Convertible Preferred Stock and Stockholders' Equity

6 Months Ended

Jun. 30, 2022

Convertible Preferred Stock And Stockholders Deficit Disclosure [Abstract]

Convertible Preferred Stock and Stockholders’ Equity

8. Convertible Preferred Stock and Stockholders’ Equity

Convertible Preferred Stock

In November 2016, the Company completed a private placement of stock in which investors, including investors affiliated with the directors and officers of the Company, purchased convertible preferred stock and common stock of the Company (the November 2016 Placement). The Company issued 2,819,549 shares of non-voting Class A Convertible Preferred Stock (the Class A Preferred) at $13.30 per share, each of which is convertible into five shares of common stock upon certain conditions defined in the Certificate of Designation of Preferences, Rights and Limitations of the Class A Preferred filed with the Delaware Secretary of State on November 22, 2016 (the CoD). The Class A Preferred were purchased exclusively by entities affiliated with Redmile Group, LLC (collectively, Redmile). The terms of the CoD prohibited Redmile from converting the Class A Preferred into shares of the Company’s common stock if, as a result of conversion, Redmile, together with its affiliates, would own more than 9.99% of the Company’s common stock then issued and outstanding (the Redmile Percentage Limitation), which percentage could change at Redmile’s election upon 61 days’ notice to the Company to (i) any other number less than or equal to 19.99% or (ii) subject to approval of the Company’s stockholders to the extent required in accordance with the Nasdaq Global Market rules, any number in excess of 19.99%. On May 2, 2017, the Company’s stockholders approved the issuance of up to an aggregate of 14,097,745 shares of common stock upon the conversion of the outstanding shares of Class A Preferred. As a result, Redmile has the right to increase the Redmile Percentage Limitation to any percentage in excess of 19.99% at its election. The Company also issued 7,236,837 shares of common stock at $2.66 per share as part of the November 2016 Placement.

The Class A Preferred are non-voting shares and have a stated par value of $0.001 per share and are convertible into five shares of the Company’s common stock at a conversion price of $2.66 per share, which was the fair value of the Company’s common stock on the date of issuance. Holders of the Class A Preferred have the same dividend rights as holders of the Company’s common stock. Additionally, the liquidation preferences of the Class A Preferred are pari passu among holders of the Company’s common stock and holders of the Class A Preferred, pro rata based on the number of shares held by each such holder (treated for this purpose as if the Class A Preferred had been converted to common stock).

During the year ended December 31, 2019, 25,000 shares of the Class A Preferred were converted into 125,000 shares of the Company’s common stock.

Pre-Funded Warrants

In January 2021, in conjunction with a public offering, the Company issued Pre-Funded Warrants, in lieu of common stock to certain investors, to purchase 257,310 shares of the Company’s common stock. The purchase price for the Pre-Funded Warrants was $85.499 per Pre-Funded Warrant, which equals the per share public offering price for the shares of common stock less the $0.001 exercise price for each such Pre-Funded Warrant. Given that the Pre-Funded Warrants are indexed to the Company’s own shares of common stock (and otherwise meet the requirements to be classified in equity), the Company recorded the consideration received from the issuance of the warrants as additional paid-in capital on the Company’s unaudited condensed consolidated balance sheets.

The Pre-Funded Warrants are exercisable at any time after the date of issuance. A holder of Pre-Funded Warrants may not exercise the Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. A holder of Pre-Funded Warrants may increase or decrease this percentage not in excess of 19.99% by providing at least 61 days’ prior notice to the Company.

As of June 30, 2022, there were 257,310 Pre-Funded Warrants outstanding.

Stock Options and Restricted Stock Units

Stock option activity under all equity and stock option plans is summarized as follows:

	Number of Options			Weighted- Average Price
Balance at December 31, 2021		7,708,263		$	20.43
Granted		848,457			36.68
Exercised		(649,901	)		9.50
Cancelled		(160,947	)		46.21
Balance at June 30, 2022		7,745,872		$	22.59

Restricted stock unit activity under all equity and stock option plans is summarized as follows:

	Number of Restricted Stock Units			Weighted- Average Grant Date Fair Value per Share
Balance at December 31, 2021		4,008,832		$	58.60
Granted		2,783,412			38.41
Vested		(485,934	)		49.51
Cancelled		(295,669	)		53.60
Balance at June 30, 2022		6,010,641		$	50.39

The allocation of stock-based compensation for all stock awards is as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development	$	13,570	$	8,624	$	26,264	$	17,146
General and administrative		6,972		4,630		13,609		9,084
Total	$	20,542	$	13,254	$	39,873	$	26,230

As of June 30, 2022, the unrecognized compensation cost related to outstanding options was $50.9 million and is expected to be recognized as expense over a weighted-average period of approximately 2.4 years.

As of June 30, 2022, the unrecognized compensation cost related to restricted stock units was $166.8 million which is expected to be recognized as expense over a weighted-average period of approximately 3.2 years.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and nonemployee stock option grants were as follows:

	Six Months Ended June 30,
	2022			2021
Risk-free interest rate		1.9	%		0.5	%
Expected volatility		76.2	%		76.6	%
Expected term (in years)		5.8			5.2
Expected dividend yield		0.0	%		0.0	%

2022 Stock Option and Incentive Plan

On June 9, 2022 the Company adopted the 2022 Stock Option and Incentive Plan (the "2022 Plan"). The 2022 Plan authorizes 9.5 million shares of common stock for issuance and allows for the grant of stock options, stock appreciation rights, restricted stock awards, performance-based awards, and other awards to individuals who are then employees, officers, directors or consultants of the Company.

Reconciliation of Consolidated Stockholders’ Equity Accounts

The following table summarizes the Company’s changes in stockholders’ equity accounts for the three and six months ended June 30, 2022 (in thousands, except share data):

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Loss			Deficit			Equity
Balance at December 31, 2021		2,794,549		3		95,726,962		96		1,448,584		(762	)		(769,083	)		678,838
Exercise of stock options, net of issuance costs		—		—		398,415		—		3,001		—			—			3,001
Issuance of common stock upon vesting of restricted stock units		—		—		412,707		1		—		—			—			1
Stock-based compensation		—		—		—		—		19,331		—			—			19,331
Unrealized loss on investments		—		—		—		—		—		(2,088	)		—			(2,088	)
Net loss		—		—		—		—		—		—			(65,690	)		(65,690	)
Balance at March 31, 2022		2,794,549		3		96,538,084		97		1,470,916		(2,850	)		(834,773	)		633,393
Exercise of stock options, net of issuance costs		—		—		251,486		—		3,184		—			—			3,184
Issuance of common stock upon vesting of restricted stock units		—		—		73,227		—		—		—			—			—
Stock-based compensation		—		—		—		—		20,542		—			—			20,542
Unrealized loss on investments		—		—		—		—		—		(531	)		—			(531	)
Net loss		—		—		—		—		—		—			(76,105	)		(76,105	)
Balance at June 30, 2022		2,794,549		3		96,862,797		97		1,494,642		(3,381	)		(910,878	)		580,483

The following table summarizes the Company’s changes in stockholders’ equity accounts for the three and six months ended June 30, 2021 (in thousands, except share data):

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balance at December 31, 2020		2,794,549	$	3		87,722,237	$	88	$	941,216	$	70		$	(556,932	)	$	384,445
Exercise of stock options, net of issuance costs		—		—		613,015		1		5,647		—			—			5,648
Issuance of common stock upon vesting of restricted stock units		—		—		430,620		—		—		—			—			—
Stock-based compensation		—		—		—		—		12,976		—			—			12,976
Public offering of common stock and issuance of pre-funded warrants, net of issuance costs		—		—		5,122,807		5		432,440		—			—			432,445
Unrealized loss on investments		—		—		—		—		—		(330	)		—			(330	)
Net loss		—		—		—		—		—		—			(45,089	)		(45,089	)
Balance at March 31, 2021		2,794,549	$	3		93,888,679	$	94	$	1,392,279	$	(260	)	$	(602,021	)	$	790,095
Exercise of stock options, net of issuance costs		—		—		368,947		—		3,681		—			—			3,681
Issuance of common stock upon vesting of restricted stock units		—		—		7,500		—		—		—			—			—
Stock-based compensation		—		—		—		—		13,254		—			—			13,254
Unrealized gain on investments		—		—		—		—		—		174			—			174
Net loss		—		—		—		—		—		—			(55,133	)		(55,133	)
Balance at June 30, 2021		2,794,549	$	3		94,265,126	$	94	$	1,409,214	$	(86	)	$	(657,154	)	$	752,071