Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Stock-Based Compensation

Stock-Based Compensation

Note 13. Stock-Based Compensation

2017 Equity Incentive Plan

The Company’s 2017 Plan became effective in August 2017. Following the effective date of the Company's 2020 Plan (as defined below), the Company ceased granting awards under the 2017 Plan, however, the terms and conditions of the 2017 Plan continue to govern any outstanding awards granted thereunder.

2020 Incentive Award Plan

The Company’s 2020 Plan was approved and became effective at the Company’s 2020 annual meeting of stockholders on May 20, 2020, and unless earlier terminated by the Board of Directors, will remain in effect until March 26, 2030. The 2020 Plan originally authorized for issuance the sum of (i) 911 shares of the Company’s common stock authorized for issuance and (ii) 233 shares of the Company’s common stock, which represents the number of shares that remained available for issuance under the 2017 Plan immediately prior to the approval of the 2020 Plan by the Company’s stockholders. Any shares of common stock which, immediately prior to the approval of the 2020 Plan by the Company’s stockholders, were subject to awards granted under the 2017 Plan that are forfeited or lapse unexercised and are not issued under the 2017 Plan will increase the number of shares of common stock available for grant under the 2020 Plan. In addition, the number of shares available for issuance under the 2020 Plan will increase on the first day of each calendar year, beginning January 1, 2021 and ending on and including January 1, 2030, by a number of shares equal to the lesser of (A) 4% of the aggregate number of shares of the Company’s common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares of common stock as determined by the Board of Directors. The shares available for issuance under the 2020 Plan increased by 1,119 shares and 977 shares on January 1, 2022 and 2021, respectively.

Stock-based awards granted under the 2020 Plan have a term of ten years with the vesting schedule determined by the Board of Directors, which is generally four years.

As of September 30, 2022, there were 739 shares available to be granted under the 2020 Plan.

Restricted stock units

The table below summarizes activity relating to RSUs.

	Number of
	shares
Outstanding as of January 1, 2022	—
Granted	122
Forfeited	(3)
Outstanding as of September 30, 2022	119

In March and May of 2022, the Company granted 97 and 25 time-based RSUs, respectively, to certain employees and consultants. The majority of RSUs granted to employees vest over four years, with 25% vesting at the one-year anniversary of the grant date and the balance vesting ratably over the remaining 12 quarters of the vesting period. The 25 RSUs granted to employees in May 2022 cliff-vest 100% at the one-year anniversary of the grant date. RSUs granted to a third-party consultant vest 50% on each of the first and second anniversaries of the grant date. None of the RSUs had vested as of September 30, 2022. The weighted average grant date fair value per share for the March and May 2022 grants were $15.31 and $10.76, respectively. Unrecognized stock-based compensation expense related to these awards was $1,395 at September 30, 2022. No RSUs were issued and outstanding as of December 31, 2021.

Profit sharing units

Effective July and September of 2022, the Company granted 1,260 and 50, respectively, individual (not in thousands) time-based profit-sharing units (“PSUs”) in OnkosXcel to certain employees and consultants. All PSUs, other than those granted to certain executive employees, vest ratably over 48 months. PSUs granted to certain executive employees, vest ratably over 24 months. The PSUs have a strike price equal to the estimated fair value of the OnkosXcel common units at the date of grant, which was determined by a third-party valuation firm retained by BTI. The fair value of the PSUs was estimated at the date of grant using a Black-Scholes option pricing model.

	Profit share unit valuation inputs
Expected volatility	94.6	%
Risk-free rate of interest	4.0	%
Expected dividend yield	—	%
Expected term	5.8	years

Unrecognized stock-based compensation expense related to these awards was $5,108 at September 30, 2022. No PSUs were issued and outstanding as of December 31, 2021.

Stock options

A summary of the status of the Company’s stock option activity for the nine months ended September 30, 2022 is presented below.

	Number	Weighted average
	of	exercise
	shares	price per share
Outstanding as of January 1, 2022	4,000	$	18.89
Granted	1,204	$	15.10
Forfeited	(206)	$	28.49
Cancelled	(90)	$	52.86
Exercised	(43)	$	5.41
Outstanding as of September 30, 2022	4,865	$	17.04
Options vested and exercisable as of September 30, 2022	3,037	$	12.58

As of September 30, 2022, the intrinsic value of options outstanding was $20,362. The intrinsic value for stock options is calculated based on the difference between the exercise prices of the underlying awards and the quoted stock price of the Company’s common stock as of the reporting date.

The total intrinsic value of stock options exercised for the nine months ended September 30, 2022, and 2021 was $321 and $11,942, respectively. The total intrinsic value of stock options exercisable at September 30, 2022 and 2021 was $20,260 and $61,939, respectively.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2022, and 2021 was $11.87 and $29.25, respectively.

The weighted average grant date fair value of options vested at September 30, 2022 was $9.29.

The weighted average remaining contractual life is 5.9 years for options exercisable as of September 30, 2022. The weighted average remaining contractual life is 7.1 years for options outstanding.

Stock-Based Compensation

The fair value of options granted during the nine months ended September 30, 2022 and 2021 was estimated using the Black-Scholes pricing model with the following assumptions:

	Nine months ended						Nine months ended
		September 30, 2022					September 30, 2021
Expected term		5.5	years	-	6.1	years	5.5	years	-	6.2	years
Expected stock price volatility		92.7	%	-	96.9	%	95.0	%	-	98.0	%
Risk-free rate of interest		1.5	%	-	3.6	%	1.0	%	-	1.2	%
Expected dividend yield		0.0	%	-	0.0	%	0.0	%	-	0.0	%

In 2021, the Company began using a combination of the historical volatility of publicly traded peer companies and the limited historical information related to the Company’s common stock to estimate volatility. The expected term of the employee awards is estimated based on the simplified method, which calculates the expected term based upon the midpoint of the term of the award and the vesting period. The Company uses the simplified method because it does not have sufficient option exercise data to provide a reasonable basis upon which to estimate the expected term. The expected dividend yield is 0% as the Company has no history of paying dividends nor does management expect to pay

dividends over the contractual terms of these options. The risk-free interest rates are determined by reference to the U.S. Treasury yield curve in effect at the time of grant, with maturities approximating the expected term of the stock options. The fair value of the underlying common stock is generally determined as the closing price of the Company’s common stock on the Nasdaq Capital Market on the grant date, with consideration of whether there is material nonpublic information that could impact that estimated fair value when it is released.

The Company recognized stock-based compensation expense related to awards issued under the 2017 Plan and the 2020 Plan, as well as the PSUs in OnkosXcel of $4,483 and $4,885 for the three months ended September 30, 2022, and 2021, respectively, and $12,790 and $17,219, for the nine months ended September 30, 2022 and 2021, respectively, which were comprised as follows:

	Three Months Ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Research and development	$	1,105	$	951	$	3,310	$	5,155
Selling, general and administrative		3,378		3,934		9,480		12,064
Total	$	4,483	$	4,885	$	12,790	$	17,219

Unrecognized compensation expense related to unvested stock option awards as of September 30, 2022 was $18,068 and will be recognized over the remaining vesting periods of the underlying awards. The weighted-average period over which such compensation is expected to be recognized is 1.6 years.

2020 Employee Stock Purchase Plan

The Company’s 2020 Employee Stock Purchase Plan (the “ESPP”) was also approved and became effective at the Company’s 2020 annual meeting of stockholders on May 20, 2020. The ESPP is designed to assist eligible employees of the Company with the opportunity to purchase the Company’s common stock at a discount through accumulated payroll deductions during successive offering periods. The aggregate number of shares that may be issued pursuant to rights granted under the ESPP is 100 shares of common stock. In addition, the number of shares available for issuance under the ESPP will increase on the first day of each calendar year, beginning on January 1, 2021 and ending on and including January 1, 2030, by a number of shares of common stock equal to the lesser of (a) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as determined by the Board of Directors. The number of shares that may be issued or transferred pursuant to rights granted under the component of the ESPP that is intended to qualify for favorable U.S. federal tax treatment under Section 423 of the Internal Revenue Code (the “Section 423 Component”) shall not exceed 500 shares. The purchase price will be determined by the administrator of the ESPP and, for purposes of the Section 423 Component, shall not be less than 85% of the fair value of a share on the first trading day or on the last trading day of the applicable offering period, whichever is lower. The shares available for issuance under the 2020 ESPP increased by 156 shares and 244 shares on January 1, 2022 and 2021, respectively. To date, no shares have been sold under the ESPP.