Common Stock, Preferred Stock and Equity Plans

Common Stock and Preferred Stock

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, 2018 and 2017, the Company had no shares of preferred stock issued or outstanding.

Share Repurchase Program

The Company’s Board of Directors approved a share repurchase program, pursuant to which the Company is authorized to repurchase up to $500.0 million of its common stock between February 1, 2018 and December 31, 2019. Under the share repurchase program, the Company is authorized to purchase shares from time to time through open market or privately negotiated transactions. Such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by the Company’s management and in accordance with the requirements of the SEC.

During the year ended December 31, 2018, the Company repurchased 2,093,891 shares of its common stock under the share repurchase program for an aggregate of $350.0 million, including commissions and fees. The Company expects to fund further repurchases of its common stock through a combination of cash on hand and cash generated by operations.

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, 2018
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	10,735,107	14,737,360
2006 Stock and Option Plan	Employees, Non-employee Directors and Consultants	NSO, RS and RSU	1,770,994	—
		Total	12,506,101	14,737,360

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, 2018, 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, 2018, the Company’s shareholders approved increases in the number of shares authorized for issuance pursuant to the 2013 Stock and Option Plan of (i) 8,000,000 shares in 2018, and (ii) 6,750,000 shares in 2017.

During the three years ended December 31, 2018, 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, 2018, 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, 2018:



	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, 2017	9,767		$	91.57
Granted	2,297		$	164.11
Exercised	(3,076	)	$	85.66
Forfeited	(431	)	$	125.37
Expired	(6	)	$	98.30
Outstanding at December 31, 2018	8,551		$	111.46	6.92	$	462,563
Exercisable at December 31, 2018	4,577		$	93.21	5.63	$	325,382

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 2018, which was $164.11 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 2018, 2017 and 2016 was $258.2 million, $302.8 million and $48.6 million, respectively. The total cash received by the Company as a result of employee stock option exercises during 2018, 2017 and 2016 was $263.4 million, $323.3 million and $48.5 million, respectively.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2018:



	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)
$29.07–$40.00	532	1.08	$	34.89	532	$	35.89
$40.01–$60.00	470	3.51	$	50.04	470	$	50.04
$60.01–$80.00	543	5.25	$	74.90	533	$	74.89
$80.01–$100.00	2,839	7.18	$	89.19	1320	$	89.85
$100.01–$120.00	693	6.09	$	109.30	603	$	109.22
$120.01–$140.00	839	6.62	$	130.27	642	$	130.24
$140.01–$160.00	1,400	9.06	$	155.52	271	$	155.30
$160.01–$180.00	526	8.50	$	162.94	156	$	162.94
$180.01–$181.60	709	9.53	$	181.60	50	$	181.60
Total	8,551	6.92	$	111.46	4,577	$	93.21

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, 2018:



	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, 2017	1,229		$	102.12	2,011		$	109.27
Granted	—		$	—	1,600		$	164.70
Vested	(690	)	$	100.07	(629	)	$	108.02
Cancelled	(59	)	$	101.55	(265	)	$	132.26
Unvested at December 31, 2018	480		$	104.91	2,717		$	140.10

The total fair value of restricted stock that vested during 2018, 2017 and 2016 (measured on the date of vesting) was $114.5 million, $157.0 million and $74.1 million, respectively. The total fair value of restricted stock units that vested during 2018, 2017 and 2016 (measured on the date of vesting) was $104.8 million, $33.2 million and $5.3 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 financial 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, 2018:



	Performance-Based RSU
	Number of Units		Weighted-average Grant-date Fair Value
	(in thousands)		(per share)
Unvested at December 31, 2017 (1)	484		$	87.59
Granted (2)	494		$	152.40
Vested	(154	)	$	87.13
Cancelled	(65	)	$	99.34
Unvested at December 31, 2018	759		$	110.50

(1) “Unvested” represents the Company’s PSUs at target to the extent performance has not been certified plus the actual number of shares that continue to be subject to service conditions for which the performance has been achieved and certified.
(2) “Granted” represents (i) the target number of shares issuable for grants during 2018 and (ii) any change in the number of shares issuable pursuant to outstanding PSUs based on performance certification during 2018.

The total fair value of PSUs that vested during 2018 and 2017 (measured on the date of vesting) was $23.2 million and $1.3 million, respectively. 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, 2018, there were 402,602 shares of common stock authorized for issuance pursuant to the ESPP.

In 2018, the following shares were issued to employees under the ESPP:



	Year Ended December 31, 2018
	(in thousands, except per share amount)
Number of shares	213,654
Average price paid per share	$	117.52