L.BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

We compute basic net income (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding during the relevant period. Diluted net income (loss) per common share has been computed by dividing net income (loss) by the diluted number of shares outstanding during the period. Except where the result would be antidilutive to net income (loss), diluted net income (loss) per common share would be computed assuming the impact of the conversion of Convertible Notes, the exercise of outstanding stock options, the vesting of RSUs, and the exercise of warrants.

We have a choice to settle the conversion obligation under the Convertible Notes in cash, shares or any combination of the two. Pursuant to certain covenants in our Term Loan Facility, which we entered into to partially fund the acquisition of Lumara Health, we may be restricted from settling the conversion obligation in whole or in part with cash unless certain conditions in the Term Loan Facility are satisfied, including a first lien leverage ratio. Therefore, during the three months ended March 31, 2015, we utilized the if-converted method to reflect the impact of the conversion of the Convertible Notes.This method assumes the conversion of the Convertible Notes into shares of our common stock and reflects the elimination of the interest expense related to the Convertible Notes. In connection with the issuance of the Convertible Notes, in February 2014, we entered into convertible bond hedges. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we are required to make upon conversion of the Convertible Notes. See Note P, “Debt,” for additional information.

The dilutive effect of the warrants, stock options and RSUs has been calculated using the treasury stock method.

The components of basic and diluted net income (loss) per share for the three months ended March 31, 2015 and 2014 were as follows (in thousands, except per share data):

	Three Months Ended March 31,
	2015		2014
Net income (loss)	$	12,904	$	(7,102	)
Weighted average common shares outstanding	27,213		21,824
Effect of dilutive securities:
Stock options and restricted stock units	1,552		—
Warrants	7,382		—
Convertible 2.5% senior notes	2,098		—
Shares used in calculating dilutive net income (loss) per share	38,245		21,824

Net income (loss) per share:
Basic	$	0.47	$	(0.33	)
Diluted	$	0.39	$	(0.33	)

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of RSUs and the exercise of warrants (prior to consideration of the treasury stock method), which were excluded from our computation of diluted net income (loss) per share because their inclusion would have been anti-dilutive (in thousands):

	Three Months Ended March 31,
	2015	2014
Options to purchase shares of common stock	856	3,335
Shares of common stock issuable upon the vesting of restricted stock units	298	481
Warrants	—	7,382
Total	1,154	11,198

During the three months ended March 31, 2014, the average common stock price was below the exercise price of the warrants.