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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="center" style="font-size: 10pt"><b></b></div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>1. Business and Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Business</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Spectrum Pharmaceuticals, Inc. (“Spectrum”, the “Company”, “we”, “our”, or “us”) is a
biotechnology company with fully integrated commercial and drug development operations, with a
primary focus in both hematology and oncology. Our strategy is comprised of acquiring, developing and commercializing a
broad and diverse pipeline of late-stage clinical and commercial products. We market two oncology
drugs, ZEVALIN<sup style="font-size: 85%; vertical-align: text-top">®</sup> and FUSILEV<sup style="font-size: 85%; vertical-align: text-top">®</sup> and have two drugs, apaziquone and belinostat,
in late stage development along with a diversified pipeline of novel drug candidates. We have
assembled an integrated in-house scientific team, including formulation development, clinical
development, medical research, regulatory affairs, biostatistics and data management, and have
established a commercial infrastructure for the marketing of our drug products. We also leverage
the expertise of our worldwide partners to assist in the execution of our strategy. Apaziquone is
presently being studied in two large Phase 3 clinical trials for non-muscle invasive bladder
cancer, or NMIBC, and is under strategic collaborations with Allergan, Inc., (“Allergan”), Nippon
Kayaku Co. Ltd., (“Nippon Kayaku”), and Handok Pharmaceuticals Co. Ltd., (“Handok”). Belinostat,
is being studied in multiple indications including a Phase 2 registrational trial for relapsed or
refractory peripheral T-cell lymphoma, (“PTCL”), under a strategic collaboration with TopoTarget
A/S (“TopoTarget”).
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Basis of Presentation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have prepared the accompanying unaudited condensed consolidated financial statements,
pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for
interim reporting. We have condensed or omitted certain information and footnote disclosures
normally included in our annual financial statements prepared in accordance with generally accepted
accounting principles (“GAAP”) pursuant to such rules and regulations. The unaudited condensed
consolidated financial statements reflect all adjustments, which are normal and recurring, that
are, in the opinion of management, necessary to fairly state the financial position as of September
30, 2011 and the results of operations and cash flows for the related interim periods ended
September 30, 2011 and 2010. The results of operations for the three and nine months ended
September 30, 2011 are not necessarily indicative of the results that may be expected for the year
ending December 31, 2011 or for any other periods.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The condensed
consolidated balance sheet at December 31, 2010 has been derived from the audited financial
statements at that date but does not include all of the information and disclosures required by
GAAP for complete financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Significant Accounting Policies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accounting policies followed by us and other information are contained in the notes to our
audited consolidated financial statements for the year ended December 31, 2010 included in our
Annual Report on Form 10-K filed on March 10, 2011. We have not changed our significant accounting
policies as of September 30, 2011. You should read this Quarterly Report on Form 10-Q in
connection with the information contained in our Annual Report on Form 10-K filed on March 10,
2011.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Segment and Geographic Information</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We operate in one reportable segment: acquiring, developing and commercializing prescription
drug products. Accordingly, we report the accompanying condensed consolidated financial statements
in the aggregate, including all of our activities in one reportable segment. Foreign operations
were not significant for any of the periods presented herein.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Use of Estimates</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in conformity with GAAP requires us to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and
disclosure of contingent obligations in the financial statements and accompanying notes. The
estimation process requires assumptions to be made about future events and conditions, and as such,
is inherently subjective and uncertain. Actual results could differ materially from our estimates.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Recent Accounting Pronouncements</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In
June 2011, the Financial Accounting Standards Board
(“FASB”) issued an accounting standards update that eliminates the option to
present components of other comprehensive income as part of the statement of changes in equity and
requires an entity to present items of net income and other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. This
guidance also requires an entity to present on the face of the financial statements
reclassification adjustments from other comprehensive income to net income. This guidance will be
effective for fiscal years beginning after December 15, 2011, which will be our fiscal year 2012,
with early adoption permitted. We do not expect the adoption of the guidance will have a material
impact on our consolidated financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In May 2011, the FASB issued an accounting standards update that clarifies and amends the
existing fair value measurement and disclosure requirements. This guidance will be effective
prospectively for interim and annual periods beginning after December 15, 2011, which will be our
fiscal year 2012, with early adoption prohibited. We do not expect the adoption of the guidance
will have a material impact on our consolidated financial statements.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December 2010, the FASB issued an accounting
standards update that provides guidance on the recognition and classification of the annual fee
imposed by the Patient Protection Act and Affordable Care Act as amended by the Health Care and
Education Reconciliation Act on pharmaceutical companies that manufacture or import branded
prescription drugs. Under this guidance, the annual fee should be estimated and recognized in full
as a liability upon the first qualifying sale with a corresponding deferred cost that is amortized
to operating expense using a straight-line method of allocation unless another method better
allocates the fee over the calendar year in which it is payable. The annual fee ranges from $2.5
billion to $4.1 billion for all affected entities in total, a portion of which will be allocated to
us on the basis of the amount of our branded prescription drug sales for the preceding year as a
percentage of the industry’s branded prescription drug sales for the same period. The annual fee is
not deductible for federal income tax purposes. This guidance became effective for calendar years
beginning after December 31, 2010. We adopted the provisions of the guidance in the first quarter
of 2011, and current estimates do not result in a material impact on our consolidated financial
statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April 2010, the FASB issued an accounting standards update that provides guidance on the
milestone method of revenue recognition for research and development arrangements. Under the
milestone method contingent consideration received from the achievement of a substantive milestone
is recognized in its entirety in the period in which the milestone is achieved, which we believe is
more consistent with the substance of our performance under our various licensing and collaboration
agreements. A milestone is defined as an event (i) that can only be achieved based in whole or in
part on either the entity’s performance or on the occurrence of a specific outcome resulting from
the entity’s performance, (ii) for which there is substantive uncertainty at the date the
arrangement is entered into that the event will be achieved, and (iii) that would result in
additional payments being due to the entity. A milestone is substantive if the consideration
earned from the achievement of the milestone is consistent with our performance required to achieve
the milestone or the increase in value to the collaboration resulting from our performance, relates
solely to our past performance, and is reasonable relative to all of the other deliverables and
payments within the arrangement. Our license and collaboration agreements with our partners
provide for payments to us upon the achievement of development milestones, such as the completion
of clinical trials or regulatory approval for drug candidates. As of September 30, 2011, our
agreements with partners included potential future payments to us for development milestones
totaling approximately $323.0 million, including potential milestone
payments totaling $304.0 million and $19.0 million from our agreements with Allergan and
Handok Pharmaceuticals, respectively. Given the challenges inherent in developing and obtaining
approval for pharmaceutical and biologic products, there was substantial uncertainty whether any
such milestones would be achieved at the time these licensing and collaboration agreements were
entered into. In addition, we evaluated whether the development milestones met the remaining
criteria to be considered substantive. As a result of our analysis, we consider our development
milestones to be substantive and, accordingly, we expect to recognize as revenue future payments
received from such milestones as we achieve each milestone. The election to adopt the milestone
method did not impact our financial position or results of operations as of and for the three month
period ended September 30, 2011. However, this policy election may result in revenue recognition
patterns for future milestones that are materially different from those recognized for milestones
received prior to adoption.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Acquisitions and Collaborations</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For all in-licensed products, pursuant to authoritative guidance issued by the FASB, we
perform an analysis to determine whether we hold a variable interest or interests that give us a
controlling financial interest in a variable interest entity. On the basis of our interpretations
and conclusions, we determine whether the acquisition falls under the purview of variable interest
entity accounting and if so, consider the necessity to consolidate
the acquisition.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We also perform an analysis to determine if the inputs and/or processes acquired in an
acquisition qualify as a business. On the basis of our interpretations and conclusions, we
determine if the in-licensed products qualify as a business and whether to account for such
products as a business combination or an asset acquisition. The excess of the purchase price over
the fair value of the net assets acquired can only be recognized as goodwill in a business
combination.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Variable Interest Entity</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our Canadian affiliate, Spectrum Pharma Canada, is owned 50% by us and was organized in
Quebec, Canada in January 2008. We fund 100% of the expenditures and, as a result we are the party
with the controlling financial interest. We are the primary beneficiary of Spectrum Pharma Canada,
which is determined to be a variable interest entity. As a result of this characterization, it is
consolidated in our financial statements as though it is a wholly-owned subsidiary. We have
eliminated all intercompany balances and transactions among our consolidated entities
from the consolidated financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Basic and Diluted Earnings per Share</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We calculate basic and diluted net income (loss) per share using the weighted average number
of common shares outstanding during the periods presented, and adjust the amount of net income
(loss) used in this calculation for preferred stock dividends (if any) declared during the period.
In periods of a net loss position, basic and diluted weighted average shares are the same. For the
diluted earnings per share calculation, we adjust the weighted average number of common shares
outstanding to include dilutive stock options, warrants and other common stock equivalents
outstanding during the periods.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Outstanding</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Earnings</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td align="left" style="border-bottom: 1px solid #000000">(in thousands, except share and per share data)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net Income</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Denominator)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Per Share</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Three Months Ended September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic earnings per share:
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">20,255</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">53,810,047</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.38</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted earnings per share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive preferred shares
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive options
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,548,411</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Incremental shares assumed issued on
exercise of in the money warrants
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">198,285</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unvested restrictive stock
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">281,535</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Targent milestone which may be settled
in cash or stock
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">591,585</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted earnings per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">20,255</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">59,469,863</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.34</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Potentially dilutive securities not
included above since
they were antidilutive:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Antidilutive options
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">80,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Outstanding</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Earnings</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td align="left" style="border-bottom: 1px solid #000000">(in thousands, except share and per share data)</td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net Income</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Denominator)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Per Share</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nine months Ended September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Basic earnings per share:
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40,236</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">52,477,789</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.77</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted earnings per share:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive preferred shares
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Dilutive options
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,973,475</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Incremental shares assumed issued on
exercise of in the money warrants
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">174,652</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Unvested restrictive stock
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">258,644</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Targent milestone which may be settled
in cash or stock
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">401,509</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Diluted earnings per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40,236</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">57,326,069</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.70</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Potentially dilutive securities
not included above since
they were antidilutive:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Antidilutive options
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">365,500</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:CashAndCashEquivalentsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>2. Cash, Cash Equivalents and Marketable Securities</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, we held substantially all of our cash, cash equivalents and
marketable securities at major financial institutions, which must invest our funds in accordance
with our investment policy with the principal objectives of such policy being preservation of
capital, fulfillment of liquidity needs and above market returns commensurate with preservation of
capital. Our investment policy also requires that investments in marketable securities be in only
highly rated instruments, which are primarily US treasury bills or US treasury backed securities,
with limitations on investing in securities of any single issuer. To a limited degree, the Federal
Deposit Insurance Corporation and third party insure these investments. However, these investments
are not insured against the possibility of a complete loss of earnings or principal and are
inherently subject to the credit risk related to the continued credit worthiness of the underlying
issuer and general credit market risks. We manage such risks on our portfolio by investing in
highly liquid, highly rated instruments and not investing in long-term maturity instruments.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cash, cash equivalents and investments in marketable securities, including long term bank
certificates of deposits, totaled $160.8 million and $104.2 million as of September 30, 2011 and
December 31, 2010, respectively. Long term bank certificates of deposit include a $500,000
restricted certificate of deposit that collateralizes tenant improvement obligations to the lessor
of our principal offices. The following is a summary of such investments (in thousands):
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="37%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="1%"> </td>
<td width="6%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Estimated fair</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Marketable Security</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Losses</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cash</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Current</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Long Term</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>September 30, 2011</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">110,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">110,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">110,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank CDs
(including restricted certificate of deposit of $500)
</div></td>
<td> </td>
<td> </td>
<td align="right">27,115</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,115</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,235</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,880</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market currency funds
</div></td>
<td> </td>
<td> </td>
<td align="right">23,369</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,369</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,369</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other securities (included in other assets)
</div></td>
<td> </td>
<td> </td>
<td align="right">190</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total investments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">160,967</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">160,990</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">110,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38,604</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12,093</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>December 31, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">53,557</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">53,557</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">53,557</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank CDs
(including restricted certificate of deposit of $500)
</div></td>
<td> </td>
<td> </td>
<td align="right">29,985</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">29,985</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">21,416</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,569</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market currency funds
</div></td>
<td> </td>
<td> </td>
<td align="right">15,488</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,488</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">15,488</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">U.S. Government securities
</div></td>
<td> </td>
<td> </td>
<td align="right">2,909</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,909</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,909</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Corporate debt securities
</div></td>
<td> </td>
<td> </td>
<td align="right">2,304</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,304</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,304</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other securities (included in other assets)
</div></td>
<td> </td>
<td> </td>
<td align="right">35</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">9</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">26</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total investments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">104,278</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">9</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">104,269</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">53,557</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">42,117</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,595</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:FairValueDisclosuresTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Fair Value Measurements</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The
carrying values of our cash and cash equivalents, marketable
securities and other securities, carried at fair value as of September 30, 2011 are classified in the
table below in one of the three categories of the fair value hierarchy described below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>Fair Value Measurements</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>($ in ‘000’s)</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 1</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 2</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Level 3</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>2011</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Assets:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">110,293</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">110,293</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Bank CDs
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,115</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">27,115</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market currency funds
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,369</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,369</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash and cash equivalents and marketable securities
</div></td>
<td> </td>
<td> </td>
<td align="right">110,293</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">50,484</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">160,777</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other securities
</div></td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">213</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">110,506</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">50,484</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">160,990</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We measure fair value based on the prices that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to
measure fair value. These tiers include the following:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 1: </i>Quoted prices (unadjusted) in active markets for identical assets or liabilities that
are accessible at the measurement date. The fair value hierarchy gives the highest priority to
Level 1 inputs.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 2: </i>Observable prices that are based on inputs not quoted on active markets, but
corroborated by market data. These inputs include quoted prices for similar assets or liabilities;
quoted market prices in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the assets or
liabilities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Level 3: </i>Unobservable inputs are used when little or no market data is available. The fair
value hierarchy gives the lowest priority to Level 3 inputs.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In determining fair value, we utilize valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs to the extent possible, as well as consider
counterparty credit risk in the assessment of fair value. Cash equivalents consist of certificates
of deposit and are valued at cost, which approximates fair value due to the short-term maturities
of these instruments. Marketable securities consist of certificates of deposit, US Treasury bills,
US Treasury-backed securities and corporate deposits, which are
stated at carrying value as it approximates fair value due to the
short term maturities of these instruments.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following summarizes the activity of Level 3 inputs measured on a recurring basis for the nine
months ended September 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Fair Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Measurements of</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Common Stock</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Warrants Using</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs (Level 3)</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>($ in ‘000’s)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td colspan="5"> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at December 31, 2010
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">3,904</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustments resulting from change
in value of warrants recognized in
earnings
</div></td>
<td> </td>
<td> </td>
<td align="right">3,488</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Adjustments resulting from
exercise of warrants recognized in
equity
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,392</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance at September 30, 2011
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the nine months ended September 30, 2011, the fair value of common stock warrants
decreased approximately $3.9 million due to the exercise of 3,747,312 warrants on or before
September 15, 2011, for a total aggregate exercise price of $24.8 million
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We did not elect the fair value option, as allowed, to account for financial assets and
liabilities that were not previously carried at fair value. Therefore, material financial assets
and liabilities that are not carried at fair value, such as trade accounts receivable and payable,
are reported at their historical carrying values.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - us-gaap:IntangibleAssetsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>4. Intangible Assets</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets consist of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>($ in ‘000’s)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Zevalin intangibles
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">41,900</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">41,900</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Fusilev intangibles
</div></td>
<td> </td>
<td> </td>
<td align="right">16,778</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td align="right">58,678</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">41,900</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Less: accumulated amortization
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(15,600</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(12,295</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">43,078</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">29,605</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three and nine months ended September 30, 2011, Zevalin intangible
amortization of $1.3 million and $3.3 million, respectively, are included in amortization of
purchased intangibles. In addition, during the three months ended September 30, 2011, $515,000 is
included in cost of goods sold related to Fusilev Targent milestones.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:InventoryDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>5. Inventories</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Inventories, net of allowances consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>($ in ‘000’s)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Raw materials
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,320</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">962</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Work-in-process
</div></td>
<td> </td>
<td> </td>
<td align="right">2,253</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Finished goods
</div></td>
<td> </td>
<td> </td>
<td align="right">6,712</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">3,272</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">10,285</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">4,234</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We continually review product inventories on hand, evaluating inventory levels relative to
product demand, remaining shelf life, future marketing plans and other factors, and record reserves
for obsolete and slow-moving inventories for amounts which we may not realize.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>6. Accounts payable and accrued obligations</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Accounts payable and other accrued obligations consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>($ in ‘000’s)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trade payables
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9,475</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,734</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for rebates
</div></td>
<td> </td>
<td> </td>
<td align="right">9,754</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,474</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued product royalty
</div></td>
<td> </td>
<td> </td>
<td align="right">8,008</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,026</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued milestone
</div></td>
<td> </td>
<td> </td>
<td align="right">5,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for returns
</div></td>
<td> </td>
<td> </td>
<td align="right">3,500</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued data and distribution fees
</div></td>
<td> </td>
<td> </td>
<td align="right">4,049</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,874</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Allowance for chargebacks
</div></td>
<td> </td>
<td> </td>
<td align="right">560</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">350</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Accrued income taxes
</div></td>
<td> </td>
<td> </td>
<td align="right">669</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Other accrued obligations
</div></td>
<td> </td>
<td> </td>
<td align="right">9,039</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7,246</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">50,054</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">38,704</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>7. Income Taxes</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On an interim basis, we estimate what the anticipated annual effective tax rate will be and
record a quarterly income tax provision in accordance with this anticipated annual rate. The
effective tax rate may be subject to fluctuations during the year as new information is obtained,
which may affect the assumptions used to estimate the annual effective tax rate, including factors
such as the valuation allowances against deferred tax assets, the recognition or derecognition of
tax benefits related to uncertain tax positions, expected utilization of R&D tax credits and
changes in or the interpretation of tax laws in jurisdictions where the we conduct business.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Our provision for income taxes is computed using the asset and liability method, under which
deferred tax assets and liabilities are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases of assets and liabilities, and
for the expected future tax benefit to be derived from tax loss and credit carryforwards. Deferred
tax assets and liabilities are determined using the enacted tax rates in effect for the years in
which those tax assets are expected to be realized. A valuation allowance is established when it is
more likely than not the future realization of all or some of the deferred tax assets will not be
achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction by
jurisdiction basis, and includes a
review of all available positive and negative evidence. As of September 30, 2011 and December
31, 2010, we maintained a valuation allowance against deferred tax assets that we concluded have
not met the “more likely than not” threshold. The change in the valuation allowance was primarily
due to a corresponding change in a deferred tax asset that we determined required a valuation
allowance.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recognize excess tax benefits associated with share-based compensation to stockholders’
equity only when realized. When assessing whether excess tax benefits relating to share-based
compensation have been realized, we follow the with-and-without approach, excluding any indirect
effects of the excess tax deductions. Under this approach, excess tax benefits related to
share-based compensation are not deemed to be realized until after the utilization of all other tax
benefits available to us.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We recognize the impact of a tax position in our financial statements only if that position is
more likely than not of being sustained upon examination by taxing authorities, based on the
technical merits of the position. Any interest and penalties related to uncertain tax positions
will be reflected in income tax expense.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>8. Commitments and Contingencies</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Facility Lease</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We sublease our principal executive office in Henderson, Nevada under a non cancelable
operating lease expiring April 30, 2014. We also lease our research and development facility in
Irvine, California under a non cancelable operating lease expiring June 30, 2016. The lease
agreements contain certain scheduled rent increases which are accounted for on a straight-line
basis.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As part of our Irvine facility lease renewal in 2009, the landlord agreed to contribute up to
approximately $1.5 million toward the cost of tenant improvements. The tenant improvements were
completed in the second quarter of 2010 at an aggregate cost of approximately $1.4 million, of
which, $451,000 is being financed. This landlord contribution is being amortized on a straight-line
basis over the term of the lease as a reduction to rent expense.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Licensing Agreements</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are developing almost all of our drug candidates pursuant to license agreements that
provide us with rights in certain territories, among other things, to develop, sublicense,
manufacture and sell the drugs. We are generally required to use commercially reasonable efforts to
develop the drugs, and are generally responsible for all development, patent filing and
maintenance, sales and marketing and liability insurance costs, and are generally contingently
obligated to make milestone payments to the licensors if we successfully reach development and
regulatory milestones specified in the license agreements. In addition, we are obligated to pay
royalties and, in some cases, milestone payments based on net sales, if any, after marketing
approval is obtained from regulatory authorities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The potential contingent development and regulatory milestone obligations under all of our
licensing agreements are generally tied to progress through the various regulatory authorities’
approval process, which approval significantly depends on positive clinical trial results. The
following items are typical of such milestone events: conclusion of Phase 2 or commencement of
Phase 3 clinical trials; filing of new drug applications in each of the United States, Europe and
Japan; and approvals from each of the regulatory agencies in those jurisdictions.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October 2008, we signed an exclusive development and commercialization collaboration
agreement with Allergan for apaziquone. Under the terms of the agreement, Allergan paid us an
up-front non-refundable $41.5 million at closing and will make additional payments of up to $304
million based on the achievement of certain development, regulatory and commercialization
milestones. In November 2009, we entered into a collaboration agreement with Handok
Pharmaceuticals of Korea for the development and commercialization of apaziquone for the treatment
of non-muscle invasive bladder cancer in North and South Korea. Under the terms of the Handok
collaboration agreement, Handok paid us an up-front payment of $1.0 million and is required to pay
potential milestone payments of approximately $19.0 million. The potential milestones will be
based on the achievement of
certain regulatory and commercialization milestones. In
June 2011, we amended the agreement with Allergan to, among other things, revise the target indications of additional clinical trials, and extend
certain milestone dates, and to modify certain payment obligations and expense allocation
provisions.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In March 2006, we entered into an Asset Purchase Agreement with Targent, Inc. As part of the
consideration for the purchase of certain assets, we agreed to pay milestone payments to Targent
upon the achievement of certain regulatory events as well as for certain sales levels for Fusilev
within a calendar year. In connection with the achievement of the FDA approval milestone in April
2011, we issued an aggregate amount of 733,715 shares of common stock to certain of Targent’s
stockholders, as directed by Targent. We capitalized $6.3 million associated with this milestone
as intangible assets during the three months ended June 30, 2011 which is being amortized over the
estimated useful life of 8.7 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In addition, in the event that aggregate net sales of Fusilev, as defined in the agreement,
exceed $40 million and or $100 million during any calendar year, we are to pay to Targent $5
million in cash or the common stock equivalent thereof for each milestone. These milestone
payments are in effect only with respect to the first calendar year in which aggregate net sales
combined exceed such amount and not with respect to any subsequent calendar year in which aggregate
net sales of the products combined exceed such amounts. In connection with the achievement of the
first sales milestone of $40 million in May 2011 we issued 577,367 shares of common stock to
certain of Targent’s stockholders, as directed by Targent. In September 2011, we achieved the
second milestone of $100 million and have capitalized an
additional $5 million for an aggregate with the first sales
milestone of $10.0 million associated with these milestones as intangible assets. The
second milestone payment may be
paid in cash or in shares of common stock at the Company’s discretion within 45 days from September
30, 2011. In the event we determine to pay this milestone in stock, it will equate to 598,086
shares. These intangible assets are being amortized over the estimated useful life of 8.6 years.
Included in cost of goods sold expense for the nine months ended September 30, 2011 is $515,000
related to the amortization of these milestones.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Service Agreements</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with the research and development of our drug products, we have entered into
contracts with numerous third party service providers, such as radio-pharmacies, distributors,
clinical trial centers, clinical research organizations, data monitoring centers, and with drug
formulation, development and testing laboratories. The financial terms of these contracts are
varied and generally obligate us to pay in stages, depending on the occurrence of certain events
specified in the contracts, such as contract execution, reservation of service or production
capacity, actual performance of service, or the successful accrual and dosing of patients.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At each period end, we accrue for all costs of goods and services received, with such accruals
based on factors such as estimates of work performed, patient enrollment, completion of patient
studies and other events. Generally, we are in a position to accelerate, slow down or discontinue
any or all of the projects that we are working on at any given point in time. Should we decide to
discontinue and/or slow down the work on any project, the associated costs for those projects would
be limited to the extent of the work completed. Generally, we are able to terminate these contracts
due to the discontinuance of the related project(s) and can thus avoid paying for the services that
have not yet been rendered and our future purchase obligations would reduce accordingly.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Employment Agreement</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have entered into an employment agreement with Dr. Rajesh C. Shrotriya, our President and
Chief Executive Officer, which expires January 2, 2013. The employment agreement automatically
renews for subsequent one-year calendar term unless either party gives written notice of such
party’s intent not to renew the agreement at least 90 days prior to the commencement of the new
term. The employment agreement requires Dr. Shrotriya to devote his full working time and effort to
our business and affairs during the term of the agreement. The employment agreement provides for a
minimum annual base salary with annual increases, periodic bonuses and option grants as determined
by the Compensation Committee of our Board of Directors.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Litigation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are involved with various legal matters arising in the ordinary course of our business.
Although the ultimate resolution of these various matters cannot be determined at this time, we do
not believe that such matters, individually or in the aggregate, will have a material adverse
effect on our consolidated results of operations, cash flows or financial condition.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>9. Stockholder’s Equity</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Treasury Stock</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On
June 13, 2011, our Board of Directors authorized the purchase of up to $25 million of our
outstanding common stock through the end of 2012. During the three months ended September 30, 2011, we
purchased 353,055 shares of our common stock for an aggregate purchase price of $2.8 million.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Repurchased shares have been recorded as treasury shares and will be held until the Company’s
Board of Directors designates that these shares be retired or used for other purposes.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Warrant Activity</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We have issued warrants to purchase shares of our common stock to investors as part of
financing transactions, or in connection with services rendered by consultants. Our outstanding
warrants expire on varying dates through June 2015. Below is a summary of warrant activity during
the nine months ended September 30, 2011:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Common Stock</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Warrants</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Exercise Price</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding at December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">4,192,312</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.45</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Issued
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,747,312</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">6.62</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expired
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Outstanding, at September 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">445,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.04</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercisable, at September 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">420,000</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.11</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Share-Based Compensation</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We record share-based employee compensation expense for all equity-based programs, including
stock options, restricted stock grants, management incentive plan, 401(k) plan matching and our employee stock purchase plan.
Total expense recorded for the three and nine months periods ended September 30, is as shown below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Nine months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>($ in ‘000’s)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Research and development
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">280</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">253</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,179</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,111</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Selling, general and administrative
</div></td>
<td> </td>
<td> </td>
<td align="right">4,056</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,803</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14,037</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,156</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total share based
compensation expense
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4,336</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,056</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">15,216</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6,267</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Stock Options</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three and nine month periods ended September 30, 2011, the Compensation Committee
of our Board of Directors granted stock options at exercise prices equal to the closing price of
our common stock on the trading day prior to the grant date. The weighted average grant date fair
value of stock options granted during the nine months period ended September 30, 2011 and 2010 were
estimated at approximately $4.58 and $2.53, respectively using the Black-Scholes option pricing
model with the following assumptions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Nine-months ended September 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Divided yield
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.00</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">70.04</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">70.80</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk free interest rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.96</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.06</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected life (years)
</div></td>
<td> </td>
<td> </td>
<td align="right">4.93</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.00</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Share based compensation expense is recognized only for those awards that are ultimately
expected to vest, and we have applied a forfeiture rate to unvested awards for the purpose of
calculating the compensation cost. These estimates will be reversed in future periods if actual
forfeitures differ from our estimates.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three and nine months ended September 30, 2011, our share-based charge in
connection with the expensing of stock options was approximately $1.5 million and $7.0 million,
respectively. During the three and nine months ended September 30, 2010, our share-based charge in
connection with the expensing of stock options was approximately $1.7 million and $4.7 million,
respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, there was approximately $14.0 million of unrecognized stock-based
compensation cost related to stock options which we expect to recognize over a weighted average
period of approximately 2.36 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Restricted Stock</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of restricted stock awards is the grant date closing market price of our common
stock, and is charged to expense over the period of vesting. These awards are subject to forfeiture
to the extent that the recipient’s service is terminated prior to the shares becoming vested.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the three and nine month periods ended September 30, 2011, the share-based charge in
connection with the expensing of restricted stock awards was approximately $260,000 and $1.4
million, respectively. During the three and nine month periods ended September 30, 2010, the
share-based charge in connection with the expensing of restricted stock awards was approximately
$121,000 and $879,000, respectively.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, there was approximately $2.2 million of unrecognized share-based
compensation cost related to non-vested restricted stock awards, which is expected to be recognized
over a weighted average period of approximately 2.27 years.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">4<b>01(k) Plan Matching Contribution</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During
the three and nine month periods ended September 30, 2011, we issued 16,683 and 53,307
shares of common stock, respectively, as our match of approximately $145,000 and
$432,000, respectively, on the 401(k)
contributions of our employees. During the three and nine month periods ended September 30, 2010,
we issued 33,584 and 108,263 shares of common stock as our match of approximately $134,000 and
$463,000, respectively, on the 401(k) contributions of our employees.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Employee Stock Purchase Plan</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Effective July 2009, we adopted the 2009 Employee Stock Purchase Plan (“Purchase Plan”). The
Purchase Plan provides our eligible employees with an incentive by providing a method whereby they
may voluntarily purchase shares of our common stock upon terms described in the Purchase Plan. The
Purchase Plan is designed to be operated on the basis of six consecutive month offering periods
commencing January 1 and July 1 of each year. The Purchase Plan provides that eligible employees
may authorize payroll deductions to purchase shares of our common stock at 85% of the fair market
value of common stock on the first or last day of the applicable purchase period. A participant may
purchase a maximum of 50,000 shares of common stock during a 6-month offering period, not to exceed
$25,000 worth of stock on the offering date during each plan year. The Purchase Plan terminates in
2019.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, Purchase Plan participant contributions of $132,818 are included in
other accrued obligations in the accompanying condensed consolidated balance sheet. A total of
5,000,000 shares of common stock are authorized for issuance under the Purchase Plan, and as of
September 30, 2011, 302,232 shares have been issued under the Purchase Plan.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Common Stock Reserved for Future Issuances</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of September 30, 2011, approximately 11.3 million shares of our common stock, when fully
vested, were issuable upon conversion or exercise of rights granted under prior financing
arrangements, stock options and warrants, as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Conversion of Series E preferred
shares
</div></td>
<td> </td>
<td> </td>
<td align="right">40,000</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercise of stock options
</div></td>
<td> </td>
<td> </td>
<td align="right">10,788,934</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercise of warrants
</div></td>
<td> </td>
<td> </td>
<td align="right">445,000</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Total shares of common stock
reserved for future issuances</b>
</div></td>
<td> </td>
<td> </td>
<td align="right">11,273,934</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - us-gaap:CompensationAndEmployeeBenefitPlansTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>10. Long-Term Retention and Management Incentive Plan</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Effective April 22, 2011, our Board of Directors adopted a Long-Term Retention and Management
Incentive Plan (the “Incentive Plan”) to provide equity and cash incentives for our principal
executive officer, principal financial officer and certain other named executive officers. The
Incentive Plan rewards long-term corporate performance, with a goal of helping to align the total
compensation of the participants with the interests of our stockholders. The Incentive Plan
provides that, upon the occurrence of certain events, defined as a $750 million (the “Initial
Capitalization Target”) and/or $1 billion market capitalization target (the “Subsequent
Capitalization Target”), each participant will be entitled to receive stock awards under our 2009
Incentive Award Plan, as amended, and cash awards upon a change in control. The Incentive Plan
will terminate on April 22, 2016, the fifth anniversary of its effective date. The number of
shares available for issuance under the Incentive Plan will not exceed 1,039,500 shares.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of each stock award under the Incentive Plan was estimated on the date of the
grant using the Monte Carlo valuation model and assumes that the Initial Capitalization Target will
be achieved at 13 months and the Subsequent Capitalization Target will be achieved at 20 months
(collectively referred to as the “Service Life”), from the effective date. The key inputs used to
estimate the awards’ fair value include the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Term of Incentive Plan
</div></td>
<td> </td>
<td colspan="2" align="right">5 Years</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Estimated trading days from grant to end of market condition
period
</div></td>
<td> </td>
<td> </td>
<td align="right">1,260</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Average stock price on date of grant
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">9.29</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Number of common shares outstanding proximate to grant date
</div></td>
<td> </td>
<td> </td>
<td align="right">52,041,781</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Maximum number of options expected to exercise during term
</div></td>
<td> </td>
<td> </td>
<td align="right">8,397,094</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected annual stock volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">65.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected return on common equity
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">15</td>
<td nowrap="nowrap">%</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value of these equity awards was determined to be approximately $8.1 million and will
be amortized over the respective Service Life. Included in selling, general and administrative
expense was $2.5 million and $5.5 million, respectively, of compensation expense for the three and
nine months ended September 30, 2011.
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<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>11. Deferred Compensation Plan</b>
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<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On September 2, 2011, the Board of Directors approved the Spectrum Pharmaceuticals, Inc.
Deferred Compensation Plan (the “Plan”). The Plan is intended to comply with the requirements of
Section 409A of the Internal Revenue Code of 1986, as amended. The Plan will be administered by
the Compensation Committee of the board of directors, or a designee or designees of the
Compensation Committee. The Plan is intended to be an unfunded plan which is maintained primarily
to provide deferred compensation benefits for a select group of our employees including management,
as selected by the Plan administrator (the “Participants”). Under the Plan, we will provide the
Participants with the opportunity to make annual elections to defer up to a specified amount or
percentage of their eligible cash compensation, as established by the Plan administrator, and we
have the option to make discretionary contributions. At September 30, 2011, deferrals and contributions totaling
$95,236 are included in other accrued obligations in the accompanying condensed consolidated
balance sheet.
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