Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation

13. 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 statements of operations included total compensation cost from share-based payments for the three-month periods ended March 31, 2013 and 2012, as follows:

	Three Months  Ended March 31,
In thousands	2013		2012
Compensation cost from:
Stock options	$	3,360	$	2,889
Stock and stock units		2,147		1,975
Purchases of common stock at a discount		103		49
	$	5,610	$	4,913
Compensation cost included in:
Research and development expenses	$	2,654	$	2,516
Selling, general and administrative expenses		2,956		2,397
	$	5,610	$	4,913

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 three or 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 three-month period ended March 31, 2013 was as follows:

	Number of Shares			Weighted Average Exercise  Price Per Share
Options outstanding, January 1, 2013		8,228,334		$	10.20
Granted		734,600		$	20.89
Forfeited		(32,569	)	$	21.45
Exercised		(246,060	)	$	5.17
Options outstanding, March 31, 2013		8,684,305		$	11.20

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 are also provided to employees and 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 three-month period ended March 31, 2013 was as follows:

	Number of Shares			Weighted Average Grant  Date Fair Value
Outstanding, January 1, 2013		1,903,445		$	9.55
Granted		824,550		$	20.78
Forfeited		(1,833	)	$	4.90
Vested or restrictions lapsed		(795,992	)	$	7.31
Outstanding, March 31, 2013		1,930,170		$	15.28

Included in stock and stock units outstanding in the above table are 190,250 performance share units, awarded in April 2011, that will vest on December 2013, one year after the FDA approval of Iclusig in December 2012. Stock and stock units outstanding also included 343,000 performance share units awarded in 2012 and 373,000 performance share units awarded in 2013 that will vest only upon achievement of the underlying performance conditions attached to these awards, none of which has occurred as of March 31, 2013. The number of shares that may vest, if any, related to the 2012 and 2013 awards is dependent on the timing of achievement of the performance criteria. 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. The Company begins to recognize compensation expense related to these performance share units when achievement of the performance condition is probable. As of March 31, 2013, the performance conditions related to the 2012 and 2013 awards are not considered probable of achievement. Accordingly, no compensation expense has been recognized related to these awards. The unrecognized compensation expense related to performance share units for which the performance conditions are not currently considered probable of achievement could be up to $20.7 million of compensation expense if the maximum performance metrics are achieved. If the Company obtains marketing authorization for Iclusig from the European Medicines Authority, or EMA, in 2013, unrecognized compensation expense of $8.3 million would become recognizable, provided the employees perform the remaining service period requirements after the performance condition is achieved.