Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation

Stock-Based Compensation

(6) Stock-Based Compensation

        The Company's 2006 Stock Plan provides for the grant of incentive stock options, nonstatutory stock options and non-vested stock to employees, officers, directors and consultants to the Company. In January 2013, the number of shares of common stock reserved for issuance under the 2006 Stock Plan was increased from 7,700,000 to 9,000,000 pursuant to an "evergreen" provision, which provides for an annual increase based on the lesser of 1,300,000 shares, 5% of the Company's then outstanding shares of common stock, or such other amount as the board of directors may determine. This increase was approved by the board of directors in December 2012. The administration of the 2006 Stock Plan is under the general supervision of the compensation committee of the board of directors. The exercise price of the stock options is determined by the compensation committee of the board of directors, provided that incentive stock options are granted at not less than fair market value of the common stock on the date of grant and expire no later than ten years from the date the option is granted. Options generally vest over four years. As of December 31, 2012, the Company had options outstanding to purchase 5,521,584 shares of its common stock, which includes options outstanding under its 2001 Stock Plan that was terminated in March 2006, and had 35,122 restricted shares of common stock outstanding. As of December 31, 2012, 1,902,341 shares were available for future issuance and were subsequently increased by an additional 1,300,000 shares in January 2013 related to the "evergreen" provision.

        The following table summarizes stock option activity during the year ended December 31, 2012:

	Shares			Weighted average exercise price		Weighted average remaining contractual life (years)		Aggregate intrinsic value
Outstanding at January 1		5,821,073		$	7.54
Options granted		1,799,096			5.14
Options exercised		(322,298	)		3.54
Options cancelled		(1,776,287	)		9.36
Outstanding at December 31		5,521,584		$	6.40		6.83	$	17,472,889
Exercisable at December 31		3,091,173		$	7.44		5.25	$	7,906,822

        The aggregate intrinsic value of all options outstanding and exercisable represents the total pre-tax amount, net of the exercise price, which would have been received by option holders if all option holders had exercised all options with an exercise price lower than the closing stock price of $9.02 on December 31, 2012, which was the last trading day of the year. The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was approximately $904,000, $518,000 and $278,000, respectively. The total cash received by the Company as a result of stock option exercises during 2012, 2011 and 2010 was $1.1 million, $0.5 million and $0.3 million, respectively. The weighted-average grant date fair values of options granted during the years ended December 31, 2012, 2011 and 2010 were $4.10, $4.26 and $3.27, respectively.

Non-Vested ("Restricted") Stock Awards With Service Conditions

        The Company's share-based compensation plan provides for awards of restricted shares of common stock to employees, officers, directors and consultants to the Company. Restricted stock awards are subject to forfeiture if employment or service terminates during the prescribed retention period. Restricted shares vest over the service period. The total fair value of restricted stock that vested during 2012, 2011 and 2010 was $0.6 million, $0.6 million and $0.2 million, respectively.

        The following table summarizes unvested restricted shares during the year ended December 31, 2012:

	Shares			Weighted average grant date fair value
Outstanding at January 1		82,450		$	4.94
Vested		(92,571	)		5.16
Granted		45,243			5.47
Outstanding at December 31		35,122		$	5.04

Stock-Based Compensation Expense

        For the years ended December 31, 2012, 2011 and 2010, the fair value of each employee stock option award was estimated on the date of grant based on the fair value method using the Black-Scholes option pricing valuation model with the following weighted average assumptions:

	Years ended December 31,
	2012			2011			2010
Risk-free interest rate		1.11	%		2.48	%		2.62	%
Expected life in years		6.25 years			6.25 years			6.25 years
Volatility		101	%		101	%		102	%
Expected dividend yield		—			—			—

        Stock-based compensation expense during the years ended December 31, 2012, 2011 and 2010 was as follows (in thousands):

	Years ended December 31,
	2012		2011		2010
Stock-based compensation expense by type of award:
Employee stock options	$	3,082	$	2,951	$	3,614
Restricted stock		240		403		434
Total stock-based compensation expense	$	3,322	$	3,354	$	4,048
Effect of stock-based compensation expense by line item:
Research and development	$	2,485	$	2,494	$	3,074
General and administrative		837		860		974
Total stock-based compensation expense included in net loss	$	3,322	$	3,354	$	4,048

        Unrecognized stock-based compensation expense as of December 31, 2012 was as follows (in thousands):

	Unrecognized stock compensation expense as of December 31, 2012		Weighted average remaining period (in years)
Employee stock options	$	7,747		2.65
Restricted stock		172		0.62
Total	$	7,919		2.61