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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2024
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-Based Compensation | 6. Stock-Based Compensation The Company generally uses the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period, and estimates the fair value of stock-based awards or restricted stock units to employees and directors using the Black-Scholes option-valuation model. The Black-Scholes model requires the input of subjective assumptions, including volatility, the expected term and the fair value of the underlying common stock on the date of grant, among other inputs. For restricted stock and restricted stock unit awards, the Company generally uses the straight-line method to allocate compensation cost to reporting periods over the holder’s requisite service period, which is generally the vesting period, and uses the fair value at grant date to value the awards. For restricted stock that vests upon the satisfaction of certain performance conditions, the Company recognizes stock-based compensation expense when it becomes probable that the performance conditions will be met. At the grant date, the Company determines the grant date fair value, as a publicly traded company, using the intrinsic value, or the closing price of its common stock on the date of grant. At the point where the criteria are deemed probable of being met, the Company records stock-based compensation with a cumulative catch-up expense in the period first recognized and then on a straight-line basis over the remaining period for which the performance criteria are expected to be completed. For the ESPP, the Company generally recognizes compensation expense for the fair value of the purchase options, as measured on the grant date, and uses the graded vesting method to allocate this compensation cost to each purchase period within the related two-year offering period. As the ESPP also allows for up to one increase in contributions during each purchase period, then as an employee elects to increase their contributions, the Company treats this as an accounting modification. The pre- and post-modification values are calculated on the date of the modification, and the incremental expense is then amortized over the remaining purchase periods. 2014 Plan. The Company’s 2014 Equity Incentive Plan (the “2014 Plan”) provides that the compensation committee of the Company’s Board of Directors (the “Compensation Committee”) may grant or issue stock options, stock appreciation rights, restricted shares, restricted stock units and unrestricted shares, deferred share units, performance and cash-settled awards and dividend equivalent rights to participants under the 2014 Plan. Initially, a total of 1,527,770 shares of the Company’s common stock were reserved for issuance pursuant to the 2014 Plan. The 2014 Plan provides that the number of shares available for issuance under the 2014 Plan would, unless otherwise determined by the Company’s Board of Directors or the Compensation Committee, be automatically increased on January 1 of each year commencing on January 1, 2016 and ended on (and including) January 1, 2024, in an amount equal to 3.5% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year. The shares of common stock deliverable pursuant to awards under the 2014 Plan are authorized but unissued shares of the Company’s common stock, or shares of the Company’s common stock that the Company otherwise holds in treasury or in trust. Any shares of the Company’s common stock underlying awards that are settled in cash or otherwise expire, or are forfeited, terminated or cancelled (including pursuant to an exchange program established by the Compensation Committee) prior to the issuance of stock will again be available for issuance under the 2014 Plan. In addition, shares of the Company’s common stock that are withheld (or not issued) in payment of the exercise price or taxes relating to an award, and shares of the Company’s common stock equal to the number surrendered in payment of any exercise price or withholding taxes relating to an award, will again be available for issuance under the 2014 Plan. As of December 31, 2023, ther e were 5,939,750 shares of the Company’s common stock available for issuance and, effective January 1, 2024, an additional 3,503,981 shares of the Company’s common stock were added to the number of shares reserved for issuance under the 2014 Plan in accordance with the terms of the 2014 Plan. As of March 31, 2024, there were 7,955,542 shares of the Company’s common stock available for issuance under the 2014 Plan. ESPP. Initially, a total of 458,331 shares of the Company’s common stock were reserved for issuance pursuant to the ESPP. The ESPP provides that the number of shares available for issuance under the ESPP would, unless otherwise determined by the Company’s Board of Directors or the Compensation Committee, be automatically increased on January 1 of each year commencing on January 1, 2016 and ended on (and including) January 1, 2024, in an amount equal to 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year. The shares of common stock available for purchase pursuant to the ESPP are authorized but unissued shares of the Company’s common stock, shares of the Company’s common stock that the Company otherwise holds in treasury or shares of the Company’s common stock that were purchased on the open market in arms’ length transactions in accordance with applicable securities laws. Shares of the Company’s common stock will be offered for purchase under the ESPP as determined by the Compensation Committee through a series of successive offerings that each have a term of 24 months and consist of four consecutive purchase periods of six months each. Prior to the commencement of any future offering under the ESPP, the Compensation Committee may determine that the current offering shall end, may commence a new offering on the first day after the end of such terminal purchase period (or any desired later date), and may decide that future offerings will consist of one or more consecutive purchase periods, each to be of such duration as determined by the Compensation Committee; however, no offering will exceed 27 months and no purchase period will exceed one year. Each employee of the Company who (1) is an employee on the first date of any offering under the ESPP, (2) is customarily scheduled to work for more than 20 hours per week and more than five months per calendar year, and (3) meets such other criteria as may be determined by the Compensation Committee (consistent with Section 423 of the Internal Revenue Code of 1986, as amended), is eligible to participate in the ESPP for each purchase period within such offering. The purchase price per share of the Company’s common stock under the ESPP may not be less than, and will initially be equal to, the lesser of: (1) 85% of the fair market value per share of the Company’s common stock on the first day of the offering, or (2) 85% of the fair market value per share of the Company’s common stock on the date the purchase right is exercised, which will be the last day of the applicable purchase period. As of December 31, 2023, there were 4,251,444 shares of the Company’s common stock available for issuance and, effective January 1, 2024, an additional 1,001,137 shares of the Company’s common stock were added to the number of shares reserved for issuance under the ESPP in accordance with the terms of the ESPP. As of March 31, 2024, there were 5,252,581 shares of the Company’s common stock available for issuance under the ESPP. During the three months ended March 31, 2024 and 2023, the Company recognized the following stock-based compensation expense (in thousands):
|  | For the Three Months Ended March 31, |  |
|  | 2024 |  |  | 2023 |  |
Stock-based compensation expense by type of award: |  |  |  |  |  |  |
Stock options |  | $ | 2,429 |  |  | $ | 1,367 |  |
Restricted stock and restricted stock units |  |  | 5,056 |  |  |  | 2,080 |  |
Employee stock purchase plan |  |  | 496 |  |  |  | 122 |  |
Total stock-based compensation expense included in expenses |  | $ | 7,981 |  |  | $ | 3,569 |  |
Stock-based compensation expense by line item: |  |  |  |  |  |  |
Research and development expenses |  | $ | 2,153 |  |  | $ | 928 |  |
General and administrative expenses |  |  | 5,828 |  |  |  | 2,641 |  |
Total stock-based compensation expense included in expenses |  | $ | 7,981 |  |  | $ | 3,569 |  |
The following table sets forth the Company’s unrecognized stock-based compensation expense by type of award and the weighted-average period over which that expense is expected to be recognized (in thousands, except for years):
|  | As of March 31, 2024 |
|  | Unrecognized Expense, Net of Estimated Forfeitures |  |  | Weighted- average Recognition Period (in years) |
Type of award: |  |  |  |  |  |
Stock options |  | $ | 21,429 |  |  |  | 3.00 |
Restricted stock and restricted stock units |  | $ | 26,018 |  |  |  | 1.89 |
The following table is a summary of restricted stock activity during the three months ended March 31, 2024:
|  | Shares of Restricted Stock |  |  | Weighted- Average Grant Date Fair Value |
Unvested at December 31, 2023 |  |  | 183,095 |  |  | $ | 0.17 |
Granted |  |  | — |  |  | $ | — |
Vested |  |  | — |  |  | $ | — |
Forfeited |  |  | — |  |  | $ | — |
Repurchased |  |  | — |  |  | $ | — |
Unvested at March 31, 2024 |  |  | 183,095 |  |  | $ | 0.17 |
The following table summarizes restricted stock unit activity during the three months ended March 31, 2024:
|  | Shares Subject to Restricted Stock Units |  |  | Weighted- Average Grant Date Value |
Unvested at December 31, 2023 |  |  | 2,855,656 |  |  | $ | 7.32 |
Granted |  |  | 1,310,533 |  |  | $ | 17.40 |
Vested |  |  | (1,259,168 | ) |  | $ | 7.27 |
Forfeited |  |  | — |  |  | $ | — |
Cancelled |  |  | (77,834 | ) |  | $ | 7.77 |
Unvested at March 31, 2024 |  |  | 2,829,187 |  |  | $ | 12.00 |
The Company issues performance-based restricted stock units (“PRSU awards”). These awards are issued to certain of its employees and the shares subject to these PRSU awards will vest upon the Company achieving certain milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the applicable grant date. At the grant date, the Company determines the grant date fair value, as a publicly traded company, using the intrinsic value, or the closing price of the Company’s common stock on the date of grant. At the point where the criteria are deemed probable of being met, the Company records stock-based compensation with a cumulative catch-up expense in the period first recognized and then on a straight-line basis over the remaining period for which the performance criteria are expected to be completed. In January 2020, the Company issued 244,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity. The shares subject to these PRSU awards vested upon the Company achieving certain milestones, with 100% of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant date. As of January 4, 2024, the date of cancellation, 77,834 PRSU awards were cancelled, 10,500 PRSU awards had been forfeited, and two of the milestones had been met, resulting in the Company recording cumulative stock-based compensation expense of $1.2 million. In January 2021, the Company issued 205,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant date. As of March 31, 2024, 10,000 PRSU awards had been forfeited, one of the four milestones had been met and one of the four milestones were deemed probable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $700,000 through March 31, 2024 and stock-based compensation expense of $(263,000) during the three months ended March 31, 2024. In January 2022, the Company issued 657,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant date. As of March 31, 2024, no PRSU awards had been forfeite d, three of the four milestones had been met and the remaining one was deemed improbable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $3.2 million through March 31, 2024 and stock-based compensation expense of $(709,000) during the three months ended March 31, 2024. In January 2023, the Company issued 920,000 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant date. As of March 31, 2024, no PRSU awards had been forfeited, two of the four milestones had been met and the remaining two were deemed probable of achievement, resulting in the Company recording cumulative stock-based compensation expense of $7.1 million through March 31, 2024 and stock-based compensation expense of $2.1 million during the three months ended March 31, 2024. In January 2024, the Company issued 677,500 PRSU awards to several of its employees, which are reflected in the above table summarizing restricted stock unit activity. The shares subject to these PRSU awards shall vest upon the Company achieving certain milestones, with 100% of the shares subject to the PRSU awards vesting upon the achievement of three of the milestones over a four-year period and 133.3% of the shares subject to the PRSU awards vesting upon the achievement of all four milestones over a four-year period, with any then-unvested portion of the PRSU awards to be cancelled on the four-year anniversary of the grant date. As of March 31, 2024, no PRSU awards had been forfeited and all of the milestones were deemed probable of achievement, resulting in the Company recording stock-based compensation expense of $2.8 million during the three months ended March 31, 2024. The following table summarizes stock option activity during the three months ended March 31, 2024:
|  | Shares Subject to Stock Options |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value |
Options outstanding at December 31, 2023 |  |  | 5,248,682 |  |  | $ | 6.79 |  |  |  | 7.10 |  |  |  | 62,210,000 |
Granted |  |  | 1,089,200 |  |  | $ | 18.42 |  |  |  |  |  |  |
Exercised |  |  | (821,689 | ) |  | $ | 5.31 |  |  |  |  |  |  |
Forfeited |  |  | — |  |  | $ | — |  |  |  |  |  |  |
Cancelled |  |  | — |  |  | $ | — |  |  |  |  |  |  |
Options outstanding at March 31, 2024 |  |  | 5,516,193 |  |  | $ | 9.31 |  |  |  | 7.72 |  |  |  | 400,998,000 |
Options exercisable at March 31, 2024 |  |  | 2,634,610 |  |  | $ | 6.75 |  |  |  | 6.46 |  |  |  | 198,264,000 |
The Company receiv ed $4.4 million and $4.0 million in cash proceeds from exercises of stock options during the three months ended March 31, 2024 and 2023, respectively. Compensation cost for stock options granted to employees is based on the estimated grant date fair value and is recognized ratably over the vesting period of the applicable option. The estimated per share weighted average fair value of stock options granted to employees during the three months ended March 31, 202 4 was $13.44. As stock-based compensation expense recognized is based on options ultimately expected to vest, the fair value of each employee option grant during the three months ended March 31, 2024 was estimated on the date of grant using the Black-Scholes model with the following weighted average assumptions:
|  | Three Months Ended March 31, 2024 |  |
Expected volatility |  |  | 82.9 |  | %
Expected term (in years) |  |  | 6.13 |  |
Risk-free interest rate |  |  | 3.88 |  | %
Expected dividend yield |  | 0 |  | %
Expected Volatility. Given the length of time the Company’s common stock has been publicly traded, the expected volatility rate used to value stock option grants is based on the volatility of the Company’s historical share prices. Expected Term. The Company elected to utilize the “simplified” method for “plain vanilla” options to value stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. Risk-free Interest Rate. The risk-free interest rate assumption was based on zero-coupon U.S. Treasury instruments that had terms consistent with the expected term of the Company’s stock option grants. Expected Dividend Yield. The Company has never declared or paid any cash dividends and does not presently plan to pay cash dividends in the foreseeable future. Forfeitures are accounted for as actual forfeitures occur. Since the Company had a net operating loss carryforward as of March 31, 2024, no excess tax benefits for the tax deductions related to stock-based awards were recognized in the consolidated statements of operations and comprehensive loss.

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