Stock-based Compensation

6 Months Ended

Jun. 30, 2022

Share-based Payment Arrangement [Abstract]

Stock-based Compensation

10. Stock-based Compensation

Stock‑based compensation expense recognized was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development	$	971	$	285	$	1,756	$	545
General and administrative		2,124		824		4,070		1,538
Total stock-based compensation expense	$	3,095	$	1,109	$	5,826	$	2,083

Valuation Assumptions

The fair value of stock options was determined using the Black-Scholes option-pricing model and the assumptions below. Each of these inputs is subjective and generally required significant judgment.

•Fair Value of Common Stock—The fair value of each share of common stock is based on the closing price of the Company’s common stock on the date of grant, or other relevant determination date, as reported on The Nasdaq Global Select Market.

•Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

•Expected Volatility—Because the Company was previously privately held and did not have any trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on the similar size, stage in life cycle or area of specialty. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

•Expected Term—The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term) as the Company has limited history of relevant stock option exercise activity.

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

The fair value of each stock option was estimated using the Black‑Scholes option‑pricing model with the following weighted-average assumptions:

	Six Months Ended June 30,
	2022			2021
Risk-free interest rate		2.00	%		0.80	%
Expected volatility		92.78	%		89.34	%
Expected term (in years)		6.01			6.10
Expected dividend yield		—			—

The grant date fair value of restricted stock units is based upon the fair market value of the Company’s common stock based on its closing price as reported on the date of grant on the Nasdaq Global Select Market.

The fair value of options granted during the six months ended June 30, 2022 and 2021 was $15.7 million and $10.2 million, respectively. The fair value of restricted stock units granted during the six months ended June 30, 2022 and 2021 was $129,000 and $67,000, respectively.

Stock Option Activity

Changes in shares available for grant under the 2020 Plan during the six months ended June 30, 2022 were as follows:

	Shares Available for Grant
Shares available for grant at December 31, 2021		4,442,315
2020 Plan reserve increase on January 1, 2022		1,868,953
Options and restricted stock units granted		(1,998,047	)
Options and restricted stock units forfeited,    cancelled, or expired		143,233
Shares available for grant at June 30, 2022		4,456,454

A summary of stock option activity under the 2020 Plan for the six months ended June 30, 2022 was as follows:

	Shares			Weighted- Average Exercise price per Share		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2021		2,270,896		$	12.76	7.22		$	8,306
Granted		1,985,797			10.43
Exercised		(288,457	)		1.02
Forfeited/expired		(129,233	)		17.26
Balance at June 30, 2022		3,839,003		$	12.28		8.82	$	793
Expected to vest		2,957,147		$	12.54		9.20	$	204
Options exercisable		881,856		$	11.42		7.57	$	589

The total fair value of options granted that vested during the six months ended June 30, 2022 and 2021 was $4.3 million and $297,000, respectively.

The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the Company’s common stock underlying all options that were in-the-money at June 30, 2022. The aggregate intrinsic value of options exercised was $3.0 million and $1.3 million during the six months ended June 30, 2022 and 2021, respectively, determined as of the date of option exercise. As of June 30, 2022, there was $22.1 million of total unrecognized compensation cost related to unvested stock options. The Company expects to recognize this cost over a remaining weighted-average period of 3.1 years. The Company utilizes newly issued shares to satisfy option exercises.

Stock options outstanding and exercisable under the 2020 Plan consisted of the following at June 30, 2022:

Exercise Price ($)	Shares Outstanding		Shares Exercisable
0.16 to 1.35		399,762		279,963
8.93 to 19.94		3,061,320		499,390
20.55 to 29.41		377,921		102,503
Total		3,839,003		881,856

Restricted Stock Unit Activity

A summary of RSU activity for the six months ended June 30, 2022 is as follows:

	Share Equivalent			Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2021		361,500		$	15.32
Granted		12,250			10.54
Cancelled		(14,000	)		15.34
Vested		(119,911	)		15.15
Non-vested at June 30, 2022		239,839		$	15.15

The RSUs will vest upon achievement of certain clinical development milestones, subject to continued service to the Company during the vesting period. In June 2022, 119,911 RSUs vested in connection with the public readout of topline data from the Company's Phase 2 ACT-AD clinical trial. As of June 30, 2022, there was $2.4 million of total unrecognized compensation cost related to unvested stock options. The Company expects to recognize this cost over a remaining weighted-average period of 1.3 years.