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 and nine-month periods ended September 30, 2014 and 2013, as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
*In thousands*	2014		2013		2014		2013
Compensation cost from:
Stock options	$	3,583	$	4,935	$	12,427	$	13,047
Stock and stock units		3,961		3,553		11,787		15,147
Purchases of common stock at a discount		94		142		369		365

	$	7,638	$	8,630	$	24,583	$	28,559


Compensation cost included in:
Research and development expenses	$	3,229	$	3,913	$	10,570	$	12,329
Selling, general and administrative expenses		4,409		4,717		14,013		16,230

	$	7,638	$	8,630	$	24,583	$	28,559

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 nine-month period ended September 30, 2014 was as follows:


	Number of Shares			Weighted Average Exercise Price Per Share
Options outstanding, January 1, 2014		10,379,668		$	10.83
Granted		1,493,560		$	7.35
Forfeited		(1,333,975	)	$	13.83
Exercised		(632,521	)	$	4.44

Options outstanding, September 30, 2014		9,906,732		$	10.31

Stock and Stock Unit Grants

Stock and stock unit grants 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 nine-month period ended September 30, 2014 was as follows:


	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding, January 1, 2014		2,047,600		$	14.18
Granted/Awarded		2,479,500		$	7.35
Forfeited		(269,668	)	$	9.33
Vested or restrictions lapsed		(646,313	)	$	13.55

Outstanding, September 30, 2014		3,611,119		$	9.96

Included in stock and stock units outstanding in the above table as of September 30, 2014 are 258,400 performance share units that will vest annually, in equal increments, over the next two years on the anniversary date of the achievement of the performance condition, which was the marketing authorization of Iclusig by the European Commission that occurred in July 2013.

Stock and stock units outstanding in the above table as of September 30, 2014 also include 333,000 performance share units awarded in 2013. The number of shares that may vest, if any, related to the 2013 performance share unit awards is dependent on the achievement, and timing of the achievement, of the performance criteria defined for the award. The compensation cost 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 performance share units when achievement of the performance condition is probable. The Company has concluded that it is probable that the performance condition related to the 2013 performance share unit awards will be met. The performance condition is based upon continued success in specific research and development initiatives. The total compensation expense for these performance share units may be up to 60% higher if the performance condition for this award is met prior to December 31, 2014.

Stock and stock units outstanding in the above table as of September 30, 2014 also include 1,066,000 performance share units awarded on January 31, 2014. The vesting of fifty percent of the award is dependent upon the achievement of specific commercial objectives by the end of 2015 and the vesting of the remainder is dependent upon the achievement, and timing of the achievement, of specific research and development objectives. The Company has concluded that it is probable that these performance conditions will be met. The total compensation expense for the portion related to the research and development objectives may be up to 60% higher depending on the timing of the achievement of the specific performance objectives.