12. Stock Based Compensation

Equity Incentive Plan

In January 2013, our Board of Directors adopted our 2013 Equity Incentive Plan, or the 2013 Plan, which became effective upon of the closing of our IPO in May 2013. The 2013 Plan has 935,213 shares of common stock available for future issuance as of December 31, 2014, subject to automatic annual increases beginning on January 1, 2014 through January 1, 2023. Further, all remaining shares available under the 2003 Equity Incentive Plan, or the 2003 Plan, were transferred to the 2013 Plan upon adoption. The 2013 Plan provides for the granting of incentive stock options, nonstatutory stock options, stock bonuses and rights to acquire restricted stock to employees, officers, directors and consultants. Incentive stock options may be granted with exercise prices of not less than 100% of the estimated fair value of our common stock and nonstatutory stock options may be granted with an exercise price of not less than 85% of the estimated fair value of the common stock on the date of grant. Stock options granted to a stockholder owning more than 10% of our voting stock must have an exercise price of not less than 110% of the estimated fair value of the common stock on the date of grant. Stock options are generally granted with terms of up to ten years and vest over a period of four years.

As of December 31, 2014, 6,949,108 shares of common stock were reserved under the 2013 Plan for the issuance of options and restricted stock.

A summary of Portola’s stock option activity follows:

				Shares
				Subject to			Weighted-
	Shares Available			Outstanding			Average Exercise
	for Grant			Options			Price Per Share
Balance at December 31, 2013		81,948			3,708,773		$	9.43
Options authorized		2,045,785		–			–
Options granted		(1,358,013	)		1,358,013			25.96
Options exercised	–				(652,125	)		6.68
Options canceled		165,493			(165,493	)		18.86
Balance at December 31, 2014		935,213			4,249,168		$	14.77

Additional information related to the status of options at December 31, 2014, is as follows (aggregate intrinsic value in thousands):

			Weighted-
			Average		Remaining
			Exercise Price		Contractual		Aggregate
	Shares		Per Share		Life		Intrinsic Value
Outstanding		4,249,168	$	14.77		6.6	$	57,709
Vested and expected to vest		4,106,671	$	14.47		6.6	$	57,009
Vested		2,503,676	$	9.67		5.2	$	46,722

The aggregate intrinsic values of options outstanding and exercisable, vested and expected to vest were calculated as the difference between the exercise price of the options and the fair value of our common stock as of December 31, 2014. The aggregate intrinsic value of options exercised was $12.5 million, $6.3 million and $451,000 for the years ended December 31, 2014, 2013 and 2012, respectively.

The total estimated grant date fair value of options vested during the years ended December 31, 2014, 2013 and 2012 was $9.0 million, $3.8 million and $3.0 million, respectively.

Additional information regarding our stock options outstanding and vested and exercisable as of December 31, 2014 is summarized below:

	Options Outstanding				Options Vested
		Weighted
		Average	Weighted		Number	Weighted
	Number of	Remaining	Average		of	Average
	Options	Contractual	Exercise Price		Options	Exercise Price
Exercise Prices	Outstanding	Life (Years)	per Share		Vested	Per Share
$1.00 - $5.10	945,481	2.8	$	4.21	945,481	$	4.21
$5.30 - $9.00	1,068,191	6.0		8.07	927,581		8.21
$9.50 - $23.85	976,963	8.2		17.61	406,830		16.81
$24.39 - $26.67	861,050	8.6		25.13	178,702		25.04
$26.75 - $29.19	397,483	9.5		28.42	45,082		29.02
	4,249,168	6.6	$	14.77	2,503,676	$	9.67

Stock-based compensation expense, net of estimated forfeitures, is reflected in the consolidated statements of operations as follows (in thousands):

	Year Ended December 31,
	2014		2013		2012
Research and development	$	4,551	$	2,295	$	1,452
General and administrative		4,782		2,679		1,357
Total stock-based compensation	$	9,333	$	4,974	$	2,809

As of December 31, 2014, total unamortized employee and nonemployee stock-based compensation was $21.8 million, which is expected to be recognized over the remaining estimated vesting period of 2.8 years. The weighted-average grant date fair value of employee options granted during the years ended December 31, 2014, 2013 and 2012 was $15.73, $12.46 and $5.90 per share, respectively.

Valuation Assumptions

The employee stock-based compensation expense was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The risk-free rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected terms of the awards. The expected term of employee options granted is determined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term). As sufficient trading history does not yet exist for our common stock, therefore our estimate of expected volatility is based on the volatility of other companies with similar products under development, market, size and other factors. To date, we have not declared or paid any cash dividends and do not have any plans to do so in the future. Therefore, we used an expected dividend yield of zero.

The following table illustrates the weighted-average assumptions for the Black-Scholes option-pricing model used in determining the fair value of options granted to employees:

	Year Ended December 31,
	2014	2013		2012
Risk-free interest rate	1.81% - 1.89%		1.43%		1.10%
Expected life	6.0 years	6.0 years		6.0 years
Expected volatility	69% - 80%		79%		72%
Dividend yield	–	–		–

Options Granted to Nonemployees

We have granted options to purchase shares of common stock to consultants in exchange for services performed. We granted options to purchase 33,888, 32,943 and 6,380 shares with average exercise prices of $25.41, $19.88 and $7.00 per share, respectively, during the years ended December 31, 2014 2013 and 2012, respectively. These options vest upon grant or various terms up to four years. We recognized non-employees stock compensation expense of $769,000, $775,000 and $144,000 during the years ended December 31, 2014, 2013 and 2012, respectively. The fair value of non-employees’ options was measured using the Black-Scholes option-pricing model reflecting the same assumptions as applied to employee options in each of the reported years, other than the expected life assumption, which is assumed to be the remaining contractual life of the option.

Employee Stock Purchase Plan

The Board of Directors adopted the 2013 Employee Stock Purchase Plan, effective upon the completion of Portola’s initial public offering of its common stock. Portola reserved a total of 1,000,000 shares of common stock for issuance under the plan. Eligible employees may purchase common stock at 85 percent of the lesser of the fair market value of Portola’s common stock on the first or last day of the offering period. The reserve for shares available under the plan automatically increases on January 1^st each year, beginning in 2014, by an amount equal to 2 percent of the total number of outstanding shares of our common stock on December 31^st of the preceding fiscal year.

The following table illustrates the weighted-average assumptions for the Black-Scholes option-pricing model used in determining the fair value of ESPP purchase rights granted to employees:

	Year Ended December 31,
	2014		2013
Risk-free interest rate		0.08%		0.10%
Expected life	0.5 years		0.4 years
Expected volatility		73%		62%
Dividend yield	–		–