Pacira BioSciences, Inc.PCRX
Pacira BioSciences, Inc. Stock Compensation Disclosure
STOCK PLANS
Stock Incentive Plans
The Company’s Amended and Restated 2011 Stock Incentive Plan, or 2011 Plan, was originally adopted by its board of directors and approved by its stockholders in June 2011 and was amended and restated in June 2014, June 2016, June 2019, June 2021 and June 2023. The June 2023 amendment and restatement and approval by the Company’s stockholders increased the number of shares of common stock authorized for issuance as equity awards under the 2011 Plan by 3,300,000 shares, which allows the granting of incentive stock options, non-statutory stock options, restricted stock units and other stock-based awards.
In April 2014, the Company’s board of directors approved and adopted the Company’s 2014 Inducement Plan (the “2014 Inducement Plan”), pursuant to which awards could be made to new employees under the 2014 Inducement Plan for up to 175,000 shares of the Company’s common stock as a material inducement to such persons entering into employment with the Company. On December 20, 2023, the board of directors, upon recommendation of the compensation committee of the board of directors, adopted the Pacira BioSciences, Inc. Amended and Restated 2014 Inducement Plan (as amended and restated, the “Inducement Plan”) such that, among other things, an additional 642,093 shares of the Company’s common stock and 817,093 shares of the Company’s common stock in total, were reserved for issuance under the Inducement Plan, and the term of the Inducement Plan was extended such that it will now expire on December 20, 2033.
The Inducement Plan allows the granting of incentive stock options, non-statutory stock options, restricted stock awards and other stock-based awards.
In addition, on December 20, 2023, the board of directors, upon recommendation of the compensation committee, approved the Inducement Award (as defined below) pursuant to the terms and provisions of the Inducement Plan. The “Inducement Award” means the grant to Frank D. Lee, in connection with his appointment as Chief Executive Officer, of: (i) 692,512 stock options with an exercise price per share equal to the closing price of the Company’s common stock as reported on the Nasdaq Global Select Market on January 3, 2024, vesting over a four-year period with a contractual term of 10 years, which will vest and become exercisable as to 25% of the option shares on January 3, 2025, and vest as to the remaining shares in successive equal quarterly installments over the subsequent three years, provided that Mr. Lee remains in continuous service with the Company as of each vesting date, and (ii) restricted stock units for 99,520 shares of the Company’s common stock, subject to continued service with the Company as of each vesting date, to vest in four equal annual installments beginning on January 2, 2025. Following the Inducement Award, no shares of the Company’s common stock remained reserved for issuance under the Inducement Plan.
The Inducement Plan was adopted by the board of directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to an employee who has not previously been an employee or member of the board of directors or the board of directors or any parent or subsidiary, or following a bona fide period of non-employment by the Company or a parent or subsidiary, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.
Equity Grants
The Company’s stock option grants have an exercise price equal to the closing price of the Company’s common stock on the date of grant, generally have a 10-year contractual term and vest in increments (typically over four years from the date of grant, although the Company may occasionally grant options with different vesting terms, including grants made to its non-employee directors). The Company also grants RSUs to employees and non-employee directors generally vesting in increments over four years from the date of grant, except for such grants made to non-employee directors. The Company uses authorized but unissued shares of its common stock to satisfy its obligations under these plans.
Employee Stock Purchase Plan
The Company’s Amended and Restated 2014 Employee Stock Purchase Plan, or ESPP, was originally adopted by its board of directors in April 2014, approved by the Company’s stockholders in June 2014 and amended and restated in June 2022. The June 2022 amendment and restatement increased the number of shares of common stock that may be sold under the plan by an additional 500,000 shares from the originally provided 500,000 shares. The purpose of the ESPP is to provide a vehicle for eligible employees to purchase shares of the Company’s common stock at a discounted price and to help retain and motivate current employees as well as attract new talent. Under the ESPP, up to 1,000,000 shares of common stock may be sold. The ESPP expires in June 2032. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code, or IRC. The maximum fair market value of stock which can be purchased by a participant in a calendar year is $25,000. Six-month offering periods begin on January 1 and July 1 of each year. During an offering period, eligible employees have the opportunity to elect to purchase shares of the Company’s common stock on the purchase dates of June 30 and December 31 (or the last trading day of an offering period). The per share purchase price is equal to 85% of the fair market value of the Company’s common stock on either the offering date or the purchase date, whichever is lesser. During the year ended December 31, 2023, 90,317 shares were purchased and issued through the ESPP.
The following tables contain information about the Company’s stock incentive plans at December 31, 2023:
| Stock Incentive Plan | Awards Reserved For Issuance | Awards Issued | Awards Available For Grant | |||||||||||||||||
| 2011 Plan | 17,731,701 | 15,362,454 | 2,369,247 | |||||||||||||||||
2014 Inducement Plan (1) | 817,093 | 25,061 | 792,032 | |||||||||||||||||
| Total | 18,548,794 | 15,387,515 | 3,161,279 | |||||||||||||||||
| Employee Stock Purchase Plan | Shares Reserved For Purchase | Shares Purchased | Shares Available For Purchase | |||||||||||||||||
| ESPP | 1,000,000 | 570,667 | 429,333 | |||||||||||||||||
(1) On December 20, 2023, in connection with Frank D. Lee’s appointment as Chief Executive Officer, the board of directors approved the grant of inducement awards to Mr. Lee pursuant to the Inducement Plan, which was adopted by the board of directors upon recommendation of the compensation committee of the board of directors, on December 20, 2023. Mr. Lee’s inducement awards included stock options to purchase an aggregate of 692,512 shares of common stock with an exercise price per share equal to $32.07, the closing price of the Company’s common stock as reported on the Nasdaq Global Select Market on January 3, 2024, and, subject to continued service with the Company as of each vesting date, such option will vest and become exercisable as to 25% of the option shares on January 3, 2025, and vest as to the remaining shares in successive equal quarterly installments over the subsequent three years; and (ii) a restricted stock unit award for 99,520 shares of the Company’s common stock, subject to continued service with the Company as of each vesting date, to vest in four equal annual installments beginning on January 2, 2025, in each case, pursuant to the terms and provisions of the Inducement Plan. As these awards were granted subsequent to December 31, 2023, they are not reflected in the table above as awards issued.
Stock-Based Compensation
Compensation expense for stock options and RSUs is based on the estimated grant date fair value of an award recognized over the requisite service period on a straight-line expense attribution method. Compensation expense for ESPP share options is based on the estimated grant date fair value of the ESPP shares and the grant date number of shares that can be purchased, which is recognized as expense on a straight-line expense attribution method over the length of an offering period.
The Company recognized stock-based compensation expense in its consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021 as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2023 | 2022 | 2021 | ||||||||||||||||||
| Cost of goods sold | $ | 5,537 | $ | 5,967 | $ | 5,891 | ||||||||||||||
| Research and development | 8,694 | 6,594 | 5,465 | |||||||||||||||||
| Selling, general and administrative | 33,664 | 35,531 | 30,890 | |||||||||||||||||
| Total | $ | 47,895 | $ | 48,092 | $ | 42,246 | ||||||||||||||
| Stock-based compensation from: | ||||||||||||||||||||
| Stock options | $ | 24,005 | $ | 26,800 | $ | 25,980 | ||||||||||||||
| RSUs | 22,974 | 20,310 | 15,335 | |||||||||||||||||
| ESPP | 916 | 982 | 931 | |||||||||||||||||
| Total | $ | 47,895 | $ | 48,092 | $ | 42,246 | ||||||||||||||
| Related income tax benefit | $ | 10,186 | $ | 10,219 | $ | 8,989 | ||||||||||||||
The following table summarizes the Company’s stock option activity and related information for the period from December 31, 2020 to December 31, 2023:
| Number of Stock Options | Weighted Average Exercise Price (Per Share) | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in Thousands) | ||||||||||||||||||||
| Outstanding at December 31, 2020 | 6,235,118 | $ | 45.98 | 6.97 | $ | 102,955 | |||||||||||||||||
| Granted | 890,277 | 60.27 | |||||||||||||||||||||
| Exercised | (732,117) | 32.56 | $ | 23,967 | |||||||||||||||||||
| Forfeited | (278,233) | 46.46 | |||||||||||||||||||||
| Expired | (64,505) | 80.31 | |||||||||||||||||||||
| Outstanding at December 31, 2021 | 6,050,540 | 49.32 | 6.59 | $ | 81,407 | ||||||||||||||||||
| Granted | 1,061,630 | 59.99 | |||||||||||||||||||||
| Exercised | (689,464) | 35.37 | $ | 23,983 | |||||||||||||||||||
| Forfeited | (113,506) | 54.97 | |||||||||||||||||||||
| Expired | (36,206) | 79.90 | |||||||||||||||||||||
| Outstanding at December 31, 2022 | 6,272,994 | 52.38 | 6.28 | $ | 2,011 | ||||||||||||||||||
| Granted | 1,587,411 | 38.23 | |||||||||||||||||||||
| Exercised | (62,680) | 30.93 | $ | 580 | |||||||||||||||||||
| Forfeited | (252,035) | 52.67 | |||||||||||||||||||||
| Expired | (465,942) | 52.11 | |||||||||||||||||||||
| Outstanding at December 31, 2023 | 7,079,748 | $ | 49.40 | 6.03 | $ | 863 | |||||||||||||||||
| Exercisable at December 31, 2023 | 4,752,678 | $ | 51.24 | 4.63 | $ | 272 | |||||||||||||||||
| Vested and expected to vest as of December 31, 2023 | 7,079,748 | $ | 49.40 | 6.03 | $ | 863 | |||||||||||||||||
As of December 31, 2023, $40.7 million of total unrecognized compensation cost related to unvested stock options is expected to be recognized over a weighted average period of 2.6 years. The Company’s stock options have a maximum expiration date of ten years from the date of grant.
The weighted average fair value of stock options granted for the years ended December 31, 2023, 2022 and 2021 was $15.92, $25.60 and $26.74 per share, respectively. The fair values of stock options granted were estimated using the Black-Scholes model with the following weighted average assumptions:
| Year Ended December 31, | ||||||||||||||||||||
| Black-Scholes Weighted Average Assumption | 2023 | 2022 | 2021 | |||||||||||||||||
| Expected dividend yield | None | None | None | |||||||||||||||||
| Risk-free interest rate | 3.05% - 4.81% | 1.37% - 4.17% | 0.43% - 1.21% | |||||||||||||||||
| Expected volatility | 41.3% | 45.1% | 49.1% | |||||||||||||||||
| Expected term of options | 4.90 years | 4.92 years | 5.36 years | |||||||||||||||||
The following table summarizes the Company’s RSU activity and related information for the period from December 31, 2020 to December 31, 2023:
| Number of Restricted Stock Units | Weighted Average Grant Date Fair Value (Per Share) | Aggregate Intrinsic Value (in Thousands) | |||||||||||||||
| Unvested at December 31, 2020 | 957,453 | $ | 46.34 | $ | 57,294 | ||||||||||||
| Granted | 446,450 | 60.81 | |||||||||||||||
| Vested | (309,779) | 45.16 | |||||||||||||||
| Forfeited | (138,847) | 50.67 | |||||||||||||||
| Unvested at December 31, 2021 | 955,277 | 52.85 | $ | 57,479 | |||||||||||||
| Granted | 621,149 | 60.11 | |||||||||||||||
| Vested | (331,196) | 50.25 | |||||||||||||||
| Forfeited | (95,768) | 56.00 | |||||||||||||||
| Unvested at December 31, 2022 | 1,149,462 | 57.26 | $ | 44,381 | |||||||||||||
| Granted | 795,962 | 38.95 | |||||||||||||||
| Vested | (404,095) | 54.88 | |||||||||||||||
| Forfeited | (176,711) | 54.15 | |||||||||||||||
| Unvested and expected to vest as of December 31, 2023 | 1,364,618 | $ | 47.66 | $ | 46,042 | ||||||||||||
As of December 31, 2023, $51.1 million of total unrecognized compensation cost related to unvested RSUs is expected to be recognized over a weighted average period of 2.8 years. The Company’s RSUs have a maximum vest date of four years from the date of grant. The fair values of RSUs awarded are equal to the closing price of the Company’s common stock on the date of grant.
The fair values of the ESPP share options granted were estimated using the Black-Scholes model with the following weighted average assumptions:
| Year Ended December 31, | ||||||||||||||||||||
| Black-Scholes Weighted Average Assumption | 2023 | 2022 | 2021 | |||||||||||||||||
| ESPP share option fair value | $10.00 - $10.34 | $15.26 - $15.86 | $15.16 - $15.23 | |||||||||||||||||
| Expected dividend yield | None | None | None | |||||||||||||||||
| Risk-free interest rate | 4.77% - 5.53% | 0.22% - 2.52% | 0.50% - 0.90% | |||||||||||||||||
| Expected volatility | 35.4% | 39.5% | 37.0% | |||||||||||||||||
| Expected term of ESPP share options | 6 months | 6 months | 6 months | |||||||||||||||||
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.