Stock compensation

3 Months Ended

Mar. 31, 2013

Stock compensation

Stock compensation

7.     Stock compensation

We recorded $9.2 million and $9.9 million, respectively, of stock compensation expense on our condensed consolidated statements of operations for the three months ended March 31, 2013 and 2012.

Stock compensation expense included within our condensed consolidated statements of operations included research and development expense of $6.5 million and $6.7 million and selling, general and administrative expense of $2.7 million and $3.2 million for the three months ended March 31, 2013 and 2012, respectively.

We utilized the Black-Scholes valuation model for estimating the fair value of the stock compensation granted, with the following weighted-average assumptions:

	Employee StockOptions For theThree MonthsEnded				Employee StockPurchase Plan For theThree MonthsEnded
	March 31,				March 31,
	2013		2012		2013		2012
Average risk-free interest rates	0.55	%	0.47	%	0.25	%	0.33	%
Average expected life (in years)	4.21		3.81		0.25		0.25
Volatility	47	%	58	%	44	%	44	%
Weighted-average fair value (in dollars)	6.95		7.71		3.26		3.21

The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.

Based on our historical experience, we have assumed an annualized forfeiture rate of 5% for our options. Under the true-up provisions of the stock based compensation guidance , we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested, as of March 31, 2013, was $40.5 million, which is expected to be recognized over the vesting period of 3 years.

The following table summarizes activity under all stock option plans:

	SharesAvailable forGrant		NumberOutstanding		WeightedAverageExercisePrice perShare
Balance at December 31, 2012	5,406,277		21,816,611		$	12.05
Options granted	(4,577,500	)	4,577,500		18.31
Options exercised	—		(2,067,375	)	8.60
Options cancelled	117,789		(118,073	)	16.69
Balance at March 31, 2013	946,566		24,208,663		$	13.51
Exercisable, March 31, 2013	—		14,640,252		$	10.70