Stock-based Compensation

On August 21, 2014, the Company’s Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”), the 2014 Employee Stock Purchase Plan (the “2014 ESPP”) and the 2006 Equity Incentive Plan (the “2006 Plan”), as amended and restated (collectively the “Plans”). On October 3, 2014, the stockholders approved these plans.

The Plans provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock and stock unit awards, performance units, stock grants and qualified performance-based awards. Under the 2006 Plan, no new stock compensation awards will be granted subsequent to the completion of the Company’s IPO. The Company initially reserved 704,000 shares of Common Stock for issuance under the 2014 Plan. The 2014 Plan provides that the number of shares reserved and available for issuance under the 2014 Plan will automatically increase each January 1, beginning January 1, 2015 by four percent of the outstanding shares of Common Stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s Board of Directors prior to each such January 1st.

Terms of the stock awards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the Plans. Options granted by the Company typically vest over three to four years. Certain awards provide for accelerated vesting if there is a change in control as defined in the Plans. Stock options outstanding under the 2006 Plan are exercisable from the date of grant for a period of ten years. Stock options granted under the 2014 Plan are exercisable only upon vesting. For options granted to date, the exercise price equaled the fair value of the Common Stock as determined by the Board of Directors on the date of grant.

Stock-based compensation expense

Total stock-based compensation expense is recognized for stock options granted to employees and non-employees and has been reported in the Company’s consolidated statements of operations as follows (in thousands):

	Year Ended December 31,
	2015		2014		2013

Research and development	$	650	$	114	$	106
General and administrative		1,514		345		49
Total	$	2,164	$	459	$	155

The Company estimates the fair value of each employee stock award on the grant date using the Black-Scholes option-pricing model based on the following assumptions regarding the fair value of the underlying Common Stock on each measurement date:

	Year Ended December 31,
	2015			2014			2013

Weighted average expected volatility		79.8	%		79.5	%		91.1	%
Expected term (in years)		6.11			6.00			5.95
Risk free interest rate		1.76	%		1.88	%		1.03	%
Expected dividend yield		0	%		0	%		0	%

Stock options issued to non-employees are accounted for using the fair value method of accounting; they are periodically revalued as the options vest and are recognized as expense over the related service period. The total expense related to all options granted to non-employees for the years ended December 31, 2015, 2014 and 2013 was $2,000, $4,000 and $32,000, respectively.

Stock Options

The following table summarizes stock option activity for employees and non-employees:

	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value

Outstanding at December 31, 2014		1,235,526		$	4.19		7.1	$	7,709
Granted		1,010,256		$	13.52
Exercised		(45,413	)	$	1.96
Outstanding at December 31, 2015		2,200,369		$	8.52		7.8	$	15,705
Exercisable at December 31, 2015		812,891		$	3.53		5.3	$	9,755
Vested or expected to vest at December 31, 2015 (1)		1,991,131		$	8.16		7.6	$	14,926

_________________________

(1) Represents the number of vested options at December 31, 2015 plus the number of unvested options expected to vest based on the unvested options outstanding at December 31, 2015.

During the year ended December 31, 2015, the Company granted stock options to purchase an aggregate of 1,010,256 shares of its Common Stock with a weighted-average exercise price of $13.52 and a weighted-average grant date fair value of $9.34. During the year ended December 31, 2014, the Company granted stock options to purchase an aggregate of 659,865 shares of its Common Stock with a weighted-average grant date fair value of $4.07. During the year ended December 31, 2013, the Company granted stock options to purchase an aggregate of 3,150 shares of its Common Stock with a weighted-average grant date fair value of $16.50.

The total intrinsic value of options exercised in the years ended December 31, 2015 and 2014 was $0.5 million and $0.2 million, respectively. As of December 31, 2015, there was $9.6 million of total unrecognized compensation cost related to employee non-vested stock options. As of December 31, 2015, total compensation cost related to non-employee, non-vested stock options was fully recognized. The total unrecognized compensation cost for employee awards will be adjusted for future forfeitures. The Company expects to recognize its remaining stock-based compensation expense over a weighted-average period of 3.0 years.

Employee Stock Purchase Plan

The 2014 ESPP initially authorized the issuance of up to 140,500 shares of Common Stock. The number of shares increases each January 1, commencing on January 1, 2015 and ending on (and including) January 1, 2024, by an amount equal to the lesser of one percent of the outstanding shares as of the end of the immediately preceding fiscal year, 281,000 shares and any lower amount determined by the Company’s Board of Directors prior to each such January 1st. As of December 31, 2015, as a result of an increase of 164,491 shares on January 1, 2015 of one percent of the outstanding shares as of the end of the fiscal year ending December 31, 2014, the 2014 ESPP authorized the issuance of up to 304,991 shares of Common Stock. The Company’s Board of Directors has determined there was to be no increase on January 1, 2016. The first offering under the 2014 ESPP began on January 1, 2015 and ended on June 30, 2015. The second offering under the 2014 ESPP began on July 1, 2015 and ended on December 31, 2015. During the year ended December 31, 2015, 7,632 shares were issued under the 2014 ESPP resulting in 297,359 shares remaining for future issuance under the plan as of December 31, 2015. The Company incurred $32,000 in stock-based compensation expense related to the 2014 ESPP for the year ended December 31, 2015.