Stock-Based Compensation

3 Months Ended

Apr. 01, 2022

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,
	2022		2021

Research and development	$	8,899	$	12,396
Selling, general and administrative	10,860		22,257
Total stock-based compensation expense	$	19,759	$	34,653

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,
	2022		2021
Stock options	$	3,678	$	4,694
Restricted stock units	13,073		11,669
Performance stock units	1,709		17,947
ESPP	1,299		343
Total stock-based compensation expense	$	19,759	$	34,653

As of March 31, 2022, 4,152,901 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, 2022, we granted 233,476 stock options with a weighted average exercise price of $19.02 per share and a weighted average grant date fair value of $7.51 per share. As of March 31, 2022, there were 12,635,435 stock options outstanding and $24.8 million of related unrecognized compensation expense.

In March 2022, we awarded to certain employees an aggregate of 1,003,482 (the target amount) RSUs that are subject to a total shareholder return (TSR) market condition (the TSR-based RSUs). 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 1, 2022 through January 3, 2025. Depending on the results relative to the TSR market condition, the holders of the TSR-based RSUs may earn up to 175% of the target amount of shares. 50% of the shares earned pursuant to the TSR-based RSU awards will vest at the end of the performance period, and the remainder will vest approximately one year later, subject to employee’s continuous service. These TSR-based RSUs will be forfeited if the market condition at or above a threshold level is not achieved at the end of the performance period on January 3, 2025.

We used a Monte Carlo simulation model and the following assumptions to determine the grant date fair value of $33.17 per share for the TSR-based RSUs:


Fair value of the Company’s common stock on grant date	$	20.70
Expected volatility	46.85		%
Risk-free interest rate	1.59		%
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.

During the three months ended March 31, 2022, we granted 3,549,973 service-based RSUs with a weighted average grant date fair value of $20.51 per share. As of March 31, 2022, there were 11,635,329 RSUs outstanding, including the TSR-based RSUs, and $209.6 million of related unrecognized compensation expense.

Stock options and service-based RSUs granted to employees during the three months ended March 31, 2022 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 Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

As of March 31, 2022, there were 5,698,281 performance-based restricted stock units (PSUs) outstanding and $116.0 million of related unrecognized stock-based compensation expense. Expense recognition for PSUs commences when it is determined that achievement of the performance target is probable. For more information about our PSUs, see “Note 8. Employee Benefit Plans” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.