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Stock Options
 12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options Stock Options
We adopted the 2007 Stock Incentive Plan (the "2007 Plan") in November 2007, which terminated in accordance with its terms on November 28, 2017; however, the outstanding stock options may continue to be exercised in accordance with their terms.
Immediately following the termination of the 2007 Plan, we adopted the 2017 Stock Incentive Plan (the "2017 Plan"), which contains substantially similar terms and conditions as the 2007 Plan. Upon the IPO, no further grants were made under the 2017 Plan and we adopted the 2018 Stock Incentive Plan (the "2018 Plan"). The purpose of the 2018 Plan is to promote the interest of our company and our stockholders by aiding in attracting and retaining employees, officers, consultants, independent contractors, and directors capable of assuring the future success of our business and to afford such persons an opportunity to acquire a proprietary interest in our company. The board of directors may amend, alter, suspend, discontinue, or terminate the 2018 Plan at any time with the approval of our stockholders.
As of December 31, 2018, there were 1,386,809 shares reserved for issuance under the 2018 Plan, of which 581,941 shares were available for issuance. Prior to the IPO, the exercise price of stock options represented fair value of the common stock at the time of issuance and was determined by the board of directors with the assistance of a third-party valuation specialist. Post-IPO, options are granted at the exercise price, which is equal to the closing price of our stock on the date of grant. The stock options granted to employees include a four-year service period in which 25% vest after the first year of service and the remainder vest in equal installments over the next 36 months of service. The stock options granted to the board of directors include either a one- or two-year service period with all shares vesting after the one year of service, or 50% vesting after one year and the remainder vesting after the second year. The stock options have a contractual life of ten years.
A summary of stock option activity and related information is as follows:
Options
Weighted Average
Exercise Price
Weighted average
remaining
contractual term
(years)
Aggregate intrinsic
value (in thousands)
Outstanding at December 31, 20151,541,163 $1.77 6.6
Granted120,277 $1.65 
Exercised(109,079)$1.74 
Forfeited(54,850)$1.87 
Outstanding at December 31, 20161,497,511 $1.76 5.8
Granted721,763 $0.94 
Exercised (127,122)$1.85 
Forfeited(20,536)$1.88 
Outstanding at December 31, 20172,071,616 $1.47 5.9
Granted1,014,556 $31.91 
Exercised(301,058)$1.86 $7,353 
Forfeited(39,958)$3.64 
Outstanding at December 31, 20182,745,156 $12.64 7.4$81,453 
Exercisable at December 31, 20181,297,075 $1.54 5.3$52,801 
The aggregate intrinsic value of options exercised is the difference between the estimated fair market value of our common stock at the date of exercise and the exercise price for those options. The aggregate intrinsic value of outstanding options is the difference between the closing price as of the date outstanding and the exercise price of the underlying stock options. The total grant date fair value of options vested during the year was $0.2 million, $0.1 million and $0.1 million for the years ended December 31, 2018, 2017 and 2016.
Total stock compensation recognized, before taxes, was as follows:
Year Ended December 31,
201820172016
Research and development$51 $43 $50 
Selling, general and administrative1,168 200 198 
Total stock-based compensation$1,219 $243 $248 
As of December 31, 2018, the amount of unearned stock-based compensation currently estimated to be expensed from now through the year 2022 related to unvested employee and non-employee director share-based awards is $15.5 million and the weighted average period over which the unearned stock-based compensation is expected to be recognized is 3.1 years. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase, or cancel any remaining unearned stock compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional share-based awards.
We estimate the fair value of share-based awards on the date of grant using the Black-Scholes option pricing model using the fair market value of our common stock on the date of grant and a number of other complex and subjective assumptions. These assumptions include, but are not limited to, estimates regarding the expected term of the awards, estimates of the stock volatility over a duration that approximates the expected term of the awards, estimates of the risk-free rate, and estimates of expected dividend rates.
Due to our limited amount of historical exercise, forfeiture, and expiration activity, we have opted to use the "simplified method" for estimating the expected term of options, whereby the expected term equals the arithmetic average of the vesting terms and the original contractual term of the option. We will continue to analyze our expected term assumption as more historical data becomes available. Due to our limited operating history and a lack of company specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that
are publicly traded. When selecting these public companies on which we have based our expected stock price volatility, we generally selected companies with comparable characteristics to it, including enterprise value, stages of clinical development, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies' shares over historical periods that approximate calculated expected term of our share-based awards. We will continue to analyze the historical stock price volatility assumption as more historical data for our common stock becomes available.
The risk-free rate assumption is based on the U.S. Treasury instruments with maturities similar to the expected term of our stock options.
The expected dividend assumption is based on our history of not paying dividends and our expectation that we will not declare dividends for the foreseeable future.
The amount of stock-based compensation expense is recognized on a straight-line basis over the vesting term and is reduced by actual forfeitures as they occur.
The fair value of options granted to employees and directors during the years ended December 31, 2018, 2017, 2016 was estimated as of the grant date using the Black-Scholes option pricing model using the following assumptions:
Year Ended December 31,
201820172016
Expected life (years)5.50 - 6.255.75 - 6.256.25
Expected volatility37.5 - 49.8% 37.5 - 41.5% 40.6%  
Risk-free interest rate2.38 - 3.07%1.88 - 2.32%1.27 - 2.25%
Dividend yield—%  —%  —%  
Weighted average fair value$16.20 $0.40 $0.47