11. Stock-Based Compensation

Overview

Employee stock-based compensation expense is calculated based on the grant-date fair value of awards ultimately expected to vest, and recognized under the straight-line attribution method, assuming that all stock-based awards will vest. Effective January 1, 2016, the Company has elected to recognize forfeitures as they occur, as permitted by ASU 2016-09, Compensation – Stock Compensation (Topic 718), Improvement to Employee Share-Based Payment Accounting. Refer to Note 2 for further details. In prior periods, the Company estimated forfeitures at time of grant and revised the estimates in subsequent periods if actual forfeitures differed from those estimates. The following table summarizes stock-based compensation expense related to the Company’s stock-based awards for the periods indicated (in thousands):

	Year ended December 31,
	2016		2015		2014
Research and development	$	1,630	$	2,856	$	2,201
General and administrative		2,970		3,292		3,681
Employee stock-based compensation expense		4,600		6,148		5,882
Non-employee stock-based compensation expense		191		196		337
Total stock-based compensation expense	$	4,791	$	6,344	$	6,219

Fair Value of Awards

The Company determines the fair value of stock-based awards on the grant date using the Black-Scholes model, which is impacted by the Company’s stock price, as well as assumptions regarding a number of highly subjective variables. The following table summarizes the weighted-average assumptions used as inputs to the Black-Scholes model, and resulting weighted-average and total estimated grant date fair values of employee stock options granted during the periods indicated:

	Year Ended December 31,
	2016			2015			2014
Assumptions:
Expected term (years)		5.3			5.2			5.2
Expected volatility		110.0	%		99.9	%		88.1	%
Risk-free interest rate		1.9	%		1.7	%		1.7	%
Expected dividend yield		0.0	%		0.0	%		0.0	%
Fair value:
Weighted-average estimated grant date fair value per share	$	3.12		$	6.20		$	19.10
Options granted to employees (in thousands)		750			531			613
Total estimated grant date fair value (in thousands)	$	2,344		$	3,294		$	11,704

The estimated fair value of stock options that vested in the years ended December 31, 2016, 2015 and 2014, was $4.6 million, $5.8 million and $2.6 million, respectively. The Company based its assumptions for the expected term on historical cancellation and exercise data, and the contractual term and vesting terms of the awards. Expected volatility is based on historical volatility of the Company’s common stock, as well as that for a mature peer group of companies in the same industry. The Company does not anticipate paying any cash dividends in the foreseeable future, and therefore uses an expected dividend yield of zero.

Option Plan Activity

The following table summarizes stock option activity for the Company’s stock option plans in the periods presented (in thousands, except per share amounts):

				Weighted		Weighted
				Average		Average
	Number			Exercise		Remaining		Aggregate
	of			Price Per		Contractual		Intrinsic
	Shares			Share		Term (Years)		Value
Outstanding as of December 31, 2015		2,083		$	18.32
Options granted		777		$	3.89
Options exercised		—			—
Options forfeited or expired		(219	)	$	25.77
Outstanding as of December 31, 2016		2,641		$	13.50		6.90	$	48
Vested and expected to vest as of December 31, 2016		2,641		$	13.50		6.90	$	48
Exercisable as of December 31, 2016		1,524		$	18.23		5.28	$	12

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (i.e., 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 option holders if they had exercised all their options on December 31, 2016.

The intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was nil, $0.2 million and $2.7 million, respectively. As the Company believes it is more likely than not that no stock option related tax benefits will be realized, the Company does not record any net tax benefits related to exercised options.

Total estimated unrecognized stock-based compensation cost related to unvested stock options was $5.3 million as of December 31, 2016, which is expected to be recognized over the respective vesting terms of each award. The weighted average term of the unrecognized stock-based compensation expense is 2.7 years.

Bonus Awards

On February 11, 2016, the Compensation Committee of the Company’s Board of Directors approved cash bonuses to certain of the Company’s employees, including its named executive officers, pursuant to the Company’s 2015 Bonus Program. Under the 2015 Bonus Program, each participant was eligible to receive a cash bonus in an amount up to a specified target percentage of such participant’s annual base salary for 2015 based on the level of achievement of certain corporate and individual objectives. The bonus payment amounts approved by the Compensation Committee were based on its determination of the degree to which such corporate and individual objectives were achieved. A portion of the bonuses awarded consisted of 122,000 fully vested shares of the Company’s common stock granted under the 2011 Plan. The stock portion of the bonus awards were granted effective as of February 29, 2016 and the cash portion of the bonus awards were paid on February 29, 2016. The number of shares of the Company’s common stock awarded to Mr. Daniel N. Swisher, Jr., the Company’s CEO and President, and Mr. Eric H. Bjerkholt, the Company’s Executive Vice President, Corporate Development and Finance, Chief Financial Officer and Corporate Secretary, under the 2011 Plan were determined based on the closing price of the Company’s common stock as quoted on the NASDAQ Capital Market on February 29, 2016, rounded down to the nearest whole share.

Performance Awards

On February 25, 2015, the Compensation Committee of the Board approved equity awards in the form of restricted stock units (“RSUs”) for certain of the Company’s employees (“participant”) under 2011 Stock Incentive Plan. The RSUs have an exercise price of $0 and vesting is subject to the achievement of the earlier of one of two milestones: acceptance of NDA (U.S.) or approval of MAA (EU) and the participant being an employee at time of milestone achievement. As of December 31, 2016, none of the RSUs were vested.

The following table summarizes the Company's RSU activity for the year ended December 31, 2016 (in thousands, except per share amounts):

	Number
	of
Performance based restricted stock units	Shares
Outstanding as of December 31, 2015		71
Stocks granted		—
Stocks exercised		—
Stocks forfeited or expired		(15	)
Outstanding as of December 31, 2016		56