MNKD 2017 Annual Report

The Company uses the Black-Scholes option valuation model to estimate the grant date fair value of employee stock options. The expected term of an option granted is based on combining historical exercise data with expected weighted time outstanding. Expected weighted time outstanding is calculated by assuming the settlement of outstanding awards is at the midpoint between the remaining weighted average vesting date and the expiration date. The expected volatility assumption is based on an assessment of the historical volatility, with consideration of implied volatility, derived from an analysis of historical trade activity. The Company has selected risk-free interest rates based on U.S. Treasury securities with an equivalent expected term in effect on the date the options were granted. Additionally, the Company uses historical data and management judgment to estimate stock option exercise behavior and employee turnover rates to estimate the number of stock option awards that will eventually vest. The Company calculated the fair value of employee stock options granted during the years ended December 31, 2017, 2016 and 2015 using the following assumptions: Year Ended December 31, 2017 2016 2015 Risk-free interest rate . . 1.83% — 2.13% 1.18% — 1.80% 1.61% — 1.86% Expected lives . . . . . . . . 5.41 — 5.78 years 5.13 — 5.82 years 5.79 — 5.86 years Volatility . . . . . . . . . . . . 83.32% — 90.39% 77.57% — 82.75% 69.76% — 71.84% Dividends . . . . . . . . . . . — — — The following table summarizes information about stock options outstanding: Number of Shares Weighted Average Exercise Price per Share Aggregate Intrinsic Value ($000) Outstanding at January 1, 2017 . . . . . . . . . . . . 5,530,256 $16.10 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,335,385 1.60 Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,300) 4.55 Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (598,204) 3.17 Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,172,697) 22.21 Outstanding at December 31, 2017 . . . . . . . . . 7,089,440 $ 9.33 $2,484 Vested and expected to vest at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,735,675 $ 9.70 $2,262 Exercisable at December 31, 2017 . . . . . . . . . 2,813,227 $19.52 $ 61 The weighted average grant date fair value of the stock options granted during the years ended December 31, 2017, 2016 and 2015 was $1.19, $3.05 and $12.80 per option, respectively. The total intrinsic value of options exercised during the year ended December 31, 2017 was de minimis. The total intrinsic value of options exercised during the years ended December 31, 2016 and 2015 was $0.1 million and $6.2 million, respectively. Intrinsic value is measured using the fair market value at the date of exercise for options exercised or at December 31 for outstanding options, less the applicable exercise price. Cash received from the exercise of options during the years ended December 31, 2017, 2016 and 2015 was approximately $0.02 million, $0.5 million and $3.3 million, respectively. The weighted-average remaining contractual terms for options outstanding, vested and expected to vest and exercisable at December 31, 2017 was 6.87 years, 6.75 years and 3.57 years, respectively. 113