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Senior Secured Term Loan Facilities
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Senior Secured Term Loan Facilities

7. Senior Secured Term Loan Facilities

On April 29, 2023, the Company entered into a financing agreement (“Financing Agreement”) with investment funds managed by Morgan Stanley Tactical Value, as lenders (the “Lenders”), and Wilmington Trust, National Association, as the administrative agent, providing for senior secured term loan facilities consisting of (i) a $75.0 million initial term loan (the “Initial Term Loan”), (ii) a $37.5 million delayed draw term loan that will be funded upon the achievement of certain clinical development milestones (“Delayed Draw Term Loan 1”) and, (iii) an uncommitted delayed draw term loan of up to $37.5 million to be funded at the Lenders sole discretion, (“Delayed Draw Term Loan 2” and, together with the Initial Term Loan and Delayed Draw Term Loan 1, the “Term Loans”).

Pursuant to the Financing Agreement, the Lenders have funded the Initial Term Loan. The clinical development milestones which could have triggered Delayed Draw Term Loan 1 were not achieved, and the Lenders have not funded Delayed Draw Term Loan 2. As such, these features expired during 2023. The Company has determined that certain other features embedded within the Loan should be bifurcated and accounted for separately as a derivative. At inception and as of September 30, 2024, the fair values of such derivatives were negligible due to the low probability of the underlying events.

The Term Loans shall accrue interest at a fixed rate of 14.0% per annum, payable monthly in arrears. The Term Loans shall mature on May 8, 2026. The Term Loans will not be subject to amortization payments. The Company is permitted to prepay the Term Loans from time to time, in whole or in part, subject to payment of a make-whole amount equal to the unpaid principal amount of the portion of the Term Loans being repaid or prepaid, plus accrued and unpaid interest of the portion of the Term Loans being repaid or prepaid, plus an amount equal to the remaining scheduled interest payments due on such portion of the Term Loans being repaid or prepaid as if such Term Loans were to remain outstanding until the scheduled maturity date.

The initial issuance costs and the related transaction costs, totaling $3.7 million is amortized as interest expense using the effective interest method over the term of the Initial Term Loan and are reported on the balance sheet as a direct deduction from the amount of the Initial Term Loan. The effective annual interest rate of the Initial Term Loan was 16.13% for the three and nine months ended September 30, 2024 and 2023. The Company recorded interest expense of $2.9 million and $8.7 million, respectively, for the three and nine months ended September 30, 2024, respectively. The Company recorded interest expense of $2.9 million and $4.5 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, the related accrued interest was $0.4 million. The Company was in compliance with all debt covenants associated with the senior secured term loan facilities as of September 30, 2024, including maintaining a minimum balance of $30 million of unrestricted cash and cash equivalents held in accounts in the U.S.

The Company’s senior secured term loan facilities as of September 30, 2024 were as follows (in thousands):

 

 

 

September 30, 2024

 

Principal of senior secured term loan facilities

 

$

75,000

 

Less: Unamortized issuance costs and transaction costs

 

 

(2,221

)

Senior secured term loan facilities, ending balance

 

 

72,779

 

Less: Current Portion classified to accrued and other current liabilities

 

 

—

 

Senior secured term loan facilities, non-current

 

$

72,779