Debt

6 Months Ended

Jun. 30, 2020

Liability Related to Sale of Future Royalties

On January 7, 2018, the Company entered into a funding agreement with RPI Finance Trust, a Delaware statutory trust ("RPI"), under which we sold a portion of our right to receive royalties on potential net sales of the ADC Trodelvy, in exchange for $175.0 million in cash. Concurrently, we entered into a common stock purchase agreement with RPI through which RPI purchased 4.4 million shares of the Company's common stock for $75.0 million (the "Financing").

The Company concluded that there were two units of accounting in the transaction: (1) the liability related to the sale of future royalties (the "Liability") and (2) the "Financing". We allocated the consideration of $250.0 million on a relative fair value basis to the Liability for $182.2 million and the common stock for $67.8 million. We continue to accrete the Liability related to the sale of future royalties using the effective interest method with an annual interest rate of approximately 21% over a period of 20 years for the six months ended June 30, 2020. As of June 30, 2020, and December 31, 2019, we determined the fair value at $288.7 million and $261.2 million, respectively. During the six months ended June 30, 2020 and 2019, the Company recognized approximately $27.5 million and $20.4 million in interest expense, respectively.

The following table shows the activity within the liability related to sale of future royalties during the six months ended June 30, 2020 and 2019 (in thousands):


	Six Months Ended June 30,
	2020		2019
Carrying value of liability related to sale of future royalties, beginning of the period	$	261,224	$	221,295
Interest expense recognized	27,469		20,373
Carrying value of liability related to sale of future royalties, end of period	$	288,693	$	241,668

Convertible Senior Notes

In February 2015, the Company issued $100.0 million of Convertible Senior Notes (the "Convertible Senior Notes") (net proceeds of approximately $96.3 million after deducting the initial purchasers’ fees and offering expenses) in a private offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon Rule 144A under the Securities Act. The remaining $7.1 million Convertible Senior Notes at December 31, 2019, converted

into 1.4 million shares of common stock based on the initial conversion price of $5.11 per share of common stock on February 14, 2020. The effective interest rate on the Convertible Senior Notes was 5.48% for the period from the date of issuance through settlement.

Total interest expense for the Convertible Senior Notes for the six months ended June 30, 2020 and 2019 was $0.1 million and $0.1 million, respectively. Included in interest expense was an immaterial amount of amortization of debt issuance costs for the six months ended June 30, 2020 and 2019.