8. Stock-Based Compensation

In 2014, the Company’s Board of Directors (the “Board”) and stockholders approved and adopted the Company’s 2014 Stock Plan (the “2014 Plan”). The 2014 Plan permitted the grant of options and restricted stock awards (including restricted stock purchase rights and restricted stock bonus awards). The 2014 Plan was terminated on the date the Company’s 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and since that date, no additional awards have been or will be made pursuant to the 2014 Plan. However, any outstanding awards granted under the 2014 Plan will remain outstanding, subject to the terms of the 2014 Plan award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms.

In 2020, the Board and the Company’s stockholders approved and adopted the 2020 Plan. The 2020 Plan permits the grant of options, restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards. The maximum number of shares of common stock that were initially issuable under the 2020 Plan was a number not to exceed 6,494,510 shares of the Company’s common stock, which is the sum of (i) 2,152,080 new shares, plus (ii) an additional number of shares not to exceed 4,342,430 shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the 2014 Plan that, on or after the date on which the 2020 Plan became effective, terminated or expired prior to exercise or settlement; were not issued because the award was settled in cash; were forfeited because of the failure to vest; or were reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2021 and continuing through January 1, 2030, in an amount equal to the lesser of (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Board no later than December 31 of the immediately preceding year.

In 2022, the Board approved and adopted the Company’s 2022 Inducement Plan (the “2022 Inducement Plan”). Under the 2022 Inducement Plan, initially 2,000,000 shares of common stock were reserved for issuance. In December 2024, the Compensation Committee of the Board approved an increase of an additional 3,000,000 shares of common stock reserved for issuance under the 2022 Inducement Plan, which increase was made effective as of January 1, 2025. The 2022 Inducement Plan permits the grant of options, restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The exercise price for each option and stock appreciation right shall be established at the discretion of the Board, provided that the exercise price of a stock option will not be less than 100% of the fair market value of the Company’s common stock on the date of grant. Specific vesting for stock options and stock appreciation rights is service related and determined in each award agreement, where stock options and stock appreciation rights are fully vested at the grant date or follow a graded vesting schedule. Stock options and stock appreciation rights granted under the plans generally expire ten years after the date of grant.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company lacks company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies in addition to its own historical volatility. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is 0% since the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan and the 2022 Inducement Plan were as follows, presented as a weighted-average:


	Years Ended December 31,
	2025			2024
Risk-free interest rate		4.07	%		3.91	%
Expected term (in years)		6.04			6.03
Expected volatility		78.18	%		85.00	%
Expected dividend yield		—			—

Stock Option Activity

The following table summarizes the stock option activity under the 2014 Plan, the 2020 Plan and the 2022 Inducement Plan:


						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
						(in years)		(in thousands)
Outstanding as of December 31, 2024		11,353,057		$	10.28		6.37	$	7,519
Granted		5,030,060			5.06		—		—
Exercised¹		(1,412,406	)		6.45		—		—
Forfeited and cancelled		(541,172	)		8.92		—		—
Outstanding as of December 31, 2025		14,429,539		$	8.89		7.40	$	235,660

Options vested and exercisable as of December 31, 2025		7,459,442		$	10.36		6.08	$	112,222
Options expected to vest as of December 31, 2025		6,970,097		$	7.32		8.82	$	123,438

(1)

Exercised amount includes shares returned for taxes withheld for exercise and net transactions.

The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2025 and 2024 was $3.56 and $10.40, respectively. For the years ended December 31, 2025 and 2024, there were 2,519,878 and 2,213,715 shares vested, respectively. The weighted-average grant-date fair value per share of options vested during the years ended December 31, 2025 and 2024 was $7.93 and $6.58, respectively. The total fair value of options vested during the years ended December 31, 2025 and 2024 was $20.0 million and $14.6 million, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2025 and 2024 was $24.2 million and $3.3 million, respectively.

As of December 31, 2025, the total unrecognized compensation expense related to unvested options was $32.1 million, which the Company expects to recognize over an estimated weighted average period of 2.58 years.

Restricted Stock Awards

Restricted stock awards ("RSAs") granted under the 2014 Plan were fully vested as of December 31, 2024. The total grant-date fair value of RSAs that vested during 2024 was $0.2 million, which was recognized as stock-based compensation expense during that period. As of December 31, 2024, there was no unrecognized compensation expense related to RSAs.

Performance-Based Restricted Stock Unit Awards

In November 2022, the Company granted to certain employees 710,000 shares of performance-based restricted stock unit awards (the "PSUs") under the 2020 Plan as consideration for services subject to performance conditions with grant-date fair value measured using the closing price of the Company's common stock. Vesting of the awards was contingent upon certification by the Compensation Committee of the achievement of defined performance goals.

Under the original terms, 35% and 65% of the PSUs were eligible to vest upon achievement of performance goals by June 30, 2024. The performance condition for the 35% tranche was achieved and certified in 2023, and the related stock-based compensation expense of $0.7 million was recognized in that period. In June 2024, the Compensation Committee extended the performance period for the remaining 65% tranche to December 31, 2024. The performance goal for this tranche was achieved and certified as of December 31, 2024, resulting in $1.4 million of stock-based compensation expense recognized in 2024. All PSUs were fully vested as of December 31, 2024.

2020 Employee Stock Purchase Plan

In 2020, the Board and the Company’s stockholders approved and adopted the ESPP. The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP. The price of the common stock purchased under the ESPP is equal to the lesser of (i) 85% of the fair market value of a share of the Company’s common stock on the first day of an offering; or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. Each offering period is not to exceed 27 months and will include one or more purchase periods (each a Purchase Period) as approved by the Board in the offering. A total of 430,416 shares of common stock were initially reserved for issuance pursuant to the ESPP. Subsequently, the number of shares of the Company’s common stock reserved for issuance under the ESPP automatically increases on January 1 of each year for a period of up to ten years, commencing on January 1, 2021 and continuing through January 1, 2030, in amount equal to the lesser of (i) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (ii) 860,832 shares of common stock, or (iii) a lesser number of shares determined by the Board no later than December 31 of the preceding calendar year.

The ESPP is a compensatory plan as defined by the authoritative guidance for stock-based compensation. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock offered under the ESPP. Stock-based compensation expense related to the ESPP was $0.5 million and $0.6 million for the years ended December 31, 2025 and 2024, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense related to awards granted under the 2014 Plan, the 2020 Plan, the ESPP and the 2022 Inducement Plan was classified in the consolidated statements of operations and comprehensive loss as follows (in thousands):


	Years Ended December 31,
	2025		2024
Research and development	$	12,164	$	16,543
General and administrative		5,422		6,039
Total	$	17,586	$	22,582

Olema Pharmaceuticals, Inc. 10-K