Equity-Based Compensation

6 Months Ended

Jun. 30, 2012

Equity-Based Compensation

Equity-Based Compensation

H.Equity-Based Compensation

We currently maintain several equity compensation plans, including our Second Amended and Restated 2007 Equity Incentive Plan, or the 2007 Plan, our Amended and Restated 2000 Stock Plan, or the 2000 Plan, and our 2010 Employee Stock Purchase Plan.

Second Amended and Restated 2007 Equity Incentive Plan

As of June 30, 2012, we have granted options and restricted stock units covering 5,161,025 shares of common stock under our 2007 Plan, of which 1,723,324 stock options and 584,880 restricted stock units have expired or terminated, and of which 35,338 options have been exercised and 247,725 shares of common stock have been issued pursuant to restricted stock units that became fully vested. The number of options and restricted stock units outstanding under this plan as of June 30, 2012 was 2,186,032 and 383,726, respectively. The remaining number of shares available for future grants as of June 30, 2012 was 847,505, not including shares subject to outstanding awards under the 2000 Plan, which will be added to the total number of shares available for issuance under the 2007 Plan to the extent that such awards expire or terminate for any reason prior to exercise. All outstanding stock options granted under our 2007 Plan have an exercise price equal to the closing price of a share of our common stock on the grant date and have either a seven or ten-year term.

Amended and Restated 2000 Stock Plan

As of June 30, 2012, the number of shares underlying outstanding options which were issued pursuant to our 2000 Plan was 390,742. There were no restricted stock units outstanding as of June 30, 2012. In November 2007, the 2000 Plan was succeeded by our 2007 Plan and, accordingly, no further grants may be made under this plan. Any shares that remained available for issuance under the 2000 Plan as of the date of adoption of the 2007 Plan are included in the number of shares that may be issued under the 2007 Plan. Any shares subject to outstanding awards granted under the 2000 Plan that expire or terminate for any reason prior to exercise will be added to the total number of shares available for issuance under the 2007 Plan.

Other Equity Compensation Grants

In addition, in May 2012, in connection with his entry into an employment agreement as our President and Chief Executive Officer, our Board of Directors granted William Heiden an option to purchase 300,000 shares of our common stock at an exercise price equal to the then fair market value of a share of our common stock. The option will be exercisable in four equal annual installments beginning on the first anniversary of the grant date. Mr. Heiden was also granted 100,000 restricted stock units, which will vest in four equal annual installments beginning on the first anniversary of the grant date. The foregoing grants were made pursuant to an inducement grant exception under the NASDAQ rules and therefore were granted outside of our 2007 Plan. We assessed the terms of these awards to Mr. Heiden and determined there was no possibility that we would have to settle these awards in cash and therefore, equity accounting was applied.

Equity-based compensation expense

Equity-based compensation expense, excluding amounts that have been capitalized into inventory, for the three and six months ended June 30, 2012 and 2011 consisted of the following (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Cost of product sales	$	68	$	157	$	146	$	352
Research and development	525		639		947		1,281
Selling, general and administrative	984		1,825		2,169		5,463
Total equity-based compensation expense	$	1,577	$	2,621	$	3,262	$	7,096

We reduce the compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historical experience. Under the current accounting guidance, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.