12. Stock-based compensation

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 955,000 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 2016 and January 2017, the number of common stock available for issuance under the 2013 Plan was increased by approximately 1.5 million and 1.6 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, expire 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, 2016, the total number of common stock that may be issued under all plans is 1.2 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 $39.8 million, $41.1 million, and $10.8 million during the years ended December 31, 2016, 2015 and 2014, respectively. Stock-based compensation expense recognized by award type is as follows (in thousands):

	Year ended December 31,
	2016		2015		2014
Stock options	$	33,966	$	37,536	$	9,487
Restricted stock awards		—		—		52
Restricted stock units		5,374		3,325		1,158
Employee stock purchase plan		416		259		66
	$	39,756	$	41,120	$	10,763

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,
	2016		2015		2014
Research and development	$	19,690	$	24,854	$	5,151
General and administrative		20,066		16,266		5,612
	$	39,756	$	41,120	$	10,763

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,
	2016			2015			2014
Expected volatility		74.3	%		72.6	%		82.3	%
Expected term (in years)		6.0			5.9			6.0
Risk-free interest rate		1.5	%		1.7	%		1.8	%
Expected dividend yield	0.0		%	0.0		%		0.0	%

The intrinsic value of options exercised during the years ended December 31, 2016, 2015, and 2014, was $15.3 million, $147.9 million and $41.4 million, respectively.

The weighted-average fair values of options granted during 2016, 2015 and 2014 was $34.22, $74.65, and $18.53, respectively.

There were no unvested restricted stock awards as of December 31, 2016 and 2015 and no restricted stock awards were granted during 2016. The aggregate fair value of restricted stock awards that vested during the year ended December 31, 2014, based on the estimated fair value of the underlying stock on the day of vesting was $1.9 million.

As of December 31, 2016, there was $69.5 million, $11.9 million and $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, 2.8, and 0.1 years.

In 2015, the Company modified outstanding options held by its former Chief Scientific Officer as part of his separation agreement, modified the vesting conditions of a stock option award held by a non-employee founder, and modified the vesting conditions of stock option awards held by two employees immediately following their separation from the Company. As a result of these modifications, the Company recognized $10.3 million of incremental stock-based compensation expense during 2015.

During the year ended December 31, 2014, the Company modified the vesting conditions of stock option awards held by several former employees, which resulted in $0.6 million of incremental expense recognized within general and administrative expenses.

Stock options

The following table summarizes the stock option activity under the Company’s equity awards plans (shares and aggregate intrinsic value in thousands):

	Shares			Weighted-average exercise price per share		Weighted-average contractual life (in years)		Aggregate intrinsic value (a) (in thousands)
Outstanding at December 31, 2015		3,532		$	48.74
Granted		1,047		$	52.09
Exercised		(377	)	$	16.30
Canceled or forfeited		(467	)	$	55.04
Outstanding at December 31, 2016		3,735		$	52.17		7.5	$	93,081
Exercisable at December 31, 2016		1,926		$	39.23		6.5	$	70,991
Vested and expected to vest at December 31, 2016		3,735		$	52.17		7.5	$	93,081

(a)	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in the money at December 31, 2016.

Restricted stock units

The following table summarizes the restricted stock unit activity under the Company’s equity award plans (shares in thousands):

	Shares			Weighted-average grant date fair value
Unvested balance at December 31, 2015		148		$	65.79
Granted		263			52.12
Vested		(113	)		46.17
Forfeited		(35	)		46.65
Unvested balance at December 31, 2016		263		$	63.07

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 238,000 shares of the Company’s common stock to participating employees. The first offering period under the 2013 ESPP opened on August 1, 2014. During the years ended December 31, 2016 and 2015, 18,338 and 10,545 shares of common stock were issued under the 2013 ESPP.