8. Stock‑Based Awards

2017 Inducement Plan

On July 31, 2017, the Company’s board of directors adopted the 2017 Inducement Plan (the “2017 Inducement Plan”). The 2017 Inducement Plan is a non-shareholder approved stock plan adopted pursuant to the “inducement exception” provided under NASDAQ listing rules. The only employees eligible to receive grants of awards under the 2017 Inducement Plan are individuals who satisfy the standards for inducement grants under NASDAQ rules, generally including individuals who were not previously an employee or director of the Company. Under the terms of the 2017 Inducement Plan upon adoption, the Company may grant up to 1,000,000 shares of common stock pursuant to nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit (“RSU”) awards, and other stock awards. The shares of common stock underlying any awards that expire, or are otherwise terminated, settled in cash or repurchased by the Company under the 2017 Inducement Plan will be added back to the shares of common stock available for issuance under the 2017 Inducement Plan. As of September 30, 2017, 622,452 shares of common stock were available for grant under the 2017 Inducement Plan.

2015 Equity Incentive Plan

On September 15, 2015, the Company’s board of directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”), and on September 16, 2015, the Company’s stockholders approved the 2015 Plan. The 2015 Plan became effective in connection with the Company’s initial public offering in October 2015. Beginning at the time the 2015 Plan became effective, no further grants may be made under the Company’s 2012 Equity Compensation Plan, as amended and restated (the “2012 Plan”). The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards, cash-based awards and other stock-based awards. The number of shares initially reserved for issuance under the 2015 Plan was 1,643,872 shares of common stock. The number of shares of common stock that may be issued under the 2015 Plan will automatically increase on January 1 of each year, beginning on January 1, 2016 and ending on January 1, 2025, in an amount equal to the lesser of (i) 4.0% of the shares of the Company’s common stock outstanding on December 31 of the preceding calendar year or (ii) an amount determined by the Company’s board of directors. The shares of common stock underlying any awards that expire, are otherwise terminated, settled in cash or repurchased by the Company under the 2015 Plan and the 2012 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan. As of January 1, 2017, the number of shares of common stock that may be issued under the 2015 Plan was automatically increased by 1,042,367 shares. As of September 30, 2017, 1,368,904 shares remained available for grant under the 2015 Plan.

2012 Equity Compensation Plan

Upon the 2015 Plan becoming effective, no further grants can be made under the 2012 Plan. The Company granted stock options to purchase a total of 1,140,524 shares under the 2012 Plan, of which 1,003,647 and 1,049,667 were outstanding as of September 30, 2017 and December 31, 2016, respectively. Stock options granted under the 2012 Plan vest over four years and expire after ten years. As required, the exercise price for the stock options granted under the 2012 Plan was not less than the fair value of common shares as determined by the Company as of the date of grant.

Stock Option Valuation

The weighted average assumptions the Company used to estimate the fair value of stock options granted were as follows:


	Nine Months Ended
	September 30,
	2017		2016

Risk-free interest rate	1.89	%	1.41	%
Expected term (in years)	6.2		6.5
Expected volatility	93.84	%	96.60	%
Expected dividend yield	0	%	0	%

The Company recognizes compensation expense for awards over their vesting period. Compensation expense for awards includes the impact of forfeitures in the period when they occur.

Stock Options

The following table summarizes stock option activity from January 1, 2017 through September 30, 2017:


					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Number		Exercise		Contractual	Intrinsic
	of Shares		Price		Term	Value
					(in years)
Outstanding as of December 31, 2016	2,702,350		$	18.94	9.05	$	24,434
Granted	617,500			26.47
Exercised	(36,738)			6.40
Forfeited and cancelled	(40,281)			21.09
Outstanding as of September 30, 2017	3,242,831		$	20.49	8.60	$	21,704
Options vested and expected to vest as of September 30, 2017	3,242,831		$	20.49	8.60	$	21,704
Options exercisable as of September 30, 2017	828,823	(1)	$	10.95	7.73	$	12,666

(1)

All options granted under the 2012 Plan are exercisable immediately, subject to a repurchase right in the Company’s favor that lapses as the option vests. This amount reflects the number of shares under options that were vested, as opposed to exercisable, as of September 30, 2017.

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2017 was $20.41 per share.

The intrinsic value of a stock option is calculated as the difference between the exercise price of the stock option and the fair value of the underlying common stock, and cannot be less than zero.

Restricted Stock Units

The following table summarizes RSU activity from January 1, 2017 through September 30, 2017:


		Weighted
		Average
		Grant Date
	Number	Fair Value
	of Shares	Per Share
Outstanding as of December 31, 2016	219,614	$	27.43
Granted	88,547		26.59
Vested	(9,299)		20.32
Forfeited and cancelled	(4,531)		27.05
Outstanding as of September 30, 2017	294,331	$	27.41

Stock‑Based Compensation

The following table summarizes stock‑based compensation expense recorded by the Company:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Cost of revenue	$	130	$	—	$	130	$	—
Research and development		1,332		623		3,853		1,577
General and administrative		2,211		995		6,147		2,617
Total stock-based compensation expense	$	3,673	$	1,618	$	10,130	$	4,194

As of September 30, 2017, the Company had unrecognized stock‑based compensation expense for stock options and RSUs of $37,674 and $6,090, respectively, which is expected to be recognized over weighted average periods of 3.06 years and 2.93 years, respectively.