XML 34 R19.htm IDEA: XBRL DOCUMENT v3.24.3
Debt
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt Debt
Innovatus Loan Agreement
On February 13, 2024 (the “Closing Date”), we entered into a five-year term loan and security agreement (the “Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), an affiliate of Innovatus Capital Partners, LLC, for an aggregate principal amount of up to $40.0 million and with a maturity date of February 13, 2029 (the “Innovatus Loan”). The Innovatus Loan consists of two tranches, of which the first tranche of $30.0 million was funded on February 13, 2024. We will be eligible to draw down the second tranche of $10.0 million upon achievement of certain milestones including pre-specified revenue thresholds.
The floating per annum interest rate of the Innovatus Loan is equal to the sum of (a) the greater of (i) prime rate published in the Money Rates section of the Wall Street Journal and (ii) 7.50%, plus (b) 3.25%; provided that, at the election of the Company, up to 2.0% of such rate shall be payable in-kind until the third anniversary of the closing date. The Company is required to make monthly interest-only payments through February 1, 2027, after which the Company is required to make monthly amortizing payments, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. 2.0% of the interest is payable in-kind for the first three years of the term by increasing the principal balance. Prepayments of the loan, in whole or in part, will be subject to an early prepayment fee which ranges between 3.0% and 1.0% and declines each year until the third anniversary date of the Closing Date, after which no prepayment fee is required. The Company is also required to pay an exit fee upon any payment or prepayment equal to 3.0% of the aggregate principal amount of the tranches funded under the Innovatus Loan.
The Innovatus Loan contains customary representations and warranties and covenants, subject to customary carve outs, and includes financial covenants related to liquidity and net product revenue, with the latter beginning with the period ended September 30, 2024. The Innovatus Loan is secured by perfected first priority liens on the Company's assets, including a commitment by the Company to not allow any liens to be placed upon the Company's intellectual property.
In connection with the issuance of the Innovatus Loan, we recorded a debt discount of $1.3 million and capitalized debt issuance costs of $0.6 million. The discount and issuance costs will be amortized over the life of the Innovatus Loan. Interest expense for the Innovatus Loan for the three and nine months ended September 30, 2024 was $1.0 million and $2.5 million respectively, and is inclusive of non-cash amortization of the debt discount, debt issuance costs, payable in-kind interest, and accretion of final payment. The carrying amount of the Innovatus Loan approximates fair value given its recent issuance and the interest rate is based on the current prime rate. The effective interest rate for the Innovatus Loan was 13.5% as of September 30, 2024.
Additionally, in connection with entering into the Innovatus Loan, we entered into a Warrant Agreement with Innovatus on February 13, 2024 and issued to Innovatus a warrant to purchase an aggregate of 424,028 shares of the Company’s common stock at an exercise price of $2.83 per share. The warrants may be exercised on a cashless basis, and are immediately exercisable through the 10th anniversary of the issuance date. At the time of issuance, the Company determined the estimated fair value of the warrants of $0.9 million using the Black-Scholes model. As the warrants represent a freestanding equity instrument, the Company recorded the fair value of the warrants in additional paid-in capital during the first quarter of 2024.
The Company accounts for the amortization of the debt discount and issuance costs utilizing the effective interest method. Long-term debt consisted of the following at September 30, 2024 (in thousands):
September 30, 2024
Face value of debt$30,000 
Add: payment in-kind interest332 
Add: amortized exit fee87 
Less: unamortized debt discount(1,208)
Less: unamortized debt issuance costs(580)
Total long-term debt$28,631 
The future principal payments under the Innovatus Loan are as follows (in thousands):
Years Ending December 31,
2024$— 
2025— 
2026— 
202713,264 
202815,917 
20292,653 
Total principal payments31,834 
Add: amortized exit fee87 
Less: uncapitalized payment in-kind interest(1,502)
Less: unamortized debt issuance fee(1,208)
Less: unamortized debt issuance costs(580)
Total long-term debt$28,631