Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
9 Months Ended
Sep. 30, 2019
Stockholders' Equity  
Stockholders' Equity

5. Stockholders’ Equity

Equity Offerings

ATM Programs

On December 14, 2015, the Company entered into an at the market, or ATM, sales agreement, or the Prior ATM Agreement, with Cowen and Company, LLC, or Cowen, to offer and sell, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $75.0 million through Cowen as its sales agent. Sales under the Prior ATM Agreement are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act of 1933, as amended, or the Securities Act. Under the Prior ATM Agreement, the Company was required to pay Cowen a commission of up to three percent of the gross sales proceeds and provided Cowen with customary indemnification rights. In 2018, the Company issued and sold 11.4 million shares of common stock under the Prior ATM Agreement at a weighted average price per share of $1.80. The net offering proceeds to the Company in 2018 for sales under the Prior ATM Agreement were approximately $20.0 million after deducting related expenses, including commissions. Sales of common stock under the Prior ATM Agreement terminated on June 29, 2018 when the Company’s Registration Statement on Form S-3 (File No. 333-225685), or the Shelf Registration Statement, was declared effective by the SEC. Accordingly, as of September 30, 2019, there was no remaining capacity available under this ATM sales facility.

In June 2018, the Company filed a $175.0 million shelf registration statement that included an ATM sales facility to offer and sell, through Cowen, from time to time at the Company’s sole discretion, shares of its common stock having an aggregate offering price of up to $50.0 million. Sales of the shares of common stock are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act. During 2018, the Company sold approximately 8.5 million shares of its common stock under this facility, at a weighted average share price of $1.60, which yielded net proceeds to the Company of approximately $13.2 million after deducting related expenses, including commissions. The Company terminated sales under this ATM sales facility on April 17, 2019, and the remaining capacity was added back to the aggregate amount available under the Shelf Registration Statement. Accordingly, as of September 30, 2019, there was no remaining capacity available under this ATM sales facility.

 

On April 17, 2019, the Company entered into a Common Stock Sales Agreement with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which the Company may offer and sell through Wainwright, from time to time at the Company’s sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million, or the Current ATM Program. Sales of the shares of common stock are deemed to be “at the market offerings,” as defined in Rule 415 under the Securities Act. The Company intends to use the net proceeds from the offering primarily for the development of its lead product candidate, oliceridine, and for general corporate purposes. The Company did not issue any shares through the Current ATM Program during the quarter ended September 30, 2019. As of September 30, 2019, there was $50.0 million remaining available for future issuances under the Current ATM Program.

Private Placement and Concurrent Warrant Issuance

 

On January 29, 2019, the Company entered into securities purchase agreements with two institutional investors wherein the Company agreed to sell to the investors an aggregate of 10,000,000 shares of its common stock, at an offering price of $1.00 per share, in a registered direct offering made pursuant to the Company’s existing registration statement on Form S-3. The net proceeds to the Company from the offering were approximately $9.2 million, after deducting fees and the expenses of the placement agent.

Pursuant to a letter agreement dated January 28, 2019, the Company engaged H.C. Wainwright & Co., LLC, or Wainwright, to act as its exclusive placement agent in connection with the issuance and sale of the shares. The Company paid Wainwright 7.0% of the aggregate gross proceeds in the offering and $50,000 for certain expenses, and it issued warrants to purchase 500,000 shares of common stock to certain designees of Wainwright. These warrants have a term of five years, are immediately exercisable and have an exercise price of $1.25 per share. The warrants are classified as equity and recorded at fair value as of the date of issuance on the Company’s Consolidated Balance Sheets and no further adjustments to their valuation are made. The letter agreement also includes indemnification obligations of the Company and other provisions customary for transactions of this nature.

Equity Incentive Plans

The Company utilizes equity incentive plans to grant various forms of stock options and restricted stock units, or RSUs, to eligible employees, directors and consultants to the Company. Under all of such plans, the amount, terms of grants and exercisability provisions are determined by the board of directors or its designee. The term of the options may be up to 10 years, and options are exercisable in cash or as otherwise determined by the board of directors. Vesting generally occurs over a period of not greater than four years. For performance-based stock awards, the Company recognizes expense when achievement of the performance factor is probable, over the requisite service period.

The estimated grant-date fair value of the Company’s stock-based awards is amortized on a straight-line basis over the awards’ service periods. Stock-based compensation expense recognized was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

Research and development

 

$

179

 

$

208

 

$

603

 

$

952

 

General and administrative

 

 

589

 

 

526

 

 

1,712

 

 

2,567

 

Total stock-based compensation

 

$

768

 

$

734

 

$

2,315

 

$

3,519

 

 

Stock Options

 

A summary of stock option activity and related information through September 30, 2019 follows:

 

 

 

 

 

 

 

 

 

 

Options Outstanding

 

    

 

    

 

 

    

Weighted 

 

 

 

 

 

 

 

Average 

 

 

 

 

Weighted 

 

Remaining 

 

 

 

 

Average 

 

Contractual 

 

 

Number of 

 

Exercise 

 

Term 

 

 

Shares

 

Price

 

(in years)

Balance, December 31, 2018

 

8,265,207

 

$

3.99

 

6.99

Granted

 

1,033,000

 

 

1.10

 

 

Exercised

 

(30,225)

 

 

0.68

 

 

Forfeited/Cancelled

 

(1,589,561)

 

 

(5.00)

 

 

Balance, September 30, 2019

 

7,678,421

 

$

3.41

 

7.16

Vested or expected to vest at September 30, 2019

 

7,678,421

 

$

3.41

 

7.16

Exercisable at September 30, 2019

 

4,100,616

 

$

4.41

 

5.82

 

The intrinsic value of the options exercisable as of September 30, 2019 was $0.1 million, based on the Company’s closing stock price of $0.97 per share and a weighted average exercise price of $4.41 per share. At September 30, 2019, there was $3.5 million of total unrecognized compensation expense related to unvested options that will be recognized over the weighted average remaining period of 1.97 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s common stock, assumptions related to the expected price volatility of the Company’s common stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s common stock.

The per-share weighted-average grant date fair value of the options granted to employees and directors during the nine months ended September 30, 2019 and 2018 was estimated at $0.70 and $1.18 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

 

 

 

 

 

 

 

 

 

September 30, 

 

 

 

    

2019

    

2018

    

    

Expected term of options (in years)

 

6.1

 

5.8

 

 

Risk-free interest rate

 

1.9

%  

2.7

%  

 

Expected volatility

 

71.9

%  

74.9

%  

 

Dividend yield

 

 0

%  

 0

%  

 

 

Restricted Stock Units

On December 6, 2018, the Company granted 1,255,000 RSUs to employees. The units vest subject to the satisfaction of service requirements as follows: 25% vested on June 1, 2019, 25% vest on December 1, 2019, and the remaining vest on December 6, 2021. The closing price of the Company’s common stock on the date of the grant was $0.64 per share, which is the fair market value per unit of the RSUs. RSU-related expense is recognized on a straight-line basis over the vesting period. Upon vesting, these awards may be settled on a net-exercise basis to cover any required withholding tax with the remaining amount converted into an equivalent number of shares of common stock. There were 94,520 shares of common stock underlying vested RSUs that were withheld during the nine months ended September 30, 2019, based on the value of the RSU awards as determined by the Company’s closing stock price on the applicable vesting date. The shares withheld for taxes are again available for issuance under the plan.

The following is a summary of changes in the status of non-vested RSUs during the year:

 

 

 

 

 

 

 

 

RSUs Outstanding

 

    

 

    

 

 

 

 

 

 

 

 

 

 

 

 

Weighted 

 

 

 

 

Average 

 

 

Number of 

 

Grant Date

 

 

Awards

 

Fair Value

Non-vested at December 31, 2018

 

1,255,000

 

$

0.65

Granted

 

330,000

 

 

0.89

Vested

 

(322,500)

 

 

0.65

Forfeited

 

(237,500)

 

 

0.65

Non-vested at September 30, 2019

 

1,025,000

 

$

0.73

 

For the nine months ended September 30, 2019, the Company recorded $0.3 million in stock-based compensation expense related to RSUs, which is reflected in the statement of operations.

As of September 30, 2019, there was $0.6 million of total unrecognized compensation expense related to unvested RSUs that will be recognized over the weighted average remaining period of 2.19 years.

Shares Available for Future Grant

At September 30, 2019, the Company has the following shares available to be granted under its equity incentive plans:

 

 

 

 

 

 

    

 

    

Inducement 

 

 

2013 Plan

 

Plan

Available at December 31, 2018

 

2,603,983

 

144,125

Authorized

 

3,387,456

 

 —

Granted

 

(1,363,000)

 

 —

Forfeited/Cancelled

 

1,781,030

 

46,031

Available at September 30, 2019

 

6,409,469

 

190,156

 

Shares Reserved for Future Issuance

At September 30, 2019, the Company has reserved the following shares of common stock for issuance:

 

 

 

Stock options outstanding under 2013 Plan

    

7,368,577

Restricted stock units outstanding under 2013 Plan

 

1,025,000

Shares available for future grant under 2013 Plan

 

6,409,469

Stock options outstanding under Inducement Plan

 

309,844

Shares available for future grant under Inducement Plan

 

190,156

Employee stock purchase plan

 

225,806

Warrants outstanding

 

623,091

Total shares of common stock reserved for future issuance

 

16,151,943