NextCure, Inc. Stock Compensation Disclosure
11. Stock-Based Compensation
Employee Equity Plans
The NextCure, Inc. 2015 Omnibus Incentive Plan (the “2015 Plan”) was adopted in December 2015 and provides for the grant of awards of stock options, restricted stock awards, unrestricted stock awards and restricted stock units to employees, consultants and directors of the Company. The 2015 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors.
On May 3, 2019, the Company’s stockholders approved the NextCure, Inc. 2019 Omnibus Incentive Plan (as amended, the “2019 Plan”), which became effective on May 8, 2019, the date on which the Company’s Registration Statement on Form S-1 (Reg. No. 333-230837) was declared effective (the “Effective Date”). The Company’s board of directors (the “Board”) determined not to make additional awards under the 2015 Plan following the effectiveness of the 2019 Plan. The 2019 Plan provides for the grant of awards of stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards and cash bonus awards to the Company’s officers, employees, non-employee directors and other key persons (including consultants). The number of shares of common stock reserved for issuance under the 2019 Plan is 2,900,000 plus the number of shares of stock related to awards outstanding under the 2015 Plan that subsequently terminate by expiration or forfeiture, cancellation or otherwise without the issuance of such shares. The number of shares reserved for issuance under the 2019 Plan will automatically increase each January 1st during the term of the 2019 Plan by 4% of the number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year or such lesser number of shares determined by the Board.
As of December 31, 2024, 1,266,983 shares were reserved for future issuance under the 2019 Plan.
Stock options granted under the 2015 Plan and 2019 Plan (together, the “Plans”) to employees generally vest over four years and expire after 10 years.
A summary of stock option activity for awards under the Plans is presented below:
Options Outstanding and Exercisable | ||||||||||
Weighted | ||||||||||
Weighted | Average | Aggregate | ||||||||
Average | Remaining | Intrinsic | ||||||||
Number of | Exercise | Contractual | Value(1) | |||||||
| Shares |
| Price |
| Life (Years) |
| (in thousands) | |||
Outstanding as of January 1, 2023 | 5,262,179 | $ | 11.44 | 7.6 | $ | 115 | ||||
Granted |
| 2,074,750 | $ | 1.55 |
| — |
| — | ||
Exercised | (5,057) | $ | 0.99 | — | — | |||||
Forfeitures | (514,770) | $ | 6.25 | — | — | |||||
Outstanding as of December 31, 2023 |
| 6,817,102 | $ | 8.83 |
| 7.3 | $ | 52 | ||
Granted | 2,984,150 | $ | 1.65 | — | — | |||||
Exercised | (14,585) | $ | 1.55 | — | — | |||||
Forfeitures | (930,144) | $ | 3.48 | — | — | |||||
Outstanding as of December 31, 2024 | 8,856,523 | $ | 6.99 | 7.1 | 22 | |||||
Exercisable as of December 31, 2024 |
| 5,078,882 | $ | 10.59 |
| 5.8 | $ | 22 | ||
(1) | The aggregate 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 were in the money at December 31, 2024 and 2023. |
The weighted average grant date fair value per share of stock options granted during the years ended December 31, 2024 and 2023 was $1.19 and $1.11 respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2024 and 2023 was $9,000 and $3,000, respectively.
The aggregate grant date fair value of stock options and restricted stock vested during the year ended December 31, 2024 and 2023 was approximately $5.1 million and $9.1 million, respectively.
On May 3, 2019, the Company’s stockholders approved the NextCure, Inc. 2019 Employee Stock Purchase Plan (the “ESPP”), which became effective on the Effective Date. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code. A total of 240,000 shares of common stock were reserved for issuance under this plan. In addition, the number of shares of common stock that may be issued under the ESPP will automatically increase each January 1st until expiration of the ESPP, in an amount equal to the lesser of (i) 1% of the number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, (ii) 480,000 shares of common stock and (iii) a number of shares of common stock determined by the administrator of the ESPP. As of December 31, 2024, 244,938 shares of common stock had been issued pursuant to the ESPP and 824,772 shares were reserved for future issuance thereunder.
Stock-Based Compensation
The Company recorded stock-based compensation expense of $6.3 million and $8.2 million during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, there was $3.9 million of unrecognized compensation cost related to unvested stock-based compensation arrangements granted under the Plans. This remaining compensation expense is expected to be recognized over a weighted-average period of 1.6 years as of December 31, 2024.
Stock-based compensation expense recorded as research and development and general and administrative expenses is as follows:
December 31, | ||||||
(in thousands) | 2024 |
| 2023 | |||
Research and development | $ | 2,756 | $ | 2,924 | ||
General and administrative |
| 3,579 |
| 5,264 | ||
Total stock-based compensation expense | $ | 6,335 | $ | 8,188 | ||
The assumptions used in the Black-Scholes option-pricing model for stock options granted were as follows:
Year Ended | |||||||
December 31, | |||||||
| 2024 |
| 2023 | ||||
Expected term |
| 5.8 | years | 6.1 | years | ||
Expected volatility |
| 83.3 | % | 81.4 | % | ||
Risk free interest rate |
| 3.6 - 4.7 | % | 3.5 - 4.1 | % | ||
Expected dividend yield |
| — | % | — | % | ||
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.