Stockholders Equity

6 Months Ended

Jun. 30, 2011

7. Stockholders’ Equity

Common Stock

In February 2011, the Company completed an underwritten public offering of 3,162,500 shares of its common stock, including the full exercise of the overallotment option granted to the underwriters, at a price of $26.00 per share. The net proceeds to the Company from the sale of shares in this offering were approximately $78,062,000 after deducting underwriting discounts and commissions and offering expenses.

For the three and six months ended June 30, 2011, approximately 86,000 and 212,000 shares of common stock, respectively, were issued pursuant to the exercise of stock options resulting in proceeds to the Company of approximately $581,000 and $1,618,000, respectively.

Share-Based Compensation

The following table summarizes share-based compensation expense for the three and six months ended June 30, 2011 and 2010 related to employee and director stock options, restricted stock awards and Employee Stock Purchase Plan (“ESPP”) purchase rights by expense category (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Research and development	$	1,150	$	743	$	2,083	$	1,427
General and administrative		1,628		1,100		3,080		2,030

Share-based compensation expense included in operating expenses	$	2,778	$	1,843	$	5,163	$	3,457

As of June 30, 2011, there was approximately $20,227,000 of total unrecognized compensation cost related to non-vested, share-based payment awards granted under all of the Company’s equity compensation plans. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. The Company expects to recognize this compensation cost over a weighted-average period of 2.7 years.

The Company estimated the fair value of each option grant on the grant date using the Black-Scholes option valuation model with the following weighted-average assumptions:

Options:


	June 30,
	2011			2010
Risk-free interest rate		2.4	%		2.7	%
Dividend yield		0.0	%		0.0	%
Volatility		73.2	%		78.8	%
Expected life (years)		5.5-6.1			5.5-6.1

The Company estimates the fair value of each purchase right granted under the ESPP at the beginning of each new offering period using the Black-Scholes option valuation model. A new offering period begins every six months in May and November of each year. The following are the weighted-average assumptions used to value the new offering periods which began in the second quarter of 2011 and 2010:

ESPP:


	June 30,
	2011			2010
Risk-free interest rate		0.4	%		0.5	%
Dividend yield		0.0	%		0.0	%
Volatility		41.4	%		66.0	%
Expected life (years)		1.3			1.3