Stock-Based Compensation

The Company’s current equity compensation plan, the 2017 Incentive Plan, was approved by shareholders at the Company’s Annual Meeting of Shareholders on May 18, 2017. The 2017 Incentive Plan is administered by the Compensation Committee and the Board of Directors of the Company. Under the terms of the 2017 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its common stock, including stock options (both incentive stock options and non-qualified stock options), RSUs, performance options/shares and other stock awards, as well as pay incentive bonuses to eligible employees and non-employee directors. On May 18, 2017, upon the approval of the 2017 Incentive Plan by shareholders, 5,000,000 shares were authorized for issuance thereunder, plus any shares subject to then-outstanding awards under the 2015 Incentive Plan and the 2013 Incentive Plan that subsequently were canceled, terminated unearned, expired, were forfeited, lapsed for any reason or were settled in cash without the delivery of shares. As of September 30, 2017, 4,929,910 shares remained for future issuance under the 2017 Incentive Plan. The 2017 Incentive Plan will terminate on April 3, 2027 unless it is extended or terminated earlier pursuant to its terms. In addition, from time to time, the Company makes inducement grants of stock options. These awards are made pursuant to the NASDAQ inducement grant exception as a component of new hires’ employment compensation in connection with the Company’s equity grant program. During the nine months ended September 30, 2017, the Company granted inducement stock options covering 236,370 shares of the Company's common stock to new employees.

Stock Options - The Company calculates the fair value of stock options granted using the Black-Scholes valuation model. The following table summarizes the Company’s grant date fair value and assumptions used in determining the fair value of all stock options granted:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016
Volatility	72%-73%	75%-76%	72%-74%	75%-77%
Risk-free interest rate	1.73%-1.93%	1.00%-1.18%	1.73%-1.99%	1.00%-1.73%
Dividend yield	0.0%	0.0%	0.0%	0.0%
Expected option term (in years)	6.25	6.25	6.25	6.25
Weighted average fair value of stock options granted	$9.59	$7.79	$10.18	$8.74

For each period presented, the volatility factor was based on the Company’s historical volatility during the expected option term. Estimated forfeitures are based on the actual percentage of option forfeitures since the closing of the Company’s merger with Transave, Inc. in December 2010.

From time to time, the Company grants performance-condition options to certain of its employees. Vesting of these options is subject to the Company achieving certain performance criteria established at the date of grant and the grantees fulfilling a service condition (continued employment). As of September 30, 2017, the Company had performance options totaling 133,334 shares outstanding which had not yet met the recognition criteria.

The following table summarizes the Company’s aggregate stock option activity for the nine months ended September 30, 2017:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2016	7,116,706		$	13.30
Granted	2,207,390		$	15.42
Exercised	(336,135	)	$	8.78
Forfeited or expired	(386,668	)	$	15.59
Options outstanding at September 30, 2017	8,601,293		$	13.92	7.65	$	148,771
Vested and expected to vest at September 30, 2017	8,269,230		$	13.88	7.60	$	143,327
Exercisable at September 30, 2017	3,904,073		$	12.46	6.40	$	73,193

The total intrinsic value of stock options exercised during the three months ended September 30, 2017 and 2016 was $1.4 million and $0.0 million, respectively, and during the nine months ended September 30, 2017 and 2016 was $3.5 million and $0.1 million, respectively.

As of September 30, 2017, there was $31.5 million of unrecognized compensation expense related to unvested stock options which is expected to be recognized over a weighted average period of 2.7 years. Included in unrecognized compensation expense was $1.1 million related to outstanding performance-condition options. The following table summarizes the range of exercise prices and the number of stock options outstanding and exercisable:



Outstanding as of September 30, 2017					Exercisable as of September 30, 2017
Range of Exercise Prices ($)		Number of Options	Weighted Average Remaining Contractual Term (in years)	Weighted Average Exercise Price ($)	Number of Options	Weighted Average Exercise Price ($)
3.03	4.55	988,195	4.89	3.59	988,195	3.59
6.90	6.90	137,577	5.47	6.90	100,077	6.90
6.96	10.85	1,081,121	8.55	10.76	289,330	10.52
11.14	12.58	1,095,757	6.65	12.17	735,792	12.16
12.66	13.58	185,880	7.76	13.24	89,704	13.29
13.67	13.67	865,660	9.27	13.67	—	—
13.94	15.91	862,300	8.01	14.97	339,372	14.55
16.07	16.16	1,009,781	7.93	16.13	463,410	16.12
16.19	17.16	871,266	9.34	17.10	31,741	16.30
17.24	27.38	1,503,756	7.41	21.20	866,452	21.13

Restricted Stock and Restricted Stock Units — The Company may grant restricted stock (RS) and RSUs to eligible employees, including its executives, and non-employee directors. Each share of RS vests, and each RSU represents a right to receive one share of the Company’s common stock, upon the completion of a specific period of continued service or achievement of a certain milestone. RS and RSU awards granted are valued at the market price of the Company’s common stock on the date of grant. The Company recognizes noncash compensation expense for the fair values of these RS and RSUs on a straight-line basis over the requisite service period of these awards. The following table summarizes the Company’s RSU award activity during the nine months ended September 30, 2017:



	Number of RSUs		Weighted Average Grant Price ($)
Outstanding at December 31, 2016	89,194		10.85
Granted	46,914		17.16
Released	(89,194	)	(10.85	)
Outstanding at September 30, 2017	46,914		17.16

The following table summarizes the aggregate stock-based compensation recorded in the Consolidated Statements of Comprehensive Loss related to stock options and RSUs during the three and nine months ended September 30, 2017 and 2016:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(in millions)
Research and development expenses	$	1.8	$	1.7	$	4.8	$	4.6
General and administrative expenses	2.9		3.4		8.5		9.3
Total	$	4.7	$	5.1	$	13.3	$	13.9