Common Stock, Preferred Stock and Equity Plans

The Company is authorized to issue 500,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by the Company’s Board of Directors, and to share ratably in the Company’s assets legally available for distribution to the Company’s shareholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The holders of common stock do not have cumulative voting rights.

The Company is authorized to issue 1,000,000 shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company’s shareholders. As of December 31, 2017 and 2016, the Company had no shares of preferred stock issued or outstanding.

Stock and Option Plans

The purpose of each of the Company’s stock and option plans is to attract, retain and motivate its employees, consultants and directors. Awards granted under these plans can be incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), restricted stock (“RSs”), restricted stock units (“RSUs”) including performance-based RSUs (“PSUs”) or other equity-based awards, as specified in the individual plans.

Shares issued under all of the Company’s plans are funded through the issuance of new shares. The following table contains information about the Company’s equity plans:



			As of December 31, 2017
Title of Plan	Group Eligible	Type of Award Granted	Awards Outstanding	Additional Awards Authorized for Grant
2013 Stock and Option Plan	Employees, Non-employee Directors and Consultants	NSO, RS, RSU and PSU	10,388,723	11,427,114
2006 Stock and Option Plan	Employees, Non-employee Directors and Consultants	NSO, RS and RSU	3,102,768	—
		Total	13,491,491	11,427,114

All options granted under the Company’s 2013 Stock and Option Plan (“2013 Plan”) and 2006 Stock and Option Plan (“2006 Plan”) were granted with an exercise price equal to the fair value of the underlying common stock on the date of grant. As of December 31, 2017, the stock and option plan under which the Company is authorized to make new equity awards is the Company’s 2013 Plan. Under the 2013 Plan, no stock options can be awarded with an exercise price less than the fair market value on the date of grant. In the three years ended December 31, 2017, the Company’s shareholders approved increases in the number of shares authorized for issuance pursuant to the 2013 Stock and Option Plan of (i) 6,750,000 shares in 2017, and (ii) 7,800,000 shares in 2015, plus the number of shares that remained available for issuance under the Company’s 2006 Stock and Option Plan, which rolled-over into the 2013 Stock and Option Plan in 2015.

During the three years ended December 31, 2017, grants to current employees and directors primarily had a grant date that was the same as the date the award was approved by the Company’s Board of Directors. During the three years ended December 31, 2017, for grants to new employees and directors, the date of grant for awards was the employee’s first day of employment or the date the director was elected to the Company’s Board of Directors. All options awarded under the Company’s stock and option plans expire not more than 10 years from the grant date.

Stock Options

The following table summarizes information related to the outstanding and exercisable options during the year ended December 31, 2017:



	Stock Options		Weighted-average Exercise Price		Weighted-average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)		(per share)		(in years)	(in thousands)
Outstanding at December 31, 2016	12,642		$	81.41
Granted	2,359		$	108.43
Exercised	(4,561	)	$	70.90
Forfeited	(611	)	$	99.53
Expired	(62	)	$	105.24
Outstanding at December 31, 2017	9,767		$	91.57	6.95	$	585,293
Exercisable at December 31, 2017	5,313		$	80.14	5.75	$	375,472

The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, that would have been received by option holders if all option holders had exercised all options with an exercise price lower than the market price on the last business day of 2017, which was $150.71 based on the average of the high and low price of the Company’s common stock on that date.

The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during 2017, 2016 and 2015 was $302.8 million, $48.6 million and $252.9 million, respectively. The total cash received by the Company as a result of employee stock option exercises during 2017, 2016 and 2015 was $323.3 million, $48.5 million and $165.6 million, respectively.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2017:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted-average Remaining Contractual Life	Weighted-average Exercise Price		Number Exercisable	Weighted-average Exercise Price
	(in thousands)	(in years)	(per share)		(in thousands)	(per share)
$18.93–$20.00	128	0.10	$	18.93	128	$	18.93
$20.01–$40.00	810	1.88	$	34.43	810	$	34.43
$40.01–$60.00	798	4.49	$	49.15	798	$	49.15
$60.01–$80.00	746	6.19	$	75.49	653	$	75.40
$80.01–$100.00	4,350	8.07	$	89.31	1,514	$	89.51
$100.01–$120.00	1,087	7.11	$	109.34	633	$	109.24
$120.01–$140.00	1,223	7.63	$	130.20	734	$	129.89
$140.01–$160.00	—	—	$	—	—	$	—
$160.01–$163.74	625	9.54	$	162.94	43	$	162.94
Total	9,767	6.95	$	91.57	5,313	$	80.14

Restricted Stock and Restricted Stock Units (excluding PSUs)

The following table summarizes the restricted stock and restricted stock unit activity of the Company during the year ended December 31, 2017:



	Restricted Stock				Restricted Stock Units (excluding PSUs)
	Number of Units		Weighted-average Grant-date Fair Value		Number of Shares		Weighted-average Grant-date Fair Value
	(in thousands)		(per share)		(in thousands)		(per share)
Unvested at December 31, 2016	2,613		$	102.54	798		$	92.62
Granted	—		$	—	1,719		$	113.13
Vested	(1,206	)	$	102.99	(278	)	$	94.72
Cancelled	(178	)	$	102.45	(228	)	$	97.86
Unvested at December 31, 2017	1,229		$	102.12	2,011		$	109.27

The total fair value of restricted stock that vested during 2017, 2016 and 2015 (measured on the date of vesting) was $157.0 million, $74.1 million and $124.0 million, respectively. The total fair value of restricted stock units that vested during 2017, 2016 and 2015 (measured on the date of vesting) was $33.2 million, $5.3 million and $8.0 million, respectively.

Performance-based RSUs (PSUs)

The potential range of shares issuable pursuant to the Company’s PSU awards range from 0% to 200% of the target shares based on financial and non-financial measures. Fifty percent of PSUs that could be earned have a one-year performance period with the amount actually earned dependent upon the Company’s product revenue performance and with vesting of the earned shares in three equal installments over a three-year period. The remaining 50% of PSUs that could be earned have a three-year performance period with the amount actually earned dependent upon the achievement of multiple clinical development milestones and with the earned shares cliff vesting at the end of the three-year performance period.

The following table summarizes the PSU activity of the Company during the year ended December 31, 2017:



	Performance-Based RSU
	Number of Units		Weighted-average Grant-date Fair Value
	(in thousands)		(per share)
Unvested at December 31, 2016 (1)	135		$	91.05
Granted (2)	392		$	86.71
Vested	(15	)	$	91.05
Cancelled	(28	)	$	86.52
Unvested at December 31, 2017	484		$	87.59

(1) Represents the Company’s 2016 PSUs based on the target number of shares issuable at the end of each of the financial and non-financial performance periods.
(2) Represents (i) the target number of shares issuable for the Company’s 2017 PSUs at the end of each of the financial and non-financial performance periods and (ii) a decrease in shares issuable under 2016 PSUs based on 2016 financial performance.

The total fair value of PSUs that vested during 2017 (measured on the date of vesting) was $1.3 million. There were no PSUs that vested during 2016, which was the first year that the Company granted PSUs.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (the “ESPP”). The ESPP permits eligible employees to enroll in a twelve-month offering period comprising two six-month purchase periods. Participants may purchase shares of the Company’s common stock, through payroll deductions, at a price equal to 85% of the fair market value of the common stock on the first day of the applicable twelve-month offering period, or the last day of the applicable six-month purchase period, whichever is lower. Purchase dates under the ESPP occur on or about May 14 and November 14 of each year. As of December 31, 2017, there were 616,256 shares of common stock authorized for issuance pursuant to the ESPP.

In 2017, the following shares were issued to employees under the ESPP:



	Year Ended December 31, 2017
	(in thousands, except per share amount)
Number of shares	275
Average price paid per share	$	80.71