8. Stock-based awards

2019 Stock option and incentive plan

The 2019 Plan was adopted and approved by the Company’s board of directors in May 2019 and by the Company’s stockholders in June 2019. The 2019 Plan became effective on June 18, 2019 and replaced the Company’s 2018 Stock Option and Grant Plan on that date. The 2019 Plan allows the board of directors or the compensation committee of the board of directors to make equity-based incentive awards to the Company’s officers, employees, directors or other key persons (including consultants). The number of shares initially reserved for issuance under the 2019 Plan was 2,572,457, which included the 107,635 shares transferred from the 2018 Plan, and shall be cumulatively increased on each January 1 by 4% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation committee of the board of directors. The 2019 Plan was increased by 2,230,177 shares on January 1, 2024 and by 2,895,320 shares on January 1, 2025.

The 2019 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. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option

may not be greater than ten years. All incentive options granted to any person possessing more than 10% of the total combined voting power of all classes of shares may not have an exercise price of less than 110% of the fair market value of the common stock on the grant date. Stock options granted to employees, officers, members of the board of directors and consultants will typically vest over a four-year period.

Shares that are expired, terminated, surrendered or canceled under the 2019 Plan without having been fully exercised will be available for future awards.

2019 Employee stock purchase plan

The 2019 Employee Stock Purchase Plan (the “2019 ESPP”) was adopted and approved by the Company’s board of directors in May 2019 and by the Company’s stockholders in June 2019. The 2019 ESPP became effective on June 18, 2019, at which time 273,869 shares were reserved for issuance. The 2019 ESPP provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2020 and each January 1 through January 1, 2029, by the least of (i) 1% of the outstanding number of shares of the Company’s common stock on the immediately preceding December 31, (ii) 410,803 shares or (iii) such number of shares as determined by the compensation committee. The 2019 ESPP was increased by 410,803 shares on January 1, 2024 and by 410,803 shares on January 1, 2025.

Stock option valuation

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees, directors and consultants as follows, presented on a weighted average basis:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2025			2024			2025			2024
Expected term (in years)		6.00			5.96			5.98			5.93
Expected volatility		92.24	%		88.06	%		90.02	%		86.38	%
Risk-free interest rate		3.91	%		4.41	%		4.26	%		4.30	%
Expected dividend yield		0.00	%		0.00	%		0.00	%		0.00	%

Stock options

The following table summarizes the Company’s stock option activity since December 31, 2024:


				Weighted-		Weighted-
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
	Number			Price per		Contractual		Value
	of Options			Share		Term (years)		(000’s)
Balance outstanding, December 31, 2024		7,560,449		$	24.38		7.53	$	46,487
Options granted		599,525		$	33.82
Options exercised		(776,334	)	$	17.70
Options cancelled		(33,456	)	$	38.33
Balance outstanding, September 30, 2025		7,350,184		$	25.79		7.13	$	160,294
Vested and expected to vest, September 30, 2025		7,350,184		$	25.79		7.13	$	160,294
Exercisable, September 30, 2025		4,668,824		$	24.43		6.30	$	108,182

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 stock options granted during the three months ended September 30, 2025 and 2024 was $37.60 and $17.56, respectively. Additionally, the weighted average grant-date fair value per share of stock options granted during the nine months ended September 30, 2025 and 2024 was $25.80 and $16.54, respectively.

Restricted Stock Units

The 2019 Plan allows for the grants of Restricted Stock Units (“RSUs”). Generally, the RSUs are subject to a four-year vesting period, vesting in equal quarterly or semi-annual installments over the vesting period.

The following table summarizes the Company’s RSUs activity since December 31, 2024:


				Weighted-		Weighted-
				Average		Average		Aggregate
				Grant Date		Remaining		Intrinsic
	Underlying			Fair Value per		Contractual		Value
	Shares			Share		Term (years)		(000’s)
Balance outstanding, December 31, 2024		715,306		$	27.04		1.74	$	19,900
Granted		178,211		$	39.27
Vested		(163,018	)	$	28.23
Cancelled or forfeited		(5,195	)	$	24.95
Balance outstanding, September 30, 2025		725,304		$	29.79		1.35	$	34,437

The aggregate intrinsic value of RSUs is calculated based of the fair value of the Company’s common stock and the outstanding RSUs.

The weighted average grant-date fair value per share of RSUs granted during the three months ended September 30, 2025 and 2024 was $51.41 and $23.16, respectively. Additionally, the weighted average grant-date fair value per share of RSUs granted during the nine months ended September 30, 2025 and 2024 was $39.27 and $23.46, respectively.

Stock-based compensation

The following table summarizes the Company’s stock-based compensation expense during the three and nine months ended September 30, 2025 and 2024:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Classified within research and development expense	$	3,732	$	2,903	$	10,879	$	8,487
Classified within general and administrative expense		5,529		4,565		16,221		14,035
Total	$	9,261	$	7,468	$	27,100	$	22,522

As of September 30, 2025, total unrecognized compensation cost related to unvested stock options and RSUs was $53,075 and $18,880, respectively. Compensation cost for these unvested stock options and RSUs is expected to be recognized over a weighted average period of 2.46 years and 2.45 years, respectively.

Akero Therapeutics, Inc. 10-Q