8. STOCKHOLDERS’ EQUITY

(a) Stock Purchase Rights

All shares of the Company’s common stock, if issued prior to the termination by the Company of its rights agreement, dated as of December 4, 2006, include stock purchase rights. The rights are exercisable only if a person or group acquires twenty percent or more of the Company’s common stock or announces a tender or exchange offer which would result in ownership of twenty percent or more of the Company’s common stock. Following the acquisition of twenty percent or more of the Company’s common stock, the holders of the rights, other than the acquiring person or group, may purchase Medivation common stock at half of its fair market value. In the event of a merger or other acquisition of the Company, the holders of the rights, other than the acquiring person or group, may purchase shares of the acquiring entity at half of their fair market value. The rights were not exercisable at December 31, 2012.

(b) Medivation Equity Incentive Plan

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. 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 all such share awards will become immediately exercisable, upon a “change of control” of Medivation, as defined in the Medivation Equity Incentive Plan.

On July 13, 2012, the Company’s stockholders approved an amendment and restatement of the Medivation Equity Incentive Plan to increase the aggregate number of shares of common stock authorized for issuance under the Medivation Equity Incentive Plan from 7,500,000 to 9,300,000. As a result of the two-for-one forward stock split described previously, the number of shares of common stock authorized for issuance under the Medivation Equity Incentive Plan was increased to 18,600,000 effective September 21, 2012. As a result of the stock split, the number of shares of the Company’s common stock issuable upon exercise of outstanding stock options and vesting of other stock-based awards was proportionally increased, and the exercise price per share thereof was proportionally decreased, in accordance with the terms of the Medivation Equity Incentive Plan. At December 31, 2012, approximately 1.9 million shares of common stock were available for issuance under the Medivation Equity Incentive Plan.

Stock Options

The Company has granted stock options pursuant to the terms of the Medivation Equity Incentive Plan. The terms of stock options granted under the Medivation Equity Incentive Plan cannot exceed ten years. Stock options generally have an exercise price equal to the fair market value of the Company’s common stock on the grant date, and generally vest over a period of four years.

The following table summarizes stock option activity for the year ended December 31, 2012, as adjusted to reflect the two-for-one forward stock split effected on September 21, 2012:


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value⁽¹⁾
Options outstanding at December 31, 2011		8,603,616		$	9.17
Granted		1,785,656		$	44.43
Exercised		(3,143,360	)	$	7.01
Forfeited		(207,621	)	$	17.42

Options outstanding at December 31, 2012		7,038,291		$	18.90		7.28	$	229.6

Vested and exercisable at December 31, 2012		3,721,873		$	10.41		5.88	$	151.7

(1)	The aggregate intrinsic value is calculated as the pre-tax difference between the weighted-average exercise price of the underlying awards and the closing price per share of $51.16 of the Company’s common stock on December 31, 2012. The amount is presented in millions.

Additional information regarding stock options is set forth below:


	Years Ended December 31,
	2012		2011		2010
Intrinsic value of options exercised	$	116,867	$	22,238	$	8,584
Grant-date fair value of options vested	$	10,795	$	12,608	$	13,730
Weighted-average grant-date fair value per share of options granted (split-adjusted)	$	26.01	$	6.88	$	4.82

Restricted Stock Units

The Company has granted restricted stock units to employees pursuant to the terms of the Medivation Equity Incentive Plan. A restricted stock unit award is an agreement to issue shares of the Company’s common stock at the time of vesting. Restricted stock units generally vest in three equal installments on approximately the first, second and third anniversaries of the grant date.

The following table summarizes restricted stock unit activity for the year ended December 31, 2012, as adjusted to reflect the two-for-one forward stock split effected on September 21, 2012:


	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2011		203,234		$	7.17
Granted		309,086		$	47.19
Vested		(113,112	)	$	9.90
Forfeited		(25,583	)	$	12.90

Unvested at December 31, 2012		373,625		$	39.06

The total fair value of restricted stock units that vested during the years ended December 31, 2012, 2011 and 2010 was $6.2 million, $2.4 million and $0.2 million, respectively.

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 provided 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 number of performance shares eligible to be earned at the upside case level was 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 was based on the achievement of the performance objective during the ten year term of the performance share awards. The performance shares under the awards were to 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.

The following table summarizes performance share award activity for the year ended December 31, 2012, as adjusted to reflect the two-for-one forward stock split effected on September 21, 2012:


	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2011		125,000		$	24.40
Earned		(83,332	)	$	24.40
Cancelled		(41,668	)	$	24.40

Unvested at December 31, 2012		—			—

During the year ended December 31, 2012, the Committee certified the actual achievement of performance objectives related to certain performance share awards at the upside case level. As a result, recipients earned a total of 83,332 shares of common stock. The total fair market value of performance share awards that vested during year ended December 31, 2012, was $4.7 million. In December 2012, the Committee cancelled all remaining performance share awards covering an aggregate of 41,668 shares of common stock.

Stock Appreciation Rights

The Company 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. Initially, the stock appreciation rights were only settlable in cash. On July 13, 2012, upon approval of an increase in the number of shares of common stock available for issuance under the Medivation Equity Incentive Plan by the Company’s stockholders, the stock appreciation rights were converted to stock-settled awards.

The following table summarizes stock appreciation rights activity for the year ended December 31, 2012, as adjusted to reflect the two-for-one forward stock split effected on September 21, 2012:


	Number of Rights			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value⁽¹⁾
Outstanding at December 31, 2011		525,600		$	24.40
Granted		387,400		$	23.20
Forfeited		(29,400	)	$	23.20

Outstanding at December 31, 2012		883,600		$	23.91		8.97	$	24.1

Vested and exercisable at December 31, 2012		131,400		$	24.40		8.95	$	3.5

(1)	The aggregate intrinsic value is calculated as the pre-tax difference between the weighted-average exercise price of the underlying awards and the closing price per share of $51.16 of the Company’s common stock on December 31, 2012. The amount is presented in millions.

The weighted-average grant date fair value per share of stock appreciation rights that were granted during the years ended December 31, 2012 and 2011 were $14.33 and $14.91, respectively. The weighted-average remeasurement-date fair value per share of cash-settled stock appreciation rights that were converted to stock-settled stock appreciation rights during 2012 was $32.94. The fair value (based on the remeasurement-date fair value per share) of stock appreciation rights that vested during the year ended December 31, 2012, was $4.3 million. No stock appreciation rights were granted during the year ended December 31, 2010.

Warrants

At December 31, 2012, warrants to purchase an aggregate of 45,808 shares of Medivation common stock at a weighted-average exercise price of $3.46 per share were outstanding. These outstanding warrants expire between 2014 and 2017.

Stock-Based Compensation

The Company estimated the fair value of stock options and stock appreciation rights using the Black-Scholes valuation model. The Black-Scholes assumptions used for stock options and stock appreciation rights granted and/or remeasured during the periods presented were:


	Years Ended December 31,
	2012			2011			2010
Expected volatility		66-73	%		71-86	%		71-72	%
Expected term (in years)		5.3-5.5			5.6-6.0			6.0
Risk-free interest rate		0.68-1.01	%		1.02-2.34	%		1.48-2.39	%
Expected dividend yield		—			—			—

Beginning in 2011, the Company has estimated expected volatility based on the historical price volatility of its common stock and implied volatility of its common stock inherent in the market price of publicly traded options in its common stock. In 2010, the Company also considered the historical price volatility of comparable companies’ common stock. The Company estimates expected term based on 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. The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the awards at the time of grant. The Company uses a dividend yield of zero as it has no history or expectation of paying cash dividends on its common stock.

Stock-based compensation expense was as follows for the periods presented:


	Years Ended December 31,
	2012		2011		2010
Stock-based compensation expense recognized as:
R&D expenses	$	11,998	$	8,090	$	7,629
SG&A expenses		11,680		5,795		5,901

Total	$	23,678	$	13,885	$	13,530

At December 31, 2012, the unrecognized stock-based compensation expense related to awards granted under the Medivation Equity Incentive Plan totaled $79.0 million and is expected to be recognized as non-cash compensation expense over a weighted-average period of 3.1 years.