Share-Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Options granted under the Company's 2018 Equity Incentive Plan (the "2018 Plan") and 2017 Stock Option Plan (the "2017 Plan"), as well as restricted shares granted as employee incentives, typically vest over a four-year service period with 25% of the award vesting on the first anniversary of the commencement date and the balance vesting monthly over the remaining three years, unless the award contains specific performance vesting provisions. For equity awards issued that have both a performance vesting condition and a services condition, once the performance criteria is achieved, the awards are then subject to a four-year service vesting with 25% of the award vesting on the first anniversary of the performance condition being achieved and the balance vesting monthly over the remaining three years. Options granted in January 2021 contained performance conditions related to specified clinical milestones. Options granted under the 2018 Plan and 2017 Plan generally expire 10 years from the date of grant. For certain senior members of management and directors, the board of directors has approved an alternative vesting schedule. Restricted stock units awarded in December 2019 vest over a 3-year service period with 50% of the award vesting one and a half years, or 18 months, from commencement date and the remaining 50% of the award vesting at the end of the third year. Restricted stock units awarded in January 2021 contained a performance condition related to specified clinical milestone.

Share Option Valuation

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the share options granted by the Company during the three months ended March 31, 2021 were as follows:


			March 31,
			2021
Expected option life (years)			6.08 years
Risk-free interest rate			0.62% to 0.99%
Expected volatility			81.33% to 81.34%
Expected dividend yield			—%

Share Options

The table below summarizes activity for the three months ended March 31, 2021:


	Number of Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2020	5,611,429	$	17.19	8.0	$	4,262
Granted	1,828,200	8.67		—	—
Exercised	(545)	0.01		—	—
Canceled or forfeited	(557,464)	16.68		—	—
Outstanding as of March 31, 2021	6,881,620	$	14.97	8.4	$	2,194
Exercisable as of March 31, 2021	2,954,620	17.20		7.6	$	2,055
Vested and expected to vest as of March 31, 2021	6,881,620	$	14.97	8.4	$	2,194

The aggregate intrinsic value of share options is calculated as the difference between the exercise price of the share options and the fair value of the Company’s ADSs for those share options that had exercise prices lower than the fair value of the Company’s ADSs.

The weighted average grant-date fair value of share options granted was $5.96 per share for the three months ended March 31, 2021, of which none were vested at the date of this report.

As of March 31, 2021, the total unrecognized compensation expense related to unvested options was $9.4 million, which the Company expects to recognize over a weighted average vesting period of 2.5 years.

During the three months ended March 31, 2021, the Company granted 1,602,500 options with performance conditions related to specified clinical milestones. As of March 31, 2021, the performance conditions were not determined to be probable and no expense was recorded for the three months ended March 31, 2021.

Restricted Ordinary Shares

A summary of the changes in the Company’s restricted ordinary shares during the three months ended March 31, 2021 is as follows:


	Number of restricted shares	Weighted average grant date fair value
Unvested and outstanding at December 31, 2020	90,383	$	4.17
Granted	—	—
Vested	(40,124)	4.17
Canceled or forfeited	—	—
Unvested and outstanding at March 31, 2021	50,259	$	4.17

As of March 31, 2021, there was no unrecognized compensation expense.

Restricted Stock Units

A restricted stock unit (“RSU”) represents the right to receive one of the Company’s ADSs upon vesting of the RSU. The fair value of each RSU is based on the closing price of the Company’s ADSs on the date of grant. The Company historically granted RSUs with service conditions that vest over 3-year service period with 50% of the award vesting one-and-half years from grant date and the remaining 50% of the award vesting at the end of the third year. In January 2021, the Company awarded restricted stock units that contained a performance condition based on a condition related to a specified clinical milestone. In March 2021, the Company awarded restricted stock units with service conditions that vest over a four year period with 25% on the first anniversary of the grant date, and the balance vesting quarterly over the remaining three years.

The following is a summary of RSU activity for the 2018 Plan for the three months ended March 31, 2021:


	Number of restricted shares	Weighted average grant date fair value
Unvested and outstanding at December 31, 2020	415,000	$	12.09
Granted	1,035,650	8.71
Vested	(21,500)	8.12
Canceled or forfeited	(119,250)	11.36
Unvested and outstanding at March 31, 2021	1,309,900	$	9.48

As of March 31, 2021, there was $2.0 million of unrecognized compensation expense related to unvested RSUs, which are expected to be recognized over a weighted average vesting period of 2.5 years.

During the three months ended March 31, 2021, the Company awarded 920,000 RSUs with a performance condition related to a specified clinical milestone. As of March 31, 2021, the performance condition was not determined to be probable and accordingly, no expense was recorded for the three months ended March 31, 2021.

Share-based Compensation Expense

Share-based compensation expense recorded as research and development expenses, general and administrative expenses, and capitalized to property and equipment is as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Research and development	$	(1,654)	$	4,562
General and administrative	984		1,627
Capitalized to property and equipment	—		46
Total share-based compensation expense	$	(670)	$	6,235

The decrease in share-based compensation expense of $6.9 million in the three months ended March 31, 2021 relates to forfeitures of share-based payment awards as a result of the reduction in workforce that began to take place during the period.