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 June 30, 2017, there were 2.3 million shares remaining available for grant under the 2011 Plan.

During both the three and six months ended June 30, 2017, the Company issued options to purchase 19.4 million shares of common stock. During the six months ended June 30, 2016 the Company issued options to purchase 3.8 million shares of common stock. These options generally vest over a three-year period for employees. Options granted to directors vest immediately.

As described in Note 3, “Sale of Commercial Business,” the Board of Directors authorized and declared a special cash dividend of $140.0 million on the Company's common stock, which was payable on May 26, 2017 to stockholders of record as of the close of business on May 17, 2017. The Board of Directors determined, in accordance with the adjustment provision of each of the Company’s 1999 Stock Option Plan, as amended, the 2008 Stock Incentive Plan, as amended, and the 2011 Plan (collectively, the “Equity Plans”), that the special cash dividend was unusual and non-recurring and that appropriate adjustment to the stock options to purchase shares of the Corporation’s common stock outstanding under the Equity Plans was required. The Company treated this adjustment as a modification to the original stock option grant because the terms of the agreements were modified in order to preserve the value of the option awards after a large non-recurring cash dividend. The calculation of the incremental compensation expense is based on the excess of the fair value of the award measured immediately before and after the modification. As a result, the Company recognized an incremental compensation expense of $5.6 million associated with the modification in the second quarter of 2017.

The fair value of stock options granted to employees during the three and six months ended June 30, 2017 and 2016 was estimated at the date of grant using the following assumptions:

	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
Risk-free interest rate	1.7 – 2.0%	1.1 – 1.5%	1.7 – 2.1%	1.5 – 1.8%
Expected dividend yield	0%	0%	0%	0%
Expected term	5.7 – 6.1 years	5.0 – 5.8 years	5.7 – 6.1 years	5.0 – 5.9 years
Expected volatility	65%	67 – 69%	65 – 68%	66 – 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.

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which simplifies several areas of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either liabilities or equity and classification of excess tax benefits on the statement of cash flows. This guidance also permits a new entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The Company adopted the guidance, electing to account for forfeitures when they occur, and it did not have an impact on the consolidated financial statements.

The Company recognized stock-based compensation expense during the three and six months ended June 30, 2017 and 2016 as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016
Employee awards:
Research and development expense	$	4,916	$	1,465	$	5,383	$	2,991
General and administrative expense		3,818		2,102		4,146		3,086
Total stock-based compensation expense	$	8,734	$	3,567	$	9,529	$	6,077

The following table summarizes stock option activity during the six months ended June 30, 2017:

						Weighted-Average Remaining		Aggregate
(in thousands, except per share amounts)	Options			Weighted-Average Exercise Price		Contractual Term (in years)		Intrinsic Value
Outstanding at December 31, 2016		19,024		$	5.77		5.97	$	7,564
Granted		19,388		$	2.46
Exercised		(2,562	)	$	2.29
Forfeited		(16,935	)	$	6.24
Outstanding at June 30, 2017		18,915		$	2.43		5.87	$	440
Vested and expected to vest at June 30, 2017		18,870		$	2.43		5.86	$	440
Exercisable at June 30, 2017		12,560		$	2.81		3.98	$	440

The weighted-average grant date fair value per share of stock options granted during the three and six months ended June 30, 2017 was $0.38 and $0.38, respectively. The weighted-average grant date fair value per share of stock options granted during the three and six months ended June 30, 2016 was $3.73 and $3.35, 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 and six months ended June 30, 2017 was $0.9 million and $2.3 million, respectively. The aggregate intrinsic value of stock options exercised during the three and six months ended June 30, 2016 was $0.6 million and $2.7 million, respectively.

As of June 30, 2017, there was $6.1 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 2.9 years.