13.	Equity Plans and Stock-Based Compensation

Stock Plans

Under the 2004 Stock Incentive Plan options to purchase 349,853 shares of common stock remained outstanding as of December 31, 2014

Under the 2010 Employment Inducement Award Plan options to purchase 12,500 shares of common stock remained outstanding as of December 31, 2014

The 2011 Equity Incentive Plan (“2011 Plan”) was approved by the Company’s stockholders and adopted in January 2011. On May 29, 2013, the stockholders of the Company approved an amendment to the 2011 Plan to increase the number of shares of common stock authorized for issuance under the plan by 1,000,000. The 2011 Plan, as amended, provides for the issuance of up to 2,500,000 shares of our common stock to employees and non-employees of the Company and became effective on January 6, 2011. The 2011 Plan is administered by our Board of Directors, or a designated committee of the Board of Directors, and awards granted under the 2011 Plan have a term of 10 years unless earlier terminated by the Board of Directors. After the adoption of the 2011 Plan, no additional awards were granted under either the 2004 Plan or the Inducement Plan. As of January 6, 2011, all shares subject to awards outstanding under the 2004 Plan and 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. As of December 31, 2014, options to purchase 1,456,927 shares of common stock remained outstanding under the 2011 Plan. As of December 31, 2014, there were 1,023,365 shares of common stock reserved for issuance under the 2011 Plan.

Activity under our stock plans is set forth below:

	Shares Underlying Outstanding Options (in thousands)			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2013		1,576		$	31.66
Options granted		582			16.75
Options exercised		(5	)		9.90
Options cancelled:
Options forfeited (unvested)		(86	)		23.94
Options cancelled (vested)		(247	)		30.51
Balance at December 31, 2014		1,820			27.48		6.07	$	833
Vested and expected to vest at December 31, 2014		1,820			27.48		6.07	$	833
Exercisable at December 31, 2014		1,040			33.10		4.02	$	649

The total intrinsic value of stock options exercised during the years ended December 31, 2014, 2013 and 2012 was, $0.1 million, $0.3 million and $2.7 million, respectively. The total intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted market price of our common stock as of the close of the exercise date.

The total fair value of stock options vested during the years ended December 31, 2014, 2013 and 2012 was, $5.6 million, $12.1 million and $9.6 million, respectively.

Our non-vested stock awards are comprised of restricted stock units granted with performance and time-based vesting criteria. A summary of the status of non-vested restricted stock units as of December 31, 2014, and activities during 2014 are summarized as follows:

	Number of Shares (In thousands)			Weighted-Average Grant-Date Fair Value
Non-vested as of December 31, 2013		128		$	39.30
Granted		155		$	17.92
Vested	-			$	-
Forfeited or expired		(104	)	$	42.02
Non-vested as of December 31, 2014		179		$	17.13

Stock-based compensation expense related to restricted stock units was approximately $0.6 million for the year ended December 31, 2014. The aggregate intrinsic value of the restricted stock units outstanding as of December 31, 2014, based on our stock price on that date, was $3.0 million.

The weighted average grant-date fair value of restricted stock units granted during the years ended December 31, 2014, 2013 and 2012 was, $17.92, $12.30 and $42.30, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2013 and 2012 was$0.1 million and $0.2 million, respectively. No restricted stock units vested during 2014.

Stock-Based Compensation

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 Company has also granted performance-based equity awards to certain of our employees under the 2011 Plan, the 2004 Plan and the Inducement Plan. As of December 31, 2014, 76,247 shares were outstanding related to options and restricted stock units subject to these performance-based vesting criteria. 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:

	Stock Options									Employee Stock Purchase Plan
	Year Ended December 31,									Year Ended December 31,
	2014			2013			2012			2014			2013			2012
Weighted-average fair value	$	15.16		$	24.15		$	33.00		$	7.45		$	9.30		$	35.40
Risk-free interest rate		1.8	%		1.1	%		0.5	%		0.2	%		0.2	%		0.2	%
Expected life (in years)		5.9			5.9			4.2			1.2			1.3			1.1
Volatility		1.4			1.4			1.6			0.9			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, while 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 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.

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 when the achievement of the vesting criteria becomes probable.

We recognized the following amounts of stock-based compensation expense (in thousands):

	Year Ended December 31,
	2014		2013		2012
Employees and directors stock-based compensation expense	$	6,062	$	11,828	$	10,439
Non-employees stock-based compensation expense		27		512		-
Total	$	6,089	$	12,340	$	10,439

	Year Ended December 31,
	2014		2013		2012
Research and development	$	2,868	$	4,228	$	3,514
General and administrative		3,221		8,112		6,925
Total	$	6,089	$	12,340	$	10,439

During the year ended December 31, 2013, we recognized $1.3 million in additional stock-based compensation expense due to the modification of the terms of stock options for five employees. Stock based compensation expense recognized for the year ended December 31, 2013 included $4.9 million related to employee severance arrangements and $0.5 million for awards to non-employees.

As of December 31, 2014, the total unrecognized compensation cost related to non-vested stock options and awards deemed probable of vesting, including all stock options with time-based vesting, net of estimated forfeitures, amounted to $13.5 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.7 years. As of December 31, 2014, the total unrecognized compensation cost related to non-vested stock options not deemed probable of vesting, net of estimated forfeitures, amounted to $0.4 million.

As of December 31, 2014, the total unrecognized compensation cost related to shares of our common stock under the Purchase Plan, amounted to $0.1 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.6 years.

Employee Stock Purchase Plan

In January 2004, the Board of Directors and stockholders adopted the 2004 Employee Stock Purchase Plan. As of December 31, 2014, 99,600 shares were approved for issuance under the 2004 Employee Stock Purchase Plan, subject to adjustment for a stock split, or any future stock dividend or other similar change in our common stock or capital structure. To date, employees have acquired 94,104 shares of our common stock under the 2004 Employee Stock Purchase Plan. As of December 31, 2014, 5,496 shares of our common stock remained available for future purchases.

In May 2014, stockholders of the Company approved the 2014 Employee Stock Purchase Plan (the “Purchase Plan”), pursuant to which the Company may issue up to 50,000 shares of its common stock to its employees. The Purchase Plan provides for the purchase of common stock by eligible employees and became effective on May 28, 2014. The purchase price per share is the lesser of (i) 85% of the fair market value of the common stock on the commencement of the offer period (generally, the fifteenth day in February or August) or (ii) 85% of the fair market value of the common stock on the exercise date, which is the last day of a purchase period (generally, the fourteenth day in February or August).