Stockholders' Equity

12 Months Ended

Dec. 31, 2020

Stockholders' Equity

Stockholders' Equity

Note 11. Stockholders’ Equity

Preferred Stock.  We are authorized to issue 5,000,000 shares of preferred stock, none of which was outstanding as of December 31, 2020 and 2019. The Board of Directors may determine the rights, preferences and privileges of any preferred stock issued in the future.

Common Stock.  We are authorized to issue 400,000,000 shares of common stock.  

Stock Compensation Plans.  As of December 31, 2020, we had a total of 6,460,660 shares of our common stock available for future issuance related to our stock plans as described below.

2010 Stock Incentive Plan.  In May 2010 the Board of Directors adopted the 2010 Stock Incentive Plan (the “2010 Stock Plan”), which was most recently amended and restated in March 2019, for issuance of common stock to employees, non-employee directors, consultants, and scientific advisors. Options are granted to employees, consultants, and scientific advisors under the 2010 Stock Plan, pursuant to a formula determined by our Board of Directors. All options are exercisable at the fair market value of the stock on the date of grant. Non-employee director options expire after ten years.

In April 2019, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Stock Plan from 36,753,475 to 44,453,475.

Option activity under the 2010 Stock Plan was as follows:

	Shares Subject to
	Outstanding Options
		Weighted Average
	Shares	Exercise Price
Balance at December 31, 2019	12,632,657	$	81.42
Options granted	2,256,146	$	92.82
Options exercised	(2,230,588)	$	52.78
Options cancelled	(542,927)	$	92.66
Balance at December 31, 2020	12,115,288	$	88.31

In July 2016, we revised the terms of our annual stock option grants to provide that new option grants would generally have a 10-year term and vest over four years, with 25% vesting after one year and the remainder vesting in 36 equal monthly installments. Previously, our option grants generally had 7-year terms and vested over three years, with 33% vesting after one year and the remainder vesting in 24 equal monthly installments.

Options to purchase a total of 6,732,942, 6,896,492 and 7,194,171 shares as of December 31, 2020, 2019 and 2018, respectively, were exercisable. The aggregate intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018 were $87.5 million, $113.8 million and $73.9 million, respectively. At December 31, 2020, the aggregate intrinsic value of options outstanding and vested options are $86.3 million and $84.3 million, respectively.

The following table summarizes information about stock options outstanding as of December 31, 2020 under the 2010 Stock Plan:

	Options Outstanding				Options Exercisable
		Weighted Average	Weighted			Weighted
		Remaining	Average			Average
	Number	Contractual Life	Exercise		Number	Exercise
Range of Exercise Prices	Outstanding	(in years)	Price		Exercisable	Price
$18.97 - $68.62	1,659,221	5.97	$	63.57	1,106,486	$	61.34
$68.82 - $68.97	48,657	7.78		68.95	21,816		68.95
$72.27 - $72.27	1,714,370	7.96		72.27	597,888		72.27
$72.58 - $80.50	1,745,853	6.34		77.24	1,041,346		75.79
$80.56 - $85.01	1,586,213	7.21		84.35	951,572		84.15
$85.34 - $95.34	1,376,900	7.24		93.20	597,552		92.96
$95.54 - $106.47	1,985,715	6.48		101.14	926,623		96.69
$107.69 - $124.00	1,219,175	5.68		113.55	801,950		113.45
$124.03 - $134.38	753,912	6.13		129.23	664,552		129.35
$138.52 - $138.52	25,272	6.25		138.52	23,157		138.52
	12,115,288				6,732,942

Restricted Stock Units and Performance Shares

In January 2014, we began granting restricted stock units (“RSUs”) and performance shares (“PSUs”) to our employees at the share price on the date of grant. Each RSU represents the right to acquire one share of our common stock. Each RSU granted prior to July 2016 was subject to cliff vesting after three years. In July 2016, we revised the terms of our RSU grants to provide that the awards will vest 25% annually over four years.

In June 2018, we granted 190,000 RSUs and 446,500 PSUs under long term incentive plans with performance and/or service-based milestones with graded and/or cliff vesting over three to four years. In April 2019, we granted an additional 100,000 PSUs under one of the existing long term incentive plans with performance based milestones and cliff vesting. For one of the existing long term incentive plans, under which 106,500 PSUs were granted, the actual number of shares of our common stock into which each PSU may convert was subject to a multiplier of up to 267% based on the level at which the performance conditions were achieved. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 142% based on the performance conditions being achieved as of March 31, 2019 and

will continue to vest through June 2022.  For an existing long term incentive plan, under which 150,000 PSUs were granted, the actual number of shares of our common stock into which each PSU may convert was subject to a multiplier of up to 100% if all performance conditions were achieved or 0% if no performance conditions were achieved. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 100% based on the performance conditions being achieved as of December 31, 2019 and will cliff vest in June 2021. Compensation expense for the performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement. For the period ended December 31, 2020, the stock compensation expense recorded during the period was for service-based awards and performance conditions deemed probable of achievement and/or achieved. For PSUs containing performance conditions which were not deemed probable of achievement at December 31, 2020, no stock compensation expense was recognized.

In July 2018, we granted 77,243 PSUs to executives with performance milestones and graded vesting over four years.  The shares of our common stock into which each PSU may convert is subject to a multiplier up to 150% based on the level at which the performance condition is achieved. Compensation expense for the performance-based awards is recorded over the estimated service period when the performance condition is deemed probable of achievement. The actual number of shares of our common stock into which each PSU converted was at a multiplier of 83% based on the performance condition being achieved as of December 31, 2018. These PSUs will continue to vest through July 2022.

In July 2019, we granted 86,975 PSUs to executives with a performance milestone and graded vesting over four years.  The shares of our common stock into which each PSU may convert is subject to a multiplier up to 125% based on the level at which the performance condition is achieved. Compensation expense for the performance-based awards is recorded over the estimated service period when the performance condition is deemed probable of achievement. The actual number of shares of our common stock into which each PSU will convert is at a multiplier of 101.8% based on the performance condition being achieved as of December 31, 2019.  These PSUs will continue to vest through July 2023.

In July 2020, we granted 92,347 PSUs to executives with performance milestones and cliff vesting on the third anniversary from date of grant.  The shares of our common stock into which each PSU may convert is subject to a multiplier up to 200% based on the level at which the financial and developmental performance conditions are achieved over the service period which ends December 31, 2022. Compensation expense for the performance-based awards is recorded over the estimated service period for each milestone when the performance conditions are deemed probable of achievement. For the period ended December 31, 2020, the stock compensation expense recorded during the period was for service-based awards and performance conditions deemed probable of achievement and/or achieved. For PSUs containing performance conditions which were not deemed probable of achievement at December 31, 2020, no stock compensation expense was recognized.

RSU and PSU award activity under the 2010 Stock Plan was as follows:

	Shares Subject to
	Outstanding Awards
	Shares	Grant Date Value
Balance at December 31, 2019	2,602,376	$	79.69
RSUs granted	1,356,377	$	98.11
PSUs granted	92,347	$	106.47
RSUs released	(572,810)	$	86.21
PSUs released	(35,455)	$	78.85
RSUs cancelled	(141,002)	$	86.03
PSUs cancelled	(17,250)	$	68.79
Balance at December 31, 2020	3,284,583	$	87.42

The following table summarizes our shares available for grant under the 2010 Plan. Each RSU and PSU grant reduces the available share pool by 2 shares.

	Shares Available
	for Grant
Balance at December 31, 2019	9,882,122
Options, RSUs and PSUs granted	(5,153,982)
Options, RSUs and PSUs cancelled	787,042
Balance at December 31, 2020	5,515,182

Employee Stock Purchase Plan.  On May 21, 1997, our stockholders adopted the 1997 Employee Stock Purchase Plan, which was most recently amended in April 2020 (the “ESPP”). Each regular full-time and part-time employee working 20 hours or more per week is eligible to participate after one month of employment. We issued 258,453, 239,590 and 233,712 shares under the ESPP in 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, we recorded stock compensation expense of $4.6 million, $3.4 million and $3.7 million, respectively, as the ESPP is considered compensatory under the FASB stock compensation rules. As of December 31, 2020, 945,478 shares remain available for issuance under the ESPP.