Equity-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

We maintain six equity-based incentive compensation plans, the 2016 Equity Incentive Plan, the Acuity Pharmaceuticals, Inc. 2003 Equity Incentive Plan, the 2007 Equity Incentive Plan, the 2000 Stock Option Plan, the Modigene Inc. 2005 Stock Incentive Plan and the Modigene Inc. 2007 Equity Incentive Plan that provide for grants of stock options and restricted stock to our directors, officers, key employees and certain outside consultants. Equity awards granted under our 2016 Equity Incentive Plan are exercisable for a period of up to 10 years from the date of grant. Equity awards granted under our 2007 Equity Incentive Plan are exercisable for a period of either 7 years or 10 years from the date of grant. Equity awards granted under our 2000 Stock Option Plan, 2003 Equity Incentive Plan and the two Modigene Plans are exercisable for a period of up to 10 years from date of grant. Vesting periods range from immediate to 5 years.

We classify the cash flows resulting from the tax benefit that arises when the tax deductions exceed the compensation cost recognized for those equity awards (excess tax benefits) as cash flows from operations. There were no excess tax benefits for the years ended December 31, 2019, 2018, and 2017.

Valuation and Expense Information

We recorded equity-based compensation expense of $13.4 million, $21.8 million and $28.3 million for the years ended December 31, 2019, 2018, and 2017, respectively, all of which were reflected as operating expenses. Of the $13.4 million of equity based compensation expense recorded in the year ended December 31, 2019, $9.7 million was recorded as selling, general and administrative expenses, $2.0 million was recorded as research and development expenses and $1.6 million was recorded as a cost of revenue. Of the $21.8 million of equity based compensation expense recorded in the year ended December 31, 2018, $14.7 million was recorded as selling, general and administrative expense, $4.2 million was recorded as research and development expenses and $2.8 million was recorded as a cost of revenue. Of the $28.3 million of equity based compensation expense recorded in the year ended December 31, 2017, $21.2 million was recorded as selling, general and administrative expense, $5.1 million was recorded as research and development expenses and 2.0 million was recorded as cost of revenue.

As of December 31, 2019, there was $15.4 million of unrecognized compensation cost related to the stock options granted under our equity-based incentive compensation plans. Such cost is expected to be recognized over a weighted-average period of approximately 1.71 years.

Stock Options

We estimate the fair value of each stock option on the date of grant using the Black-Scholes-Merton Model option-pricing formula and amortize the fair value to expense over the stock option’s vesting period using the straight-line attribution approach. We account for forfeitures as they occur and apply the following assumptions in our Black-Scholes-Merton Model option-pricing formula:



	Year Ended December 31, 2019	Year Ended December 31, 2018	Year Ended December 31, 2017
Expected term (in years)	3.0 - 10.0	3.0 - 10.0	3.0 - 10.0
Risk-free interest rate	1.35% - 2.63%	2.32% - 3.09%	1.32% - 2.41%
Expected volatility	54% - 63%	40% - 54%	38% - 55%
Expected dividend yield	0%	0%	0%

Expected Term: For the expected term of options grants, we used an estimate of the expected option life based on historical experience.

Risk-Free Interest Rate: The risk-free interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the option.

Expected Volatility: The expected volatility for stock options was based on the historical volatility of our Common Stock.

Expected Dividend Yield: We do not intend to pay dividends on Common Stock for the foreseeable future. Accordingly, we used a dividend yield of zero in the assumptions.

We maintain incentive stock plans that provide for the grants of stock options to our directors, officers, employees and non-employee consultants. As of December 31, 2019, there were 22,304,368 shares of Common Stock reserved for issuance under our 2016 Equity Incentive Plan and our 2007 Equity Incentive Plan. We intend to issue new shares upon the exercise of stock options. Stock options granted under these plans have been granted at an option price equal to the closing market value of the stock on the date of the grant. Stock options granted under these plans to employees typically become exercisable over four years in equal annual installments after the date of grant, and stock options granted to non-employee directors become exercisable in full one-year after the grant date, subject to, in each case, continuous service with us during the applicable vesting period. We assumed stock options to grant Common Stock as part of the mergers with Acuity Pharmaceuticals, Inc., Froptix, Inc., OPKO Biologics and BioReference, which reflected various vesting schedules, including monthly vesting to employees and non-employee consultants.

A summary of option activity under our stock option plans as of December 31, 2019, and the changes during the year is presented below:



Options	Number of options		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2018	33,031,298		$	9.31	5.93	$	232
Granted	8,066,000		$	2.47
Exercised	(24,877	)	$	0.66
Forfeited	(1,443,575	)	$	7.32
Expired	(2,258,425	)	$	7.74
Outstanding at December 31, 2019	37,370,421		$	8.01	6.00	$	—
Vested and expected to vest at December 31, 2019	37,370,421		$	8.01	6.00	$	—
Exercisable at December 31, 2019	24,448,521		$	10.18	4.49	$	—

The total intrinsic value of stock options exercised for the years ended December 31, 2019, 2018, and 2017 was $0.1 million, $0.5 million and $6.4 million, respectively.

The weighted average grant date fair value of stock options granted for the years ended December 31, 2019, 2018, and 2017 was $1.15, $2.08, and $4.50, respectively. The total fair value of stock options vested during the years ended December 31, 2019, 2018, and 2017 was $18.6 million, $25.8 million and $34 million, respectively.