12. Equity Plans and Stock-Based Compensation

On May 31, 2018, our stockholders approved the 2018 Equity Incentive Plan (the “2018 EIP”). The 2018 EIP is intended to be the successor to and continuation of the Dynavax Technologies Corporation 2011 Equity Incentive Plan (the “2011 EIP”). The aggregate number of shares of our common stock that may be issued under the 2018 EIP (subject to adjustment for certain changes in capitalization) is comprised of the sum of (i) 5,000,000 newly reserved shares of common stock, (ii) 140,250 unallocated shares of common stock remaining available for grant under the 2011 EIP as of May 31, 2018, and (iii) 7,477,619 shares subject to outstanding stock awards granted under the 2011 EIP and the Dynavax Technologies Corporation 2017 Inducement Award Plan that may become available from time to time as set forth in the 2018 EIP.

Option activity under our stock-based compensation plans during the nine months ended September 30, 2018 was as follows (in thousands except per share amounts):

	Shares Underlying Outstanding Options (in thousands)			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2017		3,555		$	19.56
Options granted		2,386			16.56
Options exercised		(40	)		11.95
Options cancelled:
Options forfeited (unvested)		(139	)		13.89
Options expired (vested)		(79	)		30.61
Balance at September 30, 2018		5,683		$	18.33		5.76	$	1,448
Vested and expected to vest at September 30, 2018		5,422		$	18.41		5.72	$	1,419
Exercisable at September 30, 2018		2,766		$	20.01		5.14	$	927

Restricted stock unit activity under our stock-based compensation plans during the nine months ended September 30, 2018 was as follows (in thousands except per share amounts):

	Number of Shares (In thousands)			Weighted-Average Grant-Date Fair Value
Non-vested as of December 31, 2017		2,443		$	6.01
Granted		452			16.04
Vested		(1,049	)		5.91
Forfeited		(51	)		7.79
Non-vested as of September 30, 2018		1,795		$	8.54

The aggregate intrinsic value of the restricted stock units outstanding as of September 30, 2018, based on our stock price on that date was $22.3 million. Fair value of restricted stock units is determined at the date of grant using our closing stock price.

As of September 30, 2018, approximately 151,000 shares underlying stock options and approximately 12,500 restricted stock unit awards with performance-based vesting criteria were outstanding. Vesting criteria for 12,500 of the awards with performance-based vesting criteria were not probable as of September 30, 2018. We recognized stock-based compensation expense for awards with performance-based vesting criteria of $0.4 million and $1.1 million for the three month and nine month periods ended September 30, 2018, respectively.

Under our stock-based compensation plans, option awards generally vest over a three or four-year period contingent upon continuous service, and expire seven to ten years from the date of grant (or earlier upon termination of continuous service). The fair value-based measurement of each option is estimated on the date of grant using the Black-Scholes option valuation model.

The fair value-based measurements and weighted-average assumptions used in the calculations of these measurements are as follows:

	Stock Options						Stock Options						Employee Stock Purchase Plan
	Three Months Ended						Nine Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,
	2018			2017			2018			2017			2018			2017
Weighted-average fair value	$	9.36		$	8.11		$	10.91		$	4.73		$	8.30		$	3.05
Risk-free interest rate		2.8	%		1.9	%		2.6	%		1.9	%		2.4	%		1.0	%
Expected life (in years)		4.5			4.5			4.5			4.5			1.3			1.2
Volatility		0.9			0.9			0.9			0.9			1.1			1.0

Compensation expense is based on awards ultimately expected to vest and reflects estimated forfeitures. The components of stock-based compensation expense were (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Research and development	$	2,332	$	1,973	$	7,194	$	5,707
Selling, general and administrative		2,976		1,687		8,561		5,137
Cost of sales - product		443		-		1,085		-
Inventory		295		-		295		-
Total	$	6,046	$	3,660	$	17,135	$	10,844

As of September 30, 2018, the total unrecognized compensation cost related to non-vested equity awards including all awards with time-based vesting amounted to $31.2 million, which is expected to be recognized over the remaining weighted-average vesting period of 2 years. Additionally, as of September 30, 2018, the total unrecognized compensation cost related to equity awards with performance-based vesting criteria amounted to $0.7 million.

Employee Stock Purchase Plan

The 2014 Employee Stock Purchase Plan, as amended, (the “Purchase Plan”) provides for the purchase of common stock by eligible employees and became effective on May 28, 2014. On May 31, 2018, our stockholders approved an amendment to the Purchase Plan to increase the aggregate number of shares of common stock authorized for issuance by 600,000. The purchase price per share is the lesser of (i) 85% of the fair market value of the common stock on the commencement of the offer period (generally, the sixteenth day in February or August) or (ii) 85% of the fair market value of the common stock on the exercise date, which is the last day of a purchase period (generally, the fifteenth day in February or August). For the nine months ended September 30, 2018, employees have acquired 125,193 shares of our common stock under the Purchase Plan and 573,034 shares of our common stock remained available for future purchases under the Purchase Plan.