Employee Benefit Plans

401(k) Plan

We have a defined contribution 401(k) retirement plan (“401(k) Plan”) covering substantially all employees in the United States that meet certain age requirements. Employees may contribute up to 90% of their compensation per year (subject to a maximum limit by federal tax law). Under the 401(k) Plan, we may elect to match a discretionary percentage of contributions. No such matching contributions have been made to the 401(k) Plan since its inception.

Employee Stock Purchase Plan, or ESPP

In May 2015, we adopted a new ESPP, the 2015 Employee Stock Purchase Plan (“2015 ESPP”) which replaced our 2005 ESPP and permits our eligible employees to purchase shares of common stock, at semi-annual intervals, through periodic payroll deductions. Payroll deductions may not exceed 10% of the participant’s cash compensation subject to certain limitations, and the purchase price will not be less than 85% of the lower of the fair market value of the stock at either the beginning of the applicable Offering Period or the Purchase Date. Under our 2015 ESPP, each Offering Period is twelve months, with new Offering Periods commencing every six months on the dates of March 1 and September 1 of each year. Each Offering Period consists of two (2) six month purchase periods (each a “Purchase Period”) during which payroll deductions of the participants are accumulated under the ESPP. The last business day of each Purchase Period is referred to as the “Purchase Date.” Purchase Dates are every six months on the dates of February 28 or February 29 and August 31.

We issued 122,857 and 99,192 shares of common stock under the 2015 ESPP during the twelve months ended December 31, 2017 and December 31, 2016, respectively. We issued 8,539 and 115,848 shares of common stock under the 2005 ESPP during the years ended 2016 and 2015, respectively.

Equity Incentive Plans

In May 2015, we adopted the 2015 Equity Incentive Plan (“2015 Plan”), which replaced the 2005 Equity Incentive Plan and provides for the grant of incentive and nonstatutory stock options, restricted stock, stock bonuses, stock appreciation rights, and restricted stock units to employees, directors or consultants of the Company. The total number of shares reserved for issuance pursuant to the 2015 Plan as of the date of adoption was 4.0 million and forfeited shares under the 2005 Equity Incentive Plan subsequent to May 28, 2015 are returned to the share reserve under the 2015 Plan and will be available for future awards. Stockholder approval is required to increase the maximum number of securities that may be issued under the 2015 Plan.

A summary of our stock option activity, and related information for the year ended December 31, 2017 is as follows (in millions except weighted-average exercise price and weighted-average remaining contractual term):



	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2016	0.7		$	7.40
Exercised	(0.3	)	8.21
Forfeited	—		—
Outstanding at December 31, 2017	0.4		$	6.71	1.30	$	19.5
Exercisable at December 31, 2017	0.4		$	6.71	1.30	$	19.5

The total intrinsic value of options exercised as of the date of exercise was as follows (in millions):



	Years Ended December 31,
	2017		2016		2015
Intrinsic value of options exercised	$	21.6	$	39.9	$	125.8

We define in-the-money options at December 31, 2017 as options that had exercise prices that were lower than the $57.39 closing market price of our common stock at that date. There were 0.4 million in-the-money options exercisable at December 31, 2017. The aggregate intrinsic value of options outstanding at December 31, 2017 is calculated as the difference between the exercise price of the underlying options and the market price of our common stock for the 0.4 million options that were in-the-money at that date.

Valuation and expense information

The following table summarizes share-based compensation expense related to employee stock options, restricted stock units and employee stock purchases for the years ended December 31, 2017, 2016 and 2015 (in millions):



	Years Ended December 31,
	2017		2016		2015
Cost of sales	$	9.6	$	12.0	$	8.1
Research and development	37.5		39.8		28.5
Selling, general and administrative	59.1		59.0		46.1
Share-based compensation expense included in net loss	$	106.2	$	110.8	$	82.7

At December 31, 2017, unrecognized estimated compensation costs related to unvested restricted stock units totaled $128.4 million and are expected to be recognized through 2021.

We estimate the fair value of each option grant and ESPP purchase rights on the date of grant using the Black-Scholes option pricing model with the below assumptions. We did not have any option grants during the years ended 2017, 2016 and 2015.

ESPP:



	Years Ended December 31,
	2017		2016		2015
Risk free interest rate	0.75 – 1.12		0.46 – 0.57		0.15 – 0.25
Dividend yield	—	%	—	%	—	%
Expected volatility of the Company’s stock	0.33 – 0.56		0.33 – 0.57		0.30 – 0.44
Expected life (in years)	1		1		1

Restricted Stock Units (RSUs)

RSU awards typically vest annually over three or four years, and vesting is subject to continued employment. The RSUs had a weighted-average grant date fair value of $75.78, $68.16 and $63.63 per share for the years ended December 31, 2017, 2016 and 2015, respectively. The total fair value of RSUs vested was $112.2 million, $95.8 million and $60.0 million for the years ended 2017, 2016 and 2015, respectively.

The following table sets forth a summary of our RSU activity as of and for the year ended December 31, 2017 (in millions except weighted average grant date fair value):



	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Nonvested at December 31, 2016	3.7		$	62.51
Granted	1.3		75.78
Vested	(1.9	)	58.92
Forfeited	(0.4	)	67.97
Nonvested at December 31, 2017	2.7		$	70.68	$	154.5

Reserved Shares

We have reserved shares of common stock for future issuance as follows (in millions):



	December 31,
	2017	2016
Stock options and awards under our plans:
Stock options granted and outstanding	0.4	0.7
Unvested restricted stock units	2.7	3.7
Reserved for future grant	4.7	2.0
Employee Stock Purchase Plan	1.3	1.4
Total	9.1	7.8