DEBT

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

Pharmakon Term Loans

On November 11, 2019, the Company, with Keryx as guarantor, entered into a loan agreement (Loan Agreement), with BioPharma Credit PLC as collateral agent and a lender (Collateral Agent), and BioPharma Credit Investments V (Master) LP as a lender. BioPharma Credit PLC subsequently transferred its interest in the loans, solely in its capacity as a lender, to its

affiliate, BPCR Limited Partnership. The Collateral Agent and the lenders are collectively referred to as Pharmakon. The Loan Agreement, as amended, consists of a secured term loan facility in an aggregate amount of up to $100.0 million (Term Loans), which was made available under two tranches: (i) the first tranche of $80.0 million (Tranche A), and (ii) the second tranche of $20.0 million (Tranche B). On November 25, 2019, the Company drew $77.3 million on Tranche A, net of fees and expenses, incurred by Pharmakon and reimbursed by the Company, or Lender Expenses. On December 10, 2020, the Company drew $20.0 million on Tranche B, net of immaterial Lender Expenses and issuance costs.

Proceeds from the Term Loans may be used for general corporate purposes. The Company and Keryx entered into a Guaranty and Security Agreement with the Collateral Agent (Guaranty and Security Agreement) on the Tranche A Funding Date. Pursuant to the Guaranty and Security Agreement, the Company’s obligations under the Term Loans are unconditionally guaranteed by Keryx (Guarantee). Additionally, the obligations of the Company and Keryx under the Term Loans and the Guarantee are secured by a first priority lien on certain assets of the Company and Keryx, including Auryxia and certain related assets, cash and certain equity interests held by the Company and Keryx, collectively the Collateral.

The Term Loans bear interest through maturity at a variable rate, payable quarterly in arrears. Through June 30, 2023, this rate was based upon the three-month LIBOR rate plus 7.50%, subject to a 2.00% LIBOR floor and a 3.35% LIBOR cap. On June 30, 2023, the three-month LIBOR rate was above the 3.35% LIBOR cap, therefore, the Company's interest rate as of June 30, 2023 was 10.85%. On June 29, 2023, the Company and Pharmakon entered into the Third Amendment to the Loan Agreement, which replaced LIBOR with the Secured Overnight Financing Rate (SOFR), effective June 30, 2023. The three-month SOFR rate was also above the 3.35% SOFR cap and therefore, the Company's interest rate as of June 30, 2023 would still have been 10.85% should SOFR been utilized for the quarter ended June 30, 2023. On August 11, 2023, the Company received an extension from Pharmakon of the deadline in the Loan Agreement with respect to the Company's obligation to deliver quarterly financial statements for the period ended June 30, 2023 through August 28, 2023.

The Term Loans will mature on November 25, 2024 (Maturity Date). The Company is required to repay the principal under the Term Loans in equal quarterly payments starting on the 33rd-month anniversary of the applicable Funding Date (Amortization Schedule). During the three and six months ended June 30, 2023, the Company made quarterly principal payments under the Term Loans totaling $8.0 million and $24.0 million, respectively. Under certain circumstances, unless certain liquidity conditions are met, the Maturity Date may decrease by up to one year, and the Amortization Schedule may correspondingly commence up to one year earlier.

If the Company prepays the loan prior to the Maturity Date, it will be required to make a prepayment fee. The prepayment fee would be 1.00% on or after the third anniversary, but prior to the fourth anniversary, of the applicable Funding Date of Tranche A, and 0.50% on or after the fourth anniversary of the applicable Funding Date of Tranche A but prior to the Maturity Date, and a make-whole premium on or prior to the second anniversary of the applicable Funding Date in an amount equal to foregone interest through the second anniversary of the applicable Funding Date. A change of control, which includes a new entity or group owning a majority (greater than 50%) of the Company's voting stock, triggers a mandatory prepayment of the Term Loans.

The Loan Agreement contains customary representations, warranties, events of default and covenants of the Company and its subsidiaries, including maintaining, on an annual basis, a minimum liquidity threshold which started in 2021, and on a quarterly basis, a minimum net sales threshold for Auryxia for the trailing twelve-month period of $85.0 million which started in the fourth quarter of 2020. On February 18, 2022, the Loan Agreement was amended by the First Amendment and Waiver (First Amendment and Waiver), which waived the provision under the Loan Agreement that required the Company to not be subject to any qualification as a going concern within the Company's 2021 Annual Report on Form 10-K. Pursuant to the First Amendment and Waiver, the Company's filings of Form 10-Q for fiscal quarters ending June 30, 2022 and September 30, 2022, and its future Annual Reports on Form 10-K, must not be subject to any qualification as to going concern, which requirement as to the Company's filings on Form 10-Q was waived in the Second Amendment and Waiver. If the Company does not satisfy the covenant as to going concern in any of these filings, the Company will be in default under the Loan Agreement. If an event of default occurs and is continuing under the Loan Agreement, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement. Under certain circumstances, a default interest rate will apply on all outstanding obligations during the occurrence and continuance of an event of default. As of June 30, 2023 and December 31, 2022, the Company determined that no events of default had occurred.

On July 15, 2022 (Effective Date), the Company and Pharmakon entered into the Second Amendment and Waiver (Second Amendment and Waiver), which amended and waived certain provisions of the Loan Agreement, as amended by the First Amendment and Waiver. In addition, in connection with the Second Amendment and Waiver, on the Effective Date, the Company made a $5.0 million prepayment of the principal of the Tranche A loan, or the Second Amendment Effective Date Tranche A Prepayment, and a $20.0 million prepayment of principal of the Tranche B loan, or the Second Amendment Effective Date Tranche B Prepayment, in each case, together with any and all accrued and unpaid interest on such prepayments of principal to the Effective Date. In connection therewith, the Company also paid $0.5 million in prepayment fee under the Loan Agreement. During the three months ended September 30, 2022, the Company recorded a debt extinguishment loss of $0.9 million. See Note 12 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for further details.

The Company assessed the terms and features of the Loan Agreement in order to identify any potential embedded features that would require bifurcation or any beneficial conversion feature. As part of this analysis, the Company assessed the economic characteristics and risks of the Loan Agreement, including put and call features. The terms and features assessed include a potential extension to the interest-only period dependent on both no event of default having occurred and continuing and the Company achieving certain regulatory and revenue conditions. The Company also assessed the acceleration of the obligations under the Loan Agreement under an event of default. In addition, under certain circumstances, a default interest rate will apply on all outstanding obligations during the occurrence and continuance of an event of default. In accordance with ASC 815, the Company concluded that these features are not clearly and closely related to the host instrument, and represent a single compound embedded derivative that is required to be re-measured at fair value on a quarterly basis.

The fair value of the embedded debt derivative related to the Company’s Loan Agreement with Pharmakon was $0.8 million as of June 30, 2023 and December 31, 2022. The Company classified the embedded debt derivative as a long-term liability on the unaudited condensed consolidated balance sheet as of June 30, 2023.

The Company recognized interest expense related to the Loan Agreement of $1.6 million and $2.7 million during the three months ended June 30, 2023 and 2022, respectively, and $3.3 million and $5.4 million during the six months ended June 30, 2023 and 2022, respectively. Unamortized discount and issuance costs were $0.5 million as of June 30, 2023.