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Share-based Compensation | 9 Months Ended
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Sep. 30, 2022
Share-Based Payment Arrangement [Abstract] |
Share-based Compensation | Share-based Compensation The Company's Amended and Restated Equity Incentive Plan (the Plan), which was adopted and approved by the Company's shareholders in June 2021, allows for an issuance of up to an aggregate of 23.8 million shares (inclusive of then outstanding awards) and provides for grants of stock options, performance awards, and restricted stock units (RSUs) that may be settled in cash and common shares. Also in June 2021, the Company's shareholders adopted and approved the Company's 2021 ESPP, which allows for the issuance of up to 2.5 million shares. The 2021 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code (the Code) but also permits the Company to include the employees, including non-United States employees, in offerings not intended to qualify under Section 423. The purpose of the 2021 ESPP is to provide eligible employees with opportunities to purchase the Company’s common shares at a discounted price. During the second quarter of 2022, the Company modified the 2021 ESPP for the current and future offerings. The new ESPP terms shortened the plan from four (4) purchases over a 24 month Offering Period to two (2) purchases over a 12 month offering period. Additionally, the ESPP now contains a rollover mechanism; that is, if the stock price on the purchase date is less than the offering price (as that is determined under the 2021 ESPP), that offering is then canceled and any participants are rolled into the new 12 month offering period at the lower price. As a result of the modification, $475 thousand of incremental expense was added to the estimated expense for the November 2022 and May 2023 purchase dates (to be amortized over the new 12 month offering period). Additionally, the originally scheduled purchase date in November 2023 is no longer planned given the new 12 month offering period; therefore, the modification also resulted in a “repurchase for no consideration” under ASC 718. The Company recognized an additional $651 thousand of unamortized expense for the cancelled November 2023 purchase, which was recorded during the second quarter of 2022. In addition to stock options, performance awards and RSUs granted under the Plan, the Company has granted certain stock options and RSUs as inducements material to new employees entering employment in accordance with Nasdaq Listing Rule 5635(c)(4). The inducements were granted outside of the Plan during 2022. Stock Options The Plan requires the exercise price of each option not to be less than the closing market price of the Company’s common shares on the day immediately prior to the date of grant. The board of directors approves the vesting criteria and periods at its discretion. The options issued under the plan are accounted for as equity-settled share-based payments. The Company used the Black-Scholes option pricing model to estimate the fair value of the options granted. The Company considers historical volatility of its common shares in estimating its future stock price volatility. The risk-free interest rate for the expected life of the options was based on the yield available on government benchmark bonds with an approximate equivalent remaining term at the time of the grant. The expected life is based upon the contractual term, taking into account expected employee exercise and expected post-vesting employment termination behavior. The following weighted average assumptions were used to estimate the fair value of the options granted during the nine months ended September 30, 2022 and September 30, 2021:
|  | 2022 |  | 2021
Annualized volatility |  | 70 | % |  | 66 | %
Risk-free interest rate |  | 2.01 | % |  | 0.38 | %
Expected life of options in years |  | 5.0 years |  | 4.0 years
Estimated forfeiture rate |  | 12.1 | % |  | 8.9 | %
Dividend rate |  | 0.0 | % |  | 0.0%
Fair value per common share option |  | $ | 6.60 |  |  | $ | 6.64 |
The following table summarizes the option award activity for the nine months ended September 30, 2022:
|  | September 30, 2022
|  | Number of shares (in thousands) |  | Weighted average exercise price $
Outstanding - December 31, 2021 |  | 12,074 |  |  | $ | 12.84 |
Granted |  | 3,809 |  |  | 11.25 |
Exercised |  | (77) |  |  | 6.47 |
Forfeited |  | (1,507) |  |  | 14.63 |
Outstanding - September 30, 2022 |  | 14,299 |  |  | $ | 12.26 |
Performance Awards and Restricted Stock Units On October 23, 2020, the Company issued 439,000 PAs to executive management of the Company whose vesting was contingent upon meeting specific performance metrics based on the results for the year ended December 31, 2021. Each PA which vested entitled the participant to receive common shares on the basis of the performance metrics set. On March 18, 2021 performance metrics were set and formally communicated. Therefore, March 18, 2021 was the grant date and the fair value on the grant date was $13.56. The PAs vested in 2022 and the participant was required to achieve at least one of the performance metrics to obtain the portion of the award associated with the metric. On August 6, 2021, the Company granted approximately 619,000 PAs and RSUs. The grant date for the PAs and RSUs was August 6, 2021 and the fair value on the grant date was $14.42 as this was the date performance measures were set and communicated to employees. The PAs vested on the employee's first anniversary of the grant date and the employee was required to achieve at least one of the performance metrics to obtain the portion of the award associated with the metric. The RSUs had no performance metrics and vested on the one year anniversary of the grant. During the 2022, the Company has granted RSUs and intends to grant RSUs throughout the year under the Plan, as well as inducements for certain new hires as discussed above. The RSUs are fair valued based on the market price of our common shares on the date of the grant. The following table summarizes the PA and RSU activity for the nine months ended September 30, 2022:
|  | September 30, 2022
|  | Number of shares (in thousands) |  | Weighted average exercise price $
Outstanding - December 31, 2021 |  | 347 |  |  | $ | 13.33 |
Granted |  | 2,311 |  |  | 11.26 |
Vested |  | (305) |  |  | 14.17 |
Forfeited |  | (255) |  |  | 12.39 |
Outstanding - September 30, 2022 |  | 2,098 |  |  | $ | 11.04 |
Compensation Expense The Company recognized share-based compensation expense for the three and nine month periods ended September 30, 2022 and September 30, 2021 as follows:
|  | Three months ended September 30, |  | Nine Months Ended September 30,
(in thousands) |  | 2022 |  | 2021 |  | 2022 |  | 2021
Research and development |  | $ | 1,489 |  |  | $ | 1,038 |  |  | $ | 3,531 |  |  | $ | 3,201 |
Selling, general and administrative |  | 6,625 |  |  | 6,000 |  |  | 21,480 |  |  | 19,189 |
Capitalized under inventories |  | 206 |  |  | 54 |  |  | 387 |  |  | 276 |
Share-based compensation expense |  | $ | 8,320 |  |  | $ | 7,092 |  |  | $ | 25,398 |  |  | $ | 22,666 |
As of September 30, 2022, there was $33.6 million of unrecognized share-based compensation expense related to unvested awards granted which is expected to be recognized over a weighted-average period of approximately 1.4 years.

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