Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

Stock-Based Compensation

Stock-Based Compensation

8. Stock-Based Compensation

Equity Incentive Plan

The 2004 Plan provides for the granting of stock options, restricted stock awards, stock appreciation rights and RSUs to employees, officers, directors and consultants of the Company. On April 27, 2010, an amendment and restatement of the 2004 Plan was approved by the Company’s stockholders to, among other things, reserve additional shares of common stock for issuance thereunder. As of March 31, 2012, total shares remaining available for issuance under the 2004 Plan were 720,587.

Employee Stock Purchase Plan

As of March 31, 2012, a total of 2,025,000 shares of common stock were approved and authorized for issuance under the ESPP. Through March 31, 2012, the Company issued 1,468,454 shares under the ESPP at an average price of $10.15 per share. Total shares remaining available for issuance under the ESPP were 556,546 as of March 31, 2012.

Stock-Based Compensation Expense

The allocation of stock-based compensation expense included in the condensed consolidated statements of operations was as follows:

	Three Months Ended March 31,
(in thousands)	2012		2011
Research and development	$	3,529	$	3,132
General and administrative	2,706		2,409
Total stock-based compensation expense	$	6,235	$	5,541

As of March 31, 2012, unrecognized compensation expense, net of expected forfeitures, was as follows: $7.0 million related to unvested stock options; $21.9 million related to unvested RSUs; and $29.1 million related to unvested RSAs (excludes performance-contingent RSAs).

Compensation Awards

The Company granted the following compensation awards:

	Three Months Ended March 31, 2012			Three Months Ended March 31, 2011
	Number of Compensation Awards Granted	Weighted- Average Exercise Price/Fair Value		Number of Compensation Awards Granted	Weighted- Average Exercise Price/Fair Value
2004 Plan
Stock options	118,000	$	19.05	94,000	$	22.12
RSUs time-based	468,541	18.12		394,580	24.59
RSAs time-based	402,500	18.11		1,148,000	24.70
RSAs performance-contingent(1)	44,500	18.11		1,290,000	24.73

(1)In 2011, the Compensation Committee of the Company’s Board of Directors approved the grant of 1,290,000 performance-contingent RSAs to senior management. These grants have dual triggers of vesting based upon the achievement of certain performance conditions over a six-year timeframe from 2011-2016 and continued employment, both of which must be satisfied in order for the RSAs to vest. Expense associated with these RSAs would be recognized, if at all, during these years depending on the probability of meeting the performance conditions. The maximum potential expense associated with the RSAs could be up to approximately $31.9 million (allocated as $6.3 million for research and development expense and $25.6 million for general and administrative expense) if all of the performance conditions are achieved on time. As of March 31, 2012, the Company had determined that the achievement of the requisite performance conditions was not probable and, as a result, no compensation expense has been recognized. As the RSAs are dependent upon the achievement of certain performance conditions, the expense associated with the RSAs may vary significantly from period to period. In 2012, the Compensation Committee of the Company’s Board of Directors approved the grant of 44,500 performance-contingent RSAs to senior management. These grants are subject to forfeiture unless one of three possible performance goals is achieved by December 31, 2013.

Valuation Assumptions

The range of weighted-average assumptions used to estimate the fair value of stock options granted was as follows:

	Three Months Ended March 31,
	2012			2011
Employee stock options
Risk-free interest rate	1.00%-1.17		%	2.38%-2.46		%
Expected life (in years)	6			6
Volatility	0.55			0.49
Dividend yield	—		%	—		%
Weighted-average estimated fair value of stock options granted	$	9.88		$	10.86

Stockholders’ Equity

For the three months ended March 31, 2012, approximately 247,818 shares were exercised at a weighted-average exercise price of $8.13 per share, for total cash proceeds of approximately $2,015,000.