8. Stock-Based Compensation

Restricted Stock and RSUs

A summary of the Company’s restricted stock and RSU activity for the three months ended March 31, 2015 is as follows:


	Shares			Weighted Average Fair Value at Date of Grant per Share
Unvested shares as of December 31, 2014		8,352,714		$	1.46
Granted		3,517			60.75
Vested		(758,136	)		1.43
Forfeited		—			—

Unvested shares as of March 31, 2015		7,598,095		$	1.46

Management estimates expected forfeitures and recognizes compensation costs only for those equity awards expected to vest. For the three months ended March 31, 2015, the Company recognized $3.3 million in compensation cost related to vested restricted stock, of which $2.5 million was related to service providers other than our employees, scientific founders, and directors, including $1.9 million for a former co-founding director who became a consultant upon his departure from the board of directors. Of the compensation cost for the three months ended March 31, 2015 related to vested restricted stock, $2.7 million was classified as research and development expense and $0.6 million was classified as general and administrative expense. For the three months ended March 31, 2014, the Company recognized $0.4 million in compensation cost related to vested restricted stock, of which a de minimis amount was related to service providers other than our employees, scientific founders, and directors. Of the compensation cost for the three months ended March 31, 2014 related to vested restricted stock, $0.1 million was classified as research and development expense and $0.3 million was classified as general and administrative expense.

As of March 31, 2015, there was $9.9 million of total unrecognized compensation cost related to non-vested restricted stock and RSUs held by employees, scientific founders, and directors. As of March 31, 2015, the Company expects to recognize these costs over a remaining weighted average period of 2.79 years.

Stock Options

A summary of the Company’s stock option activity for the three months ended March 31, 2015 is as follows:


	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2014		2,720,351	$	7.23		9.75		122,390
Granted		1,120,580		48.73
Exercised		—		—
Cancelled		—		—

Outstanding as of March 31, 2015		3,840,931	$	19.34		9.63	$	159,285

Exercisable as of March 31, 2015		228,425	$	7.33		9.49	$	12,182

The fair value of each stock option granted has been determined using the Black-Scholes option pricing model. The material factors incorporated in the Black-Scholes model in estimating the fair value of the options granted to employees and consultants during the three months ended March 31, 2015 included the following:


Assumptions	Three Months Ended March 31, 2015
Risk free interest rate		1.53%–1.94%
Expected volatility		75%
Expected life		6.02-10 years
Expected dividend yield		0%

For employees, scientific founders, and directors, the expected life was calculated based on the simplified method as permitted by the SEC Staff Accounting Bulletin No. 110, Share-Based Payment. For other service providers, the expected life was calculated using the contractual term of the award. Management’s estimate of expected volatility was based on available information about the historical volatility of stocks of similar publicly-traded companies for a period matching the expected term assumption. The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options. In addition to the assumptions above, management made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest.

For the three months ended March 31, 2015, the Company recognized $2.1 million in compensation expense related to stock options, of which $0.3 million was related to service providers other than our employees, scientific founders, and directors. Of the compensation costs related to stock options, $0.9 million was classified as research and development expense and $1.2 million was classified as general and administrative expense. The weighted average grant date fair value of options granted for the three months ended March 31, 2015 was $48.73 per share.

As of March 31, 2015, there was $46.3 million of total unrecognized compensation costs related to employees’ and directors’ stock options, which costs the Company expects to recognize over a remaining weighted average period of 3.57 years.