Stock Compensation

12 Months Ended

Dec. 31, 2020

Stock Compensation

Stock Compensation

Note 12. Stock Compensation

We recorded $177.9 million, $166.6 million and $148.2 million, respectively, of stock compensation expense for the years ended December 31, 2020, 2019 and 2018. Stock compensation expense within our consolidated statements of operations included research and development expense for the years ended December 31, 2020, 2019 and 2018 of $120.4 million, $114.0 million and $101.1 million, respectively. Stock compensation expense within our consolidated statements of operations also included selling, general and administrative expense for the years ended December 31, 2020, 2019 and 2018 of $56.6 million, $51.9 million and $47.1 million, respectively. Stock compensation expense within our consolidated statements of operations also included cost of product revenues for the years ended December 31, 2020 and 2019 of $1.0 million and $0.7 million respectively. For the years ended December 31, 2020, 2019 and 2018, we capitalized $0.6 million, $0.4 million and $0.1 million, respectively, of stock compensation expense as part of the cost of an asset.  

We utilized the Black-Scholes valuation model for estimating the fair value of the stock options granted, with the following weighted-average assumptions:

	Employee Stock Options						Employee Stock Purchase Plan
	For the year ended December 31,						For the year ended December 31,
	2020		2019		2018		2020		2019		2018
Average risk-free interest rates	0.80	%	2.27	%	2.61	%	0.17	%	1.82	%	2.62	%
Average expected life (in years)	4.98		5.27		5.26		0.50		0.50		0.50
Volatility	40	%	45	%	45	%	45	%	31	%	46	%
Weighted-average fair value (in dollars)	32.65		32.38		34.20		19.13		14.04		15.80

The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. Nonemployee awards are measured on the grant date by estimating the fair value of the equity instruments to be issued using the expected term, similar to our employee awards.

Based on our historical experience of employee turnover, we have assumed an annualized forfeiture rate of 5% for our options, PSUs and RSUs. Under the true-up provisions of the stock compensation guidance, we will record additional expense as the awards vest if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested as of December 31, 2020, was $75.0 million, which is expected to be recognized over the weighted average period of 1.2 years. Total compensation cost of RSUs granted but not yet vested, as of December 31, 2020, was $119.0 million, which is expected to be recognized over the weighted average period of 1.7 years.  Total compensation cost of PSUs granted but not yet vested, as of December 31, 2020, was $25.7 million, which is expected to be recognized over the weighted average period of 1.3 years, should the underlying performance conditions be deemed probable of achievement.