Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stock-Based Compensation

Stock-Based Compensation

In 2002, the Company adopted the 2002 Stock Plan (the “2002 Plan”), pursuant to which the Company's board of directors issued incentive stock options, non-statutory stock options (options that do not qualify as incentive stock options) and restricted stock to our employees, officers, directors or consultants. In March 2010, the board of directors and stockholders approved the 2010 Equity Incentive Award Plan (the “2010 Plan”), which became effective upon the completion of the Company's IPO in April 2010. A total of 1,100,000 shares of common stock were initially reserved for future issuance under the 2010 Plan and any shares of common stock reserved for future grant or issuance under the Company's 2002 Plan that remained unissued at the time of completion of the IPO became available for future grant or issuance under the 2010 Plan. In addition, the shares reserved for issuance pursuant to the exercise of any outstanding awards under the 2002 Plan that expire unexercised will also become available for future issuance under the 2010 Plan. The 2010 Plan also provides for automatic annual increases in the number of shares reserved for future issuance.

The following table presents the shares available for grant as of September 30, 2013 (in thousands):

	Shares available for grant
December 31, 2012	3,767
Annual increase in shares available for grant	1,507
Option grants	(922	)
Restricted stock unit award grants	(1,367	)
Restricted stock unit award shares withheld for taxes	132
Options forfeited	1,968
Restricted stock unit awards forfeited	335
September 30, 2013	5,420

Stock-Based Compensation Expense

The Company recognizes compensation expense related to share-based transactions, including the awarding of employee stock options, based on the estimated fair value of the awards granted. All awards granted, modified or settled after January 1, 2006 have been accounted for based on the fair value of the awards granted. The Company generally uses the straight-line method to allocate stock-based compensation expense to the appropriate reporting periods. Some awards are accounted for using the accelerated method as appropriate for the terms of the awards.

The following table presents total stock-based compensation expense by functional areas included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Research and development	$	97	$	682	$	989	$	2,183
Selling, general and administrative	529		784		2,372		2,360
Total	$	626	$	1,466	$	3,361	$	4,543

The following table presents total stock-based compensation expense by security types included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013		2012
Stock options	$	397		$	900	$	1,538	$	3,255
Restricted stock units	527			566		1,823		1,288
Performance stock units	(298		)	—		—		—
Total	$	626		$	1,466	$	3,361	$	4,543

Stock Options

The fair value of the options granted is estimated on the date of grant using the Black-Scholes option-pricing model. The fair value of the options granted to non-employees is remeasured as they vest, and the resulting change in value, if any, is recognized as an increase or decrease in stock-based compensation expense during the period the related services are rendered. The stock options are generally scheduled to vest over four years and all options expire no later than ten years from the date of grant.

Restricted Stock Units

The Company awarded 843,698 restricted stock units (“RSUs”) under the 2010 Plan during the nine months ended September 30, 2013. The fair value of the RSU awards was calculated based on the NASDAQ quoted stock price on the date of the grant with the expense recognized over the vesting period. The RSUs are generally scheduled to vest over four years.

Performance Stock Units

The Company awarded 523,048 performance stock units ("PSU") under the 2010 Plan during the nine months ended September 30, 2013. The number of shares of common stock to be issued for each vested performance stock unit ("PSU") will range between zero and two, depending on the level of performance against the criteria set by the Company's board of directors with respect to the Company's annual cash burn for the year ending December 31, 2013. A 100% achievement of the performance goal would result in one common share issued for each vested PSU. The PSU awards vest in equal installments on March 5, 2014 and March 5, 2015. The fair value of the PSU awards was calculated based on the NASDAQ quoted stock price on the date of the grant with the expense recognized on a straight-line basis over the vesting period. In the third quarter of 2013, the Company revised its estimate of forecasted performance criteria and concluded that the performance target would not likely be achieved in 2013. As a result of the revised estimate of the performance goal, the PSU-related compensation expense of $0.3 million recorded on a year to date basis was fully reversed at September 30, 2013.

Stockholder Rights Plan

In August 2012, the Company's board of directors adopted a stockholder rights plan and declared a dividend of one preferred share purchase right for each share of the Company's common stock held by stockholders of record as of September 18, 2012. Each right entitled stockholders, after the rights become exercisable, to purchase one one-thousandth of a share of the Company's Series A Junior Participating Preferred Stock, par value $0.0001, at a purchase price of $11.35 per one thousandth of a share of Series A Junior Participating Preferred Stock. In general, the rights become exercisable when a person or group acquires 15% or more of the Company's common stock or a tender offer for 15% or more of the Company's common stock is announced or commenced. The rights expired in accordance with the terms of the stockholder rights plan on September 2, 2013. Therefore, the shares of the Company's common stock are no longer accompanied by the rights, and the plan is of no further force or effect. As a result of the expiration, the Company recorded a related expense of $0.3 million in the third quarter of 2013.