Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

2015 Plan

In June 2019, the Company approved an Amended and Restated 2015 Equity Incentive Plan (the “2015 Plan”) permitting the granting of incentive stock options, non-statutory stock options, restricted stock and other stock-based awards. Following the effectiveness of the 2021 Equity Incentive Plan (“2021 Plan”), the Company ceased making grants under the 2015 Plan. However, the 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it. Shares of common stock subject to awards granted under the 2015 Plan that cease to be subject to such awards by forfeiture or otherwise after the termination of the 2015 Plan will be available for issuance under the 2021 Plan.

2021 Plan

On January 25, 2021, the Company's board of directors approved the 2021 Plan which permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, directors, officers and consultants. On January 25, 2021, shares of common stock equal to 11% of the post-IPO capitalization were authorized for issuance under the 2021 Plan. The 2021 Plan provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022, by the lesser of 5% of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors.

Stock Options

The fair value of each employee and non-employee stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model based on the following assumptions:


	Three Months Ended March 31,
	2022	2021
Risk-free interest rate	1.7%	0.7%
Expected dividend yield	0.0%	0.0%
Expected term in years	5.9	6.0
Expected volatility	71.8%-72.5%	73.8%-86.8%

Each of these inputs is subjective and generally requires significant judgment.

Expected Term—The expected term represents the period the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method, which is based on the mid-point between the contractual term and vesting period.

Volatility—The Company determines volatility based on the historical volatilities of comparable publicly traded life science companies over a period equal to the expected term because it does not have sufficient trading history for its common stock price. The comparable companies were chosen based on the similar size, stage in the life cycle, or area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding volatility on its own stock becomes available.

Risk-Free Interest Rate—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.

Dividend Yield—The Company has never paid and has no plans to pay any dividends on its common stock. Therefore, the Company has used an expected dividend yield of zero.

Fair Value of Common Stock—For periods prior to the IPO, the Company determined the estimated fair value of its common stock using the Subject Company Transaction Method which includes the back-solve and scenario-based methods (Probability Weighted Expected Return Method) to arrive at estimated fair values. Subsequent to the IPO, the fair value was based on the closing price of the Company’s common stock on the grant date.

The following table summarizes information and activity related to the Company’s stock options:


	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Total Intrinsic Value (in thousands)
Outstanding as of December 31, 2021	4,230,162	$	8.92	8.4	$	—
Options granted	2,188,700	1.93
Options forfeited	(391,106)	11.14
Options exercised	—	—
Options expired	(212,909)	9.26
Outstanding as of March 31, 2022	5,814,847	$	6.13	8.0	$	406
Options vested and exercisable	2,554,368	$	7.43	6.0	$	—

The aggregate intrinsic value in the above table is calculated as the difference between the estimated fair value of the Company's common stock price and the exercise price of the stock options. The weighted average grant date fair value per share for the stock option grants during the three months ended March 31, 2022 and 2021 was $1.19 and $8.86, respectively. As of March 31, 2022, the total unrecognized compensation related to unvested stock option awards granted was $5.9 million, which the Company expects to recognize over a weighted-average period of approximately 3.0 years.

Restricted Stock Units (RSUs)

The following table summarizes information and activity related to the Company’s RSUs:


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2021	17,504	$	9.51
Granted	—	$	—
Vested	(365)	$	9.51
Outstanding at March 31, 2022	17,139	$	9.51
Vested as of March 31, 2022	365	$	9.51

Performance-based Restricted Stock Units (PSUs)

The Company had 556,530 PSUs outstanding that were granted in June 2019. Vesting of the PSUs is dependent upon the satisfaction of both a service condition and a performance condition, an initial public offering or a change of control, as defined in the 2015 Plan. As the IPO occurred in February 2021, the performance condition was met and 185,510 PSUs vested and were released upon the closing of the IPO. Another 185,510 PSUs vested and were released in June 2021 upon the second anniversary of the grants. As of March 31, 2022, the Company had 185,510 PSUs outstanding.

Stock-based Compensation Expense

The following table summarizes total stock-based compensation expense recorded in the condensed consolidated statements of operations (in thousands):


	Three Months Ended March 31,
	2022		2021
Research and development	$	(448)	$	2,543
General and administrative	479		2,574
Total	$	31	$	5,117

The decrease in total stock-based compensation expense for the three months ended March 31, 2022 is primarily due to the reversal of expense upon the forfeiture of awards in connection with the reduction in force event that occurred on January 4, 2022. See Note 1 for additional information.

Employee Stock Purchase Plan

In January 2021, the board of directors of the Company approved the Employee Stock Purchase Plan (the “ESPP”). The ESPP was effective on the date immediately prior to the effectiveness of the Company's registration statement relating to the IPO. A total of 390,000 shares of common stock were initially reserved for issuance under the ESPP. The ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022, by the lesser of 1% of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors. The offering period and purchase period will be determined by the board of directors. As of March 31, 2022, 390,000 shares under the ESPP remain available for purchase and no offerings have been authorized.