Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

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

Stock-Based Compensation

Stock-Based Compensation

The Company has adopted certain equity incentive and stock purchase plans as described in the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Upon adopting ASU 2016-09 on January 1, 2017, the Company elected to account for forfeitures as they occur.

Valuation of Stock Options

The estimated grant date fair values of the stock options were calculated using the Black-Scholes valuation model, based on the following assumptions:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016
Risk free interest rate	1.9% to 2.1%	1.1% to 1.3%	1.9% to 2.3%	1.1% to 1.4%
Expected term	6.1 years	5.1 to 6.1 years	5.1 to 6.1 years	5.1 to 6.1 years
Expected volatility	75.1% to 75.5%	77.0% to 78.1%	75.1% to 76.6%	77.0% to 78.1%
Expected dividend yield	—%	—%	—%	—%

During the nine months ended September 30, 2017, the Company granted options to purchase approximately 0.9 million shares of common stock with a weighted average grant date fair value of $7.17.

Restricted Stock Units with a Performance Condition

In March 2017, the Company granted approximately 0.2 million restricted stock units (“RSUs”) with service and performance-based conditions to employees and executives. The weighted average fair value of RSUs granted was $10.20 per share. The RSUs vest upon the approval by the FDA of the Company’s new drug application for ZX008, provided such approval occurs within five years following the grant date. Due to the uncertainties associated with the FDA approval process, approval is not yet probable, as such term is used for accounting purposes, prior to the occurrence of the event. Accordingly, no compensation expense has been recognized as of September 30, 2017 for these awards.

Stock-Based Compensation Expense

The following table summarizes the components of total stock-based compensation expense included in the condensed consolidated statements of operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Cost of contract manufacturing	$	—	$	98	$	71	$	294
Research and development	294		532		1,313		1,449
Selling, general and administrative	968		1,311		2,682		3,460
Total	$	1,262	$	1,941	$	4,066	$	5,203