Stock-based compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based compensation

5. Stock-based compensation

Stock-based payments to employees, including grants of employee stock options and restricted stock, are recognized in the financial statements based on their grant date fair values in accordance with the applicable accounting guidance. The compensation expense related to the Company’s stock-based compensation arrangements has been included in the condensed statements of operations and comprehensive loss as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
General and administrative	$	7,316	$	626	$	9,504	$	1,876
Research and development		313		2,500		4,377		7,502
Total share-based compensation expense	$	7,629	$	3,126	$	13,881	$	9,378

The fair value of equity instruments that are ultimately expected to vest, net of estimated forfeitures, are recognized and amortized on a straight-line basis over the requisite service period. The Company estimates forfeiture rates for equity awards based on past behavior for similar equity awards with further consideration given to the class of employees to whom the equity awards were granted.

As of September 30, 2013, total unrecognized estimated compensation cost related to non-vested stock options granted prior to that date was $833,751, which is expected to be recognized over a weighted average period of approximately 1.52 years.

The Company grants stock options to purchase common stock to employees with exercise prices equal to the value of the underlying stock, as determined by the board of directors on the date the equity award was granted. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model using the appropriate forfeiture rate, risk-free interest rate, expected term and volatility assumptions. The expected life of the options was calculated using the simplified method, which calculates the life as the average of the contractual term and the vesting period of the option. Due to the Company’s limited historical data as a public company, the estimated volatility was calculated based upon the historical volatility of comparable companies whose share prices are publicly available for a sufficient period of time. The risk-free interest rate was based upon the rates for U.S. Treasury securities with maturities similar to those of the expected term of the award being valued. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

Stock Option Assumptions

The Company granted stock options under the 2013 Equity Incentive Award Plan to purchase 108,000 and 0 shares of the Company’s common stock during the nine months ended September 30, 2013 and 2012, respectively. The Company granted 108,000 stock options during the three months ended September 30, 2013. These stock options vest annually over a three-year period. The exercise price of all stock options granted during the nine months ended September 30, 2013 and 2012 was equal to the closing price of the Company’s common stock on the date of grant. The estimated fair value of each stock option granted was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the stock option grants:

	Three and Nine Months Ended September 30,
	2013			2012
Risk-free interest rate		1.75	%		—
Expected volatility of common stock		71	%		—
Dividend yield		0.0	%		—
Expected option term		6 years			—