7. Stockholders’ Deficit

Common Stock Reserved for Issuance

The Company has reserved shares of common stock, on an as-if-converted basis, for issuance as follows:

	As of December 31,
	2016		2015

Options issued and outstanding		2,141,868		1,318,647
Shares available for issuance under 2015 Stock Option and Incentive Plan		720,921		1,497,071
Shares available for issuance under 2015 Employee Stock Purchase Plan		202,087		255,000
Total		3,064,876		3,070,718

Preferred stock

As amended in November 2015, the Company's Certificate of Incorporation authorizes 5,000,000 shares of preferred stock at a par value of $0.0001 per share. As of December 31, 2016 and 2015, no preferred stock was issued or outstanding.

Redeemable Convertible Preferred Stock

Up until the IPO in October 2015, the Company’s amended and restated certificate of incorporation authorized the Company to issue 62,235,313 shares of redeemable convertible preferred stock with a par value of $0.0001 per share, of which 38,500,000 are designated Series A redeemable convertible preferred stock, 6,666,667 are designated Series A-1 redeemable convertible preferred stock, and 17,068,646 are designated Series B redeemable convertible preferred stock. From September 2012 through December 31, 2013, the Company issued an aggregate of 19,250,000 shares of Series A redeemable convertible preferred stock for net cash proceeds of $19.2 million. In February, June and July 2014, the Company issued an aggregate of 19,000,000 shares of Series A redeemable convertible preferred stock for net cash proceeds of $19.0 million. In August 2014, the Company issued 6,666,667 shares of Series A-1 redeemable convertible preferred stock to Sanofi for net cash proceeds of $9.9 million. In April 2015, the Company issued 17,068,646 shares of Series B redeemable convertible preferred stock to new and existing stockholders in exchange for net proceeds of $45.8 million. During the IPO in October 2015, all of the 38,500,000 designated Series A redeemable convertible preferred stock, 6,666,667 designated Series A-1 redeemable convertible preferred stock, and 17,068,646 designated Series B redeemable convertible preferred stock were converted to common stock.

As of December 31, 2016 and 2015, there was no outstanding redeemable convertible preferred stock.

As of December 31, 2014, the outstanding redeemable convertible preferred stock was as follows (in thousands, except share data):

	Shares Authorized		Shares Issued and Outstanding		Liquidation Value		Carrying Value
Series A		38,500,000		38,250,000	$	42,006	$	41,359
Series A-1		6,666,667		6,666,667		10,327		10,229
Total		45,166,667		44,916,667	$	52,333	$	51,588

Redeemable Convertible Preferred Stock Call Option Liability

The preferred stock purchase agreements for Series A redeemable convertible preferred stock provided the investors the right to participate in future tranches of the respective series funding at a fixed price equal to the original issue price. These rights were provided concurrently with the issuance of the original preferred stock purchase agreement. These liability classified redeemable convertible preferred stock call options were determined to be freestanding financial instruments because they are freely transferable and separately exercisable.

In connection with the Collaboration Agreement, the Company granted Sanofi the right to purchase $40.0 million of shares of redeemable convertible preferred stock at a discounted price in the future, which was determined to be a freestanding financial instrument. The Company determined the fair value of the redeemable convertible preferred stock call option liabilities using an option pricing model.

Series A Redeemable Convertible Preferred Stock Call Option Liability

On September 11, 2012, the Company sold a redeemable convertible preferred stock call option right to investors to participate in future tranches of Series A redeemable convertible preferred stock financing. As of December 31, 2012, the Company recorded an initial call option liability of $0.5 million and remeasured the call option liability immediately prior to each exercise as well as at each balance sheet date. The call option right was exercised in subsequent closings of financing from November 2012 through July 2014. During 2013, the Company remeasured the call option liability immediately before exercise and recorded $0.9 million in other income (expense) in the consolidated statements of operations and comprehensive income (loss) and reclassified the fair value of $0.2 million into preferred stock upon issuance of the Series A redeemable convertible preferred stock. In 2014, the Company remeasured the redeemable convertible preferred stock call option liability at the end of each quarter and immediately before exercise. For the year ended December 31, 2014, the Company recorded $15,000 in other income (expense) in the consolidated statement of operations and comprehensive income (loss), respectively, and reclassified the fair value of $0.3 million into preferred stock upon issuance of the Series A redeemable convertible preferred stock. As of December 31, 2014, all closings of the Series A redeemable convertible preferred stock had been completed, and the Series A redeemable convertible preferred stock call option liability balance was zero.

Series A-1 Redeemable Convertible Preferred Stock Call Option Liability

The Company recorded an initial redeemable convertible preferred stock call option liability of $0.7 million in August 2014 upon entering into the Collaboration Agreement. The Company remeasured the redeemable convertible preferred stock call option liability to $0.3 million at December 31, 2014 and recorded the change in fair value of $0.4 million in other income (expense) in the consolidated statements of operations and comprehensive income (loss). The Company remeasured the redeemable convertible preferred stock call option liability at December 31, 2015 and recorded the change in fair value of $0.3 million in other income (expense) in the consolidated statements of operations and comprehensive income (loss) reducing the balance to zero as of December 31, 2015. The Company’s obligation to issue $40.0 million additional shares of the Company’s redeemable convertible preferred stock to Sanofi at a discounted price expired upon the closing of the Series B redeemable convertible preferred stock financing in April 2015.

Dividends and Distributions

The holders of the outstanding shares of redeemable convertible preferred stock were entitled to receive, whether or not declared by the Board of Directors, a cumulative cash dividend at the rate of 8% of the original issue price per annum on each outstanding share of redeemable convertible preferred stock. The original issue price was $1.00 for Series A redeemable convertible preferred stock, $1.50 for Series A-1 redeemable convertible preferred stock and $2.695 for Series B redeemable convertible preferred stock. Such dividends were to be payable only when, as and if declared by the Board of Directors or upon a redemption or a Liquidation Event, as described below. After payment of dividends at the rate set forth above, any additional dividends declared were to be distributed among all holders of the redeemable convertible preferred stock and common stock in proportion to the number of shares of common stock that would then be held by each such holder if all shares of the redeemable convertible preferred stock were converted into common stock. No dividends were declared by the Company to date. During the year ended December 31, 2015, the Company reclassified cumulative dividends relating to its Series A, A-1 and B redeemable convertible preferred stock of $6.3 million, $1.0 million, and $1.9 million, respectively to additional paid-in-capital upon the conversion of the Series A, A-1 and B redeemable convertible preferred stock into shares of common stock.

Redemption

The Series B redeemable convertible preferred stock was to be redeemed by the Company at a price equal to the applicable original issue price, plus any dividends accrued but unpaid thereon, whether or not declared, in three annual installments commencing not more than 60 days after receipt by the Company of notice from the holders of a majority of the then outstanding shares of Series B redeemable convertible preferred stock at any time on or after five years from the date of issuance. The Series A and A-1 redeemable convertible preferred stock was to be redeemed by the Company at a price equal to the applicable original issue price, plus any dividends accrued but unpaid whether or not declared, in three annual installments commencing not more than 60 days after receipt by the Company of notice from the holders of a majority of the then outstanding shares of Series A and A-1 redeemable convertible preferred stock at any time on or after the later to occur of the redemption in full of the Series B redeemable convertible preferred stock and the date five years after the Series B redeemable convertible preferred stock original issuance date of April 2015.

If the Company did not have sufficient funds legally available on the redemption date to redeem all of the shares of a class of redeemable convertible preferred stock, the Company was to redeem a pro rata portion of each holder’s redeemable convertible preferred stock of that class based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the available funds were sufficient to redeem all such shares, and was to redeem such remaining shares as soon as practicable after the Company has funds legally available there for. The redemption of the Series A and A-1 redeemable convertible preferred stock would only happen following the redemption in full of the Series B redeemable convertible preferred stock, and the redemption of the Series A and A-1 redeemable convertible preferred stock occur on a pari passu basis.

Accretion of Redeemable Convertible Preferred Stock

The Company recorded the Series A, A-1 and B redeemable convertible preferred stock at fair value on the dates of issuance, net of offering costs and the allocation of the fair value of the convertible preferred stock tranche liability. The Series B redeemable convertible preferred stock shares were originally issued with a contingent redemption which allowed the holders to redeem their shares in three annual installments upon the vote of a majority of the then outstanding shares of Series B redeemable convertible preferred stock at any time after five years of the Series B redeemable convertible preferred stock original issuance date in April 2015. The Series A and A-1 redeemable convertible preferred stock was redeemable in three annual installments on or after the later to occur of the redemption in full of the Series B redeemable convertible preferred stock and the date five years after the Series B redeemable convertible preferred stock original issuance date. Accordingly, the Company was accreting the Series A, A-1 and B redeemable convertible preferred stock for the change in the redemption value with the change recorded to accumulated deficit at the end of each reporting period. The Company used the straight line method over the accretion periods, which resulted in approximately the same amounts as the effective interest rate method. The Company accreted $0.1 million and $0.2 million during the years ended December 31, 2015 and 2014. During the year ended December 31, 2015, the Company reclassified cumulative accretion costs relating to its Series A, A-1 and B redeemable convertible preferred stock of $0.5 million to additional paid-in capital upon the conversion of the Series A, A-1 and B redeemable convertible preferred stock into shares of common stock.

Liquidation Rights

Upon any voluntary or involuntary liquidation, dissolution, or winding up of the Company, any merger or consolidation following which the stockholders of the Company do not hold a majority, by voting power, of the capital stock of the surviving or successor entity (or its parent), or any sale or other disposition of all or substantially all of the Company’s assets (a “Liquidation Event”), before any distribution or payment was to be made to the holders of common stock, the holders of Series A, A-1 and B redeemable convertible preferred stock were entitled to be paid out of assets legally available for distribution, an amount equal to the original purchase price of the applicable series of redeemable convertible preferred stock plus all accrued but unpaid dividends. After payments of the full liquidation preferences of the Series B redeemable convertible preferred stock, the remaining assets of the Company available for distribution to stockholders were to be distributed among and paid ratably to the holders of Series A and A-1 redeemable convertible preferred stock. After payments of the full liquidation preferences of the Series A and A-1 redeemable convertible preferred stock, the remaining assets of the Company available for distribution to stockholders were to be distributed among and paid ratably to the holders of common stock in proportion to the number of shares held by them. In October, 2015, the liquidation rights related to the Series A, A-1 and B redeemable convertible preferred stock expired as these classes of preferred stock were converted to common stock.

Conversion

Each series of redeemable convertible preferred stock was convertible at the option of the holder at any time into fully paid, nonassessable shares of common stock. The number of shares of common stock to which a holder was entitled upon conversion shall be the product obtained by multiplying the preferred conversion rate (determined by dividing the original issue price by the applicable preferred stock conversion price) by the number of shares being converted. The per share conversion price of the Series A, A-1 and B redeemable convertible preferred stock was initially $1.00, $1.50 and $2.695, respectively, and was subject to adjustment in connection with certain dilutive issuances, stock splits, combinations, dividends, distributions, recapitalizations and the like. Each share of redeemable convertible preferred stock was to automatically convert into common stock upon the closing of the sale of shares of Company common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, provided that such offering results in at least $30.0 million of gross proceeds, after deducting the underwriting’ discount and commissions, to the Company and following such offering such shares are listed on a NASDAQ exchange, the New York Stock Exchange or another internationally recognized stock exchange (a “Qualified IPO”). In addition, each share of Series B redeemable convertible preferred stock was to automatically convert into common stock at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of Series B redeemable convertible preferred stock, and each share of Series A and A-1 convertible preferred stock was to automatically convert into common stock at any time upon the affirmative election of the holders of at least a majority of the outstanding shares of Series A and A-1 redeemable convertible preferred stock voting together. In October 2015, each series of the Company’s redeemable convertible preferred stock was convertible into common stock on a 3.675:1 basis. During the IPO in October 2015, all of the 38,500,000 designated Series A redeemable convertible preferred stock, 6,666,667 designated Series A-1 redeemable convertible preferred stock, and 17,068,646 are designated Series B redeemable convertible preferred stock were converted to common stock.

Voting Rights

The holders of each share of convertible preferred stock have one vote for each share of common stock into which such convertible preferred stock may be converted.