XML 54 R13.htm IDEA: XBRL DOCUMENT v2.4.1.9
Note 7 - Stockholders' Equity
 12 Months Ended
Dec. 31, 2014
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]

7.     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, we amended our Certificate of Incorporation to reduce the total authorized shares of our common stock 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 year ended December 31, 2014, warrant holders exercised 460,706 warrants under the cashless exercise provision in the warrant agreement, which resulted in the net issuance of 303,614 shares of common stock and no net cash proceeds to us. During the year ended December 31, 2013, we received $0.6 million for cash exercises of these warrants. During the year ended December 31, 2012, warrant holders exercised 7,500 warrants under the cashless exercise provision in the warrant agreement, which resulted in the net issuance of 5,034 shares of common stock and no net cash proceeds to us.


2012 Private Placement


In July 2012, we sold approximately 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 sold approximately 7.7 million shares of our common stock 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 an effective registration statement, which was previously filed with the SEC and was declared effective.


2014 Common Stock Offering


In June 2014, we sold approximately 4.8 million shares of our common stock 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 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 an effective registration statement, which was previously filed with the SEC and was declared effective.  


Common Stock Reserved for Future Issuance


Shares of Company common stock reserved for future issuance at December 31, 2014 were as follows:


   

Number of Shares

 

Stock options outstanding

    7,918,004  

Stock options available for grant

    1,333,212  

Employee stock purchase plan

    29,893  

Warrants outstanding

    4,108,147  

Common stock underlying Convertible Notes outstanding

    6,676,845  

Total shares reserved for future issuance

    20,066,101  

Warrants


The following table summarizes the warrants outstanding as of December 31, 2014:


   

Number of Shares Outstanding

   

Exercise Price

 

Expiration Date

Issued to private placement investors in October 2009

    198,860     $ 17.60  

01/07/2015

Issued to private placement investors in July 2011

    3,289,287     $ 3.60  

07/01/2016

Issued in a public offering in June 2014

    600,000     $ 0.01  

06/30/2021

Other

    20,000     $ 13.80  

08/01/2015

Total warrants outstanding

    4,108,147            

The weighted-average exercise price of warrants outstanding as of December 31, 2014 was $3.80.


Employee Stock Purchase Plan


In 1997 our stockholders approved our Employee Stock Purchase Plan (the “ESPP”). In December 2007, May 2009, June 2011 and May 2014, our stockholders authorized increases in the number of shares reserved for issuance under the ESPP by 5,000, 10,000, 25,000 and 25,000 shares, respectively, for a total of 75,000 shares reserved at December 31, 2014. Under the terms of the ESPP, employees can elect to have up to a maximum of 10% of their base earnings withheld to purchase our common stock. The purchase price of the stock is 85% of the lower of the closing prices for our common stock on: (i) the first trading day in the enrollment period, as defined in the ESPP, in which the purchase is made, or (ii) the purchase date. The length of the enrollment period is six months. Enrollment dates are the first business day of May and November and the first enrollment date was April 30, 1997. Approximately 24% of eligible employees participated in the ESPP in 2014. Under the ESPP, we issued 12,028, 5,630 and 4,270 shares in 2014, 2013 and 2012, respectively. The weighted-average exercise price per share of the purchase rights exercised during 2014, 2013 and 2012 was $7.59, $6.12 and $5.21, respectively. As of December 31, 2014, 45,107 shares of common stock have been issued under the ESPP and 29,893 shares of common stock are available for future issuance.


Stock Option Plans


We currently have one stock option plan from which we can grant options and restricted stock awards to employees, officers, directors and consultants. In December 2007, the stockholders approved our 2007 Equity Incentive Plan (the “2007 Plan”) at which time a maximum of 150,000 shares of common stock were available for grant. In May 2010, June 2011 and May 2014, our stockholders approved amendments to our 2007 Plan to increase the maximum number of shares of common stock available for grant by 100,000, 4,500,000 and 1,750,000 shares of common stock, respectively, resulting in an aggregate of 6,500,000 shares of common stock authorized for issuance as of December 31, 2014. At December 31, 2014, there were 1,333,212 shares available for future grant under the 2007 Plan. Any shares that are issuable upon exercise of options granted that expire, are cancelled, or are received back by us pursuant to a net exercise of options, are available for future grant and issuance.


We also granted stock options and restricted stock awards under the 2002 Stock Incentive Plan (the “2002 Plan”) in prior years. The remaining shares available to be granted under the 2002 Plan expired in February 2012.


In 2014, 2013 and 2012, we granted options to certain employees outside of our stockholder approved stock option plans. All options to purchase our common stock were granted with an exercise price which equals fair market value of the underlying common stock on the grant dates and expire no later than ten years from the date of grant. The options are exercisable in accordance with vesting schedules that generally provide for them to be fully vested and exercisable four years after the date of grant, provided, however, that we have also issued stock options awards that are subject to performance vesting requirements. All stock option grants issued outside of our stockholder approved plans have been registered on Form S-8 with the SEC.


A summary of our stock option activity and related data follows:


   

Outstanding Options

 
           

Weighted-

 
           

Average

 
   

Number of

   

Exercise

 
   

Shares

   

Price

 

Balance at December 31, 2011

    2,505,283     $ 6.13  

Granted

    1,874,246       11.61  

Exercised

    —       —  

Cancelled

    (55,655

)

    9.56  

Balance at December 31, 2012

    4,323,874       8.46  

Granted

    4,256,971       8.08  

Exercised

    (537,029

)

    5.20  

Cancelled

    (1,688,135

)

    9.45  

Balance at December 31, 2013

    6,355,681       8.22  

Granted

    3,181,001       9.40  

Exercised

    (756,593

)

    6.34  

Cancelled

    (862,085

)

    9.88  

Balance at December 31, 2014

    7,918,004     $ 8.69  

For the year ended December 31, 2014, option holders exercised 756,593 stock options, a portion of which were exercised under the cashless exercise provision of the 2007 Plan, resulting in the net issuance of 587,997 shares of common stock and cash proceeds to us of approximately $3.1 million.


For the year ended December 31, 2014, options cancelled (included in the above table) consisted of 806,507 options forfeited with a weighted-average exercise price of approximately $9.06 and 55,578 options expired with a weighted-average exercise price of approximately $21.64.


As of December 31, 2014, options exercisable have a weighted-average remaining contractual term of 6.3 years. The total intrinsic value of stock option exercises, which is the difference between the exercise price and closing price of our common stock on the date of exercise, during the years ended December 31, 2014 and 2013, was approximately $3,377,000 and $1,720,000, respectively. There were no exercises during the year ended December 31, 2012. As of December 31, 2014 and 2013, the total intrinsic value of options outstanding and exercisable was approximately $14,654,000 and $4,943,000, respectively, which is the difference between the exercise price and closing price of our common stock.


   

Years Ended December 31,

 
   

2014

   

2013

   

2012

 
           

Weighted-

           

Weighted-

           

Weighted-

 
           

Average

           

Average

           

Average

 
           

Exercise

           

Exercise

           

Exercise

 
   

Options

   

Price

   

Options

   

Price

   

Options

   

Price

 

Exercisable at end of year

    2,237,901     $ 9.01       1,770,597     $ 8.67       1,142,099     $ 7.98  

Options vested or expected to vest

    7,841,074     $ 8.69       6,292,296     $ 8.22       4,283,344     $ 8.45  

Exercise prices and weighted-average remaining contractual lives for the options outstanding as of December 31, 2014 were:


                                   

Weighted-

 
           

Weighted-

                   

Average

 
           

Average

   

Weighted-

           

Exercise

 
           

Remaining

   

Average

           

Price of

 
 

Options

 

Range of

 

Contractual

   

Exercise

   

Options

   

Options

 
 

Outstanding

 

Exercise Prices

 

Life (in years)

   

Price

   

Exercisable

   

Exercisable

 
    953,090  

$3.80 – $7.00

    5.92     $ 5.78       662,840     $ 5.34  
    2,511,808  

$7.20

    8.01       7.20       531,578       7.20  
    2,428,458  

$7.61 – $9.05

    9.12       8.87       204,669       8.95  
    1,991,338  

$9.20 – $15.40

    7.42       11.27       805,504       12.09  
    33,310  

$15.41 – $139.20

    1.05       36.97       33,310       36.97  
    7,918,004  

$3.80 – $139.20

    7.92       8.69       2,237,901       9.01  

At December 31, 2014, we had reserved 7,918,004 shares of common stock for future issuance upon exercise of outstanding options granted under the 2002 and 2007 Plans, as well as the non-plan grants.


Valuation and Expense Information


The following table summarizes stock-based compensation expense related to stock-based payment awards granted pursuant to all of our equity compensation arrangements for the years ended December 31, 2014, 2013 and 2012 (in thousands):


   

December 31,

 
   

2014

   

2013

   

2012

 

Research and development

  $ 3,329     $ 2,562     $ 1,617  

General and administrative

    4,738       8,328       4,115  

Stock-based compensation expense included in operating expenses

  $ 8,067     $ 10,890     $ 5,732  

As of December 31, 2014, there was $34,073,000 of total unrecognized compensation cost related to non-vested, stock-based payment awards granted under all of our equity compensation plans and all non-plan option grants. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. We expect to recognize this compensation cost over a weighted-average period of 2.6 years.


For the years ended December 31, 2014, 2013, and 2012, we estimated the fair value of each option grant and ESPP purchase right on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


Options:


   

December 31,

 
   

2014

   

2013

   

2012

 

Risk-free interest rate

    1.9

%

    1.1

%

    0.8

%

Dividend yield

    —

%

    —

%

    —

%

Volatility

    99.0

%

    104.2

%

    106.2

%

Expected life (years)

    6.0       6.0       5.5  

ESPP:


   

December 31,

 
   

2014

   

2013

   

2012

 

Risk-free interest rate

    0.1

%

    0.1

%

    0.2

%

Dividend yield

    —

%

    —

%

    —

%

Volatility

    53.8

%

    76.0

%

    77.9

%

Expected life (years)

    0.5       0.5       0.5  

The weighted-average fair value of options granted was $7.40, $6.53 and $9.21 for the years ended December 31, 2014, 2013 and 2012, respectively.


The weighted-average fair value of shares purchased through the ESPP was $3.06, $3.01 and $4.00 for the years ended December 31, 2014, 2013 and 2012, respectively.


The risk-free interest rate assumption is based on observed interest rates on United States Treasury debt securities with maturities close to the expected term of our employee and director stock options and ESPP purchases.


The dividend yield assumption is based on our history and expectation of dividend payouts. We have never paid dividends on its common stock and we do not anticipate paying dividends in the foreseeable future.


We used our historical stock price to estimate volatility.


The expected life of employee and director stock options represents the average of the contractual term of the options and the weighted-average vesting period, as permitted under the simplified method. We have elected to use the simplified method, as we do not have enough historical exercise experience to provide a reasonable basis upon which to estimate the expected term. The expected life for the ESPP purchase rights is six months, which represents the length of each purchase period.