Annual report pursuant to Section 13 and 15(d)

Stock Plans and Stock-Based Compensation

v3.21.1
Stock Plans and Stock-Based Compensation
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock Plans and Stock-Based Compensation
9. Stock Plan
s
and Stock-Based Compensation
Stock Plans
In September 2013, the Company’s stockholders approved the 2013 Equity Incentive Plan (the 2013 Plan), under which shares of common stock are reserved for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards by the Company. These awards may be granted to employees, members of the Board of Directors, and consultants. The 2013 Plan has a term of ten years and replaced the 2003 Equity Incentive Plan, which had similar terms. The 2013 Plan permits the Company to (i) grant incentive stock options to directors and employees at not less than 100% of the fair value of common stock on the date of grant; (ii) grant nonqualified options to employees, directors, and consultants at not less than 85% of fair value; (iii) award stock bonuses; and (iv) grant rights to acquire restricted stock at not less than 85% of fair value. Options generally vest over a four year period and have a term of ten years. Options granted to 10% stockholders have a maximum term of five years and require an exercise price equal to at least 110% of the fair value on the date of grant. The exercise price of all options granted to date has been at least equal to the fair value of common stock on the date of grant.
Stock option exercises are settled with shares reserved under the 2013 Plan. 
The share reserve under the 2013 Plan will automatically increase on January 1
st
of each year, for a period of not more than
ten years
, in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31
st
of the preceding calendar year, unless the Board determines otherwise prior to December 31
st
of such calendar year.
In October 2020, the Company’s board of directors approved the 2020 New Hire Plan (the 2020 Plan), under which shares of common stock are reserved for the granting of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards by the Company as an inducement to prospective new hire employees of the Company. The 2020 Plan has a term of ten years. The 2020 Plan permits the Company to (i) grant nonqualified options to new hire employees at not less than 85% of fair value; (ii) award stock bonuses; and (iii) grant rights to acquire restricted stock at not less than 85% of fair value. Options generally vest over a four year period and have a term of ten years. The share reserve under the 2020 may be increased at the discretion of and approval by the board of directors. No options have been granted to date.
Stock Plan Activity
As of December 31, 2020, there were 167,159 shares available for grant under the 2013 Plan and an additional 750,000
 s
hares which are available for grant under the 2020 Plan, which was approved during the year ended December 31, 2020, for a total of 917,159
 shares available for grant under both plans as of December 31, 2020.
In December 2020, the Board of Directors reduced the automatic share increase in the 2013 Plan share reserve that was to take place on January 1, 2021 from
5% to 4% of common shares outstanding as of December 31, 2020, thereby adding an additional 2,757,843 shares to 2013 Plan share reserve.
The following table summarizes activity in the Company’s stock option grants, including performance options:
 
    
Shares

Subject to

Outstanding

Options
    
Weighted

Average

Exercise

Price of

Options
    
Weighted

Average

Remaining

Contractual

Term

(Years)
    
Aggregate

Intrinsic

Value
(in thousands)
 
Outstanding as of December 31, 2019
     6,726,695      $ 7.88                    
Options granted
     3,611,593        4.84                    
Options exercised
     (63,633      1.44                    
Options forfeited
     (492,931      11.46                    
Options expired
     (970,094      9.02                    
    
 
 
                            
Outstanding as of December 31, 2020
     8,811,630      $ 6.35        7.60      $ 9,507  
    
 
 
                            
Vested and expected to vest as of December 31, 2020
  
 
8,811,630
 
  
 
6.35
 
  
 
7.60
 
  
$
9,507
 
    
 
 
                            
Exercisable as of December 31, 2020
     4,789,242      $ 6.57        6.49      $ 5,734  
    
 
 
                            
The total intrinsic value of options exercised was $0.4 million and $0.4 million for the years ended December 31, 2020 and 2019, respectively.
The total fair value of options vested was $3.3 million and $9.9 million for the years ended December 31, 2020 and 2019, respectively.
As of December 31, 2020, unamortized stock-based compensation expense of $17.9 million is expected to be recognized over a weighted average period of 2.8 years.
Incentive Awards
In December 2013, January 2014, and April 2014, as permitted by the 2013 Plan, the Company issued certain incentive awards to directors, employees and a consultant which are subject to 252,752 shares of the Company’s common stock and are exercisable at a weighted average price of $5.21 per share when vested. The Company may determine at its option whether to settle exercised awards in shares of common stock or in cash. Each recipient’s incentive award defines the number of common shares that may be acquired upon exercise provided the Company chooses to settle in shares. For awards settled in cash, the Company must pay the recipient the excess of the fair market value of the Company’s common stock on the date of exercise over the exercise price paid by the recipient multiplied by the number of shares the recipient would be entitled to receive had the award been settled in shares of the Company’s common stock.
Pursuant to their terms, the incentive awards have a term of 10 years and were initially scheduled to vest 100% on the second anniversary of their grant date. However, as a result of the approval by the Company’s stockholders of a 500,000 share increase to the 2013 Plan’s share reserve in June 2014, the incentive awards were automatically modified to vest monthly over four years effective from their grant date. The Company recognized the value of the incentive awards over the remaining four year vesting period which ended in the first quarter of 2018.
The Company recorded no
 s
tock-based compensation expense in the years ended December 31, 2020 and 2019 pertaining to its incentive awards. Incentive awards outstanding totaled 101,441 as of December 31, 2020 and 2019, respectively.
Stock-Based Compensation Expense
Stock-based compensation expense is included in the consolidated statements of operations and comprehensive loss and is as follows (in thousands):
 
    
Year Ended
December 31,
 
    
2020
    
2019
 
Research and development
   $ 2,739      $ 4,361  
General and administrative
     4,396        5,197  
Restructuring charges
     189        910  
    
 
 
    
 
 
 
Total stock-based compensation expense
   $ 7,324      $ 10,468  
    
 
 
    
 
 
 
Valuation Assumptions
The following table presents the weighted-average assumptions the Company used in the Black-Scholes option-pricing model to derive the grant date fair values of stock options granted in each of the years presented along with the resulting estimated weighted-average grant date fair values per share:
 
    
Year Ended
December 31,
 
    
2020
   
2019
 
Expected term (years)
     6.1       6.2  
Expected volatility
     105     76
Risk-free interest rate
     0.4     2.1
Expected dividend yield
     —         —    
Weighted-average grant date fair value per share
   $ 3.91     $ 5.60  
Expected Term
The Company does not believe it can currently place reliance on its historical exercise and post-vesting termination activity to provide accurate data for estimating the expected term. Therefore, for stock option grants made during the years ended December 31, 2020 and 2019, the Company has elected to use the simplified method for estimating the expected term, which is an average of the contractual term of the options and its ordinary vesting period. The expected term represents the period of time that options are expected to be outstanding.
Expected Volatility
As the Company has had limited trading history for its common stock, the expected stock price volatility for the Company’s common stock was estimated historically by considering the volatility rates of similar publicly traded peer entities within the life sciences industry prior to 2020 in a blended volatility methodology which weighted our own historical volatility as well as the historical volatility of the peer entities over a period commensurate with the expected term of the awards granted during the year. In 2020, the Company determined its historical stock price data was sufficient to exclusively estimate volatility thereafter. The change in estimate did not have a material impact on the Company’s estimated fair value of its awards.
Risk-Free Interest Rate
The risk-free interest rate assumption was based on U.S. treasury instruments with constant maturities whose term was consistent with the expected term of stock options granted by the Company.
Expected Dividend Yield
The Company has never declared or paid cash dividends and does not plan to pay cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero.