XML 24 R14.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Borrowings | 12 Months Ended
--- | ---
Dec. 31, 2019
Debt Disclosure [Abstract] |
Borrowings | 7. Borrowings Carrying amount of borrowings consist of the following (in thousands):
|  | December 31, |
|  | 2019 |  |  | 2018 |
Mann Group promissory notes |  | $ | 70,020 |  |  | $ | 72,089 |
MidCap Credit Facility |  |  | 38,851 |  |  |  | — |
Senior notes |  |  | 10,028 |  |  |  | 19,099 |
Deerfield Credit Facility |  |  | — |  |  |  | 11,298 |
Total debt — net carrying amount |  | $ | 118,899 |  |  | $ | 102,486 |
During the year ended December 31, 2019, the Company discharged its obligations under the Deerfield Credit Facility, entered into the MidCap Credit Facility and restructured the obligations owed to its other lenders. The following table provides a summary of the Company’s debt and key terms:
|  | December 31, |
|  | 2019 |  |  | 2018 |
|  | Amount Due |  |  | Annual interest rate |  |  | Maturity date |  |  | Conversion price |  |  | Amount Due |  |  | Annual interest rate |  |  | Maturity date |  |  | Conversion price |
Mann Group convertible note |  | $35.0 million (plus $1.0 million accrued interest paid-in-kind) |  |  | 7.00% |  |  | November 2024 |  |  | $2.50 per share |  |  | $71.5 million (plus $6.8 million accrued interest paid-in-kind) |  |  |  | 5.84 | % |  | July 2021 |  |  | $4.00 per share |
Mann Group non- convertible note |  | $35.1 million (plus $1.0 million accrued interest paid-in-kind) |  |  | 7.00% |  |  | November 2024 |  |  | N/A |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
MidCap Credit Facility |  | $40.0 million |  |  | one-month LIBOR (2% floor) plus 6.75% |  |  | August 2024 |  |  | N/A |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
2024 convertible notes |  | $5.0 million |  |  | 5.75% |  |  | November 2024 |  |  | $3.00 per share |  |  | $18.7 million |  |  |  | 5.75 | % |  | October 2021 |  |  | $5.15 per share |
June 2020 note |  | $2.6 million |  |  |  | — |  |  | June 2020 |  |  | N/A |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
December 2020 note |  | $2.6 million |  |  |  | — |  |  | December 2020 |  |  | N/A |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Deerfield Credit Facility |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  | $4.0 million |  |  |  | 9.75 | % |  | July 2019 |  |  | N/A |
|  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  | $5.0 million |  |  |  | 9.75 | % |  | August 2019 |  |  | N/A |
|  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  | $2.5 million |  |  |  | 8.75 | % |  | May 2019 |  |  | N/A |
The maturities of our borrowings as of December 31, 2019 are as follows (in thousands):
| Amounts |
2020 | $ | 5,262 |
2021 |  | 4,444 |
2022 |  | 13,333 |
2023 |  | 13,333 |
2024 |  | 83,940 |
Thereafter |  | — |
Total principal payments |  | 120,312 |
Unamortized discount |  | (539 | )
Debt issuance costs |  | (874 | )
Total debt | $ | 118,899 |
Deerfield Facility Financing Obligation – On July 1, 2013, the Company entered into a facility agreement (the “Deerfield Credit Facility”) with Deerfield Private Design Fund II, L.P. and Deerfield Private Design International II, L.P. (collectively, “Deerfield”), which permitted it to borrow $160.0 million through the issuance of 9.75% notes due 2019 (“2019 notes”), $100.0 million of which were converted into shares of the Company’s common stock during 2013 and 2014. The Company and Deerfield amended the Deerfield Credit Facility in 2014 to permit the Company to borrow an additional $20.0 million through the issuance of 8.75% notes (“Tranche B notes”). The remaining $80.0 million in principal amount that was not converted during 2013 and 2014 ($60.0 million in 2019 notes and $20.0 million in Tranche B notes) was subject to a repayment schedule that began in July 2016 and ended in August 2019. By June 30, 2019, the Company had repaid all amounts owed under the Tranche B notes and owed approximately $9.0 million in respect of outstanding 2019 notes. On July 18, 2019, the Company entered into an exchange agreement with Deerfield pursuant to which, among other things, the Company (i) repaid approximately $2.4 million in aggregate principal amount of 2019 notes plus all accrued and unpaid interest, and (ii) issued an aggregate of 1,514,423 shares of the Company’s common stock to Deerfield in exchange for approximately $1.6 million in aggregate principal amount of 2019 notes. On August 6, 2019, the Company entered into an exchange agreement with Deerfield pursuant to which, among other things, the Company (i) repaid $2.0 million of the aggregate principal amount of 2019 notes plus accrued and unpaid interest, (ii) issued an aggregate of 2,678,571 shares of the Company’s common stock to Deerfield in exchange for $3.0 million in aggregate principal amount of 2019 notes and (iii) canceled the 2019 notes. As of December 31, 2019, the Deerfield Credit Facility was paid in full. The unamortized debt issuance costs and debt discount were zero and $0.2 million as of December 31, 2019 and 2018, respectively. Milestone Rights — As of December 31, 2019 and 2018, the remaining Milestone Rights liability balance was $7.3 million and $8.9 million, respectively, which was based on initial fair value estimates calculated using the income approach and reduced by milestone achievement payments made. During the third quarter of 2019, the Company achieved the first Afrezza net sales milestone specified in the Milestone Agreement. As a result, the Company delivered a milestone event notice to the Milestone Purchasers and made a payment of $5.0 million in the fourth quarter of 2019. The carrying value of this Milestone Rights liability was $1.6 million, which represented the fair value related to this payment, determined in 2013 (the most recent measurement date). Accordingly, $1.6 million was recorded as a reduction to the current Milestone Rights liability and $3.4 million was recognized as interest expense. The remaining Milestone Right liability of $7.3 million remains non-current as of December 31, 2019. The Milestone Agreement includes customary representations and warranties and covenants by the Company, including restrictions on transfers of intellectual property related to Afrezza. The Milestone Rights are subject to acceleration in the event the Company transfers its intellectual property related to Afrezza in violation of the terms of the Milestone Agreement. The Company initially recorded the Milestone Rights at their estimated fair value. MidCap Credit Facility — I n August 2019, the Company closed the MidCap Credit Facility, which provides a secured term loan facility in an aggregate principal amount of up to $75.0 million. The Company borrowed the first advance of $40.0 million (“Tranche 1”) on August 6, 2019. Under the terms of the MidCap Credit Facility, the second advance of $10.0 million (“Tranche 2”) will be available to the Company until April 15, 2020, subject to the satisfaction of certain conditions, including achieving Afrezza net revenue of at least $30.0 million on a trailing twelve month basis. Under the terms of the MidCap Credit Facility, the third advance of $25.0 million (“Tranche 3”) will be available to the Company until June 30, 2021, subject to the satisfaction of certain milestone conditions associated with Afrezza net revenue and certain milestone conditions related to the Company’s collaboration with United Therapeutics (see Note 8 – Collaborations and Licensing Arrangements). I n addition, unamortized debt issuance costs were $0.8 million and unamortized debt discount was $0.3 million as of December 31, 2019. In December 2019, the Company entered into an Amendment No. 1 to the MidCap Credit Facility, pursuant to which the parties agreed to (i) amend the financial covenant relating to trailing twelve month minimum Afrezza Net Revenue (as defined in the MidCap Credit Facility) requirements, (ii) add a condition to the third advance of $25.0 million that requires the Company achieve certain amounts of Afrezza Net Revenue, and (iii) increase the exit fee from 6.00% to 7.00% of the principal amount of all term loans advanced to the Company under the MidCap Credit Facility. Tranche 1 and, if borrowed, Tranche 2 and Tranche 3, each accrue interest at an annual rate equal to one-month LIBOR plus 6.75%, subject to a one-month LIBOR floor of 2.00%. Interest on each term loan advance is due and payable monthly in arrears. Principal on each term loan advance under Tranche 1 and Tranche 2 is payable in 36 equal monthly installments beginning September 1, 2021, until paid in full on August 1, 2024, and principal on each term loan advance under Tranche 3 is payable beginning on the later of (i) September 1, 2021, and (ii) the first day of the first full calendar month immediately following such term loan advance, in an amount equal to the outstanding term loan advance in respect of Tranche 3 divided by the number of full calendar months remaining before August 1, 2024. The Company has the option to prepay the term loans, in whole or in part, subject to early termination fees in an amount equal to 3.00% of principal prepaid if prepayment occurs on or prior to the first anniversary of the closing date, 2.00% of principal prepaid if prepayment occurs after the first anniversary of the closing date but on or prior to the second anniversary of the closing date, and 1.00% of principal prepaid if prepayment occurs after the second anniversary of the closing date and prior to or on the third anniversary of the closing date. In connection with execution of the MidCap Credit Facility, the Company paid MidCap a $0.4 million origination fee. The Company’s obligations under the MidCap Credit Facility are secured by a security interest on substantially all of its assets, including intellectual property. The MidCap Credit Facility contains customary affirmative covenants and customary negative covenants limiting the Company’s ability and the ability of the Company’s subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. The Company must also comply with a financial covenant relating to trailing twelve month minimum Afrezza net revenue, tested on a monthly basis, and a minimum cash covenant of $15.0 million at all times prior to the funding of Tranche 2, and $20.0 million at all times following the funding of Tranche 2 and Tranche 3. As of December 31, 2019, the Company was in compliance with the financial and minimum cash covenants. The MidCap Credit Facility also contains customary events of default relating to, among other things, payment defaults, breaches of covenants, a material adverse change, listing of the Company’s common stock, bankruptcy and insolvency, cross defaults with certain material indebtedness and certain material contracts, judgments, and inaccuracies of representations and warranties. Upon an event of default, the agent and the lenders may declare all or a portion of the Company’s outstanding obligations to be immediately due and payable and exercise other rights and remedies provided for under the MidCap Credit Facility. During the existence of an event of default, interest on the term loans could be increased by 2.00%. The Company also agreed to issue warrants to purchase shares of the Company’s common stock (the “MidCap warrants”) upon the drawdown of each term loan advance under the MidCap Credit Facility in an aggregate amount equal to 3.25% of the amount drawn, divided by the exercise price per share for that tranche. The exercise price per share is equal to the volume-weighted average closing price of the Company’s common stock for the ten business days immediately preceding the second business day before the issue date. As a result of Tranche 1, the Company issued warrants to purchase an aggregate of 1,171,614 shares of the Company’s common stock, at an exercise price equal to $1.11 per share. The MidCap warrants are immediately exercisable and expire on the earlier to occur of the seventh anniversary of the respective issue date or, in certain circumstances, the closing of a merger, sale or other consolidation transactions in which the consideration is cash, stock of a publicly traded acquirer, or a combination thereof. The Company determined that these warrants met the criteria for equity classification and accounted for such warrants in additional paid-in capital. Senior Notes — As of December 31, 2019 and 2018, there was $10.2 million and $18.7 million, respectively, of principal amount of senior notes outstanding. In August 2019, the Company entered into a privately-negotiated exchange agreement with the 2021 notes, pursuant to which, among other things, the Company (i) repaid $1.5 million in cash to such holder, (ii) issued 4,017,857 shares of the Company’s common stock to such holder (at a conversion price of $1.12 per share), (iii) issued the 2024 convertible notes to such holder in the principal amount of $5.0 million and (iv) issued the 2020 notes in the aggregate principal amount of $5.2 million, all in exchange for the cancellation of the $18.7 million in principal amount of the 2021 notes. The 2020 notes may be prepaid at any time on or prior to their respective maturity dates of June 30, 2020 and December 31, 2020 at the option of the Company. In addition, the Company may elect to pay the 2020 notes at any time on or prior to their respective maturity dates, if certain conditions are met, in shares of the Company’s common stock at a price per share equal to the last reported sale price on the trading day immediately prior to the payment date. The 2024 convertible notes were issued pursuant to an indenture, dated as of August 6, 2019, between the Company and U.S. Bank National Association, as trustee (the “Indenture”). The 2024 convertible notes are the Company’s general, unsecured obligations, and are subordinated in right of payment to the indebtedness incurred pursuant to the MidCap Credit Facility. The 2024 convertible notes rank equally in right of payment with the Company’s other unsecured senior debt. The 2024 convertible Notes accrue interest at the rate of 5.75% per year on the principal amount, payable semiannually in arrears on February 15 and August 15 of each year, beginning February 15, 2020, with interest accruing from August 6, 2019. Interest on the 2024 convertible notes will be payable in cash or, at the option of the Company if certain conditions are met, in shares of the Company’s common stock at a price per share equal to the last reported sale price on the trading day immediately prior to the interest payment date. The 2024 convertible notes will mature on the earlier of (i) November 4, 2024 or (ii) the 91st day after the payment in full of, and termination and discharge of all obligations (other than contingent indemnity obligations) under the MidCap Credit Facility. The 2024 convertible notes will be convertible, at the option of the holder, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at a conversion rate of 333.3333 shares per $1,000 principal amount of 2024 convertible notes, which is equal to a conversion price of approximately $3.00 per share. If certain bankruptcy and insolvency-related events of default occur, the principal of, and accrued and unpaid interest on, all of the then outstanding 2024 convertible notes shall automatically become due and payable. If an event of default other than certain bankruptcy and insolvency-related events of defaults occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then-outstanding 2024 convertible notes, by written notice to the Trustee, may declare the 2024 convertible notes due and payable at their principal amount plus any accrued and unpaid interest, and thereupon the Trustee may, at its discretion, proceed to protect and enforce the rights of the holders by the appropriate judicial proceedings. Notwithstanding the foregoing, the Indenture provides that, to the extent the Company elects, the sole remedy for an event of default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture will, for the first 180 days after such event of default, consist exclusively of the right to receive additional interest on the 2024 convertible notes. If the Company undergoes certain fundamental changes, except in certain circumstances, each holder of 2024 convertible notes will have the option to require the Company to repurchase all or any portion of that holder’s 2024 convertible notes. The fundamental change repurchase price will be 100% of the principal amount of the 2024 convertible notes to be repurchased plus accrued and unpaid interest, if any. The Company may elect at its option to cause all or any portion of the 2024 convertible notes to be mandatorily converted in whole or in part at any time prior to the close of business on the business day immediately preceding the maturity date, if the last reported sale price of its common stock equals or exceeds 120% of the conversion price then in effect for at least 10 trading days in any 20 trading day period, ending within five business days prior to the date of the mandatory conversion notice. As a result of the exchange of the senior convertible notes, the Company recorded $3.1 million as an extinguishment gain. The unamortized premium was zero and $0.4 million as of December 31, 2019 and 2018, respectively. Mann Group promissory notes — In August 2019, the Company entered into a privately-negotiated exchange agreement with The Mann Group, pursuant to which, among other things, the Company (i) repaid $3.0 million in cash to The Mann Group, (ii) issued 7,142,857 shares of the Company’s common stock to The Mann Group (at a conversion price of $1.12 per share), (iii) issued the Mann Group convertible note to the Mann Group in an aggregate principal amount of $35.0 million and (iv) issued a new non-convertible promissory note the Mann Group non-convertible note to the Mann Group in an aggregate principal amount of $35.1 million, all in exchange for the cancellation of the $71.5 million in principal and approximately $9.5 million in accrued interest paid-in-kind under the Mann Group loan arrangement. The Mann Group convertible note and Mann Group non-convertible note each accrue interest at the rate of 7.00% per year on the principal amount, payable quarterly in arrears on the first day of each calendar quarter beginning October 1, 2019. The Mann Group convertible note will mature on November 3, 2024. The principal and any accrued and unpaid interest under the Mann Group convertible note may be converted, at the option of the Mann Group, at any time on or prior to the close of business on the business day immediately preceding the stated maturity date, into shares of the Company’s common stock at a conversion rate of 400 shares per $1,000 of principal and/or accrued and unpaid interest, which is equal to a conversion price of $2.50 per share. The conversion rate will be subject to adjustment under certain circumstances described in the Mann Group convertible note. Interest on the Mann Group convertible note will be payable in kind by adding the amount thereof to the principal amount; provided that with respect to interest accruing from and after January 1, 2021, the Company may, at its option, elect to pay any such interest on any interest payment date, if certain conditions are met, in shares of the Company’s common stock at a price per shall equal to the last reported sale price on the trading day immediately prior to the payment date. The Mann Group non-convertible note will mature on the earlier of (i) November 3, 2024 or (ii) the 90th day after the repayment in full, and termination and discharge of all obligations (other than contingent indemnity obligations) under the MidCap Credit Facility. Interest on the Mann Group non-convertible note will be payable in kind by adding the amount thereof to the principal amount; provided that the Company may, at its option, elect to pay any such interest on any interest payment date, if certain conditions are met, in shares of the Company’s common stock at a price per shall equal to the last reported sale price on the trading day immediately prior to the interest payment date. The Company recorded $0.4 million as an extinguishment gain. The unamortized premium and unaccreted debt issuance costs was zero and $0.6 million as of December 31, 2019 and 2018, respectively. Amortization of the premium and accretion of debt issuance costs related to all borrowings for the years ended December 31, 2019 and 2018 are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2019 |  |  | 2018 |
Amortization of debt premium |  | $ | (1,049 | ) |  | $ | (339 | )
Amortization of debt discount |  |  | 295 |  |  |  | 1,155 |
Accretion expense — debt issuance cost |  |  | (111 | ) |  |  | (69 | )
See Note 6 — Loan Arrangement with Former Related Party for additional information on the Company’s loan arrangements with the Mann Group.

X
- References No definition available. + Details
Name: | us-gaap_DebtDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
Name: | us-gaap_DebtDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration