11. Share-Based Compensation

2014 Equity Incentive Plan

The Company’s 2014 Equity Incentive Plan, as amended (the “2014 Plan”), provides for the Company to sell or issue common shares or restricted common shares, or to grant incentive stock options or nonqualified stock options for the purchase of common shares, to employees, members of the board of directors and consultants of the Company. The 2014 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the common share on the date of grant and the term of stock option may not be greater than ten years.

The total number of common shares that may be issued under the 2014 Plan was 4,000,000 shares as of December 31, 2016. In January 2017, the Company effected an increase, effective October 28, 2016, in the number of common shares reserved for issuance under the 2014 Plan from 4,000,000 to 4,899,230 shares. The total number of common shares that may be issued under the 2014 Plan was 4,899,230 shares as of September 30, 2017. As of September 30, 2017 and December 31, 2016, 0 and 1,034,805 shares remained available for future grant under the 2014 Plan, respectively.

2017 Equity Incentive Plan

In April 2017, the Company’s shareholders approved the 2017 Equity Incentive Plan (the “2017 Plan”), which became effective on May 3, 2017 in connection with the Company’s IPO. Upon the effectiveness of the 2017 Plan, no further grants will be made under the 2014 Plan. The 2017 Plan provides for the grant of incentive share options, nonstatutory share options, share appreciation rights, restricted share awards, restricted share unit awards, performance-based share awards and other share-based awards. Additionally, the 2017 Plan provides for the grant of performance cash awards. Upon the effectiveness of the 2017 Plan, there were 2,713,113 shares authorized for issuance under the 2017 Plan, including 372 shares which remained available for issuance under the 2014 Plan. As of September 30, 2017, 2,369,319 shares remained available for future grant under the 2017 Plan.

Vesting periods are determined at the discretion of the board of directors. Stock options granted to employees and directors typically vest over three years. Stock options granted to non-employees typically vest over three years. The Company measures and records the value of these options over the period of time services are provided and, as such, unvested portions are subject to remeasurement at subsequent reporting periods.

During the nine months ended September 30, 2017, the Company granted options to purchase 1,225,450 common shares to employees and directors, and there were no options granted during the nine months ended September 30, 2016. The Company recorded share-based compensation expense for options granted to employees and directors of $5,810 and $484 during the three months ended September 30, 2017 and 2016, respectively, and $7,710 and $1,379 during the nine months ended September 30, 2017 and 2016, respectively.

During the nine months ended September 30, 2017, the Company granted options to purchase 137,537 common shares to non-employees, and there were no options granted during the nine months ended September 30, 2016. The Company recorded share-based compensation expense for options granted to non-employees of $446 and $260 during the three months ended September 30, 2017 and 2016, respectively, and $3,095 and $788 during the nine months ended September 30, 2017 and 2016, respectively.

2017 Employee Share Purchase Plan

In April 2017, the Company’s shareholders approved the 2017 Employee Share Purchase Plan, or ESPP, which became effective on May 3, 2017 in connection with the Company’s IPO. A total of 339,139 common shares were initially reserved for issuance under this plan. The number of common shares that may be issued under the 2017 ESPP will automatically increase on January 1 of each year, beginning on January 1, 2018 and continuing through and including January 1, 2027, by the least of (i) 600,000 common shares, (ii) 1% of the total number of common shares outstanding on December 31 of the preceding calendar year and (iii) a number of shares determined by the Company’s board of directors.

Stock Option Valuation

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors under the 2014 Plan and the 2017 Plan (collectively, the “Plans”) during the three and nine months ended September 30, 2017 were as follows, presented on a weighted average basis, noting there were no stock options granted to employees and directors during the three and nine months ended September 30, 2016:

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Risk-free interest rate	2.12		%	2.01		%
Expected term (in years)	6.30			5.82
Expected volatility	72.65		%	71.74		%
Expected dividend yield	0		%	0		%
Exercise price	$	30.72		$	15.21
Fair value of common share	$	30.54		$	14.97

The assumptions that the Company used to determine the grant-date fair value of stock options granted to non-employees under the Plans during the three and nine months ended September 30, 2017 were as follows, presented on a weighted average basis, noting there were no stock options granted to non-employees during the three and nine months ended September 30, 2016:

	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Risk-free interest rate	2.07		%	2.33		%
Expected term (in years)	10.00			10.00
Expected volatility	72.55		%	70.82		%
Expected dividend yield	0		%	0		%
Exercise price	$	37.54		$	15.41
Fair value of common share	$	37.54		$	15.15

Stock Options

Stock option activity under the Plans is summarized as follows:

					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Number of		Exercise		Contractual	Intrinsic
	Shares		Price		Term	Value
					(in years)
Outstanding as of December 31, 2016	3,864,425		$	3.61	9.21	$	15,991
Granted	1,362,987		15.15		9.55
Exercised	(182,615	)	1.39
Forfeited	(11,760	)	4.44

Outstanding as of September 30, 2017	5,033,037		$	6.81	9.19	$	153,889

Options exercisable as of September 30, 2017	2,454,181		$	3.73	7.84	$	82,579
Options unvested as of September 30, 2017	2,578,856		$	9.74	8.69	$	71,310

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common shares for those stock options that had exercise prices lower than the fair value of the Company’s common shares.

The weighted average grant-date fair value per share of stock options granted for the nine months ended September 30, 2017 was $4.87. There were no stock options granted during the nine months ended September 30, 2016.

The total fair value of options vested for the nine months ended September 30, 2017 and 2016 was $2,631 and $0, respectively.

Share-Based Compensation

Share-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016

Research and development expenses	$	4,195	$	352	$	6,421	$	1,039
General and administrative expenses	2,061		392		4,384		1,128

	$	6,256	$	744	$	10,805	$	2,167

As of September 30, 2017, total unrecognized compensation cost related to the unvested share-based awards was $19,734, which is expected to be recognized over a weighted average period of 2.73 years.