Debt, Long-Term

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

Debt, Long-Term

G. Senior Secured Term Loan

On April 6, 2023, the Company entered into a loan agreement with BioPharma Credit PLC as collateral agent, BPCR Limited Partnership, and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon Advisors, LP (collectively, Pharmakon), as lenders and the guarantors party to the agreement. The loan agreement provides for up to a $175.0 million senior secured term loan consisting of two tranches that each mature on April 6, 2028. The initial tranche of $75.0 million was drawn upon execution of the loan agreement. The second tranche of $50.0 million is available at the Company’s option through March 31, 2024 and may be increased to $100.0 million upon mutual agreement of the parties. The term loan bears interest at a rate based upon the secured overnight financing rate (SOFR), subject to a SOFR floor of 2.75% per annum, plus 8.00% per annum. Payments will be interest-only for the first 36 months with an extension of 12 months if certain conditions are met, after which ratable principal payments will commence for the remainder of the term. Net proceeds from the initial tranche of the term loan, after deducting the lenders fees and transaction costs of $3.2 million, were $71.8 million.

The loan agreement permits voluntary prepayment at any time, subject to a prepayment premium. The loan agreement also includes a make-whole premium in the event of a voluntary prepayment, a prepayment due to a change in control or acceleration following an Event of Default (as defined in the loan agreement) on or prior to the three-year anniversary of the closing date, in each case in an amount equal to foregone interest from the date of prepayment through the three-year anniversary of the closing date. A change of control also triggers a mandatory prepayment of the term loan.

The loan agreement contains affirmative and negative covenants customary for transactions of this type and includes certain customary events of default. The Company was in compliance with all such covenants at June 30, 2023.

The term loan is secured by a perfected security interest on substantially all of the Company’s assets, excluding certain products and related intellectual property and contracts that are not related to ELAHERE.

The Company assessed all terms and features of the loan agreement in order to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the loan agreement, including put and call features. The Company determined that all features of the loan agreement were either clearly and closely associated with a debt host and did not require bifurcation as a derivative liability, or the fair value of the feature was immaterial to the Company's financial statements. The Company reassesses the features on a quarterly basis to determine if they require separate accounting.

The following table presents the carrying value of the Company’s term loan balance as of June 30, 2023 (in thousands):

	June 30, 2023
Principal loan balance	$	75,000
Debt discount and issuance costs, unamortized		(3,043)
Term loan, net	$	71,957

During the three and six months ended June 30, 2023, the Company recognized interest expense related to the term loan of $2.3 million. Additionally, given the Company’s current capital and expected sales of ELAHERE, the Company determined the likelihood of drawing the second tranche of $50.0 million to be remote, and as such, recorded a $1.0 million facility fee that is owed to the lender regardless of whether the additional funding is drawn as interest expense for the three and six months ended June 30, 2023.