STOCK-BASED COMPENSATION

2009 Stock Incentive Plan Overview

We have one active stockholder-approved stock-based compensation plan, the 2009 Incentive Award Plan (the “2009 Plan”), which replaced our former stockholder-approved plans. We may grant incentive stock options, non-qualified options, restricted stock awards, and stock appreciation rights under the 2009 Plan.

The maximum number of our common stock available for issuance under the 2009 Plan at inception was 10 million shares. Beginning on January 1, 2010, and each January 1st thereafter, the number of shares of common stock available for issuance under the 2009 Plan automatically increases by the greater of (i) 2.5 million shares or (ii) a number of shares such that the total number of shares of common stock available for issuance under the 2009 Plan shall equal 30% of the then number of shares of common stock issued and outstanding. As of December 31, 2015, 8.6 million shares were available for grant. It is our policy that before stock is issued through the exercise of stock options, we must first receive all required cash payment for such shares (whether through an upfront cash exercise or net-settlement exercise).

Stock-based awards are governed by agreements between us and the recipients. Incentive stock options and nonqualified stock options may be granted under the 2009 Plan at an exercise price of not less than 100% of the closing fair market value of our common stock on the respective date of grant. The grant date is generally the date the award is approved by the Compensation Committee of the Board of Directors, though for aggregate awards of 50,000 or less in each quarter, the grant date is the date the award is approved by our Chief Executive Officer.

Stock-based awards generally vest 25% on the first anniversary of the date of grant, or for new hires, the first anniversary of their initial date of employment. Awards generally vest monthly thereafter on a straight-line basis over three years. Stock options must be exercised, if at all, no later than 10 years from the date of grant. Upon termination of employment, vested stock options may be exercised within 90 days from the last date of employment. In the event of an optionee’s death, disability, or retirement, the exercise period is 365 days from the last date of employment.

Employee Stock Purchase Plan

Under the terms of our 2009 Employee Stock Purchase Plan (the “ESPP”), eligible employees can purchase common stock through payroll deductions. The purchase price is equal to the closing price of our common stock on the first or last day of the offering period (whichever is less), minus a 15% discount. We use the Black-Scholes option-pricing model, in combination with the discounted employee price, in determining the value of ESPP expense to be recognized during each offering period. A participant may purchase a maximum of 50,000 shares of common stock during a six-month offering period, not to exceed $25,000 worth of stock on the offering date during each plan year.

A total of 4.3 million shares of common stock are authorized for issuance under the ESPP. Beginning on January 1, 2010, and each January 1st thereafter, the number of shares of common stock available for issuance under the ESPP shall automatically increase by an amount equal to the lesser of (i) one million shares or (ii) an amount determined by the ESPP administrator. However, in no event shall the number of shares of common stock available for future sale under the ESPP exceed 10 million shares, subject to capitalization adjustments occurring due to dividends, splits, dissolution, liquidation, mergers, or changes in control.

Stock-Based Compensation Expense Summary

We classify our stock-based compensation expense (inclusive of our incentive stock plan, employee stock purchase plan, and 401(k) contribution matching program) in the accompanying Consolidated Statements of Operations, based on the department to which the recipient belongs. Stock-based compensation expense included within “Total operating costs and expenses” for years ended December 31, 2015, 2014 and 2013 was as follows:



	Year Ended December 31,
	2015		2014		2013
Cost of product sales	$	62	$	—	$	—
Selling, general and administrative	10,049		10,053		10,762
Research and development	1,973		1,756		2,017
Total	$	12,084	$	11,809	$	12,779

Employee stock-based compensation expense for the years ended December 31, 2015, 2014 and 2013 was recognized (reduced for estimated forfeitures) on a straight-line basis over the vesting period. Forfeitures are estimated at the time of grant and prospectively revised if actual forfeitures differ from those estimates. We estimate forfeitures of stock options using the historical exercise behavior of our employees. For purposes of this estimate, we have applied an estimated forfeiture rate of 11%, 8%, and 8% for the years ended December 31, 2015, 2014 and 2013.

Valuation Assumptions – Restricted Stock and Stock Options

The grant-date fair value per share for restricted stock awards was based upon the closing market price of our common stock on the award grant-date.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to determine fair value for the stock awards granted in the applicable year:



	Year Ended December 31,
	2015	2014	2013
Expected option life (in years) (a)	5.43	4.95	4.95
Risk-free interest rate (b)	1.25% - 1.68%	0.58% - 1.52%	0.35% - 0.78%
Volatility (c)	48.0% - 50.2%	48.9% - 62.1%	58.3% -71.5%
Dividend yield (d)	—%	—%	—%
Weighted-average grant-date fair value per stock option	$2.85	$3.49	$4.66


(a)	Determined by the historical stock option exercise behavior of our employees (maximum term is 10 years).


(b)	Based upon the U.S. Treasury yields in effect during the period which the options were granted (for a period equaling the stock options’ expected term).


(c)	Measured using our historical stock price for a period equal to stock options’ expected term.


(d)	We do not expect to declare any cash dividends in the foreseeable future.

Stock Option Activity

Stock option activity during the years ended December 31, 2015, 2014 and 2013 is as follows:



	Number of Shares		Weighted- Average Exercise Price/Share		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding — December 31, 2012	10,399,265		$	6.57
Granted	2,041,300		8.92
Exercised	(825,884	)	4.40			$	3,435	(1	)
Forfeited	(202,882	)	8.22
Expired	(82,581	)	8.91
Outstanding — December 31, 2013	11,329,218		7.10
Granted	2,576,292		7.60
Exercised	(485,260	)	4.77			$	1,629	(1	)
Forfeited	(557,109	)	9.65
Expired	(214,039	)	10.70
Outstanding — December 31, 2014	12,649,102		7.12
Granted	2,219,587		6.04
Exercised	(456,082	)	4.45			$	977	(1	)
Forfeited	(296,162	)	8.06
Expired	(279,594	)	9.05
Outstanding — December 31, 2015	13,836,851		$	6.97	6.34	$	7,516	(2	)
Vested (exercisable) — December 31, 2015	10,235,721		$	6.94	5.40	$	7,159	(2	)
Unvested (unexercisable) — December 31, 2015	3,601,130		$	7.06	9.00	$	357	(2	)


(1)	Represents the total difference between our closing stock price at the time of exercise and the stock option exercise price, multiplied by the number of options exercised.


(2)	Represents the total difference between our closing stock price on the last trading day of 2015 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2015. The amount of intrinsic value will change based on the fair market value of our stock.

The following table summarizes information with respect to stock option grants as of December 31, 2015:



	Outstanding				Exercisable
Exercise Price	Granted Stock Options Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Granted Stock Options Exercisable	Weighted- Average Exercise Price
$0.92 - 3.15	1,090,385	2.49	$	2.18	1,090,385	$	2.18
$3.16 - 4.95	1,378,444	4.29	4.24		1,378,444	4.24
$4.96 - 6.9	4,394,294	6.14	6.08		2,999,511	6.22
$6.91 - 8.99	4,500,895	7.61	7.78		2,595,943	7.95
$9.00 - 16.32	2,472,833	7.21	10.71		2,171,438	10.83
	13,836,851	6.34	$	6.97	10,235,721	$	6.94

As of December 31, 2015, there was unrecognized compensation expense of $8.8 million related to unvested stock options, which we expect to recognize over a weighted average period of 2.41 years.

Restricted Stock Award Activity

A summary of restricted stock award activity is as follows:



	Number of Restricted Stock Awards		Weighted Average Fair Value per Share at Grant Date
Unvested — December 31, 2012	1,034,604		$	11.00
Granted	523,800		8.74
Vested	(501,660	)	9.72
Forfeited	(49,625	)	10.60
Unvested — December 31, 2013	1,007,119		10.09
Granted	581,194		7.52
Vested	(578,985	)	10.24
Forfeited	(185,111	)	9.88
Unvested — December 31, 2014	824,217		8.22
Granted	1,948,585		6.32
Vested	(364,507	)	8.47
Forfeited	(234,313	)	7.32
Unvested — December 31, 2015	2,173,982		$	6.58



	2015		2014		2013
Restricted stock expense	$	4,006	$	3,830	$	4,202

As of December 31, 2015, there was approximately $9.8 million of unrecorded expense related to issued restricted stock that will be recognized over an estimated weighted average period of 2.29 years. These unvested shares are included in our issued and outstanding common stock as of December 31, 2015.

401(k) Plan – Stock Matching Contribution

We issued shares of common stock to our employees in connection with our 401(k) program, partially matching our employees’ annual 401(k) contributions, as summarized below:



	2015		2014		2013
Shares of common stock issued	179,865		133,734		99,359
Match contribution value*	$	1,124	$	1,028	$	860


*	Represents our stock price on the date of the common stock issuance multiplied by the number of shares of common stock issued.