12. SHARE-BASED COMPENSATION

Effective October 2014, the Company established the 2014 Omnibus Incentive Plan (the “2014 Plan”), which permits the granting of stock options, stock appreciation rights, RSAs, RSUs and other stock-based awards. The 2014 Plan initially authorized up to 4,000,000 shares of common stock for awards to be issued to employees, directors or consultants of the Company, and each fiscal year, the number of shares reserved for issuance under the plan automatically increases by an amount equal to 2 percent of the total number of outstanding shares of common stock as of the beginning of such fiscal year.

The Company’s 2007 Stock Option Plan, as amended (the “2007 Plan”), authorized the granting of stock options to employees, directors or consultants at no less than the market price on the date the option was granted. Options generally become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter, and have a maximum term of 10 years. No further awards will be granted under the 2007 Plan. All outstanding awards previously granted under the 2007 Plan, including those granted in 2014, will continue to be governed by their existing terms.

Adoption of ASU 2016-09

Effective January 1, 2016, the Company early adopted the accounting guidance contained within ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). The Company recorded a $16,903 deferred tax asset and a $16,903 increase to retained earnings on January 1, 2016 to recognize the Company’s excess tax benefits related to share-based awards that existed as of December 31, 2015 (modified retrospective application). Beginning January 1, 2016, the Company recognizes all newly arising excess tax benefits related to share-based awards as a reduction to income taxes in its consolidated statement of operations, which resulted in the Company’s recognition of $80, $3,003 and $4,148 in benefits to income taxes during the years ended December 31, 2018, 2017 and 2016, respectively. Effective January 1, 2016, the Company elected to account for share-based compensation forfeitures when they occur. There was no impact of this election because prior to the adoption the Company did not have adequate historical information to estimate forfeitures. No prior period amounts were adjusted as a result of the adoption of ASU 2016-09.

Stock Options

A summary of the Company’s stock option activity for the years ended December 31, 2016, 2017 and 2018 is as follows:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Options	Price		Life	Value
				(In years)
Outstanding at January 1, 2016	4,114,685	$	17.53	7.7	$	76,567
Granted	1,546,532		22.64
Exercised	(564,844)		7.87
Cancelled/expired	(683,032)		27.41
Outstanding at December 31, 2016	4,413,341		19.02	7.0		11,558
Granted	4,066,735		16.43
Exercised	(1,217,320)		6.47
Cancelled/expired	(1,154,464)		25.25
Outstanding at December 31, 2017	6,108,292		18.62	8.5		25,777
Granted	411,486		21.39
Exercised	(379,194)		10.81
Cancelled/expired	(954,559)		24.13
Outstanding at December 31, 2018	5,186,025	$	18.42	8.0	$	2,910

Exercisable at December 31, 2018	2,011,169	$	18.35	7.1	$	2,910

The Company recorded share-based compensation expense associated with stock options of $7,895, $6,628 and $5,073 for the years ended December 31, 2018, 2017 and 2016, respectively.

The Company granted service-based awards of 330,135, 2,805,976 and 1,165,000 options to purchase common stock to key employees under its 2014 Plan during the years ended December 31, 2018, 2017 and 2016, respectively. The options granted during 2016 and 2017, as well as 105,000 of the options granted during 2018, become exercisable in installments of 25 percent per year, beginning on the first anniversary of the grant date and each of the three anniversaries thereafter. The remaining 225,135 options granted during 2018 become exercisable in installments of 33.3 percent per year, beginning on the first anniversary of the grant date and each of the two anniversaries thereafter. These options have a maximum term of 10 years.

The Company granted a make-whole inducement award of 81,351 options to purchase common stock to an executive during the second quarter of 2018. These options become exercisable in installments of 33.3 percent per year, beginning on the first anniversary of the grant date and each of the two anniversaries thereafter. These options have a maximum term of 10 years.

The Company granted service-based awards of 200,000 options to purchase common stock to key employees under its 2014 Plan during the year ended December 31, 2017 that were immediately vested at time of grant. These options have a maximum term of 10 years.

The Company granted performance-based awards of 260,759 and 381,532 options to purchase common stock to key employees under the 2014 Plan during the years ended December 31, 2017 and 2016, respectively, that are earned based upon the Company’s performance relative to specified revenue and Adjusted EBITDA targets corresponding to the year in which granted. None of the performance-based awards granted during 2017 and 2016 were earned and, therefore, no share-based compensation expense was recorded for these awards in either 2017 or 2016.

The Company granted performance-based awards of 800,000 options to purchase common stock to key employees under its 2014 Plan during the year ended December 31, 2017 that will be earned or forfeited in increments based on the cumulative growth in Adjusted EBITDA of a certain therapeutic category during the years ending December 31, 2017, 2018, 2019 and 2020. The earned options, if any, will be determined annually each March 31 of the subsequent year and vest as of that date. During the first quarter of 2018, it was determined that 225,862 of these options were earned/vested based upon 2017’s actual results. These options have a maximum term of 10 years.

At December 31, 2018, the total compensation cost related to non-vested options not yet recognized was $15,677, which will be recognized over a weighted average period of 2.44 years, assuming all employees complete their respective service periods for vesting of the options.

The total intrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was $4,560, $11,973 and $13,048, respectively.

The weighted average grant date fair value of options granted during the years ended December 31, 2018, 2017 and 2016 was $8.75, $6.23 and $6.34, respectively. The grant-date fair value of each option award was estimated using the Black-Scholes-Merton option-pricing model using the assumptions set forth in the following table:


	Year Ended December 31,
	2018	2017	2016
Exercise price	$20.52 - $24.29	$14.36 - $20.87	$14.40 - $36.60
Expected volatility	36.06% - 38.36%	33.44% - 36.38%	23.90% - 24.76%
Expected dividend yield	0%	0%	0%
Risk-free rate for expected term	2.33% - 2.84%	1.88% - 2.34%	1.23% - 2.06%
Expected term (in years)	6.00 - 6.25	5.00 - 6.25	6.25

Estimating grant date fair values for employee stock options requires management to make assumptions regarding expected volatility of value of those underlying shares, the risk-free rate over the expected life of the stock options and the date on which share-based payments will be settled. Expected volatility is based on a weighted average of the Company’s historic volatility and an implied volatility for a group of industry-relevant healthcare companies as of the measurement date. Risk-free rate is determined based upon U.S. Treasury rates over the estimated expected option lives. Expected dividend yield is zero as the Company does not anticipate that any dividends will be declared during the expected term of the options. The expected term of options granted is calculated using the simplified method (the midpoint between the end of the vesting period and the end of the maximum term). Forfeitures are accounted for when they occur.

RSUs

A summary of the Company’s RSU activity as of and for the years ended December 31, 2017 and 2018 is as follows:


		Weighted
		Average
	Number	Grant Date
	of RSUs	Fair Value
Nonvested at January 1, 2017	—	$	—
Granted	90,718		14.65
Cancelled/expired	(24,079)		14.65
Nonvested at December 31, 2017	66,639		14.65
Granted	2,059,066		22.00
Vested and issued	(183,263)		23.46
Cancelled/expired	(73,413)		20.21
Nonvested at December 31, 2018	1,869,029	$	21.67

The Company granted service-based awards of 1,131,591 and 90,718 RSUs to key employees under its 2014 Plan during the years ended December 31, 2018 and 2017, respectively. The Company also granted a sign-on inducement award of 124,875 RSUs and a make-whole inducement award of 33,716 RSUs to an executive during the second quarter of 2018. The value of a RSU is determined by the market value of the Company’s common stock at the date of grant. This value is recorded as compensation expense on a straight-line basis over the vesting period, which ranges from immediate vesting to three years from the grant date.

The Company granted performance-based awards of 139,512 RSUs to certain executives under its 2014 Plan during the first quarter of 2018, which will be earned or forfeited based upon the Company’s performance relative to a specified Adjusted EBITDA goal for the year ending December 31, 2018. The earned RSUs, if any, will vest in three equal installments, with the first installment vesting upon the earlier of the date that the Company files its 2018 Annual Report on Form 10-K or Audit Committee confirmation of the satisfaction of the applicable performance goals, with the remaining installments vesting annually thereafter. The Company is accounting for these performance-based RSUs under the current presumption that 37.5 percent will be earned and 62.5 percent will be forfeited.

The Company granted performance-based awards of 629,372 RSUs as a make-whole inducement award to an executive during the second quarter of 2018, which will be earned or forfeited based upon the Company’s performance relative to specified Adjusted EBITDA and revenue goals for the year ending December 31, 2018. The earned RSUs, if any, will vest in three equal installments, with the first installment vesting upon the earlier of the date that the Company files its 2018 Annual Report on Form 10-K or Audit Committee confirmation of the satisfaction of the applicable performance goals, with the remaining installments vesting annually thereafter. The Company is accounting for these performance-based RSUs under the current presumption that they will be forfeited.

The Company granted an additional performance-based award of 1,498,500 RSUs as a sign-on inducement award to an executive during the second quarter of 2018, which will be earned or forfeited based upon the Company’s performance relative to specified cumulative Adjusted EBITDA and revenue goals for the years ending December 31, 2018 and 2019. The earned RSUs, if any, will vest in three equal installments, with the first installment vesting upon the earlier of the date that the Company files its 2019 Annual Report on Form 10-K or Audit Committee confirmation of the satisfaction of the applicable performance goals, with the remaining installments vesting annually thereafter. The vesting of a portion of this award may be accelerated at the discretion of the Board of Directors of the Company or its Compensation Committee following completion of the Company’s 2018 external audit. Further, because of the awards subjectivity, a grant date for accounting purposes, at which date the fair value of the award is determined, was not established as of December 31, 2018, as the performance goals were not considered determinable.

The Company recorded share-based compensation expense associated with RSUs of $9,634 and $203 for the years ended December 31, 2018 and 2017, respectively. At December 31, 2018, the total compensation cost related to non-vested RSUs not yet recognized was $17,791, which will be recognized over the next 2.2 years, assuming all employees complete their respective service periods for vesting of the RSUs.

RSAs

A summary of the Company’s RSA activity for the years ended December 31, 2016, 2017 and 2018 is as follows:


	Number	Weighted
	of Shares	Average
	Subject to	Grant Date
	Restriction	Fair Value
Nonvested at January 1, 2016	10,805	$	26.60
Granted	5,765		32.97
Vested	(10,805)		26.60
Nonvested at December 31, 2016	5,765		32.97
Granted	36,814		17.13
Vested	(8,288)		26.80
Nonvested at December 31, 2017	34,291		17.45
Granted	40,796		21.30
Vested	(31,732)		17.68
Nonvested at December 31, 2018	43,355	$	20.91

Under the 2014 Plan, the Company issued RSAs to non-employee directors. The value of a RSA is determined by the market value of the Company’s common stock at the date of grant. The value of a RSA is recorded as share-based compensation expense on a straight-line basis over the vesting period, which is typically one year.

The Company recorded share-based compensation expense associated with RSAs of $643, $450 and $339 for the years ended December 31, 2018, 2017 and 2016, respectively. At December 31, 2018, the total compensation cost related to non-vested RSAs not yet recognized was $485, which will be recognized during 2019, assuming the non-employee directors complete their service period for vesting of the RSAs.