5. Stock-Based Compensation

Market-Based RSAs and RSUs

2016 Market-Based RSAs and RSUs

On January 14, 2016, the Compensation Committee approved and granted 282,394 RSAs and 46,294 RSUs to senior management. These awards include a market condition based on Total Shareholder Return (“TSR”) and a service condition that requires continued employment.

In February 2018, the Compensation Committee certified the maximum achievement of the TSR as of the first measurement date, January 12, 2018. 69,440 RSAs and 30,862 RSUs representing two-thirds of the amounts were released on February 20, 2018. In connection with the separation of certain members of senior management from the Company in early February 2018, the Board agreed to accelerate the vesting and distribution of an aggregate of 118,821 RSAs to these members of senior management. The remaining 59,411 RSAs for these members of senior management were forfeited. As a net result of the vesting acceleration of the RSAs and the forfeiture of those unvested RSAs, an additional $0.7 million compensation expense was recognized during the three months ended March 31, 2018.

During the three months ended September 30, 2018, the remaining 34,721 RSAs and 15,432 RSUs were forfeited due to the additional separation of senior management members, and $0.2 million of previously recognized compensation expense was reversed.

2017 Market-Based RSAs and RSUs

On January 17, 2017, the Compensation Committee approved and granted 353,508 RSAs and 53,360 RSUs to senior management. These awards include a market condition based on the TSR of Innoviva’s common stock as compared to the TSR of NASDAQ Biotechnology Index (“Index”) and a service condition that requires continued employment.

In connection with the separation of certain members of senior management from the Company in February 2018, an aggregate of 233,448 RSAs were forfeited, and $0.8 million of previously recognized compensation expense was reversed during the three months ended March 31, 2018.

In connection with the separation of additional members of senior management from the Company during the three months ended September 30, 2018, the remaining 120,060 RSAs and 53,360 RSUs were forfeited, and $0.9 million of previously recognized compensation expense was reversed.

2018 Market-Based RSAs and RSUs

On March 2, 2018, the Compensation Committee approved and granted 111,668 RSAs and 49,630 RSUs to senior management. These awards include a market condition based on the TSR of Innoviva’s common stock over a three-year performance period from the date of grant for the RSAs and from the date of grant until September 30, 2020 for RSUs, and a service condition that requires continued employment. The grant date fair value of these awards was determined using a Monte Carlo valuation model. The aggregate value of $1.7 million was recognized as compensation expense over the implied service period and were not reversed if the market condition was not met, but with the exception of such person’s continued employment with the Company.

In connection with the separation of the senior management members from the Company during the three months ended September 30, 2018, all of 111,668 RSAs and 49,630 RSUs were forfeited, and $0.2 million of previously recognized compensation expense was reversed.

Stock-Based Compensation Expense

Stock-based compensation expense is included in the condensed consolidated statements of operations as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands)	2018		2017		2018		2017
Research and development	$	—	$	180	$	—	$	533
General and administrative		(874)		2,292		2,747		6,873
Total stock-based compensation expense	$	(874)	$	2,472	$	2,747	$	7,406

For the three months ended September 30, 2018, $1.9 million of stock based compensation was reversed for the forfeited market based awards and service based awards noted above due to the separation of senior management members.

As of September 30, 2018, unrecognized stock-based compensation cost was as follows:


	Unrecognized
	Compensation
(In thousands)	Cost
RSUs	$	1,044
RSAs		872
Total unrecognized compensation cost	$	1,916