Stock-based Compensation

9 Months Ended

Sep. 30, 2019

Stock-based Compensation

Stock-based Compensation

13. Stock-based Compensation

A summary of the Company’s stock-based compensation expense included in the Condensed Consolidated Statements of Operations are as follows:

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Research and development expenses	$	525	$	388	$	1,606	$	1,091
Selling, general and administrative expenses		3,612		3,538		10,956		9,089
Total stock-based compensation expense	$	4,137	$	3,926	$	12,562	$	10,180

At September 30, 2019, there was approximately $31,051 of unrecognized compensation expense related to unvested options, restricted stock units and performance stock units, which is expected to be recognized as expense over a weighted average period of approximately 2.6 years.

Restricted Stock Units, Performance Share Units, and Stock Options

In May 2015, the Company adopted the Amended and Restated 2014 Stock Incentive Plan (the “Plan”), under which an aggregate of 2,700,000 shares of common stock were authorized for issuance to employees, officers, directors, consultants and advisors of the Company, plus an annual increase on the first day of each fiscal year until the expiration of the Plan equal to 4% of the total number of outstanding shares of common stock on December 31^st of the immediately preceding calendar year (or a lower amount as otherwise determined by the board of directors prior to January 1^st). As of September 30, 2019, there were 1,251,722 shares of common stock available for issuance pursuant to the Plan. The Plan provides for granting of both Internal Revenue Service qualified incentive stock options and non-qualified options, restricted stock awards, restricted stock units and performance stock units. The Company’s qualified incentive stock options and non-qualified options, restricted stock awards, restricted stock units generally vest ratably over a four-year period of service. The stock options generally have a ten-year contractual life and, upon termination, vested options are generally exercisable between one and three months following the termination date, while unvested options are forfeited immediately upon termination.

In January 2019, the Company granted performance share units (“PSUs”) to certain members of the Company's senior management team. The PSUs will vest following a three-year performance period, subject to the satisfaction of annual and cumulative performance criteria and the executive’s continued employment through the performance period. No shares will be issued if the minimum applicable performance metric is not achieved. The Company recognizes compensation expense ratably over the required service period based on its estimate of the number of shares that will vest based upon the probability of achieving performance metrics. If there is a change in the estimate of the number of shares that are likely to vest, the Company will cumulatively adjust compensation expense in the period that the change in estimate is made. Achievement of the annual and cumulative performance criteria for PSU grants will be determined by the compensation committee. For PSUs granted in 2019, the performance criteria relate to Xtampza ER 2019, 2020, 2021 and three-year cumulative revenue goals. The expense for the three and nine months ended September 30, 2019 was $21 and $63, respectively.

A summary of the Company’s performance share units activity for the nine months ended September 30, 2019 and related information is as follows:

		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2018	—	$	—
Granted	99,400		15.90
Outstanding at September 30, 2019	99,400	$	15.90

A summary of the Company’s restricted stock units activity for the nine months ended September 30, 2019 and related information is as follows:

		Weighted-Average
	Shares	Grant Date Fair Value
Outstanding at December 31, 2018	514,603	$	20.67
Granted	634,708		15.48
Vested	(185,605)		21.44
Forfeited	(95,631)		18.19
Outstanding at September 30, 2019	868,075	$	16.98

A summary of the Company’s stock option activity for the nine months ended September 30, 2019 and related information is as follows:

				Weighted-
			Weighted-	Average
			Average	Remaining		Aggregate
			Exercise Price	Contractual		Intrinsic
	Shares		per Share	Term (in years)		Value
Outstanding at December 31, 2018	3,585,856	$	16.20	8.0	$	11,170
Granted	1,045,658		15.08
Exercised	(52,182)		10.27
Cancelled	(438,703)		17.96
Outstanding at September 30, 2019	4,140,629	$	15.81	7.7	$	3,611
Exercisable at September 30, 2019	2,147,473	$	14.61	6.7	$	3,108

The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model using the following assumptions:

	Nine months ended September 30,
	2019		2018
Risk-free interest rate	2.4	%	2.6	%
Volatility	63.2	%	65.0	%
Expected term (years)	6.06		6.11
Expected dividend yield	—	%	—	%

Employee Stock Purchase Plan

The Company’s 2015 Employee Stock Purchase Plan allows employees to purchase shares of the Company’s common stock. The purchase price is equal to 85% of the lower of the closing price of the Company’s common stock on (1) the first day of the purchase period or (2) the last day of the purchase period. During the three months ended September 30, 2019, 41,316 shares of common stock were purchased for total proceeds of $373. During the nine months ended September 30, 2019, 74,142 shares of common stock were purchased for total proceeds of $817. The expense for the three months ended September 30, 2019 and 2018 was $120 and $156, respectively. The expense for the nine months ended September 30, 2019 and 2018 was $293 and $398, respectively.