Shareholders’ (Deficit) Equity

Common Stock

As of December 31, 2019 and 2018, there were 27,195,469 and 26,259,254 shares of common stock, $0.0001 par value, issued and outstanding, respectively.

In March 2018, the Company sold 3,910,000 shares of common stock in an underwritten public offering at a price of $29.50 per share for gross proceeds of approximately $115.3 million. The Company received proceeds of approximately $109.8 million, net of approximately $5.5 million in underwriting commissions, discounts and other issuance costs.

Preferred Stock

As of December 31, 2019 and 2018, 3,906 shares of Series C-1² Convertible Preferred Stock (“Series C-1²Preferred”) were issued, outstanding and convertible into 6,735,378 shares of common stock. As of December 31, 2019, no shares of Series F Convertible Preferred Stock (“Series F Preferred”) were issued and outstanding. As of December 31, 2018, 2,737 shares of Series F Preferred were issued and outstanding, and, in January 2019, all of the these issued and outstanding shares of Series F Preferred were converted into 782,031 shares of common stock.

The holders of Series C-1² Preferred and Series F Preferred do not have voting rights, other than for general protective rights required by the California General Corporation Law and are not entitled to special dividends. The Series C-1² Preferred have, and the Series F Preferred had, a liquidation preference in an amount equal to $1,000 per share. As of December 31, 2019 and 2018, the Series C-1² Preferred liquidation preference was approximately $3.9 million. As of December 31, 2018, the Series F Preferred liquidation preference was approximately $2.7 million.

Equity Incentive Plans

2013 Equity Incentive Plan

In September 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Equity Plan”). The 2013 Equity Plan is an omnibus equity compensation plan that permits the issuance of various types of share-based compensation awards, including stock options, restricted stock awards, stock appreciation rights and restricted stock units, as well as cash awards, to employees, directors and eligible consultants. The 2013 Equity Plan has a 10-year term and permits the issuance of incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“IRC”). The administrator under the plan has broad discretion to establish the terms of awards, including the size, term, exercise price and vesting conditions. Generally, grants to employees vest over four years, with 25% vesting on the one-year anniversary and the remainder vesting either quarterly or monthly thereafter; grants to non-employee directors generally vest over one year on the one-year anniversary.

A total of 9,600,000 shares of common stock have been reserved for issuance under the 2013 Equity Plan. As of December 31, 2019, 3,769,824 shares of common stock remained available for future grants under the 2013 Equity Plan.

2018 Employee Stock Purchase Plan

In July 2018, the Company adopted the 2018 Employee Stock Purchase Plan (the “ESPP”). Under the ESPP, eligible employees may purchase shares of the Company’s common stock twice per month at a price equal to 85% of the closing price of shares of the Company’s common stock on the date of each purchase. Eligible employees purchasing shares under the ESPP are subject to an annual cap equal to the lesser of $25,000 or 10% of the employee’s annual cash compensation. Shares purchased under the ESPP cannot be sold for a period of one year following the purchase date (or such shorter period of time if the participating employee’s employment terminates before this one-year anniversary).

A total of 750,000 shares of common stock have been reserved for issuance under the ESPP. As of December 31, 2019, 568,728 shares of common stock remained available for future grants under the ESPP.

Equity Awards

The activity related to equity awards, which are comprised of stock options and inducement grants, during the year ended December 31, 2019 is summarized as follows:



	Equity Awards		Weighted- average Exercise Price per Share		Weighted- average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2018	6,466,214		$	23.26
Granted⁽¹⁾	2,126,023		$	6.33
Exercised	(5,211	)	$	6.00
Cancelled/forfeited	(2,970,186	)	$	18.29
Outstanding at December 31, 2019	5,616,840		$	19.50	4.33 years	$	—
Exercisable at December 31, 2019	3,645,726		$	22.76	4.48 years	$	—

(1) In March 2019, the Company issued a stock option grant to the Company’s recently appointed Chief Commercial Officer to purchase 80,000 shares of common stock. The grant was awarded as an inducement grant outside of the 2013 Equity Plan. On the first anniversary of the grant date, 25% of the underlying shares become exercisable with the remaining shares vesting on a monthly basis over the subsequent three years, subject to continued service during that time.

The total intrinsic value of equity awards exercised during the years ended December 31, 2019 and 2018 were less than $0.1 million and $1.4 million, respectively. The total grant-date fair value of equity awards vested during the years ended December 31, 2019 and 2018 was $25.9 million and $38.0 million, respectively.

Share-based Compensation Expense

For the years ended December 31, 2019 and 2018, respectively, the weighted-average grant date fair value per stock option was $4.99 and $20.52, respectively. The Company estimates the fair value of each stock option grant on the grant date using the Black-Scholes option-pricing model (the “Black-Scholes model”) with the following assumptions:



	Year Ended December 31,
	2019		2018
Volatility	97	%	114	%
Expected life (years)	6.05		6.07
Risk-free interest rate	2.5	%	2.8	%
Dividend yield	—		—

Expected volatility is based on the historical volatility of shares of the Company’s common stock. In determining the expected life of employee stock options, the Company uses the “simplified” method. The expected life assumptions for stock options granted to nonemployees, other than nonemployee directors, are based upon the contractual term of the stock options. The risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the stock options in effect at the time of the grants. The dividend yield assumption is based on the expectation of no future dividend payments by the Company.

In addition to assumptions used in the Black-Scholes model, the Company reduces share-based compensation expense based on actual forfeitures in the period that each forfeiture occurs.

Under the ESPP, eligible employees may purchase shares of the Company’s common stock twice per month at a price equal to 85% of the closing price of shares of the Company’s common stock on the date of each purchase. The benefit received by the employees, which is equal to a 15% discount on the shares of the Company’s common stock purchased, is recognized as share-based compensation expense on the date of each purchase. The Company recorded $0.1 million and $0.2 million of share-based compensation related to the ESPP for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, there was no unrecognized share-based compensation expense related to shares of common stock issued under the ESPP.

The classification of share-based compensation expense is summarized as follows (in thousands):



	Year Ended December 31,
	2019		2018
Research and development	$	14,861	$	21,113
Selling, general and administrative	8,872		14,038
Total share-based compensation expense	$	23,733	$	35,151

As of December 31, 2019, $18.4 million of total unrecognized share-based compensation expense related to unvested stock options remains and is expected to be recognized over a weighted-average period of approximately 2.3 years.

Third-party Share-based Compensation Expense

The Company estimates the fair value of stock options and warrants issued to nonemployees, other than nonemployee directors, on the grant date using the Black-Scholes model.

In December 2014, the Company granted warrants to purchase 51,000 shares of common stock to two outside third-parties at an exercise price equal to the fair market value of the stock on the grant dates. One grant vested 25% on each anniversary date over four years. The other grant vested 100% on the one-year anniversary of the grant. In January 2016, the Company granted warrants to purchase 17,000 shares of common stock to an outside third-party at an exercise price equal to the fair market value of the stock on the date of each grant. The grant vested 100% on the one-year anniversary of the grant. In January 2017, the Company granted warrants to purchase 25,013 shares of common stock to an outside third-party at an exercise price equal to the fair market value of the stock on the date of each grant. The grant vested 100% on the one-year anniversary of the grant.

In March 2018, the Company issued 43,056 shares of common stock in a cashless exercise of 83,013 warrants to a third-party warrant holder. As of December 31, 2019, the Company had outstanding warrants to purchase 10,000 shares of common stock and did not recognize share-based compensation expense for these outstanding warrants for the years ended December 31, 2019 and 2018.