Stockholders' Equity | Stockholders’ Equity Preferred Stock Our board of directors has the authority to fix and determine and to amend the number of shares of any series of preferred stock that is wholly unissued or to be established and to fix and determine and to amend the designation, preferences, voting powers and limitations, and the relative, participating, optional or other rights, of any series of shares of preferred stock that is wholly unissued or to be established. There was no preferred stock issued and outstanding as of June 30, 2018 or December 31, 2017 . Common Stock We had 48,164,828 and 48,068,650 shares of common stock outstanding as of June 30, 2018 and December 31, 2017 , respectively. Shares of common stock reserved for future issuance were as follows: June 30, December 31, (unaudited) Shares available for issuance under the employee stock purchase plan 435,565 475,010 Options granted and outstanding 4,976,842 4,094,532 Unvested restricted stock awards 490,398 195,172 Shares available for future stock option grants and restricted stock awards 1,635,676 947,199 Shares reserved for future issuance under equity incentive plans 7,538,481 5,711,913 In July 2017, we entered into a Sales Agreement (ATM Agreement) with Cowen and Company, LLC (Cowen) under which we may offer and sell, from time to time at our sole discretion through Cowen, as our sales agent, shares of our common stock having an aggregate offering price of up to $50.0 million . Cowen may sell the common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Market (Nasdaq) or on any other existing trading market for our common stock. Any common stock sold will be issued pursuant to our shelf registration statement on Form S-3 (File No. 333-206324). We will pay Cowen a commission equal to 3.0% of the gross sales proceeds of any common stock sold under the ATM Agreement and also have provided Cowen with indemnification and contribution rights. To date, we have not sold any common stock under the ATM Agreement. Equity Incentive Plans Under our 2014 Omnibus Incentive Plan (2014 Plan), the total number of shares of common stock available for issuance increases annually on January 1 of each year in an amount equal to 4% of the total number of shares of our common stock issued and outstanding as of December 31 of the immediately preceding year, or such lesser amount as deemed appropriate by our Board of Directors. On January 1, 2018 , the authorized shares available under the 2014 Plan were increased by 1,922,746 shares. There were a total of 5,837,813 shares of common stock authorized under the 2014 Plan as of June 30, 2018 . Under our 2014 Employee Stock Purchase Plan (2014 ESPP), the total number of shares of common stock available for issuance increases annually on January 1 of each year in an amount equal to the lesser of (i) 1% of the total number of shares issued and outstanding as of December 31 of the immediately preceding year, (ii) 200,000 shares, or such lesser amount as deemed appropriate by our Board of Directors. For 2018 , the Board of Directors determined the current shares available for issuance under the 2014 ESPP were sufficient and did not increase the amount of authorized shares. There were a total of 435,565 shares of common stock authorized under the 2014 ESPP as of June 30, 2018 . Restricted Stock Units In January 2018, the Compensation Committee of our Board of Directors granted 198,835 time-based restricted stock units (RSUs) and 367,500 performance-based restricted stock units (PSUs) to our employees. Restricted stock units are awards that entitle the holder to receive shares of our common stock upon vesting. The RSUs and PSUs cannot be transferred and are subject to forfeiture if the holder’s employment terminates prior to vesting. One-third of the RSUs granted in January 2018 will vest on each anniversary of the grant date over three ( 3 ) years, subject to the employee’s continued service with us on each vesting date. The fair value of each RSU is equal to the closing price of our common stock on the applicable grant date. Fifty percent of the PSUs would vest on each of June 30, 2018 and December 31, 2018 upon the achievement of certain performance criteria by such date, subject to the employee’s continued service with us on each vesting date. If the performance criteria are not met by the specified dates, the corresponding PSUs will expire. Stock-based compensation for these PSUs is recognized over the service period beginning in the period management determines it is probable that the performance criteria will be achieved. During the period ending March 31, 2018, we began recognizing stock compensation expense on the PSUs as the outcome of the performance criteria being achieved was deemed probable. As of June 30, 2018, 183,750 PSUs of the PSUs that were granted in January 2018 have expired unvested as the performance criteria was not met by the specified date. In addition, management has determined that the performance criteria associated with the remaining PSUs that were granted in January 2018 will not be achieved by the specified date due to a change in program strategy, and we have reversed the related stock-based compensation expense of $508,000 recorded in prior quarter. Summary of RSUs and PSUs information is as follows: SHARES WEIGHTED AVERAGE GRANT DATE FAIR VALUE (per share) Outstanding at December 31, 2017 195,172 $ 10.99 Granted (unaudited) 566,335 4.04 Vested (unaudited) (55,135 ) 11.96 Forfeited (unaudited) (215,974 ) 4.33 Outstanding at June 30, 2018 (unaudited) 490,398 5.78 Stock Option Activity Summary of stock option information is as follows: OPTIONS OUTSTANDING WEIGHTED- AVERAGE EXERCISE PRICE WEIGHTED- AVERAGE REMAINING CONTRACT TERM (in years) AGGREGATE INTRINSIC VALUE (in thousands) Outstanding at December 31, 2017 4,094,532 $ 10.96 7.21 $ 2,771 Granted (unaudited) 1,198,020 $ 3.98 Exercised (unaudited) (1,598 ) $ 1.15 Expired (unaudited) (188,493 ) $ 13.76 Forfeited (unaudited) (125,619 ) $ 8.68 Outstanding at June 30, 2018 (unaudited) 4,976,842 $ 9.23 7.42 $ 3,940 Exercisable as of June 30, 2018 (unaudited) 2,774,538 $ 10.74 6.25 $ 3,281 As of June 30, 2018 , there was $9.5 million of total unrecognized stock-based compensation expense related to nonvested stock options that is expected to be recognized over a weighted-average period of 2.0 years . The total intrinsic value of options exercised during the six months ended June 30, 2018 and 2017 was $4,000 and $544,000 , respectively. Stock-Based Compensation Expense Prior to the adoption of ASU No. 2016-09 on January 1, 2017, employee stock-based compensation expense recognized was calculated based on awards ultimately expected to vest and was reduced for estimated forfeitures. Effective January 1, 2017, upon our adoption of ASU No. 2016-09, we have elected to account for forfeitures as they occur. Total stock-based compensation expense recognized in our condensed consolidated statements of operations and comprehensive income (loss) is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 (unaudited) (unaudited) (unaudited) (unaudited) Employee: Research and development $ 688 $ 904 $ 1,888 $ 1,837 General and administrative 808 1,242 2,333 2,522 Non-Employee: Research and development 14 34 23 57 General and administrative 1 25 5 36 Total stock-based compensation expense $ 1,511 $ 2,205 $ 4,249 $ 4,452 We use the Black-Scholes option pricing model to estimate the fair value of stock options at the grant date. The fair values of stock options granted to employees were calculated using the following assumptions: Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 (unaudited) (unaudited) (unaudited) (unaudited) Weighted-average estimated fair value $2.75 $4.86 $2.69 $3.93 Risk-free interest rate 2.8% - 2.9% 1.9% - 2.0% 2.3% - 2.9% 1.9% - 2.1% Expected term of options (in years) 6.08 6.08 5.50 - 6.08 5.50 - 6.08 Expected stock price volatility 78% 80% 78% 80% - 82% Expected dividend yield — — — — Stock Option Exchange Program Pursuant to the Offer to Exchange Eligible Options for New Options, dated June 18, 2018 (Exchange Offer), we commenced a tender offer for our employees, including executive officers, to exchange eligible stock options for replacement stock options with modified terms. Employees who held outstanding stock options granted on or before December 31, 2017 with an exercise price equal to or greater than $5.00 per share (Eligible Options) were given an opportunity to tender each Eligible Option in exchange for a new stock option with modified terms (New Options). Pursuant to the Exchange Offer, each New Option would: • have an exercise price equal to the greater of $4.10 per share or the closing price of our common stock as reported on Nasdaq on the date the New Option was granted (Grant Date); • vest in equal monthly amounts over either two or three years, depending on whether the tendered Eligible Option was granted on or before or after December 31, 2016, respectively; • have a maximum term of seven years; • be an incentive stock option (ISO) to the greatest extent permitted by applicable law; and • be exercisable for a reduced number of shares based on the following exchange ratios: Eligible Option Exercise Price Ranges Exchange Ratio (Surrendered Eligible Options: New Options)* $5.00-$14.99 1.50 to 1 $15.00-$29.99 1.75 to 1 $30.00-And Up 2.00 to 1 * Rounded up to the nearest share The Exchange Offer expired at 6:00 p.m., Pacific time, on July 17, 2018. Pursuant to the Exchange Offer, 31 employees elected to exchange outstanding stock options, and we accepted for cancellation, stock options to purchase an aggregate of 1,590,083 shares of common stock, representing approximately 65% of the total shares of common stock underlying the Eligible Options. On July 17, 2018, immediately following the expiration of the Exchange Offer, we granted New Options to purchase 962,099 shares of common stock, each with an exercise price of $4.40 per share, which was the closing price per share of our common stock on Nasdaq on the Grant Date. As a result, 627,984 shares of common stock returned to the 2014 Plan and became available for future issuance. The exchange of stock options was treated as a modification for accounting purposes. The incremental expense for vested stock options calculated using the Black-Scholes option pricing model will be recorded in our financial statements for the quarter ending September 30, 2018. The incremental expense together with the unamortized expense remaining on the unvested options will be amortized over the vesting period of the New Options beginning on July 17, 2018. |