Equity Incentive Plans

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

2019 Equity Incentive Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”). The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then

employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries. A total of 5,750,000 shares of common stock were approved to be initially reserved for issuance under the 2019 Plan. The number of shares that remained available for issuance under the 2017 Plan (as defined below) as of the effective date of the 2019 Plan were, and shares subject to outstanding awards under the 2017 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be, added to the shares reserved under the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of June 30, 2023, an aggregate of 3,088,522 shares of common stock were available for issuance under the 2019 Plan. As of June 30, 2023 and December 31, 2022, 17,714,677 and 16,199,202 shares of common stock, respectively, were subject to outstanding awards under the 2019 Plan.

2019 Employee Stock Purchase Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective as of February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 700,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 1% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. During the six months ended June 30, 2023, 249,623 shares were issued pursuant to the ESPP. As of June 30, 2023, an aggregate of 3,146,016 shares of common stock were available for issuance under the ESPP.

2017 Equity Incentive Plan

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) permitted the granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards. Subsequent to the adoption of the 2019 Plan, no additional equity awards can be made under the 2017 Plan. As of June 30, 2023 and December 31, 2022, 2,469,068 and 2,582,771 shares of common stock, respectively, were subject to outstanding options under the 2017 Plan. As of June 30, 2023, no shares of restricted stock awards granted under the 2017 Plan were unvested.

Stock Options

The fair value of each employee and non-employee time-vested stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company uses its own volatility to the extent it has sufficient trading history, and for awards in which sufficient trading history is not available, a peer group is used. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

On May 5, 2023, the Company granted to its Chairman and Chief Executive Officer 750,000 options with an exercise price of $1.36 per share. This grant contains both service and market based vesting conditions. The awards vest on the later of the date of achievement and the one-year anniversary of the grant date. The market condition becomes satisfied in 50%, 25% and 25% tranches upon achieving the average per-share closing price of the Company's common stock over any 30 consecutive calendar days following the grant date equal to or exceeding $5.00, $7.50 and $10.00, respectively. In the event a stock price tranche has not vested prior to the fourth anniversary of the grant date, any portion of the option attributable to such tranche will be forfeited. Due to the market condition included in this grant, the Company used the Geometric Brownian Motion/Monte Carlo model to value this award. The total stock-based compensation expense related to this award is $0.4 million, which is included in general and administrative expense on the condensed consolidated statements of operations and comprehensive loss. The Company expects to recognize this expense over a weighted average period of approximately 2.2 years.

Effective May 5, 2023, and in accordance with the terms of the 2019 Plan, the Company's board of directors approved a stock option repricing (the “Option Repricing”) whereby the exercise price of each Eligible Option (as defined below) was immediately reduced to $1.36 per share, the closing stock price on May 5, 2023. For purposes of the Option Repricing, “Eligible Options” are 6,817,057 outstanding stock options as of May 5, 2023 (vested or unvested) granted under the 2019 Plan prior to November 30, 2022 and held by those eligible employees of the Company identified by the Company's board of directors, including the Company’s executive officers except for the Company’s Chairman and Chief Executive Officer.

The participation of the executive officers of the Company in the Option Repricing was subject to their agreement to cancel a portion of their Eligible Options effective immediately (the “Cancelled Options”). Each executive was required to agree to cancel one-third of his or her Eligible Options, on a grant-by-grant basis. The Cancelled Options were deducted proportionately from the vested and unvested portions of each Repriced Option grant.

To the extent an Eligible Option is exercised prior to the Premium End Date (as defined below), or the eligible employee’s employment terminates prior to the Premium End Date, the eligible employee will be required to pay the original exercise price per share of the Eligible Options in connection with any exercise of the Eligible Option. The “Premium End Date” means the earliest of (i) May 5, 2024, (ii) the date of a change in control, (iii) the eligible employee’s death or disability, or (iv) if an eligible employee is an executive subject to the cancellation of a portion of Eligible Options and is terminated under circumstances giving rise to severance under his or her employment agreement, the date of such termination. Except for the reduction in the exercise prices of the Eligible Options as described above, the Eligible Options will retain their existing terms and conditions as set forth in the 2019 Plan and the applicable award agreements.

The repricing resulted in $3.4 million of incremental cost, which was calculated using the Black-Scholes option-pricing model, of which $2.0 million of the incremental cost was recognized immediately, and $1.4 million of the incremental cost will be recognized on the straight-line basis over the remaining vesting period of the repriced options. The incremental cost is included in general and administrative expense and research and development expense on the condensed consolidated statements of operations and comprehensive loss.

The following table summarizes stock option activity during the six months ended June 30, 2023:


	Shares Subject to Options Outstanding			Weighted- Average
	Shares	Weighted- Average Exercise Price		Remaining Contractual Life (Years)	Aggregate Intrinsic Value
					(in thousands)
Outstanding as of December 31, 2022	17,487,165	$	9.24	8.1	$	47
Options granted	11,570,739	$	1.30
Options exercised	—	$	—
Options forfeited/cancelled	(9,318,846)	$	11.33
Outstanding as of June 30, 2023	19,739,058	$	3.59	7.4	$	1
Options vested and expected to vest as of June 30, 2023	19,739,058	$	3.59	7.4	$	1
Options exercisable as of June 30, 2023	8,065,502	$	5.83	5.6	$	—

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price on June 30, 2023 and the exercise price of the stock options. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2023 and 2022 was $0.0 million and $0.3 million, respectively.

The weighted-average grant date fair value per share for the stock option grants during the six months ended June 30, 2023 and 2022 was $5.41 and $8.30, respectively.

The aggregate fair value of stock options that vested during the six months ended June 30, 2023 and 2022 was $22.8 million and $18.4 million, respectively.

Restricted Stock

The summary of the Company’s restricted stock activity during the six months ended June 30, 2023 is as follows:


	Number of Restricted Stock Units Outstanding	Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2022	1,350,035	$	10.83
Granted	—	—
Vested	(779,900)	10.67
Forfeited	(125,448)	11.37
Nonvested at June 30, 2023	444,687	$	10.95

Stock-Based Compensation Expense

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Research and development	$	4,721	$	5,587	$	9,411	$	12,205
General and administrative	3,476		4,412		6,913		8,777
Total stock-based compensation expense	$	8,197	$	9,999	$	16,324	$	20,982

As of June 30, 2023, the total unrecognized compensation expense related to the unvested stock option awards granted was $32.1 million, which the Company expects to recognize over a weighted-average period of approximately 2.4 years.

As of June 30, 2023, the total unrecognized stock-based compensation expense related to the unvested restricted stock awards granted was $2.9 million, which the Company expects to recognize over a weighted-average period of approximately 0.6 years.

As of June 30, 2023, the total unrecognized compensation expense related to the ESPP was $1.3 million, which the Company expects to recognize over a weighted-average period of approximately 0.7 years.