Stock-based compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

On June 3, 2013, the Company’s board of directors adopted its 2013 Stock Option and Incentive Plan (“2013 Plan”), which was subsequently approved by its stockholders and became effective upon the closing of the Company’s IPO on June 24, 2013. The 2013 Plan replaces the 2010 Stock Option and Grant Plan (“2010 Plan”).

The 2013 Plan allows for the granting of incentive stock options, non-qualified stock options, restricted stock units and restricted stock awards to the Company’s employees, members of the board of directors, and consultants of the Company. The Company initially reserved 1.0 million shares of its common stock for the issuance of awards under the 2013 Plan. The 2013 Plan provides that the number of shares reserved and available for issuance under the 2013 Plan will automatically increase each January 1, beginning on January 1, 2014, by four percent of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee. In January 2019 and January 2020, the number of common stock available for issuance under the 2013 Plan was increased by approximately 2.2 million and 2.2 million shares, respectively, as a result of this automatic increase provision.

Any options or awards outstanding under the Company’s previous stock option plans, including both the 2010 Plan and the Second Amended and Restated 2002 Employee, Director and Consultant Stock Plan (“2002 Plan”), at the time of adoption of the 2013 Plan remain outstanding and effective. The shares of common stock underlying any awards that are forfeited, canceled, repurchased, expired or are otherwise terminated (other than by exercise) under the 2002 Plan and 2010 Plan are added to the shares of common stock available for issuance under the 2013 Plan. As of December 31, 2019, the total number of common stock that may be issued under all plans is 2.2 million.

The Company does not currently hold any treasury shares. Upon stock option exercise, the Company issues new shares and delivers them to the participant.

Stock-based compensation expense

The Company recognized stock-based compensation expense totaling $160.6 million, $110.8 million, and $53.3 million during the years ended December 31, 2019, 2018 and 2017, respectively. Stock-based compensation expense recognized by award type is as follows (in thousands):


	Year Ended December 31,
	2019		2018		2017
Stock options	$	95,668	$	83,449	$	42,262
Restricted stock units	63,580		26,628		10,495
Employee stock purchase plan	1,381		759		525
	$	160,629	$	110,836	$	53,282

Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows (in thousands):


	Year Ended December 31,
	2019		2018		2017
Research and development	$	80,139	$	54,422	$	26,633
Selling, general and administrative	80,490		56,414		26,649
	$	160,629	$	110,836	$	53,282

In February 2018, the Company issued restricted stock units with service and performance conditions to employees, approximately 0.2 million of which are outstanding as of December 31, 2019. Vesting of these awards is contingent on the occurrence of a certain regulatory milestone event which was achieved in June 2019 and fulfillment of any remaining service condition. The Company began recognizing expense for these awards in the second quarter of 2019 when achievement of the regulatory milestone was deemed probable. The Company recognized $20.1 million of expense related to these awards in the second quarter of 2019 and will continue to recognize stock-based compensation expense related to these awards through June 2021 when the final tranche of the awards vest.

As of December 31, 2019, the Company had $208.1 million, $105.8 million and less than $0.1 million of unrecognized compensation expense related to unvested stock options, restricted stock units, and the employee stock purchase plan, respectively, that is expected to be recognized over a weighted-average period of 2.5 years, 2.6 years, and 0.1 years, respectively.

Stock options

The fair value of each option issued to employees was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	Year Ended December 31,
	2019		2018		2017
Expected volatility	70.7	%	75.5	%	78.1	%
Expected term (in years)	6.0		6.0		6.0
Risk-free interest rate	2.3	%	2.7	%	2.1	%
Expected dividend yield	0.0	%	0.0	%	0.0	%

The following table summarizes the stock option activity under the Company’s equity awards plans:


	Shares (in thousands)	Weighted- average exercise price per share		Weighted- average contractual life (in years)	Aggregate intrinsic value (a) (in thousands)
Outstanding at December 31, 2018	4,643	$	108.56
Granted	1,594	$	129.76
Exercised	(354)	$	50.36
Canceled or forfeited	(400)	$	138.61
Outstanding at December 31, 2019	5,483	$	116.30	7.3	$	68,511
Exercisable at December 31, 2019	2,853	$	94.77	6.0	$	64,899
Vested and expected to vest at December 31, 2019	5,483	$	116.30	7.3	$	68,511

(a)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at December 31, 2019.

The weighted-average fair values of options granted during 2019, 2018 and 2017 was $83.44, $125.12, and $62.03, respectively. The intrinsic value of options exercised during the years ended December 31, 2019, 2018, and 2017, was $29.0 million, $73.1 million and $91.0 million, respectively.

Restricted stock units

The following table summarizes the restricted stock unit activity under the Company’s equity award plans:


	Shares (in thousands)	Weighted-average grant date fair value
Unvested balance at December 31, 2018	931	$	155.99
Granted	570	128.87
Vested	(251)	138.93
Forfeited	(123)	155.68
Unvested balance at December 31, 2019	1,127	$	146.10

The intrinsic value of restricted stock units vested during the years ended December 31, 2019, 2018, and 2017 was $28.4 million, $25.5 million and $8.1 million, respectively.

Employee Stock Purchase Plan

On June 3, 2013, the Company’s board of directors adopted its 2013 Employee Stock Purchase Plan (“2013 ESPP”), which was subsequently approved by its stockholders and became effective upon the closing of the Company’s IPO on June 24, 2013. The 2013 ESPP authorizes the initial issuance of up to a total of 0.2 million shares of the Company’s common stock to participating employees. During each of the years ended December 31, 2019 and 2018, less than 0.1 million shares of common stock were issued under the 2013 ESPP, respectively.