Stock-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

The Company incurs stock-based compensation expense related to 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 June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Risk-free interest rate	2.90%	0.99%	2.04%	0.90%
Expected volatility	95%	93%	94%	92%
Expected life in years	5.7	5.7	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 and six months ended June 30, 2022 was $8.8 million and $16.0 million, respectively, of which $2.2 million and $5.9 million, respectively, was included in research and development expenses, and $6.6 million and $10.1 million, respectively, was included in general and administrative expenses. The Company entered into a Separation Agreement with J. Joseph Kim, the Company's former President and Chief Executive Officer on May 10, 2022. Pursuant to the terms of the Separation Agreement, Dr. Kim's outstanding RSU's as of the separation date were fully vested and one-half of the RSUs were settled in the Company's common stock and one-half were settled in cash. Dr. Kim's outstanding stock options will continue to vest over a certain period and his vested stock options will remain exercisable until five years after the separation date. Stock-based compensation for the three and six months ended June 30, 2022 included a $4.2 million charge related to these modifications.

million and $7.9 million, respectively, was included in research and development expenses, and $2.6 million and $6.6 million, respectively, was included in general and administrative expenses.

At June 30, 2022, there was $15.5 million of total unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.0 years.

The weighted average grant date fair value per share, calculated using the Black-Scholes option pricing model, was $1.66 and $2.35 for employee and director stock options granted during the three and six months ended June 30, 2022, respectively, and $5.25 and $7.91 for the three and six months ended June 30, 2021, respectively.

At June 30, 2022, there was $11.6 million of total unrecognized compensation expense related to unvested service-based RSUs, which is expected to be recognized over a weighted-average period of 2.0 years.

The weighted average grant date fair value per share was $2.14 and $3.12 for service-based RSUs granted during the three and six months ended June 30, 2022, respectively, and $6.81 and $10.64 for the three and six months ended June 30, 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 and six months ended June 30, 2022 was $415,000 and $965,000, respectively. Total stock-based compensation expense for stock options and RSUs granted to non-employees for the three and six months ended June 30, 2021 was $308,000 and $737,000, respectively.

As of June 30, 2022, the Company had 111,941 performance-based RSUs outstanding, which were granted to key employees in August 2020. The underlying performance milestones of the RSUs were not probable of achievement as of June 30, 2022, and no stock-based compensation expense has been recognized to date for the performance-based RSUs.