Stock-Based Compensation

9 Months Ended

Sep. 30, 2018

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

Employee Stock Purchase Plan

In May 2017, the Company’s stockholders approved the 2016 Employee Stock Purchase Plan (the 2016 ESPP). The 2016 ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (IRC), and is not subject to the provisions of the Employee Retirement Income Security Act of 1974. The Company reserved 800,000 shares of common stock for issuance under the 2016 ESPP. The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. The 2016 ESPP provides for six-month offering periods ending on May 31 and November 30 of each year. At the end of each offering period, employees are able to purchase shares at 85% of the fair

market value of the Company’s common stock on the last day of the offering period. During the nine months ended September 30, 2019, 25,722 shares of common stock were purchased under the 2016 ESPP for net proceeds to the Company of approximately $0.4 million.

Employee Stock Option Plans

Effective February 2003, the Company implemented the 2003 Equity Incentive Plan (2003 Plan), and it was amended and approved by the Company's stockholders in 2005. Stock options granted under the 2003 Plan may be either incentive stock options as defined by the IRC, or non-qualified stock options. In 2013, the 2003 Plan was terminated, and no further awards may be issued under the plan. Any shares of common stock subject to awards under the 2003 Plan that expire, terminate, or are otherwise surrendered, canceled, forfeited or repurchased without having been fully exercised, or resulting in any common stock being issued, will become available for issuance under the 2013 Stock Incentive Plan (2013 Plan), up to a specified number of shares. As of September 30, 2019, under the 2003 Plan, there were options to purchase an aggregate of 559,357 shares of common stock outstanding at a weighted average exercise price of $2.30 per share.

In October 2013, the Company implemented the 2013 Plan. The 2013 Plan provides for the grant of stock options and other stock-based awards, as well as cash-based performance awards. The number of shares of common stock reserved for issuance under the 2013 Plan will automatically increase on January 1 of each year from January 1, 2014 through and including January 1, 2023, by the lesser of (a) 1,960,168 shares, (b) 4.0% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (c) the number of shares of common stock determined by the Company's Board of Directors. During the nine months ended September 30, 2019, the maximum number of shares of common stock authorized to be issued by the Company under the 2013 Plan was increased to 9,938,263. If an option expires or terminates for any reason without having been fully exercised, if any shares of restricted stock are forfeited, or if any award terminates, expires or is settled without all or a portion of the shares of common stock covered by the award being issued, such shares are available for the grant of additional awards. However, any shares that are withheld (or delivered) to pay withholding taxes or to pay the exercise price of an option are not available for the grant of additional awards. As of September 30, 2019, there were options to purchase an aggregate of 6,689,172 shares of common stock outstanding at a weighted average exercise price of $22.55 per share under the 2013 Plan.

The following stock-based compensation expense was recognized for the periods indicated (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Research and development	$	2,765	$	2,440	$	7,032	$	6,347
General and administrative	2,633		2,133		7,049		5,821
Total stock-based compensation expense	$	5,398	$	4,573	$	14,081	$	12,168

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the assumptions in the following table for options issued during the period indicated:


	Nine Months Ended September 30,
	2019	2018
Expected dividend yield	0%	0%
Expected volatility	73.7% - 76.6%	67.8% - 72.2%
Risk-free interest rate	1.4% - 2.6%	2.4% - 3.1%
Expected term	6.25 years	6.25 years

The following table summarizes stock option activity during the nine months ended September 30, 2019:


	Shares	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2018	5,273,964	$	22.23	6.8
Granted	2,384,770	16.87
Exercised	(210,261)	3.11
Forfeited or expired	(199,944)	23.44
Outstanding, September 30, 2019	7,248,529	20.98		7.3	$	11,733
As of September 30, 2019:
Exercisable	4,074,460	22.13		5.9	5,849
Vested and expected to vest	6,936,223	20.98		7.2	11,367

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2019 and 2018 was $14.33 and $18.07, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2019 and 2018 was approximately $2.8 million and $4.0 million, respectively. The total cash received for options exercised during the nine months ended September 30, 2019 and 2018 was approximately $0.7 million and $0.9 million, respectively. The total fair value of shares vested in the nine months ended September 30, 2019 and 2018 was approximately $12.8 million and $11.9 million, respectively. As of September 30, 2019, the total unrecognized compensation expense related to non-vested stock options, net of related forfeiture estimates, was approximately $40.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.6 years.