9. Stock Incentive Plans

Prior to the Company’s initial public offering in June 2015 (the “IPO”), the Company granted awards to eligible participants under its 2008 Equity Incentive Plan. In May 2015, the Company’s board of directors adopted and, in June 2015, the Company’s stockholders approved the 2015 Stock Incentive Plan (“2015 Plan”), which became effective immediately prior to the effectiveness of the IPO. Subsequent to the IPO, option grants are awarded to eligible participants only under the 2015 Plan.

The 2015 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2015 Plan.

Terms of stock option agreements, including vesting requirements, are determined by the Company's board of directors, subject to the provisions of the applicable stock incentive plan. Options granted by the Company generally vest ratably over four years, with a one-year cliff, and options are exercisable from the date of grant for a period of ten years. For options granted through December 31, 2019, the exercise price or purchase price, as applicable, equaled the estimated fair value of the Common Stock as determined by the Company's board of directors on the date of grant.

A summary of the Company’s stock option activity and related information for employees and non-employees follows:


				Weighted
				Average
		Weighted-		Remaining	Aggregate
		Average Exercise		Contractual	Intrinsic Value
	Shares	Price		Term (years)	(in thousands)
Outstanding at December 31, 2018	433,389	$	29.05	7.97	$	—
Granted	454,420	$	4.86
Cancelled or forfeited	(101,977)	$	18.12
Outstanding at December 31, 2019	785,832	$	16.48	8.13	$	470
Vested and Exercisable at December 31, 2019	289,782	$	33.91	6.59	$	9

There were no options exercised in the year ended December 31, 2019. The total intrinsic value of options exercised in the year ended December 31, 2018 was $1 thousand. The total fair value of employee options vested for the years ended December 31, 2019 and 2018 was $1.5 million and $1.7 million, respectively. The weighted-average grant date fair value of options granted to employees and non-employees for the years ended December 31, 2019 and 2018 was $3.25 and $6.64, respectively.

At December 31, 2019, the total unrecognized compensation expense related to unvested stock option awards was $1.7 million. The Company expects to recognize that cost over a weighted-average period of approximately 2.2 years.

Stock-Based Compensation Expense

The fair value of stock options granted to employees and non-employees was estimated using the Black-Scholes option-pricing model based on the following assumptions:


	Year Ended December 31,
	2019				2018
Weighted-average expected volatility	68.9	-	110.5	%	73.7	-	76.9	%
Expected term (in years)	5.50	-	10.00		5.75	-	6.25
Risk-free interest rate	1.39	-	2.69	%	2.67	-	2.84	%
Expected dividend yield			0	%			0	%

Volatility

Due to the lack of company-specific historical and implied volatility data of its Common Stock, the Company does not have relevant historical data to support its expected volatility. As such, the Company has used a weighted average of expected volatility based on the volatilities of a representative group of publicly traded biopharmaceutical companies. For purposes of identifying representative companies, the Company considered characteristics such as number of product candidates in early stages of product development, area of therapeutic focus, and length of trading history. The expected volatility was determined using an average of the historical volatilities of the representative group of companies for a period equal to the expected term of the option grant. The Company intends to continue to consistently apply this process using the same representative companies until a sufficient amount of historical information regarding the volatility of the Company's own share price becomes available or until circumstances change, such that the identified entities are no longer representative companies. In the latter case, more suitable, similar entities whose share prices are publicly available would be utilized in the calculation.

Expected Term

The Company uses the “simplified method” to estimate the expected term of stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the contractual term (ten years) and the vesting term (generally four years) of the Company's stock options, taking into consideration multiple vesting tranches. The Company utilizes this method due to lack of historical exercise data and the plain-vanilla nature of the Company's share-based awards.

Risk-Free Rate

The risk-free rate was based on the yield curve of U.S. Treasury securities with periods commensurate with the expected term of the options being valued.