9. Stock-Based Compensation

No income tax benefits for stock-based compensation expense have been recognized for the years ended December 31, 2022, 2021 and 2020 as a result of the Company’s full valuation allowance applied to net deferred tax assets and net operating loss carryforwards.

Equity Incentive Plans

In July 2018, the Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units (“RSUs”), stock appreciation rights, performance-based awards ("PSUs") and other stock-based awards. The number of shares of common stock that may be issued under the 2018 Plan will automatically increase on each January 1, beginning with the fiscal year ending December 31, 2019, equal to the least of (i) 5,000,000 shares, (ii) 5% of the outstanding shares of common stock as of the last day of the preceding fiscal year and (iii) such other amount as the Board of Directors may determine. Stock options and RSUs granted under the 2018 Plan generally vest over four years and expire no more than 10 years from the date of grant.

Following the IPO and upon the effectiveness of the 2018 Plan, the Company’s 2012 Equity Incentive Plan, as amended, (the “2012 Plan”), terminated and no further awards will be granted thereunder. All outstanding awards under the 2012 Plan will continue to be governed by their existing terms. Any shares subject to awards granted under the 2012 Plan that, on or after the termination of the 2012 Plan, expire or terminate and shares previously issued

pursuant to awards granted under the 2012 Plan that, on or after the termination of the 2012 Plan, are forfeited or repurchased by the Company will be transferred into the 2018 Plan. As of December 31, 2022, the maximum number of shares that may be added to the 2018 Plan pursuant to the preceding clause is 2,698,558 shares.

Prior to its termination, the 2012 Plan provided for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. Stock options granted under the 2012 Plan generally vest over four years and expire no more than 10 years from the date of grant.

As of December 31, 2022, the number of shares available for issuance under the 2018 Plan was 2,964,444.

Stock Options

The weighted-average fair value of options granted during the years ended December 31, 2022, 2021 and 2020 was $2.76, $59.00 and $51.59 per share, respectively.

The aggregate fair value of stock options that vested during the years ended December 31, 2022, 2021 and 2020 was $15.2, $17.1 million and $18.0 million, respectively.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. Following the IPO, the aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the year in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $1.8 million, $109.2 million and $62.2 million, respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense relating to unvested stock options was $12.8 million. This amount is expected to be recognized over a weighted-average period of 2.4 years.

Time-based Restricted Stock Units

Each time-based restricted stock unit (“RSU”) represents one equivalent share of our common stock to be awarded after satisfying the applicable continued service-based vesting criteria over a specified period. The fair value for these RSUs is based on the closing price of our common stock on the date of grant. The RSUs do not entitle participants to the rights of holders of common stock, such as voting rights, until the shares are issued. RSUs that are expected to vest are net of estimated future forfeitures.

The weighted-average fair value of RSUs granted during the year ended December 31, 2022, 2021 and 2020 was $5.38, $84.80 and $106.56, respectively.

As of December 31, 2022, total unrecognized stock-based compensation expense relating to unvested RSUs was $66.7 million and the weighted-average remaining vesting period was 2.5 years.

The aggregate intrinsic value of RSUs is calculated as the closing price per share of the Company’s common stock on the last trading day of the fiscal period, multiplied by the number of RSUs expected to vest as of December 31, 2022. As of December 31, 2022, the aggregate intrinsic value of RSUs was $37.7 million.

Performance-based Restricted Stock Units

During the year ended December 31, 2022, the Board of Directors approved awards of restricted stock units with performance-based vesting (“PSUs”) from the 2018 Plan. Each PSU represents one equivalent share of our common stock to be awarded upon vesting at the end of the performance periods, if specific performance goals set by the Board of Directors are achieved. No PSUs will vest if the performance goals are not met. The fair value of these PSUs is based on the closing price of our common stock on the date of grant. The Company assesses the probability of achieving the performance goals on a quarterly basis. Changes in our assessment of the probability results in adjustments to stock-based compensation, which may include either a cumulative catch-up of expense or a reduction of expense depending on whether the likelihood of vesting has increased or decreased, that is recognized in the period such determination is made. The PSUs do not entitle participants to the rights of holders of common stock, such as voting rights, until the shares are issued. PSUs that are expected to vest are net of estimated future forfeitures.

The Company did not grant any stock options or awards with performance-based or market-based vesting conditions during the year ended December 31, 2020. As of December 31, 2022 and 2021, the vesting of the PSUs was not deemed probable. Accordingly, no stock-based compensation expense related to these awards has been

recognized during the years ended December 31, 2022 and 2021. As of December 31, 2022, total unrecognized compensation expense relating to PSUs was $20.3 million over a weighted-average period of 1.25 years and the aggregate intrinsic value of PSUs was $27.6 million.

Employee Stock Purchase Plan

In July 2018, the Company’s Board of Directors and stockholders approved the 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The number of shares of common stock that may be issued under the 2018 ESPP shall automatically increase on each January 1, beginning with the fiscal year ending December 31, 2019, equal to the least of (i) 1,000,000 shares, (ii) 1% of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year and (iii) such other amount determined by the 2018 ESPP administrator. As of December 31, 2022, the number of shares available for issuance under the 2018 ESPP was 2,209,160.

Under the 2018 ESPP, employees may purchase shares of the Company’s common stock at a price per share equal to 85% of the lower of the fair market value of the common stock on the first trading day of the offering period or on the exercise date. The 2018 ESPP provides for consecutive, overlapping 24-month offering periods, each of which will include purchase periods. The first offering period commenced on July 18, 2018.

During the year ended December 31, 2022, 2021 and 2020, stock-based compensation related to the 2018 ESPP was $0.8 million, $1.2 million and $0.9 million, respectively.

As of December 31, 2022, total unrecognized compensation expense relating to shares to be purchased under the 2018 ESPP was $0.7 million over a weighted-average period of 1.2 years.

Total stock-based compensation expense recognized is as follows (in thousands):

The following weighted-average assumptions were used to calculate the fair value of stock options granted during the periods indicated:

RSU activity under the 2018 Plan is summarized as follows (in thousands, except per share data):

8. Stockholders’ Equity

September 2022 Offering

On September 21, 2022, the Company closed an underwritten registered direct offering (the “September 2022 Offering”) under its shelf registration statement on Form S-3 (File No. 333-265085), supplemented by a prospectus supplement filed with the SEC on September 19, 2022 pursuant to Rule 424(b) under the Securities Act of 1933, as amended. In connection with the September 2022 Offering, the Company sold an aggregate of 29,882,000 shares of our common stock, par value $0.001 per share, at an offering price of $5.02 per share. Aggregate net proceeds were approximately $140.6 million, after deducting the underwriting commissions and estimated offering expenses.

“At-the-Market” Equity Offerings

On August 4, 2022, the Company entered into a sales agreement (the “2022 Sales Agreement”) with Cowen and Company, LLC (“Cowen”). Pursuant to Sales Agreement, the Company may sell, from time to time, up to an aggregate of $75.0 million in gross sales proceeds of its common stock through an “at-the-market” offering (“ATM Offering”) as defined under the Securities Act of 1933. The Company will pay a commission equal to 3% of the gross proceeds from the sale of shares of its common stock under the Sales Agreement. The $75.0 million of common stock that may be offered, issued and sold in the ATM Offering is included in the $250.0 million of securities that may be offered, issued and sold by the Company under its registration statement on Form S-3 (File No. 333-265085). The Company expects to use the net proceeds from sales under the 2022 Sales Agreement for general corporate purposes.

As of December 31, 2022, no shares of our common stock were sold under the 2022 Sales Agreement. From January 1, 2023 through March 6, 2023, the Company sold 0.1 million shares of its common stock at an average price of $7.20 per share through its ATM Offering, resulting in proceeds of $1.0 million net of commissions. Under its current ATM Offering program, $74 million of common stock remain available for future sales; however, the Company is not obligated to make any sales under this program.

4. Investments

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. As of December 31, 2022 and 2021, the aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months was $162.6 million and $241.4 million, respectively. All of these securities had remaining maturities of less than one year. The Company has the intent and ability to hold such securities until recovery and has determined that there has been no material change to their credit risk. As a result, the Company determined it did not hold any investments with a credit loss at December 31, 2022 and 2021.

There were no material realized gains or losses recognized on the sale or maturity of available-for-sale securities during the years ended December 31, 2022, 2021 and 2020, and as a result, there were no material reclassifications out of accumulated other comprehensive gain (loss) for the same periods.

6. Leases

Operating Leases

The Company’s lease obligations primarily relate to leased office and laboratory space under noncancelable operating leases. In accordance with ASC 842, the Company has performed an evaluation of its other contracts with vendors and has determined that, except for the leases described below, none of its other contracts contain a lease.

2018 Redwood City Lease

In January 2018, the Company entered into an operating lease agreement for approximately 25,000 square feet of office and laboratory space in Redwood City, California (the “2018 Redwood City Lease”). The contractual term of the 2018 Redwood City Lease was 10.75 years beginning from the substantial completion and delivery of the premises, which occurred in November 2018, and originally terminating in July 2029.

The 2018 Redwood City Lease includes monthly base rent amounts escalating over the term of the lease. In addition, the lessor provided for a tenant improvement allowance ("TIA") up to $1.4 million, which was fully utilized. The TIA was recorded as leasehold improvements, with offsetting adjustments recorded to the associated operating lease right of use asset included on the Company's balance sheet as of December 31, 2021.

In November 2021, the Company entered into a lease termination agreement (the “Lease Termination Agreement”) with respect to the 2018 Redwood City Lease. Pursuant to the Lease Termination Agreement, the 2018 Redwood City Lease was terminated effective April 30, 2022. The Company accounted for this change in lease term as a modification of the original lease. As a result of the modification, the operating right-of-use asset and lease liability were remeasured during the fourth quarter of 2021.

During the second quarter of 2022, the landlord paid $1.1 million in connection with the early termination and upon satisfaction of all remaining conditions including the delivery of certain equipment and other assets related to the building.

2019 San Carlos Lease

In December 2019, the Company entered into an additional operating lease agreement for approximately 98,000 square feet of office and laboratory space in San Carlos, California (the “2019 San Carlos Lease”). The contractual term of the 2019 San Carlos Lease is 10.25 years from August 2021 until October 2031. The 2019 San Carlos Lease provides rent abatements and includes a one-time option to extend the lease term for five years. This option to extend the lease term was not determined to be reasonably certain and therefore has not been included in the Company’s calculation of the associated operating lease liability under ASC 842.

The 2019 San Carlos Lease includes monthly base rent amounts escalating over the term of the lease. In addition, the lessor provided for a TIA of up to $14.7 million, which was fully utilized and are recorded in lease obligations.

The Company utilized its incremental borrowing rate to calculate the present value of the lease payments for the 2019 San Carlos Lease based on information available on November 1, 2020, the lease commencement date for accounting purposes, which was the date the Company was deemed to have obtained control of the premises. Calculation of the operating lease liability also included estimated future TIA reimbursements that had not yet been received as of the lease commencement date. TIA reimbursements have been received subsequent to the lease commencement date and are recorded as reductions to the operating lease liability.

Classification of Operating Leases

The 2018 Redwood City Lease and the 2019 San Carlos Lease required security deposits of $0.8 million and $1.5 million, respectively, which the Company satisfied by establishing letters of credit secured by restricted cash. During the second quarter of 2022 and in accordance with the Lease Termination Agreement, the restrictions associated with the $0.8 million security deposit for the 2018 Redwood City Lease were released. As of December 31, 2022, a security deposit of $1.5 million for the 2019 San Carlos Lease was recorded as restricted cash in other long-term assets on the Company's balance sheets.

Variable costs included in the table above represent amounts the Company pays related to property taxes, insurance, maintenance and repair costs.

Cash paid for amounts included in the measurement of the Company’s operating lease liabilities and presented within cash used in operating activities in the statements of cash flows was $6.8 million, $1.7 million and $1.2 million for the years ended December 31, 2022, 2021 and 2020.

Cash received for amounts related to tenant improvement allowances from lessors was $1.3 million, $12.9 million and $0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Operating Lease Obligations

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the lease commencement date. As of December 31, 2022, the weighted-average remaining lease term of the Company’s leases was 9.3 years and the weighted-average discount rate used to determine the operating lease liabilities included on the balance sheet was 8.5%.

As of December 31, 2022, the Company has not been party to any lease agreements containing material residual value guarantees or material restrictive covenants.

Total deferred income tax assets, net of valuation allowance, at December 31, 2022 and 2021 were as follows (in thousands):

A reconciliation of the beginning and ending amount of unrecognized benefits is as follows (in thousands):