Stock-Based Compensation

3 Months Ended

Apr. 02, 2021

Share-based Payment Arrangement [Abstract]

We allocated the stock-based compensation expense for our equity incentive plans and our Employee Stock Purchase Plan (ESPP) as follows (in thousands):


	Three Months Ended March 31,
		2021		2020
Research and development		$	12,396	$	5,086
Selling, general and administrative		22,257		8,896
Total stock-based compensation expense		$	34,653	$	13,982

Stock-based compensation for each type of award under our equity incentive plans and ESPP were as follows (in thousands):


	Three Months Ended March 31,
		2021		2020
Stock options		$	4,694	$	4,994
Restricted stock units		11,669		7,797
Performance stock units		17,947		496
ESPP		343		695
Total stock-based compensation expense		$	34,653	$	13,982

As of March 31, 2021, 9,272,614 shares were available for grant under the Exelixis, Inc. 2017 Equity Incentive Plan (as amended and restated, the 2017 Plan). The share reserve is reduced by 1 share for each share issued pursuant to a stock option and 1.5 shares for full value awards granted in the form of restricted stock units (RSUs).

During the three months ended March 31, 2021, we granted 881,440 stock options with a weighted average exercise price of $21.75 per share and a weighted average grant date fair value of $9.88 per share. As of March 31, 2021, there were 15,688,044 stock options outstanding and $30.7 million of related unrecognized compensation expense.

During the three months ended March 31, 2021, we granted 3,059,698 service-based restricted stock units (RSUs) with a weighted average grant date fair value of $21.43 per share. As of March 31, 2021, there were 8,282,867 RSUs outstanding and $155.9 million of related unrecognized compensation expense.

Stock options and RSUs granted to employees during the three months ended March 31, 2021 have vesting conditions and contractual lives of a similar nature to those described in “Note 8. Employee Benefit Plans” of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

In March 2021, we awarded 1,027,650 (the target amount) performance-based restricted stock units (PSUs), subject to a performance and a market condition (the 2021 PSUs). Pursuant to the terms of 2021 PSUs, the holders of the awards may earn up to 200% of the target amount of shares, depending on the level of achievement of the performance condition related to certain net product revenues and a total shareholder return (TSR) market condition. The TSR market condition is based on our relative TSR percentile rank compared to companies in the NASDAQ Biotechnology Index during the performance period, which is January 2, 2021 through December 29, 2023. Fifty percent of the shares earned subject to the performance and market conditions will vest at the end of the performance period and the remainder will vest approximately one year later subject to employee’s continuous service. The 2021 PSUs will be forfeited if the performance condition at or above a threshold level is not achieved by December 29, 2023.

A Monte Carlo simulation model was used to determine the grant date fair value of $24.54 for the 2021 PSUs based on the following assumptions:


Fair value of the Company’s common stock on grant date	$	21.31
Expected volatility	49		%
Risk-free interest rate	0.29		%
Dividend yield	—		%

The Monte Carlo simulation model also assumed correlations of returns of the stock prices of the Company’s common stock and the common stock of a peer group of companies and historical stock price volatility of the peer group of companies. The valuation model also used terms based on the length of the performance period and compound annual growth rate goals for total stockholder return based on the provisions of the award.

As of March 31, 2021, there were 8,767,305 PSUs outstanding and $161.2 million of related unrecognized compensation expense. Expense recognition for PSUs commences when it is determined that achievement of the performance target is probable. During the three months ended March 31, 2021, we achieved additional performance targets for 461,532 additional PSUs granted during 2019. For more information about our PSUs, see “Note 8. Employee Benefit Plans” of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.