Enliven Therapeutics Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk factors” included elsewhere in this Annual Report on Form 10-K.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk factors” included elsewhere in this Annual Report on Form 10-K.

Previous wording

We are a clinical-stage biopharmaceutical company focused on the discovery and development of small molecule inhibitors to help patients with cancer not only live longer, but live better. We aim to address existing and emerging unmet needs with a precision oncology approach that improves survival and enhances overall patient well-being. Our discovery process combines deep insights in clinically validated biological targets and differentiated chemistry with the goal of designing therapies for unmet needs. By combining clinically validated targets and specific target product profiles with disciplined clinical trial design and regulatory strategy, we aim to develop drugs with an increased probability of clinical and commercial success. Clinically validated targets refers to biological targets that have demonstrated statistical significance on efficacy endpoints in published third-party clinical trials which we believe supports the development of our product candidates by increasing our probability of success. We have assembled a team of seasoned drug hunters with significant expertise in discovery and development of small molecule kinase inhibitors. Our team includes leading chemists who have been the primary or co-inventor of over 20 product candidates that have been advanced to clinical trials, including four FDA-approved products: Koselugo (selumetinib), Mektovi (binimetinib), Tukysa (tucatinib), and Retevmo (selpercatinib). We are currently advancing two parallel lead product candidates, ELVN-001 and ELVN-002, as well as pursuing several additional research stage opportunities that align with our development approach. We also nominated our third product candidate in the second quarter of 2023.

Current wording

We are a clinical-stage biopharmaceutical company focused on the discovery and development of small molecule therapeutics to help people not only live longer, but live better. We aim to address existing and emerging unmet needs with a precision oncology approach that improves survival and enhances overall well-being. Our discovery process combines deep insights in clinically validated biological targets and differentiated chemistry with the goal of designing therapies for unmet needs. By combining clinically validated targets and specific target product profiles with disciplined clinical trial design and regulatory strategy, we aim to develop drugs with an increased probability of clinical and commercial success. Clinically validated targets refers to biological targets that have demonstrated statistical significance on efficacy endpoints in published third-party clinical trials. We have assembled a team of seasoned drug hunters with significant expertise in discovery and development of small molecule therapeutics. Our team includes leading chemists who have been the primary or co-inventors of over 20 product candidates that have been advanced to clinical trials, including four FDA-approved products at their prior companies: Koselugo (selumetinib), Mektovi (binimetinib), Tukysa (tucatinib), and Retevmo (selpercatinib). We are currently advancing two product candidates, ELVN-001 and ELVN-002, as well as pursuing several additional research stage opportunities that align with our development approach.

Previous wording

To date, Former Enliven funded its operations primarily through private placements of its convertible preferred stock and sale of common stock. Former Enliven raised aggregate gross proceeds of $140.5 million from these private placements and an aggregate of $164.5 million in gross proceeds from the sale of common stock in the Former Enliven pre-closing financing (the “Financing Transaction”). As of December 31, 2023, we had cash, cash equivalents and marketable securities of $253.1 million. Based on our current operating plan, our existing cash, cash equivalents and marketable securities will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months from the date of the filing of this Form 10-K.

Current wording

Former Enliven funded its operations primarily through private placements of its convertible preferred stock and sale of common stock, raising aggregate gross proceeds of $140.5 million from these private placements and an aggregate of $164.5 million in gross proceeds from the sale of common stock in the Former Enliven pre-closing financing (the “Financing Transaction”). In March 2024, we sold in the Private Placement common stock and Pre-Funded Warrants, resulting in aggregate gross proceeds of $90.0 million. Through December 31, 2024, we have sold shares of our common stock pursuant to the Sales Agreement and received gross proceeds of $40.0 million. As of December 31, 2024, we had cash, cash equivalents and marketable securities of $313.4 million.

Previous wording

As of December 31, 2023, we had an accumulated deficit of $154.4 million. We have incurred significant losses and negative cash flows from operations since inception, including net losses of $71.6 million and $37.7 million for the years ended December 31, 2023 and 2022, respectively. We expect that our operating losses and negative operating cash flows will continue for the foreseeable future as we continue to develop our product candidates.

Current wording

As of December 31, 2024, we had an accumulated deficit of $243.5 million. We have incurred significant losses and negative cash flows from operations since inception, including net losses of $89.0 million and $71.6 million for the years ended December 31, 2024 and 2023, respectively. We expect that our operating losses and negative operating cash flows will continue for the foreseeable future as we continue to develop our product candidates.

Previous wording

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors including the timing and scope of our research and development activities. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities as we:

Current wording

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on a variety of factors including the timing and scope of our research and development activities. We expect our expenses and capital requirements will increase substantially in connection with our ongoing activities, if and as we:

Previous wording

contract to manufacture any approved product candidates;

Current wording

contract to manufacture any clinical product candidates as well as approved product candidates; for example, we expect to manufacture certain of our product candidates in additional countries including countries in Europe, which we expect to increase the cost of manufacturing our product candidates;

Previous wording

On October 13, 2022, we entered into the Merger Agreement with Former Enliven and Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged with and into Former Enliven, with Former Enliven continuing as our wholly owned subsidiary and the surviving corporation of the Merger. The Merger was intended to qualify for U.S. federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). In the event that Former Enliven stockholders, including stockholders that participated in the Financing Transaction where an aggregate of $164.5 million of common stock of Former Enliven was purchased, were in “control” of us immediately after the Merger (within the meaning of Section 368(c) of the Code), the Merger was also intended to qualify as a non-taxable exchange of shares of Former Enliven common stock for shares of our common stock within the meaning of Section 351(a) of the Code.

Current wording

On October 13, 2022, we entered into the Merger Agreement with Former Enliven and Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged with and into Former Enliven, with Former Enliven continuing as our wholly owned subsidiary and the surviving corporation of the Merger. The Merger was intended to qualify for U.S. federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the IRC. In the event that Former Enliven stockholders, including stockholders that participated in the Financing Transaction where an aggregate of $164.5 million of common stock of Former Enliven was purchased, were in “control” of us immediately after the Merger (within the meaning of Section 368(c) of the IRC), the Merger was also intended to qualify as a non-taxable exchange of shares of Former Enliven common stock for shares of our common stock within the meaning of Section 351(a) of the IRC.

Previous wording

We are monitoring macroeconomic and geopolitical developments, such as inflation, instability in the banking and financial sector, tightening of the credit markets, the Russia-Ukraine and Israel-Hamas conflicts, and COVID-19, so that we may be prepared to react to new developments as they arise.

Current wording

We are monitoring macroeconomic and geopolitical developments, such as inflation, instability in the banking and financial sector, tightening of the credit markets, the Russia-Ukraine conflict, widening conflict in the Middle East, public health emergencies/epidemics and the new presidential administration, so that we may be prepared to react to new developments as they arise.

Previous wording

The extent of the impact of these developments on our business, operations and research and development timelines and plans remains uncertain and will depend on numerous factors, including the impact, if any, on our personnel, the responses of governmental entities, and the responses of third parties, such as CROs, CMOs and other third parties with whom we do business. Any prolonged material disruption to our employees or suppliers could adversely impact our development activities, financial condition and results of operations, including our ability to obtain financing. As a result of COVID-19, Pharmaron, a contract research organization that we use to conduct preclinical studies and clinical trials and provide us with APIs, has previously experienced delays, which resulted in minor delays in our preclinical studies. For more information regarding the risks related to macroeconomic and geopolitical developments, see the section titled “Risk Factors” found elsewhere in this Annual Report on Form 10-K.

Current wording

The extent of the impact of these developments on our business, operations and research and development timelines and plans remains uncertain and will depend on numerous factors, including the impact, if any, on our personnel, the responses of governmental entities, and the responses of third parties, such as CROs, CMOs and other third parties with whom we do business. Any prolonged material disruption to our employees or suppliers could adversely impact our development activities, financial condition and results of operations, including our ability to obtain financing. For more information regarding the risks related to macroeconomic and geopolitical developments, see the section titled “Risk Factors” found elsewhere in this Annual Report on Form 10-K.

Previous wording

payments to third parties in connection with the development of our product candidates, including agreements with third parties such as CROs and consultants;

Current wording

payments to third parties in connection with the development of our product candidates, including agreements with third parties such as CROs, CMOs and consultants;

Previous wording

We expense research and development expenses in the periods in which they are incurred. At any one time, we are working on multiple programs, and we do not track our research and development expenses on a program specific basis. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs. External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. We utilize CROs for our research and development activities and CMOs for our manufacturing activities, and we do not have our own manufacturing facilities.

Current wording

We expense research and development expenses in the periods in which they are incurred. At any one time, we are working on multiple programs. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs. External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. We utilize CROs for our research and development activities and CMOs for our manufacturing activities, and we do not have our own manufacturing facilities.

Previous wording

our ability to acquire drug supply for any combination products and the cost of such drug supply;

Current wording

our ability to acquire drug supply for any products, the cost of such drug supply, and any delays in connection with obtaining such drug supply;

Previous wording

our arrangements with our CMOs and CROs;

Current wording

our arrangements with our CMOs and CROs, including transitioning from existing CMOs to CMOs in additional countries, including countries in Europe;

Previous wording

the impact of any business interruptions to our operations or to those of the third parties with whom we work, particularly in light of the COVID-19 pandemic environment;

Current wording

the impact of any business interruptions to our operations or to those of the third parties with whom we work, including due to any public health emergency, health epidemic (including COVID-19) or other outbreaks, natural disasters, or other disruptions;

Previous wording

the impact of any supply chain disruptions resulting from macroeconomic or geopolitical situations, including the COVID-19 pandemic, the Russia-Ukraine and Israel-Hamas conflicts; and

Current wording

the impact of any supply chain disruptions resulting from macroeconomic or geopolitical situations, including due to any public health emergency, health epidemic (including COVID-19) or other outbreaks, the Russia-Ukraine conflict, widening conflict in the Middle East, national security concerns and related legislation related to business operations in China and other countries and the new presidential administration; and

Previous wording

Interest income primarily consists of interest earned on our cash, cash equivalents and marketable securities.

Current wording

Other income (expense), net primarily consists of interest earned on our cash, cash equivalents and marketable securities, as well as gains and losses related to the change in fair value of the contingent value right ("CVR") liability and income tax expense.

Previous wording

Research and development expenses were $64.6 million for the year ended December 31, 2023 compared to $31.0 million for the year ended December 31, 2022, an increase of $33.6 million. This increase was primarily due to increases in external research and development costs, consisting of $17.4 million in clinical trial expenses, $5.8 million in contract manufacturing expenses, $1.2 million in consulting costs and $0.6 million in preclinical expenses, as well as increases in internal research and development costs, consisting of $4.1 million in stock-based compensation, $4.0 million in salaries and benefits and $0.5 million in other expenses.

Current wording

Research and development expenses were $80.8 million for the year ended December 31, 2024 compared to $64.6 million for the year ended December 31, 2023, an increase of $16.2 million. This increase was primarily due to increases in external research and development costs, consisting of $10.0 million in ELVN-002 costs and $1.8 million in ELVN-001 costs due to progression of clinical trials, partially offset by a decrease of $3.0 million in other external costs primarily related to lower research costs net of higher consulting costs, as well as increases in internal research and development costs, consisting of $4.0 million in stock-based compensation and $3.4 million in salaries and benefits.

Previous wording

General and administrative expenses were $19.0 million for the year ended December 31, 2023 compared to $7.8 million for the year ended December 31, 2022, an increase of $11.2 million. The increase was primarily due to an increase of $4.3 million in stock-based compensation primarily related to higher valuations on equity grants, $3.6 million in professional services costs, $1.9 million in salaries and benefits, $1.3 million in stock-based compensation as a result of the acceleration of stock option vesting in connection with the Merger, $0.9 million in liability insurance costs, $0.3 million in software services costs and $0.6 million in other expenses, partially offset by a decrease of $1.7 million in costs related to the write-off of previously deferred initial public offering costs in 2022.

Current wording

General and administrative expenses were $23.8 million for the year ended December 31, 2024 compared to $19.0 million for the year ended December 31, 2023, an increase of $4.8 million. The increase was primarily due to an increase of $4.5 million in stock-based compensation primarily related to higher valuations on equity grants and $2.1 million in salaries and benefits, partially offset by a decrease of $1.3 million in stock-based compensation as a result of the acceleration of stock option vesting in connection with the Merger in February 2023 and $0.5 million in other costs.

Previous wording

Interest income was $11.9 million for the year ended December 31, 2023 compared to $1.1 million for the year ended December 31, 2022, an increase of $10.8 million. The increase was primarily due to higher interest rates and higher investment balances.

Current wording

Other income was $15.5 million for the year ended December 31, 2024 compared to $11.9 million for the year ended December 31, 2023, an increase of $3.6 million. The increase was primarily related to higher interest income of $2.9 million due to higher interest rates and higher investment balances and a gain of $0.9 million related to the change in fair value of the CVR liability upon remeasurement, partially offset by income tax expense of $0.2 million related to the CVR milestone payment.

Previous wording

Since our inception, we have not generated any revenue from product sales or other sources and have incurred significant operating losses and negative cash flows from our operations. To date, Former Enliven funded its operations primarily through private placements of its convertible preferred stock for gross proceeds of $140.5 million and sale of common stock in the Financing Transaction for gross proceeds of $164.5 million on February 23, 2023. As of December 31, 2023, we had cash, cash equivalents and marketable securities of $253.1 million.

Current wording

Since our inception, we have not generated any revenue from product sales or other sources and have incurred significant operating losses and negative cash flows from our operations. Former Enliven funded its operations primarily through private placements of its convertible preferred stock for gross proceeds of $140.5 million and sale of common stock in the Financing Transaction in February 2023 for gross proceeds of $164.5 million. In March 2024, we sold common stock and Pre-Funded Warrants in the Private Placement and received aggregate gross proceeds of $90.0 million.

Previous wording

On June 23, 2023, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on July 3, 2023, which allows us to undertake various equity and debt offerings up to $400.0 million. On June 23, 2023, we also entered into the Sales Agreement with the Sales Agent, pursuant to which we may offer and sell shares of our common stock, from time to time, having an aggregate offering price of up to $200.0 million through the Sales Agent, in such share amounts as we may specify by notice to the Sales Agent, in accordance with the terms and conditions set forth in the Sales Agreement. Sales of our common stock made pursuant to the Sales Agreement, if any, will be made under our shelf registration statement on Form S-3. As of December 31, 2023, there have been no sales of common stock pursuant to the Sales Agreement.

Current wording

On June 23, 2023, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on July 3, 2023, which allows us to undertake various equity and debt offerings up to $400.0 million. On June 23, 2023, we also entered into the Sales Agreement with the Sales Agent, pursuant to which we may offer and sell shares of our common stock, from time to time, having an aggregate offering price of up to $200.0 million through the Sales Agent, in such share amounts as we may specify by notice to the Sales Agent, in accordance with the terms and conditions set forth in the Sales Agreement. Sales of our common stock made pursuant to the Sales Agreement are made under our shelf registration statement on Form S-3. Through December 31, 2024, we have sold shares of our common stock pursuant to the Sales Agreement and received gross proceeds of $40.0 million. As of December 31, 2024 and 2023, there was $200.0 million available for use under the shelf registration statement on Form S-3, excluding our common stock that may be offered under the Sales Agreement. As of December 31, 2024 and 2023, there was $160.0 million and $200.0 million, respectively, of our common stock available for sale under the Sales Agreement.

Previous wording

Our primary uses of cash to date have been to fund our research and development activities, including with respect to our BCR-ABL and HER2 programs and our other programs, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these activities.

Current wording

Our primary uses of cash to date have been to fund our research and development activities, including with respect to our BCR-ABL and HER2 programs and our other programs, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these activities. As of December 31, 2024, we had cash, cash equivalents and marketable securities of $313.4 million.

Previous wording

To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, that will occur. Until such time as we can generate significant revenue from product sales, if ever, we will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. We expect our expenses to increase significantly in connection with our ongoing activities as described in greater detail below. We are subject to all the risks incident in the development of new biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. We expect our expenses to increase significantly, as we:

Current wording

To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, that will occur. Until such time as we can generate significant revenue from product sales, if ever, we will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. We expect our expenses to increase significantly in connection with our ongoing activities as described in greater detail below. We are subject to all the risks incident in the development of new biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. We expect our expenses to increase significantly, if and as we:

Previous wording

We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this filing. Former Enliven received gross proceeds of $164.5 million from the Financing Transaction on February 23, 2023. We expect to continue to incur costs associated with operating as a public company. In addition, we anticipate that we will need substantial additional funding in connection with our continuing operations. We have based our projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect.

Current wording

We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of this filing. We expect to continue to incur costs associated with operating as a public company. In addition, we anticipate that we will need substantial additional funding in connection with our continuing operations. We have based our projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect.

Previous wording

Net cash used in operating activities during the year ended December 31, 2022 was $32.1 million. This consisted primarily of a net loss of $37.7 million, partially offset by non-cash charges for stock-based compensation of $3.2 million, write-off of deferred initial public offering costs of $1.7 million, net cash inflows from changes in our operating assets and liabilities of $0.5 million (primarily due to an increase in accounts payable and accrued expenses and other liabilities, partially offset by an increase in prepaids and other assets) and other non-cash charges of $0.2 million.

Current wording

Net cash used in operating activities during the year ended December 31, 2024 was $73.2 million. This consisted primarily of a net loss of $89.0 million, net cash outflows from changes in our operating assets and liabilities of $4.5 million (primarily due to an increase in prepaids and other assets, partially offset by a net increase in accounts payable and accrued expenses and other liabilities) and non-cash change in the fair value of the CVR liability of $0.9 million, partially offset by non-cash charges for stock-based compensation of $20.2 million, non-cash amortization of premiums and discounts on marketable securities of $0.4 million and other non-cash charges of $0.6 million.

Previous wording

Net cash used in operating activities during the year ended December 31, 2023 was $61.3 million. This consisted primarily of a net loss of $71.6 million and non-cash amortization of premiums and discounts on marketable securities of $4.6 million, partially offset by non-cash charges for stock-based compensation of $12.9 million, net cash inflows from changes in our operating assets and liabilities of $1.4 million (primarily due to a net increase in accounts payable and accrued expenses and other liabilities, partially offset by an increase in prepaids and other assets and a decrease in operating lease liabilities) and other non-cash charges of $0.6 million.

Current wording

Net cash used in operating activities during the year ended December 31, 2023 was $61.3 million. This consisted primarily of a net loss of $71.6 million and non-cash amortization of premiums and discounts on marketable securities of $4.6 million, partially offset by non-cash charges for stock-based compensation of $12.9 million, net cash inflows from changes in our operating assets and liabilities of $1.4 million (primarily due to a net increase in accounts payable and accrued expenses and other liabilities, partially offset by an increase in prepaids and other assets) and other non-cash charges of $0.6 million.

Previous wording

Net cash used in investing activities during the year ended December 31, 2022 was $0.6 million. This consisted primarily of cash used to purchase property and equipment.

Current wording

Net cash used in investing activities during the year ended December 31, 2024 was $36.0 million. This consisted primarily of cash used to purchase marketable securities of $350.7 million and payment of the CVR milestone (net of permitted deductions) of $9.1 million, partially offset by proceeds from maturities of marketable securities of $313.9 million and receipt of the CVR milestone of $10.0 million.

Previous wording

Net cash used in investing activities during the year ended December 31, 2023 was $148.4 million. This consisted primarily of cash used to purchase marketable securities of $268.3 million and cash used to purchase property and equipment of $0.1 million, partially offset by proceeds from maturities of marketable securities of $120.0 million.

Current wording

Net cash used in investing activities during the year ended December 31, 2023 was $148.4 million. This consisted primarily of cash used to purchase marketable securities of $268.3 million, partially offset by proceeds from maturities of marketable securities of $120.0 million.

Previous wording

Net cash provided by financing activities during the year ended December 31, 2023 was $234.3 million. This consisted primarily of net proceeds of $161.4 million resulting from the sale of shares of our common stock in the Financing Transaction, net cash acquired in connection with the reverse recapitalization of $73.1 million, and proceeds from the exercise of stock options of $0.4 million, partially offset by deferred offering costs related to the Sales Agreement of $0.6 million.

Current wording

Net cash used in financing activities during the year ended December 31, 2023 was $234.3 million. This consisted primarily of net proceeds of $161.4 million resulting from the sale of shares of our common stock in the Financing Transaction, net cash acquired in connection with the reverse recapitalization of $73.1 million, and proceeds from the exercise of stock options of $0.4 million, partially offset by deferred offering costs related to the Sales Agreement of $0.6 million.

Previous wording

We sublease certain office and laboratory space in Boulder, Colorado, under which the sublease was scheduled to expire in December 2021. We amended the lease in March 2021 and in April 2022 to expand its size and extend its expiration date to December 2024.

Current wording

We subleased certain office and laboratory space in Boulder, Colorado, under a sublease, which expired on December 31, 2024.

Previous wording

We measure stock-based awards granted to employees, non-employee directors, consultants and independent advisors based on the estimated grant date fair value of the awards. For awards with only service conditions, including stock options, restricted stock awards and restricted stock units, compensation expense is recognized over the requisite service period using the straight-line method. We use the Black-Scholes option pricing model to estimate the fair value of our stock option awards. The Black-Scholes option pricing model requires us to make assumptions and judgements about the variables used in the calculations, including the fair value of common stock, expected term, expected volatility of our common stock, risk-free interest rate and expected dividend yield. As the stock-based compensation is based on awards ultimately expected to vest, it is reduced by forfeitures, which we account for as they occur.

Current wording

We measure stock-based awards granted to employees, non-employee directors, consultants and independent advisors based on the estimated grant date fair value of the awards. For awards with only service conditions, including stock options, restricted stock awards and restricted stock units, compensation expense is recognized over the requisite service period using the straight-line method. We use the Black-Scholes option pricing model to estimate the fair value of our stock-based awards. The Black-Scholes option pricing model requires us to make assumptions and judgments about the variables used in the calculations, including the expected term, expected volatility of our common stock, risk-free interest rate and expected dividend yield. As the stock-based compensation is based on awards ultimately expected to vest, it is reduced by forfeitures, which we account for as they occur.

Previous wording

Estimating the fair value of equity-settled awards as of the grant date using the Black-Scholes option pricing model is affected by subjective assumptions. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation is recognized. These inputs are subjective and generally require significant analysis and judgement to develop. The inputs are as follows:

Current wording

Estimating the fair value of equity-settled awards as of the grant date using the Black-Scholes option pricing model is affected by subjective assumptions. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation is recognized. These inputs are subjective and generally require significant analysis and judgment to develop. The inputs are as follows:

Previous wording

We will continue to use judgment in evaluating the expected volatilities, expected terms, and risk-free interest rates utilized for our stock-based compensation calculations on a prospective basis. Assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation recognized in future periods could be materially different.

Current wording

We will continue to use judgment in evaluating the expected volatilities, expected terms, and risk-free interest rates utilized for our stock-based compensation calculations on a prospective basis. Assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock-based awards involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation recognized in future periods could be materially different.