Stock-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Employee Stock Purchase Plan

In May 2017, the Company’s stockholders approved the 2016 Employee Stock Purchase Plan (the 2016 ESPP). The 2016 ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (IRC), and is not subject to the provisions of the Employee Retirement Income Security Act of 1974. The Company reserved 800,000 shares of common stock for issuance under the 2016 ESPP. The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. The 2016 ESPP provides for six-month offering periods ending on May 31 and November 30 of each year. At the end of each offering period, employees are able to purchase shares at 85% of the fair market value of the Company’s common stock on the last day of the offering period. During the three months ended March 31, 2023, no shares of common stock were purchased under the 2016 ESPP.

Employee Stock Incentive Plans

Effective February 2003, the Company implemented the 2003 Equity Incentive Plan (2003 Plan), and it was amended and approved by the Company's stockholders in 2005. Stock options granted under the 2003 Plan may be either incentive stock options as defined by the IRC, or non-qualified stock options. In 2013, the 2003 Plan was terminated, and no further awards may be issued under the plan. Any shares of common stock subject to awards under the 2003 Plan that expire, terminate, or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised, or resulting in any common stock being issued, will become available for issuance under the 2013 Equity Incentive Plan (2013 Plan), up to a specified number of shares. As of March 31, 2023, under the 2003 Plan, there were options to purchase an aggregate of 61,572 shares of common stock outstanding.

In October 2013, the Company implemented the 2013 Plan. The 2013 Plan provides for the grant of stock options and other stock-based awards, as well as cash-based performance awards. The number of shares of common stock reserved for issuance under the 2013 Plan will automatically increase on January 1 of each year from January 1, 2014 through and including January 1, 2023, by the lesser of (a) 1,960,168 shares, (b) 4.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (c) the number of shares of common stock determined by the Company's Board of Directors. During the three months ended March 31, 2023, the maximum number of shares of common stock authorized to be issued by the Company under the 2013 Plan was increased to 15,816,949. If an option expires or terminates for any reason without having been fully exercised, if any shares of restricted stock are forfeited, or if any award terminates, expires or is settled without all or a portion of the shares of common stock covered by the award being issued, such shares are available for the grant of additional awards. However, any shares that are withheld (or delivered) to pay withholding taxes or to pay the exercise price of an option are not available for the grant of additional awards. As of March 31, 2023, there were options to purchase an aggregate of 12,778,040 shares of common stock outstanding.

The following stock-based compensation expense was recognized for the periods indicated (in thousands):


	Three Months Ended March 31,
		2023		2022
Research and development		$	2,461	$	2,392
Selling, general and administrative		2,372		2,882
Total stock-based compensation expense		$	4,833	$	5,274

Employee stock options

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the following table for options issued during the period indicated:


	Three Months Ended March 31,
	2023	2022
Expected dividend yield	0%	0%
Expected volatility	92.6% -94.3%	87.9% - 88.3%
Risk-free interest rate	3.6% - 4.2%	1.5% - 2.4%
Expected term	5.88 years	5.95 years

The following table summarizes stock option activity during the three months ended March 31, 2023:


	Shares	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2022	10,098,929	$	18.58	6.5
Granted	2,914,405	4.89
Exercised	(3,531)	1.51
Forfeited	(87,556)	11.46
Expired	(82,635)	22.01
Outstanding, March 31, 2023	12,839,612	$	15.50	7.1	$	7,827
As of March 31, 2023:
Exercisable	7,048,779	$	20.90	5.4	660
Vested and expected to vest	11,763,189	$	16.03	6.9	6,669

The weighted-average grant-date fair value of options granted during the three months ended March 31, 2023 and 2022 was $3.77 and $7.48, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2023 was de minimis and the total intrinsic value of options exercised during the three months ended 2022 was approximately $0.3 million. The total cash received for options exercised during the three months ended March 31, 2023 and 2022 was de minimis. The total fair value of shares vested in the three months ended March 31, 2023 and 2022 was approximately $0.6 million and $5.4 million, respectively. As of March 31, 2023, the total unrecognized compensation expense related to unvested stock options, net of related forfeiture estimates, was approximately $29.2 million, which the Company expects to recognize over a weighted-average period of approximately 1.5 years.

Restricted Stock Units

The Company awards restricted stock units (RSUs) to employees. RSUs are valued based on the closing price of the Company’s common stock on the date of the grant. The fair value of RSUs is recognized and amortized on a straight-line basis over the requisite service period of the award.

The following table summarizes RSU activity during the three months ended March 31, 2023:


	Shares	Weighted-Average Grant Date Fair Value
Outstanding, December 31, 2022	415,084	$	8.83
Granted	656,135	4.82
Vested	(62,751)	10.31
Forfeited	(27,657)	6.94
Outstanding, March 31, 2023	980,811	6.11

At March 31, 2023, there was $4.9 million of total unrecognized compensation cost related to unvested RSUs, which the Company expects to recognize over a remaining weighted-average period of approximately 1.6 years.