NOTE 5 — STOCK-BASED COMPENSATION

The Company's Amended and Restated 2004 Equity Incentive Award Plan, or the Plan, which is stockholder-approved, provides for the issuance of options and other stock-based awards, including restricted stock and stock appreciation rights, covering up to 7,500,000 shares of the Company's common stock. Shares issued upon exercise of stock-based awards are new shares that have been reserved for issuance under the Plan. The amendment and restatement of the Plan was approved by the Board and by the stockholders in March and May 2007, respectively.

The Plan is administered by the Board, or a committee appointed by the Board, which determines recipients and types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the Plan cannot exceed ten years. Options generally have an exercise price equal to the fair market value of the common stock on the grant date and generally vest over a period of four years. Restricted stock units granted under the Plan typically vest in three equal installments of on the first, second and third anniversaries of the grant date. In addition, all outstanding awards under the Plan will accelerate and become immediately exercisable upon a "change of control" of the Company, as defined in the Plan.

The following table summarizes stock option activity for the six months ended June 30, 2011:


	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2010		5,041,303	$	17.39
Granted		81,024	$	15.81
Exercised		332,081	$	8.78
Forfeited		46,282	$	22.43

Outstanding at June 30, 2011		4,743,964	$	17.91		6.97	$	26.5

Exercisable/vested at June 30, 2011		3,080,977	$	16.19		6.14	$	19.9

The following table summarizes restricted stock unit activity for the six months ended June 30, 2011:


	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2010		173,119	$	14.23
Granted		—		—
Vested		834	$	15.71
Forfeited		1,500	$	15.50

Outstanding at June 30, 2011		170,785	$	14.21		2.5	$	3.7

The Company estimates the fair value of stock options and warrants using the Black-Scholes option valuation model. Estimated volatility is based on the historical stock price volatility of the Company's common stock, the historical stock price volatility of comparable companies' common stock and the implied volatility of the Company's common stock inherent in the market prices of publicly traded options in its common stock. Estimated dividend yield is 0%. The risk-free rate is estimated to equal U.S. Treasury security rates for the applicable terms. For employee and director options, the Company estimates option term based on its actual exercise experience and an assumption that unexercised options will remain outstanding for a period equal to the midpoint between the date the option vests in full and the contractual option termination date. For the second quarter of 2011, this methodology produced an estimated term of 5.99 years for options granted to employees and directors. For consultant options, at each valuation date the Company uses an estimated option term equal to the period then required for the option to vest in full. Consultant options generally vest over a period of four years from the option grant date. Different estimates of volatility, dividend yield, risk-free rate and expected term could materially change the estimated value of an option and the resulting expense.

Stock-based awards granted to employees and directors are valued at their respective grant dates and expensed over the remaining vesting period of the award. Stock-based awards granted to consultants are valued at their respective measurement dates and recognized as expense based on the portion of the total consulting services provided during the applicable period. As further consulting services are provided in future periods, the Company will revalue the associated awards and recognize additional expense based on their then-current fair values

Total stock-based compensation expense recognized by the Company in the three and six months ended June 30, 2011 and 2010 was as follows:


	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
	(in thousands)				(in thousands)
Stock-based compensation expense recognized as:
Research and development expense	$	2,108	$	1,838	$	4,178	$	3,691
Selling, general and administrative expense		1,567		1,364		3,111		3,014

Total stock-based compensation expense	$	3,675	$	3,202	$	7,289	$	6,705

Unearned stock-based compensation expense attributable to employee and director awards totaled $23.0 million at June 30, 2011 and will be recognized as expense over a weighted-average period of 2.48 years.