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Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

9. Stock-Based Compensation

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


	Years Ended December 31,
	2021		2020
Research and development expense	$	8,331	$	1,180
General and administrative expense		10,856		1,460
Total stock-based compensation expense	$	19,187	$	2,640

As of December 31, 2021, the total unrecognized stock-based compensation expense was $50.5 million, which is expected to be recognized over a remaining weighted-average period of approximately 2.49 years.

Stock Option Awards

As of December 31, 2021, the Company’s equity incentive plans authorized a total of 9,564,798 shares, of which 2,931,012 shares are available for future grant, and 6,370,873 shares are outstanding. Not included in the outstanding option balance are 26,283 shares pursuant to stock options that were early exercised and subject to repurchase that remain unvested as of December 31, 2021.

Stock options granted under the Company’s equity incentive plans expire no later than 10 years from the date of grant and generally vest over a four year period, with vesting either occurring at a rate of 25% at the end of the first and thereafter in 36 equal monthly installments or on a monthly basis. In the case of awards granted to our non-employee board members, vesting generally occurs on a monthly basis over three years or in full on an annual basis. The Company issues new shares of common stock upon the exercise of stock options.

A summary of the Company’s stock option activity for the year ended December 31, 2021 is as follows (in thousands, except share and per share data and years):


	Stock Options Outstanding
	Shares Subject to Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Balance at December 31, 2020		6,316,569		$	10.93
Granted		511,773
Exercised		(261,567	)
Cancelled		(195,902	)
Balance at December 31, 2021		6,370,873			12.82		8.58		11,385,117
Vested at December 31, 2021		1,974,776		$	9.60		8.14	$	4,887,808

The aggregate intrinsic value in the table above is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the Company’s common stock for all options that were in-the-money at December 31, 2021. The aggregate intrinsic value of options exercised during the years ended December 31, 2021 and 2020 was $7.7 million and $0.1 million, respectively.

The weighted-average grant date fair value per share of option grants for the years ended December 31, 2021 and 2020 was $22.15 and $10.50, respectively. The total fair value of shares vested during the years ended December 31, 2021 and 2020 was $17.0 million and $1.1 million, respectively.

The grant date fair value of stock options was estimated using a Black-Scholes option pricing model with the following weighted-average assumptions:


	Years Ended December 31,
	2021			2020
Expected term (in years)		6.0			6.0
Expected volatility		79	%		80	%
Risk-free interest rate		0.98	%		0.51	%
Expected dividend yield		—			—

The fair value of stock options was determined using the Black-Scholes option-pricing model and the assumptions below. Each of these inputs is subjective and generally requires significant judgement.


			Fair Value of Common Stock. Prior to the Company's initial public offering in 2020, the grant date fair market value of the shares of common stock underlying stock options was determined by the Company’s board of directors. Following the closing of the Company’s IPO, the fair market value of the Company's common stock is based on its closing price as reported on the date of grant on the primary stock exchange on which the Company’s common stock is traded. Prior to the Company’s IPO, because there was no public market for the Company’s common stock, the board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair market value, which included contemporaneous valuations performed by an independent third-party, the Company’s results of operations and financial position, including its levels of available capital resources, its stage of development and material risks related to the Company’s business, progress of the Company’s research and development activities, the Company’s business conditions and projections, the lack of marketability of the Company’s common stock and preferred stock as a private company, the prices at which the Company sold shares of its redeemable convertible preferred stock to outside investors in arms-length transactions, the rights, preferences and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock, the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry, the likelihood of achieving a liquidity event for the Company’s securityholders, such as an IPO or a sale of the company, given prevailing market conditions, the hiring of key personnel and the experience of management, trends and developments in the Company’s industry and external market conditions affecting the life sciences and biotechnology industry sectors.


			Expected Term. The expected term represents the period that the options granted are expected to be outstanding. The expected term of stock options issued is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as the Company has concluded that its stock option exercise history does not provide a reasonable basis upon which to estimate expected term.


			Expected Volatility. Given the Company’s limited historical stock price volatility data, the Company derived the expected volatility from the average historical volatilities over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Company has limited trading history for its common stock. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.


			Risk-free Interest Rate. The risk-free interest rate is based on the U.S. Treasury rate, with maturities similar to the expected term of the stock options.


			Expected Dividend Yield. The Company has never paid dividends on its common stock and does not anticipate paying any dividends in the foreseeable future. Therefore, the Company uses an expected dividend yield of zero.

Employee Stock Purchase Plan

In November 2020, the Company’s board of directors and stockholders approved and adopted the 2020 ESPP. 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.

As of December 31, 2021, a total of 698,015 shares were reserved under the ESPP, of which 627,185 shares are available for future issuance and 70,830 shares have been issued. The weighted average per share fair value rights granted during the year ended December 31, 2021 was $15.95.

In determining the grant date fair value of shares to be issued under the ESPP, the Company uses the Black-Scholes option pricing model. The Black-Scholes inputs are determined in the same manner as for stock option awards. The weighted average inputs used for the ESPP for the year ended December 31, 2021, were as follows:


	Years Ended December 31,
	2021			2020
Expected term (in years)		1.2			1.2
Expected volatility		81	%		82	%
Risk-free interest rate		0.14	%		0.11	%
Expected dividend yield		—			—