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Equity Incentive Plans and Stock-Based Compensation | 6 Months Ended
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Jun. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Equity Incentive Plans and Stock-Based Compensation | Equity Incentive Plans and Stock-Based Compensation In 2015, the Company’s board of directors adopted the 2015 Equity Incentive Plan (as amended in 2018, 2019 and 2020, the “2015 Plan”), which provided for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights and restricted stock awards to the Company’s employees, officers, directors, advisors, and consultants. In May 2020, the board of directors adopted the 2020 Stock Options and Incentive Plan (the “2020 Plan”) and suspended the 2015 Plan. Awards outstanding under either the 2015 Plan or 2020 Plan that are cancelled, expire or otherwise terminated subsequent to May 2020 will become available for issuance as common stock under the 2020 Plan. Additionally, the 2020 Plan is subject to automatic increases on January 1 of each year beginning January 1, 2021. The number of shares added each January 1 will be equal to the lesser of (i) 5% of the outstanding shares on the immediately preceding December 31 or (ii) such amount as determined by the administrator of the 2020 Plan, which is the compensation committee of the board of directors of the Company. The 2020 Plan provides for the grant of incentive stock options, nonqualified stock options or other awards including stock appreciation rights, restricted stock awards and restricted stock units to the Company’s employees, officers, directors, advisors, and consultants. In 2022, the Board of Directors adopted the 2022 Inducement Plan (“Inducement Plan”), under which the Company may grant restricted stock units, stock options, stock appreciation rights, and restricted stock awards to new hires. Options under the 2020 Plan may be granted for periods of up to 10 years and at prices no less than the market price of the Company’s common stock on the date of grant, provided, however, that the exercise price of an incentive stock option granted to a 10.0% shareholder shall not be less than 110.0% of the estimated fair value of the shares on the date of grant and the option is not exercisable after the expiration of five years from the date of grant. Incentive Stock Options and Nonqualified Stock Options Stock options issued under either the 2015 Plan or the 2020 Plan generally vest over four years and expire ten years from the date of grant. Certain options provide for accelerated vesting if there is a change in control, as defined in the respective plans. The Company used the Black-Scholes option pricing model to estimate stock-based compensation expense for stock option awards with the following assumptions:
| Three months ended June 30, |  | Six months ended June 30, |  |
| 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Expected volatility | 81.16% - 81.66% |  | 73.78% - 75.17% |  | 80.97% - 81.66% |  | 73.78% - 75.17% |  |  |  |
Risk-free interest rate | 3.44% - 3.88% |  | 1.64% - 3.39% |  | 3.42%- 4.18% |  | 1.64% - 3.39% |  |  |  |
Expected dividend | — |  | — |  | — |  | — |  |  |  |
Expected term (in years) | 5.31 - 6.07 |  | 5.33 - 6.08 |  | 5.31- 6.08 |  | 5.33 - 6.08 |  |  |  |
Underlying common stock fair value | $22.33 - $26.50 |  | $4.92 - $12.68 |  | $21.94 - $34.65 |  | $4.92 - $12.68 |  |  |  |
A summary of option activity under the 2015 Plan and the 2020 Plan is as follows:
| Number of Options |  | Weighted- Average Exercise Price per Share |  | Weighted- Average Remaining Contractual Term (in Years) |  | Aggregate Intrinsic Value
Outstanding as of December 31, 2022 | 5,569,567 |  |  | $ | 13.34 |  |  | 7.96 |  | $ | 43,696 |
Granted | 1,623,184 |  |  | $ | 30.85 |  |  |  |  |
Exercised | (477,539) |  |  | $ | 6.80 |  |  |  |  |
Forfeited | (82,052) |  |  | $ | 16.07 |  |  |  |  |
Outstanding as of June 30, 2023 | 6,633,160 |  |  | $ | 18.06 |  |  | 8.18 |  | $ | 32,749 |
Exercisable as of June 30, 2023 | 2,806,127 |  |  | $ | 13.98 |  |  | 7.26 |  | $ | 20,335 |
Vested and expected to vest as of June 30, 2023 | 6,633,160 |  |  | $ | 18.06 |  |  | 8.18 |  | $ | 32,749 |
As of June 30, 2023, there were $53.1 million of unrecognized compensation costs that are expected to be recognized over the weighted-average period of 2.7 years related to stock options. Aggregate intrinsic value represents the difference between the fair value of the underlying common stock and the exercise price as of June 30, 2023. . Restricted Stock Units The service-based condition for restricted stock units ("RSUs") is generally satisfied over two years or three years. The following table sets forth the outstanding RSUs and related activity for the six months ended June 30, 2023:
| Restricted Stock Units |  | Weighted Average Grant Date Fair Value
Unvested and outstanding at December 31, 2022 | 507,925 |  |  | 17.43 |
Granted | 671,708 |  |  | 34.65 |
Forfeited | (18,647) |  |  | 22.60 |
Unvested and outstanding at June 30, 2023 | 1,160,986 |  |  | 27.31 |
As of June 30, 2023, the Company had $24.2 million of unrecognized stock-based compensation expense related to outstanding RSUs expected to be recognized over a weighted-average period of 2.30 years. Performance-Based Restricted Stock Units Performance-based restricted stock units ("PSUs") vest upon the achievement of market and performance conditions. Market conditions include the Company's total shareholder return ("TSR") relative to the NASDAQ Biotechnology Index over the term of the award ending on June 30, 2024, and performance conditions consist of multiple clinical development milestones associated with bexotegrast. The performance vesting conditions generally must be satisfied within a two-year period and are forfeited if the vesting conditions are not met. Additionally, the number of shares of common stock issued upon vesting will range from 0% to 200% of the PSUs based on achievement of certain targets. The PSUs granted were allocated evenly between the market based, TSR, awards and those with performance conditions associated with clinical development milestones. The fair value of PSUs associated with clinical development vesting conditions were determined to be equal to the fair market value of the Company's share price on the date of grant. The fair value of the TSR PSUs were derived from a Monte Carlo simulation model that used the following key assumptions:
Valuation date share price |  | $ | 17.57 |
Award term (years) |  | 1.92
Volatility |  | 70.62 | %
Correlation coefficient |  | 0.3508
Average peer group volatility |  | 79.69 | %
Average peer group correlation coefficient |  | 0.4397
Risk free interest rate |  | 2.84 | %
As of June 30, 2023, there were 354,532 PSUs associated with the TSR goal at target level achievement of 100% and related activity outstanding with a weighted average grant date fair value of $29.15 per share. There were no additional grants, forfeitures or vesting of the PSUs associated with market-based vesting conditions during the six months ended June 30, 2023. As of June 30, 2023, there were 354,532 PSUs associated with clinical development milestones at maximum level achievement with a weighted average grant date fair value of $17.57 per share. In March 2023, the second of three milestones applicable to PSUs with clinical development vesting conditions was achieved. In July 2023, the third of the three milestones applicable to these PSUs was achieved. The Company considered the remaining clinical development performance conditions probable of achievement as of June 30, 2023. As of June 30, 2023, the Company had $6.0 million of unrecognized stock-based compensation expense related to unvested PSUs expected to be recognized over a remaining weighted-average period of 0.99 years. 2020 Employee Stock Purchase Plan In June 2020, the Company adopted the Company's 2020 Employee Stock Purchase Plan (the "2020 ESPP"). The Company reserved 700,000 shares of common stock for future issuance under the plan. The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1 of each calendar year, beginning January 1, 2021, by the least of (1) 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (2) 700,000 shares or (3) such lesser amount as determined by the administrator of the 2020 ESPP, which is the compensation committee of the board of directors of the Company. Under the 2020 ESPP, eligible employees may purchase shares of our common stock through payroll deductions that cannot exceed 15% of each employee’s salary. The 2020 ESPP provides for a six-month offering period. At the end of the purchase period, eligible employees are permitted to purchase shares of common stock at the lower of 85% of the fair market value at the beginning of the offering period or 85% of the fair market value at the end of the purchase period, subject to tax limitations on the total value of the purchase. The 2020 ESPP is considered a compensatory plan, and the Company recorded $0.1 million and $0.3 million in stock-based compensation expense for the three and six months ended June 30, 2023, respectively. There was $0.1 million in stock-based compensation expense attributed to the 2020 ESPP for the three and six months ended June 30, 2022. During the three and six months ended June 30, 2023, 43,296 shares of common stock were issued under the 2020 ESPP with 844,888 shares remaining available for issuance under the 2020 ESPP. The Company used Black-Scholes option pricing model to estimate stock-based compensation expense for the 2020 ESPP with the following assumptions:
|  | Six Months Ended June 30,
|  | 2023 |  | 2022
Risk-free interest rate |  | 5.20 | % |  | 0.60 | %
Expected term of options (in years) |  | 0.50 |  | 0.50
Expected stock price volatility |  | 69.15 | % |  | 63.17 | %
Expected dividends |  | — |  |  | — |
Stock-Based Compensation Expense The following table presents the components and classification of stock-based compensation expense for the Company’s stock-based awards for the three and six months ended June 30, 2023 and 2022 (in thousands):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Restricted stock awards | $ | — |  |  | $ | 7 |  |  | $ | — |  |  | $ | 36 |
Stock options and ESPP | 5,229 |  |  | 3,396 |  |  | 10,032 |  |  | 6,898 |
Restricted stock units | 2,963 |  |  | — |  |  | 5,569 |  |  | — |
Performance-based restricted stock units | 4,854 |  |  | — |  |  | 9,368 |  |  | — |
Total stock-based compensation expense | $ | 13,046 |  |  | $ | 3,403 |  |  | $ | 24,969 |  |  | $ | 6,934 |
Research and development expenses | $ | 5,294 |  |  | $ | 1,761 |  |  | $ | 10,142 |  |  | $ | 3,675 |
General and administrative expenses | $ | 7,752 |  |  | $ | 1,642 |  |  | $ | 14,827 |  |  | $ | 3,259 |

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