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Stock Incentive Plan | 3 Months Ended
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Mar. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock Incentive Plan | Stock Incentive Plan The Company maintains two share-based incentive plans: the Axogen 2017 Stock Incentive Plan, as amended (“2017 Plan”), and the Axogen 2017 Employee Stock Purchase Plan (“2017 ESPP”). Overview of Equity Incentive Plans At the 2019 Annual Meeting of Shareholders held on August 14, 2019, the shareholders approved the Axogen 2019 Long-Term Incentive Plan (the “New Axogen Plan”), which allows for issuance of incentive stock options, non-qualified stock options, PSUs and RSUs to employees, directors and consultants at exercise prices not less than the fair market value at the date of grant. The number of shares of common stock authorized for issuance under the New Axogen Plan is (A) 3,385,482 shares, comprised of (i) 3,000,000 new authorized shares and (ii) 385,482 unallocated shares of common stock available for issuance as of August 14, 2019 pursuant to the Company’s 2010 Stock Incentive Plan, as amended and restated (the “Prior Axogen Plan”), that were not then subject to outstanding awards; plus (B) shares under the Prior Axogen Plan and the New Axogen Plan that are cancelled, forfeited, expired, unearned or settled in cash, in any such case that does not result in the issuance of common stock. Following shareholder approval of the New Axogen Plan, no future awards will be made under the Prior Axogen Plan. As of March 31, 2021, 305,141 shares of common stock were available for issuance under the New Axogen Plan. The Company recognized stock-based compensation expense, which consisted of compensation expense related to employee stock options, PSUs, RSUs and the 2017 ESPP based on the value of share-based payment awards that are ultimately expected to vest during the period, as well as the adjustment mention above, of approximately $2,694 and $556 for the three months ended March 31, 2021 and 2020, respectively. Stock Options The options granted to employees prior to July 1, 2017 typically vest 25% 1 year after the grant date and 12.5% every six months thereafter for the remaining three-year period until fully vested after four years. The options granted to employees after July 1, 2017 typically vest 50% two years after the grant date and 12.5% every six months thereafter for the remaining two-year period until fully vested after four years. The options granted to directors and certain options granted from time to time to certain executive officers have vested ratably over three years, 25% per quarter over one year or had no vesting period. Options typically have terms ranging from seven to ten years. The Company estimates the fair value of each option award issued under such plans on the date of grant using a Multiple Point Black-Scholes option-pricing model which uses a weighted average of historical volatility and peer company volatility. The Company determines the expected life of each award giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. A summary of the stock option activity is as follows:
| Options |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life |  | Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2020 | 3,516,484 |  |  | $12.79 |  |  | 5.93 |  | $ | 25,718 |
Granted | 482,400 |  |  | $20.86 |  |  |  |  |
Exercised | (138,575) |  |  | $5.02 |  |  |  |  |
Cancelled | (48,975) |  |  | $13.86 |  |  |  |  |
Outstanding, March 31, 2021 | 3,811,334 |  |  | $14.08 |  |  | 6.19 |  | $ | 29,905 |
Exercisable, March 31, 2021 | 2,239,791 |  |  | $11.99 |  |  | 4.26 |  | $ | 22,543 |
The Company used the following weighted-average assumptions for options granted during the periods indicated:
|  | March 31, 2021 |  |
Expected term (in years) |  | 5.93 |  |
Expected volatility |  | 58.38 | % |  |
Risk free rate |  | 1.14 | % |  |
Expected dividends |  | — | % |  |
Restricted and Performance Stock Units RSUs granted to employees have a requisite service period of four years. The RSUs granted to directors and certain RSUs granted from time to time to certain executive officers have vested ratably over three years, over one year or had no vesting period. The Company expenses the fair value of restricted stock awards on a straight-line basis over the requisite service period. PSUs generally have a requisite service period of three years and are subject to graded vesting conditions based on revenue goals of the Company. The Company expenses their fair value over the requisite service period. A summary of the status of non-vested RSUs/PSUs as of March 31, 2021 and the changes during the three months then ended are presented below:
| Outstanding Stock Units
| Stock Units |  | Weighted-Average Fair Value at Date of Grant per Share |  | Weighted Average Remaining Vesting Life |  | Aggregate Intrinsic Value (in thousands)
Unvested December 31, 2020 | 1,782,905 |  |  | $ | 15.23 |  |  | 1.83 |  | $ | 31,825 |
Granted | 774,464 |  |  | $ | 20.72 |  |  |  |  |
Released | (94,734) |  |  | $ | 19.08 |  |  |  |  |
Forfeited | (121,686) |  |  | $ | 16.55 |  |  |  |  |
Unvested March 31, 2021 | 2,340,949 |  |  | $ | 16.82 |  |  | 2.09 |  | $ | 47,428 |
Performance Stock Units The Company estimates the fair value of the PSUs based on its closing stock price at the time of grant and its estimate of achieving such performance target and records compensation expense as the milestones are achieved. Over the performance period, the number of shares of common stock that will ultimately vest and be issued and the related compensation expense will be adjusted based upon the Company’s estimate of achieving such performance target. The number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on the actual performance metrics as set forth in the applicable PSU award agreement. The amount actually awarded will be based upon achievement of the performance measures. At March 31, 2021, the total future stock compensation expense related to non-vested performance awards at maximum target payout is expected to be approximately $8,987. On March, 8, 2021, the Compensation Committee of the Board of Directors approved PSUs that were tied to 2022 revenue, the “2021 PSU award.” The 2021 PSU award consists of a targeted award of 332,200 shares with a payout ranging from 0% to 200% upon achievement of specific revenue goals. On July 17, 2020, the Compensation Committee of the Board of Directors approved PSU awards of 144,300 tied to the 2020 revenue. These awards were granted in mid-year with certain revenue targets adjusted for the impact of COVID-19. The 2020 PSUs granted in July reached 110% achievement of revenue targets. On February 21, 2020, the Compensation Committee of the Board of Directors approved PSUs that were tied to 2021 revenue. The 2020 PSU award consists of a targeted award of 348,000 shares. In June 2020, the Company concluded that the performance metrics relating to the 2020 PSU grant with performance metrics tied to 2021 revenue were no longer probable and therefore stock compensation related to these grants of $340 was also reversed. Subsequently, in the fourth quarter of 2020, it became probable that the Company would achieve 50% of these performance metrics and therefore adjusted stock compensation. In February 2020, the Company issued PSUs relating to a 2017 grant with performance metrics tied to 2019 revenue. The award was issued at 72.3% of achievement and therefore, 27.7% of the stock compensation, or $536 relating to this grant was forfeited or reversed in the first quarter 2020. Previously, the Compensation Committee of the Board of Director granted PSUs that were tied to 2020 revenue in 2018. As a result of COVID-19, it was determined these PSU grants would not be awarded and therefore stock compensation related to these grants of $1,161 was forfeited in the prior year. Employee Stock Purchase Plan The Company also maintains the Axogen 2017 Employee Stock Purchase Plan, which allows eligible employees to acquire shares of the Company’s common stock through payroll deductions at a discount to market price. A total of 600,000 shares of the Company’s common stock are authorized for issuance under the 2017 ESPP, and, as of March 31, 2021, 323,913 shares remained available for issuance.

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