Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation

4. Stock-Based Compensation

Following is the stock-based compensation expense related to common stock options, common stock, restricted common stock and common stock warrants:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
		(in thousands)
Research and development	$	359	$	614	$	508	$	1,138
General and administrative		520		714		844		901
Total stock-based compensation expense	$	879	$	1,328	$	1,352	$	2,039

The following table summarizes the stock option activity in the Company’s equity incentive plans, including non-plan grants to Company executives, from December 31, 2011 through June 30, 2012:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2011		3,091,474		$	6.83
Granted		480,000			2.08
Exercised		(51,830	)		2.31
Options forfeited/cancelled		(228,014	)		7.65
Outstanding, June 30, 2012		3,291,630		$	6.15

As of June 30, 2012, there was $6,292,000 of unrecognized compensation related to 1,362,675 unvested options which is expected to be recognized over a weighted–average period of approximately 3.7 years. The weighted-average grant date fair value for options granted during both the three and six months ended June 30, 2012 was $1.72. The weighted-average grant date fair value for options granted during the three and six months ended June 30, 2011 was $1.04 and $1.02, respectively.

Of the options granted during the six months ended June 30, 2011, 166,668 vest only upon the achievement of certain market conditions (83,334 and 83,334 upon the Company achieving a market capitalization of $5 billion and $10 billion, respectively). These market condition stock option awards were valued at $1,006,000 using a Monte Carlo model and will be recognized over a weighted average period of 5.5 years. Assumptions used to value these options included the following: annualized volatility of 110%, annualized drift/risk-free interest rate of 3.5% and a forecast horizon/life of 10 years.

The fair value of all other options granted is determined using the Black-Scholes option-pricing model. The following weighted average assumptions were used:

	Six Months Ended June 30,		Cumulative Period from Inception (July 10, 2000) to June 30,
	2012	2011	2012
Risk-free interest rate	0.91%	1.91%	1.98%
Expected life of the options	5.6 years	5.1 years	5.1 years
Expected volatility of the underlying stock	116%	121%	119%
Expected dividend rate	0%	0%	0%

In May 2012, the Company granted 7,000 shares of common stock to a consultant for payment of past services. These shares of common stock were valued at $16,000, based on the market value of the shares at the date of grant and are included in stock based compensation expense for the three and six months ended June 30, 2012.