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Share-based compensation

6 Months Ended

Jun. 30, 2019

8 Share-based compensation

The Company’s share-based compensation plans include the 2014 Amended and Restated Share Option Plan (the “2014 Plan”) and inducement grants under Rule 5653(c)(4) of the NASDAQ Global Select Market with terms similar to the 2014 Plan (together the “2014 Plans”). At the annual general meeting of shareholders in June 2018, the Company’s shareholders approved amendments of the 2014 Plan, increasing the shares authorized for issuance by 3,000,000 to a total of 8,601,471. The Company previously had a 2012 Equity Incentive Plan (“2012 Plan”). As of June 30, 2019, 14,000 fully vested share options are outstanding (December 31, 2018: 32,567) under the 2012 Plan.

2014 Plan

Share-based compensation expense recognized by classification included in the Consolidated statements of operations and comprehensive loss in relation to the 2014 Plan was as follows:


	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)
Research and development	$	2,119	$	993	$	4,099	$	1,799
Selling, general and administrative		2,457		1,212		4,755		2,933
Total	$	4,576	$	2,205	$	8,854	$	4,732

Share-based compensation expense for the six months ended June 30, 2019 increased by $4.1 million when compared to six months ended June 30, 2018 as a result of the appreciation of the share price and increase in number of grants. Share-based compensation expense for the three months ended June 30, 2019 increased by $2.4 million when compared to three months ended June 30, 2018 as a result of the appreciation of the share price.

Share-based compensation expense recognized by award type was as follows:


	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
	(in thousands)
Award type
Share options	$	2,004	$	1,096	$	4,080	$	2,155
Restricted share units (“RSUs”)		995		540		1,925		1,286
Performance share units (“PSUs”)		1,577		569		2,849		1,291
Total	$	4,576	$	2,205	$	8,854	$	4,732

As of June 30, 2019, the unrecognized share-based compensation expense related to unvested awards under the 2014 Plans were:


	Unrecognized		Weighted average
	share-based		remaining
	compensation		period for
	expense		recognition
Award type	(in thousands)		(in years)
Share options	$	21,695	3.08
Restricted share units		6,955	2.10
Performance share units		9,867	2.12
Total	$	38,517	2.66

The Company satisfies the exercise of share options and vesting of RSUs and PSUs through newly issued ordinary shares.

Share options

The following table summarizes option activity for the six months ended June 30, 2019:


	Options
	Number of	Weighted average
	ordinary shares	exercise price

Outstanding at December 31, 2018	2,673,712	$	15.09
Granted	530,276	$	36.05
Forfeited	(41,602)	$	11.88
Expired	(543)	$	12.26
Exercised	(218,087)	$	11.45
Outstanding at June 30, 2019	2,943,756	$	19.16

Fully vested and exercisable at June 30, 2019	1,264,254	$	12.37
Outstanding and expected to vest at June 30, 2019	1,679,502	$	24.27

Total weighted average grant date fair value of options issued during the period (in $ millions)		$	11.2
Proceeds from option sales during the period (in $ millions)		$	2.5

Share options are priced on the date of grant and, except for certain grants made to non-executive directors, vest over a period of four years, the first 25% vests after one year from the grant date and the remainder vests in equal quarterly installments, over years two, three and four. Any options that vest must be exercised by the tenth anniversary of the grant date.

The fair value of each option issued is estimated at the respective grant date using the Hull & White option pricing model with the following weighted-average assumptions:


	Three months ended June 30,		Six months ended June 30,
Assumptions	2019	2018	2019	2018
Expected volatility	75%	75%	75%	75%
Expected terms	10 years	10 years	10 years	10 years
Risk free interest rate	2.17% - 2.63%	2.99% - 3.07%	2.17% - 2.87%	2.77% - 3.07%
Expected dividend yield	0%	0%	0%	0%

Restricted share units

The following table summarizes the RSUs activity for the six months ended June 30, 2019:


	RSU
		Weighted average
	Number of	grant-date fair
	ordinary shares	value
Non-vested at December 31, 2018	412,321	$	16.49
Granted	145,004	$	33.62
Vested	(186,417)	$	12.78
Forfeited	(14,516)	$	12.90
Non-vested at June 30, 2019	356,392	$	25.55

Total weighted average grant date fair value of RSUs granted during the period (in $ millions)		$	4.9

RSUs vest over one to three years. RSUs granted to non-executive directors will vest one year from the date of grant.

Performance share units

The following table summarizes the PSUs activity for the six months ended June 30, 2019:


	PSU
		Weighted average
	Number of	grant-date fair
	ordinary shares	value
Non-vested at December 31, 2018	377,169	$	16.73
Granted	132,362	$	31.71
Vested	(23,064)	$	5.76
Non-vested at June 30, 2019	486,467	$	17.80
PSUs awarded but not yet earned	96,389	$	78.15
Total non-vested and discretionary PSUs	582,856	$	27.78

Total weighted average grant date fair value of PSUs granted and awarded during the period (in $ millions)		$	11.7

In January 2019, the Company awarded PSUs to its executives and other members of senior management. These PSUs are earned based on the Board’s assessment of the level of achievement of agreed upon performance targets through December 31, 2019.

Employee Share Purchase Plan (“ESPP”)

In June 2018 the Company’s shareholders adopted and approved an ESPP allowing the Company to issue up to 150,000 ordinary shares. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986. Under the ESPP, employees are eligible to purchase ordinary shares through payroll deductions, subject to any plan limitations. The purchase price of the shares on each purchase date is equal to 85% of the lower of the closing market price on the offering date or the closing market price on the purchase date of each three-month offering period. During the six months ended June 30, 2019 4,870 shares were issued. As of June 30, 2019, a total of 142,539 ordinary shares remains available for issuance under the ESPP plan.