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Note 5 - Stockholders' Equity
 6 Months Ended
Jun. 30, 2014
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]

5. Stockholders’ Equity


Amendments to Articles of Incorporation – Reverse Stock Split


Effective January 13, 2014, we amended our Certificate of Incorporation to change our name to Heron Therapeutics, Inc. and to effect a 1-for-20 reverse split of our outstanding common stock. The name change and Reverse Stock Split were approved by our stockholders on September 19, 2013. As a result of the Reverse Stock Split, the total authorized shares of common stock were reduced from 1,500,000,000 to 75,000,000 shares.


2011 Private Placement


In June 2011, we sold 8.0 million shares of our common stock for net proceeds of $22.8 million (net of approximately $1.2 million in issuance costs). For each share purchased, the investors received one warrant to purchase 0.5 shares of common stock at an exercise price of $3.60 per share. The warrants were immediately exercisable and expire on July 1, 2016. The warrants may be exercised for cash only, or, if a registration statement is not then effective and available for the resale of the shares of common stock issuable upon exercise of the warrants, by surrender of such warrant, or a portion of such warrant, by way of cashless exercise. There is no right to exercise the warrants to the extent that, after giving effect to such exercise the holder would beneficially own in excess of 9.99% of our outstanding shares of common stock or such other limit as may be designated by any particular purchaser. Each holder of the warrants can amend or waive the foregoing limitation by written notice to us, with such waiver taking effect only upon the expiration of a 61-day notice period.


On July 29, 2011, we filed a registration statement with the SEC to register for resale the shares and the shares of common stock issuable upon the exercise of the warrants. The registration statement was declared effective on August 4, 2011. We are obligated to maintain the effectiveness of the registration statement until the investors are able to sell shares and the shares of common stock underlying the warrants without limitation or restriction under Rule 144 of the Securities Act of 1933, as amended (“Rule 144”). There is currently only one investor who is an affiliate of ours and is therefore not able to sell without limitation under Rule 144, and that investor has agreed to waive its right to require us to maintain the effectiveness of the registration statement until it provides notice otherwise.


During the six months ended June 30, 2014, one warrant holder exercised 144,040 warrants under the cashless exercise provision in the warrant agreement, which resulted in the net issuance of 108,409 shares of common stock and no net cash proceeds to the Company. During the six months ended June 30, 2013, we received $0.6 million for cash exercises of these warrants.


2012 Private Placement


In July 2012, we sold 5.1 million shares of our common stock at a purchase price of $10.50 per share, resulting in net proceeds of approximately $50.5 million (net of approximately $3.1 million in issuance costs).


On August 24, 2012, we filed a registration statement with the SEC to register these shares for resale. The registration statement was declared effective on September 6, 2012.


2013 Common Stock Offering


In November 2013, we entered into an underwriting agreement, pursuant to which we sold a total of approximately 8.6 million shares of our common stock to the underwriters at a public offering price of $8.00 per share. We received total net proceeds of approximately $57.8 million (net of approximately $3.9 million in issuance costs).


The offering was made pursuant to our effective registration statement on Form S-3 (Registration No. 333-190550), which was previously filed with the SEC and was declared effective, and a prospectus supplement filed with the SEC. In the underwriting agreement, we agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the underwriters may be required to make because of such liabilities.


2014Common Stock Offering


In June 2014, we entered into an underwriting agreement, pursuant to which we sold a total of approximately 4.8 million shares of our common stock to the underwriters at a public offering price of $11.75 per share. In addition, as a component of the offering, we sold 600,000 pre-funded warrants to purchase shares of our common stock to the underwriters at a public offering price of $11.74 per share. The pre-funded warrants have an exercise price of $0.01 per share and are exercisable for seven years from the date of issuance. We received total net proceeds of approximately $58.9 million (net of approximately $4.0 million in issuance costs) from the sale of the common stock and the pre-funded warrants.


The offering was made pursuant to our effective registration statement on Form S-3 (Registration No. 333-195928), which was previously filed with the SEC and was declared effective, and a prospectus supplement filed with the SEC. In the underwriting agreement, we agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the underwriters may be required to make because of such liabilities.


Stock Option Exercises


For the six months ended June 30, 2014, approximately 0.4 million shares of common stock were issued pursuant to the exercise of stock options, resulting in proceeds to the Company of approximately $2.3 million.


Stock-Based Compensation


The following table summarizes stock-based compensation expense for the three and six months ended June 30, 2014 and 2013 related to stock options and Employee Stock Purchase Plan (“ESPP”) purchase rights by expense category (in thousands):


   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
   

2014

   

2013

   

2014

   

2013

 
                                 

Research and development

  $ 446     $ 541     $ 1,708     $ 790  

General and administrative

    634       1,862       2,341       3,448  

Stock-based compensation expense included in operating expenses

  $ 1,080     $ 2,403     $ 4,049     $ 4,238  
                                 

Impact on basic and diluted net loss per share

  $ 0.04     $ 0.16     $ 0.17     $ 0.28  

As of June 30, 2014, there was approximately $33.0 million of total unrecognized compensation cost related to non-vested, stock-based payment awards granted under all of the Company’s equity compensation plans. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize this compensation cost over a period of 2.3 years, which is the weighted-average vesting period for all stock-based compensation awards.


The Company estimated the fair value of each option grant on the grant date using the Black-Scholes option valuation model with the following weighted-average assumptions:


Options:

 

June 30,

 
   

2014

   

2013

 

Risk-free interest rate

    2.0 %     0.9 %

Dividend yield

    0.0 %     0.0 %

Volatility

    104.0 %     104.2 %

Expected life (years)

    6       6  

The Company estimates the fair value of each purchase right granted under the ESPP at the beginning of each new offering period using the Black-Scholes option valuation model with the following assumptions:


ESPP:

 

June 30,

 
   

2014

   

2013

 

Risk-free interest rate

    0.1 %     0.1 %

Dividend yield

    0.0 %     0.0 %

Volatility

    58.9 %     88.3 %

Expected life (months)

    6       6  

The following table summarizes the stock option activity for the six months ended June 30, 2014:


                   

Weighted-

 
                   

Average

 
           

Weighted-

   

Remaining

 
           

Average

   

Contractual

 
   

Shares

   

Exercise

   

Term

 
   

(in thousands)

   

Price

   

(Years)

 

Balance at January 1, 2014

    6,356     $ 8.22       8.14  

Granted

    1,239     $ 10.06          

Exercised

    (504

)

  $ 6.22          

Expired and forfeited

    (69

)

  $ 14.70          

Balance at June 30, 2014

    7,022     $ 8.62       8.33