Convertible Preferred Stock and Stockholders' Equity (Deficit)

6 Months Ended

Jun. 30, 2022

Stockholders' Equity Note [Abstract]

Convertible Preferred Stock and Stockholders' Equity (Deficit)

9. Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Convertible Preferred Stock

Prior to its conversion into common stock in connection with the Company’s IPO in August 2021, the Company’s convertible preferred stock was classified as temporary equity on the Company’s balance sheets in accordance with authoritative guidance. Convertible preferred stock authorized and issued and its principal terms as of June 30, 2021 consisted of the following ($ amounts in thousands):

	Shares Authorized and Outstanding		Shares Issued and Outstanding		Shares of Common Stock Issuable upon Conversion		Aggregate Liquidation Preference		Carrying Value
Series A-1		49,193,959		49,193,959		11,837,711	$	47,300	$	46,916
Series A-2		4,949,794		4,949,794		1,191,082	$	3,807	$	4,150
Series B-1		32,958,612		32,958,612		7,930,924	$	93,000	$	92,630
Series B-2		2,805,850		2,805,850		675,181	$	6,730	$	7,917
Total		89,908,215		89,908,215		21,634,898	$	150,837	$	151,613

In February 2021, the Company triggered a milestone closing associated with its Series A-1 convertible preferred stock resulting in the issuance of 21,944,874 shares.

In March 2021, before the Company effected a 1-for-4.1557 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s convertible preferred stock in July 2021, the Company entered into a convertible preferred stock purchase agreement for the issuance of 35,764,462 shares of Series B convertible preferred stock, $0.0001 par value per share, of which 32,958,612 shares of Series B-1 and 2,805,850 shares of Series B-2 were issued. The Series B convertible preferred stock financing resulted in net cash proceeds of $92.7 million, net of $0.35 million in issuance costs from the sale of 32,958,612 shares of Series B-1 convertible preferred stock at a price of $2.82172 per share. In addition, the Convertible Promissory Note of $6.5 million that the Company issued in August 2020, including accrued interest as of the date of conversion of $0.2 million, was converted into 2,805,850 shares of Series B-2 convertible preferred stock on March 19, 2021 at 85% of the offering’s share price.

In connection with the Company’s IPO in August 2021, all outstanding shares of the convertible preferred stock converted into 21,634,898 shares of common stock and the related carrying value was reclassified to common stock and additional paid-in capital. There were no shares of convertible preferred stock outstanding as of the closing of the IPO.

In addition, on August 2, 2021, the Company amended and restated its certificate of incorporation to authorize 500,000,000 shares of common stock and 50,000,000 shares of preferred stock, which shares of preferred stock are currently undesignated. The Company does not have any outstanding preferred stock as of June 30, 2022.

Common Stock

As of June 30, 2022 and December 31, 2021, of the Company's 500,000,000 authorized shares of common stock, 39,778,530 and 39,429,103 shares were issued, respectively. As of June 30, 2022 and December 31, 2021, shares outstanding, which excludes common stock issued from the early exercise of unvested stock options, were 39,630,397 and 39,175,279, respectively.

Equity Incentive Plans

In 2017, the Company established an equity incentive plan (the “2017 Plan”) under which incentives may be granted to officers, employees, directors, consultants and advisors. Awards under the 2017 Plan consisted of restricted stock and incentive and non-qualified stock options to purchase shares of common stock of the Company.

During 2021, the Company’s stockholders approved the 2021 Incentive Plan (the “2021 Plan”), which became effective in July 2021. The 2021 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, dividend equivalents, restricted stock units ("RSUs") and other stock or cash-based awards. The number of shares of the Company’s common stock initially reserved for issuance under the 2021 Plan is 4,600,000 shares; plus the shares of common stock remaining available for issuance under the 2017 Plan as of the effective date of the 2021 Plan, as well as any shares subject to outstanding awards under the 2017 Plan as of the effective date of the 2021 Plan that become available for issuance under the 2021 Plan thereafter in accordance with its terms. The number of shares initially available for issuance increases annually on January 1 of each calendar year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 5% of the shares outstanding on the final day of the immediately preceding calendar year and (B) a smaller number of shares as determined by our board of directors. The reserve for the 2021 Plan increased by 5%, or 1,971,455 shares, effective January 1, 2022. No more than 50,000,000 shares of common stock may be issued under the 2021 Plan upon the exercise of incentive stock options.

The 2021 Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. All option and service-based RSU awards are subject to a time-based vesting period which will generally be four years. Performance-based RSU awards are subject to vesting conditions based on the achievement of specified milestones related to development of vaccine candidates. Certain option and RSU awards provide for accelerated vesting if there is a change in control or if other contractually specified contingencies are met.

The term of stock options granted under the 2021 Plan cannot exceed ten years (or five years in the case of incentive stock options granted to certain significant stockholders). Options shall not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date (or 110% in the case of incentive stock options granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction.

Common stock reserved for future issuance consisted of the following:

	As of June 30,
	2022
Common stock options and restricted stock units granted and outstanding		8,820,390
Shares available for issuance under the equity incentive plans		3,195,652
Shares available for issuance under the 2021 Employee Stock Purchase Plan		740,900
Total common stock reserved for issuance		12,756,942

A summary of the status of the options issued under the Company’s equity incentive plans as of June 30, 2022, and information with respect to the changes in options outstanding is as follows:

	Options Outstanding			Weighted Average Exercise  Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2021		6,591,727		$	8.04		9.26
Granted		1,639,487			15.32
Exercised (including early)		(297,726	)		0.97			$	4,298
Forfeited		(135,967	)		13.01
Balance at June 30, 2022		7,797,521		$	9.76		8.37	$	6,333
Vested and expected to vest as of    June 30, 2022		7,797,521		$	9.76		8.37	$	6,333
Vested and exercisable at    June 30, 2022		2,019,466		$	6.12		6.40	$	1,945

Exercisable options in the table above reflect the number of options vested as of the date reported. The 2021 Plan permits early exercises of options. Cash received for early exercise of unvested options is recognized as an other noncurrent liability in the accompanying balance sheet and totaled $0.1 million at June 30, 2022.

The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the fair value of the Company’s common stock for all options that were in-the-money as of June 30, 2022.

The grant date fair value of options granted during the six months ended June 30, 2022 was $18.8 million. The weighted-average grant date fair value of option grants during the six months ended June 30, 2022 was $11.48 per share.

A summary of the status of RSUs issued under the Company’s equity incentive plans as of June 30, 2022, and information with respect to the changes in RSUs outstanding is as follows:

	Service-based RSUs					Performance-based RSUs
	Units			Weighted Average Grant-Date Fair Value		Units			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2021		388,500		$	25.96		—		$	—
Granted		615,419		$	16.18		60,000		$	18.74
Vested		(2,916	)	$	24.85		(12,000	)	$	18.74
Forfeited		(26,134	)	$	14.78		—		$	—
Nonvested at June 30, 2022		974,869		$	20.09		48,000		$	18.74
Expected to vest at June 30, 2022		974,869		$	20.09		—		$	—

Employee Stock Purchase Plan

During 2021, the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective in July 2021. The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP. The price of common stock purchased under the ESPP is equal to 85% of the lower of the fair market value of the common stock at the commencement date of each offering period or the relevant date of purchase. The number of shares of common stock initially reserved for issuance under the ESPP is 400,000 shares. The number of shares of common stock reserved for issuance under the ESPP increased on January 1, 2022 and each January 1 thereafter through January 1, 2031, in an amount equal to the lower of (1) 1% of the aggregate number of shares of common stock of the Company outstanding on the final day of the immediately preceding calendar year and (2) such smaller number of shares of common stock as determined by the Board, provided that no more than 15,000,000 shares of our common stock may be issued under the ESPP. The reserve for the ESPP increased by 1% or 394,291 shares, on January 1, 2022. As of June 30, 2022, 53,391 shares have been purchased by employees under the ESPP. Stock-based compensation expense related to the ESPP for the three and six months ended June 30, 2022 was $0.1 million and $0.2 million, respectively, and was $0 for the three and six months ended June 30, 2021.

Stock-Based Compensation Expense

Stock-based compensation expense for all equity awards and the ESPP has been reported in the condensed statements of operations and comprehensive loss as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Research and development	$	2,178	$	427	$	3,865	$	540
General and administrative		3,374		981		6,237		1,144
Total	$	5,552	$	1,408	$	10,102	$	1,684

The Company recognizes compensation expense for options and RSU awards granted to employees and the board of directors based on their grant date fair value. The compensation expense is recognized over the vesting period of 4 years on a straight-line basis.

The fair value of each stock option granted was determined using the Black-Scholes option pricing model. The assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee and nonemployee stock option grants issued during the six months ended June 30, 2022 and 2021 were as follows:

	Six Months Ended June 30,
	2022	2021
Risk-free rate of interest	1.43%-3.36%	0.53%-1.23%
Expected term (years)	5.27 - 6.08 years	5.48 - 6.49 years
Expected stock price volatility	89.3% - 118.1%	86.0% - 88.4%
Dividend yield	0%	0%

As of June 30, 2022, the unrecognized compensation cost related to outstanding stock options and RSU awards was $49.4 million and $16.5 million, respectively, and is expected to be recognized as expense over a weighted-average period of approximately 3.13 years.