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Convertible Notes Payable
 3 Months Ended
Mar. 31, 2022
Debt Disclosure [Abstract]  
Convertible Notes Payable Convertible Notes Payable
August 14, 2017, in a registered underwritten public offering, the Company issued $300.0 million aggregate principal amount of 3% Convertible Senior Notes due September 1, 2024 (the “Convertible Notes”). In addition, on September 12, 2017, the Company issued an additional $5.0 million principal amount of Convertible Notes pursuant to the exercise of an over-allotment option granted to the underwriters in the offering. In connection with the issuance of the Convertible Notes, the Company incurred approximately $9.4 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.
The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.00% per annum, payable semi-annually in arrears on March 1 and September 1. Upon conversion, the Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The Convertible Notes may be redeemed at the Company’s option, in whole or in part, if the conditions described below are satisfied. The redemption of the Convertible Notes may also be subject to certain restrictions included in Note 6, “Term Loan and Credit Facility.” The Convertible Notes will mature on September 1, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms. Subject to satisfaction of certain conditions and during the periods described below, the Convertible Notes may be converted at an initial conversion rate of 20.4891 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $48.81 per share of common stock).
Holders of the Convertible Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding June 1, 2024 only under the following circumstances:
(1)if the last reported sale price of the Company’s common stock for at least 20 trading days (whether consecutive or not) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
(2)during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
(3)if the Company calls the Convertible Notes for redemption, until the close of business on the business day immediately preceding the redemption date; or
(4)upon the occurrence of specified corporate events.
As of March 31, 2022, none of the above circumstances had occurred and, as such, the Convertible Notes were not convertible.
The Company may redeem for cash all or part of the Convertible Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-consecutive trading day period ending within five trading days prior to the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. In addition, calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances.
In March 2021, the Company entered into separate, privately negotiated transactions with certain holders of the Convertible Notes to repurchase $112.2 million face amount of the Convertible Notes for a cash purchase of $108.6 million. As the Company only extinguished a portion of the debt, the difference between the reacquisition price and the net carrying amount of the extinguished portion resulted in a gain on extinguishment of $2.0 million. Third party costs associated with the
extinguishment of $0.3 million were included in selling, general and administrative expense for the three months ended March 31, 2021.
The outstanding balances of the Convertible Notes as of March 31, 2022 consisted of the following (in thousands):
2024 Convertible Notes
Liability
Principal$192,753 
Less: debt discount and issuance costs, net(2,067)
Net carrying amount$190,686 
The debt issuance costs on the Convertible Notes will be amortized over the remaining period.
The Company determined the expected life of the Convertible Notes was equal to their seven-year term. The effective interest rate on the Convertible Notes is 3.43%.
As of March 31, 2022, the “if-converted value” did not exceed the remaining principal amount of the Convertible Notes.
The following table sets forth total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31,
20222021
Contractual interest expense$1,446 $2,157 
Amortization of debt discount196 293 
Amortization of debt issuance costs11 16 
Total interest expense$1,653 $2,466 
Future minimum payments on the Company’s Convertible Notes as of March 31, 2022 are as follows (in thousands):
Years ended December 31,
Future Minimum Payments
20222,891 
20235,783 
2024198,535 
Total minimum payments
$207,209 
Less: interest
(14,456)
Less: unamortized discount
(2,067)
Less: current portion
— 
Convertible notes payable
$190,686 
Term Loan and Credit Facility
On March 3, 2021, the Company and two of its wholly-owned subsidiaries, Radius Pharmaceuticals, Inc. and Radius Health Ventures, Inc. (collectively with the Company, the “Borrowers”), entered into an (i) Amended and Restated Credit and Security Agreement (Term Loan) (the “Term Credit Agreement”), with MidCap Financial Trust, in its capacity as administrative agent, and the financial institutions or other entities from time to time parties thereto as lenders (the “Term Lenders”) and (ii) Amended and Restated Credit and Security Agreement (Revolving Loan) (the “Revolving Credit Agreement,” together with the Term Credit Agreement, the “Credit Agreements”), with MidCap Funding IV Trust, in its capacity as administrative agent, and the financial institutions or other entities from time to time parties thereto as lenders.
The Term Credit Agreement provides for a secured term loan facility (the “Term Facility”) in an aggregate principal amount of $150.0 million (the “Initial Term Loan”), an increase of $125.0 million from the arrangement entered into in January 2020.
The Revolving Credit Agreement provides for a secured revolving credit facility (the “Revolving Facility”, together with the Term Facility, the “Facilities”) under which the Borrowers may borrow up to $25.0 million, the availability of which is determined based on a borrowing base as follows: (i) up to 85% of the net collectable value of the Borrowers’ domestic
accounts receivable due from eligible direct and third-party payors, plus (ii) up to 40% of the Borrowers’ domestic eligible inventory, minus certain reserves; provided that the availability from eligible inventory may not exceed 20% of the borrowing base at any time. As of March 31, 2022 and up to the date of issuance of these condensed consolidated financial statements, the Company was eligible to borrow $25.0 million of the Revolving Facility.
The Facilities have a maturity date of June 1, 2024. The obligations under the Credit Agreements are guaranteed by the Borrowers and are guaranteed by certain future subsidiaries of the Borrowers, subject to certain exceptions. The obligations under the Facilities are secured by substantially all of the assets of the Borrowers, and are secured by substantially all assets of the future subsidiaries of the Borrowers that become borrowers or guarantors under the Facilities, subject to certain exceptions.
Borrowings under the Term Facility bear interest through maturity at a variable rate based upon the LIBOR rate plus 5.75%, subject to a LIBOR floor of 2.00%. Borrowings under the Revolving Facility bear interest through maturity at a variable rate based upon the LIBOR rate plus 3.50%, subject to a LIBOR floor of 2.00%. The Borrowers are required to pay a monthly commitment fee on the unused commitments under the Revolving Facility of 0.50% per annum.
The Company’s obligations under the Credit Agreement are secured by substantially all of the assets of the Borrowers and their wholly-owned subsidiaries. The security interest granted over these assets could limit the Company’s ability to obtain additional debt financing. In addition, the Credit Agreements contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, will limit or restrict the Company’s ability, subject to negotiated exceptions, to incur additional indebtedness and additional liens on its assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of its businesses. In addition, the Company is required to maintain an amount of unrestricted cash of at least $50.0 million and to achieve net revenue for each preceding twelve month period of at least certain specified amounts. Failure to comply with the covenants in the Credit Agreements, including the minimum cash and minimum net revenue covenants, could result in the acceleration of its obligations under the Credit Agreements.
On March 11, 2021, the Company received proceeds of $122.6 million under the Term Facility, net of fees and expenses of $2.4 million. With the issuance of a new term loan, the Company performed an assessment comparing the discounted cash flows of the original debt and the new debt as of the modification date, and concluded that the change is considered a modification. As of the modification date, the Company established a new effective interest rate based on the carrying value of the debt and the revised cash flows. Fees paid to the lender of $2.4 million were capitalized as debt discount and will be amortized to interest expense using the effective interest method over the term of the loan. Third party costs associated with the modification of $2.8 million were included in selling, general and administrative expense for the three months ended March 31, 2021. The outstanding balance of the Term Loan as of March 31, 2022 was (in thousands):
Term loan
Principal$150,000 
Less: debt issuance costs, net(1,527)
Net carrying amount$148,473 
The following table sets forth total interest expense recognized related to the Term Facility during the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended March 31
20222021
Contractual interest expense$2,961 $1,037 
Amortization of debt discount208 49 
Total interest expense$3,169 $1,086 
Future minimum payments on the Term Facility as of March 31, 2022 are as follows (in thousands):
Years ended December 31,
Future Minimum Payments
20228,719 
202361,302 
2024102,260 
Total minimum payments
$172,281 
Less: interest
(22,281)
Less: unamortized issuance costs
(1,527)
Less: current portion
— 
Term loan
$148,473