Debt

12 Months Ended

Dec. 31, 2019

Senior Secured Term Loan due 2023

In September 2018, the Company entered into a loan agreement with BioPharma Credit PLC as the lender. The loan agreement provides for a $150 million senior secured term loan ("Senior Secured Term Loan") with an interest rate equal to the 3-month LIBOR plus 7.50% per annum and matures in 5 years from the maturity date. The Senior Secured Term Loan will be repaid in four quarterly payments equal to 12.50% thereof starting on the forty-eight month anniversary of the date of the first credit extension with the balance due on the Maturity Date. Interest is payable quarterly in arrears. The Senior Secured Term Loan contains certain customary representations and warranties, affirmative and negative covenants, and events of default applicable to the Company and certain of its subsidiaries but does not include any financial covenants relating to the achievement or maintenance of revenue or cash flow. If an event of default occurs and is continuing, the lender may declare all amounts outstanding under the Senior Secured Term Loan to be immediately due and payable. The Company received net proceeds of $146.6 million in September 2018, after deducting fees and estimated expenses.

Convertible Notes due 2023

In December 2016, the Company issued at par value $250 million aggregate principal amount of Convertible Notes, which included the exercise in full of the $25 million over-allotment option granted to the initial purchasers of the Convertible Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act (the "Note Offering"). Interest is payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2017. The Convertible Notes will mature on December 15, 2023, unless earlier repurchased, redeemed, or converted in accordance with their terms. The Convertible 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. The net proceeds from the Note Offering were $243.0 million, after deducting fees and estimated expenses. 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. 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 Convertible Notes were initially convertible into approximately 40.8 million 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;

•

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; or


•	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.

On February 15, 2018, the Company entered into an underwriting agreement relating to an underwritten public offering of 19.4 million shares of the Company’s common stock. Under the terms of the underwriting agreement, the Company granted the underwriters an option, exercisable for 30 days after February 16, 2018, to purchase up to an additional 2.9 million shares of the Company’s common stock, which was exercised with respect to 885,000 shares of the Company’s common stock.

Subsequent to the underwritten public offering on February 15, 2018, the Company did not have sufficient unissued authorized shares to cover a conversion of the Convertible Notes. As a result, the Company accounted for the portion of the bifurcated conversion feature and of the Capped Call Confirmations that would not be able to be net share settled as a current derivative liability and as a derivative asset, respectively. The fair value of the derivative liability for the conversion feature and derivative asset for the Capped Call Confirmations at February 15, 2018 was determined to be $507.4 million and $13.6 million, respectively, of which the portion that was determined to not be able to be net share settled was recorded with a corresponding impact to additional-paid-in-capital. Subsequent changes to fair value of the derivatives were recorded in the second quarter of 2018 through earnings on the Company’s Consolidated Statements of Operations resulting in a change in fair value of derivatives for the year ended December 31, 2018 of $2.7 million.

Following the approval by the stockholders of the Company on June 7, 2018, to increase the authorized shares of common stock to 500,000,000, the Company has sufficient unissued authorized shares to cover a conversion of the Convertible Notes. As a result, the derivative liability and derivative asset were reclassified into additional-paid-in-capital. The fair value of the derivative liability for the conversion feature and derivative asset for the Capped Call Confirmations at June 7, 2018 was determined to be $88.3 million and $2.4 million, respectively.

The Capped Call Confirmations were 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 Convertible Notes in the event that the market price of the common stock was greater than the strike price of the Capped Call Confirmations (which initially corresponded 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 had an initial cap price of $7.20 per share, which represented 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 was subject to certain adjustments under the terms of the Capped Call Confirmations. The Capped Call Confirmations covered, subject to anti-dilution adjustments substantially similar to those applicable to the Convertible Notes, the number of shares of common stock that underlay the Convertible Notes. The Capped Call Confirmations did not meet the criteria for separate accounting as a derivative as they were indexed to the Company’s common stock. The premiums paid for the Capped Call Confirmations were included as a net reduction to additional paid-in capital.

During the first and second quarters of 2019, the Company entered into separate, privately negotiated Exchange Agreements with the Holders of the Convertible Notes. Under the terms of the Exchange Agreements, the Holders agreed to exchange an aggregate principal amount of $247.2 million of Convertible Notes held by them in exchange for an aggregate of approximately 44.0 million shares of Company common stock, par value $0.01 per share. In addition, pursuant to the Exchange Agreements, the Company made aggregate cash payments of $1.3 million to the Holders to satisfy accrued and unpaid interest to the closing date of the transactions, along with cash in lieu of fractional shares. These transactions resulted in $215.0 million in additional paid-in-capital and common stock of $0.4 million on the Consolidated Balance Sheets as of December 31, 2019. Additionally, the Company recognized a net loss on the exchange of debt of $40.6 million on the Consolidated Statements of Operations during the year ended December 31, 2019. During the second half of the year there were no additional debt conversion transactions.

During the first and second quarter of 2019, the Company terminated the Capped Call Confirmations related to the exchange of the Convertible Notes for proceeds of approximately $19.9 million.

The last reported sale price of the Company’s common stock was equal to or more than 130% of the conversion price of the Convertible Notes for at least 20 trading days of the 30 consecutive trading days ending on the last day of the year. As a result, the Convertible Notes are currently convertible into the Company’s common stock.

The Convertible Notes and Senior Secured Term Loan consist of the following:



	As of December 31,
(in thousands)	2019			2018
Principal	$	152,825		$	400,000
Less: debt discount ⁽¹⁾	(2,974		)	(74,145		)
Less: deferred financing ⁽¹⁾	(346		)	(4,115		)
Net carrying value of the debt	$	149,505		$	321,740

______________________________


⁽¹⁾	Included in the Consolidated Balance Sheets within Convertible Notes and Senior Secured Term Loan and amortized to interest expense over the remaining life of the Convertible Notes and Senior Secured Term Loan using the effective interest rate method.

The following table sets forth interest expense recognized related to the Convertible Notes and Senior Secured Term Loan for the years ended December 31, 2019 and 2018 respectively:



(in thousands)	2019			2018
Contractual interest expense	$	16,483		$	11,426
Amortization of debt discount	$	2,381		$	10,421
Amortization of deferred financing	$	165		$	555
Effective interest rate of the liability component, Convertible debt	10.63		%	10.85		%
Effective interest rate of the liability component, Senior Secured Term Loan	10.16		%	10.48		%