Keros Therapeutics, Inc.KROS
Keros Therapeutics, Inc. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
2017 Stock Incentive Plan
The Board adopted the 2017 Stock Incentive Plan (the "2017 Plan") in February 2017, and the stockholders approved the 2017 Plan in March 2017. The 2017 Plan was most recently amended in March 2020.
As of December 31, 2024, there were an aggregate of 477,752 shares of common stock issuable upon the exercise of outstanding options under the 2017 Plan. Any options or awards outstanding under the 2017 Plan remain outstanding and effective.
2020 Equity Incentive Plan
In April 2020, the 2020 Equity Incentive Plan (the "2020 Plan") became effective, and, as a result, no further awards will be made under the 2017 Plan. The 2020 Plan provides for the grant of stock options qualifying as incentive stock options ("ISOs"), to employees and for the grant of nonstatutory stock options ("NSOs"), restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to employees, consultants and directors. The 2020 Plan also provides for the grant of performance cash awards to employees, consultants and directors. Any previously granted awards under the 2017 Plan will remain outstanding in accordance with their respective terms.
Under the 2020 Plan, there is an annual increase on January 1 of each year from January 1, 2021 continuing through January 1, 2030, by 4.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board. On January 1, 2023, the Company increased the number of shares available for future grant under the 2020 Plan by 1,101,738 shares. On January 1, 2024, the Company increased the number of shares available for future grant under the 2020 Plan by 1,273,643 shares. On January 1, 2025, the Company increased the number of shares available for future grant under the 2020 Plan by 1,622,188 shares. The awards granted under the 2020 Plan typically vest over a four-year period and have a 10-year contractual term.
As of December 31, 2024, there were an aggregate of 4,907,008 shares of common stock issuable upon the exercise of outstanding options under the 2020 Plan. Additionally, there were an aggregate of 861,617 shares reserved for future issuance under the 2020 Plan, including shares forfeited from the 2017 Plan.
2020 Employee Stock Purchase Plan
In March 2020, the Board adopted and the Company's stockholders approved the 2020 Employee Stock Purchase Plan ("ESPP"). The ESPP became effective on April 7, 2020. Under the ESPP, eligible employees can purchase shares of the Company's common stock, based on a percentage of their compensation, subject to certain limits. The purchase price per share is equal to the lower of 85% of the fair market value of the Company's common stock on the first trading day of the twenty-four month offering period, or on the applicable purchase date. Each offering under the ESPP consists of two twelve-month purchase periods.
Under the ESPP, there is an annual increase on January 1 of each year from January 1, 2021 continuing through January 1, 2030, by the lesser of (i) 1.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (ii) 455,852 shares or (iii) or a lesser number of shares as may be determined by the Board. On January 1, 2025, the Company increased the number of shares available for future grant under the ESPP by 405,547 shares. If purchase rights granted under the ESPP terminate without having been exercised, the shares of our common stock not purchased under such purchase rights will again become available for issuance under the ESPP.
As of December 31, 2024, no shares of common stock were purchased under the ESPP. As of December 31, 2024, there was an aggregate of 1,247,861 shares reserved for future issuance under the ESPP.
Stock Option Valuation
The weighted-average assumptions that the Company used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted for the years ended December 31, 2024, 2023, and 2022 were as follows:
| YEAR ENDED DECEMBER 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
Risk-free interest rate | 4.30 | % | 3.96 | % | 2.24 | % | |||||||||||
| Expected term (in years) | 5.91 | 6.05 | 6.06 | ||||||||||||||
| Expected volatility | 81.92 | % | 81.34 | % | 83.03 | % | |||||||||||
| Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||||
A summary of option activity during the year ended December 31, 2024 is as follows (in thousands except share and per share data):
| NUMBER OF OPTIONS | WEIGHTED- AVERAGE EXERCISE PRICE | WEIGHTED-AVERAGE REMAINING CONTRACTUAL TERM (IN YEARS) | AGGREGATE INTRINSIC VALUE | ||||||||||||||||||||
| Outstanding as of January 1, 2024 | 4,394,807 | $ | 36.08 | 7.31 | $ | 46,319 | |||||||||||||||||
| Granted | 1,643,300 | 57.07 | |||||||||||||||||||||
| Exercised | (398,525) | 30.47 | $ | 10,126 | |||||||||||||||||||
| Cancelled or forfeited | (227,762) | 50.47 | |||||||||||||||||||||
| Expired | (27,060) | 56.52 | |||||||||||||||||||||
| Outstanding as of December 31, 2024 | 5,384,760 | $ | 42.19 | 7.18 | $ | 7,395 | |||||||||||||||||
| Options exercisable as of December 31, 2024 | 2,903,204 | $ | 32.52 | 5.90 | $ | 7,395 | |||||||||||||||||
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.
The weighted-average grant date fair value per share of options granted during each of the years ended December 31, 2024, 2023, and 2022 was $40.92, $35.24 and $31.18, respectively. As of December 31, 2024, there was $82.0 million of unrecognized stock-based compensation expense related to unvested stock options, including 4.9 million of unrecognized stock-based compensation expense related to unvested performance-based stock options. The unrecognized stock-based compensation expense is estimated to be recognized over a period of 2.49 years.
Stock-Based Compensation Expense
Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees during the years ended December 31, 2024, 2023 and 2022 is as follows (in thousands):
| YEAR ENDED DECEMBER 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Research and development | $ | 18,294 | $ | 14,082 | $ | 8,205 | |||||||||||
| General and administrative | 16,578 | 14,681 | 10,477 | ||||||||||||||
| Total stock-based compensation expense | $ | 34,872 | $ | 28,763 | $ | 18,682 | |||||||||||
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.