Stock-Based Compensation

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Note 15—Stock-Based Compensation

The Company’s 2011 Equity Incentive Plan (the “2011 Plan”) permits the granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards to employees, directors, officers and consultants. As of June 30, 2020, 3,858,099 shares of common stock were authorized for issuance under the 2011 Plan and 390,912 shares remain available for issuance under the 2011 Plan.

Stock Options

The stock options generally vest over four years and have a ten-year contractual term. The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company is a private company as of June 30, 2020 and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined using the “simplified” method for awards. 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.

The following assumptions were used to estimate the fair value of stock option for the six months ended June 30, 2020 and 2019:

	Six Months Ended June 30,
	2020		2019
	(unaudited)
Risk-free interest rate		0.90%		2.0% - 2.1%
Expected dividend yield		—		—
Expected term in years		7.0		6.38 - 10.00
Expected volatility		70.0%		80.0%

The following table summarizes stock option activity during the six months ended June 30, 2020:

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2019		2,041,205		$	9.52		7.7	$	7,857
Options granted		867,031			14.81
Option exercised		(111,936	)		7.73
Options forfeited		(200,213	)		12.01
Outstanding as of June 30, 2020 (unaudited)		2,596,087		$	11.17		7.8	$	17,816
Options vested and exercisable as of June 30, 2020 (unaudited)		1,138,429		$	8.34		6.1	$	11,037

The aggregate intrinsic value in the above table is calculated as the difference between the fair value of the Company’s common stock as of June 30, 2020 and the exercise price of the stock options. The weighted-average grant date fair value per share for the stock option awards granted during the six months ended June 30, 2020 was $14.81. As of June 30, 2020, the total unrecognized compensation related to unvested stock option awards granted was $13.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.8 years.

Restricted Stock

The Company’s RSA activity for the six months ended June 30, 2020 was as follows:

	Number of Shares			Weighted Average Grant Price
Unvested as of December 31, 2019		—		$	—
Granted		14,945			14.81
Vested		(14,945	)		14.81
Unvested as of June 30, 2020 (unaudited)		—		$	—

The following table summarizes the total stock-based compensation expense for the stock options and RSAs recorded in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2020 and 2019 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(unaudited)				(unaudited)
Cost of products sold	$	58	$	54	$	166	$	106
Research and development		167		150		378		292
Selling, general and administrative		932		599		2,354		964
Total stock-based compensation	$	1,157	$	803	$	2,898	$	1,362

Performance-Based Restricted Stock Units

In June 2019, the Company granted 567,509 PSUs, with a grant date fair value of $13.37. Vesting of the PSUs is dependent upon the satisfaction of both a service condition and a performance condition, which is an initial public offering or a change of control. As the performance conditions for the PSU were not considered probable as of June 30, 2020 and 2019, no compensation expense related to these awards has been recorded for the three and six months ended June 30, 2020 and 2019.