EMPLOYEE STOCK BENEFIT PLANS

9 Months Ended

Sep. 30, 2013

EMPLOYEE STOCK BENEFIT PLANS

EMPLOYEE STOCK BENEFIT PLANS

K.   EMPLOYEE STOCK BENEFIT PLANS

Summary of Stock-Based Compensation Plans

The 2012 Equity Incentive Plan, or 2012 EIP, is the only existing equity compensation plan from which the Company has been authorized to make equity-based awards to employees, directors and consultants. Under the 2012 EIP, the Company reserved 5,000,000 shares of common stock for grant to employees, officers, directors and consultants in the form of stock options, restricted stock, RSUs, performance-based restricted stock units, or PRSUs, stock grants and stock appreciation rights. In addition, the number of shares of common stock available for grant includes the number of shares of common stock subject to stock options and RSUs granted and outstanding under the 2010 Equity Incentive Plan, the Directors’ Equity Incentive Plan and the Amended and Restated 2000 Equity Incentive Plan as of June 7, 2012, which become available for grant upon the forfeiture, cancellation, expiration or termination of those awards after June 7, 2012. As of September 30, 2013, there were 2,989,993 shares remaining available for grant under the 2012 EIP.

Summary of Stock-Based Compensation Expense

Stock-based compensation expense recorded in the condensed consolidated statements of comprehensive income for the three and nine months ended September 30, 2013 and 2012, is as follows:

	Three Months Ended  September 30,						Nine Months Ended  September 30,
	2013			2012			2013			2012
	(in thousands)
Stock-based compensation expense allocation:
Cost of product revenues	$	120		$	133		$	374		$	305
Research and development	2,816			2,371			8,583			6,724
Selling, general and administrative	5,029			4,248			15,147			12,215
Total stock-based compensation	7,965			6,752			24,104			19,244
Income tax effect	(2,993		)	(2,302		)	(9,058		)	(6,770		)
After-tax effect of stock-based compensation expense	$	4,972		$	4,450		$	15,046		$	12,474

Stock-based compensation expense for the three and nine months ended September 30, 2013, presented above, excludes $24.0 million of postcombination stock-based compensation expense resulting from the cash settlement of nonvested equity awards of Trius. The total was comprised of $12.4 million of research and development expense and $11.6 million of selling, general and administrative expense. See Note C., “Business Combinations and Acquisitions,” for additional information.

General Option Information

A summary of option activity for the nine months ended September 30, 2013, is as follows:

	Number of shares			Weighted Average Exercise Price
Outstanding as of December 31, 2012	8,025,194			$	27.31
Granted	1,252,843			$	45.32
Exercised	(1,310,085		)	$	20.92
Canceled	(112,413		)	$	36.24
Outstanding as of September 30, 2013	7,855,539			$	31.12
Vested and exercisable as of September 30, 2013	4,685,736			$	25.10
Weighted average grant-date fair value of options granted during the period	$	14.15

RSU Information

A summary of RSU activity, including PRSUs, for the nine months ended September 30, 2013, is as follows:

	Number of Shares		Weighted Average Grant Date Fair Value
Nonvested as of December 31, 2012	735,939		$	35.33
Granted	443,745		$	44.15
Vested	(271,724	)	$	32.35
Forfeited	(23,722	)	$	37.75
Nonvested as of September 30, 2013	884,238		$	40.61