In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the Company’s 2014 Equity Incentive Plan (2014 Plan). As of the effective date of

the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan. Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other awards to individuals who are employees, officers, directors or consultants of the Company and its affiliates.

Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of June 30, 2023, there were no unvested shares of common stock outstanding that were issued pursuant to the early exercise of stock options.

As of June 30, 2023, the Company had reserved shares of its common stock for future issuance as follows:


	Shares Reserved
Common stock options outstanding		6,001,185
Unvested restricted stock units		364,500
Available for future grants under the 2021 Equity Incentive Plan		1,543,869
Available for future grants under the 2021 Employee Stock Purchase Plan		546,341
Total shares of common stock reserved		8,455,895

A summary of the Company’s stock option activity and related information during the six months ended June 30, 2023 is as follows:


	Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		5,877,745		$	4.47		8.2	$	907
Granted		382,915		$	6.83
Exercised		(77,812	)	$	1.97
Forfeited/Expired		(181,663	)	$	5.60
Outstanding at June 30, 2023		6,001,185		$	4.62		8.0	$	14,005
Vested at June 30, 2023		2,692,861		$	4.93		7.1	$	5,566
Exercisable at June 30, 2023		3,263,418		$	4.92		7.2	$	6,509

Options exercisable at June 30, 2023 include vested options and options eligible for early exercise. All outstanding options as of June 30, 2023 are expected to vest.

Unrecognized stock-based compensation expense at June 30, 2023 was $9.9 million, which is expected to be recognized over a weighted-average vesting term of 2.6 years.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Risk-free interest rate		3.8	%		3.0	%		3.8	%		2.3	%
Expected volatility		88.4	%		84.4	%		87.2	%		84.9	%
Expected term (in years)		5.8			5.8			5.9			5.9
Expected dividend yield		—	%		—	%		—	%		—	%

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

Expected volatility. Since the Company does not have sufficient trading history for its common stock the expected volatility assumption is based on a blend of volatilities of the Company’s share price and a peer group of similar companies whose share prices are publicly available. For awards granted prior to April 2023, the expected volatility assumption was based on the volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry.

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

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.

RSUs consist of performance-based units (PSUs) and market-based units (MSUs). The following table summarizes RSU activity during the six months ended June 30, 2023:


	Number of RSUs			Weighted-Average Grant Date Fair Value
Unvested at December 31, 2022		329,500		$	5.70
Granted		40,000		$	3.63
Cancelled		(5,000	)	$	2.14
Unvested at June 30, 2023		364,500		$	5.52

The vesting of the PSUs is based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date. The fair value of the awards was based on the value of the Company’s common stock at the grant date of the award and expense recognition is based on the probability of achieving the performance conditions. Stock-based compensation expense is adjusted in future periods for subsequent changes in the expected outcome of the performance conditions. The Company had 244,500 unvested shares underlying PSUs as of June 30, 2023. The Company concluded that achievement of the performance conditions was not probable as of June 30, 2023, and therefore

no stock-based compensation expense was recognized for the three and six months ended June 30, 2023. As of June 30, 2023, there was $1.6 million of unrecognized stock-based compensation expense related to the PSUs that were deemed not probable of vesting.

The vesting of the MSUs is based on the Company’s closing stock price trading above $20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement. The fair value was based on Monte Carlo simulation model on the grant date. Stock-based compensation expense is recognized over the derived service period of approximately 3 years. The Company had 120,000 unvested shares underlying MSUs as of June 30, 2023. Stock-based compensation expense related to the MSUs during the three and six months ended June 30, 2023 was immaterial. As of June 30, 2023, there was $0.2 million of unrecognized stock-based compensation expense related to MSUs.

In connection with the CEO’s employment agreement, he is entitled to receive a Performance Award in the amount of $7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $750.0 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $750.0 million. The Company has determined that the Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions. Since the Company’s initial public offering (IPO), neither of the events have yet been satisfied. The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as stock-based compensation expense over the derived service period.

The Company recognized approximately $0.6 million and $0.8 million in compensation expense related to the change in the fair value of the Performance Award for the three and six months ended June 30, 2023, respectively. The expense is reflected in consolidated statements of operations and comprehensive loss in the general and administrative expense.

In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO. During the six months ended June 30, 2023, 84,296 shares of common stock were purchased under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 United Kingdom Sharesave Sub-plan (SAYE). An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE. No shares have been issued under the SAYE through June 30, 2023.

The following table summarizes stock-based compensation expense, including expense associated with award modifications for unvested options, reflected in the consolidated statements of operations and comprehensive loss (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	494	$	386	$	967	$	773
General and administrative		713		620		1,397		1,340
Total	$	1,207	$	1,006	$	2,364	$	2,113