Note 12. 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, 2018 and 2017. 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.

On September 7, 2017, we completed a public offering of 4,945,000 shares of our authorized but unissued common stock pursuant to an effective shelf registration statement. The underwriter had an option for a period of 30 days to purchase a maximum of 741,750 additional shares of our common stock, which expired unexercised. We sold the shares of common stock to the underwriter at a price of $131.46 per share, resulting in net proceeds, after deducting expenses related to the offering, of approximately $649.4 million.

Stock Compensation Plans. As of December 31, 2018, we had a total of 7,716,849 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, which was amended and restated in April 2013 (the “2010 Plan”) 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 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 May 2012, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Plan from 12,553,475 to 16,553,475. In May 2013, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Plan from 16,553,475 to 21,753,475. In May 2014, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Plan from 21,753,475 to 24,753,475. In May 2016, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Plan from 24,753,475 to 30,753,475. In May 2018, our stockholders approved an increase in the number of shares of common stock reserved for issuance under the 2010 Plan from 30,753,475 to 36,753,475.

Option activity under the 2010 Stock Plan was as follows:


		Shares Subject to
		Outstanding Options
	Shares Available		Weighted Average
	for Grant	Shares	Exercise Price
Balance at December 31, 2017	3,909,701	11,206,553	$	68.36
Additional authorization	5,000,000	—		—
Options granted	(3,245,314)	3,245,314	$	78.64
Options exercised	—	(1,353,518)	$	22.42
Options cancelled	813,190	(813,190)	$	94.82
Balance at December 31, 2018	6,477,577	12,285,159	$	74.39

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 7,194,171, 7,250,283 and 7,995,735 shares as of December 31, 2018, 2017 and 2016, respectively, were exercisable. The aggregate intrinsic value of options exercised for the years ended December 31, 2018, 2017 and 2016 were $73.9 million, $264.2 million and $137.0 million, respectively. At December 31, 2018 the aggregate intrinsic value of options outstanding and vested options were $118.5 million.

The following table summarizes information about stock options outstanding as of December 31, 2018 for the 2010 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
$2.80 - $17.79	588,741	0.31	$	16.48	588,741	$	16.48
$17.89 - $18.32	1,474,120	1.09		18.31	1,474,120		18.31
$18.97 - $64.55	1,652,452	3.12		49.41	1,439,924		47.60
$65.36 - $68.40	142,566	8.70		66.34	19,555		67.39
$68.62 - $68.62	1,426,578	9.39		68.62	—		—
$68.82 - $81.16	1,234,047	4.24		73.59	892,781		73.69
$83.83 - $94.63	1,701,957	7.73		88.55	894,810		87.36
$95.34 - $95.76	1,578,529	6.09		95.62	780,898		95.76
$100.81 - $113.64	1,462,739	7.63		112.39	636,592		111.63
$115.19 - $138.52	1,023,430	8.09		128.30	466,750		128.88
	12,285,159				7,194,171

Restricted Stock Units and Performance Shares.

In January 2014, we began granting RSUs and 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.

Also, in January 2014, Hervé Hoppenot, our President and Chief Executive Officer, was granted a one-time grant of 400,000 RSUs outside of our 2010 Stock Incentive Plan. Vesting of the RSUs will be subject to Mr. Hoppenot’s continued employment on the applicable vesting dates, with one‑sixth of the RSUs vesting at the end of each of the calendar years 2014 through 2019, subject to earlier acceleration of vesting upon the occurrence of certain events in accordance with the terms of his employment agreement. As of December 31, 2018, a total of 266,667 RSUs granted to Mr. Hoppenot vested, leaving 133,333 RSUs outstanding.

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. For one of the 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 are subject to a multiplier of up to 267% based on the level at which the performance conditions are achieved. 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, 2018, the stock compensation expense recorded during the period was for service-based awards and performance conditions deemed probable of achievement. For PSUs containing performance conditions which were not deemed probable of achievement at December 31, 2018, no stock compensation expense was recognized.

In July 2018, we granted 77,243 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 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.

We did not grant any PSUs during the years ended December, 31, 2017 and 2016. We granted a total of 55,326 PSUs during the year ended December 31, 2014 which had performance conditions that required expense recognition assessments during the year ended December 31, 2016. At December 31, 2016, we recognized stock compensation expense for those awards that had performance conditions deemed probable of achievement at that date. For PSUs, containing performance conditions which were not deemed probable of achievement at December 31, 2016, no stock compensation expense was recognized for those awards. The actual number of shares of our common stock into which each PSU converted was at a multiplier of 100% based on the performance conditions achieved as of December 31, 2016.

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.

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


		Shares Subject to
	Shares Available	Outstanding Awards
	for Grant	Shares	Grant Date Value
Balance at December 31, 2017	769,202	1,178,660	$	98.88
Additional authorization	1,000,000	—		—
RSUs granted	(898,598)	898,598	$	70.39
PSUs granted	(523,743)	523,743	$	66.18
RSUs cancelled	120,591	(120,591)	$	95.33
PSUs cancelled	78,299	(78,299)	$	66.44
RSUs released	—	(358,774)	$	93.64
Balance at December 31, 2018	545,751	2,043,337	$	80.35

Employee Stock Purchase Plan. On May 21, 1997, our stockholders adopted the 1997 Employee Stock Purchase Plan (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 233,712, 157,277 and 126,648 shares under the ESPP in 2018, 2017 and 2016, respectively. For the years ended December 31, 2018, 2017 and 2016, we recorded stock compensation expense of $3.7 million, $3.2 million and $2.4 million, respectively, as the ESPP is considered compensatory under the FASB stock compensation rules. As of December 31, 2018, 693,521 shares remain available for issuance under the ESPP.