12. Stock Option Plan

The Company adopted the 2003 Stock Option Plan (the “Plan”) in 2003, under which the Company initially reserved for the issuance of 1,252,436 shares of its common stock. The Plan was approved by the Company’s stockholders on December 21, 2004. On June 23, 2010, June 4, 2009, April 25, 2007 and April 26, 2006, the dates of the Company’s annual stockholders meetings during such years, the Company’s stockholders approved amendments to the Plan increasing the total shares reserved by 3,000,000, 2,000,000, 2,000,000 and 750,000 shares, respectively, for a total of 9,002,436 shares.

As of December 31, 2011, the Company had outstanding options issued to its employees to purchase up to 4,300,591 shares of the Company’s common stock, to its directors to purchase up to 837,645 shares of the Company’s common stock, as well as options to consultants in connection with services rendered to purchase up to 250 shares of the Company’s common stock.

Stock options to employees generally vest ratably over three years and have contractual terms of ten years. Stock options to directors generally vest ratably over two or three years and have contractual terms of ten years. Stock options are valued using the Black-Scholes option pricing method and compensation is recognized based on such fair value over the period of vesting on a straight-line basis. The Company has also reserved an aggregate of 45,823 additional shares for issuance under options granted outside of the 2003 Stock Option Plan. The options were granted to The University of Texas M. D. Anderson Cancer Center and DEKK-Tec, Inc. (see Note 8 to the financial statements, Commitments and Contingencies). During the year ended December 31, 2007, the Company recorded a $120 thousand stock compensation expense in connection with the Company achieving a predetermined development milestone, which triggered the vesting of 25,111 of the options granted outside of the 2003 Stock Option Plan. The 25,111 options were exercised on August 13, 2007. Proceeds from this exercise amounted to $50 and the intrinsic value of these options amounted to $104 thousand. During 2010, the Company recorded an expense of $27 thousand when 6,904 DEKK-Tec stock options vested upon achieving Phase 3 milestones.

Proceeds from the 2011, 2010, and 2009 exercises amounted to $980, $225, and $73 thousand, respectively. The intrinsic value of these options amounted to $2.5 million, $880 thousand, and $238 thousand for years ended December 31, 2011, 2010 and 2009, respectively.

Transactions under the Plan for the years ending December 31, 2011, 2010, and 2009 were as follows:


(in thousands, except share and per share data)	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2008		2,738,089			3.43
Granted		1,324,000			1.53
Exercised		(102,564	)		0.71
Cancelled		(424,839	)		3.19
Outstanding, December 31, 2009		3,534,686			2.82
Granted		1,293,000			4.55
Exercised		(196,167	)		1.19
Cancelled		(64,584	)		4.36
Outstanding, December 31, 2010		4,566,935			2.82
Granted		1,894,300			5.65
Exercised		(479,666	)		2.04
Cancelled		(843,083	)		5.01
Outstanding, December 31, 2011		5,138,486		$	4.08		7.16	$	4,464
Vested and unvested expected to vest at December 31, 2011		5,099,394		$	3.21		5.52	$	4,430
Options exercisable, December 31, 2011		2,911,186		$	3.21		5.52	$	4,232
Options exercisable, December 31, 2010		2,939,434		$	2.93		6.16	$	5,597
Options available for future grant		192,445

At December 31, 2011, total unrecognized compensation costs related to non-vested stock options outstanding amounted to $7.2 million. The cost is expected to be recognized over a weighted-average period of 1.69 years.

Restricted Stock

In March and April 2010, the Company issued 90,000 and 25,000 shares of restricted stock to its non-employee directors, respectively, all of which vest in their entirety on the one year anniversary of the grant date. In December 2009, the Company issued 347,500 shares of restricted stock to employees and 45,000 shares of restricted stock to its non-employee directors, which will vest ratably in annual installments over three and two years, respectively, commencing on the first anniversary of the grant date. In September 2009, the Company issued 828,000 shares of restricted stock to employees and 180,000 shares of restricted stock to its board of directors, all of which vest in their entireties on the one year anniversary of the grant date. In December 2008, the Company issued 396,500 shares of restricted stock to employees and 90,000 shares of restricted stock to its board of directors, all of which vested in December 2009. Also, in January 2008, the Company issued 100,000 shares of restricted stock to one employee vesting ratably over a three-year period. In 2007, the Company issued 70,000 shares of restricted stock to several employees which vested in December 2008. During the years ended December 31, 2011, 2010 and 2009, $635 thousand, $2.4 million and $1.0 million of compensation expense was recognized, respectively.

In January and December 2011, the Company repurchased 15,190 shares and 44,369 shares at $5.14 and $4.41 per share, respectively. In January, September and December 2010, the Company repurchased 15,283 shares, 349,710 shares and 51,116 shares at $3.10, $3.95 and $4.66 per share, respectively, to cover payroll taxes. In December 2009, the Company repurchased 103,823 shares of vested restricted stock from employees at $3.66 per share to pay for payroll taxes. A summary of the status of non-vested restricted stock as of December 31, 2011, 2010 and 2009 is as follows:


	Number of Shares			Weighted- Average Grant Date Fair Value
Non-vested, December 31, 2008		586,500			1.15
Granted		1,400,500			2.28
Vested		(450,333	)		0.97
Cancelled		(69,500	)		0.83
Non-vested, December 31, 2009		1,467,167			2.30
Granted		115,000			5.15
Vested		(1,182,164	)		2.19
Cancelled		(51,250	)		4.40
Non-vested, December 31, 2010		348,753			2.30
Granted		848,406			4.52
Vested		(229,586	)		3.56
Cancelled		(16,667	)		2.85
Non-vested, December 31, 2011		950,906		$	4.34

As of December 31, 2011, there was $3.9 million of total unrecognized stock-based compensation expense related to non-vested restricted stock arrangements granted under the 2003 Plan. The expense is expected to be recognized over a weighted-average period of 1.91 years.