Stock Options

12 Months Ended

Dec. 31, 2011

Stock Options Disclosure [Text Block]

(14) Stock Options

          Through the Compensation Committee of the Board of Directors, the Company administers the 2011 Incentive Stock Plan, which provides incentive and non-qualified stock option benefits for employees, officers, directors and independent contractors providing services to Enzon and its subsidiaries. The 2011 Incentive Stock Plan was adopted by the Board of Directors in March 2011 and approved by the stockholders in May 2011. Prior to this, the Company administered the 2001 Incentive Stock Plan, which was adopted by the Board of Directors in October 2001 and approved by the stockholders in December 2001. Options granted to employees generally vest over four years from date of grant and options granted to directors vest after one year. The exercise price of the options granted must be at least 100 percent of the fair value of the Company’s common stock at the time the options are granted. Options may be exercised for a period of up to ten years from the grant date. As of December 31, 2011, approximately 528,000 shares of common stock were reserved for issuance pursuant to granted options and awards under the 2011 plan. Approximately 4.5 million shares remain available for grant. Option grants remain outstanding from previous awards under the 2001 Incentive Stock Plan and an earlier 1987 Non-Qualified Stock Option Plan; however, there will be no further grants made pursuant to those plans.

          In March 2011, the Board of Directors adopted a new compensation plan for non-employee directors, effective April 1, 2011. Under the 2011 Outside Director Compensation Plan, each non-employee director receives an annual grant of stock options (Annual Option Grant) on the first trading day of the calendar year with a Black-Scholes value of $25,000 and an exercise price equal to the closing price of our common stock on the date of grant. The Annual Option Grant vests in one tranche on the first anniversary, provided that the recipient director remains on the Board, and expires on the tenth anniversary of the date of grant. In addition, upon the election of a new non-employee director to the Board, such newly elected director receives a Welcome Grant of stock options with a Black-Scholes value of $25,000 and an exercise price equal to the closing price of our common stock on the date of grant. The Welcome Grant vests in three equal tranches on each of the first three anniversaries, provided that the recipient director remains on the Board, and expires on the tenth anniversary of the date of grant. Furthermore, for a non-employee Chairperson of the Board, the value of options covered by the Annual Option Grant and the Welcome Grant shall be twice the amounts mentioned above. For a non-employee Vice-Chairperson of the Board, the value of options covered by the Annual Option Grant and the Welcome Grant shall be one and a half times the amounts mentioned above. Options granted in accordance with the 2011 Outside Director Compensation Plan will be made under the 2011 Incentive Stock Plan.

          Prior to April 1, 2011, under the 2007 Outside Director Compensation Plan, each non-employee director received an annual grant of stock options (Annual Option Grant) on the first trading day of the calendar year with a Black-Scholes value of $75,000 and an exercise price equal to the closing price of our common stock on the date of grant. The Annual Option Grant vested in one tranche on the first anniversary, provided that the recipient director remained on the Board, and expired on the tenth anniversary of the date of grant. In addition, upon the election of a new non-employee director, such newly elected director received a Welcome Grant of stock options with a Black-Scholes value of $75,000 and an exercise price equal to the closing price of our common stock on the date of grant. The Welcome Grant vested in three equal tranches on each of the first three anniversaries, provided that the recipient director remained on the Board, and expired on the tenth anniversary of the date of grant. Furthermore, for a non-employee Chairperson of the Board, the value of options covered by the Annual Option Grant and Welcome Grant were twice the amounts mentioned above. Options granted in accordance with the 2007 Outside Director Compensation Plan were made under the 2001 Incentive Stock Plan.

          The following is a summary of the activity in the Company’s outstanding Stock Option Plans, which include the 2011 Incentive Stock Plan, the 2001 Incentive Stock Plan, and the 1987 Non-Qualified Stock Option Plan (options in thousands):

	Options			Weighted Average Exercise Price Per Option		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2011		3,993		$	13.21
Granted at exercise prices which equaled the fair value on the date of grant		311		$	9.39
Exercised		(674	)	$	8.09
Forfeited		(17	)	$	12.40
Expired		(492	)	$	24.30
Outstanding at December 31, 2011		3,121		$	12.19		3.45	$	2,231
Vested and expected to vest at December 31, 2011		3,060		$	12.27		3.33	$	2,127
Exercisable at December 31, 2011		2,786		$	12.55		2.74	$	1,776

          As of December 31, 2011, there was $0.6 million of total unrecognized compensation cost related to unvested options that the Company expects to recognize over a weighted-average period of 14 months. The Board of Directors of the Company elected to accelerate the vesting of certain stock options granted under the Company’s 2001 Incentive Stock Plan as of the consummation of the sale of the specialty pharmaceutical business in January 2010. This acceleration affected outstanding options held by employees at the vice president level and below and resulted in an additional expense of $0.2 million in the first quarter of 2010 and $0.1 million in 2009. The charges primarily represented an acceleration of expense recognition pursuant to the original award and, to a lesser extent, an adjustment to recognize the modification of the award in contemplation of the sale.

          The weighted-average grant-date fair value of options granted during the years ended December 31, 2011, 2010 and 2009 was $3.29, $4.42, and $2.45, respectively. The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was $1.9 million, $11.8 million, and $26 thousand, respectively. During the year ended December 31, 2011, the grant-date fair value of options that vested was $1.2 million.

          In the years ended December 31, 2011, 2010 and 2009, the Company recorded stock-based compensation of $0.7 million, $2.2 million, and $3.2 million, respectively, related to stock options. The Company did not realize a net tax benefit related to stock-based compensation expense. The Company’s policy is to use newly issued shares to satisfy the exercise of stock options.

          The breakdown of stock-based compensation expense by major line caption in the statements of operations is shown below (in thousands):

	Year Ended December 31,
	2011		2010		2009
Research and development	$	26	$	377	$	804
General and administrative		684		1,787		2,394
	$	710	$	2,164	$	3,198

          Cash received from exercises of stock options for the years ended December 31, 2011, 2010 and 2009, was $5.5 million, $31.8 million, and $0.1 million, respectively.

          The weighted average assumptions used in the Black-Scholes option-pricing model for expected volatility, expected term until exercise and risk-free interest rate are shown in the table below. Expected volatility is based on historical volatility of the Company’s common stock. The expected term of options is estimated based on the Company’s historical exercise pattern. The risk-free interest rate is based on U.S. Treasury yields for securities in effect at the time of grant with terms approximating the expected term until exercise of the option. No dividend payments were factored into the valuations. Forfeiture rates, used for determining the amount of compensation cost to be recognized over the service period, are estimated based on stratified historical data.

	Year Ended December 31, 2011			Year Ended December 31, 2010			Year Ended December 31, 2009
Expected volatility		42	%		42	%		41	%
Expected term (in years)		4.1			5.4			5.4
Risk-free interest rate		1.5	%		2.6	%		1.7	%