|9 Months Ended|
Sep. 30, 2019
|Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]|
Our authorized capital stock consists of 520,000,000 shares, all with a par value of $0.0001 per share, of which 500,000,000 shares are designated as common stock and 20,000,000 shares are designated as preferred stock. There were no shares of preferred stock outstanding as of September 30, 2019 and December 31, 2018.
On July 18, 2019, we issued and sold 6,871,727 shares of common stock at a public offering price of $15.28 per share and pre-funded warrants to purchase 2,945,026 shares of common stock at an offering price of $15.2799 per warrant in an underwritten public offering pursuant to a shelf registration on Form S-3. We granted the underwriters an option to purchase additional shares of our common stock at a public offering price of $15.28, less underwriting discounts and commissions. This option was not exercised by the underwriters and expired in August 2019. The gross proceeds from this public offering were $150.0 million, resulting in aggregate net proceeds of $140.7 million, after deducting underwriting discounts and commissions and offering expenses payable by us.
Each pre-funded warrant entitles the holder to purchase one share of common stock at an exercise price of $0.0001 per share and expires seven years from the date of issuance. These warrants were recorded as a component of stockholders’ equity within additional paid-in capital. Per the terms of the warrant agreement, a holder of the outstanding warrants is not entitled to exercise any portion of any pre-funded warrant if, upon exercise of the warrant, the holder’s ownership (together with its affiliates) of our common stock or combined voting power of our securities beneficially owned by such holder (together with its affiliates) would exceed 9.99% after giving effect to the exercise (“Maximum Ownership Percentage”). Upon at least 61 days’ prior notice to us by the holder, any holder may increase or decrease the Maximum Ownership Percentage to any other percentage not to exceed 19.99%. As of September 30, 2019, none of the pre-funded warrants have been exercised.
In February 2019, we entered into a sales agreement (the “ATM Facility”) with Cowen and Company, LLC (“Cowen”), which provides for the sale, in our sole discretion, of shares of our common stock, in the aggregate offering price of up to $100.0 million through Cowen, as our sales agent. The issuance and sale of these shares by us pursuant to the ATM Facility are deemed “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), and are registered under the Securities Act. We pay a commission of up to 3.0% of gross sales proceeds of any common stock sold under the ATM Facility.
During the three months ended September 30, 2019, we sold an aggregate of 326,897 shares of common stock under the ATM Facility, at an average price of $15.77 per share, for gross proceeds of $5.1 million and net proceeds of $5.0 million, after deducting commissions payable by us. For the nine months ended September 30, 2019, we sold an aggregate of 686,131 shares of common stock under the ATM Facility, at an average price of $19.13 per share, for gross proceeds of $13.1 million and net proceeds of $12.6 million, after deducting commissions and other offering expenses payable by us. As of September 30, 2019, $86.9 million of common stock remained available to be sold under this facility, subject to certain conditions as specified in the agreement.
Equity Incentive Plans
Under the terms of the 2014 Equity Incentive Plan, as amended (“2014 EIP”), we may grant stock options, restricted stock awards (“RSAs”) and RSUs to employees, directors, consultants and other service providers. RSUs generally vest over four years. Stock options are granted at prices no less than 100% of the estimated fair value of the shares on the date of grant as determined by the board of directors, provided, however, that the exercise price of an option granted to a 10% shareholder cannot be less than 110% of the estimated fair value of the shares on the date of grant. Options granted generally vest over four years and expire in seven to ten years. As of September 30, 2019, a total of 12,101,764 shares of common stock were reserved for issuance under the 2014 EIP, of which 3,631,948 shares were available for future grant and 8,469,816 shares were subject to outstanding options and RSUs.
In February 2018, we adopted the 2018 Inducement Plan (“Inducement Plan”), under which we may grant options, stock appreciation rights, RSAs and RSUs to new employees. As of September 30, 2019, 1,213,760 shares of common stock were reserved for issuance under the Inducement Plan, of which 427,436 shares were available for future grant and 786,324 shares were subject to outstanding options and RSUs.
Restricted Stock Units
The fair value of RSUs is determined as the closing stock price on the date of grant. The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2019 and 2018 was $27.04 and $34.61, respectively. As of September 30, 2019, there was $45.4 million of unrecognized stock-based compensation expense related to RSUs that is expected to be recognized over a weighted average period of 2.3 years. The aggregate intrinsic value of the RSUs outstanding as of September 30, 2019 was $28.3 million.
The following is a summary of RSU activity under our 2014 EIP and Inducement Plan:
Under our RSU net settlement procedures, for most of our employees, we withhold shares at settlement to cover the minimum payroll withholding tax obligations. During the nine months ended September 30, 2019, we settled 562,964 shares underlying RSUs, of which 488,964 shares underlying RSUs were net settled by withholding 212,879 shares. The value of the RSUs withheld was $6.7 million, based on the closing price of our common stock on the settlement date. During the nine months ended September 30, 2018, we settled 634,851 shares underlying RSUs, of which 439,986 shares underlying RSUs were net settled by withholding 189,951 shares. The value of the RSUs withheld was $7.5 million, based on the closing price of our common stock on the settlement date. The value of RSUs withheld in each period was remitted to the appropriate taxing authorities and has been reflected as a financing activity in our condensed consolidated statements of cash flows.
The following is a summary of stock option activity under our 2014 EIP and Inducement Plan. The table below also includes the activity relating to options for 275,000 shares of our common stock which were issued in 2017 outside of these plans:
Aggregate intrinsic value represents the difference between the closing stock price of our common stock on September 30, 2019 and the exercise price of outstanding, in-the-money options. As of September 30, 2019, there was $75.9 million of unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a weighted average period of 2.8 years.
Options for 192,716 and 781,191 shares of our common stock were exercised during the nine months ended September 30, 2019 and 2018, with an intrinsic value of $3.4 million and $13.9 million, respectively. As we believe it is more likely than not that no stock option related tax benefits will be realized, we do not record any net tax benefits related to exercised options.
The fair value of each option issued was estimated at the date of grant using the Black-Scholes valuation model. The following table summarizes the weighted-average assumptions used as inputs to the Black-Scholes model, and resulting weighted-average grant date fair values of stock options granted to employees during the periods indicated:
Employee Stock Purchase Plan
Our 2014 Employee Stock Purchase Plan (“2014 ESPP”) allows eligible employees to purchase our common stock at 85% of the lower of its fair market value at (i) the beginning of a 12-month offering period, or (ii) at the end of one of the two related 6-month purchase periods. No participant in the 2014 ESPP may purchase shares of common stock valued at more than $25,000 per calendar year. The Company recorded $0.9 million and $0.5 million of expense related to the 2014 ESPP in the nine months ended September 30, 2019 and 2018, respectively. 74,439 and 77,100 shares were purchased under the 2014 ESPP during the nine months ended September 30, 2019 and 2018, respectively.
As of September 30, 2019, there was $0.8 million of unrecognized stock-based compensation expense related to the ESPP that is expected to be recognized by the end of the second quarter of 2020.
The 2014 ESPP provides for annual increases in the number of shares available for issuance thereunder on the first business day of each fiscal year, beginning with 2015 and ending in 2024, equal to the lower of (i) one percent of the number of shares of our common stock outstanding as of such date, (ii) 230,769 shares of our common stock, or (iii) a lesser number of shares as determined by our board of directors. As of September 30, 2019, there were 1,355,973 shares authorized under the 2014 ESPP.
The following shares of common stock were reserved for future issuance under our equity incentive plans as of September 30, 2019:
Stock-based Compensation Expense
Total stock-based compensation expense related to all employee and non-employee stock awards was as follows:
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef