Stock-Based Compensation

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Note 11 – Stock-Based Compensation

Stock Options

The 2015 Stock Incentive Plan, as amended (“2015 Plan”), was approved at the Company’s annual meeting of stockholders in June 2015. Under the 2015 Plan, equity awards may be granted to officers, directors, employees and consultants of and advisors to the Company and any present or future subsidiary.

The 2015 Plan authorizes the issuance of up to 56,000,000 shares of the Company’s common stock under equity awards granted under the plan, including an increase of 20,000,000 shares approved at the Company’s 2018 annual meeting of stockholders. All such shares authorized for issuance under the 2015 Plan have been reserved. The 2015 Plan will expire on March 4, 2025.

The Amended and Restated 2005 Stock Incentive Plan (“2005 Plan”) expired in February 2015 and no new awards may be made under such plan, although awards will continue to be outstanding in accordance with their terms.

The 2015 Plan permits and the 2005 Plan permitted the grant of stock options (including incentive stock options), restricted stock, stock appreciation rights and restricted stock units. In addition, under the 2015 Plan, unrestricted stock, stock units and performance awards may be granted. Stock options and stock appreciation rights generally have a maximum term of 10 years and may be or were granted with an exercise price that is no less than 100% of the fair market value of the Company’s common stock at the time of grant. Grants of stock options are generally subject to vesting over periods ranging from one to four years.

Stock Options Awards

The following is a summary of option activity under the 2015 Plan and the 2005 Plan for the year ended December 31, 2018:

	2015 Plan					2005 Plan
	Stock Options			Weighted- Average Exercise Price		Stock Options			Weighted- Average Exercise Price
Outstanding at January 1, 2018		33,675,720		$	3.61		12,818,929		$	3.26
Granted		16,613,409		$	2.24		—		$	—
Exercised		(252,728	)	$	1.35		(563,125	)	$	1.73
Canceled		(2,180,163	)	$	4.18		(602,432	)	$	4.15
Outstanding at December 31, 2018		47,856,238		$	3.12		11,653,372		$	3.29
Shares exercisable at December 31, 2018		15,815,855		$	4.65		11,653,372		$	3.29
Shares available for grant at December 31, 2018		7,821,034

The fair value of stock options granted under the 2015 Plan was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2018	2017	2016
Weighted average fair value of options granted	$1.74	$1.06	$1.88
Risk-free interest rate	2.26%-3.10%	1.61%-2.34%	0.97%-1.78%
Dividend yield	0%	0%	0%
Volatility	93.31%-115.61%	88.91%-114.10%	57.86%-108.88%
Expected term (in years)	4.07-7.50	4.14-7.46	4.22-7.28
Expected forfeiture rate(1)	N/A	N/A	0%-16.33%

(1) See Note 3 regarding the Company’s adoption of ASU 2016-09 in 2017.

The Company used the Monte Carlo simulation model to determine the fair value of its 1.7 million stock options containing a market condition that were granted in 2016 (the “Performance Options”). The fair value of the Performance Options was estimated with the following assumptions: 99.11% volatility, a 1.74% risk-free interest rate, 5.62% forfeiture rate and 0% dividend yield, which resulted in fair values of $0.74 to $0.92 per share, and expected terms of 1.35 years to 3.50 years.

The total aggregate intrinsic value and weighted-average remaining contractual term of stock options outstanding under the 2015 Plan and 2005 Plan as of December 31, 2018 was $10.2 million and 7.5 years, respectively. The total aggregate intrinsic value and weighted-average remaining contractual term of stock options exercisable under the 2015 Plan and 2005 Plan as of December 31, 2018 was $4.3 million and 5.7 years, respectively. The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2018. This amount is subject to change based on changes to the closing price of the Company’s common stock. The aggregate intrinsic value of options exercised and vesting of restricted stock awards for 2018, 2017 and 2016 was $0.4 million, $0.1 million and $2.4 million, respectively.

Employee Stock Purchase Plan

The ESPP was approved at the Company annual meeting of stockholders in June 2013. The ESPP currently authorizes an aggregate of 7,600,000 shares of the Company’s common stock to be purchased, and the aggregate amount of shares will continue to increase 5% on each anniversary of its adoption up to a maximum of 8,000,000 shares. The number of authorized shares and the maximum number of shares both include an increase of 4,000,000 shares approved at the Company’s 2018 annual meeting of stockholders. The ESPP allows employees to purchase shares of common stock of the Company at each purchase date through payroll deductions of up to a maximum of 15% of their compensation, at 85% of the lesser of the market price of the shares at the time of purchase or the market price on the beginning date of an option period (or, if later, the date during the option period when the employee was first eligible to participate). At December 31, 2018, there were 3,363,066 shares available for issuance under the ESPP.

The ESPP is considered compensatory for financial reporting purposes. As such, the fair value of ESPP shares was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2018	2017	2016
Range of Black-Scholes fair values of ESPP shares granted	$0.36-$3.53	$0.45-$5.47	$1.86-$4.76
Risk-free interest rate	0.66%-2.24%	0.45%-1.13%	0.22%-0.61%
Dividend yield	0%	0%	0%
Volatility	52.19%-203.83%	45.98%-267.85%	43.03%-86.75%
Expected term (in years)	0.5-2.0	0.5-2.0	0.5-2.0
Expected forfeiture rate(1)	N/A	N/A	5%

(1) See Note 3 regarding the Company’s adoption of ASU 2016-09 in 2017.

Restricted Stock Awards

The following is a summary of restricted stock awards activity for the year ended December 31, 2018:

	Number of Shares			Per Share Weighted- Average Grant-Date Fair Value
Outstanding and Unvested at January 1, 2018		18,750		$	4.99
Restricted stock granted		―		$	―
Restricted stock vested		―		$	―
Restricted stock forfeited		(18,750	)	$	4.99
Outstanding and Unvested at December 31, 2018		―		$	―

The Company recorded stock-based compensation expense for awards issued under the above mentioned plans in the consolidated statements of operations as follows (in thousands):

	Year Ended December 31,
	2018		2017		2016
Research and development	$	10,575	$	11,750	$	11,168
General and administrative		7,739		8,059		7,992
Total stock-based compensation expense	$	18,314	$	19,809	$	19,160

As of December 31, 2018, there was approximately $45 million of total unrecognized compensation expense related to unvested stock options and the ESPP. This unrecognized non-cash compensation expense is expected to be recognized over a weighted-average period of 1.6 years, and will be allocated between research and development and general and administrative expenses accordingly. This estimate does not include the impact of other possible stock-based awards that may be made during future periods.