10. 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 the closing of our IPO in May 2013. As of December 31, 2015, we are authorized to issue 9,387,452 shares of common stock under the 2013 Plan. The 2013 Plan had 1,422,745 shares of common stock available for future issuance as of December 31, 2015, subject to automatic annual increases each January 1st and will continue through January 1, 2023. The automatic annual share increase is equal to 5 % of the total number of outstanding shares of our common stock on December 31st of the preceding fiscal year, unless the Board of Directors elects to forego or reduce such increase. 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 appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards to employees, officers, directors and consultants.

Stock Options

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.

The following table summarizes stock option activity, under our 2013 Plan and related information:

	Shares
	Subject to			Weighted-
	Outstanding			Average Exercise
	Stock Options			Price Per Share
Balance at December 31, 2014		4,249,168		$	14.77
Options granted		1,815,991			38.33
Options exercised		(1,095,486	)		10.14
Options canceled		(238,190	)		26.26
Balance at December 31, 2015		4,731,483		$	24.19

Additional information related to the status of stock options at December 31, 2015, is as follows (aggregate intrinsic value in thousands):

			Weighted-
			Average		Remaining
			Exercise Price		Contractual		Aggregate
	Shares		Per Share		Life		Intrinsic Value
Outstanding		4,731,483	$	24.19		7.3	$	128,996
Vested and expected to vest		4,543,051	$	23.73		7.2	$	125,964
Vested		2,341,265	$	14.92		5.6	$	85,533

The aggregate intrinsic values of stock options outstanding and exercisable, vested and expected to vest were calculated as the difference between the exercise price of the stock options and the fair value of our common stock as of December 31, 2015. The aggregate intrinsic value of stock options exercised was $35.9 million, $12.5 million and $6.3million for the years ended December 31, 2015, 2014 and 2013, respectively.

The total estimated grant date fair value of stock options vested during the years ended December 31, 2015, 2014 and 2013 was $12.0 million, $9.0 million and $3.8 million, respectively. As of December 31, 2015, total unamortized employee and nonemployee stock-based compensation was $42.4 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 stock options granted during the years ended December 31, 2015, 2014 and 2013 was $22.84, $15.73 and $12.46 per share, respectively.

Additional information regarding our stock options outstanding and vested and exercisable as of December 31, 2015 is summarized below:

	Stock Options Outstanding						Stock Options Vested
			Weighted
			Average		Weighted		Number		Weighted
	Number of		Remaining		Average		of		Average
	Stock Options		Contractual		Exercise Price		Stock Options		Exercise Price
Exercise Prices	Outstanding		Life (Years)		per Share		Vested		Per Share
$3.30 - $5.10		495,133		2.4	$	4.55		495,133	$	4.55
$5.30 - $9.00		767,038		4.9		8.18		743,033		8.21
$9.50 - $22.16		483,519		7.3		15.29		321,529		14.88
$22.60-$25.00		330,676		7.9		23.95		162,964		23.95
$25.08-$25.08		523,124		8.0		25.08		251,396		25.08
$25.14-$29.19		522,962		8.7		27.57		170,511		27.83
$29.72-$29.72		542,160		8.8		29.72		127,311		29.72
$35.69-$44.39		578,896		9.0		40.82		53,971		42.84
$44.63 - $51.45		479,225		9.5		47.71		14,506		47.21
$52.74 - $52.74		8,750		9.6		52.74		911		52.74
		4,731,483		7.3	$	24.19		2,341,265	$	14.92

Restricted stock units

In January 2015, the Compensation Committee of our Board of Directors approved the commencement of granting restricted stock units to our employees. RSUs are share awards that entitle the holder to receive freely tradable shares of our Common Stock upon vesting. The RSUs cannot be transferred, and until they vest, the awards are subject to forfeiture if employment terminates prior to the release of the vesting restrictions. The RSUs, generally vest equal amounts on each of the first three year anniversaries of the grant date, provided the employee remains continuously employed with us. The fair value of the RSUs is equal to the closing price of our Common Stock on the grant date.

The following table summarizes RSU activity, under our 2013 Plan and related information:

	Shares
	Subject to			Weighted-
	Outstanding			Average grant date
	RSU's			fair value per share
Balance at December 31, 2014		–		$	–
RSUs granted		187,200			30.74
RSUs canceled		(19,450	)		29.72
Balance at December 31, 2015		167,750		$	30.86

None of these RSUs vested in 2015. We recognized stock-based compensation expenses of $1.5 million in 2015 relating to these RSUs. As of December 31, 2015, there was $3.3 million of unrecognized compensation costs related to these RSUs, which is expected to be recognized over an estimated weighted-average period of 2.0 years.

Performance stock units

In January and June 2015, the Compensation Committee of our Board of Directors approved 165,000 M-PSU awards to our executive officers. Each M-PSU represents a contingent right to receive one share of our Common Stock upon achievement of market-based performance and subject to the recipient’s continued employment. At any time during the four years following the date of the grant, a portion of the M-PSUs will vest one year after the date the average closing price of our Common Stock on the NASDAQ Global Select Market is above $50.00 per share for 45 consecutive trading days, and the remaining portion of the grant will vest one year after the date the average closing price of our Common Stock is above $60.00 per share for 45 consecutive trading days. The estimated M-PSU expense is being recognized, on an accelerated basis over the estimated requisite service period, with no adjustments in the future periods based upon our actual Common Stock price.

In June 2015, the Compensation Committee of our Board of Directors approved a program to award up to 69,625 PSUs to certain non-executive employees based on the achievement of goals related to the development of Andexanet alfa and Betrixaban. Each award represents a contingent right to receive one share of our Common Stock upon the achievement of certain performance conditions by pre-specified dates and the award recipient’s continued employment. During the third and fourth quarter of 2015, performance conditions were achieved and 40,496 PSUs were granted. The estimated expense associated with these awards is also being recognized, on an accelerated basis, over the vesting period.

The following table summarizes PSU activity, under our 2013 Plan and related information:

	Shares
	Subject to			Weighted-
	Outstanding			Average grant date
	PSU's			fair value per share
Balance at December 31, 2014		–		$	–
PSUs granted		40,496			49.99
M-PSUs granted		165,000			24.29
PSUs canceled		(235	)		49.44
Balance at December 31, 2015		205,261		$	29.33

None of these PSUs vested in 2015. We recognized stock-based compensation expenses of $2.3 million in 2015 relating to these PSUs. As of December 31, 2015, there was $3.3 million of unrecognized compensation costs related to these PSUs, which is expected to be recognized over an estimated weighted-average period of 1.4 years.

Employee Stock Purchase Plan (“ESPP”)

The Board of Directors adopted the 2013 ESPP, effective upon the completion of Portola’s initial public offering of its common stock. As of December 31, 2015, we reserved a total of 1,818,314 shares of common stock for issuance under the 2013 ESPP. The reserve for shares available under the ESPP automatically increases on January 1st each year, beginning in 2014, by an amount equal to 2 % of the total number of outstanding shares of our common stock on December 31^st of the preceding fiscal year unless the Board of Directors elects to forego or reduce such increases. In 2014, the Board of Directors elected to completely forego the automatic 2015 increase of shares available under the ESPP. The ESPP had 1,759,270 shares of common stock available for future issuance as of December 31, 2015. Eligible employees may purchase common stock at 85 % of the lesser of the fair market value of our Common Stock on the first or last day of the offering period.

Stock-Based Compensation

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

	Year Ended December 31,
	2015		2014		2013
Research and development	$	11,653	$	4,551	$	2,295
Selling, general and administrative		11,205		4,782		2,679
Total stock-based compensation	$	22,858	$	9,333	$	4,974

Valuation Assumptions

The Fair value of our stock options and purchase rights under our ESPP were 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 these awards:

Year Ended December 31,

2015

2014

2013

Risk-free interest rate

Stock options

1.54%-1.93%

1.81%-1.89%

1.43%

ESPP

0.14%

0.08%

–

Expected term

Stock options

6.0 years

ESPP

0.5 years

–

Expected volatility

Stock options

64% - 66%

69% - 80%

79%

ESPP

62%

73%

–

Dividend yield

Stock options

–

ESPP

–

The weighted-average fair value of the M-PSUs was determined using the Monte Carlo simulation models incorporating the following assumptions:

	Year Ended December 31, 2015
	PSUs
Number of M-PSUs granted		165,000
Weighted-average grant date stock price	$	31.95
Weighted-average risk-free interest rate		1.13	%
Weighted-average volatility		62	%
Dividend yield	–
Weighted- average fair value per share of M-PSUs granted ($50 Vesting Hurdle)	$	24.22
Weighted- average fair value per share of M-PSUs granted ($60 Vesting Hurdle)	$	24.34

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, 66,041, 33,888 and 32,943 shares with average exercise prices of $40.85, $25.41 and $19.88 per share, respectively, during the years ended December 31, 2015, 2014 and 2013, respectively. These options vest upon grant or various terms up to four years. We recognized non-employees stock compensation expense of $2.79 million $769,000 and $775,000 during the years ended December 31, 2015, 2014 and 2013, 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.