Stock-based compensation

9 Months Ended

Sep. 30, 2022

Stock-based compensation

Stock-based compensation

9. Stock-based compensation

Founder Awards

In January 2014, the Company issued 1,188,233 shares of restricted stock to its founders (each, a “Founder”) at an original issuance price of $0.0425 per share. Of the total restricted shares awarded to the Founders, 835,292 shares generally vest over one to four years, based on each Founder’s continued service to the Company in varying capacities as a Scientific Advisory Board member, consultant, director, officer or employee, as set forth in each grantee’s individual restricted stock purchase agreement.

The remaining 352,941 of the shares issued were subject to vesting upon the achievement of certain performance objectives as well as continued service to the Company, as set forth in the agreements. These performance conditions were tied to certain milestone events specific to the Company’s corporate goals, including but not limited to preclinical and clinical development milestones related to the Company’s product candidates. Stock-based compensation expense associated with these performance-based awards is recognized when the achievement of the performance condition is considered probable, using management’s best estimates. Management concluded that the achievement of the performance milestone associated with the performance-based award for one Founder had been met during 2016.

In December 2019, the Company modified one of the remaining Founder performance awards, repurchasing 58,823 shares of common stock previously issued to this Founder. Additionally, the Company modified the award to vest solely based on time rather than on performance. The Company revalued the award at the modification date and is recognizing expense on a straight-line basis over the three-year vesting period from the modification date.

In July 2022, the Company modified the last remaining Founder performance award, repurchasing 72,647 shares of common stock previously issued to this Founder. Additionally, the Company modified the award to vest solely based on time rather than on performance. The Company revalued the award at the modification date and is recognizing expense on a straight-line basis over the two-year vesting period. Stock-based compensation related to the modification of this award was less than $0.1 million for both the three and nine months ended September 30, 2022.

Inducement Awards

During the three and nine months ended September 30, 2022, the Company issued to two executives non-statutory stock options to purchase an aggregate of 276,000 shares of the Company’s common stock outside of the Company’s 2015 Stock Option Plan as an inducement material to such executive’s acceptance of an offer of employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). Each stock option vests over a four-year period, with 25% of the shares underlying the option award vesting on the first anniversary of the effective date of the award and the remaining 75% of the shares underlying the award vesting in 36 equal monthly installments following the first anniversary of the effective date of the award.

Stock-Based Compensation Expense

Total compensation cost recognized for all stock-based compensation awards in the condensed consolidated statements of operations and comprehensive income (loss) is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in thousands)
Research and development	$	588	$	702	$	2,170	$	3,409
General and administrative		1,601		1,375		4,828		6,261
Total stock-based compensation expense	$	2,189	$	2,077	$	6,998	$	9,670

Stock-based compensation expense by type of award included within the condensed consolidated statements of operations and comprehensive income (loss) was as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(in thousands)
Stock options	$	1,357	$	1,372	$	4,452	$	6,375
Restricted stock awards and units		748		651		2,382		3,018
Employee stock purchase plan awards		84		54		164		277
Total stock-based compensation expense	$	2,189	$	2,077		6,998		9,670

Restricted Stock Units

A summary of the status of and changes in unvested restricted stock unit activity under the Company’s equity award plans for the nine months ended September 30, 2022 was as follows:

		Weighted
		Average
		Grant Date
		Fair Value
	Units	Per Unit
Unvested restricted stock units as of December 31, 2021	806,379	$	7.26
Granted	770,580	$	3.89
Vested	(419,999)		6.71
Forfeited	(215,685)	$	4.96
Unvested restricted stock units as of September 30, 2022	941,275	$	5.27

Stock-based compensation of restricted stock units is based on the fair value of the Company’s common stock on the date of grant and is recognized over the vesting period. Restricted stock units granted by the Company typically vest in equal amounts, annually over three years. All of the restricted stock units granted in the nine months ended September 30, 2022 vest in equal amounts, annually over three years. The stock-based compensation expense related to

restricted stock units and awards was $0.7 million and $2.4 million for the three and nine months ended September 30, 2022, respectively. The stock-based compensation expense related to restricted stock units and awards was $0.7 million and $3.0 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the Company had unrecognized stock-based compensation expense related to its unvested restricted stock units of $3.3 million, which is expected to be recognized over the remaining average vesting period of 1.9 years.

Stock Options

The following is a summary of stock option activity for the nine months ended September 30, 2022:

		Weighted		Remaining	Aggregate
		Average		Contractual	Intrinsic
		Exercise		Life	Value
	Shares	Price		(in years)	(in thousands)
Outstanding at December 31, 2021	5,013,193	$	12.69	5.6	$	1,165
Granted	3,504,675	$	5.14
Exercised	(79,837)	$	7.56
Cancelled or forfeited	(2,358,960)	$	13.22
Outstanding at September 30, 2022	6,079,071	$	8.20	8.1	$	5,693
Exercisable at September 30, 2022	2,581,363	$	10.85	6.4	$	1,838

As of September 30, 2022, the Company had unrecognized stock-based compensation expense related to its unvested stock options of $13.5 million which is expected to be recognized over the remaining weighted-average vesting period of 3.1 years.