Connect Biopharma Holdings LtdCNTB
Connect Biopharma Holdings Ltd Stock Compensation Disclosure
Equity Incentive Plans
Employee Share Purchase Plan
In 2021, our Board approved our Employee Share Purchase Plan (“ESPP”) at which time a maximum of 600,000 ordinary shares were available for issuance. On the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, the number of shares available for issuance under the ESPP shall be increased by that number of shares equal to the lesser of 1% of the aggregate number of ordinary shares outstanding on the final day of the immediately preceding calendar year or such smaller number of shares as determined by the Board. In January 2022, the number of shares reserved for issuance under the ESPP increased by 550,763 shares. Our Board did not approve any increases to the authorized shares for fiscal years 2023, 2024 or 2025. At December 31, 2025, a total of 1,150,763 shares were authorized under the ESPP.
Under the terms of the ESPP, employees can elect to have up to a maximum of 10% of their base earnings withheld to purchase ordinary shares. The purchase price of the share is 85% of the lower of the closing prices for our ordinary shares on either: (i) the first trading day in the enrollment period, as defined in the ESPP, in which the purchase is made, or (ii) the purchase date. The length of the enrollment period is 24 months, with purchases every six months. Enrollment dates are the first business day of May and November. Under the ESPP, we issued 311,778 and 44,837 shares in 2025 and 2024, respectively. The weighted-average exercise price per share of the purchase rights exercised during 2025 and 2024 was $0.70 and $0.74, respectively. As of December 31, 2025, 442,290 ordinary shares have been issued under the ESPP and 708,473 ordinary shares are available for future issuance.
Stock Option Plans
2019 Plan
The Board approved the 2019 Plan in November 2019, under which the Company granted stock options to employees, non-employee directors, and consultants. Stock option grants under the 2019 Plan generally vest over a four-year period and have a maximum term of 10 years from the date of grant. The 2019 Plan was replaced by the 2021 Stock Incentive Plan (“2021 Plan”) in March 2021.
2021 Plan
In March 2021, the Board approved the 2021 Plan under which the Company may grant stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards and other stock-related awards to employees, non-employee directors and consultants. Stock option grants under the 2021 Plan generally vest over a four-year period and have a maximum term of 10 years from the date of grant.
The 2021 Plan initially had a maximum of 6,000,000 ordinary shares available for grant. The number of ordinary shares initially available for issuance will be increased on the first day of each of our fiscal years during the term of the 2021 Plan commencing with the fiscal year beginning January 1, 2021, by an amount equal to the least of (i) 5.0% of the total number of ordinary shares issued and outstanding on the last day of the immediately preceding fiscal year; or (ii) such lesser number of shares as may be determined by the Board. Our Board determined the increase under the 2021 Plan for the fiscal years beginning January 1, 2022, 2023, 2024 and 2025, to be 5.0% 2.5%, 5.0%, and 5.0%, respectively, of our outstanding shares as determined on December 31, 2022, 2023, 2024, and 2025, respectively. In no event will more than 60,000,000 shares be issuable upon the exercise of incentive share options (within the meaning of Section 422 of the U.S. Internal Revenue Code) under the 2021 Plan. At December 31, 2025, there were 17,647,834 ordinary shares authorized for issuance and 6,325,438 shares available for future grant under the 2021 Plan. Any shares that are issuable on exercise of options granted that expire, are cancelled or that we receive pursuant to a net exercise of options are available for future grant and issuance.
2024 Employment Inducement Incentive Award Plan
The Board adopted the Company’s 2024 Employment Inducement Incentive Award Plan (“Inducement Plan”) in June 2024. The Inducement Plan permits the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards and other stock-related awards. Stock awards granted under the Inducement Plan may only be made to individuals who did not previously serve as employees or non-employee directors of the Company or an affiliate of the Company. In addition, stock awards must be approved by either a majority of the Company’s independent directors or the Compensation Committee. The terms of the Inducement Plan are otherwise substantially similar to the Company’s 2021 Plan. The maximum number of ordinary shares that may be issued under the Inducement Plan is 4,500,000 shares. At December 31, 2025, there were 68,777 shares available for future grants. All stock option grants issued under the Inducement Plan were approved by our Board and were registered on Form S-8 with the SEC.
The following summarizes all stock option plan activity for the year ended December 31, 2025:
| Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (millions) | |||||||||||
| Outstanding at December 31, 2024 | 14,263,242 | $ | 2.93 | |||||||||||
| Granted | 4,058,859 | $ | 2.10 | |||||||||||
| Exercised | (781,322) | $ | 1.12 | |||||||||||
| Cancelled | (2,350,204) | $ | 7.24 | |||||||||||
| Outstanding at December 31, 2025 | 15,190,575 | $ | 2.14 | 8.5 | $ | 17.2 | ||||||||
| Options exercisable at December 31, 2025 | 5,096,895 | $ | 3.02 | 7.4 | $ | 5.8 | ||||||||
For the year ended December 31, 2025, options cancelled consisted of 372,573 options forfeited with a weighted-average exercise price of $1.58 and 1,977,631 options expired with a weighted-average exercise price of $8.30.
The total intrinsic value of stock option exercises, which is the difference between the exercise price and closing price of our ordinary shares on the date of exercise, during the year ended December 31, 2025 and 2024 was $1.0 million and $0.1 million, respectively.
On December 31, 2025, we had reserved 15,190,575 ordinary shares for future issuance on exercise of outstanding options granted under the 2019, 2021 and Inducement Plans.
Share-Based Compensation
The following summarizes share-based compensation expense related to share-based payment awards granted pursuant to all of our equity compensation arrangements (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Research and development | $ | 1,099 | $ | 2,951 | |||||||
| General and administrative | 2,627 | 3,777 | |||||||||
| Total share-based compensation expense | $ | 3,726 | $ | 6,728 | |||||||
As of December 31, 2025, there was $13.3 million of total unrecognized compensation cost related to non-vested, share-based payment awards granted under all of our equity compensation plans. Total unrecognized compensation cost will be adjusted for forfeitures. We expect to recognize this compensation cost over a weighted-average period of 3.0 years.
The following are the weighted-average assumptions for stock options:
Options:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Risk-free interest rate | 3.9 | % | 4.4 | % | |||||||
| Dividend yield | 0.0 | % | 0.0 | % | |||||||
| Volatility | 103.4 | % | 104.5 | % | |||||||
| Expected life (years) | 6 | 10 | |||||||||
| Early exercise multiple (years) | — | 2.2 - 2.8 | |||||||||
The following are the weighted-average assumptions for purchase rights under the ESPP:
ESPP:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Risk-free interest rate | 4.1% | 4.2% - 4.4% | |||||||||
| Dividend yield | 0.0 | % | 0.0 | % | |||||||
| Volatility | 109.0% | 111.9% - 128.5% | |||||||||
| Expected life (years) | 0.5 - 2 | 0.5 - 2 | |||||||||
The weighted-average fair value of options granted was $1.71 and $1.08 for the years ended December 31, 2025 and 2024, respectively.
The weighted-average fair value of purchase rights granted under the ESPP was $0.51 and $0.38 for the years ended December 31, 2025 and 2024, respectively.
Risk-Free Interest Rate: The risk-free interest rate assumption is based on the U.S. Treasury yield for obligations with contractual terms similar to the expected term of the stock option or purchase right being valued.
Dividend Yield: The Company has never paid any dividends and currently has no plans to do so.
Volatility: The expected volatility assumption was determined by examining the average volatility of comparable companies. The volatility of each comparable company was based on the historical daily share prices for a period commensurate to the expected life of the stock option. The expected volatility for employee share purchase rights was determined by examining the historical volatility of the Company’s ordinary shares for a period commensurate to the expected life of the ESPP purchase rights.
Expected Life: The expected life represents the weighted-average period the stock options are expected to be outstanding. The expected life for the employee share purchase rights is based upon the terms of each offering period.
Early Exercise Multiple: The average ratio of the stock price to the exercise price of when employees would decide to voluntarily exercise their vested stock options.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.