NOTE 11. 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, 2015.

(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 and stock appreciation rights. The vesting of all outstanding awards under the Medivation Equity Incentive Plan will accelerate, and all such awards will become immediately exercisable, upon a “change of control” of Medivation, as defined in the Medivation Equity Incentive Plan. On June 16, 2015, 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 21,150,000 to 23,850,000. As a result of the two-for-one stock split effected through a stock dividend described in Note 2, “Summary of Significant Accounting Policies,” the number of shares of common stock authorized for issuance under the Medivation Equity Incentive Plan was increased to 47,700,000 effective on September 15, 2015. As a result of the stock dividend, 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 as applicable for options and stock appreciation rights was proportionally decreased, in accordance with the terms of the Medivation Equity Incentive Plan.

As of September 30, 2015, approximately 8.8 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, 2015:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2014		10,135,914		$	16.76
Granted		1,631,634		$	53.86
Exercised		(1,278,016	)	$	11.22
Forfeited/expired		(230,274	)	$	41.34

Outstanding at September 30, 2015		10,259,258		$	22.80		6.24	$	221.5

Vested and exercisable at September 30, 2015		6,893,054		$	13.05		5.02	$	203.1

⁽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 $42.50 of the Company’s common stock on September 30, 2015. The calculation excludes any awards with an exercise price higher than the closing price of the Company’s common stock on September 30, 2015. 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, 2015 was $25.60.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2015:


	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2014		967,160		$	38.10
Granted		574,695		$	53.93
Vested		(247,572	)	$	38.04
Forfeited		(98,926	)	$	44.84

Unvested at September 30, 2015		1,195,357		$	45.16

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for the nine months ended September 30, 2015:


	Number of Rights			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2014		1,376,456		$	12.03
Granted		—			—
Exercised		(55,048	)	$	11.60
Forfeited		(17,156	)	$	11.60

Outstanding at September 30, 2015		1,304,252		$	12.05		6.19	$	39.7

Vested and exercisable at September 30, 2015		1,213,404		$	12.05		6.18	$	36.9

(1)

(c) ESPP

The ESPP 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 contributions are limited on an annual basis to $25,000 in accordance with Section 423 of the Internal Revenue Code. As a result of the stock dividend described in Note 2, “Summary of Significant Accounting Policies,” the number of shares of common stock authorized for issuance under the ESPP was increased from 3,000,000 shares to 6,000,000 shares effective September 15, 2015. As of September 30, 2015, a total of 312,086 shares have been issued under the ESPP.

(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 were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Risk-free interest rate	1.37-1.77%	1.56-1.79%	1.33-1.78%	1.56-1.79%
Estimated term (in years)	5.01-7.17	5.06	4.99-7.17	5.06-5.50
Estimated volatility	57-64%	63%	50-64%	60-64%
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:


	Nine Months Ended September 30,
	2015			2014
Risk-free interest rate		0.12	%		0.06	%
Estimated term (in years)		0.50			0.50
Estimated volatility		37	%		53	%
Estimated dividend yield		—			—

No offering periods commenced during the third quarters of 2014 or 2015.

Stock-based compensation expense was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Stock-based compensation expense recognized as:
R&D expense	$	5,673	$	4,611	$	17,593	$	13,236
SG&A expense		7,719		7,346		23,249		19,563

Total	$	13,392	$	11,957	$	40,842	$	32,799

Unrecognized stock-based compensation expense was approximately $95.7 million at September 30, 2015 and is expected to be recognized over a weighted-average period of approximately 2.5 years.