Debt

3 Months Ended

Mar. 31, 2020

Debt

Debt

10. Debt

Credit Line Agreement

In September 2015, the Company entered into a credit line with UBS (the “Credit Line”) providing for a $50.0 million revolving line of credit that can be drawn down in increments at any time. The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%. The Credit Line is secured by a first priority lien and security interest in the Company’s money market and marketable securities held in its managed investment account with UBS. UBS has the right to demand full or partial payment of the Credit Line Obligations and terminate the Credit Line, in its discretion and without cause, at any time.

For the three months ended March 31, 2020 and 2019, the Company recorded interest expense on the Credit Line of $0.3 million and $0.4 million, respectively. Interest payments on the Credit Line were made within the same periods. As of March 31, 2020, remaining accrued interest was $1.1 million, and the total principal amount outstanding with accrued interest was $49.0 million.

2017 Term Loan

In August 2017, the Company entered into the 2017 Term Loan with OrbiMed, which has a maximum borrowing capacity of $100.0 million. On the closing date of August 8, 2017, the Company borrowed $75.0 million, with the remaining $25.0 million available to borrow at the Company’s option at any time through December 31, 2019, subject to standard conditions. The amounts borrowed under 2017 Term Loan will primarily be used for general corporate purposes and to fund and support the Company’s business and operations. Interest is accrued on the outstanding balance of the loan at a rate equal to the sum of (i) 8.75% plus (ii) the higher of 1.00% or LIBOR. The 2017 Term Loan has an eighty-four month term and will mature in August 2024. The Company is required to make interest payments on a quarterly basis, with repayment of the full outstanding balance on the maturity date. The Company’s obligations under the 2017 Term Loan are secured by substantially all of its assets, including its intellectual property, subject to certain customary exceptions.

On December 31, 2018, the Company amended certain terms in the 2017 Term Loan with OrbiMed. The amendment increased the existing unused borrowing capacity from $25.0 million to $50.0 million and extended the expiration date for the option to draw the additional to March 31, 2019. If the Company has drawn from the unused borrowing capacity of $50.0 million, the interest rate described above would instead decrease to the sum of (i) 8.25% plus (ii) the higher of 1.00% or LIBOR. If the amount drawn is less than $50.0 million, the interest rate would remain at the sum of (i) 8.75% plus (ii) the higher of 1.00% or LIBOR.

In April 2019, the Company entered into a second amendment of the 2017 Term Loan with OrbiMed to further extend the expiration date until December 31, 2019 to draw the unused borrowing capacity of $50.0 million. In the second amendment, the interest rate is equal to the sum of (i) 8.25% plus (ii) the higher of 1.00% or LIBOR, provided the Company draws the minimum capacity of $25.0 million. If the amount drawn is less than $25.0 million, the interest rate would remain at the sum of (i) 8.75% plus (ii) the higher of 1.00% or LIBOR. As a fee in consideration of extending the commitment to provide this option to draw until December 31, 2019, the Company issued an additional 25,000 shares of our common stock to OrbiMed on April 29, 2019. As of December 31, 2019, the Company did not exercise such option, and the right to draw the unused borrowing capacity has expired.

The 2017 Term Loan contains customary affirmative and negative covenants including financial information maintenance covenants, indebtedness limitation covenants, minimum net revenues covenants, and investment covenants. It also includes standard events of default such as payment defaults and nonperformance of obligations and covenants described above. Upon an event of default, an additional interest of 3.00% may be applied to the outstanding debt balance until such default is cured, and OrbiMed may declare all outstanding obligations immediately due and payable. As of December 31, 2019, the Company was in compliance with all of its covenants under the 2017 Term Loan.

The Company is allowed to voluntarily make prepayments on its outstanding debt balance either partially or in full. When prepayments are made, an additional prepayment premium will be applied to the outstanding principal amount at the time. The prepayment premium will gradually reduce from 12.5% to 2.5% over the term of the loan.

On August 14, 2017, the Company paid OrbiMed a fee in consideration of providing the 2017 Term Loan by issuing 300,000 shares of its common stock. The fair value of the fee was $2.4 million, which was determined based on the Company’s stock price of $8.16 on August 8, 2017. Additionally, the Company paid legal fees of $0.3 million in connection with this term loan. Total debt issuance costs incurred amounted to $2.7 million, which is accounted for as a debt discount to be amortized on a straight-line basis over the term of the loan. The Company has classified $2.1 million of the debt discount as a direct reduction from the outstanding debt balance of $75.0 million, while the remainder is classified as noncurrent assets (as described in Note 6, Balance Sheet Components).

For the three months ended March 31, 2020 and 2019, the Company recorded interest expense for the 2017 Term Loan totaling $2.1 million and $2.3 million, respectively, which also included the amortization of debt discount. Debt discount amortized as interest expense for the three months ended March 31, 2020 and 2019 was $0.1 million in each of the two periods. The Company has not made any principal payment as it is not required to repay the outstanding balance until August 2024. The following table indicates how the Company reported its long-term debt at the end of the period:

	March 31,		December 31,
	2020		2019
		(Amounts in thousands)
Debt principal balance	$	75,000	$	75,000
Less: unamortized debt discount		(2,119)		(1,344)
Net carrying amount at end of period	$	72,881	$	73,656

The unamortized debt discount increased from $1.3 million as of December 31, 2019 to $2.1 million due to a reclass of the unamortized portion of debt issuance cost previously classified in noncurrent assets of $0.9 million to long-term debt financing. The reclass was recorded as a result of the expiration for option to draw the unused borrow capacity as of March 31, 2020. The term loan was subsequently paid off in April 2020 (see Note 13, Subsequent Events).