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Stock-based Compensation

12 Months Ended

Dec. 31, 2023

Stock-based Compensation

Stock-based Compensation

17. Stock-based Compensation

Performance Share Units, Restricted Stock Units and Stock Options

Performance Share Units

The Company periodically grants PSUs to certain members of the Company's senior management team. PSUs vest subject to the satisfaction of annual and cumulative performance and/or market conditions established by the Compensation Committee.

In January 2019, the Company granted PSUs with performance conditions related to 2019, 2020, 2021 and three-year cumulative revenue goals for Xtampza ER. The PSUs were to vest following a three-year performance period, subject to the satisfaction of the performance criteria and the executive’s continued employment through the performance period. PSUs may vest in a range between 0% and 200%, based on the satisfaction of performance criteria, and no shares will be issued if the minimum applicable performance metric is not achieved. The Company recognizes compensation expense ratably over the required service period based on its estimate of the number of shares that will vest based upon the probability of achieving the performance metrics. During the year ended December 31, 2021, the Company adjusted cumulative compensation expense based on the number of shares that vested.

Beginning in February 2020 and each year thereafter, the Company granted PSUs with performance criteria related to the relative ranking of the total stockholder return (“TSR”) of the Company’s common stock for each individual year within a three-year performance period as well as the cumulative three-year performance period return relative to the TSR of certain peer companies within the S&P Pharmaceutical Select Industry Index. TSR will be measured based on the 30-day average stock price on the first day of each period compared to the 30-day average stock price on the last day of each period. The PSUs subject to the annual performance criteria will vest annually, subject to the satisfaction of the performance criteria and the executive’s continued employment through the performance period. The cumulative PSUs will vest following the three-year performance period, subject to the satisfaction of the performance criteria and the executive’s continued employment through the performance period. PSUs may vest in a range between 0% and 200%, based on the satisfaction of performance, and no shares will be issued if the minimum applicable performance metric is not achieved. As these PSUs vest based on the achievement of market conditions, the grant date fair values were determined using a Monte-Carlo valuation model. The Monte-Carlo valuation model considered a variety of potential future share prices for the Company as well as its peer companies in the selected market index.

A summary of the Company’s PSUs activity for the year ended December 31, 2023 and related information is as follows:


				Weighted-Average
		Shares		Grant Date Fair Value
Outstanding as of December 31, 2022		447,770		$	28.71
Granted		216,500			38.71
Vested		(223,170)			27.99
Forfeited		—			—
Performance adjustment		62,780			27.14
Outstanding as of December 31, 2023		503,880		$	33.13

The number of PSUs awarded represents the target number of shares of common stock that may be earned; however, the actual number of shares earned may vary based on the satisfaction of performance criteria. The weighted-average grant date fair value of PSUs granted for the years ended December 31, 2023, 2022, and 2021 was $38.71, $24.12, and $35.15, respectively.

For the years ended December 31, 2023, 2022, and 2021, the stock-based compensation expense for PSUs was $7,037, $5,398, and $4,817 respectively.

As of December 31, 2023, the unrecognized compensation cost related to performance share units was $5,585 and is expected to be recognized as expense over approximately 1.6 years.

Restricted Stock Units

A summary of the Company’s RSUs activity for the year ended December 31, 2023 and related information is as follows:


				Weighted-Average
		Shares		Grant Date Fair Value
Outstanding as of December 31, 2022		2,047,571		$	19.67
Granted		1,278,256			26.25
Vested		(675,647)			19.83
Forfeited		(206,273)			21.91
Outstanding as of December 31, 2023		2,443,907		$	22.88

The weighted-average grant date fair value of RSUs granted for the years ended December 31, 2023, 2022, and 2021 was $26.25, $17.53, and $24.23, respectively. The total fair value of RSUs vested (measured on the date of vesting) for the years ended December 31, 2023, 2022, and 2021 was $17,677, $10,166, and $11,165, respectively.

As of December 31, 2023, the unrecognized compensation cost related to restricted stock units was $37,022 and is expected to be recognized as expense over approximately 2.6 years. The weighted-average grant date fair value of restricted stock units vested during the years ended December 31, 2023, 2022, and 2021 was $13,398, $12,547, and $8,526, respectively.

Stock Options

A summary of the Company’s stock option activity for the year ended December 31, 2023 and related information is as follows:


							Weighted-
					Weighted-		Average
					Average		Remaining			Aggregate
					Exercise Price		Contractual			Intrinsic
		Shares			per Share		Term (in years)			Value
Outstanding as of December 31, 2022		1,683,805		$	18.84		5.5		$	7,953
Exercised		(498,008)			17.34
Cancelled		(9,047)			18.90
Outstanding as of December 31, 2023		1,176,750		$	19.48		4.3		$	13,297
Exercisable as of December 31, 2023		1,158,209		$	19.45		4.3		$	13,120

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:


	Years Ended December 31,
	2023			2022			2021
Risk-free interest rate	—	%		—	%		0.7	%
Volatility	—	%		—	%		67.2	%
Expected term (years)	—			—			6.0
Expected dividend yield	—	%		—	%		—	%

Risk-free Interest Rate. The risk-free interest rate assumption is based on observed interest rates appropriate for the expected term of the stock option grants.

Expected Volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption is based on the Company’s volatility as well as the historical volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology and pharmaceutical industries. In evaluating similarity, the Company considers factors such as industry, stage of life cycle and size.

Expected Term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior through December 31, 2021, it determined the expected term assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

Expected Dividend Yield. The expected dividend yield assumption is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

The Company did not grant stock options during the years ended December 31, 2023 and 2022. The weighted-average grant date fair value of stock options granted for the year ended December 31, 2021 was $12.60. The total intrinsic value of stock options exercised for the years ended December 31, 2023, 2022, and 2021 was $4,786, $3,943, and $6,456, respectively.

As of December 31, 2023, the unrecognized compensation cost related to outstanding options was $110 and is expected to be recognized as expense over approximately 0.2 years.

Employee Stock Purchase Plan

The Company’s 2015 Employee Stock Purchase Plan allows employees as designated by the Company’s Board of Directors to purchase shares of the Company’s common stock. The purchase price is equal to 85% of the lower of the closing price of the Company’s common stock on: (i) the first day of the purchase period; or (ii) the last day of the purchase period. During the year ended December 31, 2023, 26,505 shares of common stock were purchased for total proceeds of $460. As of December 31, 2023, there were 2,244,157 shares of common stock authorized for issuance pursuant to the employee stock purchase plan. The expense for the years ended December 31, 2023, 2022 and 2021 was $209, $117 and $224 respectively.

Stock-Based Compensation Expense

Stock-based compensation for all stock options, restricted stock awards, restricted stock units, performance share units and for the employee stock purchase plan are reported within the following:


	Years Ended December 31,
	2023			2022			2021
Research and development	$	—		$	1,591		$	3,422
Selling, general and administrative		27,136			21,283			20,833
Total stock-based compensation expense	$	27,136		$	22,874		$	24,255