12. Stock‑Based Compensation

2013 Stock Incentive Plan

In September 2013, the board of directors adopted the 2013 Stock Incentive Plan, as amended (the “2013 Plan”), which provides for the grant of incentive stock options and nonqualified stock options or other awards including restricted stock awards, unrestricted stock awards, and restricted stock units to the Company’s employees, officers, directors, advisors, and consultants for the purchase of up to 1,057,692 shares of the Company’s common stock. In June 2014, the 2013 Plan was amended to increase the number of shares reserved thereunder by 1,365,384 shares. In April 2015, the 2013 Plan was amended to increase the number of shares reserved thereunder by 153,846 shares. In July 2015, the 2013 Plan was amended to increase the number of shares reserved thereunder by 3,740,847 shares.

The terms of stock awards agreements, including vesting requirements, are determined by the board of directors and are subject to the provisions of the 2013 Plan. The stock options granted to employees generally vest over a four-year period and expire ten years from the date of grant. Certain awards contain performance based vesting criteria. There has only been one such award to date. Certain options provide for accelerated vesting in the event of a change in control, as defined in the applicable options. Awards granted to non‑employee consultants generally vest monthly over a period of one to four years. In connection with the IPO, the Company’s board of directors determined to grant no further awards under the 2013 Plan.

2015 Stock Incentive Plan

The Company’s board of directors adopted and the Company’s stockholders approved the 2015 stock incentive plan (the “2015 Plan”), which became effective immediately prior to the effectiveness of the registration statement related to the IPO. The 2015 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock‑based awards. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2015 Plan.

The number of shares reserved for issuance under the 2015 Plan is subject to further increases for (a) any additional shares of the Company’s common stock subject to outstanding awards under the 2013 Plan that expire, terminate, or are otherwise surrendered, cancelled, forfeited, or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right and (b) annual increases, to be added as of the first day of each fiscal year, from January 1, 2017 until, and including, January 1, 2026, equal to the lowest of 2,923,076 shares of common stock, 4% of the number of shares of common stock outstanding on such first day of the fiscal year in question and an amount determined by the Company’s board of directors. On January 1, 2018, the Company increased the shares under the 2015 Plan by 1,801,017 shares.

2015 Employee Stock Purchase Plan

The Company’s board of directors adopted and the Company’s stockholders approved the 2015 employee stock purchase plan (the “2015 ESPP”), which became effective upon the closing of the IPO. The number of shares reserved for issuance under the 2015 ESPP is subject to annual increases, to be added as of the first day of each fiscal year, from January 1, 2017 until, and including, January 1, 2026, in an amount equal to the least of (a) 769,230 shares of common stock, (b) 1% of the total number of shares of common stock outstanding on the first day of the applicable year, and (c) an amount determined by the board of directors. The first offering under the 2015 ESPP opened on December 1, 2017. On January 1, 2018, the Company increased the shares under the 2015 ESPP Plan by 450,254 shares.

Founder Awards

In September 2013, the Company issued 2,403,845 shares of restricted stock to its non‑employee founders for services rendered subject to certain repurchase rights. The shares vested 25% upon the first issuance of shares of Series A Preferred Stock and then 1.5625% a month through the fourth anniversary of the vesting commencement date. These shares of restricted stock were subject to repurchase rights. Accordingly, the Company recorded the proceeds from the issuance of restricted stock as a liability in its consolidated balance sheets. The restricted stock liability was reclassified into stockholders’ equity (deficit) as the restricted stock vested. In June 2014, one founder ceased to be in the Company’s service and the Company repurchased 285,457 shares of unvested restricted stock from the founder for $74. The remaining founder awards completed vesting in August 2017.

Stock‑based compensation expense associated with these awards was recognized as the awards vested. Unvested awards were remeasured at each reporting period end to reflect the current fair value of such awards on a straight‑line basis.

Stock‑Based Compensation Expense

Total compensation cost recognized for all stock‑based compensation awards in the consolidated statements of operations was as follows (in thousands):


	Year Ended
	December 31,
	2017		2016		2015
Research and development	$	15,131	$	4,234	$	3,015
General and administrative		8,233		12,647		498
Total stock-compensation expense	$	23,364	$	16,881	$	3,513

Restricted Stock

From time to time, upon approval by the Company’s board of directors, certain employees and advisors have been granted restricted shares of common stock. These shares of restricted stock are subject to repurchase rights. Accordingly, the Company has recorded the proceeds from the issuance of restricted stock as a liability in the consolidated balance sheets. The restricted stock liability is reclassified into stockholders’ equity (deficit) as the restricted stock vests. A summary of the status of and changes in unvested restricted stock as of December 31, 2016 and 2017 is as follows:


		Weighted
		Average
		Grant Date
		Fair Value
	Shares	Per Share
Unvested Restricted Common Stock as of December 31, 2016	822,638	$	0.02
Issued	480,000	$	28.05
Vested	(784,119)	$	4.95
Forfeited	(5,294)	$	0.03
Unvested Restricted Common Stock as of December 31, 2017	513,225	$	18.70

The expense related to restricted stock awards granted to employees and non‑employees was $0.5 million and $4.1 million, respectively, for the year ended December 31, 2017. The expense related to restricted stock awards granted to employees and non‑employees was $0 and $8.3 million, respectively, for the year ended December 31, 2016. The expense related to restricted stock awards granted to employees and non-employees was $0 and $2.3 million, respectively, for the year ended December 31, 2015.

As of December 31, 2017, the Company had no unrecognized stock‑based compensation expense related to its employee unvested restricted stock awards. As of December 31, 2017, the Company had unrecognized stock‑based compensation expense related to its non‑employee unvested restricted stock awards of $10.3 million which is expected to be recognized over a remaining weighted average vesting period of 4.7 years.

Stock Options

Certain of the Company’s stock option agreements allow for the exercise of unvested awards. During 2014, options to purchase 75,304 shares of common stock for $0.03 per share were exercised prior to their vesting. The unvested shares are subject to repurchase by the Company if the employees cease to provide service to the Company, with or without cause. As such, the Company does not treat the exercise of unvested options as a substantive exercise. The Company has recorded the proceeds from the exercise of unvested stock options as a liability in the consolidated balance sheets. The liability for unvested common stock subject to repurchase is reclassified into stockholders’ equity (deficit) as the shares vest.

The following is a summary of stock option activity for the year ended December 31, 2017:


		Weighted Average		Remaining	Aggregate Intrinsic
	Shares	Exercise Price		Contractual Life	Value (in thousands)
Outstanding at December 31, 2016	3,411,783	$	13.71	8.8	$	16,190
Granted	1,392,689		—	—		—
Exercised	(289,583)		—	—		—
Cancelled	(142,753)		—	—		—
Outstanding at December 31, 2017	4,372,136	$	17.28	8.5	$	60,591
Vested and expected to vest at December 31, 2017	4,372,126	$	17.28	8.5	$	60,591
Exercisable at December 31, 2017	1,540,023	$	14.95	8.3	$	25,099

The table above reflects unvested stock options as exercised on the dates that the shares are no longer subject to repurchase. The Company had 4,572 and 21,955 shares of unvested common stock at December 31, 2017 and 2016 related to the exercise of unvested stock options.

The total intrinsic value of options exercised for the years ended December 31, 2017, 2016, and 2015 was $5.0 million, $0.9 million, and $0.1 million, respectively.

Using the Black‑Scholes option pricing model, the weighted average fair value of options granted to employees and directors during the years ended December 31, 2017, 2016, and 2015 was $16.07, $14.10, and $5.91, respectively. The expense related to options granted to employees and directors was $12.3 million, $6.0 million, and $0.7 million for the years ended December 31, 2017, 2016, and 2015, respectively.

The fair value of each option issued to employees and directors was estimated at the date of grant using the Black‑Scholes option pricing model with the following weighted‑average assumptions:


	Year Ended
	December 31,
	2017		2016		2015
Expected volatility	77.8	%	78.4	%	78.8	%
Expected term (in years)	6.25		6.25		6.25
Risk free interest rate	2.1	%	1.5	%	1.7	%
Expected dividend yield	—		—		—

There were no options granted to persons other than employees and directors during the year ended December 31, 2017. For the year ended December 31, 2017, 2016 and 2015, the fair value of each option issued to persons other than employees and directors was estimated at the date of grant using the Black‑Scholes option pricing model with the weighted‑average assumptions set forth in the table below:


	Year Ended
	December 31,
	2017	2016		2015
Expected volatility	—	76.5	%	80.0	%
Expected term (in years)	—	10.0		10.0
Risk free interest rate	—	1.6	%	2.2	%
Expected dividend yield	—	—		—

As of December 31, 2017, the Company had unrecognized stock‑based compensation expense related to its employee stock options of $33.4 million which the Company expects to recognize over a remaining weighted average vesting period of 2.5 years.