NOTE 9 — 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 September 30, 2014.

(b) Medivation Equity Incentive Plan

The Medivation Equity Incentive Plan provides for the issuance of options and other stock-based awards, including restricted stock units, performance share awards and stock appreciation rights. The vesting of all outstanding awards under the Medivation Equity Incentive Plan 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 June 27, 2014, 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 19,150,000 to 21,150,000. As of September 30, 2014, approximately 2.8 million shares were available for issuance under the Medivation Equity Incentive Plan.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2014:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2013		6,614,534		$	22.12
Granted		851,213		$	75.57
Exercised		(1,593,563	)	$	13.87
Forfeited		(427,701	)	$	45.89
Expired		(243	)	$	48.18

Outstanding at September 30, 2014		5,444,240		$	31.02		6.49	$	369.4

Vested and exercisable at September 30, 2014		3,613,023		$	18.42		5.43	$	290.7

⁽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 $98.87 of the Company’s common stock on September 30, 2014. The calculation excludes any awards with an exercise price higher than the closing price of the Company’s common stock on September 30, 2014. The amounts are presented in millions.

The weighted-average grant-date fair value per share of options granted during the nine months ended September 30, 2014 was $41.54.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2014:


	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2013		311,347		$	52.57
Granted		345,034		$	79.85
Vested		(37,952	)	$	53.11
Forfeited		(74,254	)	$	62.73

Unvested at September 30, 2014		544,175		$	68.64

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for the nine months ended September 30, 2014:


	Number of Rights			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2013		806,116		$	23.98
Granted		—		$	—
Exercised		(58,850	)	$	23.71
Forfeited		(10,384	)	$	24.40

Outstanding at September 30, 2014		736,882		$	23.99		7.03	$	55.2

Vested and exercisable at September 30, 2014		494,136		$	24.01		6.94	$	37.0

⁽¹⁾

(c) ESPP

The ESPP, which was approved by the Company’s stockholders on June 28, 2013, permits eligible employees to purchase shares of the Company’s common stock through payroll deductions at the lower of 85% of the fair market value of the common stock at the beginning or end of a purchase period. Eligible employee purchases are limited on an annual basis to $25,000 in accordance with Section 423 of the Internal Revenue Code. As of September 30, 2014, a total of 3,000,000 shares of the Company’s common stock were authorized for issuance under the ESPP, and 90,067 shares have been issued.

(d) Stock-Based Compensation

The Company estimates the fair value of stock options, stock appreciation rights, and ESPP shares using the Black-Scholes valuation model. The Black-Scholes assumptions used to estimate the fair value of stock options granted during the periods were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Risk-free interest rate		1.56-1.79	%		1.45	%		1.56-1.79	%		0.73-1.55	%
Estimated term (in years)		5.06			5.25			5.06-5.50			5.24-5.50
Estimated volatility		63	%		68	%		60-64	%		68-75	%
Estimated dividend yield		—			—			—			—

The Black-Scholes assumptions used to estimate the fair value of shares issued under the ESPP on the commencement date of the offering period were as follows. No offering periods commenced during the third quarter of 2014.


	Nine Months Ended September 30, 2014
Risk-free interest rate		0.06	%
Estimated term (in years)		0.50
Estimated volatility		53	%
Estimated dividend yield		—

Stock-based compensation expense was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Stock-based compensation expense recognized as:
R&D expense	$	4,611	$	3,765	$	13,236	$	11,202
SG&A expense		7,346		5,436		19,563		14,426

Total	$	11,957	$	9,201	$	32,799	$	25,628

Unrecognized stock-based compensation expense totaled $80.5 million at September 30, 2014, and is expected to be recognized over a weighted-average period of 2.40 years.