Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

Stockholders' Equity

Note 7. Stockholders’ Equity

Sales Agreement

On October 4, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with SVB Leerink LLC (“SVB Leerink”) to sell shares of common stock from time to time through an “at-the-market” equity offering program (the “ATM”) under which SVB Leerink will act as the Company’s agent. The Company has no obligation to sell any shares of common stock under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. SVB Leerink will be entitled to compensation in an amount of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement. A maximum of $50.0 million of shares of common stock may be sold under the Sales Agreement. As of December 31, 2021, the Company has sold 15,534,172 shares of its common stock under the Sales Agreement at a weighted average price of $1.46 resulting in gross proceeds of $22.7 million. The Company incurred $1.0 million in issuance costs relating to the ATM, consisting of $0.4 million in professional service fees and $0.6 million in underwriter commissions. As of December 31, 2021, the Company may sell up to an additional $27.3 million of shares of its common stock under the Sales Agreement.

Equity Incentive Plan

In January 2015, the Company adopted the Metacrine, Inc. 2015 Equity Incentive Plan (as amended, the “2015 Plan”), which provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, and stock appreciation rights to its employees, members of its board of directors, and consultants. In August 2020, the Company’s Board of Directors approved the 2020 Equity Incentive Plan (the “2020 Plan”), which is the successor and continuation of the 2015 Plan. No additional awards may be granted under the 2015 Plan and all outstanding awards under the 2015 Plan remain subject to the terms of the 2015 Plan. As of December 31, 2021, there were 2,661,970 shares authorized and available for issuance under the 2020 Plan.

Recipients of incentive stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to no less than the estimated fair market value of such stock on the date of grant. The maximum term of options granted under the 2015 and 2020 Plans (or collectively, the “Equity Plans”) is ten years and, in general, the options issued under the Equity Plans vest over a four-year period from the vesting commencement date. The 2015 Plan allows for early exercise of stock options, which may be subject to repurchase by the Company at the lower of (i) the fair market value at the repurchase date or (ii) the original exercise price. The early exercise of stock options is not permitted under the 2020 Plan.

A summary of the Company’s unvested shares and unvested stock liability is as follows (in thousands, except share data):

	Number of Unvested Shares			Unvested Stock Liability
Balance at December 31, 2020		36,492		$	27
Repurchased shares		(2,695	)		(1	)
Vested shares		(31,665	)		(23	)
Balance at December 31, 2021		2,132		$	3

A summary of the Company’s stock option activity is as follows (in thousands, except share and per share data):

	Number of Outstanding Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In Years)		Aggregate Intrinsic Value
Balance at December 31, 2020		3,136,076		$	5.23		7.95	$	8,963
Granted		1,246,705		$	7.30
Exercised		(491,695	)	$	2.23
Cancelled		(465,801	)	$	7.06
Balance at December 31, 2021		3,425,285		$	6.17		7.82	$	6
Vested and expected to vest at December 31, 2021		3,425,285		$	6.17		7.80	$	6
Exercisable at December 31, 2021		1,356,322		$	4.86		6.17	$	6

The weighted average grant date fair value per share of option grants for the years ended December 31, 2021 and 2020 (excluding the impact of stock option modifications) was $5.34 and $8.33, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2021 and 2020 was $1.8 million and $0.9 million, respectively.

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

	Years Ended December 31,
	2021	2020
Risk-free interest rate	0.6% – 1.3%	0.4% – 0.7%
Expected volatility	84.2% – 89.5%	82.4% – 94.8%
Expected term (in years)	5.5 – 6.1	5.8 – 10.0
Expected dividend yield	0.0%		0.0	%

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities similar to the expected term of the awards.

Expected volatility. Since the Company recently completed its IPO and does not have sufficient trading history for its common stock, the expected volatility assumption is based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available. 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.

Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have sufficient historical exercise behavior, it determines the expected life assumption using the simplified method, for employees, which is an average of the contractual term of the option and its vesting period. The expected term for nonemployee options is equal to the contractual term.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends and, therefore, used an expected dividend yield of zero.

Restricted Stock Units

A summary of the Company’s restricted stock units activity is as follows (in thousands, except share and per share amounts):

	Number of Outstanding Awards			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Balance at December 31, 2020		-		$	-
Granted		579,150		$	4.09
Cancelled		(110,650	)	$	4.09
Balance at December 31, 2021		468,500		$	4.09	$	314
Vested and expected to vest at December 31, 2021		468,500		$	4.09	$	314

In June 2021, the Company granted 359,100 restricted stock units to certain executives and employees that vest in full upon the achievement of a specified development milestone related to the Company’s FXR program. The Company assesses the probability the development milestone will be achieved on a quarterly basis and recognizes stock-based compensation cost ratably over the requisite service period. The Company determined that achievement of the milestone was probable as of December 31, 2021.

No restricted stock units vested during the years ended December 31, 2021 and 2020.

Employee Stock Purchase Plan

In September 2020, the Company’s Board of Directors and stockholders adopted and approved the 2020 Employee Stock Purchase Plan (the “ESPP”). The ESPP permits eligible employees, who elect to participate in an offering under the ESPP, to contribute up to 15% of their eligible gross compensation towards the purchase of shares of common stock. Eligible employees can purchase up to 20,000 shares of common stock on a given purchase date. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the Company’s common stock on the commencement date of each offering period or the relevant purchase date, whichever is lower. Offerings under the ESPP are approximately two years in duration and consist of four purchase periods that are approximately six months in duration. The ESPP is considered a compensatory plan as defined by the authoritative guidance for stock-based compensation. As of December 31, 2021, there were 583,605 shares of common stock available for future issuance under the ESPP.

Stock-Based Compensation Expense

Stock-based compensation expense recognized for all equity awards has been reported in the consolidated statements of operations and comprehensive loss as follows (in thousands):

	Years Ended December 31,
	2021		2020
General and administrative	$	5,308	$	3,788
Research and development		1,641		1,233
Total stock-based compensation	$	6,949	$	5,021

As of December 31, 2021, unrecognized stock-based compensation cost was $13.0 million, which is expected to be recognized over a remaining weighted average period of approximately 2.2 years.  

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance consists of the following:

	Years Ended December 31,
	2021		2020
Common stock options outstanding		3,425,285		3,136,076
Shares available for issuance under equity incentive plans		2,661,970		2,907,742
Shares available for issuance under the ESPP		583,605		405,000
Restricted stock units outstanding		468,500		—
Common stock warrant		154,240		23,122
Total common stock reserved for future issuance		7,293,600		6,471,940