Note

— Stock-Based Compensation

Stock Incentive Plan

As of

December

31,

2016,

the Company had

two

stock-based employee compensation plans, the Stock Incentive Plan (“Incentive Plan”) and the Employee Stock Purchase Plan (“ESPP”). The Incentive Plan was amended and restated in

April

2016

and approved by the Company’s stockholders in

May

2016.

The ESPP was amended and restated in

March

2014

and approved by the Company’s stockholders in

May

2014.

Stock-based compensation expense of

$8,487

($8,340

of expense related to the Incentive Plan,

$147

of expense related to the ESPP) was recognized during

2016,

while

$9,705

($9,485

of expense related to the Incentive Plan,

$220

of expense related to the ESPP) was recognized during

2015,

and

$10,177

($9,963

of expense related to the Incentive Plan,

$214

of expense related to the ESPP) was recognized during

2014.

The Company accounts for stock-based compensation in accordance with FASB authoritative guidance regarding share-based payments. Total stock-based compensation was allocated as follows:

	Year Ended December 31,
	2016		2015		2014
Research and development	$	6,088	$	7,580	$	8,906
General and administrative		2,399		2,125		1,271
Total stock-based compensation expense	$	8,487	$	9,705	$	10,177

The Company grants stock option awards and restricted stock unit awards to its employees, directors, and consultants under the Incentive Plan. Under the Incentive Plan, stock option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Commencing

March

2011,

stock option awards granted to employees generally vest

25%

each year until fully vested after

four

years. In

January

2013,

the Company made retention grants of stock option awards and restricted stock units. These awards vest

50%

each year until fully vested after

two

years. In

August

2013

and

December

2014,

the Company issued

1,032

and

1,250

performance-based stock options, respectively. These awards vest upon successful completion of specific development milestones. As of

December

31,

2015,

75%

of the

August

2013

grants have vested based upon achievement of

three

milestones:

(1)

successful completion of the OPuS-

clinical trial, for which vesting occurred in the

second

quarter of

2014,

(2)

FDA approval of RAPIVAB for which vesting occurred in the

fourth

quarter of

2014,

and

(3)

initiation of a Phase

clinical trial to evaluate the safety, pharmacokinetics and pharmacodynamics of orally-administered

BCX7353

in healthy volunteers, for which vesting occurred in the

second

quarter of

2015.

Thus, as of

December

31,

2016,

25%

of the

August

2013

performance-based grants and

100%

of the

December

2014

performance-based grants remain unvested and no compensation expense has been recognized for these portions of the previously issued performance-based grants. Stock option awards granted to non-employee directors of the Company generally vest monthly over

one

year. All stock option awards have contractual terms of

years. The vesting exercise provisions of all awards granted under the Incentive Plan are subject to acceleration in the event of certain stockholder-approved transactions, or upon the occurrence of a change in control as defined in the Incentive Plan.

Related activity under the Incentive Plan is as follows:

	Awards Available			Options Outstanding			Weighted Average Exercise Price
Balance at December 31, 2013		1,082			8,986		$	4.99
Plan amendment		3,750			—			—
Restricted stock awards granted		(593	)		—			—
Restricted stock awards cancelled		—			—			—
Stock option awards granted		(1,965	)		1,965			10.99
Stock option awards exercised		—			(1,258	)		4.78
Stock option awards cancelled		88			(88	)		8.83
Balance at December 31, 2014		2,362			9,605			6.21
Restricted stock awards granted		(163	)		—			—
Restricted stock awards cancelled		1			—			—
Stock option awards granted		(2,217	)		2,217			11.52
Stock option awards exercised		—			(1,118	)		4.36
Stock option awards cancelled		33			(33	)		9.87
Balance at December 31, 2015		16			10,671			7.50
Plan amendment		3,800
Restricted stock awards granted		(34	)		—			—
Restricted stock awards cancelled		22			—			—
Stock option awards granted		(2,248	)		2,248			3.20
Stock option awards exercised		—			(107	)		2.63
Stock option awards cancelled		717			(717	)		10.78
Balance at December 31, 2016		2,273			12,095		$	6.55

For stock option awards granted under the Incentive Plan during

2016,

2015

and

2014,

the fair value was estimated on the date of grant using a Black-Scholes option pricing model and the assumptions noted in the table below. The weighted average grant date fair value of these awards granted during

2016,

2015

and

2014

was

$2.17,

$7.72

and

$8.02,

respectively. The fair value of the stock option awards is amortized to expense over the vesting periods using a straight-line expense attribution method. The following explanations describe the assumptions used by the Company to value the stock option awards granted during

2016,

2015,

and

2014.

The expected life is based on the average of the assumption that all outstanding stock option awards will be exercised at full vesting and the assumption that all outstanding stock option awards will be exercised at the midpoint of the current date (if already vested) or at full vesting (if not yet vested) and the full contractual term. The expected volatility represents the volatility over the most recent period corresponding with the expected life. The Company has assumed no expected dividend yield, as dividends have never been paid to stockholders and will not be for the foreseeable future. The weighted average risk-free interest rate is the implied yield currently available on

zero

-coupon government issues with a remaining term equal to the expected term.

Weighted Average Assumptions for Stock Option Awards Granted under the Incentive Plan

	2016			2015			2014
Expected Life		5.5			5.5			5.5
Expected Volatility		82	%		81	%		87	%
Expected Dividend Yield		0.0	%		0.0	%		0.0	%
Risk-Free Interest Rate		1.4	%		1.6	%		1.6	%

The total intrinsic value of stock option awards exercised under the Incentive Plan was

$339

during

2016,

$10,117

during

2015

and

$8,522

during

2014.

The intrinsic value represents the total proceeds (fair market value at the date of exercise, less the exercise price, times the number of stock option awards exercised) received by all individuals who exercised stock option awards during the period.

The following table summarizes, at

December

31,

2016,

by price range:

(1)

for stock option awards outstanding under the Incentive Plan, the number of stock option awards outstanding, their weighted average remaining life and their weighted average exercise price; and

(2)

for stock option awards exercisable under the Plan, the number of stock option awards exercisable and their weighted average exercise price:

				Outstanding					Exercisable
Range				Number	Weighted Average Remaining Life		Weighted Average Exercise Price		Number		Weighted Average Exercise Price
$	0	to	3	1,919		5.7	$	1.64		1,510	$	1.53
	3	to	6	4,749		6.9		4.02		2,578		4.48
	6	to	9	1,153		3.5		7.10		1,118		7.11
	9	to	12	3,457		7.2		11.10		1,074		11.29
	12	to	15	722		8.0		12.39		195		12.73
	15	to	18	95		8.5		15.39		24		15.39
$	0	to	18	12,095		6.6	$	6.55		6,499	$	5.66

The weighted average remaining contractual life of stock option awards exercisable under the Incentive Plan at

December

31,

2016

was

6.6

years.

The aggregate intrinsic value of stock option awards outstanding and exercisable under the Incentive Plan at

December

31,

2016

was

$20,002.

The aggregate intrinsic value represents the value (the period’s closing market price, less the exercise price, times the number of in-the-money stock option awards) that would have been received by all stock option award holders under the Incentive Plan had they exercised their stock option awards at the end of the year.

The total fair value of the stock option awards vested under the Incentive Plan was

$6,380

during

2016,

$4,492

during

2015

and

$2,844

during

2014.

As of

December

31,

2016,

the number of stock option awards vested and expected to vest under the Incentive Plan is

11,013.

The weighted average exercise price of these stock option awards is

$6.53

and their weighted average remaining contractual life is

6.5

years.

The following table summarizes the changes in the number and weighted-average grant-date fair value of non-vested stock option awards during

2016:

	Non-Vested Stock Option Awards			Weighted Average Grant-Date Fair Value
Balance December 31, 2015		4,863		$	6.40
Stock option awards granted		2,248			2.17
Stock option awards vested		(1,278	)		4.99
Stock option awards forfeited		(235	)		6.79
Balance December 31, 2016		5,598		$	5.40

As of

December

31,

2016,

there was approximately

$14,541

of total unrecognized compensation cost related to non-vested employee stock option awards and restricted stock units granted by the Company. That cost is expected to be recognized as follows:

$6,880

2017,

$4,649

2018,

$2,606

2019,

and

$406

2020.

Employee Stock Purchase Plan

The Company has reserved a total of

1,475

shares of common stock to be purchased under the ESPP, of which

422

shares remain available for purchase at

December

31,

2016.

Eligible employees

may

authorize up to

15%

of their salary to purchase common stock at the lower of

85%

of the beginning or

85%

of the ending price during

six

-month purchase intervals. No more than

may

be purchased by any

one

employee at the

six

-month purchase dates and no employee

may

purchase stock having a fair market value at the commencement date of

$25

or more in any

one

calendar year.

There were

75,

and

shares of common stock purchased under the ESPP in

2016,

2015,

and

2014,

respectively, at a weighted average price per share of

$4.36,

$8.65

and

$6.29,

respectively. Expense of

$147,

$220

and

$214

related to the ESPP was recognized during

2016,

2015,

and

2014,

respectively. Compensation expense for shares purchased under the ESPP related to the purchase discount and the “look-back” option were determined using a Black-Scholes option pricing model. The weighted average grant date fair values of shares granted under the ESPP during

2016,

2015,

and

2014,

were

$1.95,

$4.93

and

$4.41,

respectively.