In March 2019, subsequent to the Merger, the Company sold 1,491,072 shares of the Company’s common stock to Frazier.

In March 2019, the founders granted the Company a repurchase right for the 3,373,408 shares of common stock originally purchased in 2018. The Company has the right, but not the obligation, to repurchase unvested shares in the event the founder’s relationship with the Company is terminated, subject to certain limitations, at the original purchase price of the stock. The repurchase right lapsed for 843,352 shares in March 2019 and the repurchase right for the remaining 2,530,056 shares lapses in equal monthly amounts over the following 48-month period ending in March 2023. The fair value of the founder shares at the date the repurchase right was granted is being recognized as stock-based compensation expense on a straight-line basis over the vesting period. As of September 30, 2019, 2,213,808 shares of common stock were subject to repurchase by the Company and the associated repurchase liability was not significant. The amount of recognized and unrecognized stock-based compensation related to the founder stock was immaterial for all periods presented.

In May 2019, the Company issued Takeda 1,084,000 shares of common stock in connection with the Takeda License.

For the period from January 1, 2019 to May 6, 2019, the Company issued 2,524,852 shares of common stock to various employees and consultants of the Company for aggregate proceeds of approximately $1,000. Upon issuance, these shares were subject to a repurchase option by the Company at the original purchase price of the shares. The repurchase rights generally lapse as to 25% of the shares on the first anniversary of the vesting commencement date, and the repurchase right lapses as to 1/48th of the shares each one-month period thereafter, subject to the purchaser remaining continuously an employee, consultant or director of the Company.

On October 29, 2019, the Company completed its IPO and issued 10,997,630 shares of common stock for net proceeds of approximately $191.4 million.

The Company’s 2019 Equity Incentive Plan (the “Existing Incentive Plan”) provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, and other stock awards to eligible recipients, including employees, directors or consultants of the Company. As of September 30, 2019, the Company had 2,231,739 shares of common stock authorized for issuance under the Existing Incentive Plan, of which 814,951 shares remained available for grant. In May 2019, the Company issued 16,260 shares of common stock under a restricted stock award, of which 6,775 were unvested as of September 30, 2019. For the nine months ended September 30, 2019, 1,400,258 stock options and 16,260 restricted stock awards were granted under the Existing Incentive Plan.

Balance at January 1, 2019	—
Vesting restrictions placed on previously issued shares	3,373,408
Sale of unvested common stock	2,524,852
Issuance of unvested restricted stock awards	16,260
Share vesting	(1,458,985	)
Balance at September 30, 2019	4,455,535

For accounting purposes, unvested shares of common stock are considered issued, but not outstanding until they vest.

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company, prior to the IPO on October 29, 2019, is a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. 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 zero 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.

A summary of the Company’s stock option activity and related information is as follows:

	Options Outstanding		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2018		—
Options granted		1,400,528	$	9.10		—		—
Options exercised and shares vested		—		—		—		—
Options cancelled		—		—		—		—
Balance at September 30, 2019		1,400,528	$	9.10		9.94	$	5,575
Options exercisable as of September 30, 2019		—		—		—		—

The estimated weighted-average fair value of employee and nonemployee director stock options granted during 2019 was $5.12. As of September 30, 2019, the Company had $3.8M of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 3.72 years.

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model and the resulting weighted average fair value of stock options granted were as follows:

	Nine Months Ended September 30,
	2019			2018
Assumptions:
Expected term (in years)		6.07			—
Expected volatility		60.17	%		—
Risk free interest rate		1.58	%		—
Dividend yield		—			—

Stock-based compensation expense recognized for all equity awards, including founder stock, has been reported in the combined statements of operations as follows (in thousands):

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Research and development expense	$	8	$	8
General and administrative expense		29		58
Total	$	37	$	66

For the three and nine months ended September 30, 2019, the vested fair value of the restricted stock awards was $37,000 and $66,000, respectively. There was no stock-based compensation expense for the nine months ended September 30, 2018.