Stock-based Compensation

6 Months Ended

Jun. 30, 2015

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

Stock-based compensation expense for options granted and restricted stock awards (“RSAs”) is reflected in the consolidated statement of operations as follows:



	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
(in thousands)	2015		2014		2015		2014
Research and development	$	583	$	237	$	1,094	$	852
General and administrative	2,893		2,145		5,123		3,452
Total	$	3,476	$	2,382	$	6,217	$	4,304

The estimated fair value of options granted is determined on the date of grant using the Black-Scholes option pricing model. Options granted to non-employees are revalued at each financial reporting period until required service is performed. Compensation expense related to RSAs is based on the market value of the Company’s common stock on the date of grant and is expensed on a straight-line basis (net of estimated forfeitures) over the vesting period.

As of June 30, 2015, the Company had $31.4 million of unrecognized compensation expense related to options granted under its equity plans. This cost is expected to be recognized over a weighted average period of 2.8 years as of June 30, 2015. The weighted average remaining contractual life on all outstanding options as of June 30, 2015 was 8.3 years.

As of June 30, 2015, the Company had $2.4 million of unrecognized compensation expense, related to unvested RSAs. This cost is expected to be recognized over a weighted average period of 3.3 years as of June 30, 2015. The weighted average remaining contractual term for RSAs as of June 30, 2015 was 3.3 years.

Equity Plans

The Company maintains two equity compensation plans, the 2005 Aerie Pharmaceutical Stock Plan (the “2005 Plan”) and the 2013 Omnibus Incentive Plan (the “2013 Equity Plan”), which was amended and restated as the Aerie Pharmaceuticals, Inc. Amended and Restated Omnibus Incentive Plan (the “Amended and Restated Equity Plan”). The 2005 Plan and the Amended and Restated Equity Plan are referred to collectively as the “Plans.”

On October 30, 2013, the effective date of the 2013 Equity Plan, the 2005 Plan was frozen and no additional awards will be made under the 2005 Plan. Any shares remaining available for future grant under the 2005 Plan were allocated to the 2013 Equity Plan.

At the 2015 Annual Meeting of Stockholders held on April 10, 2015, the Company’s stockholders approved the adoption of the Amended and Restated Equity Plan and no additional awards will be made under the 2013 Equity Plan. Any shares remaining available under the 2013 Equity Plan were allocated to the Amended and Restated Equity Plan.

The Amended and Restated Equity Plan provides for the granting of up to 5,729,068 equity awards in respect of common stock of the Company, including equity awards that were available for issuance under the 2013 Equity Plan. The Company granted stock options to employees to purchase 921,400 and 1,143,700 shares of common stock during the six months ended June 30, 2015 and 2014, respectively. The Company granted 99,027 RSAs to employees during the six months ended June 30, 2015. No RSAs were granted by the Company during the six months ended June 30, 2014.

The following table summarizes the stock option activity under the Plans:



	NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE		AGGREGATE INTRINSIC VALUE
					(000’s)
Options outstanding at December 31, 2014	3,826,459		$	8.39	$	79,792
Granted	921,400		27.09		—
Exercised	(83,270	)	1.46		—
Canceled	(62,758	)	13.66		—
Options outstanding at June 30, 2015	4,601,831		$	12.14	$	25,356
Options exercisable at June 30, 2015	1,962,997		$	6.45	$	21,986

The following table summarizes the RSA activity under the Plans:



	NUMBER OF SHARES		WEIGHTED AVERAGE FAIR VALUE PER SHARE

RSAs outstanding at December 31, 2014	103,064		$	2.47
Granted	99,027		28.00
Vested	(46,539	)	2.74
Canceled	(1,538	)	32.30
RSAs outstanding at June 30, 2015	154,014		$	18.50

The vesting of the RSAs is time and service based with terms of two to four years. The RSAs are subject to repurchase, such that the Company has the right, but not the obligation, to repurchase unvested shares upon the employee’s termination.