11.

Stock-Based Compensation

For the three-month periods ended September 30, 2018 and 2017, the Company recorded stock-based compensation expense of approximately $2,779,000 and $1,817,000, respectively, for share-based awards granted under the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan”), the Repligen Corporation Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan,”), and the Repligen Corporation 2018 Stock Option and Incentive Plan (the “2018 Plan,” and together with the 2001 Plan and the 2012 Plan, the “Plans”). The Company recorded stock-based compensation expense of approximately $7,672,000 and $4,845,000 for the nine-month periods ended September 30, 2018 and 2017, respectively, for share-based awards granted under the Plans.

The following table presents stock-based compensation expense included in the Company’s consolidated statements of comprehensive income (amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Cost of product revenue	$	277	$	197	$	777	$	491
Research and development		253		127		650		338
Selling, general and administrative		2,249		1,493		6,245		4,016

Total	$	2,779	$	1,817	$	7,672	$	4,845

The 2018 Plan allows for the granting of incentive and nonqualified options to purchase shares of common stock, restricted stock units (“RSUs”) and other equity awards. Employee grants under the Plans generally vest over a three- to five-year period, with 20%-33% vesting on the first anniversary of the date of grant and the remainder vesting in equal yearly installments thereafter. Nonqualified options and RSUs issued to non-employee directors under the Plans generally vest over one year. In the first quarter of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation awards to its Chief Executive Officer consisting of both stock options and RSUs that are subject to time-based vesting over nine years. Options granted under the Plans have a maximum term of ten years from the date of grant and generally, the exercise price of the stock options equals the fair market value of the Company’s common stock on the date of grant. At September 30, 2018, options to purchase 1,033,312 shares and 707,716 RSUs were outstanding under the Plans. At September 30, 2018, 2,906,351 shares were available for future grant under the 2018 Plan.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date, and the Company uses the value of the common stock as of the grant date to value RSUs. The Company measures stock-based compensation cost at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards with service based vesting over the employee’s requisite service period on a straight-line basis. In the third quarter of 2017, the Company issued performance stock units to certain employees related to the Spectrum Acquisition which are tied to the achievement of certain revenue and gross margin metrics and the passage of time. Additionally, in the first quarter of 2018, the Company issued performance stock units to certain individuals which are tied to the achievement of certain 2018 revenue metrics and the passage of time. The Company recognizes expense on performance based awards over the vesting period based on the probability that the performance metrics will be achieved. The Company recognizes stock-based compensation expense for options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.

Information regarding option activity for the nine-month period ended September 30, 2018 under the Plans is summarized below:


	Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)		(in thousands) Aggregate Intrinsic Value
Options outstanding at December 31, 2017		734,940		$	20.80
Granted		439,678			34.79
Exercised		(131,718	)		18.02
Forfeited/cancelled		(9,588	)		29.71

Options outstanding at September 30, 2018		1,033,312		$	26.99		7.38	$	29,421

Options exercisable at September 30, 2018		444,446		$	18.73		5.29	$	16,325

Vested and expected to vest at September 30, 2018 (1)		986,509		$	26.64		7.29	$	28,429

(1)

Represents the number of vested options as of September 30, 2018 plus the number of unvested options expected to vest as of September 30, 2018 based on the unvested outstanding options at September 30, 2018 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on September 28, 2018, the last trading day of the nine-month period ended September 30, 2018, of $55.46 per share and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on September 30, 2018.

The weighted average grant date fair value of options granted during the nine-month periods ended September 30, 2018 and 2017 was $18.56 and $16.94, respectively. The total fair value of stock options that vested during the nine-month periods ended September 30, 2018 and 2017 was approximately $2,113,000 and $2,074,000, respectively.

Information regarding RSU and performance stock unit activity for the nine-month period ended September 30, 2018 under the Plans is summarized below:


	Units Outstanding			Weighted- Average Remaining Contractual Term (in years)		(in thousands) Aggregate Intrinsic Value
Restricted and performance stock units outstanding at December 31, 2017		505,235
Granted		385,461
Vested		(134,590	)
Forfeited/cancelled		(48,390	)

Restricted stock units outstanding at September 30, 2018		707,716			3.94	$	39,250

Vested and expected to vest at September 30, 2018 (1)		649,985			3.43	$	36,048

(1)

Represents the number of unvested RSUs expected to vest as of September 30, 2018 based on the unvested outstanding RSUs at September 30, 2018 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (equal to the closing price of the common stock on September 28, 2018, the last trading day of the nine-month period ended September 30, 2018, of $55.46 per share) that would have been received by the RSU holders had all RSUs vested on September 28, 2018. The aggregate intrinsic value of RSUs vested during the nine-month periods ended September 30, 2018 and 2017 was approximately $5,165,000 and $3,480,000, respectively.

The weighted average grant date fair value of RSUs granted during the nine-month periods ended September 30, 2018 and 2017 was $35.13 and $36.85, respectively. The total grant date fair value of RSUs that vested during the nine-month periods ended September 30, 2018 and 2017 was approximately $4,065,000 and $2,565,000, respectively.

As of September 30, 2018, there was $28,360,000 of total unrecognized compensation cost related to unvested share-based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 4.51 years.