Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

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

11. Stock-Based Compensation

As of December 31, 2015, there were 2.5 million shares of common stock available to be granted under the Company’s 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan is administered by the Company’s board of directors and permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.

In February 2016, 4.1 million additional shares of common stock became available for grant to employees, officers, directors and consultants under the 2011 Plan. At March 31, 2016, there were 3.5 million shares remaining available for grant under the 2011 Plan.

During the three months ended March 31, 2016 and 2015, the Company issued options to purchase 3.1 million and 2.3 million shares of common stock, respectively. These options generally vest over a three-year period for employees. Options granted to directors vest immediately.

The fair value of stock options granted to employees during the three months ended March 31, 2016 and 2015 was estimated at the date of grant using the following assumptions:


	Three Months Ended March 31,
	2016		2015
Risk-free interest rate		1.3 – 1.5%		1.6. – 1.8%
Expected dividend yield		0%		0%
Expected term		5.8 years		5.9 years
Expected volatility		67 – 68%		67%

The Company uses the simplified method to calculate the expected term, as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The computation of expected volatility is based on the historical volatility of comparable companies from a representative peer group selected based on industry and market capitalization. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. Management estimates expected forfeitures based on historical experience and recognizes compensation costs only for those equity awards expected to vest.

The Company recognized stock-based compensation expense during the three months ended March 31, 2016 and 2015 as follows:


	Three Months Ended March 31,
(in thousands)	2016		2015
Employee awards:
Research and development	$	1,868	$	1,967
General and administrative		1,665		1,377

Stock-based compensation for employee awards		3,533		3,344
Stock-based compensation for non-employee awards		—		26

Total stock-based compensation	$	3,533	$	3,370

The following table summarizes stock option activity during the three months ended March 31, 2016:


						Weighted-Average Remaining		Aggregate
(in thousands, except per share amounts)	Shares			Weighted-Average Exercise Price		Contractual Term (in years)		Intrinsic Value
Outstanding at December 31, 2015		19,211		$	5.72		6.24	$	47,963
Granted		3,130		$	5.45
Exercised		(539	)	$	3.12
Forfeited		(155	)	$	7.69

Outstanding at March 31, 2016		21,647		$	5.73		6.65	$	61,405

Vested and expected to vest at March 31, 2016		21,182		$	5.71		6.59	$	60,457
Exercisable at March 31, 2016		14,979		$	5.20		5.50	$	49,061

The weighted-average grant date fair value per share of stock options granted during the three months ended March 31, 2016 and 2015 was $3.27 and $5.52, respectively.

The aggregate intrinsic value is calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2016 and 2015 was $2.1 million and $13.5 million, respectively.

As of March 31, 2016, there was $24.0 million of total unrecognized stock-based compensation expense related to unvested employee stock awards. The Company expects to recognize this expense over a weighted-average period of approximately 2.2 years.