Stock-based Compensation

6 Months Ended

Jun. 30, 2016

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

Stock-based Compensation

Stock-based Compensation

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

	THREE MONTHS ENDED   JUNE 30,				SIX MONTHS ENDED   JUNE 30,
(in thousands)	2016		2015		2016		2015
Research and development	$	814	$	583	$	1,526	$	1,094
General and administrative	3,067		2,893		5,889		5,123
Total	$	3,881	$	3,476	$	7,415	$	6,217

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 the 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 over the vesting period.

As of June 30, 2016, the Company had $29.8 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 2.5 years as of June 30, 2016. The weighted average remaining contractual life on all outstanding options as of June 30, 2016 was 7.8 years.

As of June 30, 2016, the Company had $2.9 million of unrecognized compensation expense, related to unvested RSAs. This cost is expected to be recognized over a weighted average period of 3.0 years as of June 30, 2016. The weighted average remaining contractual term for RSAs as of June 30, 2016 was 3.0 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”), as described below. 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 have been or will be made under the 2005 Plan. Any remaining shares 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 have been or will be made under the 2013 Equity Plan. Any remaining shares 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 following table summarizes the stock option activity under the Plans:

	NUMBER OF SHARES		WEIGHTED AVERAGE EXERCISE PRICE		WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	AGGREGATE INTRINSIC VALUE (000’s)
Options outstanding at December 31, 2015	4,583,586		$	12.86
Granted	758,736		16.18
Exercised	(30,403	)	2.44
Canceled	(40,640	)	21.96
Options outstanding at June 30, 2016	5,271,279		$	11.04	7.8	$	35,051
Options vested and expected to vest at June 30, 2016(1)	5,194,864		$	13.25	7.8	$	34,896
Options exercisable at June 30, 2016	2,760,266		$	9.48	7.0	$	27,204

(1) Includes vested options and options that are expected to vest as of the balance sheet date after applying an estimated annual forfeiture rate.

The following table summarizes the RSA activity under the Plans:

	NUMBER OF SHARES		WEIGHTED AVERAGE FAIR VALUE PER SHARE
RSAs outstanding at December 31, 2015	119,993		$	20.31
Granted	112,655		15.98
Vested	(47,538	)	16.90
Canceled	(477	)	19.23
RSAs outstanding at June 30, 2016	184,633		$	18.55

The vesting of the RSAs is time and service based with terms of one to four years.