Stock-Based Compensation

6 Months Ended

Jun. 30, 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 new members of the Company’s Board of Directors vest over a period of three years in equal quarterly 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

Pursuant to the Company’s non-employee director compensation policy, an aggregate of 36,000 restricted stock units were granted to non-employee directors on June 4, 2020, the date of the Company’s 2020 Annual Meeting of Stockholders, under the 2014 Plan with a grant date fair value of $15.62 per share. The restricted stock units will vest on the earlier of (i) June 4, 2021 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 and six months ended June 30, 2020, $40 of stock compensation expense relating to these restricted stock units was recognized in the Condensed Statements of Comprehensive Loss, all of which related to G&A expense. None of the 36,000 restricted stock units vested and were settled in shares of the Company’s common stock as of June 30, 2020.

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 and six months ended June 30, 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 recognizes compensation expense associated with these restricted stock units ratably over the three-year vesting period following the grant date. For the three months ended June 30, 2020, the Company recognized $142 of stock compensation expense in the Condensed Statement of Comprehensive Loss, consisting of $47 relating to R&D expense and $95 relating to G&A expense. For the six months ended June 30, 2020, the Company recognized $186 of stock compensation expense in the Condensed Statement of Comprehensive Loss, consisting of $61 relating to R&D expense and $125 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 June 30, 2020.

Pursuant to the terms of the Company’s non-employee director compensation policy, an aggregate of 24,000 restricted stock units were granted to non-employee directors on June 4, 2019, the date of the Company’s 2019 Annual

Meeting of Stockholders, under the 2014 Plan with a grant date fair value of $20.47 per share. The restricted stock units vested 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 recognized compensation expense associated with these restricted stock units ratably over the one-year vesting period following the grant date. For the three and six months ended June 30, 2020, $82 and $205, respectively, of stock compensation expense relating to these restricted stock units was recognized in the Condensed Statements of Comprehensive Loss, all of which related to G&A expense. For the three and six months ended June 30, 2019, the Company recognized $41 of stock compensation expense relating to the Board of Directors’ restricted stock units in the Condensed Statements of Comprehensive Loss, all of which related to G&A expense. All 24,000 restricted stock units vested and were settled in shares of the Company’s common stock as of June 30, 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 was 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. In May 2019, performance targets relating to an aggregate of 74,166 restricted stock units had been achieved and thus such restricted stock units vested and the awards were settled in shares of common stock. In December 2019, performance targets relating to 36,666 restricted stock units had been achieved and thus such restricted stock units vested and the awards were settled in shares of common stock. Also in December 2019, 8,334 restricted stock units were forfeited. In April and June 2020, performance targets relating to 65,834 and 30,000 restricted stock units, respectively, had been achieved and thus such restricted stock units vested and the awards were settled in shares of common stock. As a result, no restricted stock units remain unvested as of June 30, 2020. During the three and six months ended June 30, 2020, the Company recognized $1,543 of stock compensation expense relating to the vesting of these restricted stock units in the Condensed Statements of Comprehensive Loss, consisting of $1,087 relating to R&D expense and $456 relating to G&A expense. During the three and six months ended June 30, 2019, $1,194 of stock compensation expense relating to the vesting of these restricted stock units was recognized in the Condensed Statements of Comprehensive Loss, consisting of $590 relating to G&A expense and $604 relating to R&D expense.

Stock Options

Under the 2014 Plan, the Company granted 147,000 and 241,000 stock options during the three months ended June 30, 2020 and 2019, respectively, and 820,350 and 1,198,000 stock options during the six months ended June 30, 2020 and 2019, respectively. No stock options were granted under the 2019 Inducement Plan during the three and six months ended June 30, 2020. The fair values of stock options granted during the three and six months ended June 30, 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		Six Months Ended
	June 30,		June 30,
	2020	2019	2020	2019
Risk-free interest rate	0.42% - 0.54%	1.95% - 2.36%	0.42% - 1.57%	1.95% - 2.62%
Expected volatility	73.73% - 74.80%	73.06% - 73.78%	73.72% - 74.80%	73.06% - 75.19%
Expected dividend yield	0%	0%	0%	0%
Expected life of employee options (in years)	6.25	6.25	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 and non-employee members of the Company’s Board of Directors for their Board service during the three months ended June 30, 2020 and 2019 was $10.23 and $13.07, respectively, and during the six months ended June 30, 2020 and 2019 was $10.53 and $11.28, respectively. No options were granted to non-employee consultants during the three and six months ended June 30, 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 and six months ended June 30, 2020 and 2019, the Company recognized compensation expense relating to stock options as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Research and development	$	1,670	$	1,326	$	3,279	$	2,408
General and administrative		1,142		1,355		2,212		2,507
Total stock option expense	$	2,812	$	2,681	$	5,491	$	4,915

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 $1,133 in R&D expense and $551 in G&A expense for the three months ended June 30, 2020, and $1,147 in R&D expense and $581 in G&A expense for the six months ended June 30, 2020; (ii) the vesting of executives’ restricted stock units for $604 in R&D expense and $590 in G&A expense for the three and six months ended June 30, 2019; (iii) compensation expense relating to the Board of Directors’ restricted stock units for $122 and $245 in G&A expense for the three and six months ended June 30, 2020, respectively; (iv) compensation expense relating to the Board of Directors’ restricted stock units for $41 in G&A expense for the three and six months ended June 30, 2019; and (v) the issuance of common stock relating to the consulting agreement for $99 in G&A expense for the three and six months ended June 30, 2019.

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 six months ended June 30, 2020 is presented below:

		Weighted
	Number of	Average Exercise
	Shares	Price
Outstanding, December 31, 2019	4,450,517	$	14.73
Granted	820,350		16.04
Exercised	(24,346)		11.34
Expired	(167,964)		13.85
Forfeited	(113,791)		16.21
Outstanding, June 30, 2020	4,964,766	$	14.96
Options exercisable, June 30, 2020	2,756,734

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 and six months ended June 30, 2020 and 2019.