Stock-based Compensation

2015 Stock Incentive Plan

Under the Company’s stock-based compensation plan which is governed by its Amended and Restated 2015 Stock Incentive Plan, as amended (the “2015 Plan”), the Company may grant incentive stock options, non-qualified stock options, RSAs, RSUs and stock appreciation rights. The maximum number of shares of the Company’s common stock available for issuance under the 2015 Plan is 1,630,000 shares. As of December 31, 2018, 230,847 shares were available for grant. It is the Company’s policy that before stock is issued through the exercise of stock options, the Company must first receive all required cash payment for such shares. The stock issuable under the 2015 Plan must be shares of authorized new unissued shares.

Stock-based awards are governed by agreements between the Company and the recipients. Incentive stock options and non-qualified stock options may be granted under the 2015 Plan at an exercise price of not less than 100% of the closing fair market value of the Company’s common stock on the respective date of grant. The grant date is generally the date of approval of the grant. The Company’s standard stock-based awards vest as to 1/3 of the shares underlying the award on the 1st anniversary of the date of grant, or for new hires, the 1st anniversary of their initial date of employment with the Company. Awards vest monthly thereafter on a straight-line basis over 2 years. All stock options have 10-year terms.

2017 Inducement Stock Incentive Plan

On October 27, 2017, the Company adopted the 2017 Inducement Stock Incentive Plan, as amended (the “2017 Inducement Plan”). The 2017 Inducement Plan provides for the grant of equity-based awards in the form of non-qualified stock options, RSAs, RSUs, stock appreciation rights, performance shares and performance units. In accordance with Nasdaq Listing Rules, awards under the 2017 Inducement Plan may only be made to an employee who has not previously been an employee of the Company or a member of the Company’s board of directors (the “Board”), or an employee or member of the Board of any subsidiary of the Company, or following a bona fide period of non-employment with the Company or any subsidiary of the Company, if he or she is granted such award in connection with his or her commencement of employment with the Company or a subsidiary of the Company and such grant is an inducement material to his or her entering into employment with the Company or such subsidiary.

The maximum number of shares of the Company’s common stock available for issuance under the 2017 Inducement Plan is 400,000 shares. As of December 31, 2018, 235,300 shares were available for grant.

Employee Stock Purchase Plan

Under the terms of the ESPP, eligible employees can purchase common stock, through payroll deductions, at a purchase price equal to the closing price of the Company’s common stock on the first or last day of the offering period (whichever is less) minus a 15% discount. As of December 31, 2018, 38,396 shares were available for grant.

The table below summarizes the stock-based compensation expense, common stock purchased by Company employees and the average purchase price per share under the ESPP in the years ended December 31, 2018, 2017 and 2016.



	Year Ended December 31,
	2018		2017		2016
Stock-based compensation expense	$	1,033	$	850	$	1,205
Common stock purchased by Company employees	60,695		44,649		39,412
Average purchase price per share	$	22.16	$	56.43	$	81.72

Stock-based Compensation Expense Summary

The table below summarizes the impact of recording stock-based compensation expense in the Consolidated Statements of Operations and Comprehensive Loss in the years ended December 31, 2018, 2017 and 2016:



	Year Ended December 31,
	2018		2017		2016
Cost of goods sold	$	830	$	828	$	944
Operating expenses:
Research and development	1,132		1,259		1,528
Clinical and regulatory affairs	483		770		672
Marketing and sales	3,468		3,796		4,335
General and administrative	5,117		4,991		4,807
Total operating expenses	10,200		10,816		11,342
Total stock-based compensation expense	$	11,030	$	11,644	$	12,286

In addition, the Company had $0.3 million, $0.4 million and $0.5 million of stock-based compensation expense capitalized in inventory as of December 31, 2018, 2017 and 2016, respectively.

Valuation Assumptions

The following assumptions were used to determine fair value for the stock options granted in the applicable year:



	Year Ended December 31,
	2018	2017	2016
Expected life (in years)	5.6	5.6	5.5
Volatility	56.5%	51.3%	44.2%
Risk-free interest rate	2.7%	1.9%	1.2%
Dividend yield	—	—	—
Weighted average grant date fair value per share	$10.66	$25.13	$34.51

Stock Option Activity

Stock option activity in the year ended December 31, 2018 was as follows:



	Number of Shares		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (a)
Outstanding balance at December 31, 2017	1,182,433		$	75.55
Granted	531,017		20.51
Exercised	(60,734	)	26.12
Forfeited	(196,514	)	65.12
Expired	(140,842	)	103.38
Outstanding balance at December 31, 2018	1,315,360		$	54.20	7.5	$	6,952
Vested and expected to vest balance at December 31, 2018	1,200,709		$	55.85	7.3	$	5,274
Exercisable balance at December 31, 2018	475,323		$	84.08	4.8	$	—


(a)	The aggregate intrinsic value of stock options as of December 31, 2018 is calculated based on the difference between the Company’s closing stock price on the last trading day of the period reported and the stock option exercise price.

In the years ended December 31, 2018, 2017 and 2016, the aggregate intrinsic value of stock options exercised was $1.3 million, $0.2 million and $2.7 million, respectively.

As of December 31, 2018, the aggregate unrecognized compensation expense related to stock options of $9.4 million is expected to be recognized over an estimated weighted average period of 1.9 years.

The following table summarizes information regarding outstanding and exercisable stock options as of December 31, 2018:



					Outstanding				Exercisable
Range of Exercise Prices					Number of Shares	Weighted Average Remaining Contractual Term (in years)	Weighted Average Exercise Price		Number of Shares	Weighted Average Remaining Contractual Term (in years)	Weighted Average Exercise Price
$	6.80		$	13.70	327,950	9.9	$	8.15	—	0.0	$	—
16.40		—	44.20		258,712	7.4	38.05		60,120	2.2	40.55
44.90		—	66.20		323,981	7.7	55.93		114,741	6.3	57.07
66.60		—	75.30		209,526	6.5	73.72		147,924	6.2	73.78
75.70		—	155.10		162,038	5.0	121.65		124,141	4.3	123.75
155.30		—	175.80		33,154	5.4	165.84		28,398	5.3	165.72
$	6.80	—	$	175.80	1,315,361	7.5	$	54.20	475,324	5.2	$	84.08

RSU Activity

The following table summarizes the activity for RSUs:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested as of December 31, 2017	213,644		$	62.70
Granted (1)	321,261		15.02
Forfeited	(72,473	)	51.85
Vested	(39,712	)	85.55
Unvested as of December 31, 2018	422,720		$	26.15


(1)	Shares granted in 2018 include 39,574 performance stock units that require certain performance conditions to be achieved in order to vest.

In the years ended December 31, 2018, 2017 and 2016, the weighted average grant date fair value of RSUs granted was $15.02, $50.10 and $82.90, respectively.

In the years ended December 31, 2018, 2017 and 2016, the total fair value of RSUs vested was $2.1 million, $1.8 million and $2.6 million, respectively.

As of December 31, 2018, the aggregate unrecognized compensation expense related to RSUs of $3.8 million is expected to be recognized over an estimated weighted average period of 2.1 years.

Non-Employee RSUs

There were no RSUs granted to non-employees in the year ended December 31, 2018.

As of December 31, 2018 and 2017, a total of 0 and 4,100 shares, respectively, of unvested RSUs issued to non-employees were outstanding.

Award Modifications

In the year ended December 31, 2018, there were award modifications affecting 2 individuals, a former executive and a former director of the Company, in connection with their departures. The employees were provided with accelerated vesting and extended exercisability for certain awards outstanding which included stock options, RSUs and performance stock units. The total incremental stock-based compensation expense recognized in the years ended 2018, 2017 and 2016 related to award modifications was $1.8 million, $0.3 million and $0.3 million, respectively.