Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

Stock-Based Compensation

9. Stock-Based Compensation

The Company awards stock options and other equity-based instruments to its employees, directors and consultants and provides employees the right to purchase common stock (collectively “share-based payments”), pursuant to stockholder approved plans. The Company’s statement of operations included total compensation cost from share-based payments for the three-month periods ended March 31, 2012 and 2011, as follows:

	Three Months Ended March  31,
In thousands	2012		2011
Compensation cost from:
Stock options	$	2,889	$	889
Stock and stock units		1,975		1,461
Purchases of common stock at a discount		49		54
	$	4,913	$	2,404
Compensation cost included in:
Research and development expenses	$	2,516	$	1,158
General and administrative expenses		2,397		1,246
	$	4,913	$	2,404

Stock Options

Stock options are granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant. Stock options generally vest ratably over four years and have contractual terms of ten years. Stock options are valued using the Black-Scholes option valuation model and compensation cost is recognized based on such fair value over the period of vesting on a straight-line basis.

Stock option activity under the Company’s stock plans for the year ended March 31, 2012 was as follows:

	Number of Shares			Weighted Average Exercise  Price Per Share
Options outstanding, January 1, 2012		7,381,329		$	5.22
Granted		1,531,750		$	14.90
Forfeited		(12,063	)	$	2.89
Exercised		(775,107	)	$	4.23
Options outstanding, March 31, 2012		8,125,909		$	7.14

Stock and Stock Unit Grants

Stock and stock unit grants are provided to non-employee directors as compensation and generally carry no restrictions as to resale or are fully vested upon grant. Stock and stock unit grants to officers carry restrictions as to resale for periods of time or vesting provisions over time as specified in the grant. Stock and stock unit grants are valued at the closing market price of the Company’s common stock on the date of grant and compensation expense is recognized over the requisite service period, vesting period or period during which restrictions remain on the common stock or stock units granted.

Stock and stock unit activity under the Company’s stock plans for the year ended March 31, 2012 was as follows:

	Number of Shares			Weighted Average Grant  Date Fair Value
Outstanding, January 1, 2012		2,785,026		$	4.51
Granted		901,677		$	15.00
Forfeited		(6,800	)	$	4.13
Vested or restrictions lapsed		(1,420,406	)	$	3.73
Outstanding, March 31, 2012		2,259,497		$	9.19

Included in stock and stock units outstanding in the above table are 392,500 performance share units, awarded in March 2011, that will vest upon regulatory approval of ponatinib by the U.S. Food and Drug Administration on or before December 31, 2016 and 352,000 performance share units, awarded in March 2012, that will vest upon regulatory approval of ponatinib by the European Medicines Agency on or before December 31, 2016. The number of shares that may vest, if any, related to the March 2012 awards is dependent on the timing of approval. The compensation costs for such performance-based stock awards will be based on the awards that ultimately vest and the grant date fair value of those awards. Compensation expense related to these performance share units will begin to be recognized when achievement of the performance condition is probable. The unrecognized stock compensation expense associated with the maximum number of shares that may be issued upon achievement of the performance conditions was $11.5 million at March 31, 2012.