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Stockholders' Equity | 6 Months Ended
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Jun. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Stockholders' Equity | 8. Stockholders’ Equity Common Stock 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 June 30, 2023, no shares of common stock were subject to repurchase by the Company and there is no associated repurchase liability. 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. In November 2019, the Company repurchased 17,560 shares at the original purchase price for an aggregate purchase price of $5.20. As of June 30, 2023, no shares remain available for repurchase by the Company. On October 29, 2019, upon completion of the IPO, the Company sold 10,997,630 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 1,434,473 additional shares at a public offering price of $19.00 per share. The net proceeds were approximately $191.5 million, after deducting underwriting discounts, commissions and offering costs. In November 2020, the Company entered into the Sales Agreement, pursuant to which, the Company will pay the Sales Agent a commission for its services in acting as an agent in the sale of common stock in an amount equal to 3% of the gross sales price per share sold. In September 2022, the Company sold 2,414,897 shares for net proceeds of approximately $24.6 million under the ATM Offering after deducting $0.8 million of issuance costs. In February 2023, the Company sold 1,514,219 shares for net proceeds of approximately $14.1 million under the ATM Offering after deducting $0.4 million of issuance costs. As of June 30, 2023, the Company has utilized $39.9 million of the available $125.0 million under the ATM Offering. On December 16, 2020, the Company completed an underwritten public offering, in which it sold 2,250,000 shares of its common stock at a price of $42.00 per share for total gross proceeds of $94.5 million. The net purchase price after deducting underwriting discounts and commissions was $39.48 per share, which generated net proceeds of $88.8 million. The Company incurred an additional $0.2 million of offering expenses in connection with this public offering. On May 23, 2023, the Company completed an underwritten public offering, in which it sold 12,793,750 shares of its common stock, which included the exercise in full by the underwriters of their option to purchase 1,668,750 shares, at a price of $11.75 per share for total gross proceeds of $150.3 million. The net purchase price after deducting underwriting discounts and commissions was $11.08 per share, which generated net proceeds of $141.8 million. The Company incurred an additional $0.4 million of offering expenses in connection with this public offering. A summary of the Company’s unvested shares is as follows:
Balance at December 31, 2022 |  |  | 254,437 |
Share vesting |  |  | (254,437 | )
Balance at June 30, 2023 |  |  | — |
For accounting purposes, unvested awards are considered issued, but not outstanding until they vest. Common stock reserved for future issuance consists of the following:
|  | June 30, 2023 |
Common stock warrants |  |  | 91,228 |
Stock options and performance-based awards outstanding |  |  | 8,965,607 |
Shares available for issuance under the 2019 Incentive Plan |  |  | 520,803 |
Shares available for issuance under the ESPP Plan |  |  | 1,048,370 |
Balance at June 30, 2023 |  |  | 10,626,008 |
Preferred Stock The Company is authorized to issue up to 40 million shares of preferred stock. As of June 30, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding. Equity Incentive Plan The Company’s 2019 Equity Incentive Plan, or 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. The Company had 2,231,739 shares of common stock authorized for issuance under the Existing Incentive Plan, of which, 1,400,528 stock options and 16,260 restricted stock awards were granted. As a result of the adoption of the 2019 Incentive Award Plan, or the 2019 Plan, in October 2019, no further shares are available for issuance under the Existing Incentive Plan. 2019 Incentive Award Plan In October 2019, the board of directors adopted, and the Company’s stockholders approved, the 2019 Plan, which became effective in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then employees, officers, non-employee directors or consultants of the Company or its subsidiaries. The number of shares initially available for issuance will be increased by (i) the number of shares subject to stock options or similar awards granted under the Existing Incentive Plan that expire or otherwise terminate without having been exercised in full after the effective date of the 2019 Plan and unvested shares issued pursuant to awards granted under the Existing Incentive Plan that are forfeited to or repurchased by the Company after the effective date of the 2019 Plan, with the maximum number of shares to be added to the 2019 Plan pursuant to clause (i) above equal to 1,416,788 shares, and (ii) an annual increase on January 1 of each calendar year beginning in 2020 and ending in 2029, equal to the lesser of (a) 5% of the shares of common stock 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. As of June 30, 2023, 520,803 shares remain available for issuance, which reflects 2,559,070 of stock option, performance-based unit, or PSU, and restricted stock unit, or RSU, awards granted, and 35,823 of awards cancelled or forfeited, during the six months ended June 30, 2023 as well as an annual increase of 2,086,165 shares authorized on January 1, 2023. Performance-based Units During 2020, the Company granted the initial PSUs whereby vesting depends upon the approval by the FDA of vonoprazan for H. pylori and then, or concurrent with, Erosive GERD. In 2022, the Company granted an additional 37,500 PSUs to employees. In 2023, the Company granted an additional 597,650 PSUs to employees. As of June 30, 2023, the PSU milestones had not been achieved and no related compensation cost had been recognized. The following table summarizes PSU activity under the 2019 Incentive Award Plan during the six months ended June 30, 2023.
|  | Number of Stock Units |  |  | Weighted- Average Grant Date Fair Value Per Share |
Unvested balance at December 31, 2022 |  |  | 412,300 |  |  | $ | 30.97 |
Granted |  |  | 597,650 |  |  |  | 10.89 |
Vested |  |  | — |  |  |  | — |
Forfeited |  |  | — |  |  |  | — |
Unvested balance at June 30, 2023 |  |  | 1,009,950 |  |  | $ | 19.09 |
As of June 30, 2023, there was approximately $19.3 million of related unrecognized stock-based compensation expense, which will begin to be recognized upon vesting. Restricted Stock Units The following table summarizes RSU activity under the 2019 Incentive Award Plan during the six months ended June 30, 2023.
|  | Number of Stock Units |  |  | Weighted- Average Grant Date Fair Value Per Share |
Unvested balance at December 31, 2022 |  |  | 877,467 |  |  | $ | 11.03 |
Granted |  |  | 812,760 |  |  |  | 8.62 |
Vested |  |  | (418,877 | ) |  |  | 10.04 |
Forfeited |  |  | (2,817 | ) |  |  | 10.26 |
Unvested balance at June 30, 2023 |  |  | 1,268,533 |  |  | $ | 9.82 |
As of June 30, 2023, the Company had $10.3 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.1 years. Employee Stock Purchase Plan In October 2019, the board of directors adopted, and the Company’s stockholders approved, the Employee Stock Purchase Plan, or the ESPP, which became effective in connection with the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation, which includes a participant’s gross base compensation for services to the Company, including overtime payments and excluding sales commissions, incentive compensation, bonuses, expense reimbursements, fringe benefits and other special payments. A total of 270,000 shares of common stock were initially reserved for issuance under the ESPP. In addition, the number of shares available for issuance under the ESPP will be annually increased on January 1 of each calendar year beginning in 2020 and ending in 2029, by an amount equal to the lesser of: (i) 1% of the shares outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the board of directors. As of June 30, 2023, 1,048,370 shares of common stock remain available for issuance, which includes the 121,801 shares sold to employees during the six months ended June 30, 2023 as well as an annual increase of 417,233 shares authorized on January 1, 2023. The ESPP is considered a compensatory plan, and for the three and six month period ended June 30, 2023 the Company recorded related stock-based compensation of $0.2 million and $0.3 million respectively, compared to $0.1 million and $0.1 million respectively, for the same periods in 2022. The weighted-average assumptions used to estimate the fair value of ESPP awards using the Black-Scholes option valuation model were as follows:
|  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |
Assumptions: |  |  |  |  |  |
Expected term (in years) |  |  | 0.49 |  |  |  | 0.49 |
Expected volatility |  |  | 69.10 | % |  |  | 72.41 | %
Risk free interest rate |  |  | 4.77 | % |  |  | 0.37 | %
Dividend yield |  |  | — |  |  |  | — |
The estimated weighted-average fair value of ESPP awards for the six months ended June 30, 2023 and 2022, were $2.87 and $5.31, respectively. As of June 30, 2023, the total unrecognized compensation expense related to the ESPP was less than $0.1 million, which is expected to be recognized over a weighted-average period of approximately 0.1 years. 401(k) Plan The Company established a 401(k) savings plan during the year ended December 31, 2020. The Company’s contributions to the plan are discretionary. During the three and six months ended June 30, 2023, the Company incurred $0.4 million and $1.2 million, respectively, of expense related to estimated employer contribution liabilities, which was based on a 75% match of employees’ contributions during the periods, compared to $0.3 million and $0.9 million, respectively, for the same periods in 2022. In August 2021, the Board of Directors approved a semi-annual discretionary match for 2021, which was settled by contributing 18,394 shares. In January 2022, the Board of Directors approved a second semi-annual discretionary match for 2021, which was settled by contributing 16,756 shares. In July 2022, the Board of Directors approved a semi-annual match for 2022, which was settled by contributing 84,784 shares. In January 2023, the Board of Directors approved a semi-annual match for 2022, which was settled by contribution 52,130 shares. In July 2023, the Board of Directors approved a semi-annual match for 2023, which was settled by contributing 83,826 shares. Stock Options 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, was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimated 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 was determined utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees was equal to the contractual term of the option award. The risk-free interest rate was 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 was 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, 2022 |  |  | 5,586,470 |  |  | $ | 23.40 |  |  |  | 7.90 |  |  | $ | 4,476 |
Options granted |  |  | 1,148,660 |  |  |  | 8.68 |  |  |  |  |  |  |
Options exercised |  |  | (15,000 | ) |  |  | 7.40 |  |  |  |  |  |  |
Options cancelled |  |  | (33,006 | ) |  |  | 34.28 |  |  |  |  |  |  |
Balance at June 30, 2023 |  |  | 6,687,124 |  |  | $ | 20.85 |  |  |  | 7.79 |  |  | $ | 14,936 |
Options exercisable as of June 30, 2023 |  |  | 3,441,791 |  |  |  | 23.53 |  |  |  | 7.06 |  |  |  | 6,680 |
The estimated weighted-average fair value of employee and nonemployee director stock options granted during 2023 was $5.31 per option. As of June 30, 2023, the Company had $33.2 million of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 1.9 years. The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model were as follows:
|  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |
Assumptions: |  |  |  |  |  |
Expected term (in years) |  |  | 6.03 |  |  |  | 6.05 |
Expected volatility |  |  | 64.02 | % |  |  | 66.04 | %
Risk free interest rate |  |  | 3.48 | % |  |  | 1.89 | %
Dividend yield |  |  | — |  |  |  | — |
Stock-Based Compensation Expense Stock-based compensation expense recognized for all equity awards, including founder stock, has been reported in the statements of operations and comprehensive loss as follows (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Research and development expense |  | $ | 1,803 |  |  | $ | 1,319 |  |  | $ | 3,580 |  |  | $ | 2,458 |
General and administrative expense |  |  | 5,450 |  |  |  | 4,566 |  |  |  | 10,721 |  |  |  | 9,202 |
Total |  | $ | 7,253 |  |  | $ | 5,885 |  |  | $ | 14,301 |  |  | $ | 11,660 |

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