Equity Transactions and Share-based Compensation

Common Stock

On June 16, 2015, the Company completed an underwritten public offering of 4,341,250 shares of common stock, including 566,250 shares sold pursuant to the full exercise of an option granted to the underwriters to purchase additional shares of common stock. All of the shares were offered by the Company at a price to the public of $39.75 per share. The net proceeds from this offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, were approximately $161.9 million.

Stock Options

In connection with the Company’s IPO, the Company adopted the 2013 Equity Incentive Plan (the 2013 Plan). The 2013 Plan provides for the grant of incentive stock options (ISOs), nonstatutory stock options (NSOs), stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards, performance-based stock awards, and other forms of equity compensation (collectively, stock awards), all of which may be granted to employees, including officers, non-employee directors and consultants of the Company and its affiliates. Additionally, the 2013 Plan provides for the grant of performance cash awards. The number of shares of common stock reserved for future issuance automatically increases on January 1 of each calendar year by 4% of the total number of shares of capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors. On January 1, 2015, the common stock reserved for issuance under the 2013 Plan was automatically increased by 1,641,271 shares. As of June 30, 2015, there was a total of 1,785,375 shares reserved for future issuance under the 2013 Plan.

Employee Stock Purchase Plan

In February 2013, the Company’s board of directors adopted the 2013 Employee Stock Purchase Plan (ESPP), which was subsequently ratified by stockholders and became effective in April 2013. Initially, the ESPP authorized the issuance of 704,225 shares of common stock pursuant to purchase rights granted to the Company’s employees or to employees of any of its designated affiliates. The number of shares of common stock reserved for issuance automatically increases on January 1 of each calendar year, from January 1, 2014 through January 1, 2023 by the lesser of (a) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, (b) 422,535 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b). On January 1, 2015, the common stock reserved for issuance under the ESPP was automatically increased by an additional 410,317 shares bringing the total number of shares of common stock that may be purchased under the ESPP to 1,329,277.

The Company has reserved a total of 1,381,191 shares of common stock to be purchased under the ESPP, of which 1,329,277 shares remained available for purchase as of June 30, 2015. Eligible employees may authorize up to 15% of their salary to purchase common stock at the lower of 85% of the beginning price or 85% of the ending price during each six-month purchase interval. The ESPP also provides for an automatic reset feature to start participants on a new twenty-four month participation period in the event that the common stock market value on a purchase date is less than the common stock value on the first day of the twenty-four month offering period. The Company did not issue any shares of common stock pursuant to the ESPP for the three months ended June 30, 2015 and 2014. The Company issued 25,639 and 14,184 shares of common stock pursuant to the ESPP for the six months ended June 30, 2015 and 2014, respectively. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option were determined using a Black-Scholes option pricing model.

For awards with only service conditions and graded-vesting features, the Company recognizes compensation expense on a straight-line basis over the requisite service period. For the three and six months ended June 30, 2015 and 2014, there was no non-employee share-based compensation expense. Employee-related compensation expense recognized related to stock options, RSUs and the ESPP is as follows (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2015		2014			2015		2014
Research and development expense	$	1,202	$	(471	)	$	2,226	$	(96	)
General and administrative expense	1,599		1,115			2,977		1,511
Total share-based compensation expense	$	2,801	$	644		$	5,203	$	1,415