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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2022
Stock-Based Compensation |
Stock-Based Compensation | 8. Stock-Based Compensation In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the 2014 Equity Incentive Plan (2014 Plan). As of the effectiveness of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan. Under the 2021 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, directors or consultants of the Company, and employees and consultants of the Company’s affiliates. Under the 2014 Plan, certain employees were granted the ability to early exercise their options. The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. The shares purchased by the employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest. As of March 31, 2022, there were no shares subject to stock options that have been early exercised. Shares Reserved for Future Issuance As of March 31, 2022, the Company had reserved shares of its common stock for future issuance as follows: ​
​ | ​ | ​
​ |  | Shares
​ | ​ | Reserved
Common stock options outstanding |  | 4,262,702
Unvested restricted stock units | ​ | 279,500
Available for future grants under the 2021 Equity Incentive Plan |  | 2,165,387
Available for future grants under the 2021 Employee Stock Purchase Plan | ​ | 479,012
Available for future grants outside of the 2021 Plan as inducement award | ​ | 100,000
Total shares of common stock reserved |  | 7,286,601
​ Stock Options A summary of the Company’s stock option activity and related information during the three months ended March 31, 2022 is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Options Outstanding | ​ | Weighted- Average Exercise Price | ​ | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Outstanding at December 31, 2021 | ​ | 4,215,643 | ​ | $ | 5.49 | ​ | 8.5 | ​ | ​
Granted | ​ | 233,600 | ​ | $ | 6.80 | ​ | ​ | ​ | ​
Exercised | ​ | (713) | ​ | $ | 3.45 | ​ | ​ | ​ | ​
Forfeited/Expired |  | (185,828) |  | $ | 6.48 |  |  | ​ | ​
Outstanding at March 31, 2022 |  | 4,262,702 |  | $ | 5.52 |  | 8.0 | $ | 379
Vested at March 31, 2022 |  | 1,490,020 |  | $ | 4.20 |  | 6.4 | $ | 368
Exercisable at March 31, 2022 |  | 2,703,228 |  | $ | 4.49 |  | 7.2 | $ | 375
​ Options exercisable at March 31, 2022 include vested options and options eligible for early exercise. All outstanding options as of March 31, 2022 are expected to vest. Unrecognized stock-based expense at March 31, 2022 was $10.4 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years. The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | ​ |
​ | ​ | Three Months Ended March 31, |
​ |  | 2022 |  | ​ | 2021 |
Risk-free interest rate |  | 1.8 | % | ​ | 0.7 | %
Expected volatility |  | 85.2 | % | ​ | 71.2 | %
Expected term (in years) |  | 6.0 |  | ​ | 5.9 | ​
Expected dividend yield |  | — | % | ​ | — | %
​ Risk-free interest rate. The Company bases the risk-free interest rate assumption on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. Expected volatility. Since the Company recently completed its IPO and does not have sufficient trading history for its common stock the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biotechnology industry. Expected term. The expected term represents the period of time that options are expected to be outstanding. Because the Company does not have historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period. Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends. Fair value of common stock. For periods prior to the IPO, since there had been no public market for the Company’s common stock, the Company’s board of directors, with input from management, determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant. Performance-Based Restricted Stock Units (PSUs) The following table summarizes PSU activity as of March 31, 2022, under the 2021 Plan: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted-
​ | ​ | Number of | ​ | Average Grant Date
​ | ​ | PSUs | ​ | Fair Value
Outstanding at December 31, 2021 | ​ | 299,500 | ​ | $ | 6.32
Granted | ​ | 10,000 | ​ | ​ | 8.98
Released | ​ | — | ​ | ​ | —
Cancelled | ​ | (30,000) | ​ | ​ | 6.69
Outstanding at March 31, 2022 | ​ | 279,500 | ​ | $ | 6.37
​ The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date. The fair value of the awards was based on the value of the Company’s common stock at the date of the award and expense recognition is based on the probability of achieving the performance metric. The Company concluded that achievement of the performance conditions was not probable as of March 31, 2022, and therefore no compensation expense was recognized for the three months ended March 31, 2022 in connection with the PSUs. Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions. Market-Based Awards Restricted Stock Units In December 2021, the Company granted 100,000 market-based restricted stock units (MRSUs) to its chief executive officer (CEO) pursuant to the 2021 Plan. The MRSUs vest based on the Company’s closing stock price trading above $20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement. The share price of the Company’s common stock on the date of issuance of the MRSUs was $6.69 per share. The fair value was $0.4 million based on Monte Carlo simulation model on the grant date. Compensation expense is recognized over the derived service period of 3 years. Stock- based compensation expense in connection with the MRSUs was immaterial for the three months ended March 31, 2022. As of March 31, 2022, there was $0.4 million of unrecognized compensation expense related to this MRSU. Performance Award In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a Performance Award in the amount of $7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $750 million. The Company has determined that the Performance Award is subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions. Since the IPO, neither of the events have yet been satisfied. The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as compensation cost over the derived service period. During the three-months ended March 31, 2022, the Company reversed $0.4 million in compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price. As of March 31, 2021, prior to the IPO, the Performance Award was not probable of being achieved; therefore, no stock-based compensation expense was recognized during the three months ended March 31, 2021. 2021 Employee Stock Purchase Plan (ESPP) In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO. As of March 31, 2022, 8,624 shares have been issued under the ESPP. In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE). An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE. No shares have been issued under the SAYE through March 31, 2022. The stock-based compensation expense related to the ESPP and SAYE for the three months ended March 31, 2022, was immaterial. The following table summarizes stock compensation expense, including expense associated with award modifications for unvested options, reflected in the unaudited consolidated statements of operations and comprehensive loss (in thousands):
​ | ​ | ​ | ​ | ​ | ​
​ | ​
​ | Three Months Ended March 31,
​ | 2022 |  | 2021
Research and development | $ | 387 | ​ | $ | 364
General and administrative | ​ | 720 | ​ | ​ | 107
Total | $ | 1,107 | ​ | $ | 471
​

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