STOCK PLANS

Stock Incentive Plans

The Company’s amended and restated 2011 stock incentive plan, or 2011 Plan, was originally adopted by its board of directors and approved by its stockholders in June 2014, and amended in June 2016. 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 automatically reallocated to the 2011 Plan. In April 2014, the Company’s board of directors also adopted the 2014 Inducement Plan.

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). The Company also grants RSUs to employees and non-employee directors. The Company uses authorized and unissued shares to satisfy its obligations under these plans.

2014 Employee Stock Purchase Plan

The Company’s 2014 Employee Stock Purchase Plan, or ESPP, was adopted by its board of directors in April 2014 and 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. During the year ended December 31, 2018, 64,740 shares were purchased and issued under the ESPP.

The following tables contain information about the Company’s stock incentive plans at December 31, 2018:



Stock Incentive Plan	Awards Reserved For Issuance	Awards Issued	Awards Available For Grant
2007 Plan	2,022,837	2,022,837	—
2011 Plan	9,931,700	8,392,572	1,539,128
2014 Inducement Plan	175,000	36,576	138,424
	12,129,537	10,451,985	1,677,552

Employee Stock Purchase Plan	Shares Reserved For Purchase	Shares Purchased	Shares Available For Purchase
2014 ESPP	500,000	224,887	275,113

Stock-Based Compensation

Compensation expense for stock options and RSUs is based on the estimated grant date fair value of options recognized over the requisite service period on a straight-line expense attribution method. This applies to employees and non-employee directors, as well as nonemployees upon the Company’s adoption of ASU 2018-07 in June 2018, which aligned the accounting for share-based payments to nonemployees with that of employees and directors. Subsequent to the adoption of ASU 2018-07, compensation expense for options and RSUs granted to nonemployees are measured at the estimated grant date fair value and are no longer required to be revalued at each reporting period until vested. For more information on the Company’s adoption of ASU 2018-07, refer to Note 3, Recent Accounting Pronouncements. Compensation expense for ESPP share options is based on the estimated 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 in its consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016 as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
Cost of goods sold	$	4,478	$	5,467	$	6,438
Research and development	3,934		3,341		3,297
Selling, general and administrative	23,313		22,793		21,513
Total	$	31,725	$	31,601	$	31,248

Stock-based compensation from:
Stock options (employee awards)	$	21,980	$	24,056	$	24,505
Stock options (consultant awards)	663		167		841
RSUs	8,371		6,698		5,117
ESPP	711		680		785
Total	$	31,725	$	31,601	$	31,248

The following table summarizes the Company’s stock option activity and related information for the period from December 31, 2015 to December 31, 2018:



	Number of Options		Weighted Average Exercise Price (Per Share)		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in Thousands)
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
Granted	1,994,332		39.35
Exercised	(332,732	)	21.55			$	7,418
Forfeited	(481,126	)	42.30
Expired	(409,149	)	68.01
Outstanding at December 31, 2018	5,722,818		$	41.69	7.07	$	49,166
Exercisable at December 31, 2018	3,009,133		$	43.03	5.38	$	37,629
Vested and expected to vest at December 31, 2018	5,722,818		$	41.69	7.07	$	49,166

As of December 31, 2018, $47.5 million of total unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted average period of 2.9 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, 2018, 2017 and 2016 was $19.34, $20.78 and $19.13 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,
	2018	2017	2016
Expected dividend yield	None	None	None
Risk-free interest rate	2.26% - 3.05%	1.68% - 2.42%	1.03% - 2.48%
Expected volatility	53.3%	51.4%	53.5%
Expected term of options	5.14 years	5.31 years	5.77 years

The following table summarizes the Company’s RSU activity and related information for the period from December 31, 2015 to December 31, 2018:



	Number of Units		Weighted Average Grant Date Fair Value (Per Share)		Aggregate Intrinsic Value (in Thousands)
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 at December 31, 2017	499,546		47.32		$	22,804
Granted	331,129		38.36
Vested	(156,450	)	49.59
Forfeited	(96,261	)	43.92
Unvested and expected to vest at December 31, 2018	577,964		$	42.14	$	24,864

As of December 31, 2018, $19.2 million of total unrecognized compensation cost related to non-vested RSUs is expected to be recognized over a weighted average period of 2.8 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 were estimated using the Black-Scholes model with the following weighted average assumptions:



	Year Ended December 31,
	2018	2017	2016
ESPP share option fair value	$10.40 - $13.15	$10.80 - $13.85	$10.57 - $25.28
Expected dividend yield	None	None	None
Risk-free interest rate	1.53% - 2.14%	0.62% - 1.14%	0.37% - 0.49%
Expected volatility	52.2%	53.8%	63.4%
Expected term of ESPP share options	6 months	6 months	6 months