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Share-based payments | 12 Months Ended
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Dec. 31, 2017
Disclosure Of Terms And Conditions Of Sharebased Payment Arrangement [Abstract] |
Share-based payments | 13. Share-based payments The Company has three share-based payment plans for employees, directors and consultants. The share options granted will be settled in equity. 2016 options In 2016, share options were granted under the following share-based payment plans: U.K. share-based payment plans Options granted under these plans will vest if the option holder remains under their respective employment/consultancy contract for the agreed vesting period. The majority of the share options granted under these plans will vest equally over a period of four years, with the exception of the following: 1) options granted to a director, under which a third of the options granted vested immediately with the remaining two-thirds vesting each subsequent year; and 13. Share-based payments (continued) 2) options granted to three employees, under which two thirds of the options vested immediately with the remaining third vesting in 2017. Upon vesting, each option allows the holder to purchase one ordinary share at a specified option price determined at grant date. Stock option plan (U.S. Sub-Plan) On June 30, 2016, share options were granted under this sub-plan, which will vest equally over a period of four years if the option holder remains under the respective employment contract. Upon vesting, each option allows the holder to purchase one ordinary share at a specified option price determined at grant date. On December 12, 2016, 45,750 share options were granted to a non-executive director with an exercise price of £4.00 each, which could be exercised within six months after the grant date. The share options were exercised on December 29, 2016. In terms of the stock option agreement, should that non-executive director cease holding office within the four years from the grant date then a reducing number, dependent upon when such cessation occurs, of these shares options so acquired may, at the Board’s discretion, be subject to a mandatory transfer notice. These share options will only be fully unencumbered by such restriction after a period of four years from the expiration of the grant date and consequently the share-based payment expense is recognized on a straight-line basis. Cancelled share option arrangement During the year ended December 31, 2016, the share-based payment arrangements for three employees were cancelled. The cancellation of the original plan resulted in an acceleration of the remaining vesting period, with the remaining charge recognized in 2016 deemed immaterial. 2017 options In 2017, share options were granted under the following share-based payment plans: U.K. share-based payment plans Options granted under these plans will vest if the option holder remains under their respective contract of employment or contract of service for the agreed vesting period. The share options granted under these plans will vest equally over a period of four years, with the exception of options granted to a director, under which the options granted vested immediately. Upon vesting, each option allows the holder to purchase one ordinary share at a specified option price determined at grant date. Stock option plan (U.S. Sub-Plan) Options granted under these plans will vest if the option holder remains under their respective employment contract for the agreed vesting period. The share options granted under these plans will vest equally over a period of four years. 13. Share-based payments (continued) Upon vesting, each option allows the holder to purchase one ordinary share at a specified option price determined at grant date. Share options and weighted average exercise prices are as follows for the reporting periods presented:
|  | Number of shares |  |  | Weighted average exercise price per share |
|  |  |  |  |  | £ |
Outstanding at January 1, 2015 |  |  | 2,873,747 |  |  |  | 0.26 |
Granted |  |  | — |  |  |  | — |
Forfeited |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |
Outstanding at December 31, 2015 |  |  | 2,873,747 |  |  |  | 0.26 |
Granted |  |  | 507,690 |  |  |  | 3.81 |
Forfeited |  |  | — |  |  |  | — |
Cancelled |  |  | (50,000 | ) |  |  | 2.95 |
Exercised1 |  |  | (83,250 | ) |  |  | 2.40 |
Outstanding at December 31, 2016 |  |  | 3,248,187 |  |  |  | 0.72 |
Granted |  |  | 1,500,815 |  |  |  | 2.58 |
Forfeited |  |  | (7,500 | ) |  |  | 0.16 |
Cancelled |  |  | — |  |  |  | — |
Exercised2 |  |  | (30,000 | ) |  |  | 4.00 |
Outstanding at December 31, 2017 |  |  | 4,711,502 |  |  |  | 1.29 |
Vested and exercisable at December 31, 20173 |  |  | 4,030,833 |  |  |  | 0.36 |
Vested and exercisable at December 31, 2016 |  |  | 2,841,419 |  |  |  | 0.36 |
Vested and exercisable at December 31, 2015 |  |  | 2,262,500 |  |  |  | 0.23 |
1. The weighted average share price at the date of exercise of these options was £9.00 |
2. The weighted average share price at the date of exercise of these options was £10.43 |
3. Share options granted to a non-executive director in 2016 are not included in these calculations. These share options were exercised and will only be fully unencumbered after a period of four years from the grant date. |
The weighted average remaining contractual life of the share options outstanding as at December 31, 2017 is 4.49 years (2016: 6.66; 2015: 6.18). 13. Share-based payments (continued) The following principal assumptions were used in the valuation for the 2016 share options.
|  |  |  | Options granted on |
|  |  |  | Jun 30, 2016 |  |  |  |  | Aug 22, 2016 |  |  |  |  | Aug 22, 2016 |  |  |  |  | Aug 22, 2016 |  |  |  |  | Aug 22, 2016 |
Vesting dates |  |  |  | Oct 12, 2016 |  |  |  |  | Aug 22, 2016 |  |  |  |  | Aug 22, 2016 |  |  |  |  | Dec 07, 2016 |  |  |  |  | Mar 01, 2017 |
|  |  |  | Oct 12, 2017 |  |  |  |  | Aug 22, 2017 |  |  |  |  | Aug 22, 2017 |  |  |  |  | Dec 07, 2017 |  |  |  |  | Mar 01, 2018 |
|  |  |  | Oct 12, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Dec 07, 2018 |  |  |  |  | Mar 01, 2019 |
|  |  |  | Oct 12, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Dec 07, 2019 |  |  |  |  | Mar 01, 2020 |
Volatility |  |  |  |  | 69.05 | % |  |  |  |  | 67.92 | % |  |  |  |  | 67.92 | % |  |  |  |  | 67.92 | % |  |  |  |  | 67.92 | %
Dividend yield |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Risk-free investment rate |  |  |  |  | 0.11 | % |  |  |  |  | 0.07 | % |  |  |  |  | 0.07 | % |  |  |  |  | 0.07 | % |  |  |  |  | 0.07 | %
Fair value of option at grant date |  | £ |  |  | 4.02 |  |  | £ |  |  | 6.15 |  |  | £ |  |  | 6.01 |  |  | £ |  |  | 5.74 |  |  | £ |  |  | 5.62 |
Fair value of share at grant date |  | £ |  |  | 6.97 |  |  | £ |  |  | 8.61 |  |  | £ |  |  | 8.61 |  |  | £ |  |  | 8.61 |  |  | £ |  |  | 8.61 |
Exercise price at date of grant |  | £ |  |  | 4.00 |  |  | £ |  |  | 2.80 |  |  | £ |  |  | 3.00 |  |  | £ |  |  | 3.40 |  |  | £ |  |  | 3.60 |
Lapse date |  |  |  | June 30, 2026 |  |  |  |  | Aug 22, 2026 |  |  |  |  | Aug 22, 2026 |  |  |  |  | Aug 22, 2026 |  |  |  |  | Aug 22, 2026 |
Expected option life (years) |  |  |  |  | 2.50 |  |  |  |  |  | 2.36 |  |  |  |  |  | 2.36 |  |  |  |  |  | 2.36 |  |  |  |  |  | 2.36 |
Number of options granted |  |  |  |  | 270,690 |  |  |  |  |  | 12,500 |  |  |  |  |  | 37,500 |  |  |  |  |  | 25,000 |  |  |  |  |  | 11,250 |
|  |  |  | Options granted on |
|  |  |  | Aug 22, 2016 |  |  |  |  | Aug 22, 2016 |  |  |  |  | Oct 28, 2016 |  |  |  |  | Oct 28, 2016 |  |  |  |  | Dec 12, 2016 |
Vesting dates |  |  |  | May 01, 2017 |  |  |  |  | May 16, 2017 |  |  |  |  | Oct 28, 2017 |  |  |  |  | Oct 28, 2016 |  |  |  |  | Dec 12, 2017 |
|  |  |  | May 01, 2018 |  |  |  |  | May 16, 2018 |  |  |  |  | Oct 28, 2018 |  |  |  |  | Oct 28, 2017 |  |  |  |  | Dec 12, 2018 |
|  |  |  | May 01, 2019 |  |  |  |  | May 16, 2019 |  |  |  |  | Oct 28, 2019 |  |  |  |  | Oct 28, 2018 |  |  |  |  | Dec 12, 2019 |
|  |  |  | May 01, 2020 |  |  |  |  | May 16, 2020 |  |  |  |  | Oct 28, 2020 |  |  |  |  |  |  |  |  |  |  | Dec 12, 2020 |
Volatility |  |  |  |  | 67.92 | % |  |  |  |  | 67.92 | % |  |  |  |  | 68.38 | % |  |  |  |  | 68.38 | % |  |  |  |  | 60.92 | %
Dividend yield |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Risk-free investment rate |  |  |  |  | 0.07 | % |  |  |  |  | 0.07 | % |  |  |  |  | 0.28 | % |  |  |  |  | 0.28 | % |  |  |  |  | 0.06 | %
Fair value of option at grant date |  | £ |  |  | 5.62 |  |  | £ |  |  | 5.62 |  |  | £ |  |  | 5.85 |  |  | £ |  |  | 5.46 |  |  | £ |  |  | 5.22 |
Fair value of share at grant date |  | £ |  |  | 8.61 |  |  | £ |  |  | 8.61 |  |  | £ |  |  | 8.76 |  |  | £ |  |  | 8.76 |  |  | £ |  |  | 9.19 |
Exercise price at date of grant |  | £ |  |  | 3.60 |  |  | £ |  |  | 3.60 |  |  | £ |  |  | 3.40 |  |  | £ |  |  | 4.00 |  |  | £ |  |  | 4.00 |
Lapse date |  |  |  | Aug 22, 2026 |  |  |  |  | Aug 22, 2026 |  |  |  |  | Oct 28, 2026 |  |  |  |  | Oct 28, 2026 |  |  |  |  | Dec 12, 2026 |
Expected option life (years) |  |  |  |  | 2.36 |  |  |  |  |  | 2.36 |  |  |  |  |  | 2.17 |  |  |  |  |  | 2.17 |  |  |  |  |  | 0.50 |
Number of options granted |  |  |  |  | 5,000 |  |  |  |  |  | 37,500 |  |  |  |  |  | 12,500 |  |  |  |  |  | 50,000 |  |  |  |  |  | 45,750 |
The fair values of options granted were determined using the Black-Scholes model that takes into account factors specific to the share incentive plan such as the assumption that the options will be exercised at a single point in time, in December 2018. This has been incorporated into the measurement by means of actuarial modelling. As NuCana plc was unlisted at the grant date of the options, it is not possible to derive historical volatility from the Company’s own share price. The underlying expected volatility was therefore determined by using the historical volatility of similar listed entities as a proxy. The volatility percentage applied to each tranche is the average of the historical volatility of companies comparable to NuCana plc. In prior years, management made contemporaneous valuation of the share price, based on recent capital transactions, as an input to the Black-Scholes model. For the 2016 awards, the Company’s ordinary share valuations were prepared using the guideline public company, or GPC, method under the market approach. In the application of the GPC method, we considered the pricing of IPOs completed by clinical-stage oncology companies between April 2015 and May 2016. We converted prospective IPO value to present value by applying a discount rate of 25%. The discount rate was derived from studies of rates of return required by venture investors in IPO-stage companies. In addition to the IPO GPCs, we considered the enterprise values indicated by a group of eight trading GPCs. The trading prices of these clinical-stage GPCs provided contemporaneous indications of value as of each appraisal date. We applied a discount for lack of marketability to the ordinary shares to account for the lack of access to an active public market. We estimated the discount for lack of marketability using an Asian put model. In the year ended December 31, 2016, an employee remuneration expense, all of which related to equity-settled share-based payments, of £1.1 million (2015: £0.8 million) has been included in the statement of operations and credited to equity. 13. Share-based payments (continued) The following principal assumptions were used in the valuation for share 2017 options.
|  |  |  | May 16, 2017 |  |  |  |  | Sep 13, 2017 |  |  |  |  | Sep 14, 2017 |  |  |  |  | Sep 14, 2017 |  |  |  |  | Sep 14, 2017 |
Vesting dates |  |  |  | Oct 28, 2017 |  |  |  |  | Sep 13, 2018 |  |  |  |  | Mar 06, 2018 |  |  |  |  | Sep 14, 2018 |  |  |  |  | Sep 14, 2018 |
|  |  |  | Oct 28, 2018 |  |  |  |  | Sep 13, 2019 |  |  |  |  | Mar 06, 2019 |  |  |  |  | Sep 14, 2019 |  |  |  |  | Sep 14, 2019 |
|  |  |  | Oct 28, 2019 |  |  |  |  | Sep 13, 2020 |  |  |  |  | Mar 06, 2020 |  |  |  |  | Sep 14, 2020 |  |  |  |  | Sep 14, 2020 |
|  |  |  | Oct 28, 2020 |  |  |  |  | Sep 13, 2021 |  |  |  |  | Mar 06, 2012 |  |  |  |  | Sep 14, 2021 |  |  |  |  | Sep 14, 2021 |
Volatility |  |  |  |  | 66.56 | % |  |  |  |  | 66.94 | % |  |  |  |  | 66.97 | % |  |  |  |  | 66.97 | % |  |  |  |  | 66.97 | %
Dividend yield |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Risk-free investment rate |  |  |  |  | 0.12 | % |  |  |  |  | 0.27 | % |  |  |  |  | 0.36 | % |  |  |  |  | 0.36 | % |  |  |  |  | 0.36 | %
Fair value of option at grant date |  | £ |  |  | 7.70 |  |  | £ |  |  | 6.15 |  |  | £ |  |  | 6.08 |  |  | £ |  |  | 6.08 |  |  | £ |  |  | 6.08 |
Fair value of share at grant date |  | £ |  |  | 11.08 |  |  | £ |  |  | 10.43 |  |  | £ |  |  | 10.34 |  |  | £ |  |  | 10.34 |  |  | £ |  |  | 10.34 |
Exercise price at date of grant |  | £ |  |  | 4.00 |  |  | £ |  |  | 5.40 |  |  | £ |  |  | 5.40 |  |  | £ |  |  | 5.40 |  |  | £ |  |  | 5.40 |
Lapse date |  |  |  | May 16, 2027 |  |  |  |  | Sep 13, 2027 |  |  |  |  | Sep 14, 2027 |  |  |  |  | Sep 14, 2027 |  |  |  |  | Sep 14, 2027 |
Expected option life (years) |  |  |  |  | 2.63 |  |  |  |  |  | 2.30 |  |  |  |  |  | 2.30 |  |  |  |  |  | 2.30 |  |  |  |  |  | 2.30 |
Number of options granted |  |  |  |  | 23,250 |  |  |  |  |  | 14,690 |  |  |  |  |  | 25,000 |  |  |  |  |  | 110,310 |  |  |  |  |  | 12,500 |
|  |  |  | Sep 14, 2017 |  |  |  |  | Sep 15, 2017 |  |  |  |  | Sep 15, 2017 |  |  |  |  | Sep 27, 2017 |  |  |  |  | Sep 27, 2017 |
Vesting dates |  |  |  | Sep 14, 2018 |  |  |  |  | Sep 15, 2018 |  |  |  |  | Sep 15, 2017 |  |  |  |  | Mar 20, 2018 |  |  |  |  | Sep 27, 2018 |
|  |  |  | Sep 14, 2019 |  |  |  |  | Sep 15, 2019 |  |  |  |  |  |  |  |  |  |  | Mar 20, 2019 |  |  |  |  | Sep 27, 2019 |
|  |  |  | Sep 14, 2020 |  |  |  |  | Sep 15, 2020 |  |  |  |  |  |  |  |  |  |  | Mar 20, 2020 |  |  |  |  | Sep 27, 2020 |
|  |  |  | Sep 14, 2021 |  |  |  |  | Sep 15, 2021 |  |  |  |  |  |  |  |  |  |  | Mar 20, 2021 |  |  |  |  | Sep 27, 2021 |
Volatility |  |  |  |  | 66.97 | % |  |  |  |  | 67.02 | % |  |  |  |  | 67.02 | % |  |  |  |  | 67.11 | % |  |  |  |  | 67.11 | %
Dividend yield |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | % |  |  |  |  | 0 | %
Risk-free investment rate |  |  |  |  | 0.36 | % |  |  |  |  | 0.44 | % |  |  |  |  | 0.44 | % |  |  |  |  | 0.47 | % |  |  |  |  | 0.47 | %
Fair value of option at grant date |  | £ |  |  | 3.90 |  |  | £ |  |  | 6.76 |  |  | £ |  |  | 10.11 |  |  | £ |  |  | 4.36 |  |  | £ |  |  | 4.36 |
Fair value of share at grant date |  | £ |  |  | 10.34 |  |  | £ |  |  | 10.15 |  |  | £ |  |  | 10.15 |  |  | £ |  |  | 11.19 |  |  | £ |  |  | 11.19 |
Exercise price at date of grant |  | £ |  |  | 10.80 |  |  | £ |  |  | 4.00 |  |  | £ |  |  | 0.04 |  |  | £ |  |  | 11.19 |  |  | £ |  |  | 11.19 |
Lapse date |  |  |  | Sep 14, 2027 |  |  |  |  | Sep 15, 2027 |  |  |  |  | Sep 15, 2027 |  |  |  |  | Sep 27, 2027 |  |  |  |  | Sep 27, 2027 |
Expected option life (years) |  |  |  |  | 2.30 |  |  |  |  |  | 2.29 |  |  |  |  |  | 2.29 |  |  |  |  |  | 2.26 |  |  |  |  |  | 2.26 |
Number of options granted |  |  |  |  | 25,000 |  |  |  |  |  | 45,750 |  |  |  |  |  | 1,028,533 |  |  |  |  |  | 37,500 |  |  |  |  |  | 178,282 |
The fair values of options granted were determined using the Black-Scholes model that takes into account factors specific to the share incentive plan such as the assumption that the options will be exercised at a single point in time, in December 2019. This has been incorporated into the measurement by means of actuarial modelling. As NuCana plc was unlisted at the grant date of the options, it is not possible to derive historical volatility from the Company’s own share price. The underlying expected volatility was therefore determined by using the historical volatility of similar listed entities as a proxy. The volatility percentage applied to each tranche is the average of the historical volatility of companies comparable to NuCana plc. With the exception of the awards granted on September 27, 2017, the Company’s ordinary share valuations were prepared using the guideline public company, or GPC, method under the market approach. In the application of the GPC method, we considered the pricing of IPOs completed by clinical-stage oncology companies between July 2015 and June 2017. We converted prospective IPO value to present value by applying a discount rate of 25%. The discount rate was derived from studies of rates of return required by venture investors in IPO-stage companies. In addition to the IPO GPCs, we considered the enterprise values indicated by a group of eight trading GPCs. The trading prices of these clinical-stage GPCs provided contemporaneous indications of value as of each appraisal date. We applied a discount for lack of marketability to the ordinary shares to account for the lack of access to an active public market. We estimated the discount for lack of marketability using an Asian put model. In the year ended December 31, 2017, an employee remuneration expense, all of which related to equity-settled share-based payments, of £11.7 million (2016: £1.1 million; 2015: £0.8 million) has been included in the statement of operations and credited to equity.

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