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Debt Obligations

12 Months Ended

Dec. 31, 2023

Debt Obligations

Debt Obligations

8.Debt Obligations

A summary of the Company’s debt obligations, including level within the fair value hierarchy (see Note 3. Fair Value Measurements), is as follows:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	At December 31, 2023
(in thousands)	Principal Amount		​	​	Unamortized Debt Discount and Debt Issuance Costs	​	Net Carrying Value		​	Estimated Fair Value			Level
Financial Liabilities:	​		​	​		​	​		​	​		​
2027 Term Loans	$	250,000	​	$	(3,519)	​	$	246,481	​	$	246,481	​	Level 2*
2026 Convertible Notes	$	230,000	​	$	(3,112)	​	$	226,888	​	$	150,155	​	Level 2**
​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	At December 31, 2022
(in thousands)	Principal Amount		​	Unamortized Debt Discount and Debt Issuance Costs		​	Net Carrying Value		​	Estimated Fair Value			Level
Financial Liabilities:	​		​	​		​	​		​	​
2027 Term Loans	$	250,000	​	$	(4,517)	​	$	245,483	​	$	245,483	​	Level 2*
2026 Convertible Notes	$	230,000	​	$	(4,425)	​	$	225,575	​	$	157,205	​	Level 2**

​

* The principal amounts outstanding are subject to variable interest rates, which are based on three-month SOFR starting April 1, 2023 plus fixed percentages. Through March 31, 2023, the variable component was based on the three-month LIBOR. Therefore, the Company believes the carrying amount of these obligations approximates fair value.

** The fair value is influenced by interest rates, the Company’s stock price and stock price volatility and is determined by prices observed in market trading. Since the market for trading of the 2026 Convertible Notes is not considered to be an active market, the estimated fair value is based on Level 2 inputs.

​

2027 Term Loans

The Company entered into the Loan Agreement with BioPharma Credit, PLC, BPCR Limited Partnership, and Biopharma Credit Investments V (Master) LP, acting by its general partner, BioPharma Credit Investments V GP LLC that provides for a senior secured term loan facility of up to $300.0 million to be funded in four committed tranches: (i) the Tranche A Loan in an aggregate principal amount of $100.0 million that was funded on January 5, 2022; (ii) the Tranche B Loan in an aggregate principal amount of $100.0 million that was funded on March 31, 2022; (iii) the Tranche C Loan in an aggregate principal amount of $50.0 million that was not funded; and (iv) the Tranche D Loan in an aggregate principal amount of $50.0 million that was funded on September 14, 2022. The Company has the right to request an uncommitted additional facility amount of up to $100.0 million that is subject to new terms and conditions.

The 2027 Term Loans mature on either (i) the fifth anniversary of the Tranche A Closing Date; or (ii) October 15, 2025, if the outstanding aggregate principal amount of the Company’s 2026 Convertible Notes is greater than $50.0 million on October 1, 2025. The 2027 Term Loans accrued interest from inception through March 31, 2023 at 8.25% plus three-month LIBOR per annum with a LIBOR floor of 1.0%; and starting April 1, 2023, accrue interest at 8.25% plus the Adjusted Term SOFR which is the sum of three-month SOFR and 0.26161% per annum, with a floor on Adjusted Term SOFR of 1.0%. The interest rate for the fourth quarter of 2023 was 13.91%. Interest is payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year. Repayment of outstanding principal of the 2027 Term Loans will be made in five equal quarterly payments of principal commencing March 31, 2026.

The Company adopted the prospective method to account for future cash payments. Under the prospective method, the effective interest rate is not constant, and any change in the expected cash flows is recognized prospectively as an adjustment to the effective yield.

The obligations under the Loan Agreement are secured pursuant to customary security documentation, including a guaranty and security agreement among the Credit Parties and the Collateral Agent which provides for a lien on substantially all of the Company’s tangible and intangible assets and property, including intellectual property.

Pursuant to the Loan Agreement, and subject to certain restrictions, proceeds of the 2027 Term Loans were used to fund the Company’s general corporate and working capital requirements except for the following: in January 2022, proceeds of the Tranche A Loan were used to repay in full all amounts outstanding under the 2025 Term Loan, as well as all associated costs and expenses pursuant to which a payoff amount of $81.9 million was outstanding; in March 2022, proceeds of the Tranche B Loan were drawn in connection with the full repayment of all amounts outstanding under the 2022 Convertible Notes, as well as all associated costs and expenses pursuant to which a payoff amount of $111.1 million was outstanding.

The Loan Agreement contains certain customary representations and warranties. In addition, the Loan Agreement includes covenants, such as the requirement to maintain minimum trailing twelve-month net sales in an amount that began at $200.0 million for the quarter ending March 31, 2022 and increases to $210.0 million for the quarter ended March 31, 2024. As a result of the Consent and Amendment entered into on February 5, 2024, beginning in the second quarter of 2024 and continuing through the quarter ended December 31, 2026, the requirement is to maintain minimum trailing twelve-month net sales of $125.0 million. In addition, there is a requirement to maintain a minimum trailing twelve-month net sales for LOQTORZI tested quarterly at the end of each quarter commencing with the quarter ended December 31, 2024. Further, the Loan Agreement includes certain other affirmative covenants and negative covenants, including, covenants and restrictions that among other things, restrict the Company’s ability to incur liens, incur additional indebtedness, make investments, engage in certain mergers and acquisitions or asset sales, and declare dividends or redeem or repurchase capital stock. The Loan Agreement also contains customary events of default, including among other things, the Company’s failure to make any principal or interest payments when due, the occurrence of certain bankruptcy or insolvency events or its breach of the covenants under the Loan Agreement. Upon the occurrence of an event of default, the Lenders may, among other things, accelerate the Company’s obligations under the Loan Agreement. A change of control of the Company triggers a mandatory prepayment of the 2027 Term Loans within ten business days. See Note 17. Subsequent Events for further information regarding the Consent and Amendment to the 2027 Term Loans.

As of December 31, 2023, the Company was in full compliance with these covenants and there were no events of default under the 2027 Term Loans.

In connection with the closing of Tranche A, the Company incurred $7.8 million in debt discounts and issuance costs of which $6.8 million related to all the tranches of the 2027 Term Loans and was thus allocated pro rata between the tranches. The unamortized debt

discount and issuance costs allocated to funded tranches are presented as deductions to the 2027 Term Loan balance and are amortized into interest expense using the effective interest method. The $2.3 million allocated to Tranche B was fully amortized over the commitment period prior to funding and recognized as interest expense in the first quarter of 2022. The associated debt discounts and issuance costs of unfunded tranches were deferred as assets and amortized into interest expense using the straight-line method over the commitment period of the respective tranches. At the closing dates of Tranche B on March 31, 2022 and Tranche D on September 14, 2022, the Company incurred an additional $1.0 million and $0.5 million, respectively, in debt issuance costs. As of December 31, 2023, the total remaining unamortized debt discount and debt offering costs related to Tranches A, B and D of $3.5 million will be amortized using the effective interest rate over the remaining term of 3.0 years.

The following table presents the components of interest expense related to the 2027 Term Loans:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)	​	2023		​	2022
Contractual interest	​	$	34,289	​	$	20,243
Amortization of debt discount and debt issuance costs	​	​	1,094	​	​	4,550
Total interest expense	​	$	35,383	​	$	24,793

​

Assuming the fourth quarter of 2023 interest rate of 13.91%, future payments on the 2027 Term Loans as of December 31, 2023, are as follows:

​

​	​	​	​
Year ending December 31, (in thousands)	​	​	​
2024 - interest only	​	$	35,345
2025 - interest only	​		35,248
2026 - principal and interest	​		224,607
2027 - principal and interest	​	​	50,097
Total minimum payments	​		345,297
Less amount representing interest	​		(95,297)
2027 Term Loans, gross	​		250,000
Less unamortized debt discount and debt issuance costs	​		(3,519)
Net carrying amount of 2027 Term Loans	​	$	246,481

​

The table above does not reflect any adjustment for transactions contemplated by the Consent and Amendment entered into on February 5, 2024, including any prepayments to the 2027 Term Loans.

1.5% Convertible Senior Subordinated Notes due 2026

In April 2020, the Company issued and sold $230.0 million aggregate principal amount of its 2026 Convertible Notes in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net proceeds from the offering were $222.2 million after deducting initial purchasers’ fees and offering expenses. The 2026 Convertible Notes are general unsecured obligations and will be subordinated to the Company’s designated senior indebtedness (as defined in the indenture for the 2026 Convertible Notes) and structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables. The 2026 Convertible Notes accrue interest at a rate of 1.5% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, since October 15, 2020, and will mature on April 15, 2026, unless earlier repurchased or converted.

At any time before the close of business on the second scheduled trading day immediately before the maturity date, noteholders may convert their 2026 Convertible Notes at their option into shares of the Company’s common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate. The initial conversion rate is 51.9224 shares of common stock per $1,000 principal amount of the 2026 Convertible Notes, which represents an initial conversion price of approximately $19.26 per share of common stock. The initial conversion price represents a premium of approximately 30.0% over the last reported sale of $14.82 per share of the Company’s common stock on the Nasdaq Global Market on April 14, 2020, the date the 2026 Convertible Notes were issued. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. If a “make-whole fundamental change” (as defined in the indenture for the 2026 Convertible Notes) occurs, the Company will, in certain circumstances, increase the conversion rate for a specified period of time for noteholders who convert their 2026 Convertible Notes in connection with that make-whole fundamental change. The 2026 Convertible Notes are not redeemable at the Company’s election before maturity. If a “fundamental change” (as defined in the indenture for the 2026 Convertible Notes) occurs, then, subject to a limited exception,

noteholders may require the Company to repurchase their 2026 Convertible Notes for cash. The repurchase price will be equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

The 2026 Convertible Notes have customary provisions relating to the occurrence of “events of default” (as defined in the Indenture for the 2026 Convertible Notes). The occurrence of such events of default could result in the acceleration of all amounts due under the 2026 Convertible Notes.

​

As of December 31, 2023, the Company was in full compliance with these covenants, and there were no events of default under the 2026 Convertible Notes.

​

The Company evaluated the features embedded in the 2026 Convertible Notes under the relevant accounting rules and concluded that the embedded features do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. The proceeds received from the issuance of the convertible debt were recorded as a liability in the consolidated balance sheets.

Capped Call Transactions

In connection with the pricing of the 2026 Convertible Notes, the Company paid $18.2 million to enter into privately negotiated capped call transactions with one or a combination of the initial purchasers, their respective affiliates and other financial institutions. The capped call transactions are generally expected to reduce the potential dilution upon conversion of the 2026 Convertible Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the 2026 Convertible Notes, and is subject to anti-dilution adjustments generally similar to those applicable to the conversion rate of the 2026 Convertible Notes. Since inception, the cap price has been $25.93 per share, which represents a premium of approximately 75.0% over the last reported sale price of the Company’s common stock of $14.82 per share on April 14, 2020, and is subject to certain adjustments under the terms of the capped call transactions.

The capped call transactions are accounted for as separate transactions from the 2026 Convertible Notes and classified as equity instruments. Therefore, the total $18.2 million capped call premium paid was recorded as a reduction to additional paid-in capital in the consolidated balance sheets in 2020. The capped calls will not be subsequently re-measured as long as the conditions for equity classification continue to be met.

The Company incurred $0.9 million of debt issuance costs relating to the issuance of the 2026 Convertible Notes, which were recorded as a reduction to the notes in the consolidated balance sheet. The debt issuance costs are being amortized and recognized as additional interest expense over the six-year contractual term of the notes using the effective interest rate method.

If the 2026 Convertible Notes were converted on December 31, 2023, the holders of the 2026 Convertible Notes would have received common shares with an aggregate value of $39.8 million based on the Company’s closing stock price of $3.33 as of December 29, 2023.

The following table presents the components of interest expense related to 2026 Convertible Notes:

​

​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)		2023		​	2022		​	2021
Stated coupon interest	​	$	3,450	​	$	3,450	​	$	3,450
Amortization of debt discount and debt issuance costs	​		1,313	​		1,286	​		1,259
Total interest expense	​	$	4,763	​	$	4,736	​	$	4,709

​

The remaining unamortized debt discount and debt offering costs related to the Company’s 2026 Convertible Notes of $3.1 million as of December 31, 2023, will be amortized using the effective interest rate over the remaining term of the 2026 Convertible Notes. The annual effective interest rate is 2.1% for the 2026 Convertible Notes.

Future payments on the 2026 Convertible Notes as of December 31, 2023 are as follows:

​	​	​	​
Year ending December 31, (in thousands)		​	​
2024 - interest only	​	$	3,450
2025 - interest only	​		3,450
2026 - principal and interest	​		231,725
Total minimum payments	​		238,625
Less amount representing interest	​		(8,625)
2026 Convertible Notes, principal amount	​		230,000
Less unamortized debt discount and debt issuance costs	​		(3,112)
Net carrying amount of 2026 Convertible Notes	​	$	226,888

​

8.2% Convertible Notes due 2022

On February 29, 2016, the Company issued and sold $100.0 million aggregate principal amount of its 8.2% Convertible Senior Notes due 2022. The 2022 Convertible Notes constituted general, senior unsubordinated obligations of the Company and were guaranteed by certain subsidiaries of the Company, bore interest at a fixed coupon rate of 8.2% per annum payable quarterly and matured on March 31, 2022. In March 2022, the Company fully repaid the 2022 Convertible Notes, and as a result had no continuing obligations associated with them thereafter. The payoff amount of $111.1 million included the repayment of the entire outstanding principal amount, the 9.0% premium of the outstanding principal amount and accrued and unpaid interest.

The 2022 Convertible Notes were issued to Healthcare Royalty Partners III, L.P., for $75.0 million in aggregate principal amount, and to three related party investors, KKR Biosimilar L.P., MX II Associates LLC, and KMG Capital Partners, LLC, for $20.0 million, $4.0 million, and $1.0 million, respectively, in aggregate principal amount.

The following table presents the components of interest expense of the 2022 Convertible Notes:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)	​	2022			2021
Stated coupon interest	​	$	2,050	​	$	8,200
Amortization of debt discount and debt issuance costs	​		521	​		1,966
Total interest expense	​	$	2,571	​	$	10,166

​

2025 Term Loan

On January 7, 2019, the Company entered into the 2025 Term Loan with affiliates of Healthcare Royalty Partners (together, the “Lender”). The 2025 Term Loan consisted of a six-year term loan facility for an aggregate principal amount of $75.0 million (the “Borrowings”). Starting January 1, 2020, the Borrowings under the 2025 Term Loan bore interest at 6.75% per annum plus three month LIBOR. Interest was payable quarterly in arrears.

Pursuant to the terms of the 2025 Term Loan, the Company was required to begin paying principal on the Borrowings in equal quarterly installments beginning on January 7, 2022, with the outstanding balance to be repaid on January 7, 2025, the maturity date. In January 2022, pursuant to the Company entering into the 2027 Term Loans, the Company voluntarily prepaid all amounts outstanding under the 2025 Term Loan. The payoff amount of $81.9 million included principal repayment in full, accrued interest, a 5.0% prepayment premium fee of the Borrowings principal amount, and an exit fee of 4.0% of the Borrowings principal amount. The prepayment premium fee and unamortized exit fee, debt discount and debt issuance costs, net from the 2025 Term Loan totaled $6.2 million and was recorded in loss on debt extinguishment in the consolidated statements of operations for 2022.

​

The following table presents the components of interest expense of the 2025 Term Loan:

​

​	​	​	​	​	​	​
​	​	Year Ended December 31,
(in thousands)	​	2022			2021
Stated coupon interest	​	$	154	​	$	7,034
Amortization of debt discount and debt issuance costs	​		16	​		1,032
Total interest expense	​	$	170	​	$	8,066

​

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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.

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