Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Share-based Compensation Expense

The following table summarizes non-cash share-based compensation expense (in thousands):


	December 31,
	2020		2019		2018
Share-based compensation expense as a component of:
Research and development expenses	$	13,497	$	9,641	$	8,352
General and administrative expenses	17,230		14,874		12,494
	$	30,727	$	24,515	$	20,846

Stock Plans

In December 2020, our 2002 Stock Incentive Plan was amended to increase the number of shares available for issuance by 1.1 million shares. As of December 31, 2020, there were 1.1 million shares available for future option grants or direct issuance under the Amended 2002 Plan.

Following is a summary of our stock option plan activity and related information:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value (In thousands)
Balance at January 1, 2018	1,876,332	$	53.17	5.77	$	157,340
Granted	228,362	$	162.00
Exercised	(358,162)	$	55.24
Forfeited	(10,228)	$	114.53
Balance at December 31, 2018	1,736,304	$	66.71	5.47	125,858
Exercisable at December 31, 2018	1,313,374	$	47.03	4.56	117,314
Options vested and expected to vest as of December 31, 2018	1,736,304	$	66.71	5.47	$	125,858
Granted	338,617	$	116.69
Exercised	(112,011)	$	23.65
Forfeited	(6,531)	$	139.37
Balance at December 31, 2019	1,956,379	$	77.54	5.45	72,002
Exercisable at December 31, 2019	1,454,726	$	61.82	4.42	70,345
Options vested and expected to vest as of December 31, 2019	1,956,379	$	77.54	5.45	$	72,002
Granted	806,300	$	92.93
Exercised	(156,845)	$	21.26
Forfeited	(44,012)	$	91.30
Balance at December 31, 2020	2,561,822	$	85.59	6.09	59,033
Exercisable at December 31, 2020	1,611,830	$	76.05	4.54	53,286
Options vested and expected to vest as of December 31, 2020	2,561,822	$	85.59	6.09	$	59,033

The weighted-average grant-date fair value of all stock options granted during 2020, 2019 and 2018 was $41.39, $48.65 and $58.85 per share, respectively. The total intrinsic value of all options exercised during 2020, 2019 and 2018 was approximately $11.9 million, $10.4 million and $51.9 million, respectively.

Cash received from options exercised, net of fees paid, in 2020, 2019 and 2018 was $2.5 million, $2.6 million and $19.8 million, respectively.

Following is a further breakdown of the options outstanding as of December 31, 2020:


Range of exercise prices	Options outstanding	Weighted average remaining life in years	Weighted average exercise price		Options exercisable	Weighted average exercise price
$10.05-$14.47	284,184	0.86	$	13.08	270,184	$	13.00
$21.92-$56.26	344,629	2.88	$	35.34	344,629	$	35.34
$63.58-$74.42	307,356	5.20	$	71.96	220,650	$	73.41
$82.90-$95.35	185,033	6.23	$	86.22	140,400	$	86.32
$95.68	305,106	9.12	$	95.68	63,059	$	95.68
$97.92	4,976	5.02	$	97.92	4,976	$	97.92
$98.20	270,850	9.26	$	98.20	—	$	98.20
$100.02-$113.76	257,914	6.69	$	104.12	220,092	$	103.96
$117.58	19,744	9.44	$	117.58	—	$	117.58
$117.97-$195.91	582,030	7.56	$	137.18	347,840	$	141.38
	2,561,822	6.09	$	85.59	1,611,830	$	76.05

The assumptions used for the specified reporting periods and the resulting estimates of weighted-average grant date fair value per share of options granted:


	Year Ended December 31,
	2020	2019	2018
Risk-free interest rate	0.2%-1.4%	1.4%-2.6%	2.7%-3.0%
Expected volatility	47%-71%	40%-49%	33%-36%
Expected term	4.7 to 5.1 years	4.6 to 5.9 years	5.1 to 5.8 years

As of December 31, 2020, there was $37.2 million of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted average period of 2.9 years.

Restricted Stock Activity

The following is a summary of our restricted stock activity and related information:


	Shares	Weighted-Average Grant Date Fair Value

Outstanding at January 1, 2018	133,294	$	91.60
Granted	62,133	$	169.92
Vested	(61,989)	$	86.19
Forfeited	(1,165)	$	125.16
Outstanding at December 31, 2018	132,273	$	130.63
Granted	118,498	$	115.90
Vested	(102,846)	$	121.55
Forfeited	(666)	$	134.36
Outstanding at December 31, 2019	147,259	$	125.11
Granted	111,306	$	89.73
Vested	(52,363)	$	121.69
Forfeited	—	$	—
Outstanding at December 31, 2020	206,202	$	106.88

As of December 31, 2020, unrecognized compensation cost related to non-vested stock awards amounted to $10.6 million. That cost is expected to be recognized over a weighted average period of 1.5 years.

Employee Stock Purchase Plan

As of December 31, 2020, 52,808 shares of our common stock are available for future issuance under the Amended Employee Stock Purchase Plan, or ESPP. The ESPP permits eligible employees to purchase up to 1,250 shares of Ligand common stock per calendar year at a discount through payroll deductions. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first of a six month offering period or purchase date, whichever is lower. There were 6,455, 4,745 and 3,386 shares issued under the ESPP in 2020, 2019 and 2018, respectively.

Share Repurchases

In May 2018, in conjunction with our 2023 Notes debt offering, we repurchased 260,000 shares of our common stock at a cost of $191.14 per share. In September 2018, the board of directors authorized us to repurchase up to $200.0 million of our common stock from time to time over a period of up to three years (the “Repurchase Program”). On January 23, 2019, the board of directors elected to increase the Repurchase Program, authorizing us to repurchase up to a maximum of $350.0 million of our outstanding common stock under the Repurchase Program.

On September 11, 2019, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $500.0 million of our common stock from time to time over the next three years. We expect to acquire shares primarily through open-market transactions and have entered into a Rule 10b5-1 trading plan, and may enter into additional Rule 10b5-1 trading

plans in the future, to facilitate open-market repurchases. The timing and amount of repurchase transactions will be determined by management based on our evaluation of market conditions, share price, legal requirements and other factors. Our prior $350.0 million stock repurchase program mentioned above was terminated in connection with the approval of the new stock repurchase program. Authorization to repurchase $248.8 million of our common stock remained available as of December 31, 2020.During the twelve months ended December 31, 2020, 2019 and 2018, we repurchased 934,079 shares for $78.0 million, 4,122,133 shares for $448.4 million, and 782,248 shares for $127.5 million, respectively.