of stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), RSUs, performance shares and performance units. As of December 31, 2023, 7.0 million shares have been added to the Company's 2014 Plan. As of December 31, 2023, 0.6 million shares of common stock remain available for future grant under the 2014 Plan.

In June 2018, the Company’s stockholders approved the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan, which authorized 2.9 million shares of common stock to be issued, allows for the grant of stock options, SARs, RSAs, RSUs, performance shares and performance units. In June 2020, June 2022 and June 2023, an additional 3.8 million, 2.5 million and 2.5 million shares of common stock, respectively, were approved by the Company’s stockholders and added to the 2018 Plan. As of December 31, 2023, together with the roll-over shares from the Company’s 2011 Equity Incentive Plan, 5.1 million shares of common stock remain available for future grant under the 2018 Plan.

In general, stock options have a ten-year term and vest over a four-year period, with one-fourth of the underlying shares vesting on the first anniversary of the grant and 1/48th of the underlying shares vesting monthly thereafter, such that the underlying shares will be fully vested on the fourth anniversary of the grant, subject to the terms of the applicable plan under which they were granted.

The fair values of stock options granted during the periods presented are measured on the date of grant using the Black-Scholes-Merton option-pricing model, with the following assumptions:


	For the Year Ended December 31,
	2023	2022	2021
Risk-free interest rate (1)	3.5 - 4.9%	1.6 - 4.2%	0.4 - 1.3%
Expected dividend yield (2)	—	—	—
Expected term (3)	5.23 years	5.09 years	4.99 years
Expected volatility (4)	46.8 - 63.2%	52.4 - 72.9%	60.1 - 70.8%

(1)

The risk-free interest rate is estimated using an average of Treasury bill interest rates over a historical period commensurate with the expected term of the option that correlates to the prevailing interest rates at the time of grant.

(2)

The expected dividend yield is zero as the Company has not paid any dividends to date and does not expect to pay dividends in the future.

(3)

The expected term is estimated using historical exercise behavior.

(4)

The expected volatility is the implied volatility in exchange-traded options of the Company’s common stock.

The amounts estimated according to the Black-Scholes-Merton option-pricing model may not be indicative of the actual values realized upon the exercise of these options by the holders.

The following table summarizes the Company’s stock option activity for the period indicated:


	For the Year Ended December 31, 2023
				Weighted-Average
	Shares			Exercise Price
Grants outstanding at beginning of the period		9,130,140		$	70.04
Granted		1,186,399			147.71
Exercised		(528,909	)		76.68
Cancelled and forfeited		(204,935	)		103.74
Grants outstanding at end of the period		9,582,695		$	78.57

Grants exercisable at end of the period		5,951,953		$	70.91
Grants vested and expected to vest at end of the period		9,216,033		$	77.01

The weighted-average grant date fair value per share of stock options granted during the years ended December 31, 2023, 2022 and 2021 was $70.94, $48.82 and $48.16, respectively.


			Weighted-Average
	Aggregate		Remaining
	Intrinsic Value		Contractual
	(in thousands)		Life (Years)
Options outstanding at December 31, 2023	$	288,119		5.7
Options exercisable at December 31, 2023	$	202,405		4.9
Options vested and expected to vest at December 31, 2023	$	285,706		5.5

The following table summarizes the Company’s shares vested and stock options exercised for each of the periods indicated:


	For the Year Ended December 31,
	2023		2022		2021
	(in thousands)
Aggregate grant date fair value of shares vested	$	142,692	$	140,889	$	79,068
Aggregate intrinsic value of stock options exercised	$	29,711	$	12,150	$	10,622

In June 2017, the Company granted its CEO 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 CEO to modify the vesting conditions of the options (the “Amendment”). Under the Amendment, one-third of the options vested (the “Vested Tranche”) on the Effective Date with no required service or market conditions. Subject to the CEO'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. Additionally, the CEO is subject to a one-year post-exercise restriction to sell, transfer or dispose shares acquired upon the exercise of any options that vest after deduction of any shares withheld or sold to pay the applicable aggregate exercise price and/or withholding taxes.

To determine the incremental compensation cost of the modification, the fair value of the modified awards was compared to the fair value of the original awards measured immediately before its terms or conditions were modified. As the Vested Tranche became immediately vested on the Effective Date, the post-modification fair value for the Vested Tranche is based on the Black-Scholes-Merton option-pricing model, while the pre-modification fair value is based on a lattice model with Monte Carlo simulations.

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 were fully recognized over a 1.3-year period from the Effective Date. The aggregate incremental cost of the modification of the CEO's awards was $123.3 million.

During both the years ended December 31, 2023 and 2022, respectively, 550,110 options relating to the Unvested Tranche became vested as they met the conditions for vesting as a result of the average closing price of the Company's common stock exceeding $128.65 and $105.74 during 20 consecutive trading days and the compound annual growth rate of the Company's common stock exceeding that of the Nasdaq Biotech Index by greater than 5%. Accordingly, all previously unrecognized expense associated with these options was immediately recognized. For the years ended December 31, 2023 and 2022, the Company recorded $13.4 million and $109.9 million as stock-based compensation expense relating to the CEO’s awards, respectively. As of December 31, 2023, the Unvested Tranche was fully expensed.

Excluding the options with market and service conditions granted to the Company’s CEO, the remaining stock options granted during the periods presented in the table have only service-based criteria and vest over four years.

The Company grants RSUs to members of its board of directors and employees. The following table summarizes the Company’s RSU activity for the period indicated:


	For the Year Ended December 31, 2023
					Weighted-Average
					Grant Date
	Shares				Fair Value
Grants outstanding at beginning of the period		1,829,632		(1)	$	93.59
Granted		1,165,925		(2)		151.20
Vested		(644,614	)			93.69
Forfeited		(110,439	)			112.27
Grants outstanding at end of the period		2,240,504			$	120.17

(1) Included in RSUs outstanding at the beginning of the year ended December 31, 2023 are 38,500 shares of PSUs (the “March 2022 PSUs”) with performance conditions related to regulatory approval of the Company’s product candidates.

(2) Included in RSUs granted during the year ended December 31, 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.

The weighted-average grant date fair value of RSUs granted during the years ended December 31, 2022 and 2021 was $85.39 and $85.32, respectively. The fair values of RSUs vested during the years ended December 31, 2023, 2022 and 2021 totaled $82.6 million, $33.1 million and $23.1 million, respectively.

As a result of the regulatory approval of ELEVIDYS in June 2023 and the achievement of the Company's financial performance target during the year ended December 31, 2023, the March 2023 PSUs became eligible for vesting and, as a result, the Company recorded stock-based compensation expense of $26.3 million. 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 $48.5 million. The associated expense will be recognized over approximately the next 1.2 years.

As of December 31, 2023, the performance conditions for the March 2022 PSUs were deemed 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. The remaining RSUs granted during the periods presented in the table have only service-based criteria and vest over four years.

Under the Company’s 2013 ESPP, participating employees purchase common stock through payroll deductions. The purchase price is equal to 85% of the lower of the closing price of the Company’s common stock on the first business day and the last business day of the relevant purchase period. The 24-month offering period will end between February 29, 2024 and August 31, 2025. The following table summarizes the Company’s ESPP activity for each of the periods indicated:


	For the Year Ended December 31,
	2023		2022		2021
Number of shares purchased		153,027		115,124		111,171
Proceeds received (in millions)	$	10.8	$	7.5	$	7.8

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


	For the Year Ended December 31,
	2023		2022		2021
	(in thousands)
Research and development	$	82,489	$	61,293	$	50,526
Selling, general and administrative		100,025		171,725		63,417
Total stock-based compensation	$	182,514	$	233,018	$	113,943

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


	For the Year Ended December 31,
	2023		2022		2021
	(in thousands)
Stock options	$	79,472	$	174,868	$	68,995
Restricted stock units		97,808		52,601		40,055
Employee stock purchase plan		5,234		5,549		4,893
Total stock-based compensation	$	182,514	$	233,018	$	113,943

As of December 31, 2023, there was $260.7 million of total unrecognized stock-based compensation expense related to the Company’s stock-based compensation plans, including estimated forfeitures. The expense is expected to be recognized over a weighted-average period of approximately three years. Of this amount, $110.3 million related to options with service conditions only, $6.6 million related to RSUs with certain performance conditions not met and the remaining $143.8 million related to restricted stock units with service conditions only.