8. STOCK COMPENSATION

The Company’s equity incentive plans allow for the granting of a variety of stock awards. To date, the Company has granted stock options, restricted stock awards, RSUs and SARs.

Stock-based compensation costs are based on the fair value calculated utilizing the Black-Scholes-Merton option pricing model on the date of grant. The fair value of stock awards, with consideration given to estimated forfeitures, is amortized as compensation expense on a straight-line basis over the vesting period of the grants.

In June 2013, the Company’s stockholders approved an additional 3.6 million shares available for grants under the Amended and Restated 2011 Equity Incentive Plan (the 2011 Plan) and stockholders approved the 2013 Employee Stock Purchase Plan (ESPP) with 250,000 shares available to be issued. As of June 30, 2013, 3,199,747 shares of common stock remain available for future grant under the 2011 Plan and 250,000 shares are available to be issued under the ESPP.

Stock Options

In general, stock options granted prior to December 31, 2010 vest over a three year period, with one-third of the underlying shares vesting on each anniversary of grant, and have a ten year term. Beginning in January 2011, stock options granted generally vest over a four year period, with one-fourth of the underlying shares vesting on the first anniversary of the grant and the remaining underlying shares vesting pro-ratably on a monthly basis thereafter, such that the underlying shares will be fully vested on the fourth anniversary of the grant.

In June 2013, the Company granted 969,500 of time-based stock options that vest in the manner described above and 459,500 stock options with performance-based vesting criteria. The performance criteria is based upon the achievement of certain clinical and regulatory milestones. As of June 30, 2013, the achievement of these performance criteria is not probable and accordingly the Company has not recognized any expense related to these options.

A summary of the Company’s stock option activity with respect to the six months ended June 30, 2013 follows:


Stock Options	Underlying Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2012		2,522,522		$	11.76
Granted		1,754,170			34.10
Exercised		(119,547	)		8.35
Canceled		(180,956	)		9.60


Outstanding at June 30, 2013		3,976,189		$	21.82		8.91	$	64,737,000


Vested at June 30, 2013 and expected to vest		3,639,329		$	21.27		8.84	$	61,269,000

Exercisable at June 30, 2013		714,247		$	11.81		6.82	$	18,963,000

The weighted-average fair value per share of stock-based awards granted to employees during the three months ended June 30, 2013 and 2012 was $23.20 and $3.53, respectively, and during the six months ended June 30, 2013 and 2012 was $22.50 and $4.56, respectively. During the six months ended June 30, 2013, the total intrinsic value of stock options exercised was $3.0 million. During the six months ended June 30, 2013 and 2012, the total grant date fair value of stock options that vested was $0.6 million and $2.7 million, respectively.

The fair values of stock options granted during the period presented were measured on the date of grant using the Black-Scholes-Merton option-pricing model, with the following assumptions:


	Three and Six Months Ended June 30,
	2013			2012
Risk-free interest rate		0.7% - 1.4	%		0.8% - 1.1	%
Expected dividend yield		0	%		0	%
Expected lives		5.0 years			5.3 years
Expected volatility		80.0% - 84.1.	%		79.7% - 82.5	%

(1)

For the three and six months ended June 30, 2013, expected volatility has been estimated using a blend of calculated volatility of the Company’s common stock over a historical period and implied volatility in exchange-traded options associated with the Company’s common stock. Prior to January 1, 2013, expected volatility has been estimated using calculated volatility of the Company’s common stock over a historical period commensurate with the expected term of the option.

Restricted Stock Awards

In June 2013, the Company granted 6,000 shares of restricted stock awards to members of its board of directors. These shares vest on the first anniversary of the grant and have a grant date fair value of $34.92 per share. The weighted-average grant-date fair value of restricted stock awards is based on the market price of the Company’s common stock on the date of grant. The following table sets forth restricted stock activity for the period shown:


	Six Months Ended June 30, 2013
	Shares		Weighted Average Grant Date Fair Value per Share
Restricted Stock Awards, beginning of period		4,998	$	10.08
Granted		6,000		34.92
Vested		—		—
Canceled		—		—


Restricted Stock Awards, end of period		10,998		23.63

Restricted Stock Units

For the six months ended June 30, 2013, restricted stock unit activity is summarized in the following table:


	Six Months Ended June 30,
	2013
	Shares		Weighted Average Grant Date Fair Value per Share
Restricted Stock Units, beginning of period		38,260	$	6.32
Granted		—		—
Vested		24,594		6.83
Canceled		341		5.40


Restricted Stock Units, end of period		13,325	$	5.40

Stock-based Compensation Expense

A summary of the stock-based compensation expense, including stock options, restricted stock, RSUs, and SARs recognized in the condensed consolidated statements of operations and comprehensive loss is as follows:


	Three Months Ended				Six Months Ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
	(in thousands)				(in thousands)
Research and development	$	724	$	259	$	1,254	$	512
General and administrative		1,594		181		2,735		636


Total	$	2,318	$	440	$	3,989	$	1,148

As of June 30, 2013, there was $45.3 million of unrecognized compensation cost related to non-vested share-based compensation arrangements outstanding including stock options, restricted stock, RSUs, and SARs. These costs are expected to be recognized over a weighted-average period of 3.3 years.