Long Term Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Long Term Debt

6. Long Term Debt

In May 2022 the Company and its wholly-owned subsidiary, Canticle Pharmaceuticals, Inc., entered into the $250.0 million Loan Facility with the several banks and other financial institutions or entities party thereto (each, a “Lender” and collectively referred to as the “Lenders”), and Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent for itself and the Lenders. Under the terms of the Loan Facility, the first $50.0 million tranche was drawn at closing. The Company may also draw up to an additional $125.0 million in two separate tranches upon achievement of certain resmetirom clinical and regulatory milestones. A fourth tranche of $75.0 million may be drawn by the Company, subject to the approval of Hercules.

The Loan Facility has a minimum interest rate of 7.45% and adjusts with changes in the prime rate. The Company will pay interest-only monthly payments of accrued interest under the Loan Facility for a period of 30 months, which period may be extended to 36, 48, and 60 months upon the successive achievement of certain clinical and regulatory milestones and if the Company maintains compliance with applicable covenants. The Loan Facility matures in May 2026 and may be extended an additional year upon the achievement of certain clinical and regulatory milestones. The Loan Facility is secured by a security interest in substantially all of the Company’s assets, other than intellectual property. It includes an end of term charge of 5.35% of the aggregate principal amount, which is accounted for in the loan discount. In connection with the first tranche drawn at closing, the Company issued Hercules a warrant to purchase 14,899 shares, which had a Black-Scholes value of $0.6 million. Additional details of the Loan Facility were filed with the Securities and Exchange Commission (“SEC”) on a Current Report on Form 8-K on May 9, 2022 and the Loan and Security Agreement associated with the Loan Facility is included as an exhibit to this Quarterly Report on Form 10-Q.

The Loan Facility includes affirmative and restrictive financial covenants commencing on January 1, 2023, including maintenance of a minimum cash, cash equivalents and liquid funds covenant of $35.0 million, which may decrease in certain circumstances if the Company achieves certain clinical milestones and a revenue milestone, and a revenue-based covenant that could apply commencing at or after the time that financial reporting is due for the quarter ending September 30, 2024. The Loan Facility also includes customary covenants associated with a secured loan facility, including covenants concerning financial reporting obligations, and certain limitations on indebtedness, liens (including a negative pledge on intellectual property and other assets), investments, distributions (including dividends), collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, and deposit accounts.

As of June 30, 2022, the outstanding principal under the Loan Facility was $50.0 million. The interest rate as of June 30, 2022 was 8.70%. As of June 30, 2022, the Company was in compliance with all loan covenants and provisions.

Future minimum payments, including interest and principal, under the loans payable outstanding as of June 30, 2022 are as follows (in thousands):

Period Ending June 30, 2022:	Amount
2022 (remaining six months)	$	2,196
2023		4,410
2024		9,338
Thereafter		50,782
	$	66,726
Less amount representing interest		(14,051	)
Less unamortized discount		(4,005	)
Loans payable, net of discount	$	48,670