Stock-Based Compensation Expense

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Expense

(3) Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to employee stock options for the three-month and six-month periods ended June 30, 2013 and June 30, 2012, which was allocated as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Research and development	$	201	$	205	$	420	$	428
General and administrative		104		103		206		210
	$	305	$	308	$	626	$	638

We use the Black-Scholes pricing model to value stock options. The estimated fair value of employee stock options granted during the six months ended June 30, 2013 and 2012 was calculated using the Black-Scholes model with the following weighted-average assumptions:

	For the Six			For the Six
	Months Ended			Months Ended
	June 30, 2013			June 30, 2012
Risk-free interest rate		1.00	%		1.19	%
Expected dividend yield		0.00	%		0.00	%
Expected volatility		98.09	%		97.97	%
Expected life (years)		6.08			6.18
Weighted-average fair value of options granted	$	1.24		$	2.01

The risk-free interest rate assumptions are based upon various U.S. Treasury rates as of the date of the grants, 1.00%, for the six months ended June 30, 2013 and 0.97% to 1.66% for the six months ended June 30, 2012.

The expected dividend yield is based on the assumption that we do not expect to declare a dividend over the life of the options.

The expected volatility assumptions for 2013 and 2012 are based on the weighted average volatility for the most recent one-year period as well as the volatility over the expected life of 6.08 years and 6.18 years, respectively.

The expected life of employee stock options represents the weighted average combining the actual life of options that have already been exercised or cancelled with the expected life of all outstanding options. The expected life of outstanding options is calculated assuming the options will be exercised in part at the midpoint of the vesting date (four years) and in part at the full contractual term (ten years).

The Company estimates forfeiture rates at the time of grant and revises these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on the demographics of current option holders and standard probabilities of employee turnover. We do not record tax-related effects on stock-based compensation given our historical and anticipated operating experience and offsetting changes in our valuation allowance which fully reserves against potential deferred tax assets.

Stock Options

The following table summarizes the stock option activity for the six months ended June 30, 2013:  

			Weighted		Weighted
			average		average		Aggregate
	Number		exercise		contractual		intrinsic
(in thousands,	of shares		price		life (years)		value
except exercise price and contractual term data)
Stock options outstanding, December 31, 2012		1,409	$	7.06
Granted		626		1.59
Forfeited		(207)		2.61
Expired		(14)		11.82
Stock options outstanding at June 30, 2013		1,814	$	5.65		7.47	$	-
Vested or expected to vest at June 30, 2013		1,665	$	5.97		7.31	$	-
Exercisable at June 30, 2013		874	$	9.28		5.65	$	-

Unrecognized stock-based compensation related to stock options was approximately $1.4 million as of June 30, 2013. This amount is expected to be expensed over a weighted average period of 2.7 years. There were no options exercised during the six months ended June 30, 2013 or 2012.

The following table summarizes information about our stock options outstanding as of June 30, 2013:

	Outstanding						Exercisable
			Weighted
			average		Weighted				Weighted
			remaining		average				average
Range of exercise	Number		contractual		exercise		Number		exercise
prices	of shares		life (in years)		price		of shares		price
	(number of shares in thousands)
$0.00 - $10.00		1,502		8.40	$	2.55		569	$	3.30
$10.01 - $20.00		161		2.87		16.16		161		16.15
$20.01 - $30.00		128		3.61		23.61		121		23.71
$30.01 - $41.25		23		0.82		33.32		23		33.32
		1,814		7.47	$	5.65		874	$	9.28