Allogene Therapeutics, Inc.ALLO
Allogene Therapeutics, Inc. Stock Compensation Disclosure
Stock-Based Compensation
2018 Equity Incentive Plan
In June 2018, the Company adopted its 2018 Equity Incentive Plan (Prior 2018 Plan). The Prior 2018 Plan provided for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the Company’s Board of Directors and consultants of the Company under terms and provisions established by the Company’s Board of Directors. In September 2018, the Board of Directors adopted a new amended and restated 2018 Equity Incentive Plan as a successor to and continuation of the Prior 2018 Plan, which became effective in October 2018 (the 2018 Plan), which authorized additional shares for issuance and provided for an automatic annual increase to the number of shares issuable under the 2018 Plan by an amount equal to 5% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The term of any stock option granted under the 2018 Plan cannot exceed 10 years. The Company generally grants stock-based awards with service conditions only. Options granted typically vest over a four-year period but may be granted with different vesting terms. Restricted Stock Units granted typically vest annually over a four-year period but may be granted with different vesting terms. Options shall not have an exercise price less than 100% of the fair market value of the Company’s common stock on the grant date. If the individual possesses more than 10% of the combined voting power of all classes of stock of the Company, the exercise price
shall not be less than 110% of the fair market value of a common share of stock on the date of grant. This requirement is applicable to incentive stock options only.
As of December 31, 2024 and 2023, there were 8,838,676 and 6,468,650 shares reserved by the Company under the 2018 Plan for the future issuance of equity awards.
Stock Option Exchange Program
On June 21, 2022, the Company commenced an offer to exchange certain eligible options held by eligible employees of the Company for new options (the Exchange Offer). The Exchange Offer expired on July 19, 2022. Pursuant to the Exchange Offer, 199 eligible holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 3,666,600 shares of the Company’s common stock, representing approximately 93.5% of the total shares of common stock underlying the eligible options. On July 19, 2022, immediately following the expiration of the Exchange Offer, the Company granted new options to purchase 3,666,600 shares of common stock, pursuant to the terms of the Exchange Offer and the 2018 Plan. The exercise price of the new options granted pursuant to the Exchange Offer was $13.31 per share, which was the closing price of the common stock on the Nasdaq Global Select Market on the grant date of the new options. The new options are subject to a new three-year vesting schedule, vesting in equal annual installments over the vesting term. Each new option has a maximum term of seven years.
The exchange of stock options was treated as a modification for accounting purposes. The incremental expense of $5.2 million for the modified options was calculated using a lattice option pricing model. The incremental expense and the unamortized expense remaining on the exchanged options as of the modification date are being recognized over the new three-year service period.
Stock Option Activity
The following summarizes option activity under the 2018 Plan:
| Outstanding Options | |||||||||||||||||||||||
Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contract Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||||||||
| Balance, December 31, 2023 | 21,812,946 | $ | 9.93 | 7.53 | $ | 662 | |||||||||||||||||
| Options granted | 6,211,389 | 3.08 | 8.69 | ||||||||||||||||||||
| Options exercised | (357,993) | 2.27 | $ | 597 | |||||||||||||||||||
| Options forfeited | (3,481,458) | 10.93 | |||||||||||||||||||||
| Balance, December 31, 2024 | 24,184,884 | $ | 8.14 | 7.53 | $ | 1 | |||||||||||||||||
| Exercisable, December 31, 2024 | 17,673,060 | $ | 9.63 | 7.11 | $ | — | |||||||||||||||||
| Vested and expected to vest, December 31, 2024 | 24,184,884 | $ | 8.14 | 7.53 | $ | — | |||||||||||||||||
The aggregate intrinsic values of options exercised, outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on the Nasdaq Global Select Market on December 31, 2024. The aggregate intrinsic value of options exercised during the years ended December 31, 2024 and 2023 was $0.6 million and $2.3 million, respectively. During the years ended December 31, 2024 and 2023, the estimated weighted-average grant-date fair value of employee options granted was $2.05 per share and $3.33 per share, respectively. As of December 31, 2024 and 2023, there was $35.5 million and $58.1 million, respectively, of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.85 years and 2.42 years, respectively.
The fair value of employee, consultant and director stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Fair value of common stock | $1.40 - $3.32 | $2.72 - $7.23 | |||||||||
| Expected term in years | 5.02 - 6.25 | 5.27 - 6.08 | |||||||||
| Expected volatility | 72.85% - 74.09% | 73.18% - 74.10% | |||||||||
| Expected risk-free interest rate | 3.42% - 4.32% | 3.45% - 4.61% | |||||||||
| Expected dividend | 0% | 0% | |||||||||
The Black-Scholes option-pricing model and the lattice option pricing model require the use of subjective assumptions which determine the fair value of stock-based awards. These assumptions include:
Fair value of common stock— For all grants subsequent to the Company’s IPO in October 2018, the fair value of common stock was determined by taking the closing price per share of common stock per Nasdaq.
Expected term— The expected term represents the period that stock-based awards are expected to be outstanding. The expected term for option grants is determined using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the stock-based awards.
Expected volatility— Prior to November 2024, the Company used an average historical stock price volatility of comparable public companies within the biotechnology and pharmaceutical industry that were deemed to be representative of future stock price trends as the Company does not have sufficient trading history for its common stock. For grants subsequent to October 2024, the Company uses an average historical stock price volatility of its common stock as it accumulated sufficient historical stock price data.
Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.
Expected dividend—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.
Expected exercise barrier - The modified options are assumed to be exercised upon vesting and when the ratio of stock market price to exercise price reaches 2.57, or expiration, whichever is earlier.
Restricted Stock Unit Activity
The following summarizes restricted stock unit activity under the 2018 Plan:
| Outstanding Restricted Stock Units | |||||||||||||||||||||||
| Restricted Stock Units | Weighted- Average Grant Date Fair Value per Share | Weighted Average Remaining Vesting Life | Aggregate Intrinsic Value | ||||||||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||||||||
| Unvested December 31, 2023 | 12,180,471 | $ | 6.68 | 2.00 | $ | 39,099 | |||||||||||||||||
| Granted | 5,625,325 | 3.94 | 1.24 | ||||||||||||||||||||
| Vested | (2,168,832) | 9.48 | |||||||||||||||||||||
| Forfeited | (2,293,171) | 7.82 | |||||||||||||||||||||
| Unvested December 31, 2024 | 13,343,793 | $ | 4.87 | 1.58 | $ | 28,422 | |||||||||||||||||
| Vested and expected to vest, December 31, 2024 | 13,343,793 | $ | 4.87 | 1.58 | $ | 28,422 | |||||||||||||||||
For the year ended December 31, 2024, the Company granted 35,000 performance-based restricted stock units to certain executive officers and other employees pursuant to the 2018 Plan. These awards are subject to the holders' continuous
service to the Company through each applicable vesting event. Through December 31, 2024, the Company believes that the achievement of the requisite performance conditions for these awards are not probable. As a result, no compensation expense has been recognized related to the performance-based restricted stock units in the year ended December 31, 2024. The Company recognized $2.4 million and $2.2 million in stock-based compensation expense related to the restricted units with a market condition for the years ended December 31, 2024 and 2023, respectively.
For the years ended December 31, 2024 and 2023, total fair value of vested restricted stock units, performance based restricted stock units and restricted stock units with a market condition as of their grant dates was $20.6 million, and $33.3 million, respectively. As of December 31, 2024 and 2023, there was $33.7 million and $50.7 million, respectively, of unrecognized stock-based compensation which is expected to be recognized over a weighted average period of 2.10 years and 2.36 years, respectively.
Employee Stock Purchase Plan
In October 2018, the stockholders approved the 2018 Employee Stock Purchase Plan (ESPP), which initially reserved 1,160,000 shares of the Company's common stock for employee purchases under terms and provisions established by the Board of Directors. Effective January 1, 2024 and 2023, the number of shares authorized under the ESPP for employee purchases increased by 1,686,422 and 1,444,383 shares, respectively. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code. Under the current offering adopted pursuant to the ESPP, each offering period is approximately 24 months, which is generally divided into four purchase periods of approximately six months.
Employees are eligible to participate if they are employed by the Company. Under the ESPP, employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of common stock on the first trading day of each offering period or on the purchase date. The ESPP provides for consecutive, overlapping 24-month offering periods. The offering periods are scheduled to start on the first trading day on or after March 16 or September 16 of each year, except for the first offering period which commenced on October 11, 2018, the first trading day after the effective date of the Company’s registration statement. Contributions under the ESPP are limited to a maximum of 15% of an employee’s eligible compensation.
The fair values of the rights granted under the ESPP were calculated using the following assumptions:
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Expected term (in years) | 0.50 – 2.00 | 0.50 – 2.00 | |||||||||
| Volatility | 76.16% – 88.69% | 67.32% – 85.05% | |||||||||
| Risk-free interest rate | 3.49% – 5.25% | 4.05% – 5.35% | |||||||||
| Dividend yield | 0% | 0% | |||||||||
Stock-based compensation expense
The following table presents stock-based compensation expense by award type that was recorded as research development and general and administrative expense in its consolidated statements of operations and comprehensive loss:
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Stock options | $ | 27,817 | $ | 34,350 | ||||||||||
| Restricted stock units, performance based restricted stock units and restricted stock units with a market condition | 21,997 | 28,497 | ||||||||||||
| Employee stock purchase plan | 1,929 | 3,104 | ||||||||||||
| Total stock-based compensation expense | $ | 51,743 | $ | 65,951 | ||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 13, 2025 | Showing above |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 8, 2019 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.