STOCK PLANS

Stock Incentive Plans

The Company’s amended and restated 2011 stock incentive plan, or 2011 Plan, was adopted by its board of directors and approved by its stockholders in June 2014. The 2011 Plan allows the granting of incentive stock options, non-statutory stock options, restricted stock awards and other stock-based awards. Since the adoption of the 2011 Plan, any remaining shares available for issuance under a 2007 stock incentive plan, or 2007 Plan, are reallocated to the 2011 Plan. In April 2014, the Company’s board of directors adopted the 2014 Inducement Plan which authorized 175,000 shares of common stock to be granted as equity awards to new employees.

In June 2016, the Company’s board of directors adopted an amendment to the 2011 Plan. Under the amendment, an additional 4,000,000 shares of common stock were authorized for issuance as equity awards under the 2011 Plan. The amendment to the 2011 Plan was subsequently approved by the Company’s stockholders and became effective in June 2016.

All of the Company’s stock option grants have an exercise price equal to the closing price of the Company’s common stock on the date of grant, generally have a 10-year contractual term and vest in increments (generally over four years from the date of grant although the Company may occasionally grant options with different vesting terms). Since 2015, the Company has granted RSUs to employees and its board of directors. The Company uses authorized and unissued shares to satisfy its obligations under these plans.

2014 Employee Stock Purchase Plan

In April 2014, the Company’s board of directors adopted the 2014 Employee Stock Purchase Plan, or ESPP, which was subsequently approved by the Company’s stockholders in June 2014. The purpose of the ESPP is to provide a vehicle for eligible employees to purchase shares of the Company’s common stock at a discounted price and to help retain and motivate current employees as well as attract new talent. Under the ESPP, up to 500,000 shares of common stock may be sold. The plan expires in June 2024. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code. The maximum fair market value of stock which can be purchased by a participant in a calendar year is $25,000. Six-month offering periods begin on January 1 and July 1 of each year. During an offering period, eligible employees have the opportunity to elect to purchase shares of the Company’s common stock on the purchase dates of June 30 and December 31 or the last trading day of an offering period. The per share purchase price will be equal to the lesser of 85% of the fair market value of the Company’s common stock on either the offering date or the purchase date.

The following table contains information about the Company’s plans at December 31, 2017:



Stock Incentive Plans	Awards Reserved for Issuance	Awards Issued	Awards Available for Grant
2007 Plan	2,022,837	2,022,837	—
2011 Plan	9,931,700	7,037,947	2,893,753
2014 Inducement plan	175,000	52,276	122,724
	12,129,537	9,113,060	3,016,477

Employee Stock Purchase Plan	Shares Reserved for Purchase	Shares Purchased	Shares Available for Purchase
2014 ESPP	500,000	160,147	339,853

Stock-Based Compensation

Compensation expense for stock options and RSUs granted to employees and directors is based on the estimated grant date fair value of options recognized over the requisite service period on a straight-line expense attribution method. Compensation expense for options and RSUs granted to non-employees is based on the fair value of options, which are revalued each reporting period until vested and are recognized as expense over the requisite service period. Compensation expense for ESPP options is based on the grant date fair value of the ESPP shares and the grant date number of shares that can be purchased, which is recognized as expense over the length of an offering period.

The Company recognized stock-based compensation expense (net of forfeitures) in its consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 as follows (in thousands):



	Year Ended December 31,
	2017		2016		2015
Cost of goods sold	$	5,467	$	6,438	$	6,012
Research and development	3,341		3,297		5,134
Selling, general and administrative	22,793		21,513		22,222
Total	$	31,601	$	31,248	$	33,368

Stock-based compensation from:
Stock options (employee awards)	$	24,056	$	24,505	$	27,262
Stock options (consultant awards)	167		841		2,367
RSUs	6,698		5,117		2,887
ESPP	680		785		852
Total	$	31,601	$	31,248	$	33,368

The following table summarizes the Company’s stock option activity and related information for the period from January 1, 2015 to December 31, 2017:



	Number of Options		Weighted Average Exercise Price (Per Share)		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
Outstanding at December 31, 2014	4,677,856		$	35.78	7.86	$	248,276
Granted	906,706		75.35
Exercised	(618,434	)	16.29			$	39,401
Forfeited	(294,880	)	64.29
Expired	(25,526	)	81.94
Outstanding at December 31, 2015	4,645,722		44.03		7.31	$	162,340
Granted	1,656,598		38.20
Exercised	(518,226	)	11.13			$	21,750
Forfeited	(401,048	)	70.27
Expired	(175,303	)	80.91
Outstanding at December 31, 2016	5,207,743		42.16		7.39	$	37,581
Granted	1,072,625		43.93
Exercised	(539,989	)	12.55			$	15,865
Forfeited	(555,897	)	48.66
Expired	(232,989	)	74.65
Outstanding at December 31, 2017	4,951,493		$	43.51	6.91	$	57,021
Exercisable at December 31, 2017	2,882,384		$	42.20	5.51	$	47,082
Vested and expected to vest at December 31, 2017	4,951,493		$	43.51	6.91	$	57,021

As of December 31, 2017, $41.6 million of total unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted average period of 2.7 years. The Company’s stock options have a maximum expiration date of ten years from the date of grant.

The weighted average fair value of stock options granted for the years ended December 31, 2017, 2016 and 2015 was $20.78, $19.13 and $37.82 per share, respectively. The fair values of stock options granted were estimated using the Black-Scholes model with the following weighted average assumptions:



	Year Ended December 31,
	2017	2016	2015
Expected dividend yield	None	None	None
Risk-free interest rate	1.68% - 2.42%	1.03% - 2.48%	1.40% - 2.28%
Expected volatility	51.4%	53.5%	52.9%
Expected term of options	5.31 years	5.77 years	5.76 years

The following table summarizes the Company’s RSU activity and related information for the period from January 1, 2015 to December 31, 2017:



	Number of Units		Weighted Average Grant Date Fair Value (Per Share)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2014	—		$	—	$	—
Granted	232,046		78.65
Vested	—		—
Forfeited	(15,848	)	79.43
Unvested at December 31, 2015	216,198		78.59		$	16,602
Granted	256,631		40.21
Vested	(61,487	)	78.33
Forfeited	(46,939	)	68.84
Unvested at December 31, 2016	364,403		52.85		$	11,824
Granted	343,583		44.23
Vested	(101,379	)	53.76
Forfeited	(107,061	)	49.98
Unvested and expected to vest at December 31, 2017	499,546		$	47.32	$	22,804

As of December 31, 2017, $19.1 million of total unrecognized compensation cost related to non-vested RSUs is expected to be recognized over a weighted average period of 2.9 years. The Company’s RSUs have a maximum vest date of four years from the date of grant. The fair values of RSUs awarded are equal to the closing price of the Company’s common stock on the date of grant.

The fair values of the ESPP share options granted are estimated using the Black-Scholes model with the following weighted average assumptions:



	Year Ended December 31,
	2017	2016	2015
ESPP option fair value	$10.80 - $13.85	$10.57 - $25.28	$21.93 - $25.24
Expected dividend yield	None	None	None
Risk-free interest rate	0.62% - 1.14%	0.37% - 0.49%	0.11% - 0.13%
Expected volatility	53.8%	63.4%	50.7%
Expected term of ESPP share options	6 months	6 months	6 months