STOCK-BASED COMPENSATION

We allocated the stock-based compensation expense for our equity incentive plans and our 2000 Employee Stock Purchase Plan (“ESPP”) as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Research and development	$	3,169	$	1,663	$	9,102	$	4,741
Selling, general and administrative	6,573		3,626		19,228		10,288
Total stock-based compensation	$	9,742	$	5,289	$	28,330	$	15,029

We have several equity incentive plans under which we have granted stock options and restricted stock units (“RSUs”) to employees and directors. At September 30, 2018, 14,408,816 shares were available for grant under our equity incentive plans.

We used a Monte Carlo simulation pricing model to value stock options that include market vesting conditions and a Black-Scholes Merton option pricing model to value other stock options and ESPP purchases. The weighted average grant-date fair value per share of stock options and ESPP purchases were as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Stock options	$	8.67	$	11.75	$	9.13	$	10.32
ESPP	$	6.19	$	6.85	$	6.96	$	5.29

The grant-date fair value of stock option grants and ESPP purchases was estimated using the following assumptions:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Stock options:
Risk-free interest rate	2.91	%	1.70	%	2.83	%	1.68	%
Dividend yield	—	%	—	%	—	%	—	%
Volatility	55	%	58	%	55	%	61	%
Expected life	4.4 years		4.0 years		4.4 years		4.1 years
ESPP:
Risk-free interest rate	2.11	%	1.14	%	1.74	%	0.88	%
Dividend yield	—	%	—	%	—	%	—	%
Volatility	51	%	55	%	52	%	61	%
Expected life	6 months		6 months		6 months		6 months

We considered our implied volatility and our historical volatility in developing our estimates of expected volatility. The assumptions for the expected life of stock options were based on historical exercise patterns and post-vesting termination behavior.

The fair value of RSUs was based on the closing price of the underlying common stock on the date of grant.

Activity for stock options during the nine months ended September 30, 2018 was as follows (dollars in thousands, except per share amounts):



	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding at December 31, 2017	22,208,446		$	6.83
Granted	3,022,113		$	19.52
Exercised	(2,083,457	)	$	5.01
Forfeited	(216,522	)	$	14.40
Expired	(5,548	)	$	18.62
Options outstanding at September 30, 2018	22,925,032		$	8.59	3.9 years	$	226,821
Exercisable at September 30, 2018	15,896,370		$	5.03	3.1 years	$	203,118

In September 2018, in connection with our long-term incentive compensation program, we granted 308,365 stock options to our President and Chief Executive Officer that have a market vesting condition (“PSOs”). In addition to the standard service conditions included in our other stock options, these PSOs may not be exercised unless, at any time after the grant date, the fair market value of a share of our Common Stock is at least 125% of the per share exercise price of the PSOs over a period of at least 30 consecutive calendar days.

As of September 30, 2018, there was $52.8 million of unrecognized compensation expense related to our unvested stock options that will be recognized over a weighted-average period of 2.6 years.

Activity for RSUs during the nine months ended September 30, 2018 was as follows (dollars in thousands, except per share amounts):



	Shares		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
RSUs outstanding at December 31, 2017	3,762,990		$	17.76
Awarded	2,411,245		$	18.50
Vested and released	(374,992	)	$	8.18
Forfeited	(249,362	)	$	18.64
RSUs outstanding at September 30, 2018	5,549,881		$	18.69	2.1 years	$	98,344

In September 2018, in connection with our long-term incentive compensation program, we awarded 693,131 RSUs that will vest upon the achievement of certain product revenue, late-stage clinical development and pipeline expansion performance targets (“PSUs”). The PSUs were designed to drive the performance of our management team toward the achievement of key corporate objectives and will be forfeited if the performance targets are not met by December 31, 2021.

Expense recognition for PSUs commences when it is determined that attainment of the performance goal is probable. We have not recognized any compensation expense related to these PSUs. As of September 30, 2018, the total unrecognized compensation expense related to the unvested PSUs was $12.7 million.

As of September 30, 2018, there was $87.6 million of unrecognized compensation expense related to our unvested RSUs, including the PSUs described above. The RSUs will be recognized over a weighted-average period of 3.2 years.