XML 57 R25.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

18. Stock-Based Compensation

Summary of Plans

Upon completion of the Merger with resTORbio on September 15, 2020, Former Adicet’s 2014 Share Option Plan (the 2014 Plan), Former Adicet’s 2015 Stock Incentive Plan (the 2015 Plan), resTORbio’s 2017 Stock Incentive Plan (the 2017 Plan), resTORbio’s 2018 Stock Incentive Plan (the 2018 Plan) and resTORbio’s 2018 Employee Stock Purchase Plan (the 2018 ESPP, and, collectively with the 2014 Plan, the 2015 Plan, the 2017 Plan and the 2018 Plan, the Plans) were assumed by the Company. The Plans are administered by the Board of Directors or, at the discretion of the Board of Directors, by a committee of the Board of Directors. No further shares will be issued from the 2014 Plan or 2017 Plan. The exercise prices, vesting and other restrictions are determined at the discretion of the Board of Directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years. Incentive stock options granted to employees and restricted stock awards granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over four years. Non-statutory options granted to employees, officers, members of the Board of Directors, advisors, and consultants of the Company typically vest over three or four years. Shares that are expired, terminated, surrendered or canceled under the Plans without having been fully exercised will be available for future awards. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.

The 2017 Plan and 2018 Plan

In 2017, resTORbio adopted the 2017 Plan. In connection with resTORbio’s initial public offering completed in January 2018, the resTORbio Board adopted and resTORbio’s stockholders approved the 2018 Plan. The 2018 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2019, by 4% of the outstanding number of shares of resTORbio’s common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board. On January 1, 2021, the number of shares reserved and available for issuance under the 2018 Plan automatically increased by 787,089 shares of Common Stock equal to 4% of the number of shares of Common Stock issued and outstanding on December 31, 2020.

Since the date of effectiveness of the 2018 Plan, resTORbio has not and the Company will not grant any further awards under the 2017 Plan. However, any shares of common stock subject to awards under the 2017 Plan that expire, terminate, or otherwise are surrendered, canceled, forfeited or repurchased without having been fully exercised or resulting in any common stock being issued will become available for issuance under the 2018 Plan.

As of December 31, 2020, the number of shares of common stock available for grant under the 2017 and 2018 Plan is 1,456,492. As of December 31, 2020, an aggregate of 1,317,892 shares of common stock were issuable upon the exercise of outstanding stock options under the 2017 Plan and 2018 Plans at a weighted average exercise price of $15.62 per share.

The 2014 Plan and 2015 Plan

At the Effective Time of the Merger, each outstanding and unexercised option to purchase Former Adicet’s common stock, whether vested or unvested, pursuant to the 2015 Plan and a subset of options issued pursuant to the 2014 Plan were converted into options to purchase a number of shares of the Company’s common stock based on the Exchange Ratio.

As of December 31, 2020, the number of shares of common stock available for grant under the 2014 and 2015 Plan is 283,129. As of December 31, 2020, an aggregate of 1,957,536 shares of common stock were issuable upon the exercise of outstanding stock options under the 2015 plan at a weighted average exercise price of $7.43 per share and an aggregate of 69,014 shares of common stock were issuable upon the exercise of outstanding stock options under the 2014 Plan at a weighted average exercise price of $1.27 per share.

Since the date of effectiveness of the Merger, the Company has not and will not grant any further awards under the 2014 Plan.

2018 Employee Stock Purchase Plan

The resTORbio Board adopted and resTORbio’s stockholders approved the 2018 ESPP, which became effective on the date immediately preceding the date on which resTORbio’s registration statement on Form S-1 became effective. As a result of the Merger, the 2018 ESPP enables eligible employees to purchase shares of the Company’s common stock at a discount. Prior to the Merger, the number of shares of common stock originally reserved for issuance under the 2018 ESPP were 39,290 shares. The 2018 ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2019 and increasing each January 1 thereafter through January 1, 2028, by the least of (i) 1% of the outstanding number of shares of

the Company’s common stock on the immediately preceding December 31; (ii) 77,703 shares or (iii) such number of shares as determined by the ESPP administrator. On January 1, 2019, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from 39,290 to 79,369 shares. On January 1, 2020, as a result of the foregoing evergreen provision, the number of shares of common stock available for issuance under the 2018 ESPP automatically increased from 79,369 to 131,432 shares. No shares have been issued under the 2018 ESPP during the year ended December 31, 2020.

Inducement Grants

As of December 31, 2020, an aggregate of 362,503 shares were issuable upon the exercise of inducement grants of stock options approved by the Company in accordance with Nasdaq listing Rule 5635(c)(4) at a weighted average exercise price of $14.33 per share.

Former CEO’s Stock Option Modification

In connection with the Merger, the stock options granted to Dr. Singhal were modified (see Note 3), which resulted in acceleration and recognition of the stock compensation expense of $0.6 million during the quarter ended September 30, 2020. The modification also resulted in incremental stock compensation expense of $0.1 million that will be recognized through May 7, 2021 as the Company determined that Dr. Singhal will be providing substantial services under the ICSA through that date. The ICSA was terminated in February 2021.

Former CEO’s Performance Option

On July 14, 2020, the Company’s Board of Directors confirmed that the conditions for Dr. Singhal’s Second Target Milestone Option (as defined in Dr. Singhal’s amendment to his employment agreement with the Company, dated October 15, 2019) had been fulfilled as the Company achieved the milestone for the selection of a clinical candidate to the second collaboration target under the Regeneron Agreement. According to Dr. Singhal’s employment agreement, Dr. Singhal would be granted an option to purchase 22,574 shares of the Company’s common stock related to the achievement of this milestone option. However, as this milestone option was earned during his transition from Chief Executive Officer to an advisory role, only 75% of this option vested. As a result, following the Merger, on September 17, 2020, the Company’s Board of Directors granted this option to Dr. Singhal to purchase 16,931 shares of the Company’s common stock at an exercise price of $16.11 per share, (i) one-third of the shares vesting on the first anniversary of May 6, 2019, (ii) one-third of the shares vesting in 12 equal monthly installments following such first anniversary, and (iii) one-third of the shares vesting in accordance with the terms of his Transition Agreement which consisted of 12 months’ of accelerated vesting of his unvested options to purchase the Company’s common stock upon completion of the Merger. The Company recognized $0.1 million in stock compensation expense associated with this reward during the year ended December 31, 2020.

Options

A summary of stock option activity is set forth below (in thousands, except share and per share data):

				Outstanding Awards
	Number of Shares Available for Grant			Number of Shares Underlying Outstanding Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding, January 1, 2018		38,055			963,435		$	2.02			9.27	$	4,977
Options authorized		837,000
Options granted		(210,452	)		210,452		$	2.26
Options exercised		—			(123,949	)	$	1.92
Options forfeited or cancelled		153,399			(153,399	)	$	2.25
Outstanding, December 31, 2018		818,002			896,539		$	2.04			8.57	$	2,436
Options authorized		814,184
Options granted		(1,124,430	)		1,124,430		$	5.39
Options exercised		—			(14,791	)	$	(2.12	)
Options forfeited or cancelled		145,380			(145,532	)	$	2.17
Outstanding, December 31, 2019		653,136			1,860,646		$	4.05			8.53	$	5,812
Assumed as part of the Merger		2,707,144			81,370		$	8.39
Options granted		(1,914,142	)		2,276,645		$	15.14
Options exercised					(210,752	)	$	2.18
Options forfeited or cancelled		293,483			(300,964	)	$	6.04
Outstanding, December 31, 2020		1,739,621			3,706,945		$	10.90			7.98	$	15,126
Shares exercisable December 31, 2020					1,219,904		$	4.64			5.11	$	11,563
Vested and expected to vest, December 31, 2020					3,706,945		$	10.90			7.98	$	15,126

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money at December 31, 2020, 2019 and 2018.

The aggregate intrinsic value of stock options exercised during the years ended on December 31, 2020, 2019 and 2018 was $2.5 million, $0.1 million and $0.4 million, respectively.

The total fair value of options that vested during the years ended December 31, 2020, 2019 and 2018 was $2.4 million, $0.9 million and $1.8 million, respectively. The options granted during the years ended December 31, 2020, 2019 and 2018 had a weighted-average per share grant-date fair value of $9.96 per share, $2.98 per share and $3.95 per share, respectively. As of December 31, 2020, the total unrecognized stock-based compensation expense related to unvested stock options was $21.6 million, which is expected to be recognized over the remaining weighted-average vesting period of 3.6 years.

Restricted Stock

Activity with respect to restricted stock was as follows:

	Number of Shares Underlying Outstanding Restricted Stock			Weighted Average Grant Date Fair Value
Unvested, January 1, 2018		165,699		$	4.19
Vested		(134,516	)	$	4.19
Unvested, December 31, 2018		31,183		$	4.19
Vested		(31,183	)	$	4.19
Unvested, December 31, 2019		—		$	—

As of December 31, 2020, there was no unrecognized compensation cost related to restricted stock.

The fair value of restricted stock vested during the years ended December 31, 2020, 2019 and 2018 was $0, $0.1 million and $0.6 million, respectively.

Stock-Based Compensation Associated with Awards to Employees and Non-Employees

Total stock-based compensation expense recognized was as follows (in thousands):

	Year Ended December 31,
	2020		2019		2018
Research and development	$	1,674	$	274	$	285
General and administrative		3,589		901		2,194
Total stock-based compensation	$	5,263	$	1,175	$	2,479

The Company estimated the fair value of stock options using the Black Scholes option-pricing model. The fair value of stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of stock options was estimated using the following weighted-average assumptions:

	Year Ended December 31,
	2020	2019	2018
Expected volatility	72.6%-96.3%	71.5%-86.5%	73.3%-74%
Risk-free interest rate	0.1%-1.7%	1.6%-2.5%	2.7%-2.8%
Dividend yield	0%	0%	0%
Expected term	1.00-6.08 years	5.15-6.08 years	6.02-6.08 years

The assumptions are as follows:

•

Expected volatility. The expected volatility was determined by examining the historical volatilities for comparable publicly traded companies within the biotechnology and pharmaceutical industry using an average of historical volatilities of the Company’s industry peers.

•

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield with a maturity equal to the expected term of the option in effect at the time of grant.

•

Dividend yield. The expected dividend is assumed to be zero as dividends have never been paid and there are no current plans to pay dividends on common stock.

•

Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The expected term is calculated using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under

this method. For awards with multiple vesting-tranches, the times from grant until the mid-points for each of the tranches may be averaged to provide an overall expected term.

In addition to the assumptions used in the Black-Scholes option-pricing model, the Company recognizes the actual forfeitures by reducing the employee stock-based compensation expense in the same period the forfeiture occurs.

The Company will continue to use judgment in evaluating the expected volatility, risk-free interest rates, dividend yield and expected term, utilized for stock-based compensation on a prospective basis.