Praxis Precision Medicines, Inc.PRAX
Praxis Precision Medicines, Inc. Stock Compensation Disclosure
Stock-Based Compensation
Equity Incentive Plans
In January 2024, the Board of Directors ("the Board") adopted the 2024 Inducement Plan (the "Inducement Plan") without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules ("Rule 5635(c)(4)"). In accordance with Rule 5635(c)(4), the Inducement Plan allows the Company to grant awards only to a newly hired employee who was not previously an employee or non-employee director or to an employee who is being rehired following a bona fide period of non-employment if such award is a material inducement to such employee entering into employment. In January 2025, the number of shares of common stock authorized for issuance under the Inducement plan was increased by 870,000 shares. The total number of shares of common stock authorized for issuance under the Inducement Plan as of December 31, 2025 and 2024 was 1,000,000 and 130,000 shares, respectively.
The total number of shares of common stock authorized for issuance under the 2020 Plan as of December 31, 2025 and December 31, 2024 was 2,941,950 shares and 1,970,833 shares, respectively. The total number of shares of common stock authorized for issuance under the 2017 Stock Incentive Plan (the "2017 Plan") as of December 31, 2025 and 2024 was 395,850 shares. Any authorization to issue new options under the 2017 Plan was cancelled upon the effectiveness of the 2020 Plan and no further awards will be granted under the 2017 Plan.
Stock options issued under the 2024 Inducement, 2020 Plan and 2017 Plan expire ten years from the date of grant. Shares that expire, are terminated, surrendered or canceled under the 2024 Inducement, 2020 Plan and 2017 Plan without having been fully exercised will be available for future awards. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for future awards. Upon stock option exercise, the Company issues new shares and delivers them to the participant.
The total shares authorized for issuance under the 2020 Employee Stock Purchase Plan (the "2020 ESPP") as of December 31, 2025 and 2024 was 369,368 shares and 175,145 shares, respectively. During the years ended December 31, 2025, 2024, and 2023, the Company issued 22,691, 31,381, and 24,690 shares, respectively, under the 2020 ESPP.
Restricted Stock Units
The following table summarizes the Company’s restricted stock unit activity:
| Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Unvested as of December 31, 2024 | 224,473 | $ | 71.71 | ||||||||
| Issued | 414,151 | 67.60 | |||||||||
| Vested | (86,005) | 105.57 | |||||||||
| Forfeited | (50,766) | 55.89 | |||||||||
| Unvested as of December 31, 2025 | 501,853 | $ | 64.12 | ||||||||
As of December 31, 2025, total unrecognized compensation cost related to unvested restricted stock units was $23.7 million, which is expected to be recognized over a weighted-average period of 2.97 years.
The total fair value of restricted stock units that vested during the years ended December 31, 2025 and 2024 was $8.7 million and $1.0 million, respectively.
Stock Options
The following table summarizes the Company’s stock option activity:
| Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| (In years) | (In thousands) | ||||||||||||||||||||||
| Outstanding as of December 31, 2024 | 1,809,343 | $ | 90.84 | 8.47 | $ | 39,989 | |||||||||||||||||
| Granted | 324,670 | 60.03 | |||||||||||||||||||||
| Exercised | (220,261) | 57.01 | $ | 27,608 | |||||||||||||||||||
| Cancelled or Forfeited | (36,974) | 74.65 | |||||||||||||||||||||
| Outstanding as of December 31, 2025 | 1,876,778 | $ | 89.80 | 7.72 | $ | 409,936 | |||||||||||||||||
| Exercisable as of December 31, 2025 | 1,101,369 | $ | 112.82 | 7.11 | $ | 225,671 | |||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 1,876,778 | $ | 89.80 | 7.72 | $ | 409,936 | |||||||||||||||||
The aggregate intrinsic value of stock options exercised for the years ended December 31, 2025 and 2024 was $27.6 million and $1.2 million, respectively. The aggregate intrinsic value of stock options outstanding, exercisable and vested and expected to vest is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at December 31, 2025. The aggregate intrinsic value of stock options exercised is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock on the date of exercise for those stock options that had exercise prices lower than the fair value of the Company’s common stock on the exercise date.
Valuation of Stock Options
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 to employees, members of the Board, and non-employees on the date of grant were as follows for the for the years ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Risk-free interest rate | 4.45 | % | 4.01 | % | 3.60 | % | |||||||||||
| Expected term (in years) | 6.00 | 6.03 | 6.00 | ||||||||||||||
| Expected volatility | 93.08 | % | 96.60 | % | 88.40 | % | |||||||||||
| Expected dividend yield | — | % | — | % | — | % | |||||||||||
| Weighted average grant-date fair value per share | $ | 46.74 | $ | 41.25 | $ | 29.73 | |||||||||||
As of December 31, 2025, total unrecognized compensation cost related to unvested stock options was $30.8 million, which is expected to be recognized over a weighted-average period of 2.10 years.
Stock-Based Compensation
Stock-based compensation expense was allocated as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Research and development | $ | 15,286 | $ | 15,620 | $ | 8,055 | |||||||||||
| General and administrative | 18,655 | 25,740 | 16,802 | ||||||||||||||
| Total stock-based compensation expense | $ | 33,941 | $ | 41,360 | $ | 24,857 | |||||||||||
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.