Employee Stock Benefit Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Employee Stock Purchase Plan

In September 2016, the Company initiated the first offering period under the Company’s 2016 Employee Stock Purchase Plan (the “ESPP”), pursuant to which eligible employees may purchase shares of the Company’s common stock on the last day of each predetermined six-month offering period at 85% of the lower of the fair market value per share at the beginning or end of the applicable offering period. The offering periods run from March 1 through August 31 and from September 1 through February 28 (or February 29, in a leap year) of each year.

At December 31, 2019, there were 1,473,247 shares available for future sale to employees under this plan. As of December 31, 2019, the Company recorded a liability of $0.8 million related to employee withholdings under this plan.

Stock Options under Equity Incentive Plans

The Company has granted awards to employees, directors and consultants under the following compensation plans. The Company’s 2018 Stock Option and Incentive Plan (the “2018 Plan”) is the current plan under which the Company grants awards.

2003 Long-Term Incentive Plan—The Company’s 2003 Long-Term Incentive Plan (the “2003 Plan) provided for the granting of incentive stock options and nonqualified options to key employees, directors and consultants of the Company. The exercise price of the incentive stock options, as determined by the Company's board of directors, was required to be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock) of the common stock fair value as of the date of the grant. The provisions of the 2003 Plan limited the exercise of incentive stock options, but in no case could the exercise period extend beyond ten years from the date of grant (five years in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock). Stock options granted under the 2003 Plan generally vest over a four-year period.

2011 Equity Incentive Plan—The Company's 2011 Equity Incentive Plan (the “2011 Plan”) replaced the 2003 Plan when the Company's board of directors approved the 2011 Plan on November 7, 2011 and the shares that remained available for issuance under the 2003 Plan were assumed as shares authorized under the 2011 Plan. The 2011 Plan provided for the granting of incentive stock options and nonqualified options to key employees, directors and consultants of the Company. The exercise price of the incentive stock options, as determined by the Company's board of directors, was required to be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock) of the common stock fair value as of the date of the grant. The provisions of the 2011 Plan limited the exercise of incentive stock options, but in no case could the exercise period extend beyond ten years from the date of grant (five years in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company's common stock). Stock options granted under the 2011 Plan generally vest over a four-year period, subject to continued employment with, or services to, the Company.

2018 Stock Option and Incentive Plan—The 2018 Plan replaced the 2011 Plan when the Company’s stockholders approved the new plan on June 6, 2018 and the shares that remained available for issuance under the 2011 Plan were assumed as shares authorized under the 2018 Plan. The 2018 Plan provides for the granting of equity awards, including incentive and non-qualified stock options and restricted stock units, to employees, non-employee directors and consultants of the Company. The exercise price of the incentive stock options, as determined by the Company’s Board of Directors, must be at least 100% (110% in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s common

stock) of the common stock fair value as of the date of the grant. The provisions of the 2018 Plan limit the exercise of incentive stock options, but in no case may the exercise period extend beyond ten years from the date of grant (five years in the case of incentive stock options granted to a stockholder owning in excess of 10% of the Company’s common stock). Stock options and restricted stock units granted under the 2018 plan generally vest over a four-year period, subject to continued employment with, or services to, the Company.

As of December 31, 2019, an aggregate of 4,834,255 common shares remained outstanding under all of the Company’s stock based compensation plans. The number of common shares remaining available for granting of future awards under these plans was approximately 5,684,071 at December 31, 2019.

The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its employee stock options. The weighted-average grant-date fair value per share of options granted during 2019, 2018, and 2017 was $12.97, $18.69, and $22.74 respectively. The weighted-average assumptions used in the Black-Scholes option-pricing model were as follows:



	Years Ended December 31,
	2019		2018		2017
Expected term (years)	6.13		6.23		6.02
Volatility	72	%	56	%	57	%
Expected dividend yield	0	%	0	%	0	%
Risk-free interest rates	2.35	%	2.68	%	2.01	%

A summary of stock option activity for the year ended December 31, 2019 is as follows (in thousands, except for share, per share, and weighted-average contractual life amounts):



	Shares		Weighted-Average Exercise Price (in dollars per share)		Weighted-Average Contractual Life (In Years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2018	5,462,787		$	36.88
Granted	1,110,100		19.88
Exercised	(341,337	)	8.40
Canceled	(558,747	)	33.91
Expired	(838,548	)	40.59
Options outstanding at December 31, 2019	4,834,255		$	34.69	6.76	$	4,167
Options exercisable at December 31, 2019	2,951,940		$	39.49	5.56	$	3,166

The aggregate intrinsic value of options exercised (i.e., the difference between the market price at exercise and the price paid by employees to exercise the option) during the years ended December 31, 2019 and 2018 was $4.2 million and $9.1 million, respectively.

As of December 31, 2019, there was approximately $25.1 million of total unrecognized compensation expense related to unvested option-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 2.41 years.

Restricted Stock Units

A summary of RSU activity during the year ended December 31, 2019 is as follows:



	RSUs		Weighted-Average Grant Date Fair Value (in dollars per share)
RSUs Outstanding at December 31, 2018	227,088		$	37.69
Granted	613,650		20.04
Vested	(92,031	)	35.79
Forfeited	(134,434	)	26.17
RSUs Outstanding at December 31, 2019	614,273		$	22.83

As of December 31, 2019, there was approximately $9.8 million of total unrecognized compensation expense related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.55 years.

Performance Units

During the twelve months ended December 31, 2019, the Company awarded 79,000 performance restricted stock units (“PSUs”) to employees. Each PSU entitles the holder to receive one share of the Company’s common stock if and when the PSU vests. The PSUs vest upon achievement of certain performance targets within a pre-specified period from the grant date. The vesting of any earned units is subject to the employee’s continued service relationship with the Company through each vesting date.

A summary of PSU activity during the twelve months ended December 31, 2019 is as follows:



	PSUs	Weighted-Average Grant Date Fair Value (in dollars per share)
PSUs Outstanding at December 31, 2018	—	$	—
Granted	79,000	19.20
Vested	—	—
Forfeited	—
PSUs Outstanding at December 31, 2019	79,000	$	19.20

As the performance condition must be met for the awards to vest, compensation cost will be recognized over the implicit service period and only if the performance condition is assessed as probable of achievement. As of December 31, 2019, the achievement of the performance condition was not probable and, therefore, no expense has been recognized to date.

The following table summarizes stock-based compensation expense by financial statement line (in thousands):



	Years Ended December 31,
	2019		2018		2017
Research and development	$	8,768	$	11,657	$	14,699
General and administrative	14,847		17,044		20,304
Share-based compensation expense included in operating expenses	$	23,615	$	28,701	$	35,003

Warrants

At December 31, 2018, the Company had outstanding warrants to purchase 120,532 shares of the Company’s common stock at prices ranging from $14.00 to $16.97 per share. The warrants became exercisable at various dates between 2011 and 2014. No warrants were outstanding as of December 31, 2019.