7. Stock‑Based Compensation

Our Board of Directors and the requisite stockholders previously approved the 2010 Equity Incentive Plan (the 2010 Plan). In October 2013, our Board of Directors approved the 2013 Equity Incentive Plan (the 2013 Plan) and in November 2013 our stockholders approved the 2013 Plan. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other stock awards. The 2013 Plan became effective as of December 3, 2013, the date of the Company’s initial public offering. As of December 2, 2013, we suspended the 2010 Plan and no additional awards may be granted under the 2010 Plan. Any shares of common stock covered by awards granted under the 2010 Plan that terminate after December 2, 2013 by expiration, forfeiture, cancellation or other means without the issuance of such shares will be added to the 2013 Plan reserve.

As of December 31, 2018, the total number of shares of common stock available for issuance under the 2013 Plan was 9,581,833. Unless otherwise determined by the Board, beginning January 1, 2014, and continuing until the expiration of the 2013 Plan, the total number of shares of common stock available for issuance under the 2013 Plan will automatically increase annually on January 1 by 4% of the total number of issued and outstanding shares of common stock as of December 31 of the immediate preceding year. On January 1, 2018, the total number of shares of common stock available for issuance under the 2013 Plan was automatically increased by 1,880,100 shares, which number is included in the number of shares available for issuance above. As of December 31, 2018 a total of 6,751,287 options have been issued under the 2013 Plan.

During the year ended December 31, 2018, the Company awarded 33,933 Restricted Stock Units (RSUs) to certain employees pursuant to the 2013 Plan. Vesting of these awards will be in three equal annual installments and is contingent on continued employment terms. The fair value of these awards is determined based on the intrinsic value of the stock on the date of grant and will be recognized as stock-based compensation expense over the requisite service period.

In November 2013, our Board of Directors and stockholders approved the 2013 Employee Stock Purchase Plan (ESPP), which became effective as of December 5, 2013. Under the ESPP our employees may elect to have between 1-15% of their compensation withheld to purchase shares of the Company’s common stock at a discount. The ESPP had an initial two-year term that includes four six-month purchase periods and employee withholding amounts may be used to purchase Company stock during each six-month purchase period. The initial two-year term ended in December 2015 and pursuant to the provisions of the ESPP, the second two-year term began automatically upon the end of the initial term. The total number of shares that can be purchased with the withholding amounts are based on the lower of 85% of the Company’s common stock price at the initial offering date or 85% of the Company’s stock price at each purchase date.

We have reserved a total of 581,286 shares of common stock for issuance under the ESPP. Unless otherwise determined by our Board, beginning on January 1, 2014, and continuing until the expiration of the ESPP, the total number shares of common stock available for issuance under the ESPP will automatically increase annually on January 1 by the lesser of (i) 1% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock. On January 1, 2014, the total number of shares of common stock available for issuance under the ESPP was automatically increased by 313,545 shares, which number is included in the number of shares reserved for issuance above. Pursuant to approval by our board, there were no increases in the number of authorized shares in the ESPP in years from 2015 to 2018. As of December 31, 2018, we have issued a total of 349,716 shares of common stock under the ESPP.

Total employee, director and non‑employee stock‑based compensation expense recognized was as follows:


	Year Ended
	December 31,
(In thousands)	2018		2017		2016
General and administrative	$	7,699	$	5,617	$	3,592
Research and development		12,849		8,034		4,256
	$	20,548	$	13,651	$	7,848

	Year Ended
	December 31,
(In thousands)	2018		2017		2016
Stock options	$	19,537	$	13,153	$	7,470
ESPP		744		498		378
Restricted stock units		267		—		—
	$	20,548	$	13,651	$	7,848

Information with respect to stock options outstanding is as follows:


	December 31,
	2018		2017		2016
Exercisable options		3,058,659		2,558,941		1,743,765
Weighted average exercise price per share of exercisable options	$	15.12	$	11.06	$	8.87
Weighted average grant date fair value per share of options granted during the year	$	18.06	$	16.92	$	10.30
Options available for future grants		3,576,574		3,394,691		2,943,216
Weighted average remaining contractual life		7.51		7.62		7.82

The following table summarizes stock option activity for the years ended December 31, 2018 and 2017:


				Weighted-
		Weighted-		Average
		Average		Remaining
		Exercise		Contractual	Aggregate
	Number of	Price		Term	Intrinsic Value
	Shares	(Per Share)(1)		(in years)	(in thousands)(2)
Balances at December 31, 2016	4,045,801		11.95	7.82	$	58,131
Options granted	1,511,100		22.61
Options forfeited	(96,856)		17.08
Options expired	(3,000)		21.99
Options exercised(3)	(363,603)		7.69
Balances at December 31, 2017	5,093,442		15.32	7.62	$	35,495
Options granted	1,805,937		27.43
Options forfeited	(107,720)		21.66
Options exercised(3)	(824,731)		9.24
Balances at December 31, 2018	5,966,928	$	19.71	7.51	$	99,273
As of December 31, 2018
Options vested and expected to vest	5,966,928	$	19.71	7.51	$	99,273
Exercisable	3,058,659	$	15.12	6.42	$	64,417

(1)

The weighted average exercise price per share is determined using exercise price per share for stock options.

(2)

The aggregate intrinsic value is calculated as the difference between the exercise price of the option and the fair value of our common stock for in‑ the‑money options at December 31, 2018 and 2017.

(3)

The total intrinsic value of stock options exercised was $23.6 million, $5.7 million and $11.2 million for the years ended December 31, 2018, 2017 and 2016 respectively.

The stock options outstanding and exercisable by exercise price at December 31, 2018 are as follows:


Stock Options Outstanding					Stock Options Exercisable
		Weighted-
		Average
		Remaining	Weighted-			Weighted-
Range of		Contractual	Average			Average
Exercise	Number of	Term	Exercise Price		Number of	Exercise Price
Prices	Shares	(in years)	Per Share		Shares	Per Share
$0.59 – $4.25	291,433	4.49	$	3.63	291,433	$	3.63
$9.78 – $14.75	1,560,249	6.39	$	12.10	1,281,242	$	11.97
$14.77 – $22.18	852,138	6.62	$	17.00	706,562	$	16.35
$22.20 – $33.78	2,929,571	8.42	$	23.92	760,672	$	23.08
$34.56 – $43.16	333,537	9.68	$	39.26	18,750	$	38.93
	5,966,928	7.51	$	19.71	3,058,659	$	15.12

We estimated the fair value of employee and non‑employee awards using the Black‑Scholes valuation model. The fair value of employee stock options is being amortized on a straight‑line basis over the requisite service period of the awards. Management estimates the probability of non‑employee awards being vested based upon an evaluation of the non‑employee achieving their specific performance goals.

Options granted after our initial public offering are issued at the fair market value of our stock on the date of grant.

The fair value of employee stock options was estimated using the following weighted average assumptions for the years ended December 31, 2018, 2017 and 2016:


	Options
	2018		2017		2016
Common stock fair value per share	$	21.80 - 43.16	$	19.61 - 25.67	$	11.50 - 26.76
Expected volatility		70.97% - 73.10%		77.42% - 96.73%		75.77% - 90.83%
Risk-free interest rate		2.29% - 3.10%		0.96% - 2.37%		1.03% - 2.18%
Expected dividend yield		—		—		—
Expected term (in years)		5.23 - 6.08		5.23 - 6.08		5.23 - 6.08


	ESPP
	2018	2017	2016
Expected term (years)	0.5 - 2.0	0.5 - 2.0	0.5 - 2.0
Expected volatility	57.0% - 71.4%	67.8% - 79.8%	67.8% - 79.8%
Risk-free interest rate	1.47% - 2.70%	0.47% - 1.80%	0.47% - 0.93%
Expected dividend yield	—	—	—

The expected term of stock options represents the average period the stock options are expected to remain outstanding. The expected stock price volatility for our stock options for the years ended December 31, 2018, 2017 and 2016 was determined by examining the historical volatilities for industry peers and adjusting for differences in our life cycle and financing leverage. Industry peers consist of several public companies in the biopharmaceutical industry.

We determined the average expected life of stock options based on the simplified method because our common stock has not been publicly traded for an extended period and we do not have a track record of our stock being traded on the public markets for sufficient time to establish the volatility of our stock.

The risk‑free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of our stock options.

The expected dividend assumption is based on our history and expectation of dividend payouts.

The following table summarizes restricted stock units activity for the years ended December 31, 2018:


		Weighted-
		Average
		Grant Date
	Number of	Fair Value
	Shares	(Per Unit)
Unvested at December 31, 2017	—		—
Granted	33,933	$	27.64
Vested	—		—
Forfeited	—		—
Unvested at December 31, 2018	33,933	$	27.64

As of December 31, 2018 and 2017, the unamortized compensation expense related to unvested stock options was $42.8 million and $30.7 million, respectively. The remaining unamortized compensation expense will be recognized over the next 2.71 years. At December 31, 2018 and 2017, the unamortized compensation expense was $0.8 million and $1.1 million respectively under our ESPP. The remaining unamortized expense will be recognized over the next 11.2 months. At December 31, 2018, the unamortized compensation expense related to unvested restricted stock units was $0.7 million, which will be recognized over the next 2.15 years.