Share-Based Payments

2013 Stock Incentive Plan

In June 2013, our Board of Directors adopted and, in July 2013 our stockholders approved, the 2013 Stock Incentive Plan, or the 2013 Plan. The 2013 Plan became effective upon the closing of our initial public offering, or IPO, and provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, or RSUs, performance-based stock units, or PSUs, and other stock-based awards. Following the adoption of the 2013 Plan, we granted no further stock options or other awards under the 2007 Stock Incentive Plan, or the 2007 Plan. Any options or awards outstanding under the 2007 Plan at the time of adoption of the 2013 Plan remain outstanding and effective. As of September 30, 2017, the total number of shares reserved under the 2007 Plan and the 2013 Plan are 7,407,798, and we had 1,275,813 shares available for future issuance under the 2013 Plan.

The following table presents stock option activity for the nine months ended September 30, 2017:



	Number of Stock Options		Weighted- Average Exercise Price
Outstanding at December 31, 2016	5,218,880		$	46.79
Granted	1,494,252		50.61
Exercised	(529,618	)	19.31
Forfeited/expired	(362,903	)	72.43
Outstanding at September 30, 2017	5,820,611		$	48.68
Exercisable at September 30, 2017	2,969,761		$	41.87
Vested and expected to vest at September 30, 2017	5,820,611		$	48.68

At September 30, 2017, the total unrecognized compensation expense related to unvested stock option awards was $95.7 million, which we expect to recognize over a weighted-average period of approximately 2.5 years.

Restricted stock units

We may grant awards of RSUs to non-employee directors and employees on a discretionary basis pursuant to the 2013 Plan. Each RSU entitles the holder to receive, at the end of each vesting period, a specified number of shares of our common stock.

The following table presents RSU activity for the nine months ended September 30, 2017:



	Number of Stock Units		Weighted-Average Grant Date Fair Value
Unvested shares at December 31, 2016	77,050		$	49.60
Granted	60,750		51.04
Vested	(7,500	)	122.22
Forfeited/expired	(10,300	)	39.76
Unvested shares at September 30, 2017	120,000		$	46.63

As of September 30, 2017, there was approximately $2.8 million of total unrecognized compensation expense related to RSUs, which we expect to be recognized over a weighted-average period of approximately 1.2 years.

Performance-based stock options

During the nine months ended September 30, 2017 and 2016, no options to purchase shares of common stock that contain performance-based or a combination of performance-based and service-based vesting criteria were granted by us. However, certain performance-based stock options issued in prior periods were still outstanding as of September 30, 2017. Performance-based vesting criteria for options primarily relate to milestone events specific to our corporate goals, including but not limited to certain preclinical, clinical and regulatory development milestones related to our product candidates. Stock-based compensation expense associated with these performance-based stock options is recognized if the performance condition is considered probable of achievement using our management’s best estimates. As of September 30, 2017, all performance-based milestones had been achieved and all expense related to these options has been recorded.

Performance-based stock units

We may grant awards of PSUs to non-employee directors and employees on a discretionary basis pursuant to the 2013 Plan. Each PSU entitles the holder to receive, at the achievement of the performance-based and service-based vesting criteria, a specified number of shares of our common stock. Performance-based vesting criteria primarily relate to milestone events specific to our corporate goals, specifically regulatory milestones related to our product candidates.

The following table presents PSU activity for the nine months ended September 30, 2017:



	Number of Stock Units		Weighted-Average Grant Date Fair Value
Unvested shares at December 31, 2016	200,613		$	53.36
Granted	16,391		50.83
Vested	—		—
Forfeited/expired	(25,630	)	51.00
Unvested shares at September 30, 2017	191,374		$	53.46

Stock-based compensation expense associated with these PSUs is recognized if the performance condition is considered probable of achievement using our management’s best estimates. As of September 30, 2017, there was approximately $10.2 million of total unrecognized compensation expense related to PSUs with performance-based vesting criteria that are not considered probable of achievement.

2013 Employee Stock Purchase Plan

In June 2013, our Board of Directors adopted, and in July 2013 our stockholders approved, the 2013 Employee Stock Purchase Plan, or the 2013 ESPP. The 2013 ESPP is administered by our Board of Directors or by a committee appointed by our Board of Directors. Under the 2013 ESPP, each offering period is six months, at the end of which employees may purchase shares of common stock through payroll deductions made over the term of the offering period. The per-share purchase price at the end of each offering period is equal to 85% of the closing price of one share of our common stock at the beginning or end of the offering period, whichever is lower, subject to Internal Revenue Service limits. We issued 59,651 shares and 36,680 shares during the nine months ended September 30, 2017 and 2016, respectively, under the 2013 ESPP. The 2013 ESPP provides participating employees with the opportunity to purchase up to an aggregate of 327,272 shares of our common stock. As of September 30, 2017, we had 213,791 shares available for future issuance under the 2013 ESPP.

Stock-based compensation expense

During the three and nine months ended September 30, 2017 and 2016, we recorded stock-based compensation expense for employee and non-employee stock options, RSUs, performance-based stock options and ESPP shares. Stock-based compensation expense by award type included within the condensed consolidated statements of operations is as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options	$	11,330	$	11,425	$	32,315	$	30,288
Restricted stock units	634		510		2,104		1,367
Performance-based stock options	—		—		—		46
Employee Stock Purchase Plan	243		208		709		545
Total stock-based compensation expense	$	12,207	$	12,143	$	35,128	$	32,246

Expenses related to equity-based awards were allocated as follows in the condensed consolidated statements of operations (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Research and development expense	$	7,620	$	7,903	$	22,835	$	19,992
General and administrative expense	4,587		4,240		12,293		12,254
Total stock-based compensation expense	$	12,207	$	12,143	$	35,128	$	32,246