5. Debt

Our outstanding debt obligations consisted of the following (in thousands):


	December 31,		March 31,
	2017		2018
Convertible notes, net	$	143,446	$	146,529
Term Loan (Tranche A), net		293,659		293,888
Total long-term debt	$	437,105	$	440,417

Convertible Notes

On September 29, 2014, in a registered underwritten public offering, the Company completed the issuance of $201.3 million aggregate principal amount of Convertible Notes. In conjunction with the sale of the Convertible Notes, the Company used $20.8 million of the net proceeds to enter into separate Capped Calls.

The Convertible Notes bear interest at a rate of 3.00% per annum, payable semi-annually on April 1 and October 1, and 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 will mature on October 1, 2021, unless earlier converted or repurchased in accordance with their terms. Prior to the close of business on the business day immediately preceding April 1, 2021, the Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods as discussed below, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion price of the Convertible Notes is approximately $35.13 per share of common stock at an initial conversion rate of 28.4627 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes.

The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends. At any time prior to the close of business on the business day immediately preceding April 1, 2021, holders may convert their Convertible Notes at their option only under the following circumstances:

(1)

during any calendar quarter commencing after the calendar quarter ending on December 31, 2014 (and only during such calendar quarter), if the closing sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter in which the conversion occurs is greater than 130% of the conversion price on each applicable trading day;

(2)

during the five business day period after any ten consecutive trading day period, or 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 closing sale price of the Company’s common stock and the conversion rate on each such trading day; or

(3)

upon the occurrence of specified corporate events.

As of March 31, 2018, the carrying value of the Convertible Notes, net of unamortized discount and debt issuance costs, was $146.5 million and the estimated fair value of the principal amount was $369.0 million. As provided by the terms of the indenture underlying the Convertible Notes, the Company has a choice to settle the conversion obligation for the Convertible Notes in cash, shares or any combination of the two. The Company currently intends to settle the par value of the Convertible Notes in cash and any excess conversion premium in shares.

The following table presents total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2017 and 2018 (in thousands):


	Three Months Ended March 31,
	2017		2018
Contractual interest expense	$	1,509	$	1,509
Amortization of debt discount		2,615		2,953
Amortization of debt issuance costs		143		130
Total interest expense	$	4,267	$	4,592

2017 Term Loan Agreement

In November 2017, the Company entered into a loan agreement, or the Loan Agreement, with BioPharma Credit PLC and affiliates, or the Lenders. The Lenders agreed to provide up to an aggregate principal amount of $500.0 million in two tranches, with the first tranche equal to $300.0 million, or Tranche A, and the second in an amount between $50.0 million and $200.0 million at the Company’s discretion, or Tranche B. The Company drew Tranche A on December 6, 2017 with a maturity date of December 6, 2024. Tranche B is available for draw at the Company’s option, on 90 days’ notice, from June 30, 2018 until December 20, 2018 and if drawn by the Company, will also have a maturity date of December 6, 2024. Borrowings under the Tranche A and Tranche B loans bear interest at rates equal to the London Interbank Offered Rate, or LIBOR, plus an applicable margin of 8% per annum and 7.5% per annum, respectively (with the LIBOR rate subject to a floor of 1% and cap equal to the LIBOR rate as of the Tranche A closing date plus 1.5%). The loans have an up-front fee of 2% on the funded amount of each tranche, payable at the applicable closing date.

The Tranche A loan was recorded on the condensed consolidated balance sheets, net of a debt discount of $6.0 million in upfront fees assessed by the Lenders at the time of borrowing. The debt discount and deferred financing costs of $0.4 million are being amortized to interest expense using the effective interest method over the same term. The effective annual interest rate of the outstanding debt under Tranche A loan is approximately 10.0%. For the three months ended March 31, 2018, the Company recognized $7.5 million of interest expense related to the Tranche A loan, including $0.2 million related to the accretion of debt discount and amortization of deferred financing costs.