Equity-Based Compensation

3 Months Ended

Mar. 31, 2013

Equity-Based Compensation

Equity-Based Compensation

J. 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. During the three months ended March 31, 2013, we also granted equity to our Chief Commercial Officer through an inducement grant that was outside of these plans.

Second Amended and Restated 2007 Equity Incentive Plan

As of March 31, 2013, we have granted options and restricted stock units covering 6,085,975 shares of common stock under our 2007 Plan, of which 2,409,472 stock options and 619,537 restricted stock units have expired or terminated, and of which 38,900 options have been exercised and 383,200 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 March 31, 2013 was 2,259,972 and 374,894, respectively. The remaining number of shares available for future grants as of March 31, 2013 was 954,851, 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 March 31, 2013, the number of shares underlying outstanding options which were issued pursuant to our 2000 Plan was 114,641. There were no restricted stock units outstanding as of March 31, 2013. 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 January 2013, in connection with the entry into an employment agreement, our Board of Directors, or Board, granted our Chief Commercial Officer an option to purchase 75,000 shares of our common stock at an exercise price equal to the fair market value of a share of our common stock on the date of grant. The option will be exercisable in four equal annual installments beginning on the first anniversary of the grant date. Our Chief Commercial Officer was also granted 35,000 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 outside of our 2007 Plan as permitted under the NASDAQ Global Market rules. We assessed the terms of these awards and determined there was no possibility that we would have to settle these awards in cash and therefore, equity accounting was applied.

In February 2013, we granted restricted stock units to certain members of our senior management covering a maximum of 82,500 shares of common stock, which are subject to a performance condition tied to the price of our common stock. These restricted stock units vest, if at all, at the end of the three-year period ending December 31, 2015 based on the achievement of a minimum, target or maximum stock price range. In the event that the minimum stock price range is not achieved at the measurement date, none of the restricted stock units will vest. The total fair value of these restricted stock units is $0.7 million, which we will recognize to expense over a period of three years from the date of grant, net of any estimated and actual forfeitures.

Equity-based compensation expense

Equity-based compensation expense, excluding amounts that have been capitalized into inventory, for the three months ended March 31, 2013 and 2012 consisted of the following (in thousands):

	Three Months Ended March 31,
	2013		2012
Cost of product sales	$	23	$	78
Research and development	932		422
Selling, general and administrative	1,328		1,185
Total equity-based compensation expense	$	2,283	$	1,685

We reduce the equity-based compensation expense being recognized to account for estimated forfeitures, which we estimate based primarily on historical experience, adjusted for unusual events such as our corporate restructuring in 2012, which resulted in higher than expected turnover and forfeitures in that year. Under 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.