8.	Stock-Based Compensation

Restricted Stock Units

During the nine months ended September 30, 2017, the Company granted 32,500 restricted stock units to certain employees of the Company. The Company did not grant restricted stock units prior to January 1, 2017. These restricted stock units vest ratably over two years, with cliff vesting of 50% at both the one-year and two-year anniversary of the grant date, which was in February 2018 and will be in February 2019, respectively.

During the three months ended March 31, 2018, the Company granted 33,600 performance restricted stock units to certain employees of the Company. These performance restricted stock units will vest upon the achievement of a certain regulatory milestone, in some cases upon meeting the milestone and, in other cases, upon the first anniversary of achievement of the milestone.

During the three months ended June 30, 2018, the Company granted 37,800 performance restricted stock units to certain employees of the Company. These performance restricted stock units will vest upon the achievement of a certain commercial milestone.

The fair value of restricted stock units that vested during the nine months ended September 30, 2018 was $2.6 million. No restricted stock units vested during the nine months ended September 30, 2017 or during the three months ended September 30, 2018.

The table below summarizes activity relating to restricted stock units:

	Shares
Outstanding as of December 31, 2017		29,100
Granted		71,400
Vested		(14,550	)
Forfeited		(2,050	)
Outstanding as of September 30, 2018		83,900

Stock Option Plans

On July 2, 2014, the stockholders of the Company approved the 2014 Stock Option and Incentive Plan (the “2014 Stock Option Plan”), which became effective immediately prior to the completion of the Company’s IPO. The 2014 Stock Option Plan provides for the grant of restricted stock awards, restricted stock units, incentive stock options and non-statutory stock options. The 2014 Stock Option Plan replaced the Company’s 2011 Stock Option and Grant Plan (the “2011 Stock Option Plan”). The Company no longer grants stock options or other awards under the 2011 Stock Option Plan. Any options or awards outstanding under the 2011 Stock Option Plan remained outstanding and effective.

The 2014 Stock Option Plan provides for an annual increase, to be added on the first day of each fiscal year, by up to 4% of the Company’s outstanding shares of common stock as of the last day of the prior year. On January 1, 2018, 1,680,117 shares of common stock, representing 4% of the Company’s outstanding shares of common stock as of December 31, 2017, were added to the 2014 Stock Option Plan.

On December 15, 2016, the Board of Directors of the Company (the “Board”) approved the 2016 Inducement Equity Plan (the “2016 Stock Option Plan”). The 2016 Stock Option Plan provides for the grant of equity awards to individuals who have not previously been an employee or a non-employee director of the Company to induce them to accept employment and to provide them with a proprietary interest in the Company. On September 20, 2018, the Board amended the 2016 Stock Option Plan to increase the total number of shares reserved for issuance under such plan by 1,200,000 shares.

As of September 30, 2018, the total number of shares reserved under all equity plans is 10,001,048, and 2,422,437 shares were available for future issuance under such plans.

During the three months ended March 31, 2018 and 2017, the Company granted 323,753 and 449,208 options, respectively, to certain employees to purchase shares of common stock that contain performance-based vesting criteria, primarily related to the achievement of certain clinical and regulatory development milestones related to product candidates. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.

During the three months ended June 30, 2018 and 2017, the Company granted 200,250 and no options, respectively, to certain employees to purchase shares of common stock that contain performance-based vesting criteria, related to the achievement of certain clinical development, regulatory development and commercial milestones related to product candidates. Recognition of stock-based compensation expense associated with these performance-based stock options commences when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.

During the three months ended September 30, 2018 and 2017, the Company granted no options, respectively, to employees to purchase shares of common stock that contain performance-based vesting criteria.

During the three months ended June 30, 2018, a performance milestone was achieved under a stock option granted to a consultant. The milestone was related to the consummation of a licensing or corporate partnering arrangement. During the three months ended June 30, 2018, the Company recognized stock-based compensation expense related to this milestone of $6.9 million.

During the nine months ended September 30, 2018 and 2017, the achievement of the milestones that had not been met that are the criteria for vesting of performance-based stock options was considered not probable, and therefore no expense has been recognized related to these awards for the nine months ended September 30, 2018 and 2017.

Stock-based compensation expense for stock options, restricted stock units and the employee stock purchase plan recognized during the three and nine months ended September 30, 2018 and 2017 was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
	(in thousands)
Research and development	$	13,997	$	5,399	$	34,991	$	14,239
General and administrative		11,481		4,332		35,332		11,050
	$	25,478	$	9,731	$	70,323	$	25,289

Stock-based compensation expense by award type recognized during the three and nine months ended September 30, 2018 and 2017 was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
	(in thousands)
Stock options	$	25,015	$	9,414	$	69,023	$	24,565
Restricted stock units		164		176		487		444
Employee stock purchase plan		299		141		813		280
	$	25,478	$	9,731	$	70,323	$	25,289

The weighted average grant date fair value per share relating to outstanding stock options granted under the Company’s stock option plans during the nine months ended September 30, 2018 and 2017 was $113.12 and $40.43, respectively.

The table below summarizes activity related to stock options:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2017		5,586,593		$	43.58		8.09	$	676,717
Granted		2,775,594			168.97
Exercised		(711,621	)		35.13
Forfeited		(155,855	)		79.46
Outstanding as of September 30, 2018		7,494,711		$	90.07		8.15	$	459,643
Exercisable as of September 30, 2018		2,460,232		$	36.17		6.73	$	258,528

At September 30, 2018, the Company had unrecognized stock-based compensation expense related to its unvested service-based stock option awards of $291.8 million, which is expected to be recognized over the remaining weighted average vesting period of 2.94 years. The intrinsic value of stock options exercised during the nine months ended September 30, 2018 and 2017 was $93.0 million and $14.1 million, respectively.

At September 30, 2018, 1,098,536 performance-based stock options were both outstanding and unvested, and the total unrecognized stock-based compensation expense related to those awards was $58.4 million.