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Stock-Based Compensation
12 Months Ended
Dec. 31, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

12. Stock-Based Compensation

Summary of Equity Incentive Plans

In March 2018, the Company’s board of directors adopted the Company’s 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan was approved by the Company’s stockholders in April 2018 and became effective in May 2018. The 2018 Plan initially reserved 4,289,936 shares for the issuance of stock options as well as any automatic annual increases in the number of shares of common stock reserved for future issuance under the 2018 Plan. Awards granted under the 2018 Plan expire no later than ten years from the date of grant. For stock options, the option price shall not be less than 100% of the estimated fair value on the day of grant. Options granted typically vest over a four-year period but may be granted with different vesting terms. Unvested options not exercised at the time of an employee’s termination of employment are added back to the 2018 Plan.

Following the Company’s IPO and in connection with the effectiveness of the 2018 Plan, the 2013 Equity Incentive Plan (the “2013 Plan”) terminated and no further awards will be granted under that plan. All outstanding awards under the 2013 Plan will continue to be governed by their existing terms and the shares that remained outstanding for issuance under the 2013 Plan were transferred into the 2018 Plan. As of December 31, 2021, there were in aggregate 13,271,831 shares of common stock authorized for issuance under the 2018 Plan.

Prior to its termination, the 2013 Plan provided for the granting of incentive stock options (“ISOs”), non-statutory stock options (“NSOs”) and restricted shares to employees, directors, and consultants at the discretion of management and the board of directors. The exercise price of an ISO and NSO shall not be less than 100% of the estimated fair value of the shares on the date of grant, and the exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. For awards granted between September 2017 and February 2018 with an exercise price of $3.42, a deemed fair value ranging from $3.95 to $8.47 per share was used in calculating stock-based compensation expense, which was determined using management hindsight. Options granted under the 2013 Plan expire no later than ten years from the date of grant and generally vest over a four-year period but may be granted with different vesting terms. Unvested options not exercised at the time of an employee’s termination of employment are added back to the 2018 Plan.

Under the 2013 Plan, the Company permitted early exercise of certain stock options prior to vesting. These unvested shares are subject to repurchase by the Company at the original issuance price in the event the optionee’s employment is terminated either voluntarily or involuntarily. The amounts paid for shares purchased under an early exercise of stock options and subject to repurchase by the Company are reported as a liability and reclassified into additional paid-in capital as the shares vest.

In March 2020, the Company’s board of directors approved the Company’s 2020 Employment Inducement Incentive Plan (“the 2020 Plan”), to provide for grants to newly hired employees as a material inducement for them to commence employment with the Company. The 2020 Plan initially reserved 1,100,000 shares for the issuance of

stock options, and in November 2020, the Company reserved an additional 1,500,000 shares of common stock for future issuance under the 2020 Plan. Awards granted under the 2020 Plan expire no later than ten years from the date of grant. For stock options, the option price shall not be less than 100% of the estimated fair value on the day of grant. Options granted typically vest over a four-year period but may be granted with different vesting terms. Unvested options not exercised at the time of an employee’s termination of employment are added back to the 2020 Plan. As of December 31, 2021, there were in aggregate 2,530,000 shares of common stock authorized for issuance under the 2020 Plan.

Equity Incentive Plan Activity

The following sections summarize activity under the Company’s equity incentive plans.

Stock Options, Restricted Stock Units (RSUs) and Performance Stock Units (“PSUs”) Activity

A summary of the Company’s stock option activity under the 2013 Plan, 2018 Plan and 2020 Plan for the year ended December 31, 2021 is as follows:

 

 

 

Shares

Available

for Grant

 

 

Outstanding

Options

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contract

Term

 

 

Aggregate

Intrinsic

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in Years)

 

 

(in thousands)

 

Balance at December 31, 2020

 

 

4,270,764

 

 

 

7,475,472

 

 

$

6.88

 

 

 

 

 

 

 

 

 

Shares added

 

 

2,942,007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

(3,629,461

)

 

 

3,062,738

 

 

 

4.92

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

(430,047

)

 

 

3.64

 

 

 

 

 

 

 

 

 

Canceled

 

 

1,730,141

 

 

 

(1,441,208

)

 

 

8.70

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

5,313,451

 

 

 

8,666,955

 

 

$

6.05

 

 

 

7.7

 

 

$

 

Vested and exercisable at December 31, 2021

 

 

 

 

 

 

4,204,083

 

 

$

6.55

 

 

 

6.4

 

 

$

 

Vested and expected to vest at December 31, 2021

 

 

 

 

 

 

8,666,955

 

 

$

6.05

 

 

 

7.7

 

 

$

 

 

The total intrinsic value of options exercised was $1.1 million and $1.5 million for the years ended December 31, 2021 and 2020, respectively. The weighted-average estimated fair value of stock options granted was $4.88 and $4.83 for the years ended December 31, 2021 and 2020, respectively.

The aggregate intrinsic value of options exercisable was zero and $4.1 million as of December 31, 2021 and 2020, respectively.

In September 2020, the board of directors granted retention stock-based awards to employees covering an aggregate of 3.2 million shares of common stock, including options to purchase an aggregate of 250,000 shares of common stock and 2,959,850 of restricted stock units. The awards are all time-based vesting and vest over three to four years.

During the year ended December 31, 2020 the Company issued 13,550 shares in settlement of stock-based compensation awards accounted for as liability awards. During the year ended December 31, 2021, there were no shares issued in settlement of stock-based compensation awards accounted for as liability awards.

The following table summarizes the Company’s RSU, RSA and PSU activity for the year ended December 31, 2021:

 

 

 

Shares

 

 

Weighted-

Average

Grant Date

Fair Value

 

Unvested at December 31, 2020

 

 

2,922,077

 

 

$

3.44

 

Granted

 

 

566,723

 

 

$

4.88

 

Released

 

 

(962,693

)

 

$

3.36

 

Canceled

 

 

(535,170

)

 

$

3.33

 

Unvested at December 31, 2021

 

 

1,990,937

 

 

$

3.92

 

 

 

As of December 31, 2021, the total stock-based compensation cost related to options, RSAs, RSUs and PSUs granted but not yet amortized was $23.1 million and will be recognized over a weighted-average period of approximately 3.2 years. The total grant date fair value of RSUs and RSAs vested during the years ended December 31, 2021 and 2020 was approximately $3.1 million and $1.2 million, respectively.

In March 2020, the board of directors granted the Company’s newly hired Chief Executive Officer stock-based awards covering an aggregate of 1.1 million shares of common stock, including options to purchase an aggregate of 800,000 shares of common stock, 120,000 RSUs, 150,000 PSUs and 30,000 shares of common stock. The stock-based awards were granted pursuant to the 2020 Plan.

The 30,000 shares of common stock were fully vested on the date of grant and thus, the related compensation expense of $0.2 million was recognized on the grant date. The stock options and RSUs will vest subject to continued service through the applicable vesting date.

Valuation of Stock Options

The Company uses the Black-Scholes option-pricing model for determining the estimated fair value and stock-based compensation related to stock options and ESPP awards. The fair value of stock options granted to employees was estimated on the date of grant using the Black-Scholes option pricing model using the following assumptions:

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Expected term of options (in years)

 

6.0

 

 

6.1

 

 

6.1

 

Expected stock price volatility

 

85.7%-88.5%

 

 

92.6%-107.9%

 

 

99.4%-111.3%

 

Risk-free interest rate

 

1.08%-1.35%

 

 

0.29%-0.52%

 

 

1.59%-2.27%

 

Expected dividend yield

 

 

 

 

 

 

 

 

 

 

The valuation assumptions were determined as follows:

Expected Term—The expected term represents the period that the options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Expected Volatility—The Company used an average historical stock price volatility based on a combined weighted average of the Company’s historical average volatility and that of a selected peer group of comparable public companies within the biotechnology and pharmaceutical industry that were deemed to be representative of future stock price trends as the Company does not have a sufficient historical trading history of its own common stock. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

Risk-Free Interest Rate—The Company based the risk-free interest rate over the expected term of the options based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of the grant.

Expected Dividend Yield—The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future. Therefore, the expected dividend yield is zero.

The fair value of ESPP awards was not material for all periods presented.

Performance Stock Units

The PSUs were originally scheduled to vest as to 50,000 PSUs upon the attainment of (a) a volume-weighted average per share closing trading price of the Company’s common stock of at least $36.875 over a trailing 30-day period or (b) a change in control transaction in which the price per share to the holders of the Company’s common stock is at least $36.875 and as to 100,000 PSUs (x) at such time as the Company’s market capitalization reaches at least $2.5 billion, as measured based on the volume weighted-average closing trading price over a trailing 30 day period or (y) a change in control transaction in which the consideration paid to the Company’s stockholders is equal to at least $2.5 billion, as determined by the Company’s board of directors. In January 2021, the board of directors modified the PSUs to vest as to 50,000 PSUs upon the attainment of (a) a volume-weighted average per share closing trading price of the Company’s common stock of at least $18 over a trailing 30-day period or (b) a change in

control transaction in which the price per share to the holders of the Company’s common stock is at least $18.00 and as to 100,000 PSUs upon the attainment of (x) a volume-weighted average per share closing trading price of the Company’s common stock of at least $36.00 over a trailing 30-day period or (y) a change in control transaction in which the price per share to the holders of the Company’s common stock is at least $36.00, as determined by the Company’s board of directors.

For the PSU awards, the Company used the Monte-Carlo option pricing model to determine the fair value of awards at the date of grant. The Monte-Carlo option pricing model uses similar input assumptions as the Black-Scholes model; however, it further incorporates into the fair-value determination the possibility that the market condition may not be satisfied. Compensation costs related to awards with a market-based condition are recognized regardless of whether the market condition is ultimately satisfied. Compensation cost is not reversed if the achievement of the market condition does not occur. The total grant date fair value of the PSU awards was determined to be $0.7 million and will be recognized as compensation expense over the weighted-average derived service period of approximately 4.3 years. The incremental fair value of the PSUs on the modification date of $31,000 are added to the unamortized value of the original grant of $569,000 and will be amortized to expense over the new implied service periods of 1.63 years to 2.79 years.

Performance and Market Contingent Stock Options

As of December 31, 2020, there were 87,521 performance and market contingent stock option awards outstanding with a grant date total fair value of $0.3 million. As of December 31, 2020 the Company determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation cost was recognized for these awards.

 

In January 2021, the board of directors modified 17,479 performance and market contingent stock options with vesting conditions that required the combination of a liquidity event, change of control or IPO with a market condition at prescribed levels. The modification removed the performance condition and lowered the market conditions to a volume-weighted average per share closing trading price of the Company’s common stock of at least $18.00 over a trailing 30-day period for one tranche and at least $36.00 over a trailing 30-day period for the second tranche. The fair value of the options on the modification date of $81,000 will be amortized to expense over the implied service periods of 1.46 years to 2.52 years.

 

In June 2021, the board of directors modified 33,370 performance and market contingent stock options with vesting conditions that required the combination of a liquidity event, change of control or IPO with a market condition at prescribed levels. The modification removed the performance condition and adjusted the market conditions to a date on which the Company attains a valuation of at least one billion dollars measured by the volume-weighted average per share closing trading price of the Company’s common stock over a trailing 30-day period. The fair value of the options on the modification date of $102,000 will be amortized to expense over the implied service periods of 1.85 years.

 

As of December 31, 2021, there were 50,849 market contingent stock option awards outstanding with a modification date total fair value of $0.2 million.

2018 Employee Stock Purchase Plan

In March 2018, the Company’s board of directors adopted the Company’s 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The 2018 ESPP was approved by the Company’s stockholders in April 2018 and became effective on May 2, 2018. The 2018 ESPP reserved 536,242 shares of common stock for issuance pursuant to future awards, as well as any automatic increases in the number of shares of the Company’s common stock reserved for future issuance under this plan.  

Under the 2018 ESPP, employees are offered the option to purchase the Company’s common stock at a discount during the offering periods, at semi-annual intervals, with their accumulated payroll deductions. The option purchase price will be 85% of the lower of the closing trading price per share at the beginning of the offering period or at the purchase date. The 2018 ESPP provides for consecutive offering periods and eligible employees may elect to withhold up to 15% of their compensation through payroll deductions during the offering period for the purchase of stock. The maximum number of shares that may be purchased by any one participant is limited to 15,000 shares in each offering period and $25,000 in fair market value during any calendar year per the Internal Revenue Code limits. The first offering period commenced on September 16, 2018.

Stock-Based Compensation Expense

The following table sets forth the total stock-based compensation expense for all options granted to employees and nonemployees, including shares sold through the issuance of non-recourse promissory notes which are considered to be options for accounting purposes, and costs associated with the 2018 ESPP included in the Company’s statement of operations (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Research and development

 

$

4,809

 

 

$

6,563

 

 

$

4,979

 

General and administrative

 

 

6,744

 

 

 

7,250

 

 

 

5,873

 

Total

 

$

11,553

 

 

$

13,813

 

 

$

10,852

 

 

Stock-based compensation for the year ended December 31, 2020 includes $0.1 million of expense related to awards accounted for as liability awards. There was no expense related to awards accounted for as liability awards included in stock-based compensation for the year ended December 31, 2021.

During the years ended December 31, 2021 and 2020, stock-based compensation expense recognized related to nonemployee options was $0.4 million and $0.3 million, respectively.