6.Stock-Based Compensation

2014 Stock Plan (the “2014 Plan”) and 2016 Equity Incentive Plan (the “2016 Plan”)

The following table summarizes stock option activity under the 2014 Plan and the 2016 Plan (collectively, the “Plans”) for the six months ended June 30, 2017 (in thousands, except per share data):


		Weighted		Weighted Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Life (Years)	Value
Outstanding at December 31, 2016	2,577	$	22.01	8.79	$	66,466
Granted	838	$	73.18
Exercised	(97)	$	4.75
Cancelled or forfeited	(69)	$	14.57
Outstanding at June 30, 2017	3,249	$	35.88	8.65	$	150,365
Exercisable at June 30, 2017	985	$	19.08	7.91	$	62,111
Exercisable and expected to vest at June 30, 2017	3,249	$	35.88	8.65	$	150,362

(a)

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of the common stock for the options that were in-the-money at June 30, 2017 and December 31, 2016.

For the six months ended June 30, 2017 and 2016, the total number of stock options exercised was 97,146 and 0, respectively, resulting in total proceeds of $461,000 and $0, respectively.

As of June 30, 2017 and December 31, 2016, there was $52.0 million and $20.6 million, respectively, of unrecognized stock-based compensation expense related to stock option awards that is expected to be recognized over a weighted-average period of 1.5 and 1.4 years, respectively.

The Company has recorded total stock-based compensation expense related to the issuance of stock option awards under the Plans in the consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Research and development	$	3,546	$	1,291	$	5,523	$	12,751
General and administrative		4,452		2,554		7,217		4,636
	$	7,998	$	3,845	$	12,740	$	17,387

Stock Options Granted to Employees

The weighted-average grant date fair value of options granted during the three months ended June 30, 2017 and 2016 was $55.79 and $31.86, respectively, and for the six months ended June 30, 2017 and 2016 was $53.73 and $22.29, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2017		2016		2017		2016
Expected volatility	87.36	%	90.00	%	87.24	%	90.00	%
Risk-free interest rate	1.90	%	1.57	%	1.91	%	1.57	%
Expected term (in years)	6.08		6.08		6.08		6.08
Expected dividend yield	0.00	%	0.00	%	0.00	%	0.00	%

Options generally expire ten years following the date of grant. Options typically vest over a period of three to four years, but vesting provisions can vary by award based on the discretion of the Board of Directors. Certain awards issued by the Company include clinical development-related performance conditions that must be achieved in order for vesting to occur. Options to purchase common stock carry an exercise price equal to the estimated fair value of the Company’s common stock on the date of grant. Options to purchase shares of the Company’s common stock may be exercised by payment of the exercise price in cash, by the delivery of previously acquired shares of common stock having a fair value equal to the exercise price payable or the withholding of common shares equal to the fair value of the aggregate exercise price. Upon the termination of service of a holder of stock options awarded under the Plans, all unvested options are immediately forfeited and vested options may be exercised within three months of termination.

Service-Based Restricted Stock Units

As of June 30, 2017, and December 31, 2016, there were 37,934 and 57,500, respectively, outstanding service-based restricted stock units (“RSUs”) granted to employees. During the six months ended June 30, 2017, 18,966 RSUs vested, which included 5,961 RSUs exchanged for tax-related purposes resulting in the remaining 13,005 RSUs converting to common stock. The Company recognized RSU-related stock-based compensation expense of $517,000 during the six months ended June 30, 2017, of which, $459,000 is research and development expense and $58,000 is general and administrative expense. No RSUs were issued and outstanding as of June 30, 2016. At June 30, 2017 and 2016, there was $710,000 and $0, respectively, of unrecognized compensation cost related to unvested RSUs that will be recognized as expense over a weighted-average period of 1.1 years. A summary of the status of the Company's RSUs at June 30, 2017 and of changes in RSUs outstanding under the 2016 Plan for the six months ended June 30, 2017 is as follows (in thousands, except per share data):


		Weighted
		Average
		Grant Date
	Number	Fair Value
	of Shares	Per Share
Outstanding at December 31, 2016	58	$	34.90
Granted	—		—
Vested	(19)	$	34.90
Forfeited and cancelled	(1)	$	34.90
Outstanding at June 30, 2017	38	$	34.90

The Company granted RSUs with service-based vesting terms. The outstanding RSUs vest over a period of three years. For awards that vest subject to the satisfaction of service requirements, compensation expense is measured based on the fair value of the RSUs on the date of grant and is recognized as expense on a straight-line basis, net of estimated forfeitures, over the requisite service period. All RSUs issued vest over time as stipulated in the individual RSU award agreements.

Performance-Based Restricted Stock Units

On March 20, 2017, the Company granted to certain employees a total of 49,332 performance-based restricted stock units (“PSUs)”. These PSUs vest upon the achievement of certain regulatory and manufacturing milestones. If the milestones do not occur on or before the three-year anniversary of the grant date, all unvested PSUs will be cancelled. As of June 30, 2017, all 49,332 of these PSUs were outstanding, none had vested and the weighted average grant date fair value of all shares was $79.75 per share. The Company has not yet recognized any PSU-related stock-based compensation as regulatory and manufacturing milestones have not yet been met; however, in the event the performance conditions are met, $3.9 million of research and development compensation expense will be recognized by the Company. There were no PSUs issued and outstanding during the six months ended June 30, 2016.

Restricted Stock Granted to Non-Employees

In January 2014, the Company issued 2,334,391 shares of restricted common stock to Dr. Brian Kaspar pursuant to a consulting agreement for scientific advisory services. Of these shares, 583,597 common shares were vested at the time of grant and the remaining restricted shares were scheduled to vest in the amount of 25% per year on the second, third and fourth anniversary of the grant date pursuant to a restricted stock purchase agreement, which became effective upon the effectiveness of the consulting agreement.

In January 2016, the Company entered into an employment agreement with Dr. Kaspar. Upon the effectiveness of the employment agreement, Dr. Kaspar’s 1,750,794 unvested shares granted pursuant to the restricted stock purchase agreement vested in full. As a result of the vesting of the remainder of this award the Company recorded $10.4 million of additional stock compensation expense during the year ended December 31, 2016.

Warrants Granted to Non-Employees

During the six month period ended June 30, 2017, there were no warrants exercised and as a result no proceeds received by the Company. As of June 30, 2017, there were 305,775 common stock warrants vested and outstanding issued to non-employees with a weighted-average exercise price of $2.57.