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Stockholders' Equity
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity

8. Stockholders’ Equity

As of June 30, 2012, we had the following stock-based compensation plans: the 1997 Equity Incentive Plan (the “1997 Plan”); the 2004 Stock Incentive Plan, which includes the 2004 Non-Employee Director Option Program (the “2004 Plan”); the 2004 Employee Stock Purchase Plan (the “Purchase Plan”); the 2010 Employment Inducement Award Plan (the “2010 Inducement Plan”); and the 2011 Equity Incentive Plan (the “2011 Plan”).

The 2011 Plan is administered by our Board of Directors (the “Board”), or a designated committee of the Board, and awards granted under the 2011 Plan have a term of 10 years unless earlier terminated by the Board. No additional awards will be granted under the 1997 Plan, the 2004 Plan or the 2010 Inducement Plan. All shares currently subject to awards outstanding under the 1997 Plan, 2004 Plan or 2010 Inducement Plan that expire or are forfeited will be included in the reserve for the 2011 Plan to the extent such shares would otherwise return to such plans.

Under our stock-based compensation plans, option awards generally vest over a 4-year period contingent upon continuous service and expire 10 years from the date of grant (or earlier upon termination of continuous service). The fair value of each option is estimated on the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:

 

     Employee Stock Options     Employee Stock
Purchase Plan		  
     Three Months Ended
June  30,		     Six Months Ended
June  30,		     Six Months Ended
June  30,		  
       2012         2011         2012         2011         2012         2011    

Weighted-average fair value per share

    $ 3.34      $ 2.30      $ 3.30      $ 2.78      $ 3.80      $ 2.52   

Risk-free interest rate

      0.55 %      1.3 %      0.53 %      1.6 %      0.19 %      0.52 % 

Expected life (in years)

      4.0        4.0        4.0        4.0        1.0        1.2   

Volatility

      1.6        1.6        1.6        1.6        1.6        1.6   

Expected dividends

      —          —          —          —          —          —     

Expected volatility is based on the historical volatility of our stock. The expected life of options granted is estimated based on historical option exercise and employee termination data. Executive level employees, who hold a majority of the options outstanding, and non-executive level employees were grouped and considered separately for valuation purposes. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is 0% for all years and is based on our history and expectation of dividend payouts.

Compensation expense is based on awards ultimately expected to vest and reflects estimated forfeitures. For equity awards with time-based vesting, the fair value is amortized to expense on a straight-line basis over the vesting periods. For equity awards with performance-based vesting criteria, the fair value is amortized to expense over the remaining vesting period commencing when the achievement of the vesting criteria becomes probable. As of June 30, 2012, the total unrecognized compensation cost related to non-vested equity awards deemed probable of vesting amounted to $13.7 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.52 years. As of June 30, 2012, the total unrecognized compensation cost related to non-vested equity awards not deemed probable of vesting amounted to $6.9 million.

As of June 30, 2012, 2,800,000 shares related to equity awards with performance-based vesting criteria were outstanding.

 

Stock-based compensation expense for the three months ended June 30, 2012 and 2011 was $2.1 million and $1.2 million, respectively. We recognized stock-based compensation expense of $4.4 million and $2.6 million for the six months ended June 30, 2012 and 2011, respectively. We recognized the following amounts of stock-based compensation expense (in thousands):

 

     Three Months Ended
June  30,		      Six Months Ended
June 30,		  
         2012              2011              2012              2011      

Research and development expense

    $ 938       $ 531       $ 1,741       $ 1,043   

General and administrative expense

      1,131         636         2,650         1,604   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 2,069       $ 1,167       $ 4,391       $ 2,647   
  

 

 

     

 

 

     

 

 

     

 

 

  

Activity under the stock-based compensation plans during the six months ended June 30, 2012 was as follows (in thousands except per share amounts):

 

     Options and Awards
Available
for Grant		     Number of Options and Awards
Outstanding		     Weighted-Average
Price Per Share		  

Balance at December 31, 2011

      11,524        11,101      $ 3.09   

Options granted

      (3,612 )      3,612      $ 3.66   

Awards granted

      (1,815 )      1,815      $ 4.23   

Options exercised

      —          (824 )    $ 1.70   

Awards vested

      —          (40 )    $ 4.22   

Options cancelled:

       

Options forfeited (unvested)

      310        (310 )    $ 3.24   

Options expired (vested)

      4        (4 )    $ 4.55   

Awards cancelled (unvested)

      —          (40 )    $ 4.22   
  

 

 

    

 

 

    

Balance at June 30, 2012

      6,411        15,310      $ 3.42   

The following table summarizes outstanding options that are net of expected forfeitures (vested and expected to vest) and options exercisable under our stock option plans as of June 30, 2012 (in thousands, except per share amounts and years):

 

     Number of Shares      Weighted-
Average
Exercise
Price Per
Share		      Weighted-
Average
Remaining
Contractual
Term
(in years)		      Aggregate Intrinsic
Value		  

Outstanding options (vested and expected to vest)

      12,347       $ 3.33         7.4       $ 15,897   

Options exercisable

      6,689       $ 3.53         6.1       $ 8,930  

Employee Stock Purchase Plan

As of June 30, 2012, 996,000 shares have been reserved and approved for issuance under the Purchase Plan, subject to adjustment for a stock split, any future stock dividend or other similar change in our common stock or capital structure. To date, employees have acquired 620,947 shares of our common stock under the Purchase Plan. As of June 30, 2012, 375,053 shares of our common stock remained available for future purchases.

Warrants

As of June 30, 2012, warrants to purchase an aggregate of approximately 19 million shares of our common stock were outstanding. During the three and six months ended June 30, 2012, warrants were exercised to purchase an aggregate of approximately 3.4 million and 4.7 million shares, respectively, of our common stock.