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Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Note 12—Stock-Based Compensation

Our equity plans provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance units, performance shares and other stock and cash awards to employees, directors and consultants. Stock options are granted with an exercise price not less than the fair market value of Omeros’ common stock on the date of the grant. Any unexercised options expire 10 years from grant date, and any unvested stock options granted which are subsequently canceled become available for future reissuance.

Vesting schedules for our equity plans generally are as follows:


Grant Type		Vesting Schedule
Employee initial grants		25% at one-year anniversary, 1/48 monthly thereafter
Employee recurring grants		1/48 monthly
Board member initial grants		33+% per year for 3 years
Board member recurring grants		100% after one year
Non-employee consultant grants		1/12 monthly
Non-employee consultant grants		1/48 monthly

In November 2020, restricted stock awards totaling 14,000 shares with a fair value of $11.05 per share were granted to sales employees. The awards vested immediately upon grant.

Stock-based compensation expense is as follows:



	Year Ended December 31,
	2020		2019		2018

	(In thousands)
Research and development	$	6,331	$	6,095	$	4,961
Selling, general and administrative		8,594		7,690		6,752
Total	$	14,925	$	13,785	$	11,713

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to stock option grants during the periods ended:


	Year Ended December 31,
	2020			2019			2018
Estimated weighted-average fair value	$	8.19		$	9.93		$	10.32
Weighted-average assumptions:
Expected volatility		77	%		80	%		78	%
Expected life, in years		6.0			6.0			6.0
Risk-free interest rate		1.06	%		2.41	%		2.68	%
Expected dividend yield		—	%		—	%		—	%

Expected volatility is based on the historical volatility of our stock price weighted by grant issuances over the reporting period. We use the simplified method to calculate expected life used in the valuation of our stock options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

Stock option activity for all stock plans is as follows:


		Weighted-
		Average			Aggregate
		Exercise		Remaining	Intrinsic
	Options	Price per		Contractual Life	Value
	Outstanding	Share		(In years)	(In thousands)
Balance at December 31, 2019	11,207,931	$	11.72
Granted	2,237,535		12.29
Exercised	(556,421)		9.03
Canceled	(950,517)		12.14
Balance at December 31, 2020	11,938,528	$	11.92	5.8	$	32,384
Vested and expected to vest at December 31, 2020	11,584,202	$	11.88	5.8	$	31,880
Exercisable at December 31, 2020	8,805,571	$	11.48	4.9	$	27,844

The total intrinsic value of options exercised during the years ended December 31, 2020, 2019 and 2018 was $5.6 million, $5.4 million and $11.4 million, respectively.

At December 31, 2020, there were 3.1 million unvested options outstanding that vest over a weighted-average period of 2.5 years. The remaining estimated compensation expense to be recognized in connection with these unvested options is $23.2 million.