Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Share-Based Payment Arrangement [Abstract]

Equity Incentive Plans

In November 2018, the Company adopted the 2018 Equity Incentive Plan (the “2018 Plan”), which permits the granting of stock awards and incentive and nonstatutory stock options to employees, directors and consultants of the Company.

In July 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan became effective on July 17, 2019. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company. Shares subject to outstanding awards under the 2018 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be added to the shares reserved under the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31st of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of September 30, 2024, 1,779,664 shares of common stock were available for issuance under the 2019 Plan.

In March 2020, the compensation committee of the Company’s board of directors approved and adopted the 2020 Inducement Plan (the “2020 Inducement Plan”). Under the 2020 Inducement Plan, the Company may grant nonstatutory stock options, stock appreciation rights, restricted stock and restricted stock units to new employees entering into employment with the Company in accordance with Nasdaq Listing Rule 5635(c)(4). Through September 30, 2024, the Company’s board of directors has authorized 4,000,000 shares of the Company’s common stock for future issuance under the 2020 Inducement Plan. As of September 30, 2024, 666,438 shares of common stock were available for issuance under the 2020 Inducement Plan.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2024 (in thousands, except share and per share data):


	Number of Awards	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2023	9,632,504	$	15.87	6.9	$	131,785
Granted	1,752,471	$	27.36
Exercised	(775,041)	$	14.21
Canceled and forfeited	(398,923)	$	22.60
Outstanding as of September 30, 2024	10,211,011	$	17.71	6.7	$	217,551
Vested and exercisable as of September 30, 2024	6,674,171	$	13.96	5.6	$	167,100

The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2024 and 2023 was $19.38 and $17.96 per share, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2024 and 2023 was $14.3 million and $4.7 million, respectively. Intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that had exercise prices that were lower than the per share fair value of the common stock on the date of exercise. As of September 30, 2024, the total unrecognized stock-based compensation related to unvested stock option awards granted was $56.1 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years.

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the expected stock price volatility was based upon the weighting of the Company’s historical volatility and the historical volatility of a peer group of publicly traded companies. The historical volatility data was computed using the daily closing prices for the Company’s and its peer companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following assumptions were used to estimate the fair value of stock option awards granted during the following periods:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Expected term (in years)	6.08	6.08	5.50-6.08	5.31-6.08
Expected volatility	73.10%-76.30%	80.99%-81.63%	72.34%-80.36%	80.99%-85.24%
Risk-free interest rate	3.48%-4.24%	3.97%-4.39%	3.48%-4.62%	3.35%-4.39%
Expected dividend yield	—	—	—	—

Restricted Stock Units

The following table summarizes the activity under the Company’s restricted stock units for the nine months ended September 30, 2024:


	Number of Awards	Weighted-Average Grant Date Fair Value per Award
Unvested and outstanding as of December 31, 2023	1,129,492	$	23.41
Granted	757,519	$	27.51
Vested	(398,203)	$	22.47
Cancelled/Forfeited	(131,513)	$	24.61
Unvested and outstanding as of September 30, 2024	1,357,295	$	25.86

The fair value of restricted stock unit awards granted to employees and nonemployees is equal to the closing market price of the Company’s common stock on the grant date.

As of September 30, 2024, the total unrecognized stock-based compensation related to restricted stock unit awards granted was $26.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.0 years.

Performance Stock Units

In January 2023, the Company granted an aggregate of 135,835 performance stock units to certain executive participants (“2023 Executive PSUs”). The 2023 Executive PSUs are subject to a performance condition of achieving certain net product sales levels related to Livmarli during the year ended December 31, 2024. If the performance condition is met, the first tranche of the award will vest on March 15, 2025 and the second tranche will vest on March 15, 2026, subject to the executive employees’ continuous service through each vesting date. The number of units to be vested in the first tranche of the 2023 Executive PSUs is calculated by multiplying two-thirds of the 2023 Executive PSUs granted by a percentage calculated based on attained Livmarli sales metrics, as certified by the Company’s Compensation Committee.

The number of units to be vested in the second tranche of the 2023 Executive PSUs equals 50% of the units vested in the first tranche.

In June 2023, the Company granted an aggregate of 12,000 PSUs to certain employees (“2023 Employee PSUs”). The 2023 Employee PSUs were subject to a performance condition of achieving certain net product sales related to Livmarli in the US for the year ended December 31, 2023. The first tranche of the 2023 Employee PSUs vested during the nine months ended September 30, 2024.

In January 2024, the Company granted an aggregate of 148,250 performance stock units to certain executive participants (“2024 Executive PSUs”). The 2024 Executive PSUs are subject to a performance condition of achieving certain net product sales levels related to the Company’s approved medicines during the year ended December 31, 2025. If the performance condition is met, the first tranche of the award will vest on March 15, 2026 and the second tranche will vest on March 15, 2027, subject to the executive employees’ continuous service through each vesting date. The number of units to be vested in the first tranche of the 2024 Executive PSUs is calculated by multiplying two-thirds of the 2024 Executive PSUs granted by a percentage calculated based on attained sales metrics for the Company’s approved medicines, as certified by the Company’s Compensation Committee. The number of units to be vested in the second tranche of the 2024 Executive PSUs equals 50% of the units vested in the first tranche.

The following table summarizes the activity under the Company's performance stock units for the nine months ended September 30, 2024:


	Number of Awards	Weighted-Average Grant Date Fair Value per Award
Unvested and outstanding as of December 31, 2023	147,835	$	23.64
Granted	160,250	$	26.49
Vested	(3,645)	$	25.39
Cancelled/Forfeited	(19,485)	$	24.60
Unvested and outstanding as of September 30, 2024	284,955	$	25.15

As of September 30, 2024, the total unrecognized stock compensation related to performance stock units granted was $5.4 million, which the Company expects to recognize over a weighted-average period of approximately 1.6 years.

2019 Employee Stock Purchase Plan

In July 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (“ESPP”). A total of 500,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to the lesser of (i) 1% of the outstanding number of shares of common stock on December 31st of the preceding calendar year, (ii) 1,500,000 shares of common stock or (iii) such lesser amount as determined by the Company’s board of directors. The ESPP became effective on July 17, 2019 and generally provides for six-month consecutive offering periods beginning in May and November of each year. During the three months ended September 30, 2024, no shares were issued under the ESPP. During the nine months ended September 30, 2024, 68,089 shares were issued under the ESPP. As of September 30, 2024, the Company had 1,439,970 shares available for future issuance under the ESPP. The stock-based compensation related to the ESPP was $0.2 million for each of the three months ended September 30, 2024 and 2023, and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Compensation Expense

Total stock-based compensation is reflected in the accompanying unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Selling, general and administrative	$	8,018	$	5,759	$	23,578	$	17,290
Research and development	3,571		2,626		10,978		8,013
Cost of sales	319		—		637		—
Total	$	11,908	$	8,385	$	35,193	$	25,303

Stock-based compensation capitalized into inventory was $0.2 million for the three months ended September 30, 2024 and 2023, and $0.9 million and $0.6 million for the nine months ended September 30, 2024 and 2023, respectively.