Stock-based Compensation

2013 Stock Option and Grant Plan

In February 2013, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2013 Stock Option and Grant Plan (the “2013 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, RSAs and RSUs to eligible employees, officers, directors, and consultants. The 2013 Plan was subsequently amended in January 2015, April 2015, July 2015, March 2016 and October 2016 to allow for the issuance of additional shares of common stock.

2017 Stock Option and Incentive Plan

In January 2017, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2017 Stock Option and Incentive Plan (the “2017 Plan”), which became effective immediately prior to the effectiveness of the Company’s IPO. Upon the adoption of the 2017 Plan, no further awards will be granted under the 2013 Plan.

The 2017 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2017 Plan. The terms of awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the 2017 Plan.

The Company initially registered 1,753,758 shares of common stock under the 2017 Plan, which was comprised of (i) 1,510,000 shares of common stock reserved for issuance under the 2017 Plan, plus (ii) 243,758 shares of common stock originally reserved for issuance under the 2013 Plan that became available for issuance under the 2017 Plan upon the completion of the Company’s IPO. The 2017 Plan also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 Plan on January 1, 2018 and each January 1^st thereafter. The number of shares added each year will be equal to the lesser of (i) 4% of the outstanding shares on the immediately preceding December 31^st or (ii) such amount as determined by the Compensation Committee of the Board of Directors. Effective January 1, 2018, 1,290,609 additional shares were automatically added to the shares authorized for issuance under the 2017 Plan.

As of December 31, 2018, there were 1,113,539 shares available for future issuance under the 2017 Plan.

2017 Employee Stock Purchase Plan

In January 2017, the Board of Directors adopted and the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which became effective upon the closing of the Company’s IPO. The Company initially reserved 302,000 shares of common stock for future issuance under the 2017 ESPP. The 2017 ESPP also provides that an additional number of shares will automatically be added to the shares authorized for issuance under the 2017 ESPP on January 1, 2018 and each January 1^st thereafter through January 1, 2027. The number of shares added each year will be equal to the lesser of (i) 1% of the outstanding shares on the immediately preceding December 31^st,(ii) 603,000 shares or (iii) such amount as determined by the Compensation Committee of the Board of Directors. Effective January 1, 2018, 322,652 additional shares were automatically added to the shares authorized for issuance under the 2017 ESPP. No offering periods under the 2017 ESPP had been initiated as of December 31, 2018.

Stock-based Compensation Expense

Total stock-based compensation expense recognized in the consolidated statements of operations for the years ended December 31, 2018 and 2017 was as follows (in thousands):



	Year Ended December 31,
	2018		2017
Research and development	$	4,540	$	2,840
General and administrative	4,867		1,935
Total stock-based compensation expense	$	9,407	$	4,775

Founder Awards

From December 2012 to February 2013, the Company issued 1,395,659 shares of restricted stock to non-employee founders (the “Founders”). Of the total restricted stock awarded to the Founders, 1,043,357 shares vested over one to four years, based on each Founder’s continued service relationship with the Company in varying capacities as advisors, as prescribed by the grantee’s individual restricted stock purchase agreements. The remaining 352,302 shares vested upon the determination by the Board of Directors of a Founder’s achievement of certain performance objectives, as set forth in the agreements. These performance criteria were linked to certain milestones specific to the Company’s research and development goals, including but not limited to preclinical and clinical development milestones related to the Company’s product candidates. As of December 31, 2018, all restricted stock awards issued to Founders were vested.

Restricted stock awards granted to two Founders originally contained options that enabled the Founders to sell their vested shares back to the Company at fair value upon both (i) the termination of the consulting agreement between the Founder and the Company for any reason and (ii) the determination by the Founder’s employer that the ownership of the restricted stock is in violation of the employer’s conflict of interest policy. The occurrence of these events was determined to be outside of the Founders’ and the Company’s control. As such, these restricted stock awards were previously recorded on the consolidated balance sheet as contingently redeemable common stock, residing in temporary equity, in accordance with the classification guidance of ASC 718, Compensation—Stock Compensation, and ASC 480, Distinguishing Liabilities from Equity. In June 2017, the restricted stock purchase agreements related to the two Founders were amended such that these options expired on July 26, 2017. Accordingly, these restricted stock awards were reclassified from contingently redeemable common stock to additional paid-in capital as of that date.

RSA Activity

Pursuant to RSA agreements originally issued under the terms of the 2013 Plan, the Company, at its discretion, has the option to repurchase unvested shares underlying RSAs at the initial purchase price if the employees or non-employees terminate their service relationships with the Company. The shares underlying RSAs are recorded in stockholders’ equity as they vest.

The following table summarizes RSA activity for the year ended December 31, 2018 (in thousands, except per share amounts):



	RSAs		Weighted-Average Grant Date Fair Value per Share
Unvested as of December 31, 2017	16		$	—
Issued	—		$	—
Vested	(9	)	$	—
Repurchased	—		$	—
Unvested as of December 31, 2018	7		$	—

The aggregate fair value of RSAs that vested during the years ended December 31, 2018 and 2017, based upon the fair values of the stock underlying the RSAs on the day of vesting, was less than $0.1 million and $1.3 million, respectively.

RSU Activity

The Company has also granted RSUs to its employees under the 2017 Plan. The following table summarizes RSU activity for the year ended December 31, 2018 (in thousands, except per share amounts):



	RSUs		Weighted-Average Grant Date Fair Value per Share
Unvested as of December 31, 2017	—		$	—
Issued	388		$	8.02
Vested	—		$	—
Cancelled	(17	)	$	8.02
Unvested as of December 31, 2018	371		$	8.02

No RSUs vested during the years ended December 31, 2018 or 2017.

As of December 31, 2018, there was unrecognized stock-based compensation expense related to unvested RSUs of $2.4 million, which the Company expects to recognize over a weighted-average period of approximately 1.6 years.

Stock Option Activity

The fair value of stock options granted to employees and directors during the years ended December 31, 2018 and 2017 was calculated on the date of grant using the following weighted-average assumptions:



	Year Ended December 31,
	2018		2017
Risk-free interest rate	2.7	%	2.1	%
Expected dividend yield	—	%	—	%
Expected term (in years)	6.0		6.1
Expected volatility	65.2	%	70.1	%

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted to employees and directors during the years ended December 31, 2018 and 2017 was $12.88 and $10.96 per share, respectively.

The following table summarizes changes in stock option activity during the year ended December 31, 2018 (in thousands, except per share amounts):



	Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2017	4,868		$	6.28	7.9	$	35,178
Granted	1,581		$	21.15
Exercised	(683	)	$	2.26
Cancelled	(743	)	$	14.95
Outstanding at December 31, 2018	5,023		$	10.23	7.6	$	3,133
Exercisable at December 31, 2018	2,733		$	5.91	6.8	$	3,014

The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was $5.7 million and $1.9 million, respectively.

As of December 31, 2018, there was unrecognized stock-based compensation expense related to unvested stock options of $19.7 million, which the Company expects to recognize over a weighted-average period of approximately 2.3 years.