Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

 v2.3.0.11
Share-Based Compensation
 6 Months Ended
Jun. 30, 2011
Share-Based Compensation Note [Abstract]  
Share-Based Compensation
8.  Share-Based Compensation

In December of 2010, the Board of Directors of the Company approved a company-wide grant of share options under the Company's 2010 Long Term Incentive and Share Award Plan (“LTIP”) and, in the first quarter of 2011, the options for 1,430,840 shares became effective. 1,040,220 of these options were granted subject to shareholder approval of an increase in the number of shares available under the LTIP. On May 26, 2011, shareholder approval was obtained at the Company's annual general meeting of shareholders. A cumulative adjustment of $1.3 million was recorded in the second quarter of 2011 to reflect the share-based compensation expense that would have been recorded from the conditional grant date to the shareholder approval date. The adjustment was based on the fair value of these options at the date of shareholder approval and calculated using the closing share price and expected term on that date. The remaining assumptions included in the calculation were the same assumptions used for the second quarter option grants. A portion of the 2011 annual options granted include immediate vesting terms with the remainder of the options vesting monthly over two years for employees and one year for directors.
 
As of June 30, 2011, the Company had approximately 4,562,486 common shares reserved for future issuance under its share option plans and Employee Share Purchase Plan (“ESPP”).

The following table shows total share-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (in thousands):

   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2011
    
2010
    
2011
    
2010
  
Research and development
   $ 885     $ 629     $ 1,946     $ 1,086  
Selling, general and administrative
     1,399       490       2,110       995  
Total share-based compensation expense
   $ 2,284     $ 1,119     $ 4,056     $ 2,081  
 
The valuation of share-based compensation awards is determined at the date of grant using the Black-Scholes Model. This model requires inputs such as the expected term of the option, expected volatility and risk-free interest rate. Further, the forfeiture rate also affects the amount of aggregate compensation. These inputs are subjective and generally require significant analysis and judgment to develop. While estimates of the expected term, volatility and forfeiture rate are derived primarily from the Company's historical data, the risk-free rate is based on the yield available on United States Treasury zero-coupon issues. The fair value of share-based awards was estimated based on the following weighted average assumptions for the three and six months ended June 30, 2011 and 2010:

   
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2011
    
2010
    
2011
    
2010
  
Dividend yield
     0 %     0 %     0 %     0 %
Expected volatility
     87 %     79 %     87 %     79 %
Risk-free interest rate
     1.76 %     1.80 %     1.87 %     2.52 %
Expected term
  
5.6 years
    
5.6 years
    
5.3 years
    
5.6 years
  
 
Share option activity for the six months ended June 30, 2011 was as follows:

   
Options
    
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Life
(in years)
    
Aggregate Intrinsic Value
(in thousands)
  
Options outstanding at December 31, 2010
     2,331,450     $ 25.36       7.71     $ 99  
Granted
     1,806,040       5.24                  
Forfeited, expired or cancelled
     (85,988 )     51.89                  
Options outstanding at June 30, 2011
     4,051,502     $ 15.83       8.27     $ 1  
Options exercisable at June 30, 2011
     2,308,248     $ 22.33       7.63     $ -