Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation

Stock-Based Compensation

9.  Stock-Based Compensation

As of December 31, 2011, there were 830,000 shares of common stock available to be issued under the 2008 Stock Incentive Plan, as amended (the “2008 Plan”). The 2011 Stock Incentive Plan (the “2011 Plan”) became effective upon closing of the Company’s initial public offering in April 2012. Upon effectiveness of the 2011 Plan, no further awards were available to be issued under the 2008 Plan. The 2011 Plan is administered by the Board of Directors of the Company and permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The 2011 Plan increased the total number of shares of common stock available to be issued by 3.5 million.

During the nine months ended September 30, 2011 and 2012, the Company issued options to purchase 1.9 million and 3.2 million shares of common stock, respectively. These options generally vest over a three-year period for employees. Prior to the closing of the Company’s initial public offering in April 2012, options previously granted to directors had vested immediately. After the closing of the Company’s initial public offering in April 2012, options granted to directors vest over a one-year period. During the nine months ended September 30, 2011 and 2012, the Company also issued options to purchase 0.1 million shares of common stock to non-employees in each period. The assumptions used to estimate the fair value of options granted to non-employees at the date of grant were materially consistent with those used for employee and director grants.

The weighted-average assumptions used to estimate the fair value of employee and director options at the date of grant for the three and nine months ended September 30, 2011 and 2012 were as follows:

	Three months ended September 30,		Nine months ended September 30,
	2011	2012	2011	2012
Risk-free interest rate	1.6%	0.7-0.9%	1.6-2.5%	0.9-1.1%
Expected dividend yield	0%	0%	0%	0%
Expected term	5.9 years	5.3-5.9 years	5.0-5.9 years	5.3-5.9 years
Expected volatility	73%	66%-68%	73%	66-72%

The Company recognized stock-based compensation expense as follows for the three and nine months ended September 30, 2011 and 2012:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2011		2012		2011		2012
Employee awards:
Research and development	$	1,021	$	1,119	$	2,654	$	2,972
General and administrative	405		681		2,453		1,544
Stock-based compensation for employee awards	1,426		1,800		5,107		4,516
Stock-based compensation for non-employee awards	363		383		466		416
Total stock-based compensation	$	1,789	$	2,183	$	5,573	$	4,932

The following table summarizes stock option activity during the nine months ended September 30, 2012:

(in thousands, except per share amounts)	Number of shares		Weighted average exercise price		Aggregate intrinsic value
Outstanding, December 31, 2011	17,617		$	2.56	$	74,329
Granted	3,220		$	7.46
Exercised	(857	)	$	2.17
Forfeited	(168	)	$	4.23
Outstanding, September 30, 2012	19,812		$	3.34	$	119,270
Exercisable, September 30, 2012	14,692		$	2.32	$	103,676
Vested and expected to vest, September 30, 2012	19,414		$	3.29	$	118,313

The aggregate intrinsic value was calculated as the difference between the exercise price of the stock options and the fair value of the underlying common stock as of the respective balance sheet date.