Stock-based compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based compensation

Stock-based compensation

The following table summarizes the stock-based compensation expense recognized in the three and nine months ended September 30, 2017 and 2016 (in thousands):

	September 30, 2017				September 30, 2016
	2017		2016		2017		2016
Cost of goods sold	$	340	$	297	$	811	$	1,605
Research and development	606		2,981		1,779		4,508
Sales and marketing	393		2,352		1,170		3,604
General and administrative	595		3,146		1,932		4,728
	$	1,934	$	8,776	$	5,692	$	14,445

Stock-based compensation expense in the three and nine months ended September 31, 2016 included a net amount of approximately $5.8 million associated with the accelerated vesting of stock options covering approximately 1.1 million shares of the Company’s common stock and stock appreciation units (“SAUs”) of approximately 0.2 million shares with a market-based vesting condition. In September 2016, the market-based condition of these stock options and SAUs was satisfied when the average closing price of the Company’s common stock over a period of 20 consecutive trading days was equal to or exceeded $15.00 per share and the recipients remained in continuous service with the Company.  Outstanding SAUs are re-measured each reporting period at fair value until settlement.  

Determining Fair Value

The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:  

	Three Months Ended September 30,		Nine Months Ended September 30,
Stock options	2017	2016	2017	2016
Weighted-average expected term (years)	6.0	5.9	6.0	5.8
Weighted-average volatility	65%	65%	65%	65%
Risk-free interest rate	2.02%	1.01%-1.15%	2.02%-2.08%	1.01%-1.76%
Expected dividends	—%	—%	—%	—%
Stock appreciation units
Weighted-average expected term (years)	2.2	2.6	2.3	2.8
Weighted-average volatility	71%	62%	71%	62%
Risk-free interest rate	1.03%-1.55%	0.45%-0.71%	0.51%-1.55%	0.45%-1.47%
Expected dividends	—%	—%	—%	—%
ESPP
Weighted-average expected term (years)	0	0	0.67	0.70
Weighted-average volatility	—%	—%	55%	70%
Risk-free interest rate	—%	—%	0.45%-0.91%	0.08%-0.39%
Expected dividends	—%	—%	—%	—%

Stock Options and Restricted Stock Units (RSUs)

The following table summarizes the Company’s stock option and RSU activity during the nine months ended September 30, 2017:

	Stock Options				Restricted Stock Units
	Number of Shares		Weighted Average Exercise Price		Number of Units		Weighted Average Grant Date Fair Value
Balance as of December 31, 2016	4,301,340		$	5.18	2,089,473		$	10.15
Granted	502,746		7.37		1,351,071		7.91
Exercised/Converted	(515,988	)	3.80		(789,123	)	9.40
Cancelled/Forfeited	(61,106	)	8.71		(147,783	)	10.50
Balance as of September 30, 2017	4,226,992		$	5.56	2,503,638		$	9.15

Stock appreciation units

SAUs are liability classified share-based awards. The Company did not grant any SAUs during the three and nine months ended September 30, 2017 or 2016. As of September 30, 2017 and December 31, 2016, there were 259,704 and 286,768 SAUs outstanding, respectively, and related SAU liabilities were $0.7 million and $2.0 million, respectively.  

Employee Stock Purchase Plan (“ESPP”)

As of September 30, 2017, there was $0.1 million of unrecognized stock-based compensation expense for employee stock purchase rights that will be recognized over the remaining offering period through November 2017.