Stock-Based Compensation

3 Months Ended

Mar. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

13. Stock-Based Compensation

2019 Inducement Plan

On October 30, 2019, the Company’s Board of Directors adopted the 2019 Inducement Plan, or the 2019 Plan, which is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq Listing Rule 5635(c)(4), or Rule 5635, for the purpose of awarding (i) non-statutory stock options, (ii) restricted stock awards, (iii) restricted stock unit awards, (iv) other stock awards (collectively, the Inducement Awards) to new employees of the Company, as inducement material to such new employees entering into employment with the Company. On November 20, 2019, the Company filed a Registration Statement on Form S-8 with the SEC covering the offering of up to 300,000 shares of its common stock, par value $0.001, pursuant to the Company’s 2019 Plan. Initial grants of Inducement Awards made to employees vest as to 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months and subsequent grants vest monthly over a period of four years from the grant date.

2014 Equity Incentive Plan

The Company’s 2014 Equity Incentive Plan, or the 2014 Plan, is administered by the Company’s Board of Directors or a duly authorized committee thereof, referred to as the Plan administrator. The 2014 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of equity compensation, collectively referred to as Stock Awards. Additionally, the 2014 Plan provides for the grant of performance cash awards. Incentive stock options may be granted only to employees. All other awards may be granted to employees, including officers, non-employee directors, and consultants. No incentive stock options may be granted under the 2014 Plan after the tenth anniversary of the effective date of the 2014 Plan. Stock Awards granted under the 2014 Plan vest at the rate specified by the Plan administrator. Initial grants of Stock Awards made to employees and non-employee consultants generally vest as to 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months and subsequent grants vest monthly over a period of four years from the grant date. Stock options initially granted to members of the Company’s Board of Directors vest over a period of three years in equal installments from the date of the grant, subject to the option holder’s continued service as a Director through such date. Subsequent grants to Directors that are made automatically at Annual Meetings of Stockholders vest fully on the first anniversary of the date of grant. The Plan administrator determines the term of Stock Awards granted under the 2014 Plan up to a maximum of ten years.

The aggregate number of shares of the Company’s common stock reserved for issuance under the 2014 Plan has automatically increased on January 1 of each year, beginning on January 1, 2015 and will continue to increase on January 1 of each year through and including January 1, 2024, by 3% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors. On January 1, 2020, the aggregate number of shares of common stock that may be issued pursuant to Stock Awards under the 2014 Plan automatically increased from 6,086,907 to 7,488,513. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2014 Plan is 30,000,000 shares.

Restricted Stock Units

In February 2020, the Compensation Committee of the Company’s Board of Directors approved and granted a total of 138,000 restricted stock units to executive officers under the 2014 Plan with a grant date fair value of $16.36 per share. Vesting of the restricted stock units is contingent on the achievement of certain performance targets related to the results of ongoing clinical trials, NDA filing and FDA approval as well as the recipient’s continuous service through

each performance target. At the date of grant, the Company concluded that the probability of achievement of the performance targets could not be determined until the various milestones were probable of being achieved, and accordingly, the Company did not recognize any compensation expense during the three months ended March 31, 2020. Recognition of compensation expense associated with these awards begins when, and to the extent, the performance criteria have been achieved and therefore, the restricted stock units are earned and vesting has occurred.

Additionally in February 2020, the Compensation Committee of the Company’s Board of Directors also approved and granted a total of 98,000 time-based restricted stock units to executive officers under the 2014 Plan with a grant date fair value of $16.36 per share. The restricted stock units vest in three equal installments annually from the date of the grant. As a result, the Company will recognize compensation expense associated with these restricted stock units ratably over the three-year vesting period following the grant date. For the three months ended March 31, 2020, $44 of stock compensation expense was recognized in the Statement of Comprehensive Loss, consisting of $14 relating to R&D expense and $30 relating to G&A expense. None of the 98,000 restricted stock units vested or were settled in shares of the Company’s common stock as of March 31, 2020.

In June 2019, the Board of Directors, upon the recommendation of the Compensation Committee, amended the Company’s non-employee director compensation policy. Pursuant to the terms of the amended policy, each non-employee director was entitled to receive, at the time of the Company’s 2019 Annual Meeting of Stockholders, 6,000 restricted stock units. As a result, on June 4, 2019, the date of the Company’s 2019 Annual Meeting of Stockholders, an aggregate of 24,000 restricted stock units were granted to Directors under the 2014 Plan with a grant date fair value of $20.47 per share. The restricted stock units vest on the earlier of (i) June 4, 2020 and (ii) immediately prior to the Company’s next Annual Meeting of Stockholders following the grant date, subject to the recipient’s continued service through such date. As a result, the Company will recognize compensation expense associated with these restricted stock units ratably over the one-year vesting period following the grant date. For the three months ended March 31, 2020, $123 of stock compensation expense relating to the Board of Directors’ restricted stock units was recognized in the Statements of Comprehensive Loss, all of which related to G&A expense. None of the 24,000 restricted stock units vested or were settled in shares of the Company’s common stock as of March 31, 2020.

In March 2019, the Compensation Committee of the Company’s Board of Directors approved and granted a total of 215,000 restricted stock units to executive officers under the 2014 Plan with a grant date fair value of $16.10 per share. Vesting of the restricted stock units is contingent on the achievement of certain performance targets related to the results of ongoing clinical trials, subject to the recipient’s continuous service through the vesting events. At the date of grant, the Company concluded that the probability of achievement of the performance targets could not be determined until the milestones were probable of being achieved, and accordingly, the Company would recognize compensation expense associated with these awards when, and to the extent, the restricted stock units vested in accordance with achievement of the performance targets. As of March 31, 2020, 95,834 restricted stock units remain unvested since various performance targets have not yet been achieved. During the three months ended March 31, 2020 and 2019, no stock compensation expense relating to the vesting of these restricted stock units was recognized in the Statements of Comprehensive Loss since none of the restricted stock units had vested during the respective periods.

Stock Options

Under the 2014 Plan, the Company granted 673,350 and 957,000 stock options during the three months ended March 31, 2020 and 2019, respectively. No stock options were granted under the 2019 Inducement Plan during the three months ended March 31, 2020. The fair values of stock options granted during the three months ended March 31, 2020 and 2019 were estimated as of the dates of grant using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended
	March 31,
	2020	2019
Risk-free interest rate	0.54% - 1.57%	2.54% - 2.62%
Expected volatility	73.72% - 74.71%	74.29% - 75.19%
Expected dividend yield	0%	0%
Expected life of employee options (in years)	6.25	6.25
Expected life of non-employee options (in years)	—	—

The weighted-average grant date fair value per share of options granted to employees during the three months ended March 31, 2020 and 2019 was $10.59 and $10.83, respectively. No options were granted to non-employee members of the Company’s Board of Directors for their Board service or to non-employee consultants during the three months ended March 31, 2020 and 2019.

On January 1, 2019, the Company used the Black-Scholes option valuation model to remeasure the fair value of all outstanding unvested options that had been granted to non-employee consultants in accordance with ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Non-employee Share-Based Payment Accounting. The range of assumptions used by the Company on January 1, 2019 were as follows:

	January 1, 2019
Risk-free interest rate	2.59% - 2.62%
Expected volatility	58.9% - 84.6%
Expected dividend yield	0%
Expected life of non-employee options (in years)	0.81 - 8.19

During the three months ended March 31, 2020 and 2019, the Company recognized compensation expense relating to stock options as follows:

	Three Months Ended
	March 31,
	2020		2019
Research and development	$	1,609	$	1,082
General and administrative		1,070		1,152
Total stock option expense	$	2,679	$	2,234

The following were excluded from the table above as they are not related to stock options: compensation expense for i) the vesting of executives’ restricted stock units for $14 in R&D expense and $30 in G&A expense for the three months ended March 31, 2020; and ii) compensation expense relating to the Board of Directors’ restricted stock units for $123 in G&A expense for the three months ended March 31, 2020.

A summary of stock option award activity related to employees, non-employee members of the Company’s Board of Directors and non-employee consultants as of and for the three months ended March 31, 2020 is presented below:

		Weighted		Aggregate
	Number of	Average Exercise		Intrinsic
	Shares	Price		Value
Outstanding, December 31, 2019	4,450,517	$	14.73
Granted	673,350		16.11
Exercised	(7,500)		9.94
Expired	(161,089)		13.64
Forfeited	(24,688)		16.51
Outstanding, March 31, 2020	4,930,590	$	14.95	$	5,099
Weighted average remaining contractual life as of March 31, 2020 (in years)	7.68
Options exercisable, March 31, 2020	2,484,710	$	13.10	$	4,763
Weighted average remaining contractual life as of March 31, 2020 (in years)	6.47
Options vested and expected to vest as of March 31, 2020	4,930,590	$	14.95	$	5,099
Weighted average remaining contractual life as of March 31, 2020 (in years)	7.68

The Company does not expect to realize any tax benefits from its stock option activity or the recognition of stock-based compensation expense because the Company currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related to excess tax benefits have been reported in cash flows from operations for the three months ended March 31, 2020 and 2019.