Stockholders' Equity

12 Months Ended

Dec. 31, 2018

8.	Stockholders’ Equity

Public Offering of Common Stock

On July 3, 2017, the Company completed a public offering in which 2,807,017 shares of its common stock were sold to the public at a price of $42.75 per share. The underwriters were granted an option, which they exercised in full, to purchase an additional 421,052 shares of the Company’s common stock. The total proceeds from this offering, net of underwriting discounts, commissions and other offering expenses, totaled $129.3 million.

Stock Option and Incentive Plans

At our 2018 annual meeting of shareholders held on May 16, 2018, our shareholders approved the 2018 Stock Option and Incentive Plan (the “2018 Plan”). Under the 2018 Plan the number of shares of our common stock that are reserved and available for issuance shall be 2,778,000 plus the number of shares of common stock available for issuance under our Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan”). The shares of common stock underlying any awards under the 2018 Plan, 2012 Plan and the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan,” and together with the 2018 Plan and 2012 Plan, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan. At December 31, 2018, 2,874,751 shares were available for future grant under the 2018 Plan.

Stock-Based Compensation

The Company recorded stock-based compensation expense of $

10.2 million

, $

6.7 million

and $

4.6 million

for the years ended December 31, 2018, 2017 and 2016, respectively, for share-based awards granted under the Plans. The following table presents stock-based compensation expense in the Company’s consolidated statements of operations and comprehensive income:

	For the Years Ended December 31,
	2018		2017		2016
	(Amounts in thousands)
Cost of product revenue	$	1,019	$	704	$	341
Research and development		917		481		537
Selling, general and administrative		8,256		5,562		3,717
Total stock-based compensation	$	10,192	$	6,747	$	4,595

During 2016, the Company modified certain stock option grants for its former senior vice president of research and development in conjunction with his retirement. As part of the April 2016 transition agreement, all outstanding equity awards continued to vest through December 31, 2016, and fifty percent (50%) of the option awards that are unvested on February 28, 2017 immediately vested and became exercisable as of that date. As a result of these modifications to his share-based payment arrangements, the Company incurred stock compensation expense of $

0.3 million

for the year ended December 31, 2016. This expense was recorded to research and development expense on the Company’s consolidated

statement of operations and comprehensive income.

The 2018 Plan allows for the granting of incentive and nonqualified options to purchase shares of common stock, restricted stock 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 issued to

non-employee

directors and consultants 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 restricted stock units (“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 December 31, 2018, options to purchase 998,226 shares and 705,413 RSUs were outstanding under the Plans.

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. The fair value of share-based awards granted during the years ended December 31, 2018, 2017 and 2016 were calculated using the following estimated assumptions:

	For the Years Ended December 31,
	2018		2017		2016
Expected term (in years)		5.5 – 7.5		6.1		6.7 – 7.1
Expected volatility (range)		45.14 – 50.87%		51.48%		50.85 – 51.01%
Risk-free interest rate		2.63 – 2.96%		1.88 – 1.99%		1.51 – 2.37%
Expected dividend yield		0%		0%		0 %

Information regarding option activity for the year ended December 31, 2018 under the Plans is summarized below:

	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2017		734,940		$	20.80
Granted		449,678		$	35.48
Exercised		(176,804	)	$	19.31
Forfeited/expired/cancelled		(9,588	)	$	29.71
Options outstanding at December 31, 2018		998,226		$	27.54		7.19	$	25,273
Options exercisable at December 31, 2018		410,760		$	18.53		4.96	$	14,051
Vested and expected to vest at December 31, 2018 (1)		953,454					7.10	$	24,490

(1)

Represents the number of vested options as of December 31, 2018 plus the number of unvested options expected to vest as of December 31, 2018 based on the unvested outstanding options at December 31, 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 December 31, 2018, the last business day of 2018, of $52.74 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 December 31, 2018. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018, 2017 and 2016 was $

5.3 million

, $

5.3 million

and $

5.0 million,

respectively.

The weighted average grant date fair value of options granted during the years ended December 31, 2018, 2017 and 2016 was $18.90, $16.94 and $14.16, respectively. The total fair value of stock options that vested during the years ended December 31, 2018, 2017 and 2016 was $

2.3 million

, $

2.2 million

and $

1.7 million,

respectively.

Information regarding RSU activity for the year ended December 31, 2018 under the Plans is summarized below:

	Shares			Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2017		505,235
Awarded		407,961
Vested		(153,383	)
Forfeited/expired/cancelled		(54,400	)
Unvested at December 31, 2018		705,413			3.98	$	37,203
Vested and expected to vest at December 31, 2018 (1)		652,543			3.26	$	34,415

(1)

Represents the number of vested RSUs units as of December 31, 2018 plus the number of unvested RSUs expected to vest as of December 31, 2018 based on the unvested outstanding RSUs at December 31, 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 December 31, 2018, the last business day of 2018, of $52.74 per share, as RSUs do not have an exercise price) that would have been received by the RSU holders had all holders exercised on December 31, 2018. The aggregate intrinsic value of RSUs vested during the years ended December 31, 2018, 2017 and 2016 was $

6.2 million,

4.0 million

and $

1.7 million

, respectively.

The weighted average grant date fair value of RSUs granted during the years ended December 31, 2018, 2017 and 2016 was $30.30, $26.03 and $27.25, respectively. The total fair value of RSUs that vested during the years ended December 31, 2018, 2017 and 2016 was $

4.6 million

, $

4.0 million

and $

1.5 million

, respectively.

As of December 31, 2018, there was $

27.1 million

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 4.53 years. The Company expects 1,195,236 unvested options and RSUs to vest over the next five years.