Facility Agreement

6 Months Ended

Jun. 30, 2015

14. Facility Agreement

As of June 30, 2015, there were $60.0 million principal amount of 2019 notes and $20.0 million principal amount of Tranche B notes outstanding. The 2019 notes accrue interest at annual rate of 9.75% and the Tranche B notes accrue interest at an annual rate of 8.75%. The Facility Agreement principal repayment schedule is comprised of annual payments beginning on July 1, 2016 and ending December 9, 2019. The repayment dates correspond to the dates on which the 2019 notes or Tranche B notes, as applicable, were issued.

In conjunction with the Facility Agreement, the Company entered into a Milestone Rights Agreement with Deerfield which requires the Company to make contingent payments to Deerfield, totaling up to $90.0 million, upon the Company achieving specified commercialization milestones.

The Milestone Rights were initially recorded as a short-term liability equal to $3.2 million included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet and a long-term liability equal to $13.1 million included in other liabilities. During the first quarter of 2015, the second milestone triggering event was achieved following the Company’s product launch on February 3, 2015, which resulted in a $5.8 million incremental charge to interest expense due to the increase in carrying value of the liability to the required $10.0 million payment made in February of 2015. In the first quarter of 2015, the Company determined that it was probable that the first commercial sales related milestone would be achieved within the next twelve months. As of June 30, 2015, the short-term portion of the liability had a balance of $1.6 million and the long-term portion of the liability had a balance of $7.3 million.

Accretion of debt issuance cost and debt discount in connection with the Facility financing agreement during the three and six months ended June 30, 2015 and 2014 are as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2015		2014		2015		2014
Accretion expense- debt issuance cost	$	9	$	27	$	17	$	309
Accretion expense – debt discount	$	380	$	516	$	745	$	6,883

The Facility Agreement contains a financial covenant that requires the Company’s cash and cash equivalents, which include available borrowings under the Loan Arrangement, on the last day of each fiscal quarter to not be less than $25.0 million. If the Company fails to satisfy this financial covenant, or another event of default occurs under the Facility Agreement, Deerfield may declare all or any portion of the 2019 notes and/or Tranche B notes to be immediately due and payable.