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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2022
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION 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 September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |
Research and development | $ | 16,438 |  |  | $ | 11,487 |  |  | $ | 34,886 |  |  | $ | 37,550 |  |  |
Selling, general and administrative | 20,899 |  |  | 22,479 |  |  | 46,832 |  |  | 59,104 |  |  |
Total stock-based compensation expense | $ | 37,337 |  |  | $ | 33,966 |  |  | $ | 81,718 |  |  | $ | 96,654 |  |  |
Stock-based compensation for each type of award under our equity incentive plans and ESPP were as follows (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Stock options | $ | 3,299 |  |  | $ | 4,607 |  |  | $ | 10,470 |  |  | $ | 15,203 |
Restricted stock units | 22,233 |  |  | 13,721 |  |  | 54,234 |  |  | 40,802 |
Performance stock units | 11,331 |  |  | 14,971 |  |  | 14,621 |  |  | 37,616 |
ESPP | 474 |  |  | 667 |  |  | 2,393 |  |  | 3,033 |
Total stock-based compensation expense | $ | 37,337 |  |  | $ | 33,966 |  |  | $ | 81,718 |  |  | $ | 96,654 |
On May 25, 2022, at the 2022 Annual Meeting of Stockholders, our stockholders approved the amendment and restatement of Exelixis, Inc. 2017 Equity Incentive Plan (as amended and restated, the 2017 Plan). The amendment and restatement increased the share reserve under the 2017 Plan by 28,500,000 shares. As of September 30, 2022, 31,485,656 sh ares were available for grant under the 2017 Plan. The share reserve is reduced by 1 share for each share issued pursuant to a stock option and 2 shares for full value awards, including restricted stock units (RSUs). During the nine months ended September 30, 2022, we granted 588,862 stock options with a weighted average exercise price of $19.99 per share and a weighted average grant date fair value of $8.36 per s hare. As of September 30, 2022, there were 11,416,151 stock options outstanding and $19.6 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 nine months ended September 30, 2022, we granted 5,292,088 service-based RSUs with a weighted average grant date fair value of $20.56 per share. As of September 30, 2022, there were 11,864,173 RSUs outstanding, including the TSR-based RSUs, and $193.8 million of related unrecognized compensation expense. Stock options and service-based RSUs granted to employees during the nine months ended September 30, 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 Fiscal 2021 Form 10-K. As of September 30, 2022, there were 5,367,906 performance-based restricted stock units (PSUs) outstanding and $101.0 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. During the three months ended September 30, 2022, we achieved a performance condition for threshold achievement for 495,886 PSUs granted during 2020 (the 2020 PSUs) and have recognized $9.7 million of stock-based compensation expense related to the 2020 PSUs during the three months ended September 30, 2022. 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 Fiscal 2021 Form 10-K.

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