Quarterly report pursuant to Section 13 or 15(d)

Share-based Compensation

Share-based Compensation
9 Months Ended
Sep. 30, 2021
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 outstanding awards). Also in June 2021, the Company's shareholders adopted and approved the Company's Employee Stock Purchase Plan (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.
As of September 30, 2021 and December 31, 2020, 129.6 million and 126.7 million, common shares were issued and outstanding.

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 month periods ended September 30, 2021 and September 30, 2020:
September 30, 2021 September 30, 2020
Annualized volatility 66  % 43%
Risk-free interest rate 0.38  % 0.70  %
Expected life of options in years 4.0 years 3.0 years
Estimated forfeiture rate 8.9  % 12  %
Dividend rate 0.0  % 0.0%
Fair value per common share option $ 6.64  $ 5.05 
The following table summarizes the option award activity during the nine months ended September 30, 2021:

September 30, 2021
Number of shares (in thousands) Weighted average exercise price $
Outstanding - Beginning of Period 14,047  11.35 
Granted 2,059  13.42 
Exercised (2,324) 6.60 
Cancelled/Forfeited (945) 13.72 
Outstanding - End of Period 12,837  12.37 
Vested and expected to vest - End of Period 2,635  14.54 
Options exercisable - End of Period 5,244  10.81 
Performance Awards and Restricted Stock Units
On October 23, 2020, the Company issued 439,000 performance awards (PAs) to executive management of the Company whose vesting is contingent upon meeting specific performance metrics based on the results for the year ended December 31, 2021. Each PA which vests entitles 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.
On August 6, 2021, the Company granted approximately 619,000 PAs and restricted stock units (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 vest on the employee's first anniversary of the grant date and the employee must achieve at least one of the performance metrics to obtain the portion of the award associated with the metric. The RSUs have no performance metrics and will vest on the one year anniversary of the grant.
The Company recorded approximately $0.7 million and $1.1 million of share-based compensation expense related to PAs and RSUs during the three and nine month periods ended September 30, 2021.
Compensation Expense
The Company recognized share-based compensation expense for the three and nine month periods ended September 30, 2021 and September 30, 2020 as follows:
Three months ended
September 30,
Nine Months Ended
September 30,
(in thousands) 2021 2020 2021 2020
Research and development $ 1,038  $ 814  $ 3,201  $ 3,111 
Selling, general and administrative 6,000  3,750  19,189  9,151 
Capitalized under inventories 54  47  276  47 
Share-based compensation expense $ 7,092  $ 4,611  $ 22,666  $ 12,309 
As of September 30, 2021, there was $16.9 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 1.1 years.