Equity Plans |
Note 8. Equity Plans Equity Incentive Plan In July 2016, the Company’s Board of Directors (“the Board”) and stockholders approved the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) to replace the 2007 Stock Option Plan. The 2016 Plan is administered by the Board, or a committee appointed by the Board, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Awards granted under the 2016 Plan expire no later than ten years from the date of grant. As of June 30, 2023, 841,577 shares of common stock were available for issuance under the 2016 Plan. Inducement Plan In May 2018, the Board approved the Company’s 2018 Inducement Plan (as subsequently amended, the “2018 Inducement Plan”), a non-stockholder approved stock plan, under which the Company awards options and restricted stock unit awards to persons that were not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company, within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The 2018 Inducement Plan is administered by the Board or the Compensation Committee of the Board (the “Compensation Committee”), which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Awards granted under the 2018 Inducement Plan expire no later than ten years from the date of grant. As of June 30, 2023, 575,961 shares of common stock were available for issuance under the 2018 Inducement Plan. Stock Options Stock option activity under the Company’s equity incentive and inducement plans is set forth below: | | | | | | | | | | | | | | | | | | | | Weighted- | | Weighted- | | | | | | | Average | | Average | | | | | | | Exercise | | Remaining | | Aggregate | | | Options | | Price Per | | Contractual | | Intrinsic | | | Outstanding | | Share | | Life | | Value (1) | | | | | | | | (years) | (in millions) | Balances at December 31, 2022 | | 6,240,509 | | $ | 19.03 | | | | | | Options granted | | 2,262,750 | | | 12.61 | | | | | | Options exercised | | (220,771) | | | 12.27 | | | | | | Options forfeited | | (157,679) | | | 26.14 | | | | | | Balances at June 30, 2023 | | 8,124,809 | | $ | 17.29 | | 7.53 | | $ | 92.2 | Options exercisable – June 30, 2023 | | 4,410,899 | | $ | 16.81 | | 6.33 | | | 51.9 | Options vested and expected to vest – June 30, 2023 | | 8,124,809 | | $ | 17.29 | | 7.53 | | $ | 92.2 |
(1) | The aggregate intrinsic values were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on June 30, 2023. The calculation excludes options with an exercise price higher than the closing price of the Company’s common stock on June 30, 2023. |
The estimated weighted-average grant-date fair value of common stock underlying options granted to employees during the six months ended June 30, 2023 was $10.40 per share. Stock Options Valuation Assumptions The fair value of employee stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions: | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | | 2023 | | 2022 | | 2023 | | 2022 | Expected term (in years) | | 6.08 - 6.08 | | 5.50 - 6.08 | | 5.27 - 6.08 | | 5.27- 6.08 | Expected volatility | | 106.2% - 107.5% | | 96.3% - 99.9% | | 106.2% - 107.5% | | 96.3% - 99.9% | Risk-free interest rate | | 3.71% - 4.04% | | 2.71% - 2.93% | | 3.57% - 4.04% | | 1.64% - 2.93% | Dividend yield | | — | | — | | — | | — |
In determining the fair value of the options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires judgment to determine. Expected Term—The Company’s expected term represents the period that the Company’s options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). The Company has limited historical exercise information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. Expected Volatility—Beginning January 1, 2023, the Company’s expected volatility is estimated based upon the volatility of the Company’s stock price over a period equal to the expected term of the stock option grants. For the year ended December 31, 2022, the Company’s expected volatility was estimated based upon a mix of 25% of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 75% of the volatility of the Company’s stock price since its initial public offering in August 2016. 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 Units Restricted stock unit (“RSU”) activity under the Company’s equity incentive plans is set forth below: | | | | | | | | | | Weighted | | | | | Average | | | Number of | | Grant Date | | | Shares | | Fair Value | Unvested RSUs at December 31, 2022 | | 637,436 | | $ | 19.29 | Granted | | 396,775 | | | 12.17 | Vested | | (284,321) | | | 14.20 | Forfeited | | (12,901) | | | 16.28 | Unvested RSUs at June 30, 2023 | | 736,989 | | $ | 18.37 |
Performance Stock Units Performance stock unit (“PSU”) activity under the Company’s equity incentive plans is set forth below: | | | | | | | | | | Weighted | | | | | Average | | | Number of | | Grant Date | | | Shares | | Fair Value | Unvested PSUs at December 31, 2022 | | 199,500 | | $ | 14.59 | Granted | | — | | | — | Vested | | (114,000) | | | 8.76 | Forfeited | | — | | | — | Unvested PSUs at June 30, 2023 | | 85,500 | | $ | 23.57 |
The terms of the PSUs provide for 100% of shares to be earned based on the achievement of certain pre-determined performance objectives, subject to the participant’s continued employment. The PSUs will vest, if at all, upon certification by the Compensation Committee of the actual achievement of the related performance objectives, subject to specified change of control exceptions. Stock-based compensation expense associated with PSUs is based on the fair value of the Company’s common stock on the grant date, which equals the closing price of the Company’s common stock on the grant date. The Company recognizes compensation expense over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance objectives becomes probable. During the three and six months ended June 30, 2023, the Compensation Committee certified the actual achievement of performance objectives related to certain PSUs. As a result, recipients earned a total of 114,000 shares of common stock. The total fair market value of PSUs on vest date during the three and six months ended June 30, 2023 was $3.0 million. The total grant date fair value of unvested PSUs outstanding as of June 30, 2023 was $2.0 million. As of June 30, 2023, the achievement of the related performance objectives was deemed not probable and, accordingly, no stock-based compensation for unvested PSUs has been recognized as expense as of June 30, 2023. Employee Stock Purchase Plan The Company’s 2016 Employee Stock Purchase Plan (“2016 ESPP”) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation. At the end of each offering period, eligible employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock at the beginning of the offering period or at the end of each applicable purchase period. During the six months ended June 30, 2023, a total of 68,605 shares of common stock were issued under the 2016 ESPP, and 1,486,685 shares of common stock remained available for issuance as of June 30, 2023. Stock-Based Compensation Total stock-based compensation expense was as follows (in thousands): | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | | | 2023 | | 2022 | | 2023 | | 2022 | Research and development | | $ | 4,809 | | $ | 4,106 | | $ | 9,391 | | $ | 7,432 | General and administrative | | | 3,534 | | | 2,699 | | | 6,536 | | | 5,308 | Total stock-based compensation expense | | $ | 8,343 | | $ | 6,805 | | $ | 15,927 | | $ | 12,740 |
As of June 30, 2023, total unrecognized stock-based compensation expense was approximately $60.7 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years.
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