Stock Compensation

3 Months Ended

Mar. 31, 2020

Stock Compensation [Abstract]

Stock Compensation

14.  Stock Compensation

The Company’s 2012 Equity Incentive Plan (“2012 Plan”) became effective upon the pricing of its initial public offering in October 2012. At the same time, the Company’s 2003 Stock Incentive Plan (“2003 Plan”) was terminated and 555,843 shares available under the 2003 Plan were added to the 2012 Plan.

On January 1, 2020, the number of shares available for issuance under the 2012 Plan increased by 1,211,533 shares, as a result of the automatic increase provisions thereof.

The estimated fair value of the stock options granted in the three months ended March 31, 2020 was determined utilizing a Black-Scholes option-pricing model at the date of grant. The fair value of the restricted stock units (“RSUs”) granted in the three months ended March 31, 2020 was determined utilizing the closing price of the Company’s common stock on the date of grant. The fair value of the performance restricted stock units (“PRSUs”) granted in the three months ended March 31, 2020 was determined utilizing the Monte Carlo simulation method.

The following table summarizes stock option activity during the three months ended March 31, 2020:

				Weighted
				Average
	Number	Weighted		Remaining	Aggregate
	of Options	Average		Contractual	Intrinsic Value
	(in thousands)	Exercise Price		Term (years)	(in thousands)
Outstanding at December 31, 2019	1,981	$	99.87	7.4	$	65,662
Granted	557	$	99.94	—	$	—
Exercised	(9)	$	47.78	—	$	—
Cancelled/forfeited	(63)	$	97.85	—	$	—
Expired	(20)	$	198.78	—	$	—
Outstanding at March 31, 2020	2,446	$	99.32	7.7	$	6,106
Expected to vest	1,256	$	92.39	9.0	$	1,005
Exercisable	1,190	$	106.62	6.4	$	5,101

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the underlying options and the deemed fair value of the Company’s common stock for those options that had exercise prices lower than the deemed fair value of the Company’s common stock. As of March 31, 2020, the total compensation cost related to non-vested option awards not yet recognized is approximately $66.6 million with a weighted average remaining vesting period of 1.54 years.

The Company estimated the fair value of stock options granted in the periods presented utilizing a Black-Scholes option-pricing model utilizing the following assumptions:

	Three Months Ended March 31,
	2020		2019
Volatility	61.9 - 87.1	%	87.0 - 87.2	%
Expected term (in years)	6.0		6.0
Risk-free rate	0.9 - 1.7	%	2.5 - 2.9	%
Expected dividend yield	—	%	—	%

The following table summarizes the aggregate RSU, restricted stock award (“RSA”), PRSU and performance restricted share award (“PRSA”) activity during the three months ended March 31, 2020:

		Weighted
	Number of	Average Grant Date
	Awards	Fair Value
	(in thousands)
Non-vested awards at December 31, 2019	709	$	88.39
Granted	399	$	102.82
Vested	(104)	$	74.75
Forfeited	(43)	$	94.43
Non-vested awards at March 31, 2020	961	$	95.58

As of March 31, 2020, there is approximately $76.9 million of total unrecognized compensation expense related to unvested RSUs, RSAs, PRSUs and PRSAs, which is expected to be recognized over a weighted average vesting period of 1.72 years.

During the three months ended March 31, 2020, the Company granted a total of 64,900 PRSUs to certain of the Company’s executive officers. The performance criterion for such PRSUs is based on the Total Shareholder Return (“TSR”) of the Company’s common stock relative to the TSR of the companies comprising the S&P Biotechnology Select Industry Index (the “TSR Peer Group”) over a 3-year performance period and is accounted for as a market condition under ASC Topic 718, Compensation – Stock Compensation. The TSR for the Company or a member of the TSR Peer Group is calculated by dividing (a) the difference of the ending average stock price minus the beginning average stock price by (b) the beginning average stock price. The beginning average stock price equals the average closing stock price over the one calendar month period prior to the beginning of the performance period, after adjusting for dividends, as applicable. The ending average stock price equals the average closing price over the one calendar month period ending on the last day of the performance period, after adjusting for dividends, as applicable. The Company’s relative TSR is then used to calculate the payout percentage, which may range from zero percent (0%) to one hundred and fifty percent (150%) of the target award. The Company utilized a Monte Carlo Simulation to determine the grant date fair value of such PRSUs.

The Company recorded approximately $0.6 million of stock-based compensation related to such PRSUs during the three months ended March 31, 2020.

The Company accounts for all forfeitures when they occur. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest and are not forfeited. The Company has in the past, and may in the future, grant performance-based awards with vesting terms based on the achievement of specified goals. To the extent such awards do not contain a market condition, the Company recognizes no expense until achievement of the performance requirement is deemed probable. There are no awards with performance conditions outstanding as of March 31, 2020.

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations as follows:

	Three Months Ended March 31,
	2020		2019
	(in thousands)
Selling, general and administrative	$	9,723	$	11,331
Research and development		2,750		3,566
Total stock-based compensation	$	12,473	$	14,897