Note 6 – Deerfield Loan

Long-term debt consists solely of amounts due under the Deerfield Loan for the periods presented:

	June 30,			December 31,
(in thousands)	2015			2014

Note payable	$	30,000		$	30,000
Unamortized discount		(8,549	)		(9,698	)
Long-term debt, net of discount	$	21,451		$	20,302

When issued, the principal amount of the loan was payable in three $10 million annual installments beginning in February 2017, provided that the installments due in February 2017 and 2018 could be deferred one year if prior to such payment date we achieve a certain market capitalization milestone. See, Note 9, “Deerfield Loan,” in the Notes to Consolidated Financial Statements in our 2014 Form 10-K. Accordingly, if the milestones were achieved in each year, payment of the principal amount could be deferred until the sixth anniversary date of the loan on February 13, 2019. In July 2015, we restructured the Deerfield Loan by prepaying $5.0 million of the outstanding principal amount, prepaying (in the form of securities issued in the July 2015 public offering) $5.0 million in future interest obligations, reducing the interest rate on remaining interest from 8.75% to 8.25%, eliminating the installment due in February 2017 and adjusting the remaining maturities. (see, Note 8, “Subsequent Events – Deerfield Loan Restructuring”)

The following amounts comprise the Deerfield Loan interest expense for the periods presented:

(in thousands)	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014

Cash interest expense	$	654	$	654	$	1,301	$	1,302
Non-cash amortization of debt discounts		594		470		1,149		909
Amortization of debt costs		5		5		10		10
Total interest expense	$	1,253	$	1,129	$	2,460	$	2,221

Cash interest expense represents interest at an annual rate of 8.75% on the outstanding principal amount for the period, paid in cash on a quarterly basis. Non-cash amortization of debt discount represents the amortization of transaction fees and the fair value of the warrants issued in connection with the Deerfield Loan. The amortization of debt costs represents legal costs incurred in connection with the Deerfield Loan.

In connection with the Deerfield Loan, we issued the Deerfield Warrants to purchase 7.0 million shares of our common stock at an exercise price of $2.81 per share that expire on February 13, 2019. The Deerfield Warrants are derivatives that qualify for an exemption from liability accounting provided in ASC 815 and are classified as equity. See, Note 9, “Deerfield Loan,” in the Notes to Consolidated Financial Statements in our 2014 Form 10-K.