Incentive Stock Options and Employee Stock Purchase Plan

6 Months Ended

Jun. 30, 2021

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Incentive Stock Options and Employee Stock Purchase Plan

8. Incentive Stock Options and Employee Stock Purchase Plan

2021 Inducement Stock Incentive Plan

On January 20, 2021, the Board of Directors adopted a 2021 Inducement Stock Incentive Plan (the “2021 Plan”), pursuant to which the Company may grant non-statutory stock options, restricted stock, restricted stock units and other stock-based awards with respect to an aggregate of 2,612,550 
shares of common stock. Awards under the 2021 Plan may only be granted to persons who (i) were not previously an employee or director of the Company or (ii) are commencing employment with the Company following a bona fide period of non-employment, in either case as an inducement material to the individual’s entering into employment with the Company and in accordance with the requirements of Nasdaq Stock Market Rule 5635(c)(4).

2018 Equity Incentive Plan

On March 7, 2018, the Company’s Board of Directors (the “Board of Directors”), subject to stockholder approval, adopted, and on June 15, 2018, the Company’s stockholders approved, the 2018 Equity Incentive Plan (the “2018 Plan”), which became effective on June 27, 2018. The 2018 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The Company previously awarded grants under the 2016 Stock Incentive Plan (the “2016 Plan”). Upon the effectiveness of the 2018 Plan, no further awards will be made under the 2016 Plan, but awards outstanding under the 2016 Plan will continue to be governed by their existing terms.

As of December 31, 2020, there were 7,457,171 shares of common stock reserved for issuance under the 2018 Plan. On January 1, 2021, the number of shares of common stock that may be issued under the 2018 Plan increased by 3,001,185 shares of common stock. During the six months ended June 30, 2021, a total of 12,848 shares issued under the 2016 Plan have been canceled and rolled over to the 2018 Plan, such that there is a total of 10,471,204 shares of common stock reserved for issuance under the 2018 Plan as of June 30, 2021. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, repurchased or are otherwise terminated by the Company under the 2016 Plan will be added back to the shares of common stock available for issuance under the 2018 Plan.

The 2018 Plan is administered by the Board of Directors. The exercise prices, vesting periods and other restrictions are determined at the discretion of the Board of Directors, except that the exercise price per share of options may not be less than 100% of the fair market value of the common stock on the date of grant. Stock options awarded under the 2018 Plan expire 10 years after the grant date, unless the Board of Directors sets a shorter term. Awards granted to employees, officers, members of the Board of Directors and consultants typically vest over a period of one to four years.

Typically, unvested stock options are forfeited upon the recipient ceasing to provide services to the Company.

2018 Employee Stock Purchase Plan

On March 7, 2018, the Board of Directors, subject to stockholder approval, adopted, and on June 15, 2018, the Company’s stockholders approved the 2018 Employee Stock Purchase Plan (the “2018 ESPP”), which became effective on June 27, 2018. As of June 30, 2021, 870,096 shares of common stock were reserved for issuance under this plan.

As of June 30, 2021, 54,152 shares have been issued under the 2018 ESPP.

Stock Options

The following table summarizes the Company’s stock option activity since December 31, 2020 (in thousands, except share and per share amounts):

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Intrinsic Value
						(in years)
Outstanding as of December 31, 2020		9,557,391		$	8.79		7.92	$	93,256
Granted		3,126,560		$	21.81
Exercised		(286,899	)	$	8.25
Forfeited		(154,303	)	$	14.68
Outstanding as of June 30, 2021		12,242,749		$	12.06		8.07	$	189,483
Exercisable as of June 30, 2021		5,953,908		$	8.14		7.07	$	115,421
Vested and expected to vest as of June 30, 2021		12,242,749		$	12.06		8.07	$	189,483

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2021 and 2020 was $3.8 million and $10.7 million, respectively.

The weighted average grant-date fair value per share of stock options granted was $13.56 and $5.50 during the six months ended June 30, 2021 and 2020, respectively.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company completed its initial public offering in July 2018 and therefore lacks company-specific historical and implied volatility information before that date. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. 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. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted to employees and directors:

	Six Months Ended June 30,
	2021			2020
Risk-free interest rate		1.03	%		0.79	%
Expected term (in years)		6.1			6.1
Expected volatility		69.7	%		68.6	%
Expected dividend yield		0	%		0	%

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Research and development expenses	$	2,841	$	4,091	$	4,921	$	5,545
General and administrative expenses		2,495		1,923		4,399		3,641
	$	5,336	$	6,014	$	9,320	$	9,186

As of June 30, 2021, total unrecognized compensation cost related to the unvested stock-based awards was $57.4 million, which is expected to be recognized over a weighted average period of 2.9 years.