Notes Payable

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Notes Payable

8.Notes Payable

On October 29, 2019 (the “Closing Date”), the Company entered into the Loan Agreement with Hercules pursuant to which a term loan in an aggregate principal amount of up to $50,000 (the “Original Credit Facility”) was available to the Company in three tranches, subject to certain terms and conditions. The first tranche of $25,000 was advanced to the Company on the Closing Date. The Company did not meet the milestone requirements for the second tranche under the Original Credit Facility, and as such, the additional amount of up to $12,500 was not available for the Company to borrow. The Company elected not to borrow the third tranche of $12,500, which was available upon Hercules’ approval until June 30, 2021. Advances under the Original Credit Facility will bear interest at a rate equal to the greater of either (i) the Prime Rate (as reported in The Wall Street Journal) plus 4.40%, and (ii) 9.65%. Following an interest-only period of 24 months, principal payments are due in 24 equal monthly installments commencing December 1, 2021 and ending November 1, 2023.

Effective as of February 24, 2022 (the “Effective Date”), the Company entered into an Amendment to the Loan and Security Agreement (the “Amendment”), with the lenders party thereto (the “Lenders”), and Hercules in its capacity as the administrative agent and the collateral agent for the Lenders, which amended the Original Credit Facility. Pursuant to the Amendment, term loans in an aggregate principal amount of up to $100,000 (the “New Credit Facility”) became available to the Company in five tranches, subject to certain terms and conditions.

The first tranche in an aggregate principal amount of $25,000 was outstanding as of the Effective Date, after taking into account reborrowing by the Company on the Effective Date of a previously-repaid principal amount of approximately $2,900. The second tranche in an aggregate principal amount of $12,500 and the third tranche in an aggregate principal amount of $12,500 have been advanced to the Company and were outstanding as of the Effective Date. The fourth tranche in an aggregate principal amount of $25,000 is available upon satisfaction of certain conditions, including the approval by the FDA of a biologics license application in respect of SER-109 (the "Regulatory Approval Milestone") by no later than December 15, 2023. The fifth tranche in an aggregate principal amount of up to $25,000 is available through the Amortization Date (as defined below) upon satisfaction of certain conditions, including the Lenders’ investment committee approval.

All advances outstanding under the New Credit Facility will bear interest at a rate equal to the greater of either (i) the Prime Rate (as reported in The Wall Street Journal) plus 6.40%, and (ii) 9.65%. For all advances outstanding under the New Credit Facility, the Company will make interest only payments through December 31, 2023, extendable to December 31, 2024 upon satisfaction of certain conditions (such applicable date, the “Amortization Date”). The principal balance and interest of the advances will be repaid in equal monthly installments after the Amortization Date and continuing through October 1, 2024, extendable to October 1, 2025, upon satisfaction of certain conditions (such applicable date, the “Maturity Date”).

The Company may prepay advances under the New Credit Facility, in whole or in part, at any time subject to a prepayment charge equal to: (a) 2.0% of amounts so prepaid, if such prepayment occurs during the first year following the Effective Date; (b) 1.5% of the amount so prepaid, if such prepayment occurs during the second year following the Effective Date, and (c) 1.0% of the amount so prepaid, if such prepayment occurs during the third year following the Effective Date.

The Company will pay an end of term charge of 4.85% of the aggregate amount of the advances made under the Original Credit Facility on the earliest date of (i) November 1, 2023; (ii) the date that the Company prepays all of the outstanding principal in full, or (iii) the date the loan payments are accelerated due to an event of default. The Company will pay an additional end of term charge of 1.75% of the aggregate amount of the advances under the New Credit Facility (including the first tranche of $25,000) on the earliest

date of (i) the Maturity Date; (ii) the date that the Company prepays all of the outstanding principal in full, or (iii) the date the loan payments are accelerated due to an event of default.

Other terms of the New Credit Facility remain generally identical to those under the Original Credit Facility, with certain covenants amended by the Amendment to provide the Company with additional operational flexibility, including the ability for the Company to issue up to $350,000 in convertible notes. The New Credit Facility includes a conditional liquidity covenant commencing on June 15, 2023, which ceases to apply if certain conditions are satisfied.

The New Credit Facility is secured by substantially all of the Company’s assets, other than the Company’s intellectual property. The Company has agreed to not pledge or secure its intellectual property to others.

The Company accounted for the New Credit Facility as a modification in accordance with the guidance in ASC 470-50, Debt. Amounts paid to the lenders were recorded as debt discount and a new effective interest rate was established. Upon issuance, the New Credit Facility was recorded as a liability with an initial carrying value of $50,586, net of debt issuance costs. The initial carrying value will be accreted to the repayment amount, which includes the outstanding principal plus the end of term charge, through interest expense using the effective interest rate method over the term of the Loan Agreement. As of December 31, 2022, the carrying value of the New Credit Facility is $51,047 and the effective interest rate in effect is 15.01%. As of December 31, 2021, the carrying value of the New Credit Facility was $24,643, and the effective interest rate in effect was 11.47%. The New Credit Facility is classified as a long-term liability on the consolidated balance sheet.

The future principal payments due under the New Credit Facility, excluding interest and the end of term charge, are as follows:

Year Ending December 31,	Principal
2023		—
2024	$	50,000
Total	$	50,000

During the years ended December 31, 2022 and 2021, the Company recognized $6,020 and $2,910 of interest expense related to the Loan Agreement, respectively, which is reflected in interest expense on the consolidated statement of operations and comprehensive loss.