Stock-based Compensation

9 Months Ended

Sep. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

11. Stock-based Compensation

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Research and development	$	43	$	13	$	62	$	42
General and administrative		68		56		156		147
Total stock-based compensation expense	$	111	$	69	$	218	$	189

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 grant date fair market value of the shares of common stock underlying stock options has historically been determined by the Company’s board of directors. Because previously there was no public market for the Company’s common stock, the board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair market value, which include contemporaneous valuations performed by an independent third party, important developments in the Company’s operations, sales of convertible preferred stock, the rights, preferences and privileges of its convertible preferred stock relative to those of its common stock, lack of marketability of its common stock, actual operating results, financial performance, the progress of clinical development, the likelihood of achieving a liquidity event for its security holders, the trends, development and conditions in the life sciences and biotechnology sectors, the economy in general, and the stock price performance and volatility of comparable public companies.

• 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:

	Nine Months Ended September 30,
	2020			2019
Risk-free interest rate		0.49	%		1.58	%
Expected volatility		80.11	%		74.59	%
Expected term (in years)		6.93			6.59
Expected dividend yield		—			—

The weighted-average grant-date fair value of options granted to employees and directors during the nine months ended September 30, 2020 and 2019 were $2.1 million and $259,000 respectively. The weighted-average grant-date fair value of options granted to advisors during the nine months ended September 30, 2020 was $727,000. The remeasured weighted-average fair value of options granted to advisors during the nine months ended September 30, 2019 was $46,000.

Stock Option Activity

A summary of option activity for the nine months ended September 30, 2020 was as follows:

	Available for Grant			Shares			Weighted- Average Exercise price per Share		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2019		399,737			1,514,770		$	1.03	7.16		$	500
Authorized		4,343,534			—
Granted		(994,293	)		994,293			16.20
Exercised		—			(540,334	)		1.00
Forfeited/expired		41,301			(41,301	)		1.35
Balance at September 30, 2020		3,790,279			1,927,428		$	8.85		8.18	$	18,521
Expected to vest					1,298,059		$	12.71		9.52	$	7,460
Options exercisable					629,373		$	0.89		5.43	$	11,061

The total fair value of options granted to employees, directors, and advisors that vested during the nine months ended September 30, 2020 was $219,000, which included $144,000 for options granted to employees and directors and $75,000 for options granted to advisors. The total fair value of options that vested during the nine months ended September 30, 2019 was $123,000, which included $64,000 for options granted to employees and directors and $59,000 for options granted to advisors.  

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 September 30, 2020. The aggregate intrinsic value of options exercised was $9.4 million and $4,000 during the nine months ended September 30, 2020 and 2019, respectively, determined as of the date of option exercise. As of September 30, 2020, there was $2.9 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 1.95 years. The Company utilizes newly issued shares to satisfy option exercises.

Stock options outstanding and exercisable consisted of the following at September 30, 2020:

	Employees and Directors				Non-employees
Exercise Price ($)	Shares Outstanding		Shares Exercisable		Shares Outstanding		Shares Exercisable
0.16		75,660		75,660		12,611		12,611
0.48		162,353		162,353		—		—
1.00		—		—		37,830		37,830
1.04		70,933		70,933		31,525		31,525
1.19		52,645		38,878		34,677		34,677
1.31		63,050		63,050		—		—
1.35		294,754		27,529		116,642		63,049
1.49		31,525		10,508		—		—
17.00		747,770		770		195,453		—
Total		1,498,690		449,681		428,738		179,692

Restricted Stock Award Activity

In 2018, the Company issued a restricted stock award (“RSA”) to an advisor under the 2014 Plan. The restricted stock award vests over three years and requires continued service to the Company during the vesting period. The vesting provisions of individual awards may vary as approved by the board of directors. If continued service terminates for any reason, the Company has the right to repurchase the unvested shares for no consideration. Shares subject to repurchase as of September 30, 2020 and December 31, 2019 were 4,204 shares and 8,407 shares, respectively, all of which were related to non-employee RSAs.

A summary of RSA activity for the nine months ended September 30, 2020 was as follows:

	Share Equivalent			Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2019		8,407			1.35
Granted		—			—
Vested		(4,203	)		1.35
Non-vested at September 30, 2020		4,204		$	1.35