Stockholders' Equity

9 Months Ended

Sep. 30, 2023

Stockholders’ Equity

Amended and Restated Certificate of Incorporation

On June 16, 2020, the Company’s certificate of incorporation was amended and restated to authorize 400,000,000 shares of common stock and 40,000,000 shares of undesignated preferred stock, each with a par value of $0.0001 per share. There was no preferred stock outstanding during the periods presented in the condensed financial statements.

Common Stock

On July 2, 2021, the Company entered into a sales agreement (the 2021 Sales Agreement) with Cowen and Company, LLC (the Sales Agent), under which the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $150.0 million through the Sales Agent. Sales of the Company’s common stock made pursuant to the 2021 Sales Agreement are made under the Company’s shelf registration statement on Form S-3, which became automatically effective upon filing on July 2, 2021 (the Shelf Registration Statement). During the nine months ended September 30, 2022, the Company sold 7,141,761 shares of its common stock pursuant to the 2021 Sales Agreement and received net proceeds of $121.3 million, after deducting offering-related transaction costs and commissions.

On November 8, 2022, the Company entered into a sales agreement (the 2022 Sales Agreement) with the Sales Agent, with substantially similar terms as the 2021 Sales Agreement. Under the 2022 Sales Agreement, the Company may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Sales Agent. The Company is not obligated to sell, and the Sales Agent is not obligated to buy or sell, any shares of common stock under the 2022 Sales Agreement. Upon entry into the 2022 Sales Agreement, the 2021 Sales Agreement was terminated. During the nine months ended September 30, 2023, the Company sold 4,107,810 shares of its common stock pursuant to the 2022 Sales Agreement and received net proceeds of $60.5 million, after deducting offering-related transaction costs and commissions.

On December 15, 2022, the Company completed a public offering of 13,800,000 shares of its common stock at a public offering price of $17.25 per share. The net proceeds from the offering were $223.8 million, after deducting underwriting discounts, commissions and offering costs of $14.3 million. The shares sold in the offering were registered pursuant to the Company’s Shelf Registration Statement.

Stock Options

Stock option activity for employee and non-employee awards and related information is as follows (in thousands, except per share data):


	Number of Options	Weighted- Average Exercise Price Per Share
Outstanding at December 31, 2022	9,352	$	15.28
Granted	3,885	14.77
Exercised	(145)	3.88
Forfeited/expired	(566)	19.19
Outstanding at September 30, 2023	12,526	$	15.08

Restricted Stock Units and Performance Stock Units

During the nine months ended September 30, 2023, under the 2020 Incentive Award Plan and the 2022 Employment Inducement Incentive Award Plan, the Company granted restricted stock units (RSUs) and performance stock units (PSUs) to employees of the Company.

RSUs are valued at the market price of a share of the Company’s stock on the date of grant. RSUs vest ratably on an annual basis over a four-year service period and are payable in shares of common stock on the vesting date. Compensation expense for RSUs is recognized on a straight-line basis over the four-year service period. Forfeitures are recorded in the period in which they occur.

The following table summarizes the RSU activity for the nine months ended September 30, 2023 (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested at December 31, 2022	—	$	—
Granted	757	20.03
Vested	—	—
Forfeited	(56)	20.70
Unvested at September 30, 2023	701	$	19.98

During the nine months ended September 30, 2023, the Company granted 750,000 PSUs at a weighted-average grant date fair value of $6.57 per share. The PSUs vest upon achievement of certain clinical milestones and continued employment thereafter. The PSUs have a two-year term and any unvested awards at the end of the term will be forfeited. Compensation expense for PSUs is recognized on a straight-line basis over the requisite service periods when the achievement of the performance condition is determined to be probable. If a performance condition is not determined to be probable or is not met, no stock-based compensation expense is recognized, and any previously recognized expense is reversed. Forfeitures are recognized as a reduction of stock-based compensation expense in the period they occur.

There were no PSUs outstanding as of December 31, 2022. As of September 30, 2023, no PSUs were vested and no stock-based compensation expense was recognized as the performance conditions were not deemed probable.

Employee Stock Purchase Plan

The Company issued 81,005 and 48,760 shares of common stock under the Employee Stock Purchase Plan (ESPP) during the nine months ended September 30, 2023 and 2022, respectively. The Company had an outstanding liability of $0.6 million at September 30, 2023, which is included in accounts payable and accrued liabilities on the condensed balance sheet, for employee contributions to the ESPP for shares pending issuance at the end of the current offering period. As of September 30, 2023, 467,023 shares of common stock were available for issuance under the ESPP.

Stock-Based Compensation Expense

The assumptions used in the Black-Scholes model to determine the fair value of stock option grants were as follows:


	Options		ESPP
	Nine Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Risk-free interest rate	3.5% - 4.5%	1.5% - 3.4%	5.4%	2.2%
Expected volatility	80% - 82%	85%	76%	79%
Expected term (in years)	5.5 - 6.1	5.5 - 6.1	0.5	0.5
Expected dividend yield	—%	—%	—%	—%

Risk-Free Interest Rate. The Company bases the risk-free interest rate assumption for equity awards on the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

Expected Volatility. The expected volatility of stock options is estimated based on the average historical volatilities of common stock of comparable publicly traded companies and the Company's own volatility. The comparable companies are chosen based on their size and stage in the life cycle. 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. Prior to 2023, the Company exclusively used peer group companies to determine expected volatility.

Expected Term. The Company's limited option exercise history does not provide a reasonable basis for estimating expected term, therefore the Company has estimated the expected life of its stock options using the simplified method, whereby the expected life equals the average of the vesting term and the original contractual term of the option. The expected life assumption for employee stock purchases under the ESPP is six months to conform with the six-month ESPP offering period.

Expected Dividend Yield. The Company’s expected dividend yield assumption is zero as it has never paid dividends and has no present intention to do so in the future.

The allocation of stock-based compensation expense for stock option, RSU awards, PSU awards, and shares purchasable under the ESPP was as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Research and development expense	$	5,611	$	4,151	$	16,325	$	10,948
General and administrative expense	4,209		2,935		12,052		8,884
Total stock-based compensation expense	$	9,820	$	7,086	$	28,377	$	19,832

As of September 30, 2023, the unrecognized compensation cost related to outstanding time-based options and RSUs was $75.1 million and $11.8 million, respectively, which is expected to be recognized over a weighted-average period of 2.7 years and 3.4 years, respectively. Unrecognized compensation cost related to PSUs was $4.9 million. As of September 30, 2023, the unrecognized compensation cost related to stock purchase rights under the ESPP was $0.2 million, which is expected to be recognized over a weighted-average period of 0.2 years.