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Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Employee Benefit Plans | EMPLOYEE BENEFIT PLANS Equity Incentive Plans and ESPP We allocated the stock-based compensation expense for our equity incentive plans and our ESPP as follows (in thousands):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Research and development | $ | 46,654 |  |  | $ | 37,198 |  |  | $ | 19,374 |
Selling, general and administrative | 73,166 |  |  | 67,872 |  |  | 37,228 |
Total stock-based compensation expense | $ | 119,820 |  |  | $ | 105,070 |  |  | $ | 56,602 |
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Stock options | $ | 19,048 |  |  | $ | 19,863 |  |  | $ | 23,422 |
Restricted stock units | 53,629 |  |  | 35,675 |  |  | 26,056 |
Performance stock units | 43,428 |  |  | 47,106 |  |  | 4,878 |
ESPP | 3,715 |  |  | 2,426 |  |  | 2,246 |
Total stock-based compensation expense | $ | 119,820 |  |  | $ | 105,070 |  |  | $ | 56,602 |
We have several equity incentive plans under which we granted stock options and RSUs, including PSUs, to employees and directors. At December 31, 2021, 11,004,584 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 award and 1.5 shares for full value awards granted in the form of RSUs or PSUs. On May 20, 2020, at our 2020 Annual Meeting of Stockholders, our stockholders approved the amendment and restatement of the 2017 Plan. The amendment and restatement increased the share reserve under the 2017 Plan by 21,000,000 shares, subject to adjustment for certain changes in our capitalization, which became effective immediately upon stockholder approval. The Board of Directors delegated responsibility for administration of our equity incentive plans to the Compensation Committee of our Board of Directors, including the authority to determine the term, exercise price and vesting requirements of each grant. Stock options granted to our employees and directors generally have a four-year vesting term and a one-year vesting term, respectively, an exercise price equal to the fair market value on the date of grant, and a seven-year life from the date of grant. RSUs granted to our employees and directors generally have a four-year vesting term and a one-year vesting term, respectively. PSUs granted pursuant to our equity incentive plans vest upon specified service conditions and the achievement of a performance target or market condition. We have adopted a Change in Control and Severance Benefit Plan for certain executive officers. Eligible Change in Control and Severance Benefit Plan participants include employees with the title of vice president and above. If a participant’s employment is terminated without cause during a period commencing one month before and ending thirteen months following a change in control, as defined in the plan document, then the Change in Control and Severance Benefit Plan participant is entitled to have the vesting of all their outstanding equity awards accelerated and the exercise period for their stock options extended to no more than one year. We have an ESPP that allows for qualified employees (as defined in the ESPP) to purchase shares of our common stock at a price equal to the lower of 85% of the closing price at the beginning of the offering period or 85% of the closing price at the end of each six-month purchase period. As of December 31, 2021, we had 3,168,354 shares available for issuance under our ESPP. Pursuant to the ESPP, we issued 536,226, 534,419 and 483,009 shares of common stock at an average price per share of $17.76, $14.55 and $12.60 during the years ended December 31, 2021, 2020 and 2019, respectively. Cash received from purchases under the ESPP for the years ended December 31, 2021, 2020 and 2019 was $9.5 million, $7.8 million and $6.1 million, respectively. We used a Black-Scholes Merton option pricing model to value stock options and ESPP purchases. The weighted average grant-date fair value per share of stock options and ESPP purchases were as follows:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Stock options | $ | 9.04 |  |  | $ | 9.44 |  |  | $ | 8.19 |
ESPP | $ | 6.12 |  |  | $ | 6.12 |  |  | $ | 4.85 |
The grant-date fair value of stock option grants and ESPP purchases was estimated using the following assumptions:
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Stock options: |  |  |  |  |
Risk-free interest rate | 0.74 | % |  | 0.30 | % |  | 1.77 | %
Dividend yield | — | % |  | — | % |  | — | %
Volatility | 51 | % |  | 54 | % |  | 48 | %
Expected life | 4.6 years |  | 4.4 years |  | 4.3 years
ESPP: |  |  |  |  |
Risk-free interest rate | 0.08 | % |  | 0.79 | % |  | 2.16 | %
Dividend yield | — | % |  | — | % |  | — | %
Volatility | 47 | % |  | 52 | % |  | 50 | %
Expected life | 6 months |  | 6 months |  | 6 months
We considered both implied and historical volatility in developing our estimate of expected volatility. The assumption for the expected life of stock options is based on historical exercise patterns and post-vesting termination behavior. The risk-free interest rate is based on U.S. Treasury rates with the same or similar term as the underlying award. Our dividend rate is based on historical experience and our investors’ current expectations. The fair value of RSUs, including PSUs, was based on the closing price of the underlying common stock on the date of grant. Activity for stock options during the year ended December 31, 2021 was as follows (in thousands, except per share amounts):
| Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Stock options outstanding at December 31, 2020 | 16,129 |  |  | $ | 12.72 |  |  |  |  |
Granted | 2,573 |  |  | $ | 21.33 |  |  |  |  |
Exercised | (4,486) |  |  | $ | 4.23 |  |  |  |  |
Cancelled | (545) |  |  | $ | 21.15 |  |  |  |  |
Stock options outstanding at December 31, 2021 | 13,671 |  |  | $ | 16.79 |  |  | 3.3 years |  | $ | 48,860 |
Stock options exercisable at December 31, 2021 | 9,962 |  |  | $ | 15.23 |  |  | 2.4 years |  | $ | 48,171 |
As of December 31, 2021, there was $27.8 million of unrecognized compensation expense related to our unvested stock options. The compensation expense for the unvested stock options will be recognized over a weighted-average period of 2.7 years. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2021 and the exercise prices, multiplied by the number of in-the-money stock options) that would have been received by the stock option holders had all stock option holders exercised their stock options on December 31, 2021. The total intrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019 was $76.0 million, $106.5 million and $54.1 million, respectively. Cash received from stock option exercises during the years ended December 31, 2021, 2020 and 2019 was $14.8 million, $26.9 million and $16.4 million, respectively. Activity for RSUs during the year ended December 31, 2021 was as follows (in thousands, except per share amounts):
| Shares |  | Weighted Average Grant Date Fair Value |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
RSUs outstanding at December 31, 2020 | 5,378 |  |  | $ | 21.96 |  |  |  |  |
Awarded | 4,220 |  |  | $ | 21.34 |  |  |  |  |
Vested and released | (2,020) |  |  | $ | 22.03 |  |  |  |  |
Forfeited | (750) |  |  | $ | 21.69 |  |  |  |  |
RSUs outstanding at December 31, 2021 | 6,828 |  |  | $ | 21.58 |  |  | 1.7 years |  | $ | 124,824 |
As of December 31, 2021, there was $123.6 million of unrecognized compensation expense related to our unvested RSUs which will be recognized over a weighted-average period of 2.9 years. Activity for PSUs, during the year ended December 31, 2021 was as follows (in thousands, except per share amounts):
| Shares |  | Weighted Average Grant Date Fair Value |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
PSUs outstanding at December 31, 2020 | 7,378 |  |  | $ | 21.70 |  |  |  |  |
Awarded | 2,056 |  |  | $ | 24.54 |  |  |  |  |
Vested and released | (2,388) |  |  | $ | 19.76 |  |  |  |  |
Forfeited | (736) |  |  | $ | 22.57 |  |  |  |  |
PSUs outstanding at December 31, 2021 | 6,310 |  |  | $ | 23.00 |  |  | 3.0 years |  | $ | 98,121 |
In March 2021, in connection with our long-term incentive compensation program, we awarded certain employees 1,027,650 (the 2021 target amount) 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 2021 target amount, or up to 2,055,300 total 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 an 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. The performance condition for a threshold of net product revenues relative to the 2021 PSUs was deemed probable of achievement in the fourth quarter of 2021. 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 | — | %
During the year ended December 31, 2020, in connection with our long-term incentive compensation program, we awarded 2,327,840 PSUs (the 2020 target amount) that will vest upon the achievement of performance targets related to clinical trial positive top-line results and product approvals by the FDA (the 2020 PSUs). Pursuant to the terms of the 2020 PSUs, employees may earn up to 200% of the 2020 target amount, or 4,655,680 total shares, depending on the volume and timing of achievement of the performance targets. The 2020 PSUs will be forfeited if the performance targets are not met by December 31, 2024. The performance condition for threshold achievement of a product approval by the FDA relative to the 2020 PSUs occurred in the third quarter of 2021 representing 25% of the 2020 target amount. During the year ended December 31, 2019, in connection with our long-term incentive compensation program, we awarded 1,926,605 PSUs (the 2019 target amount) that vest upon the achievement of performance targets related to product approvals by the FDA (the 2019 PSUs). Pursuant to the terms of the 2019 PSUs, employees may earn up to 200% of the 2019 target amount, or 3,853,210 total shares, depending on the volume and timing of achievement of the performance targets. The performance condition for early achievement of the 2019 PSUs occurred during 2020 representing 150% of the 2019 target amount. The performance condition for earning the remaining 50% of the 2019 target amount occurred in early 2021. During the year ended December 31, 2018, we awarded 693,131 PSUs that vest upon the achievement of certain product revenue, late-stage clinical development programs and discovery pipeline expansion performance targets (the 2018 PSUs). The performance targets for 167,726 remaining 2018 PSUs were achieved in 2021. Expense recognition for PSUs commences when it is determined that attainment of the performance target is probable. Of the aggregate outstanding PSUs, 4,853,112 relate to awards for which we achieved the performance target. As of December 31, 2021, the remaining unrecognized compensation expense for the PSUs achieved or deemed probable of achievement related to the PSUs was $12.1 million, which will be recognized over a weighted-average period of 3.0 years. The total unrecognized compensation expense for the PSUs for which we have not yet determined that attainment of the performance target is probable was $121.6 million as of December 31, 2021. Exelixis, Inc. 401(k) Plan (the 401(k) Plan) We sponsor the 401(k) Plan under which we have historically made matching contributions to our employees’ 401(k) accounts in the form of our common stock. Beginning in 2020, our matching contributions are in the form of cash. We recorded compensation expense of $9.5 million, $6.7 million and $4.6 million for the years ended December 31, 2021, 2020 and 2019, respectively, for matching contributions to our employees 401(k) accounts.

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