Common Stock Equity Incentive Plan

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Common Stock Equity Incentive Plan

Common Stock Equity Incentive Plan

In April 2000, the stockholders approved NewLink’s 2000 Equity Incentive Plan (the “2000 Plan”), and in July 2009, the stockholders approved NewLink’s 2009 Equity Incentive Plan (the “2009 Plan”). Following the approval of the 2009 Plan, all options outstanding under the 2000 Plan are effectively included under the 2009 Plan. Under the provisions of the 2009 Plan, NewLink may grant the following types of common stock awards:

• Incentive Stock Options

• Nonstatutory Stock Options

• Restricted Stock Awards

• Stock Appreciation Rights

Awards under the 2009 Plan, as amended, may be made to officers, employees, Board of Directors, advisors, and consultants to NewLink. As of December 31, 2012 there were 4,895,139 shares of common stock authorized for the 2009 plan and 614,665 shares remained available for issuance. As of December 31, 2011 there were 4,071,490 shares of common stock authorized for the 2009 plan and 319,239 shares remained available for issuance.

On January 7, 2011, stockholders authorized an increase of 714,286 shares of common stock available for issuance under the 2009 Plan. On January 1, 2012 an additional 823,649 shares of common stock were added to the shares reserved for future issuance under the Company’s 2009 Equity Incentive Plan. Subsequent to year end, on January 1, 2013 an additional 838,375 shares of commons stock were added to the shares reserved for future issuance under the Company's 2009 Equity Incentive Plan. The shares added to the reserve on January 1, 2012 and January 1, 2013 were increased pursuant to an “evergreen provision” on January 1 of each year, from 2012 to (and including) 2019, in an amount equal to 4% of the total number of shares of Common Stock outstanding on December 31 of the preceding calendar year.

Under the terms of the Company's 2010 Non-Employee Directors’ Stock Option Plan, or Directors’ Plan, which became effective on November 10, 2011, 238,095 shares of common stock were reserved for future issuance. As of December 31, 2012, 164,297 shares remained available for issuance under the plan.

Under the terms of the Company's 2010 Employee Stock Purchase Plan, or 2010 Purchase Plan, which became effective on November 10, 2011, 214,285 shares of common stock were reserved for future issuance. As of December 31, 2012, 174,762 shares remained available for issuance under the plan. During the year ending December 31, 2012, 39,523 shares of common stock were purchased under the terms of the plan.

Stock Options

Share-based employee compensation expense for the years ended December 31, 2012, 2011 and 2010, and from inception through December 31, 2012 was $3.2 million, $2.5 million, $1.5 million and $8.5 million, respectively, and is allocated between research and development and general and administrative expenses within the consolidated statements of operations, giving rise to a related tax benefit of $0 for all periods. As of December 31, 2012, the total compensation cost related to nonvested option awards not yet recognized was $4.3 million and the weighted average period over which it is expected to be recognized was 2.3 years.

The NewLink Board of Directors determines the vesting period for each stock option award. Generally, stock options awarded to date under the 2009 Plan vest 20% or 25% on the first anniversary date of issuance with the remaining options vesting ratably over the next 36 to 48 months, though some options have effective vesting periods that begin prior to the date of grant. In such cases, compensation expense was recognized for the vested portion of the award upon grant. The stock options may include provisions for early exercise of options. If any shares acquired are unvested, they are subject to repurchase at NewLink’s discretion until they become vested.

The following table summarizes the stock option activity for the year ended December 31, 2012:

	Number of options		Weighted average exercise price		Weighted average remaining contractual term (years)
Outstanding at beginning of period	3,515,051		$	3.51
Options granted	672,079		8.10
Options exercised	(341,429	)	2.60
Options forfeited	(86,296	)	6.88
Options expired	(6,992	)	2.94
Outstanding at end of period	3,752,413		$	4.34	7.2
Options exercisable at end of period	2,571,041		$	3.34	6.7

In the above table, options granted includes 13,000 shares of stock grants, which are fully vested at issuance.

Based on the December 31, 2012 price of $12.50 per share, the intrinsic value of stock options outstanding at December 31, 2012, was $30.8 million, of which $23.5 million and $7.3 million related to stock options that were vested and unvested, respectively, at that date.

The following table summarizes options that were granted during the years ended December 31, 2012, 2011 and 2010, and the range of assumptions used to estimate the fair value of those stock options using a Black-Scholes valuation model:

	Years Ended December 31,
	2012	2011	2010
Number of options granted	672,079	664,323	1,297,738
Risk-free interest rate	0.98%-2.05%	0.1%-3.1%	2.3%-3.5%
Expected dividend yield	—	—	—
Expected volatility	63.0%-73.6%	62.6%-67.9%	59.8%-68.1%
Expected term (in years)	5.8-7.0	5.0-7.5	5.0-7.5
Weighted average grant-date fair value per share	$5.02	$7.12	$2.90

The intrinsic value of options exercised during the year ended December 31, 2012 was $3.6 million. The fair value of awards vested during the year ended December 31, 2012 was $2.5 million.

The intrinsic value of options exercised during the year ended December 31, 2011 was $194,000. The fair value of awards vested during the year ended December 31, 2011 was $7.8 million.

The intrinsic value of options exercised during the year ended December 31, 2010 was $82,000. The fair value of awards vested during the year ended December 31, 2010 was $3.7 million.

NewLink does not have a formal policy regarding the source of shares issued upon exercise of stock options. NewLink expects shares issued upon future stock option exercises to be new shares.