Stock-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

The Company incurs stock-based compensation expense related to restricted stock units ("RSUs") and stock options. The fair value of restricted stock is determined by the closing price of the Company's common stock reported on the Nasdaq Global Select Market on the date of grant. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of subjective assumptions, including the expected stock price volatility and expected option life. The Company amortizes the fair value of the awards on a straight-line basis over the requisite vesting period of the awards. Expected volatility is based on historical volatility. The expected life of options granted is based on historical expected life. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The dividend yield is based on the fact that no dividends have been paid historically and none are currently expected to be paid in the foreseeable future. The Company recognizes forfeitures as they occur.

The weighted average assumptions used in the Black-Scholes model for option grants to employees and directors are presented below:


	Three Months Ended March 31,
	2022	2021
Risk-free interest rate	1.88%	0.88%
Expected volatility	93%	92%
Expected life in years	5.7	5.8
Dividend yield	—	—

Total employee and director stock-based compensation expense recognized in the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 was $7.2 million and $9.2 million, respectively, of which $3.7 million and $5.2 million, respectively, was included in research and development expenses, and $3.5 million and $4.0 million, respectively, was included in general and administrative expenses.

At March 31, 2022, there was $19.8 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.2 years.

The weighted average grant date fair value per share, calculated using the Black-Scholes option pricing model, was $2.48 and $8.34 for employee and director stock options granted during the three months ended March 31, 2022 and 2021, respectively.

At March 31, 2022, there was $17.1 million of total unrecognized compensation expense related to unvested service-based RSUs, which is expected to be recognized over a weighted-average period of 2.1 years.

The weighted average grant date fair value per share was $3.33 and $11.42 for service-based RSUs granted during the three months ended March 31, 2022 and 2021, respectively.

The fair value of stock options granted to non-employees was estimated using the Black-Scholes pricing model. Total stock-based compensation expense for stock options and RSUs granted to non-employees for the three months ended March 31, 2022 and 2021 was $550,000 and $429,000, respectively.

On August 28, 2020, the Company granted 663,353 performance-based RSUs to key employees under the 2016 Incentive Plan. The RSUs will vest in two tranches as follows: 50% of the shares in each tranche will vest upon achievement of the predetermined performance milestones and the remaining 50% of the shares in each tranche will vest upon subsequent completion of a one-year service period. The grant date fair value of the performance-based RSUs was $8.0 million based on the grant date closing price per share of $12.06. As of March 31, 2022, the underlying performance milestones of the RSUs were not probable of achievement, and no stock-based compensation expense was recognized for the performance-based RSUs for the three months then ended.