4. SHARE-BASED COMPENSATION

The compensation expense related to the Company’s share-based compensation arrangements has been included in the condensed consolidated statements of comprehensive loss as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
General and administrative	$	1.4	$	0.9	$	2.6	$	1.7
Research and development		1.5		0.8	$	2.7	$	1.7

Total share-based compensation expense	$	2.9	$	1.7	$	5.3	$	3.4

The fair value of equity instruments that vest based on continued employee service, net of estimated forfeitures, is recognized and amortized on a straight-line basis over the requisite service period. For restricted stock units (RSUs) with performance-based vesting requirements (PRSUs), no expense is recorded until the performance condition is probable of being achieved. The Company estimates forfeiture rates for equity awards based on past behavior for similar equity awards with further consideration given to the class of employees to whom the equity awards were granted.

As of June 30, 2014, total unrecognized estimated compensation cost related to non-vested stock options and non-vested RSUs, that vest over a given service period, granted prior to that date was $16.2 million and $8.9 million, respectively, which is expected to be recognized over a weighted average period of approximately 2.8 years and 3.3 years, respectively. Additionally, the Company has approximately 0.5 million RSUs with performance-based vesting requirements outstanding. The total unrecognized estimated compensation cost related to these performance-based RSUs is $9.3 million and is expected to be recognized at the point when the performance conditions have been achieved, which is when these events will become probable.

During the six months ended June 30, 2014 and 2013, stock options to purchase approximately 0.5 million and 0.6 million shares of the Company’s common stock were exercised, respectively. The cash received by the Company from stock option exercises during the six months ended June 30, 2014 and 2013 was approximately $3.3 million and $2.6 million, respectively. The Company also issued approximately 93,000 shares of common stock pursuant to the vesting of RSUs during the six months ended June 30, 2014.

Stock Option Assumptions

The Company granted stock options to purchase approximately 0.9 million and 0.8 million shares of the Company’s common stock during the six months ended June 30, 2014 and 2013, respectively. These stock options generally vest monthly over a four-year period. The exercise price of all stock options granted during the six months ended June 30, 2014 and 2013 was equal to the closing price of the Company’s common stock on the date of grant. The estimated fair value of each stock option granted was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the stock option grants:


	Three Months Ended June 30,		Six Months Ended June 30,
	2014	2013	2014	2013
Risk-free interest rate	2.1%	1.5%	2.3%	1.4%
Expected volatility of common stock	70.6%	77.5%	71.2%	75.8%
Dividend yield	0.0%	0.0%	0.0%	0.0%
Expected option term	7.3 years	7.5 years	7.1 years	7.3 years

The Black-Scholes option-pricing model incorporates various and highly sensitive assumptions including expected volatility, expected term and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options. The expected option term is estimated based on historical experience as well as the status of the employee. For example, directors and officers have a longer expected option term than all other employees. Additionally, recent grants of stock options have a contractual life of ten years, versus seven years for older option grants, and the vesting period for recent option grants has been extended to four years, which together have also resulted in an increase in the expected option term over time. The risk-free rate for periods within the contractual life of the option is based upon observed interest rates appropriate for the expected term of the Company’s employee stock options. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future. For the six months ended June 30, 2014 and 2013, share-based compensation expense related to stock options was $4.1 million and $3.0 million, respectively.

Restricted Stock Units

During the six months ended June 30, 2014, the Company granted approximately 0.4 million RSUs that vest annually over a four year period. Additionally, during the six months ended June 30, 2014, the Company granted approximately 0.5 million PRSUs that vest based on the achievement of pre-defined Company-specific performance criteria and expire five years from the grant date. As the performance based criteria for vesting for the PRSUs is not currently probable, no associated expense has been recorded for the PRSUs during the three or six months ended June 30, 2014.

During the six months ended June 30, 2013, the Company granted approximately 0.4 million RSUs that vest annually over a four year period. The fair value of RSUs is estimated based on the closing sale price of the Company’s common stock on the date of the RSU grant. For the six months ended June 30, 2014 and 2013, share-based compensation expense related to RSUs was $1.2 million and $0.4 million, respectively.