STOCKHOLDER’S EQUITY AND STOCK-BASED COMPENSATION

Issuance of Common Stock

In April 2015, the Company issued 8,510,000 shares of common stock at $27.00 per share in an underwritten public offering. Net proceeds from the offering were approximately $215.8 million, after deducting offering expenses.

Equity Incentive Plan

The Company's 1995 Equity Incentive Plan (the Equity Plan), as amended, is an equity plan under which equity awards, including awards of restricted stock, RSUs and incentive and nonqualified stock options to purchase shares of common stock may be granted to employees, consultants and directors of the Company by action of the Compensation Committee of the Board of Directors. Options are granted at the current fair market value on the date of grant, generally vest ratably over a 48-month period, and expire within ten years from date of grant. RSUs are valued at the current fair market value on the date of grant, and generally vest annually in equal installments over a four-year period. The Equity Plan is intended to attract and retain employees and to provide an incentive for employees, consultants and directors to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company.

At September 30, 2015, a total of 6,188,704 shares were available for future grants under the Equity Plan.

The following table summarizes stock option and RSU activity for the period ended September 30, 2015:



	Number of Options		Number of RSUs
Outstanding as of December 31, 2014	11,587,079		486,174
Granted/Awarded	4,090,351		241,250
Options Exercised/Shares Issued	(1,767,097	)	(153,177	)
Cancelled	(133,648	)	(13,708	)
Outstanding as of September 30, 2015	13,776,685		560,539

Exercisable as of September 30, 2015	7,461,978		—

Employee Stock Purchase Plan

The Company's 1998 Employee Stock Purchase Plan (the Purchase Plan) allows employees to purchase shares of the Company's common stock at a discount from fair market value. Under the Purchase Plan, eligible employees may purchase shares during six-month offering periods commencing on June 1 and December 1 of each year at a price per share of 85% of the lower of the fair market value price per share on the first or last day of each six-month offering period. Participating employees may elect to have up to 10% of their base pay withheld and applied toward the purchase of such shares, subject to the limitation of 875 shares per participant per quarter. The rights of participating employees under the Purchase Plan terminate upon voluntary withdrawal from the Purchase Plan at any time or upon termination of employment. The compensation expense recognized in connection with the Plan was approximately $87,000 and $221,000 for the three and nine months ended September 30, 2015, respectively, and approximately $90,000 and $177,000 for the three and nine months ended September 30, 2014, respectively. There were 30,584 and 29,051 shares purchased under the Plan during the nine months ended September 30, 2015 and 2014.

At September 30, 2015, a total of 672,168 shares were reserved and available for issuance under this Plan.

Stock-Based Compensation Expense

The Company measures compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options was determined using the Black-Scholes valuation model. Such value is recognized as expense over the service period, net of estimated forfeitures and adjusted for actual forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including historical experience. Actual results and future changes in estimates may differ substantially from the Company's current estimates.

The following table reflects stock compensation expense recorded, net of amounts capitalized into inventory:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(in thousands)
Compensation expense related to:
Equity Incentive Plan	$	5,782	$	1,952	$	13,374	$	5,117
Employee Stock Purchase Plan	87		90		221		177
	$	5,869	$	2,042	$	13,595	$	5,294

Stock-based compensation expense charged to:
Research and development	$	1,662	$	794	$	4,381	$	2,021

Selling, general and administrative	$	4,207	$	1,248	$	9,214	$	3,273

Stock-based compensation expense of $36,000 and $117,000 for the three and nine months ended September 30, 2015, respectively, and $22,000 and $45,000 for the three and nine months ended September 30, 2014, respectively, has been excluded from the chart above and was capitalized into inventory. Capitalized stock-based compensation is recognized into cost of product sales when the related product is sold.