NOTE 6 — STOCK-BASED COMPENSATION

(a) Medivation Equity Incentive Plan

The Medivation Amended and Restated 2004 Equity Incentive Award Plan, or the Medivation Equity Incentive Plan, which is stockholder-approved, provides for the issuance of options and other stock-based awards, including restricted stock units, performance share awards and stock appreciation rights, covering up to 7,500,000 shares of Medivation’s common stock. Shares issued upon exercise of stock-based awards are new shares that have been reserved for issuance under the Medivation Equity Incentive Plan. The amendment and restatement of the Medivation Equity Incentive Plan was approved by the Company’s Board of Directors, or Board, and by the Company’s stockholders in March and May 2007, respectively. See Note 12, “Subsequent Events,” for additional information regarding the Medivation Equity Incentive Plan.

The Medivation Equity Incentive 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 vesting of all outstanding awards under the Medivation Equity Incentive Plan, including all outstanding options, restricted stock units, performance share awards and stock appreciation rights will accelerate and become immediately exercisable upon a “change of control” of Medivation, as defined in the Medivation Equity Incentive Plan.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2012:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2011		4,301,808		$	18.34
Granted		370,538		$	66.99
Exercised		(949,531	)	$	11.93
Forfeited		(48,487	)	$	25.88

Outstanding at June 30, 2012		3,674,328		$	24.80		7.03	$	244.7

Vested and exercisable at June 30, 2012		2,092,153		$	19.60		5.74	$	150.2

(1)	The aggregate intrinsic value is calculated as the pre-tax difference between the exercise price of the underlying awards and the closing stock price per share of $91.40 of the Company’s common stock on June 29, 2012. The amount is presented in millions.

The Company estimates the fair value of each stock option on the grant date using the Black-Scholes valuation model, which requires the use of subjective assumptions related to the expected stock price volatility, expected stock option term, expected dividend yield and expected risk-free rates of return. The following presents the assumptions used to estimate the fair value of stock options granted and the weighted-average grant date fair value per share of options granted during the periods presented:


	Three months ended June 30,					Six months ended June 30,
	2012			2011⁽¹⁾		2012			2011
Risk-free interest rate		0.83	%		—		0.83 - 1.01	%		2.33 - 2.34	%
Estimated term (in years)		5.42			—		5.42 - 5.48			5.99
Estimated volatility		71	%		—		71 - 73	%		81	%
Estimated dividend yield		—			—		—			—
Weighted-average grant date fair value per share of options granted	$	51.73		$	—	$	40.91		$	11.07

(1)	No stock options were granted during the three months ended June 30, 2011.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the six months ended June 30, 2012:


	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2011		101,617		$	14.35
Granted		32,903		$	46.39
Forfeited		(9,737	)	$	23.59

Unvested at June 30, 2012		124,783		$	22.07

Performance Share Awards

The Company granted performance share awards in 2011 to certain employees pursuant to the terms of the Medivation Equity Incentive Plan. The terms of the performance share awards provide for base case and upside case numbers of shares eligible to be earned based on the level of achievement of specified performance objectives related to commercial product sales and timelines.

The performance shares under the awards will be earned, if at all, upon determination by the Compensation Committee of the Board of Directors, or the Committee, of actual achievement of performance objectives, subject to specified change of control exceptions. Each recipient of a performance share award must remain an employee of the Company through the date the Committee determines actual performance has been achieved in order to earn the performance shares eligible under the award. Each performance share award is convertible into one share of the Company’s common stock upon the achievement of the performance objective. The base and upside case numbers of shares eligible to be earned under the performance share awards are set forth below. The number of performance shares eligible to be earned at the upside case level is based on achievement of the applicable performance objective by a specified date, and the number of performance shares eligible to be earned at the base case level is based on the achievement of the performance objective during the ten year term of the performance share awards. The following summarizes the performance share awards outstanding and eligible to be earned at June 30, 2012:


	Base Case Achievement		Upside Case Achievement
Performance shares eligible to be earned		20,835		41,666

Stock-based compensation expense associated with performance share awards is based on the grant date fair value of the Company’s common stock and is recognized based on the probable outcome of the performance conditions, which are evaluated quarterly. No stock-based compensation expense with respect to the performance shares was recognized during the three and six months ended June 30, 2012.

Stock Appreciation Rights

The Company has granted stock appreciation rights to certain employees pursuant to the terms of the Medivation Equity Incentive Plan. Stock appreciation rights give the holder the right, upon exercise, to receive the difference between the market price per share of the Company’s common stock at the time of exercise and the exercise price of the stock appreciation right. The exercise price of the stock appreciation right is equal to the market price of the Company’s common stock at the date of the grant. Until such time, if any, that the Company’s stockholders approve an increase to the number of shares of common stock available pursuant to the Medivation Equity Incentive Plan, the stock appreciation rights may be settled only in cash; following such approval, if it occurs, the stock appreciation rights may be settled only in the Company’s common stock. See Note 12, “Subsequent Events,” for additional information regarding the Company’s stock appreciation rights.

The following table summarizes stock appreciation rights activity for the six months ended June 30, 2012:


	Number of Rights			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2011		262,800		$	48.79
Granted		193,700		$	46.39
Forfeited		(14,700	)	$	46.39

Outstanding at June 30, 2012		441,800		$	47.81		9.48	$	19.3

(1)	The aggregate intrinsic value is calculated as the pre-tax difference between the exercise price of the underlying awards and the closing stock price per share of $91.40 of the Company’s common stock on June 29, 2012. The amount is presented in millions.

The Company records compensation expense for cash-settled stock appreciation rights based on the estimated fair value on the date of grant using the Black-Scholes valuation model, which requires the use of subjective assumptions related to the expected stock price volatility, expected term, expected dividend yield and risk-free interest rate. Cash-settled stock appreciation rights are liability-classified awards for which compensation expense and the liability are remeasured at each interim reporting date until they are settled based upon the portion of the requisite service period rendered, using a revised Black-Scholes valuation. The fair value of each cash-settled stock appreciation right was estimated on the date of the grant, and was remeasured at June 30, 2012, using the Black-Scholes valuation model with the following assumptions:


	Stock Appreciation Rights Granted During the Six Months Ended June 30, 2012			Remeasurement as of June 30, 2012
Risk-free interest rate		1.01	%		0.83	%
Estimated term (in years)		5.48			5.42
Estimated volatility		73	%		71	%
Estimated dividend yield		—			—

The weighted-average fair value per share of cash-settled stock appreciation rights granted during the six months ended June 30, 2012 was $28.67. The weighted average fair value per share of all cash-settled stock appreciation rights outstanding as of the remeasurement date of June 30, 2012 was $66.16. As of June 30, 2012, no cash-settled stock appreciation rights were exercisable. No stock appreciation rights were granted during the three months ended June 30, 2012. At June 30, 2012, $3.6 million was recorded in accrued expenses on the accompanying unaudited consolidated balance sheet related to stock appreciation rights.

Stock-Based Compensation

Stock-based compensation expense was as follows:


	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Stock-based compensation expense recognized as:
Research and development expense	$	3,048	$	2,108	$	5,485	$	4,178
Selling, general and administrative expense		2,533		1,567		4,432		3,111

Total	$	5,581	$	3,675	$	9,917	$	7,289

Unrecognized stock-based compensation expense associated with stock options, restricted stock units and stock appreciation rights totaled $51.7 million at June 30, 2012 and is expected to be recognized over a weighted-average period of 3.1 years.