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Stockholders' Equity
 9 Months Ended
Sep. 30, 2013
Stockholders' Equity

8. Stockholders’ Equity

On May 29, 2013, the stockholders of the Company approved an amendment to the Company’s 2011 Equity Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the plan by 10,000,000.

Option activity under our stock-based compensation plans during the nine months ended September 30, 2013 was as follows (in thousands except per share amounts):

 

 

Shares Underlying
Outstanding Options

 

 

Weighted-Average
Exercise Price Per Share

 

  

Weighted-Average
Remaining
Contractual Term
(years)

 

  

Aggregate
Intrinsic
Value

 

Balance as of December 31, 2012             

 

  13,806

  

 

$

  3.38

  

  

 

 

 

  

 

 

 

Options granted             

 

  5,542

  

 

 

  2.71

  

  

 

 

 

  

 

 

 

Options exercised             

 

(74

) 

 

 

  1.41

  

  

 

 

 

  

 

 

 

Options cancelled:

 

 

 

 

 

 

 

  

 

 

 

  

 

 

 

Options forfeited (unvested)             

 

(2,028

) 

 

 

  3.33

  

  

 

 

 

  

 

 

 

Options cancelled (vested)             

 

(381

) 

 

 

  3.56

  

  

 

 

 

  

 

 

 

Balance as of September 30, 2013             

 

  16,865

  

 

$

  3.17

  

  

 

  5.35

  

  

$

  310

  

Vested and expected to vest as of September 30, 2013             

 

  16,272

  

 

$

  3.18

  

  

 

  4.97

  

  

$

  310

  

Exercisable as of September 30, 2013             

 

  10,977

  

 

$

  3.35

  

  

 

  3.37

  

  

$

  307

  

Restricted stock unit activity under our stock-based compensation plans during the nine months ended September 30, 2013 was as follows (in thousands except per share amounts):

 

 

Number of
Shares

 

 

Weighted-Average
Grant-Date Fair
Value

 

Balance as of December 31, 2012             

 

  1,755

  

 

$

  4.23

  

Granted             

 

  250

  

 

 

  1.23

  

Vested             

 

—

  

 

 

—

  

Forfeited or expired             

 

(230

) 

 

 

  4.23

  

Balance as of September 30, 2013             

 

  1,775

  

 

$

  3.81

  

The aggregate intrinsic value of the restricted stock units outstanding as of September 30, 2013, based on our stock price on that date, was $2.1 million.

As of September 30, 2013, approximately 2,600,000 shares underlying stock options and restricted stock units awards with performance-based vesting criteria were outstanding.

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

The fair value-based measurements and weighted-average assumptions used in the calculations of these measurements are as follows:

 

 

Stock Options

 

 

Stock Options

 

 

Employee Stock
Purchase Plan

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2013

 

 

2012

 

 

2013

 

 

2012

 

 

2013

 

 

2012

 

Weighted-average fair value             

$

  1.15

  

 

$

  3.34

  

 

$

  2.43

  

 

$

  3.30

  

 

$

  0.93

  

 

$

  3.80

  

Risk-free interest rate             

 

  1.9

%

 

 

  0.6

%

 

 

  1.1

%

 

 

  0.5

%

 

 

  0.2

%

 

 

  0.2

%

Expected life (in years)             

 

  5.6

  

 

 

  4.0

  

 

 

  5.9

  

 

 

  4.0

  

 

 

  1.3

  

 

 

  1.0

  

Volatility             

 

  1.5

  

 

 

  1.6

  

 

 

  1.4

  

 

 

  1.6

  

 

 

  0.8

  

 

 

  1.6

  

Expected volatility is based on historical volatility of our stock price. The expected life of options granted is estimated based on historical option exercise and employee termination data, giving consideration to options that have not yet completed a full life cycle. Our senior management, who hold a majority of the options outstanding, and other employees were grouped and considered separately for valuation purposes. The expected life of the options for senior management is six years and for other employees five and a half years. The risk-free 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 zero percent for all years and is based on our history and expectation of dividend payouts. All stock option awards to non-employees are accounted for at the fair value of the consideration received or the fair value of the equity instrument issued, as calculated using the Black-Scholes model.

Compensation expense is based on awards ultimately expected to vest and reflects estimated forfeitures. For equity awards with time-based vesting, the fair value-based measurement is amortized to expense on a straight-line basis over the vesting periods. For equity awards with performance-based vesting criteria, the fair value-based measurement is amortized to expense over the remaining vesting period commencing when the achievement of the vesting criteria becomes probable.

We recognized stock-based compensation expense of $2.8 million and $1.9 million for the three months ended September 30, 2013 and 2012, respectively. Stock-based compensation expense for the three months ended September 30, 2013 includes $1.0 million related to severance arrangements. We recognized stock-based compensation expense of $10.8 million and $6.3 million for the nine months ended September 30, 2013 and 2012, respectively. Stock-based compensation during the nine months ended September 30, 2013 included $5.1 million related to severance arrangements. The Company recorded stock-based compensation expense for awards to non-employees of $0.4 million for the nine months ended September 30, 2013.

The components of stock-based compensation expense were (in thousands):

 

 

Three Months Ended
September 30,

 

  

Nine Months Ended
September 30,

 

 

2013

 

  

2012

 

  

2013

 

  

2012

 

Research and development             

$

  1,001

  

  

$

  824

  

  

$

  3,351

  

  

$

  2,565

  

General and administrative             

 

  1,844

  

  

 

  1,079

  

  

 

  7,496

  

  

 

  3,729

  

Total             

$

  2,845

  

  

$

  1,903

  

  

$

  10,847

  

  

$

  6,294

  

As of September 30, 2013, the total unrecognized compensation cost related to non-vested equity awards including all awards with time-based vesting amounted to $12.1 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.93 years. Additionally, as of September 30, 2013, the total unrecognized compensation cost related to equity awards with performance-based vesting criteria not deemed probable of vesting amounted to $5.0 million.

Employee Stock Purchase Plan

As of September 30, 2013, 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 828,414 shares of our common stock under the Purchase Plan including 129,690 shares during the nine months ended September 30, 2013. As of September 30, 2013, 167,586 shares of our common stock remained available for future purchases.

Warrants

As of September 30, 2013, warrants to purchase an aggregate of approximately 12,500,000 shares of our common stock were outstanding. The warrants are exercisable at a weighted average price of $1.96 per share. During the nine months ended September 30, 2013 and September 30, 2012, warrants were exercised to purchase an aggregate of approximately 84,000 and 4,700,000 shares of our common stock, respectively.