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Debt Instruments and Related Party Transactions | 12 Months Ended
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Dec. 31, 2016
Debt Instruments and Related Party Transactions |
Debt Instruments and Related Party Transactions | 16. Debt Instruments and Related Party Transactions October 2015 and February 2016 Notes and Warrants Purchase Agreement In October 2015, the Company entered into the October 2015 Purchase Agreement with Redmile, who beneficially owned approximately 6.7% of the Common Stock as of December 31, 2015, whereby it sold, on a private placement basis, (a) $50.0 million aggregate principal amount of its unsecured promissory notes ("Notes") and (b) five-year warrants ("Warrants") for 1.3 million shares of Common Stock. The payment terms under the purchase agreement contained two installments, the first $15.0 million in October 2017 and the balance $35.0 million in October 2020. Interest was payable at 4.1% on a monthly basis over the term of the loan. Due to the embedded redemption (put and/or call) features in the note agreement, it was determined that the fair value of the warrants should be bifurcated from the value of the notes payable and recorded as a debt discount. The relative fair value of the warrants and the debt discount as related to the October 2015 purchase agreement was determined to be $8.8 million. This Purchase Agreement was modified in February 2016 when the Company entered into a Note and Warrant Purchase Agreement (the "February 2016 Purchase Agreement") with Redmile for an aggregate amount of up to $75.0 million. The Company agreed with Redmile that in full consideration of the purchase price for the notes issued under the October 2015 Purchase Agreement, Redmile surrendered for cancellation all notes and warrants acquired from the October 2015 Purchase Agreement and the Company paid Redmile any unpaid interest accrued thereunder. Pursuant to the February 2016 agreement, at closing, it sold, on a private placement basis (a) $50.0 million aggregate principal amount of unsecured promissory notes ("Initial Notes") and (b) five year warrants to purchase up to 37 shares of the Company's Common Stock for every $1,000 of the principal amount of Initial Notes purchased ("Initial Warrants"), for an aggregate of up to 1,850,000 shares of Common Stock issuable under the Initial Warrants. The payment terms contained two installments, the first $15.0 million in October 2017 and the balance $35.0 million in October 2021. The interest rate was 3.875% and payable upon of maturity. This transaction was accounted for as a debt modification in accordance with ASC 470-50. The incremental fair value between the warrants that were cancelled and the February issued warrants of $3.5 million was recorded as additional unamortized debt discount on the balance sheet and added to the prior warrant balance within equity. The Notes mentioned above were cancelled in December 2016. For more details, refer to section December 2016 Note Purchase Agreement below in this footnote. June 2016 Amended Purchase Agreement In June 2016, following the marketing approval for migalastat in Europe, the Company entered into the Amended Purchase Agreement with Redmile. Such amendment joined GCM to the February 2016 Purchase Agreement. Pursuant to the Amended Purchase Agreement, the Company sold an additional $30 million unsecured promissory notes and five year warrants to purchase up to purchase up to 42 shares of our Common Stock, par value $0.01 per share for every $1,000 of the principal amount of additional notes purchased, for an aggregate of up to 1,260,000 shares of Common Stock issuable from the additional warrants. The payment was due in October 2021. The interest rate was 3.875% and payable upon of maturity. The Notes mentioned above were cancelled in December 2016. For more details, refer to section December 2016 Note Purchase Agreement below in this footnote. December 2016 Note Purchase Agreement On December 15, 2016, the Company entered into a Note Purchase Agreement ("Note Purchase Agreement") with GCM and RedMile, pursuant to which the Company agreed to prepay all outstanding principal and accrued and unpaid interest on the notes issued by the Company and held by GCM and Redmile. Such prepayment was made on December 21, 2016. The Note Purchase Agreement did not cancel the warrants, under the Amended Purchase Agreement. The net loss on extinguishment of the debt was $13.3 million and is included as loss on extinguishment in the Consolidated Statement of Operations for the year ended December 31, 2016. 2016 Convertible Debt On December 21, 2016, the Company issued at par value $250 million aggregate principal amount of unsecured Convertible Senior Notes due 2023 (the "Convertible Notes"), which included the exercise in full of the $25 million over-allotment option granted to the initial purchasers of the Notes, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. Interest is payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2017. The Notes will mature on December 15, 2023, unless earlier repurchased, redeemed, or converted in accordance with their terms. The Notes are convertible at the option of the holders, under certain circumstances and during certain periods, into cash, shares of the Company's common stock or a combination thereof and may be settled as described below. The net proceeds from the Note Offering were $243.1 million, after deducting fees and estimated expenses payable by the Company. In addition, the Company used approximately $13.5 million of the net proceeds from the issuance of the Convertible Notes to pay the cost of the capped call transactions ("Capped Call Confirmations") that the Company entered into in connection with the issuance of the Convertible Notes. The Convertible Notes are governed by an indenture dated December 21, 2016 (the "Indenture") by and between Amicus and Wilmington Trust, National Association, as trustee. The Convertible Notes are initially convertible into approximately 40,849,675 shares of the Company's common stock under certain circumstances prior to maturity at a conversion rate of 163.3987 shares per $1,000 principal amount of Convertible Notes, which represents a conversion price of approximately $6.12 per share of Common Stock, subject to adjustment under certain conditions. Holders may convert their Convertible Notes at their option at specified times prior to the maturity date of December 15, 2023, only if:
| • | during any fiscal quarter commencing after March 31, 2017, if the last reported sale price of the Company's common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 130% of the conversion price of the Convertible Notes on the last day of such preceding fiscal quarter;
| • | a Holder submits its Convertible Notes for conversion during the five business day period following any five consecutive trading day period in which the trading price for the Convertible Notes, per $1,000 principal amount of the Convertible Notes, for each such trading day was less than 98% of the product of the last reported sale price of the Company's common stock and the conversion rate of the Convertible Notes on such date; or
| • | the Company issues to all or substantially all of the holders of common stock rights options or warrants entitling then them for a period of not more than 60 calendar days after the date of such issuance to subscribe for or purchase shares of the Common Stock, at a price per share less than the average of the Last Reported Sale Prices of the Common Stock for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of such issuance or distributes to all or substantially all holders of the Common Stock the Company's assets, debt securities or rights to purchase the Company's securities which distribution has a per share value of exceeding 10% of the Last Reported Sale Price of the Common Stock on the Trading Day immediately preceding the date of announcement of such distribution
| • | the Company enters into specified corporate transactions.
| • | the Company has had a call for redemption, the holder can convert up until the second trading day immediately preceding the redemption date
The Convertible Notes will be convertible, at the option of the note holders, regardless of whether any of the foregoing conditions have been satisfied, on or after September 15, 2023 at any time prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date of December 15, 2023. Upon the occurrence of a make-whole fundamental change or if the Company call all or any portion of the Convertible Notes for redemption prior to July 1, 2020, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change or during the related redemption period. Upon conversion, the Company may pay cash, shares of the Company's common stock or a combination of cash and stock, as determined by the Company in its discretion. The Company accounts for the Convertible Notes as a liability and equity component where the carrying value of the liability component will be valued based on a similar instrument. In accounting for the issuance of the Convertible Notes, the Company separated the Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the Convertible Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense over the seven-year term of the Convertible Notes. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. In accounting for the issuance of the Convertible Notes, the Company separated the Convertible Notes into liability and equity components based on their relative values. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the par value of the Convertible Notes. The difference between the principal amount of the Convertible Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and amortized to interest expense using the effective interest method over the seven-year term of the Convertible Notes. The equity component of the Convertible Notes of approximately $88.3 million is included in additional paid-in capital in the Consolidated Balance Sheets and is not remeasured as long as it continues to meet the conditions for equity classification. Additionally, the Company recorded a deferred tax liability of $29.8 million in relation to the Convertible Notes. The Company incurred transaction costs of approximately $7.5 million, including approximately $6.9 million that was paid from the gross proceeds of the Convertible Notes offering. In accounting for the transaction costs, the Company allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds from the Convertible Notes. Transaction costs attributable to the liability component were recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and amortized to interest expense over the seven-year term of the Convertible Notes. Transaction costs attributable to the equity component were netted with the equity component in additional-paid-in-capital. The Convertible Notes consist of the following as of December 31, 2016:
Liability component |  | (In thousands) |
Principal |  | $ | 250,000 |
Less: debt discount (1) |  |  | (90,807 | )
Less: deferred financing (1) |  |  | (4,729 | )
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Net carrying value of the debt |  | $ | 154,464 |
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(1) | Included in the Consolidated Balance Sheets within Convertible Senior Notes (due 2023) and amortized to interest expense over the remaining life of the Convertible Senior Notes using the effective interest rate method.
The fair value of the debt at December 31, 2016 was approximately $258.8 million. The following table sets forth total interest expense recognized related to the Convertible Notes for the year ended December 31, 2016:
Components |  | (In thousands) |
Contractual interest expense |  | $ | 208 |
Amortization of deferred financing |  |  | 26 |
Amortization of debt discount |  |  | 248 |
Total |  | $ | 482 |
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Effective interest rate of the liability component |  |  | 10.85 | %
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The Capped Call Confirmations of $13.5 million are expected generally to reduce the potential dilution to the Common Stock upon any conversion of the Convertible Notes and/or offset the cash payments the Company is required to make in excess of the principal amount upon conversion of the Notes in the event that the market price of the Common Stock is greater than the strike price of the Capped Call Confirmations (which initially corresponds to the initial conversion price of the Convertible Notes and is subject to certain adjustments under the terms of the Capped Call Confirmations), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Confirmations. The Capped Call Confirmations have an initial cap price of $7.20 per share, which represents a premium of approximately 50% over the closing price of the Company's Common Stock on The NASDAQ Global Market on December 15, 2016, and is subject to certain adjustments under the terms of the Capped Call Confirmations. The Capped Call Confirmations will cover, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of Common Stock that will underlie the Convertible Notes. The Capped Call Confirmations do not meet the criteria for separate accounting as a derivative as they are indexed to the Company's Common Stock. The premiums paid for the Capped Call Confirmations have been included as a net reduction to additional paid-in capital.

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