Stock-based Compensation

3 Months Ended

Mar. 31, 2026

Share-Based Payment Arrangement [Abstract]

2015 Stock Plan

The 2015 Stock Plan, as amended (the “2015 Stock Plan”), is the Company’s stockholder-approved incentive plan through which equity based grants are awarded. The 2015 Stock Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based compensation awards to employees, officers, directors, and consultants of the Company. The administration of the 2015 Stock Plan is under the general supervision of the Compensation Committee of the Board of Directors. The terms of stock options awarded under the 2015 Stock Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option is granted. As of March 31, 2026, 211,145 shares were available for future issuance under the 2015 Stock Plan.

2023 Inducement Plan

In September 2023, the Company adopted the 2023 Inducement Plan (the “2023 Inducement Plan”), pursuant to which the Company from time to time was permitted to make equity grants to new employees as a material inducement to their employment. The 2023 Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and was administered by the Compensation Committee of the Board. The 2023 Inducement Plan provided for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but did not allow for the granting of incentive stock options. The terms of the stock options under the 2023 Inducement Plan, in general, were determined by the Compensation Committee, provided the exercise price per share generally would not be set at less than the fair market value of a share of the common stock on the date of grant and the term would not be greater than ten years from the date the option or award was granted. A total of 500,000 shares of the Company’s common stock were reserved for issuance under the 2023 Inducement Plan. In June 2025, the Company terminated the 2023 Inducement Plan, and therefore no additional awards may be made from the 2023 Inducement Plan. Any awards outstanding under the 2023 Inducement Plan will continue to be governed by the terms thereof.

2025 Inducement Plan

In June 2025, the Company adopted the 2025 Inducement Plan (the “2025 Inducement Plan”), pursuant to which the Company may from time to time make equity grants to new employees as a material inducement to their employment. The 2025 Inducement Plan was adopted without stockholder approval, pursuant to Nasdaq Listing Rule 5635(c)(4), and is administered by the Compensation Committee of the Board. The 2025 Inducement Plan provides for the granting of non-statutory stock options, restricted stock, restricted stock units, performance stock units and other stock-based compensation awards to new employees, but does not allow for the granting of incentive stock options. The terms of the stock options under the 2025 Inducement Plan, in general, are determined by the Compensation Committee, provided the exercise price per share generally shall not be set at less than the fair market value of a share of the common stock on the date of grant and the term shall not be greater than ten years from the date the option or award is granted. A total of 100,000 shares of the Company’s common stock were initially reserved for issuance under the 2025 Inducement Plan. In September 2025, the 2025 Inducement Plan was amended to increase the aggregate number of shares reserved for issuance by an additional 300,000 shares. A total of 230,287 shares were available for future issuance as of March 31, 2026.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2026:


	Shares	Weighted average exercise price
Outstanding at December 31, 2025	979,861	$	155.25
Options granted	102,652	437.68
Options exercised	(58,815)	39.84
Options cancelled	(5,353)	231.67
Outstanding at March 31, 2026	1,018,345	$	189.98
Exercisable at March 31, 2026	716,129	$	126.50

The total cash received by the Company as a result of stock option exercises was $2.3 million and $8.6 million for the three months ended March 31, 2026 and 2025, respectively. The total intrinsic value of options exercised was $27.6 million and $25.7 million for the three months ended March 31, 2026 and 2025, respectively.

The Company awards restricted stock units (“RSUs”) to employees, officers and directors of the Company. RSUs vest annually and are subject to forfeiture if employment or service terminates before vesting.

The following table summarizes RSU activity, excluding performance-based RSUs, during the three months ended March 31, 2026:


	Shares	Weighted average grant date fair value
Outstanding at December 31, 2025	798,422	$	307.85
RSUs granted	315,641	439.07
RSUs vested	(141,030)	299.16
RSUs forfeited	(12,135)	304.20
Outstanding at March 31, 2026	960,898	$	352.28

For the three months ended March 31, 2026 and 2025, the total fair value of RSUs vested was $65.3 million and $25.0 million, respectively.

Performance-Based Restricted Stock Units

The Company has granted various performance-based restricted stock units (“PSUs”) to certain senior members of leadership. Depending on the terms of the PSUs and the outcome of the pre-established performance criteria, which may include a market or performance condition, a recipient may ultimately earn the target number of PSUs granted or a specified multiple thereof at the end of the vesting period. The Company granted PSUs to the Company’s Chief Executive Officer (“CEO”) in connection with his hiring in September 2023. Such PSUs may be earned based on the achievement of three significant sustained stock price appreciation hurdles over a five-year period. The Company’s CEO achieved the first two hurdles in 2025 and earned 50,000 shares for each hurdle. The Company’s CEO is eligible to earn an additional 50,000 shares upon the achievement of the final hurdle. Earned PSUs are settled on a delayed basis notwithstanding the date of achievement of the stock price hurdle. Beginning in 2024, the Company issued PSUs to certain executives that may be earned based on the Company’s total shareholder return relative to a defined peer group over a three year period. Accordingly, any PSUs granted in 2024, 2025 and 2026 will vest, to the extent earned, in the first quarter of 2027, 2028 and 2029, respectively.

The following table summarizes PSU activity during the three months ended March 31, 2026:


	PSUs	Eligible to Earn PSUs	Weighted average grant date fair value
Outstanding PSUs at December 31, 2025	103,244	256,488	$	500.55
PSUs granted	38,803	77,606	616.19
PSUs earned	—	—	—
PSUs forfeited	(173)	(346)	593.93
Outstanding at March 31, 2026	141,874	333,748	$	532.06

Outstanding PSUs excludes 100,000 shares underlying PSU awards that have been earned but are subject to delayed settlement as there is no longer a risk of forfeiture with respect to these awards.

Outstanding Awards

As of March 31, 2026, the Company had RSUs, PSUs, and options outstanding pursuant to which an aggregate of 2,312,991 shares of its common stock may be issued pursuant to the terms of all awards granted under the 2015 Stock Plan, 2023 Inducement Plan and 2025 Inducement Plan. Shares underlying PSU awards that have been earned but are subject to delayed settlement have been excluded from this amount as there is no longer a risk of forfeiture with respect to these awards.

Stock-Based Compensation Expense

Stock-based compensation expense during the three months ended March 31, 2026 and 2025 was as follows (in thousands):


	Three Months Ended March 31,
	2026		2025
Stock-based compensation expense by type of award:
Stock options	$	5,163	$	5,439
Restricted stock units	24,490		11,788
Performance-based restricted stock units	4,365		3,704
Total stock-based compensation expense	$	34,018	$	20,931
Effect of stock-based compensation expense by line item:
Cost of sales	$	96	$	—
Research and development	7,865		5,215
Selling, general and administrative	26,057		15,716
Total stock-based compensation expense included in net loss	$	34,018	$	20,931

Unrecognized stock-based compensation expense as of March 31, 2026 was $377.1 million with a weighted average remaining period of 3.13 years.

MADRIGAL PHARMACEUTICALS, INC. 10-Q