Instil Bio, Inc.TIL
Instil Bio, Inc. Stock Compensation Disclosure
Stock-Based Compensation
2021 Equity Incentive Plan
In March 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which became effective in connection with the Company’s initial public offering (“IPO”). The 2021 Plan was approved by the Board of Directors and stockholders in March 2021. The 2021 Plan is an equity incentive plan pursuant to which the Company may grant the following awards: (i) incentive stock options; (ii) nonstatutory stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock unit awards; (vi) performance awards; and (vii) other forms of stock awards to employees, directors, and consultants, including employees and consultants of the Company’s affiliates. The 2021 Plan is a successor to the Company’s 2018 Stock Incentive Plan (the “2018 Plan”). Following the effectiveness of the 2021 Plan, no further grants may be made under the 2018 Plan; however, any outstanding equity awards granted under the 2018 Plan will continue to be governed by the terms of the 2018 Plan.
The number of shares available for future issuance under the 2021 Plan is the sum of (1) 433,000 new shares of common stock, (2) 209,722 remaining shares of common stock reserved under the 2018 Plan that became available for issuance upon the effectiveness of the 2021 Plan and (3) the number of shares of common stock subject to outstanding awards under the 2018 Plan when the 2021 Plan became effective that thereafter expire or are forfeited, canceled, withheld to satisfy tax withholding or to purchase or exercise an award, repurchased by the Company or are otherwise terminated. The number of shares of common stock reserved for issuance under the 2021 Plan will automatically increase on January 1 of each year, for a period of ten years, from January 1, 2022 continuing through January 1, 2031, by 5% 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 Company’s Board of Directors. Stock options granted by the Company to employees generally vest over four years with a one-year cliff.
As of December 31, 2024, 512,993 shares of common stock remained available for issuance under the 2021 Plan.
The following summarizes option activity under the 2021 Plan as of December 31, 2024:
Shares Available for Grant | Shares Issuable Under Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contract Term (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||||||||||||||
Balance, December 31, 2022 | 405,233 | 1,053,997 | $ | 112.25 | 7.22 | $ | 711 | ||||||||||||||||||||||
| Additional shares authorized | — | ||||||||||||||||||||||||||||
Options granted(1) | (271,921) | 271,921 | $ | 12.68 | |||||||||||||||||||||||||
| Options forfeited | 526,296 | (526,296) | $ | 97.80 | |||||||||||||||||||||||||
| Options exercised | — | — | $ | — | |||||||||||||||||||||||||
Balance, December 31, 2023 | 659,608 | 799,622 | $ | 87.90 | 7.18 | $ | 101 | ||||||||||||||||||||||
| Additional shares authorized | 325,196 | ||||||||||||||||||||||||||||
Options granted(1) | (546,800) | 546,800 | $ | 29.19 | |||||||||||||||||||||||||
| Options forfeited | 74,989 | (74,989) | $ | 132.63 | |||||||||||||||||||||||||
| Options exercised | — | (21,974) | $ | 16.64 | |||||||||||||||||||||||||
Balance, December 31, 2024 | 512,993 | 1,249,459 | $ | 60.78 | 7.31 | $ | 4,827 | ||||||||||||||||||||||
Exercisable, December 31, 2024 | 642,832 | $ | 81.70 | 5.77 | $ | 1,972 | |||||||||||||||||||||||
Vested and expected to vest, December 31, 2024 | 642,832 | $ | 81.70 | 5.77 | $ | 1,972 | |||||||||||||||||||||||
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(1) Includes zero and 4,796 stock options during the years ended December 31, 2024 and 2023, respectively, subject to only performance conditions.
The aggregate intrinsic value disclosed in the above table is based on the difference between the exercise price of the stock option and the estimated fair value of the Company’s common stock as of the respective period-end dates. There were 21,974 and zero stock options exercised during the years ended December 31, 2024 and 2023, respectively. The aggregate intrinsic value of stock options exercised was $0.1 million and zero during the years ended December 31, 2024 and 2023, respectively. The weighted-average grant date fair value of stock options granted during the years ended December 31, 2024 and 2023, was $22.85 and $8.74 per share, respectively.
The following table sets forth stock-based compensation included in the Company’s statements of operations and comprehensive loss (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Research and development expense | $ | 2,066 | $ | 1,549 | |||||||
| General and administrative expense | 15,191 | 16,617 | |||||||||
| Total stock-based compensation expense | $ | 17,257 | $ | 18,166 | |||||||
As of December 31, 2024 and 2023, there was $16.6 million and $22.4 million, respectively, of total unrecognized compensation cost related to unvested stock options granted under the 2018 Plan and 2021 Plan, which is expected to be recognized over a weighted average period of 2.25 years and 1.39 years, respectively.
The fair value of the Company’s 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 | ||||||||||||||||||||||
| Expected term (in years) | 5.27 | — | 6.08 | 5.28 | — | 6.08 | |||||||||||||||||
| Expected volatility | 86.92 | % | — | 100.06% | 76.19 | % | — | 77.56% | |||||||||||||||
| Risk-free interest rate | 3.53 | % | — | 4.57% | 3.54 | % | — | 4.01% | |||||||||||||||
| Fair value of common stock | $10.50 | — | $66.10 | $11.18 | — | $15.20 | |||||||||||||||||
| Expected dividend yield | —% | —% | |||||||||||||||||||||
The Black-Scholes option pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. These assumptions include:
Expected term—The expected term represents the period that stock-based awards are expected to be outstanding and is determined as the average of the time-to-vesting and the contractual life of the awards.
Expected volatility—Since the Company is privately held and does not have any trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded biotechnology companies over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle or area of specialty.
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 awards.
Expected dividend yield—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.
Performance Awards
During the years ended December 31, 2024 and 2023, zero and 4,796 stock options were granted to both employees and non-employees based upon performance conditions and strategic transactions. As of December 31, 2023, the 2023 performance grants were expected to be recognized over a weighted average period of 0.37 years. A strategic transaction has been defined as (a) a change in control, or (b) certain corporate and business goals specific to the employee’s performance or employment agreement. Stock-based compensation expense related to awards where performance conditions were achieved for the year ended December 31, 2024 was zero. As of December 31, 2024 and 2023, the Company had zero and $5.1 million of unrecognized compensation cost relating to these performance awards, calculated using the accelerated attribution method and the grant date fair value of the awards, respectively.
Employee Stock Purchase Plan
In March 2021, the Company adopted the Employee Stock Purchase Plan (the “ESPP”), which became effective in connection with the IPO. The ESPP was adopted by the Board of Directors and stockholders in March 2021, but the Company has not yet commenced offerings to employees under the ESPP. The ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 61,850 shares of common stock. The number of shares reserved under the ESPP automatically increases on January 1 of each year through and until January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, and (ii) 123,700 shares; provided, however, that before the date of any such increase, the Board of Directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).
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.