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Convertible Senior Notes | 3 Months Ended
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Mar. 31, 2023
Convertible Senior Notes. |
Convertible Senior Notes | 12. Convertible Senior Notes ​ 2026 Convertible Notes ​ On February 13, 2020, the Company issued 2.625% convertible senior notes due in 2026 (the “2026 Convertible Notes”) in the aggregate principal amount of $143,750, in a public offering registered under the Securities Act of 1933, as amended. The 2026 Convertible Notes were issued in connection with funding the acquisition of the Nucynta Products. Some of the Company’s existing investors participated in the 2026 Convertible Notes offering. In connection with the issuance of the 2026 Convertible Notes, the Company incurred approximately $5,473 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees. ​ The 2026 Convertible Notes are senior, unsecured obligations and bear interest at a rate of 2.625% per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2020. Before August 15, 2025, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after August 15, 2025, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The 2026 Convertible Notes will mature on February 15, 2026, unless earlier repurchased, redeemed or converted. The initial conversion rate is 34.2618 shares of common stock per $1 principal amount of 2026 Convertible Notes, which represents an initial conversion price of approximately $29.19 per share of common stock. The conversion rate and conversion price are subject to adjustment upon the occurrence of certain events. ​ Holders of the 2026 Convertible Notes may convert all or any portion of their 2026 Convertible Notes, in multiples of $1 principal amount, at their option only under the following circumstances: ​
| (1) | during any calendar quarter commencing after the calendar quarter ending on March 31, 2020, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
| (2) | during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the “trading price” per $1 principal amount of the 2026 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;
| (3) | upon the occurrence of certain corporate events or distributions on the Company’s common stock;
| (4) | if the Company calls the 2026 Convertible Notes for redemption; or
| (5) | at any time from, and including, August 15, 2025 until the close of business on the scheduled trading day immediately before the maturity date.
​ As of March 31, 2023, none of the above circumstances had occurred and as such, the 2026 Convertible Notes could not have been converted. ​ The Company did not have the right to redeem the 2026 Convertible Notes prior to February 15, 2023. On or after February 15, 2023, the Company may redeem the 2026 Convertible Notes, in whole and not in part, at a cash redemption price equal to the principal amount of the 2026 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on: ​
| (1) | each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and
| (2) | the trading day immediately before the date the Company sends such notice.
​ Calling any 2026 Convertible Notes for redemption will constitute a make-whole fundamental change, in which case the conversion rate applicable to the conversion of any 2026 Convertible Notes, if converted in connection with the redemption, will be increased in certain circumstances for a specified period of time. ​ The 2026 Convertible Notes have customary default provisions, including (i) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture, if such default is not cured within 3 calendar days after its occurrence; (iv) a default with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales; (v) a default in any of the Company’s other obligations or agreements under the indenture that are not cured or waived within 60 days after notice to the Company; (vi) certain payment defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $20,000 or other defaults by the Company or certain subsidiaries with respect to such indebtedness that result in the acceleration of such indebtedness; (vii) default upon the occurrence of one or more final judgments being rendered against the Company or any of the Company’s significant subsidiaries for the payment of at least $20,000; and (viii) certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries. ​ Repurchase of a Portion of the 2026 Convertible Notes ​ Contemporaneously with the offering of the 2029 Convertible Notes (as defined below), the Company entered into separate privately negotiated transactions with certain holders of the 2026 Convertible Notes to repurchase $117,400 aggregate principal amount of the 2026 Convertible Notes for an aggregate of $140,100 of cash, which includes accrued and unpaid interest on the 2026 Convertible Notes to be repurchased. This transaction involved a contemporaneous exchange of cash between the Company and holders of the 2026 Convertible Notes participating in the issuance of the 2029 Convertible Notes. Accordingly, the Company evaluated the transaction for modification or extinguishment accounting in accordance with Accounting Standards Codification (“ASC”) 470-50, Debt – Modifications and Extinguishments on a creditor-by creditor basis depending on whether the exchange was determined to have substantially different terms. The repurchase of the 2026 Convertible Notes and issuance of the 2029 Convertible Notes were deemed to have substantially different terms based on the present value of the cash flows immediately prior to and after the exchange. Therefore, the repurchase of the 2026 Convertible Notes was accounted for as a debt extinguishment. The Company recorded a $23,504 loss on early extinguishment of debt on the Condensed Consolidated Statements of Operations for the three months ending March 31, 2023, which includes the recognition of previously deferred financing costs of $2,264. After giving effect to the repurchase, the total remaining principal amount outstanding under the 2026 Convertible Notes as of March 31, 2023 was $26,350. ​ 2029 Convertible Notes On February 10, 2023, the Company issued 2.875% convertible senior notes due in 2029 (the “2029 Convertible Notes”) in the aggregate principal amount of $241,500, in a private offering to qualified institutional buyers pursuant to Section 4(a)(2) and Rule 144A under the Securities Act of 1933, as amended. The 2029 Convertible Notes were issued to finance the concurrent repurchase of a portion of the 2026 Convertible Notes, and the remainder of the net proceeds may be used for general corporate purposes. In connection with the issuance of the 2029 Convertible Notes, the Company incurred approximately $6,280 of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees. ​ The 2029 Convertible Notes are senior, unsecured obligations and bear interest at a rate of 2.875% per year payable semi-annually in arrears on February 15 and August 15 of each year, beginning on August 15, 2023. The 2029 Convertible Notes will mature on February 15, 2029, unless earlier repurchased, redeemed or converted. Before November 15, 2028, noteholders will have the right to convert their notes only upon the occurrence of certain events. From and after November 15, 2028, noteholders may convert their notes at any time at their election until the close of business on the scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The initial conversion rate is 27.3553 shares of common stock per $1 principal amount of 2029 Convertible Notes, which represents an initial conversion price of approximately $36.56 per share of common stock. The conversion rate and conversion price are subject to adjustment upon the occurrence of certain events. ​ Holders of the 2029 Convertible Notes may convert all or any portion of their 2029 Convertible Notes, in multiples of $1 principal amount, at their option only under the following circumstances:
| (1) | during any calendar quarter commencing after the calendar quarter ending on June 30, 2023, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
| (2) | during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the “trading price” per $1 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;
| (3) | upon the occurrence of certain corporate events or distributions on the Company’s common stock;
| (4) | if the Company calls any or all of the 2029 Convertible Notes for redemption, but only with respect to the 2029 Convertible Notes called for redemption; or
| (5) | at any time from, and including, November 15, 2028 until the close of business on the scheduled trading day immediately before the maturity date.
​ As of March 31, 2023, none of the above circumstances had occurred and as such, the 2029 Convertible Notes could not have been converted. ​ The Company may not redeem the 2029 Convertible Notes prior to February 17, 2026. On or after February 17, 2026 and on or before the 40th scheduled trading day before the maturity date, the Company may redeem the 2029 Convertible Notes, in whole or in part, at a cash redemption price equal to the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on: ​
| (1) | each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and
| (2) | the trading day immediately before the date the Company sends such notice.
​ However, the Company may not redeem less than all of the outstanding 2029 Convertible Notes unless at least $75,000 aggregate principal amount of the 2029 Convertible Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. ​ Calling any 2029 Convertible Note for redemption will constitute a make-whole fundamental change with respect to that 2029 Convertible Note, in which case the conversion rate applicable to the conversion of that 2029 Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances for a specified period of time. ​ The 2029 Convertible Notes have customary default provisions, including (i) a default in the payment when due (whether at maturity, upon redemption or repurchase upon fundamental change or otherwise) of the principal of, or the redemption price or fundamental change repurchase price for, any note; (ii) a default for 30 days in the payment when due of interest on any note; (iii) a default in the Company’s obligation to convert a note in accordance with the indenture, if such default is not cured within 3 business days after its occurrence; (iv) a default with respect to the Company’s obligations under the indenture related to consolidations, mergers and asset sales; (v) a default in any of the Company’s other obligations or agreements under the indenture that are not cured or waived within 60 days after notice to the Company; (vi) certain payment defaults by the Company or certain subsidiaries with respect to mortgages, agreements or other instruments for indebtedness for money borrowed of at least $30,000 or other defaults by the Company or certain subsidiaries with respect to such indebtedness that result in the acceleration of such indebtedness; (vii) default upon the occurrence of one or more final judgments being rendered against the Company or any of the Company’s significant subsidiaries for the payment of at least $30,000; and (xiii) upon the occurrence of certain events of bankruptcy, insolvency and reorganization with respect to the Company or any of its significant subsidiaries. ​ The 2026 Convertible Notes and 2029 Convertible Notes (together, the “Convertible Notes”) are classified on the Condensed Consolidated Balance Sheets as of March 31, 2023, as convertible senior notes. ​ As of March 31, 2023, the outstanding balance of the Convertible Notes consisted of the following: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | 2026 Convertible Notes | ​ | 2029 Convertible Notes | ​ | Total Convertible Notes
Principal | $ | 26,350 | ​ | $ | 241,500 | ​ | $ | 267,850
Less: unamortized issuance costs | ​ | (484) | ​ | ​ | (6,144) | ​ | ​ | (6,628)
Net carrying amount | $ | 25,866 | ​ | $ | 235,356 | ​ | $ | 261,222
​ The Company determined the expected life of the 2026 Convertible Notes and 2029 Convertible Notes was equal to the six-year term of each. The effective interest rate on the 2026 Convertible Notes and 2029 Convertible Notes is 3.34% and 3.28%, respectively. As of March 31, 2023, the if-converted value did not exceed the remaining principal amount of the Convertible Notes. ​ The following table presents the total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2023, and 2022: ​
​ | ​ | ​ | ​ | ​ | ​
​ | Three Months Ended March 31,
​ | 2023 | ​ | 2022
Contractual interest expense | $ | 1,479 | ​ | $ | 943
Amortization of debt issuance costs | ​ | 263 | ​ | ​ | 223
Total interest expense | $ | 1,742 | ​ | $ | 1,166
​ As of March 31, 2023, the future minimum payments on the Convertible Notes were as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Years ended December 31, | 2026 Convertible Notes | ​ | 2029 Convertible Notes | ​ | Total Convertible Notes
2023 | $ | 346 | ​ | $ | 3,568 | ​ | $ | 3,914
2024 | ​ | 692 | ​ | ​ | 6,943 | ​ | ​ | 7,635
2025 | ​ | 692 | ​ | ​ | 6,943 | ​ | ​ | 7,635
2026 | ​ | 26,696 | ​ | ​ | 6,943 | ​ | ​ | 33,639
2027 | ​ | — | ​ | ​ | 6,943 | ​ | ​ | 6,943
Thereafter | ​ | — | ​ | ​ | 251,915 | ​ | ​ | 251,915
Total minimum payments | $ | 28,426 | ​ | $ | 283,255 | ​ | $ | 311,681
Less: interest | ​ | (2,076) | ​ | ​ | (41,755) | ​ | ​ | (43,831)
Less: unamortized issuance costs | ​ | (484) | ​ | ​ | (6,144) | ​ | ​ | (6,628)
Convertible Notes carrying value | $ | 25,866 | ​ | $ | 235,356 | ​ | $ | 261,222
​

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