Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

In June 2018, the Company adopted its 2018 Equity Incentive Plan (Prior 2018 Plan). The Prior 2018 Plan provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Company’s Board of Directors and consultants of the Company under terms and provisions established by the Company’s Board of Directors. In September 2018, the Board of Directors adopted a new amended and restated 2018 Equity Incentive Plan as a successor to and continuation of the Prior 2018 Plan, which became effective in October 2018 (the 2018 Plan), which authorized additional shares for issuance and provided for an automatic annual increase to the number of shares issuable under the 2018 Plan by an amount equal to 5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. The term of any stock option granted under the 2018 Plan cannot exceed 10 years. The Company generally grants stock-based awards with service conditions only. Options shall not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date. Options granted typically vest over a four-year period but may be granted with different vesting terms. Restricted Stock Units granted typically vest annually over a four-year period but may be granted with different vesting terms.

As of March 31, 2021, there were 17,212,410 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.

Stock Option Activity

The following summarizes option activity under the 2018 Plan:


	Outstanding Options
	Number of Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contract Term	Aggregate intrinsic value
				(in years)	(in thousands)
Balance, December 31, 2020	10,434,034	$	17.73	8.29	$	93,149
Granted	1,617,078	34.04
Exercised	(447,880)	8.95
Forfeited	(496,070)	15.36
Balance, March 31, 2021	11,107,162	$	20.57	8.23	$	166,162
Exercisable, March 31, 2021	7,423,034	$	19.15	8.19	$	120,201
Vested and expected to vest, March 31, 2021	11,107,162	$	20.57	8.23	$	166,162

The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on March 31, 2021. For the three months ended March 31, 2021, the estimated weighted-average grant-date fair value of employee options granted was $21.41 per share. As of March 31, 2021, there was $102.9 million of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 2 years, 332 days.

The fair value of employee, consultant and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:


	Three Months Ended March 31,
	2021	2020
Expected term in years	6.06 - 6.08	6.07 - 6.09
Expected volatility	70.80%	71.42%
Expected risk-free interest rate	0.60% - 1.16%	0.80% - 1.65%
Expected dividend	0%	0%

Expected term— The expected term represents the period that stock-based awards are expected to be outstanding. The expected term for option grants is determined using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the stock-based awards.

Expected volatility— The Company uses an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry that were deemed to be representative of future stock price trends as the Company does not have sufficient trading history for its common stock. 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.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Expected dividend—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

Restricted Stock Unit Activity

The following summarizes restricted stock unit activity under the 2018 Plan:


	Outstanding Restricted Stock Units
	Restricted Stock Units	Weighted- Average Fair Value at Date of Grant per Share		Weighted Average Remaining Vesting Life	Aggregate Intrinsic Value
				(in years)	(in thousands)
Unvested December 31, 2020	2,493,920	$	26.14	1.66	$	62,947
Granted	1,139,363	33.94		2.45
Vested	(439,652)	23.44
Forfeited	(140,218)	25.53
Unvested March 31, 2021	3,053,413	$	29.47	2.01	$107,785
Vested and expected to vest, March 31, 2021	3,053,413	$	29.47	2.01	$107,785

As of March 31, 2021, there was $82.0 million of unrecognized stock-based compensation related to unvested restricted stock units, which is expected to be recognized over a weighted-average period of 3 years, 88 days.

Total stock-based compensation related to stock options, restricted stock units, employee stock purchase plan and vesting of the founders’ common stock was as follows (in thousands):


	Three Months Ended March 31,
	2021		2020
Research and development	$	7,920	$	6,657
General and administrative	8,872		7,558
Total stock-based compensation	$	16,792	$	14,215

Early Exercised Options

The Company allows certain of its employees and its directors to exercise options granted under the Prior 2018 Plan and the 2018 Plan prior to vesting. The shares related to early exercised stock options are subject to the Company’s lapsing repurchase right upon termination of employment or service on the Company’s board of directors at the lesser of the original purchase price or fair market value at the time of repurchase. In order to vest, the holders are required to provide continued service to the Company. The proceeds are initially recorded in accrued and other liabilities for the current portion, and other long-term liabilities for the non-current portion. The proceeds are reclassified to paid-in capital as the repurchase right lapses. As of March 31, 2021 and December 31, 2020 there was $2.8 million and $2.8 million recorded in accrued and other liabilities and $0.4 million and $1.1 million recorded in other long-term liabilities related to shares held by employees and directors that were subject to repurchase. The underlying shares are shown as outstanding in the condensed consolidated financial statements since the exercise date but the shares which are subject to future vesting conditions are not included in the calculation of earnings per share.