Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2012 Stock Plan and 2018 Incentive Award Plan

In June 2012 and September 2018, the Company’s Board of Directors adopted and its stockholders approved the Company’s 2012 Stock Plan (as amended and restated), or the 2012 Plan, and the Company’s 2018 Incentive Award Plan, or the 2018 Plan, respectively, under which the Company may grant cash and equity incentive awards to its employees and non-employees. Upon effectiveness of the 2018 Plan in connection with the IPO in October 2018, the 2012 Plan was terminated and 508,847 shares reserved under the 2012 Plan were forfeited. Any outstanding awards granted under the 2012 Plan remain outstanding, subject to the terms of the 2012 Plan and applicable award agreement, and further cancellation of awards granted under the 2012 Plan are not available for grant in the future. No further grants will be made under the 2012 Plan. The number of shares of common stock available for issuance under the 2018 Plan may be increased on January 1 of each calendar year beginning in 2019 and ending in 2028 by an amount equal to the least of (i) 3,689,000 shares, (ii) four percent of the shares of common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by the Company’s Board of Directors.

2023 Employment Inducement Incentive Award Plan

In August 2023, the Company’s Board of Directors adopted the 2023 Employment Inducement Incentive Award Plan, or the 2023 Plan, under which the Company may exclusively grant awards to its new employees as an inducement material to the employee’s entry into employment with the Company. The 2023 Plan was approved by the Company's Board of Directors without stockholder approval in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules.

Stock Option Activity

A summary of the Company’s stock option activity under the 2012 Plan, the 2018 Plan and the 2023 Plan, and related information is as follows:

		Options Outstanding
	Shares Available for Grant	Shares Subject to Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
						(in thousands)
Balance as of January 1, 2021	1,819,223	3,101,181	$	15.80	6.9	$	350,670
2018 Plan annual increase(1)	3,689,000	—
Granted	(345,774)	345,774	119.82
Exercised	—	(693,074)	11.19
Canceled	65,523	(128,907)	47.51
Restricted stock units granted	(873,916)	—
Restricted stock units canceled	315,988	—
Market-based restricted stock units canceled	558,254	—
Performance-based restricted stock units granted	(52,917)	—
Performance-based restricted stock units canceled	56,243	—
Balance as of December 31, 2021	5,231,624	2,624,974	29.17		6.5	193,014
2018 Plan annual increase(1)	3,689,000	—
Granted	(1,051,466)	1,051,466	44.86
Granted in connection with the Joint Venture Acquisition	(15,128)	15,128	4.90
Exercised	—	(228,311)	6.29
Canceled	56,391	(60,683)	90.84
Restricted stock units granted	(2,995,533)	—
Restricted stock units canceled	490,525	—
Performance-based restricted stock units granted	(26,935)	—
Performance-based restricted stock units canceled	59,818	—
Balance as of December 31, 2022	5,438,296	3,402,574	34.34		6.8	39,749
2018 Plan annual increase(1)	3,689,000	—
Shares authorized under the 2023 Plan	5,000,000	—
Granted	(1,000,760)	1,000,760	30.80
Exercised	—	(51,124)	7.93
Canceled	338,570	(339,307)	58.45
Restricted stock units granted	(2,436,947)	—
Restricted stock units canceled	1,049,447	—
Performance-based restricted stock units granted	(126,041)	—
Performance-based restricted stock units canceled	51,829	—
Balance as of December 31, 2023	12,003,394	4,012,903	$	31.76	6.6	$	39,115
Vested and Exercisable as of December 31, 2023		2,401,061	$	25.39	4.9	$	37,730

(1)Effective as of January 1, 2021, 2022 and 2023, an additional 3,689,000 shares of common stock became available for issuance under the 2018 Plan, as a result of the operation of the automatic annual increase provision therein.

Aggregate intrinsic value represents the difference between the estimated fair value of the underlying common stock and the exercise price of outstanding, in-the-money options. The total intrinsic value of the options exercised was $1.0 million, $12.2 million and $83.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The weighted-average grant date fair value of options granted was $19.90, $28.61 and $70.25 per share for the years ended December 31, 2023, 2022 and 2021, respectively.

Future stock-based compensation for unvested options as of December 31, 2023 was $39.8 million, which is expected to be recognized over a weighted-average period of 2.4 years.

Restricted Stock Units

A summary of the Company’s restricted stock unit activity excluding the performance-based and market-based restricted stock units under the 2012 Plan, the 2018 Plan and the 2023 Plan, and related information is as follows:

	Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of January 1, 2021	1,118,655	$	92.89
Granted	873,916	123.36
Vested and released	(178,030)	92.14
Canceled	(315,988)	97.79
Balance as of December 31, 2021	1,498,553	109.72
Granted	2,902,217	45.04
Granted in connection with the Joint Venture Acquisition	93,316	38.24
Vested and released	(315,673)	96.36
Canceled	(490,525)	90.52
Balance as of December 31, 2022	3,687,888	60.70
Granted	2,436,947	26.62
Vested and released	(728,603)	60.07
Canceled	(1,049,447)	56.85
Balance as of December 31, 2023	4,346,785	$	42.63

Future stock-based compensation for unvested restricted stock units as of December 31, 2023 was $151.9 million, which is expected to be recognized over a weighted-average period of 2.4 years.

Performance-based Restricted Stock Units

Since November 2020, the Compensation Committee of the Board of Directors started to approve, and the Company started to grant performance-based restricted stock units, or PSUs, to its employees and non-employees. The PSUs granted to employees consist of financial and/or operational metrics to be met over a performance period of approximately 0.3 to 4 years and an additional service period requirement of up to 2 years after the performance metrics are met. The PSUs granted to a consultant consistent of operational metrics to be met over a performance period of 4 years. The PSUs are expected to be expensed over a period of approximately 0.3 to 4.5 years subject to meeting the respective performance metrics and service requirements.

In November 2020, and as part of these PSU programs, the Company granted PSUs consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met. As of December 31, 2023, these PSUs had a grant-date fair value of approximately $25.7 million, net of forfeitures, however no compensation expense for these PSUs has been recorded to-date since the achievement of the performance metrics did not meet the criteria for accrual as of December 31, 2023.

A summary of the Company’s performance-based restricted stock unit activity under the 2018 Plan and related information is as follows:

	Performance-based Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of January 1, 2021	377,922	$	113.40
Granted	52,917	135.94
Canceled	(56,243)	113.40
Balance as of December 31, 2021	374,596	116.58
Granted	26,935	37.50
Canceled	(59,818)	114.94
Balance as of December 31, 2022	341,713	110.64
Granted	126,041	32.84
Vested and released	(3,435)	32.86
Canceled	(51,829)	80.91
Balance as of December 31, 2023	412,490	$	91.25

Stock-based compensation recorded for the PSUs for the years ended December 31, 2023, 2022 and 2021 was $2.6 million, $1.3 million and $1.3 million, respectively. Future stock-based compensation for unvested PSUs that are probable to vest as of December 31, 2023 was $5.3 million, which is expected to be recognized over a weighted-average period of 1.8 years.

Market-based Restricted Stock Units

In May 2020, the Board of Directors approved and granted 1,695,574 market-based restricted stock units, or MSUs, under the 2018 Plan to each of the Company's Co-Chief Executive Officers, which is subject to the achievement of market-based share price goals established by the Board of Directors. The MSUs consist of three separate tranches and the vesting of each tranche is subject to the Company's common stock closing price being maintained at or above a predetermined share price goal for a period of 30 consecutive calendar days. The share price goal can be met any time during the seven-year performance period from the date of grant. Upon vesting, the MSUs must be held for a period of six to twelve months depending on the time of vesting within the seven-year performance period. The vesting of the MSUs can also be triggered upon a change in control event and achievement of a certain change in control price goal, or when there is a qualifying termination or in the event of death or disability. Any MSUs that remain unvested at the end of the seven-year performance period will automatically be forfeited and terminated without further consideration. The following table presents additional information relating to each MSU award:

Tranche	Price Goal	Number of RSUs
Tranche 1	$120 per share	565,192
Tranche 2	$150 per share	565,191
Tranche 3	$200 per share	565,191

The grant date fair values of the MSUs were determined using a Monte Carlo valuation model for each tranche. The related stock-based compensation expense for each tranche was recognized based on an accelerated attribution method over the estimated derived service period. The derived service period was the median duration of the successful stock price paths to meet the price goal for each tranche as simulated in the Monte Carlo valuation model. The Monte Carlo valuation model used assumptions such as volatility, risk-free interest rate, cost of equity and dividend estimated for the performance period of the MSU. The weighted-average grant date fair value of the MSUs was $67.00 per share and the weighted-average derived service period was estimated to be in the range of 0.83 – 2.07 years.

On January 1, 2021, Tranche 1 of the MSUs became vested because it had met both service requirement and market-based performance metrics as the predetermined share price goal of $120 per share was achieved for a period of 30 consecutive calendar days. No MSUs were granted, vested or canceled during the years ended December 31, 2023, and 2022. A summary of the Company’s market-based restricted stock unit activity under the 2018 Plan and related information is as follows:

	Market-based Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Balance as of January 1, 2021	3,391,148	$	67.00
Vested and released	(572,130)	70.58
Canceled (1)	(558,254)	70.58
Balance as of December 31, 2021	2,260,764	65.20
Balance as of December 31, 2022	2,260,764	65.20
Balance as of December 31, 2023	2,260,764	$	65.20

(1)Represented shares withheld by the Company for the holders' tax obligation upon release of vested MSUs.

The MSUs were fully expensed as of June 30, 2022. Stock-based compensation for the MSUs for the years ended December 31, 2022 and 2021 was $16.1 million and $99.2 million, respectively, which was recorded in general and administrative expenses on the accompanying consolidated statement of operations.

AMEA 2020 Equity Incentive Plan

In August 2020, the board of directors of the Joint Venture approved its 2020 Equity Incentive Plan, or the AMEA 2020 Plan, under which the Joint Venture may grant equity incentive awards to its employees and non-employees.

In June 2022, in connection with the Joint Venture Acquisition, the Company issued a tender offer to purchase the Joint Venture's Class B common stock issued and issuable upon exercise of vested Joint Venture's stock options, at a price of $4.44 per share determined pursuant to an independent valuation. In July 2022, the Company settled the tender offer with the 39 grantees for a total amount of $13.7 million. In addition, in connection with the Joint Venture Acquisition, the unvested Joint Venture's stock options were cancelled and such grantees received replacement awards covering a number of shares of the Company's common stock. The replacement awards, valued at $4.1 million, are subject to the same vesting schedule that applied to the unvested Joint Venture's stock option immediately prior to the close of the Joint Venture Acquisition transaction, to be recognized over a weighted-average period of 2.2 years. The Company accounted for this as a modification which resulted in an immaterial incremental stock-based compensation expense. After the settlement of the tender offer in July 2022, the Company cancelled the AMEA 2020 Plan.

A summary of the Joint Venture's stock option activity under the AMEA 2020 Plan and related information is as follows:

		Options Outstanding
	Shares Available for Grant	Shares Subject to Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
						(in thousands)
Balance as of January 1, 2021	542,220	4,053,335	$	0.58	9.6	$	—
Granted	(826,667)	826,667	0.58
Exercised	—	(602,408)	0.58
Canceled	625,375	(625,375)	0.58
Balance as of December 31, 2021	340,928	3,652,219	0.58		8.8	—
Exercised	—	(2,051,645)	0.58
Canceled	82,407	(82,407)	0.58
Canceled in connection with the Joint Venture Acquisition	(423,335)	(1,518,167)	0.58
Balance as of December 31, 2022	—	—	$	—	0.0	$	—

No stock options were granted under the AMEA 2020 Plan for the year ended December 31, 2022. The weighted-average grant date fair value of options granted under the AMEA 2020 Plan was $0.33 per share for the year ended December 31, 2021.

Stock‑Based Compensation Expense

The following table presents the effect of employee and non‑employee related stock‑based compensation expense including the Joint Venture:

	Year Ended December 31,
	2023		2022		2021
	(in thousands)
Cost of precision oncology testing	$	4,614	$	5,498	$	3,468
Cost of development services and other	1,851		—		—
Research and development expense	34,682		26,630		18,907
Sales and marketing expense	24,764		25,442		15,479
General and administrative expense	24,848		37,115		113,595
Total stock-based compensation expense	$	90,759	$	94,685	$	151,449

Valuation of Stock Options

The grant date fair value of stock options was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions including the Joint Venture:

	Year Ended December 31,
	2023	2022	2021
Expected term (in years)	5.50 – 6.10	5.50 – 6.10	5.49 – 6.06
Expected volatility	69.3% – 70.5%	63.3% – 67.6%	63.6% – 66.7%
Risk-free interest rate	3.4% – 4.5%	1.9% – 4.4%	0.3% – 1.3%
Expected dividend yield	0%	0%	0%

The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the estimated fair value of common stock of the Company and the Joint Venture, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The valuation assumptions were determined as follows:

Fair Value of Common Stock

The fair value of the Company’s common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market.

The grant date fair value of the Joint Venture's common stock was determined by the board of directors of the Joint Venture, using valuation methodologies which utilize certain assumptions including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability. The methodologies used to estimate the enterprise value of the Joint Venture were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Expected Term

The expected term represents the period that the 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) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term.

Expected Volatility

Prior to the commencement of trading of the Company’s common stock on the Nasdaq Global Select Market on October 4, 2018 in connection with its IPO, there was no active trading market for the Company’s common stock. Due to limited historical data for the trading of the Company’s common stock, expected volatility is estimated based on the average volatility for comparable publicly traded peer group companies in the same industry plus the Company's expected volatility for the available periods. The comparable companies are chosen based on their similar size, stage in the life cycle or area of specialty.

The Joint Venture derived the expected volatility from the average historical volatility over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Joint Venture did not have any trading history for its common stock.

Risk-Free Interest Rate

The risk-free interest rate is based on the U.S. Treasury rate, with maturities similar to the expected term of the stock options.

Expected Dividend Yield

The Company does not anticipate paying any dividends in the foreseeable future and, therefore, uses an expected dividend yield of zero.

The Joint Venture did not anticipate paying any dividends, therefore used an expected dividend yield of zero.

2018 Employee Stock Purchase Plan

In September 2018, the Company’s Board of Directors adopted and its stockholders approved the 2018 Employee Stock Purchase Plan, or the ESPP. A total of 922,250 shares of common stock were initially reserved for issuance under the ESPP. On the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, the number of shares of common stock available for issuance under the ESPP may be increased by the least of (i) 1,106,700 shares, (ii) 1% of the shares outstanding (on an as-converted basis) on the last day of the immediately preceding calendar year, assuming the conversion of any shares of preferred stock, but excluding shares issuable upon the exercise or payment of stock options, warrants or other equity securities with respect to which shares have not actually been issued, and (iii) such smaller number of shares as determined by the Company’s Board of Directors. Effective as of January 1, 2020 and March 2, 2023, an additional 942,614 and 1,026,194 shares of common stock became available for issuance under the ESPP.

Subject to any plan limitations, the ESPP allows eligible employees to contribute, normally through payroll deductions, up to 10% of their earnings for the purchase of the Company’s common stock at a discounted price per share. The price at which common stock is purchased under the ESPP is equal to 85% of the fair market value of the Company’s common stock on the first or last day of the offering period, whichever is lower. The ESPP provides for separate six-month offering periods beginning on May 15 and November 15 of each year.

Shares of common stock purchased under the ESPP were 464,870, 307,953 and 110,227, for the years ended December 31, 2023, 2022 and 2021, respectively. The total compensation expense related to the ESPP was $5.1 million, $4.6 million and $3.5 million, for the years ended December 31, 2023, 2022 and 2021, respectively.

The grant date fair value of the stock purchase right granted under the ESPP was estimated on the first day of each offering period using the Black-Scholes option pricing model. The following assumptions used in the valuation were substantially consistent with the assumptions used to value stock options with the exception of the expected term which was based on the term of each purchase period:

	Year Ended December 31,
	2023	2022	2021
Expected term (in years)	0.50	0.50	0.50
Expected volatility	51.5% – 76.6%	81.8% – 92.0%	46.5% – 50.8%
Risk-free interest rate	5.2% – 5.4%	1.5% – 4.5%	0% – 0.1%
Expected dividend yield	0%	0%	0%

As of December 31, 2023, the unrecognized stock-based compensation expense related to the ESPP was $2.1 million, which is expected to be recognized over the remaining term of the offering period of 0.4 years.