Stock-based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Stock-based compensation

The Company issues stock-based awards pursuant to its 2010 Stock Incentive Plan. Effective as of October 12, 2017, the Company's 2010 Stock Incentive Plan was amended and restated (A&R Plan). The A&R Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, deferred stock units, performance shares, stock appreciation rights and other equity-based awards. The Company's employees, officers, directors and other persons are eligible to receive awards under the A&R Plan. As of December 31, 2019, 10,055,648 shares of the Company's common stock were authorized to be issued under the A&R Plan, and 1,813,717 shares were reserved for future awards under the A&R Plan. The number of shares of the Company's common stock authorized under the A&R Plan will automatically increase on January 1^st of each year, commencing on January 1, 2018 and continuing until the expiration of the A&R Plan, in an amount equal to four percent of the total number of shares of the Company's common stock outstanding on December 31^st of the preceding calendar year, subject to the discretion of the Company's board of directors or compensation committee to determine a lesser number of shares shall be added for such year.

The amount, terms of grants, and exercisability provisions are determined and set by the Company's board of directors or compensation committee. The Company measures employee stock-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the award. Stock-based awards issued to non-employees are revalued until the award vests.

Stock options

The Company has issued service-based and performance-based stock options that generally have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the board of directors. Vesting generally occurs over a period of not greater than four years. Performance-based options may vest upon the achievement of certain milestones in connection with the Company's development programs. Additionally, the Company has issued stock options in excess of the fair market value of Common Stock on the issuance date that were only exercisable upon a change in control or upon or after an initial public offering. As of December 31, 2019, all of the performance conditions related to performance-based stock options issued by the Company have been achieved.

The following table summarizes the activity related to stock option grants to employees and nonemployees for the years ended December 31, 2019:


	Shares	Weighted average exercise price per share		Weighted average remaining contractual life
Outstanding at December 31, 2018	6,182,873	$	10.60	6.67
Granted	2,088,673	7.72
Exercised	(254,335)	4.09
Expired	—	—
Forfeited	(617,994)	12.96
Outstanding at December 31, 2019	7,399,217	$	9.81	6.37
Exercisable at December 31, 2019	4,287,676	$	9.43	4.68
Vested and expected to vest at December 31, 2019	7,399,217	$	9.81	6.37

During the year ended December 31, 2019, stock options to purchase 2,088,673 shares of common stock were granted to employees that generally vest over four years. The options had an estimated weighted average grant date fair value of $4.79. The grant date fair value of each option grant was estimated at the time of grant using the Black-Scholes option-pricing model.

The total aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was $1,005 and $9,255, respectively. The aggregate intrinsic value of stock options outstanding and stock options exercisable as of December 31, 2019 was $18,397 and $14,431, respectively. At December 31, 2019, the unrecognized compensation cost related to unvested stock options expected to vest was $18,733. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 2.4 years.

Restricted stock units

The Company has issued RSUs for which vesting generally occurs over a period not greater than four years. In April 2019, the Company issued 20,600 RSUs at a price of $10.20, all of which forfeited during the year ended December 31, 2019. No RSUs were issued or outstanding at December 31, 2018.

2017 Employee Stock Purchase Plan

The Company's 2017 Employee Stock Purchase Plan (the 2017 Plan) became effective on October 12, 2017. As of December 31, 2019, 934,695 shares of the Company's common stock were authorized to be issued pursuant to purchase rights granted to its employees or to employees of any of its participating affiliates under the 2017 Plan. 707,261 shares of the Company's common stock were reserved for future issuance under the 2017 Plan. The number of shares of the Company's common stock that may be issued pursuant to rights granted under the 2017 Plan shall automatically increase on January 1^st of each year, commencing on January 1, 2018 and continuing until the expiration of the 2017 Plan, in an amount equal to one percent of the total number of shares of the Company's common stock outstanding on December 31^stof the preceding calendar year, subject to the discretion of the board of directors or compensation committee to determine a lesser number of shares shall be added for such year.

Under the 2017 Plan, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the administrator. The 2017 Plan is administered by the compensation committee. Eligible employees may contribute up to 15% of their eligible compensation. A participant may not accrue rights to purchase more than $25 worth of the Company’s common stock for each calendar year in which such right is outstanding.

Payroll withholdings accumulate during the following six month offering periods each calendar year while the Purchase Plan is effective:

•January 1 through June 30, and

•July 1 through December 31.

At the end of each offering period, shares of the Company’s common stock may be purchased at 85% of the lesser of the average of the high and low sales price of the Company’s common stock on (i) the first trading day of the relevant offering period and (ii) the last trading day of the relevant offering period (or, if the relevant offering period has multiple purchase periods, the last trading day of the relevant purchase period). In accordance with the guidance in ASC 718-50 – Compensation – Stock Compensation, the ability to purchase shares of the Company’s common stock at the lower of the price on the first day of the offering period or the last day of the offering period (i.e. the purchase date) represents an option and, therefore, the 2017 Plan is a compensatory plan under this guidance. Accordingly, stock-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black-Scholes option-pricing model and is recognized over the requisite service period of the option. The Company has recognized stock-based compensation expense of $405 and $446 during the years ended December 31, 2019 and 2018, respectively, related to the 2017 Plan.

Stock-based compensation expense

The Company recorded stock-based compensation expense in the following expense categories of its accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018:


	Year Ended December 31,
	2019		2018
Cost of product sales	$	103	$	9
Research and development	1,062		989
Selling, general and administrative	8,695		7,545
Total stock-based compensation expense	$	9,860	$	8,543

In addition, stock-based compensation expense of $150 and $27 was charged to inventory and prepaid expenses and other assets, respectively, during the year ended December 31, 2019, which represents the total stock-based compensation expense incurred related to employees involved in the manufacturing process of finished goods and samples during the period.

The Company utilized the Black-Scholes valuation model for estimating the fair value of stock options shares issued under the 2017 Plan. The Company calculated the fair value of each option grant and the shares issued under the 2017 Plan on the respective dates of grant using the following weighted average assumptions:


	December 31, 2019
	2010 A&R Stock Incentive Plan		2017 Employee Stock Purchase Plan
Risk free interest rate	2.47	%	2.32	%
Expected term (in years)	6.05		0.50
Expected volatility	67.03	%	73.34	%
Annual dividend yield	0.00	%	0.00	%

Option valuation methods, including Black-Scholes, require the input of subjective assumptions, which are discussed below.

•The expected term of employee options is determined using the "simplified" method, as prescribed in SEC's Staff Accounting Bulletin (SAB) No. 107, Share Based Payment (SAB No. 107), whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company's lack of sufficient historical data. The expected term of nonemployee options is equal to the contractual term.

•The expected volatility is based on a weighted average of the Company's historical volatility and the volatilities of similar entities within the Company's industry which were commensurate with the expected term assumption as described in SAB No. 107.

•The risk-free interest rate is based on the interest rate payable on US Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term.

•The expected dividend yield is 0% because the Company has not historically paid, and does not expect for the foreseeable future to pay, a dividend on its common stock.