DEBT

9 Months Ended

Sep. 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, or Loan Agreement, with BioPharma Credit PLC as collateral agent and a lender, or Collateral Agent, and BioPharma Credit Investments V (Master) LP as a lender, and a Guaranty and Security Agreement with the Collateral Agent. 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, or Term Loans, which was made available under two tranches: (i) the first tranche of $80.0 million, or Tranche A, and (ii) the second tranche of $20.0 million, or Tranche B. On November 25, 2019, the Company drew $77.3 million on Tranche A, net of fees and expenses of $2.7 million. On December 10, 2020, the Company drew $20.0 million on Tranche B, net of immaterial lender expenses and issuance costs.

On July 15, 2022, or Second Amendment Effective Date, the Company prepaid $25.0 million of the then outstanding principal, $5.0 million on Tranche A and a $20.0 million on Tranche B as well as a $0.5 million prepayment fees under the terms of the Loan Agreement. During the three months ended September 30, 2022, the Company recorded a debt extinguishment loss of $0.9 million. As of September 30, 2023, the Company had $43.0 million of principal outstanding.

The Term Loans, as amended, bear interest through maturity at a variable rate based on the three month Secured Overnight Financing Rate, or SOFR, plus a SOFR adjustment of 0.30% plus 7.50%. The SOFR interest rate was capped at 3.35% through October 31, 2023, the date of the Fourth Amendment to the Loan Agreement, or Fourth Amendment. As of September 30, 2023, the three-month SOFR rate was above the SOFR cap, therefore, the Company's interest rate was 11.15%. The Company recognized interest expense related to the Loan Agreement of $1.4 million and $2.1 million during the three months ended September 30, 2023 and 2022, respectively, and $4.7 million and $7.5 million during the nine months ended September 30, 2023 and 2022, respectively. Unamortized discount and issuance costs were $0.4 million as of September 30, 2023.

The Company was required to make equal quarterly principal payments that started on the 33rd-month anniversary of the applicable Funding Date until November 25, 2024, or Original Maturity Date. The Fourth Amendment, which the Company entered into on October 31, 2023, extended the maturity date to March 31, 2025, or New Maturity Date, and revised the principal payments to monthly principal payments starting in October 2024 on the remaining principal balance of $35.0 million. During the three months ended September 30, 2023, the Company made no quarterly principal payments under the Term Loans. During the nine months ended September 30, 2023, the Company made quarterly principal payments under the Term Loans totaling $24.0 million. 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 New Maturity Date, it will be required to make a prepayment fee of 0.50% of such prepayment amount. 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 obligations of the Company and Keryx under the Loan Agreement 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. The Loan Agreement contains various affirmative and negative covenants, including that limit the Company's ability to engage in specified types of transactions and require the Company to maintain one or more controlled cash accounts. In addition, the Loan Agreement, as amended, requires the Company to (i) report quarterly minimum net Auryxia sales for the trailing twelve-month period of $85.0 million, (ii) in certain instances maintain an annual minimum liquidity threshold and (iii) not be subject to any qualification as to going concern in its Annual Reports on Form 10-K. If an event of default occurs, including a qualification as a going concern, 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 September 30, 2023 and December 31, 2022, the Company was in compliance with the covenants under the Pharmakon Loan Agreement.

The Company concluded the contingent put and call features that could require mandatory repayment upon the occurrence of an event of default, default interest rates to be payable and certain other events represent an embedded derivative required to be bifurcated from the debt host instrument and accounted for separately and 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 on September 30, 2023 and December 31, 2022. During the nine months ended September 30, 2023, there was no change in fair value of the embedded debt derivative. During the nine months ended September 30, 2022, we recognized a $1.1 million gain in other (expense) income in the consolidated statements of operations and comprehensive loss related to the decrease in the fair value of the embedded debt derivative.

See Note 12 of the Notes to the Consolidated Financial Statements in the 2022 Annual Report on Form 10-K/A for further details.