CAPITAL STRUCTURE

6 Months Ended

Jun. 30, 2013

CAPITAL STRUCTURE [Abstract]

CAPITAL STRUCTURE

 5. CAPITAL STRUCTURE

As of June 30, 2013 and December 31, 2012, there were 58,314,471 and 52,424,649 shares, respectively, of the Company's common stock issued and outstanding.

Common Stock Issuance under At-The-Market ("ATM") Sales Agreement

On April 30, 2012, the Company entered into an ATM Sales Agreement, with Cowen and Company, LLC ("Cowen"), under which the Company could, at its discretion, sell its common stock with a sales value of up to a maximum of $40.0 million through ATM sales on the NASDAQ Stock Market. The Company pays Cowen as the sole sales agent a commission of 3.0% of the gross sales price for any sales made under the ATM. The common stock is sold at prevailing market prices at the time of the sale of common stock, and, as a result, prices will vary.

For the period ending June 30, 2013, $5.3 million was recorded as a receivable due to a timing difference of the receipt of cash proceeds from the sale of common stock under the ATM and is classified as prepaid and other on the Company's Condensed Consolidated Balance Sheets.

On July 3, 2013, the Company and Cowen amended and restated the Sales Agreement (the "Amended and Restated Sales Agreement") to increase the aggregate gross sales proceeds that may be raised to $100,000,000, of which approximately $38.3 million was previously sold pursuant to the original Sales Agreement dated April 30, 2012. (See Note 9 – Subsequent Events.)

Sales in the ATM offering are being made pursuant to the prospectus supplement dated April 30, 2012, as amended by Amendment No. 2 dated July 3, 2013, which supplements the Company's prospectus dated February 3, 2012, filed as part of the shelf registration statement that was declared effective by the Securities and Exchange Commission ("SEC") on February 3, 2012. Cumulatively through June 30, 2013, the Company sold 6,208,986 shares under the ATM offering at a weighted-average selling price of $5.98 per share for net proceeds of approximately $36.0 million.

Common Stock Warrants

During the quarter ended June 30, 2013, the Company received approximately $4.9 million from the exercise of warrants in exchange for the issuance of 1,733,280 shares of the Company's common stock.

The table reflects the number of common stock warrants outstanding as of June 30, 2013:

(In thousands, except per share amounts)	Number of shares exercisable		Exercise price			Expiration date
Issued in connection with Encode merger		233	$	2.87		12/13/2015
Issued to placement agents in August 2009		65	$	1.50		7/31/2014
TorreyPines warrants assumed in 2009 Merger		4	$	157.08		9/26/2015
Issued to registered direct investors in Dec. 2009		363	$	2.45		12/22/2014
Issued to private placement investors in Aug. 2010		1,450	$	3.075		8/12/2015
Issued to placement agent in Aug. 2010		98	$	3.075		8/12/2015
Total warrants outstanding		2,213	$	3.15	*
* Weighted-average exercise price

The warrants issued by the Company in the August 2010 private placement and the December 2009 equity financing contain a conditional obligation that may require the Company to transfer assets to repurchase the warrants upon the occurrence of potential future events. Under ASC 480, a financial instrument that may require the issuer to settle the obligation by transferring assets is classified as a liability. Therefore, the Company has classified the warrants from both financings as liabilities and will mark them to fair value at each period end.

A Black-Scholes option-pricing model was used to obtain the fair value of the warrant liabilities. These warrants were issued in the December 2009 and August 2010 equity financings using the following assumptions at June 30, 2013 and December 31, 2012:

	December 2009 equity financing Series A						August 2010 private placement investors and placement agent
	June 30, 2013			December 31, 2012			June 30, 2013			December 31, 2012
Fair value ($ millions)	$	2.6		$	2.6		$	10.9		$	13.8
Black-Scholes inputs:
Stock price	$	9.35		$	5.85		$	9.35		$	5.85
Exercise price	$	2.45		$	2.45		$	3.075		$	3.075
Risk free interest rate		0.27	%		0.25	%		0.36	%		0.31	%
Volatility		95	%		100	%		95	%		112	%
Expected term (years)		1.5			2.0			2.0			2.5
Dividend		0			0			0			0

Marked-to-Market

As a result of the marking-to-market of the warrant liability at quarter-end and the day prior to the exercise of warrants subject to warrant liability accounting, the Company recorded a loss of approximately $7.0 million and a gain of approximately $6.9 million for the three months ended June 30, 2013 and May 31, 2012, respectively, and losses of approximately $6.0 million and $0.9 million for the six months ended June 30, 2013 and May 31, 2012, respectively, in the line item adjustment to fair value of common stock warrants in its Condensed Consolidated Statements of Comprehensive Loss.

Below is the activity of the warrant liabilities for the six month periods ended June 30, 2013 and May 31, 2012:

	For the six months ended
(In millions)	June 30, 2013			May 31, 2012
Fair value of December 2009 direct offering warrants (including placement agent warrants) at beginning of the six month periods ended June 30, 2013 and May 31, 2012	$	2.6		$	6.7
December 2009 direct offering warrants exercised		(1.7	)		(4.5	)
Adjustment to mark to market common stock warrants		1.7			1.0
December 2009 direct offering common stock warrant liability at fair value at June 30, 2013 and May 31, 2012		2.6			3.2
Fair value of August 2010 private placement warrants (including broker warrants) at beginning of the six month periods ended June 30, 2013 and May 31, 2012		13.8			18.7
August 2010 private placement warrants exercised		(7.2	)		(2.7	)
Adjustment to mark to market common stock warrants		4.3			(0.1	)
August 2010 private placement common stock warrant liability at fair value at June 30, 2013 and May 31, 2012		10.9			15.9
Total warrant liability at June 30, 2013 and May 31, 2012, respectively	$	13.5		$	19.1

Effect of Raptor's Stock Price and Volatility Assumptions on the Calculation of Fair Value of Warrant Liabilities

As discussed above, the Company uses the Black-Scholes option pricing model as its method of valuation for warrants that are subject to warrant liability accounting. The determination of the fair value as of the reporting date is affected by Raptor's stock price as well as assumptions regarding a number of highly complex and subjective variables which could provide differing variables. These variables include, but are not limited to, expected stock price volatility over the term of the security and risk-free interest rate. In addition, the Black-Scholes option pricing model requires the input of an expected life for the securities for which the Company has estimated based upon the stage of its development. The fair value of the warrant liability is revalued each balance sheet date utilizing Black-Scholes valuation model computations with the decrease or increase in fair value being reported in the Condensed Consolidated Statement of Comprehensive Loss as other income or expense, respectively. The Company's reported net loss was approximately $40.1 million for the six months ended June 30, 2013. If the Company's June 30, 2013 closing stock price had been 10% lower, its net loss would have been approximately $1.7 million lower. If the Company's June 30, 2013 closing stock price had been 10% higher, its net loss would have been approximately $1.7 million higher. If the Company's June 30, 2013 volatility assumption had been 10% lower, its net loss would have been approximately $0.3 million lower. If the Company's June 30, 2013 volatility assumption had been 10% higher, its net loss would have been approximately $0.3 million higher.