SOCIETAL CDMO, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and notes thereto in Part I, Item 1 of this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited consolidated financial statements and notes thereto for the year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onMarch 1, 2022 , or Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Our actual results may differ materially from those discussed below. Please see "Forward-Looking Statements" and "Risk Factors" included in Part I, Item 1A of our Annual Report for factors that could cause or contribute to such differences.
Cautionary note regarding forward-looking statements
This Quarterly Report and the documents incorporated by reference herein contain forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report or the documents incorporated by reference herein regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," "would" "could," "should," "potential," "seek," "evaluate," "pursue," "continue," "design," "impact," "affect," "forecast," "target," "outlook," "initiative," "objective," "designed," "priorities," "goal," or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.
The forward-looking statements in this Quarterly Report and the documents incorporated herein by reference include, among other things, statements about:
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our estimates regarding expenses, future revenue, cash flow, capital requirements and timing and availability of and the need for additional financing;
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our ability to maintain or expand our relationships, profitability and contracts with our key commercial partners, including the impact of changes in consumer demand for the products we manufacture for our commercial partners;
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our ability to grow and diversify our business with new customers, including our ability to meet desired project outcomes with development customers, and the potential loss of development customers if they do not receive adequate funding or if their products do not obtain FDA approval;
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the risk that failure to maintain compliance with the continued listing
requirements of the Nasdaq Capital Market ("Nasdaq"), may result in receipt of a
Nasdaq delisting notice; if upon receipt of a delisting notice, we fail to
regain compliance within any allowed grace period or other process provided
under the Nasdaq listing requirements, our common stock may be delisted and the
value of our common stock may decrease;
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the extent to which the ongoing COVID-19 pandemic and other diseases continue to disrupt our business operations and the financial condition of our customers and suppliers, including our ability to initiate and continue relationships with manufacturers and third-party logistics providers given recent supply chain challenges;
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the extent to which inflation, global instability, including political instability, such as a deterioration in the relationship between the US andChina or escalation in conflict betweenRussia andUkraine , including any additional resulting sanctions, export controls or other restrictive actions that may be imposed by theU.S. and/or other countries against governmental or other entities in, for example,Russia , may disrupt our business operations or our financial condition or the financial condition of our customers and suppliers;
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our ability to operate under increased leverage and associated lending covenants; to pay existing required interest and principal amortization payments when due; and/or to obtain acceptable refinancing alternatives;
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the performance of third-party suppliers upon which we depend for Active Pharmaceutical Ingredients, or APIs, various other direct and indirect materials, and other third parties involved with maintenance of our facilities and equipment;
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our ability to maintain and defend our intellectual property rights against third-parties;
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pharmaceutical industry market forces that may impact our commercial customers' success and continued demand for the products we produce for those customers;
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our ability to recruit or retain key scientific, technical, business development, and management personnel and our executive officers, including as a result of applicable state and federal vaccine mandates;
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our ability to comply with stringentU.S. and foreign government regulation in the manufacture of pharmaceutical products, including current Good Manufacturing Practice, or cGMP, compliance andU.S. Drug Enforcement Agency , or DEA, compliance and other relevant regulatory authorities applicable to our business; and
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our ability to realize the expected benefits of the
We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly under "Item 1A. Risk Factors," that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make. You should read this Quarterly Report and the documents that we incorporate by reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements. Solely for convenience, tradenames referred to in this Quarterly Report appear without the ® symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these tradenames. All trademarks, service marks and tradenames included or incorporated by reference in this Quarterly Report are the property of their respective owners. OverviewSocietal CDMO, Inc. is a bi-coastal contract development and manufacturing organization, or CDMO, with capabilities spanning pre-investigational new drug development to commercial manufacturing and packaging for a wide range of therapeutic dosage forms with a primary focus in the area of small molecules. With an expertise in solving complex formulation and manufacturing problems, we are a leading CDMO providing development, end-to-end regulatory support, clinical and commercial manufacturing, aseptic fill/finish, lyophilization, packaging and logistics services to the global pharmaceutical market. In addition to our experience in handling DEA-controlled substances and developing and manufacturing advanced dosage forms, we have the expertise to deliver on our clients' pharmaceutical development and manufacturing projects, regardless of complexity level. We do all of this in our best-in-class facilities that, in the aggregate, total 145,000 square feet, inGainesville, Georgia andSan Diego, California .
We currently manufacture the following key products with our key commercial partners: Ritalin LA, Focalin XR, Verelan PM, Verelan SR, Verapamil PM, Verapamil SR, Donnatal liquids and tablets and Scot-Tussin cough and cold liquids, as well as supporting numerous development stage products.
EffectiveMarch 21, 2022 , we changed our name toSocietal CDMO, Inc. to reflect the corporate transformation that has taken place primarily as a result of our acquisition and successful integration ofIriSys into the organization. We use cash flow generated by our business primarily to fund the growth of our CDMO business and to make payments under our credit facility. We believe our business will continue to contribute cash to fund our growth, to make payments under our credit facility and for other general corporate purposes.
Global economic and supply conditions
Global economic conditions, logistics and supply chain issues continue to present obstacles to our business despite having endured other challenges related to the COVID-19 pandemic during 2021.
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We rely on third-party manufacturers to supply our manufacturing components,
supplies and related materials, which in some instances are supplied from a
single source. Prolonged disruptions in the supply of any of our third-party
materials, difficulty implementing new sources of supply or significant price
increases could have an adverse effect on our results. While the impact of
COVID-19 has lessened in many ways, we are experiencing a higher level of
residual supply chain disruptions that we are actively managing to meet our
second half 2022 production timelines and that may constrain our ability to
capture additional growth opportunities, beyond our established projections,
from customers who would otherwise want to increase their safety stock of the
products that we produce.
We also continue to closely monitor economic developments related to COVID-19
and other diseases and geopolitical conflicts, such as the conflict between
Due to these and other factors, we anticipate a general slowdown in clinical development activity as a result of clinical failures and/or a lack of adequate funding to go forward, which may cause a reduction in the number of business development opportunities that we will be able to pursue during 2022. We also expect to face continuing inflationary pressures on raw materials, labor and logistics during 2022. Finally, we expect to be impacted by higher interest rates on our LIBOR-based term loan borrowings during the second half of 2022. Financial overview Revenues
We recognize three types of revenue: manufacturing, profit-sharing and research and development.
Manufacturing We recognize manufacturing revenue from the sale of products we manufacture for our commercial partners. Manufacturing revenues are recognized upon transfer of control of a product to a customer, generally upon shipment, based on a transaction price that reflects the consideration we expect to be entitled to as specified in the agreement with the commercial partner, which could include pricing and volume-based adjustments.
Profit-sharing
We recognize profit-sharing or royalty revenue, collectively referred to as profit-sharing revenue, related to the sale of products by our commercial partners that incorporate our technologies. Profit-sharing revenues are generally recognized under the terms of the applicable license, development and/or supply agreement. For arrangements that include sales-based profit-sharing and the license is deemed to be the predominant item to which the profit-sharing relates, we recognize revenue when the related sales occur by the commercial partner. For arrangements that include sales-based profit-sharing and the license is not deemed to be the predominant item to which the profit-sharing relates, we recognize revenue when the performance obligation to which the profit-sharing has been allocated has been satisfied, which is upon transfer of control of a product to a customer. In these cases, significant judgment is required to calculate the estimated variable consideration from such profit-sharing using the expected value method based on historical commercial partner pricing and deductions. Estimated variable consideration is partially constrained due to the uncertainty of price adjustments made by our commercial partners, which are outside of our control. Factors causing price adjustments by our commercial partners include increased competition in the products' markets, mix of volume between the commercial partners' customers, and changes in government pricing.
Research and development
Research and development revenue includes services associated with formulation,
process development, clinical trial material and clinical trial support
services, as well as custom development of manufacturing processes and
analytical methods for a customer's non-clinical, clinical and commercial
products. Such revenues are recognized at a point in time or over time depending
on the nature and particular facts and circumstances associated with the
contract terms.
In contracts that specify milestones, we evaluate whether the milestones are
considered probable of being achieved and estimate the amount to be included in
the transaction price using the most likely amount method. Milestone payments
related to arrangements under which we have continuing performance obligations
are deferred and recognized over the period of performance. Milestone payments
that are not within our control, such as submission for approval to regulators
by a commercial partner or approvals from regulators, are not considered
probable of being achieved until those submissions are submitted by the customer
or approvals are received.
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In contracts that require revenue recognition over time, we utilize input or
output methods, depending on the specifics of the contract, that compare the
cumulative work-in-process to date to the most current estimates for the entire
performance obligation. Under these contracts, the customer typically owns the
product details and process, which have no alternative use. These projects are
customized to each customer to meet its specifications and typically only one
performance obligation is included. Each project represents a distinct service
that is sold separately and has stand-alone value to the customer. The customer
also retains control of its product as the product is being created or enhanced
by our services and can make changes to its process or specifications upon
request.
Cost of sales and selling, general and administrative expenses
Cost of sales consists of inventory costs, including production wages, material costs and overhead, and other costs related to the recognition of revenue. Selling, general and administrative expenses consists of salaries and related costs for administrative, public company costs, business development personnel as well as legal, patent-related expenses and consulting fees. Public company costs include compliance, auditing services, tax services, insurance and investor relations.
In
Primarily in the last nine months of 2021, we qualified for approximately$4.4 million of federal employee retention credits that were recognized as offsets to expense. We will not recognize any such expense offsets in 2022.
Amortization of intangible assets
Historically, we recognized amortization expense related to an intangible asset for our profit-sharing and contract manufacturing relationships on a straight-line basis over an estimated useful life of six years. Amortization stopped when the intangible asset reached the end of its useful life inApril 2021 . With the acquisition ofIriSys , we are recognizing amortization expense related to acquired customer relationships, backlog and trademarks and trade names on a straight-line basis over estimated useful lives of 7, 2.4, and 1.5 years, respectively. Interest expense Interest expense for the periods presented primarily relates to our Athyrium senior secured term loans and the amortization of related financing costs. In addition, following the acquisition ofIriSys , there is additional interest expense related to interest on the sellers note which was a component of theIriSys acquisition purchase price.
Net operating losses and tax carryforwards
As ofDecember 31, 2021 , we had federal net operating loss, or NOL, carry forwards of approximately$135.9 million ,$127.7 million of which have an indefinite carry forward period. The remaining$8.2 million of federal NOL carry forwards,$137.7 million of state NOL carry forwards and federal and state research and development tax credit carryforwards of$4.6 million are also available to offset future taxable income, but they will begin to expire at various dates beginning in 2028 if not utilized. We believe that it is more likely than not that the deferred income tax assets associated with ourU.S. operations will not be realized, and as such, there is a full valuation allowance against ourU.S. deferred tax assets.
Key indicators of performance
To evaluate our performance, we monitor a number of industry-standard key indicators such as:
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Safety and human capital management, as measured by recordable injuries, good saves and employee retention;
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Operational excellence, as measured by the percentage of our orders that are delivered on-time and in full;
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New business growth, as measured by value of new contracts signed; and
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Financial operating results, as measured by revenue and EBITDA, as adjusted.
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EBITDA, as adjusted, is a non-GAAP measure that we discuss and reconcile to its
nearest GAAP measure elsewhere in our public financial reporting. We believe
that supplementing our financial results presented in accordance with GAAP with
non-GAAP measures is useful to investors, creditors and others in assessing our
performance. These measurements should not be considered in isolation or as a
substitute for reported GAAP results because they may include or exclude certain
items as compared to similar GAAP-based measurements, and such measurements may
not be comparable to similarly-titled measurements reported by other companies.
Rather, these measurements should be considered as an additional way of viewing
aspects of our operations that provide a more complete understanding of our
business.
Results of operations
Comparison of second quarters 2022 and 2021
Three months ended June 30,
(in millions) 2022 2021
Revenue $ 23.2 $ 18.0
Operating expenses:
Cost of sales (excluding amortization of intangible
assets) 17.5 12.3
Selling, general and administrative 5.2 3.8
Amortization of intangible assets 0.2 0.1
Total operating expenses 22.9 16.2
Operating income 0.3 1.8
Interest expense (3.4 ) (4.0 )
Gain on extinguishment of debt - 3.4
Net (loss) income $ (3.1 ) $ 1.2
Revenue. The increase of $5.2 million was primarily driven by an increase in
European Ritalin LA demand from our new customer InfectoPharm, revenue resulting
from the acquisition of IriSys , as well as higher revenues from our clinical
trial materials business. These increases were partially offset by declining
revenues from Lannett's commercial sales of Verapamil PM products compared to
the prior year. In an effort to address this decline, we recently executed an
amendment to our license and supply agreement with Lannett for the marketing of
Verapamil PM and Verelan products subsequent to the end of the period, which
provides overall improved economics for Societal and is expected to strengthen
revenues from Lannett in the second half of the year despite the declines
experienced in the first half of the year.
Cost of sales. The increase of $5.2 million was primarily due to costs
associated with operating the San Diego facility acquired from IriSys and
increased costs tied to the increased manufacturing revenue during the quarter.
In addition, in 2021, we received certain employment incentive tax credits that
were not repeated in 2022 resulting in increased expense in 2022. These
increases were partially offset by the reallocation of expenses reflecting the
post-acquisition organizational structure. Prior to October 1, 2021 , these
employees supported our plant operations and were classified in cost of sales.
Selling, general and administrative. The increase of
Amortization of intangible assets. The increase of$0.1 million was the result of the amortization related to the acquisition ofIriSys for acquired customer relationships, backlog and trademarks and trade names partially offset by the amortization of CDMO royalties and contract manufacturing relationships acquired in 2015 ending onApril 10, 2021 . Interest expense. The decrease of$0.6 million was primarily due to reduced non-cash financing expense and increased capitalized interest. This decrease was partially offset by an increase in interest from the debt portion of theIriSys acquisition purchase price. Gain on extinguishment of debt. InJune 2021 , the promissory note with PNC Bank under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act of 2020, or the PPP Note, and all accrued interest thereon was forgiven. 22 --------------------------------------------------------------------------------
Comparison of six months ended 2022 and 2021
Six months ended June 30,
(in millions) 2022 2021
Revenue $ 44.3 $ 34.8
Operating expenses:
Cost of sales (excluding amortization of intangible
assets) 33.6 26.7
Selling, general and administrative 10.9 8.5
Amortization of intangible assets 0.4 0.7
Total operating expenses 44.9 35.9
Operating loss (0.6 ) (1.1 )
Interest expense (6.8 ) (7.8 )
Gain on extinguishment of debt - 3.4
Net loss $ (7.4 ) $ (5.5 )
Revenue. The increase of $9.5 million was primarily driven by revenue resulting
from the acquisition of IriSys as well as higher revenues from our clinical
trial materials business. In addition, there was an increase in European Ritalin
LA demand from our new customer InfectoPharm as well as an increase in revenue
from our largest commercial customer Teva, correlated with pull through in
demand resulting from market share gains against the sole competitor for the
Verapamil SR products. The increase in revenue was partially offset by a decline
in revenue from Lannett's commercial sales of the Verapamil PM products.
Cost of sales. The increase of $6.9 million was primarily due to the acquisition
of the San Diego facility and certain 2021 employment incentive tax credits that
were not repeated in 2022 resulting in increased expense in 2022. These
increases were partially offset by the reallocation of expenses reflecting the
post-acquisition organizational structure. Prior to October 1, 2021 , these
employees supported our plant operations and were classified in cost of sales.
Selling, general and administrative. The increase of $2.4 million was primarily
related to increased personnel costs tied to the reallocation of expenses and
integration costs associated with the IriSys integration. These increases were
offset by lower stock-based compensation expense.
Amortization of intangible assets. The decrease of $0.3 million was the result
of the amortization of CDMO royalties and contract manufacturing relationships
acquired in 2015 ending on April 10, 2021 partially offset by the amortization
related to the acquisition of IriSys for acquired customer relationships,
backlog and trademarks and trade names.
Interest expense. The decrease of $1.0 million was primarily due to reduced
non-cash financing expense and increased capitalized interest. Also contributing
to the reduction in interest was the successful refinancing and reduced term
loan borrowings under the Credit Agreement with Athyrium as well as a decrease
in the LIBOR base rate of interest on our term loans under the Credit Agreement.
These decreases were partially offset by an increase in interest from the debt
portion of the IriSys acquisition purchase price.
Gain on extinguishment of debt. In
Liquidity and capital resources
At
Since our inception, we have financed our operations and capital expenditures primarily from results of operations and the issuance of equity and debt. During the first half of 2022, our capital expenditures were$3.3 million to scale and support our expansion of capabilities. We are party to a credit agreement with Athyrium, or the Credit Agreement, which has been fully drawn. The Credit Agreement requires us to repay the outstanding principal amount of$100.0 million onDecember 31, 2023 . The Credit Agreement also includes certain financial covenants that the Company will need to satisfy on a monthly and quarterly basis, including: (i) maintaining a permitted net leverage ratio, calculated as our indebtedness, net of cash and cash equivalents, divided by EBITDA, each as defined in the Credit Agreement; and (ii) a minimum amount of cash and cash equivalents on hand. 23 -------------------------------------------------------------------------------- We are also party to an amended common stock purchase agreement withAspire Capital Fund LLC , orAspire Capital . The amended agreement provides that, upon the terms and subject to the conditions and limitations set forth in the agreement,Aspire Capital is committed to purchase, at our sole election, up to an aggregate value of$41.2 million in shares of common stock. As ofJune 30, 2022 , there is availability to issue up to$30.0 million or 6,199,299 shares of common stock under the 2019 Common Stock Purchase Agreement. We may require additional financing or choose to refinance certain of these instruments, which could include debt refinancing, sale of real estate and/or other assets, strategic development, licensing activities and/or marketing arrangements or through public or private sales of equity or debt securities from time to time. Financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could materially adversely impact our growth plans and our financial condition or results of operations. Further, our ability to access capital market or otherwise raise capital may be adversely impacted by potential worsening global economic conditions, geopolitical conflicts, and the recent disruptions to, and volatility in, financial markets inthe United States and worldwide resulting from the ongoing COVID-19 pandemic and the conflict betweenRussia andUkraine . Additional debt or equity financing, if available, may be dilutive to the holders of our common stock and may involve significant cash payment obligations and covenants that restrict our ability to operate our business or to access capital.
Sources and uses of cash
Six months ended June 30,
(amounts in millions) 2022 2021
Net cash (used in) provided by:
Operating activities $ (6.1 ) $ 2.7
Investing activities (3.3 ) (2.1 )
Financing activities (0.3 ) 21.3
Total $ (9.7 ) $ 21.9
Cash flows from operating activities represents our net loss as adjusted for
stock-based compensation, depreciation, non-cash interest expense and
amortization of intangibles as well as changes in operating assets and
liabilities. The increase in cash used in operations in 2022 compared to 2021
was primarily due to a decrease in stock-based compensation expense in addition
to changes in operating assets and liabilities. These included (i) a $3.3
million change in inventory balances due to timing of production and customer
orders; (ii) a $1.1 million change in accounts receivable due to increased sales
activity; (iii) a $2.3 million change in accrued payroll due to the fact that
there were limited cash bonuses paid in 2021 and the effects of payroll period
cutoff; and (iv) an additional $2.2 million interest payment that fell in the
first quarter of 2022 compared to 2021, partially offset by (v) a $0.5 million
reduction of prepaid expenses and other current assets.
Net cash used in investing activities for each period includes capital
expenditures to scale and support our expansion of capabilities. With the
inclusion of IriSys , we continue to anticipate that 2022 capital expenditures
will increase as we continue to maintain our existing capabilities and support
the growth of our clinical trials business and other new business acquired from
IriSys . We expect to complete a significant capital project during the early
second half of 2022 that will enhance our sterile fill and finishing
capabilities. If we are unable to complete the capital project according to
plan, this could have an adverse impact on our forecasted results.
Net cash provided by financing activities in 2021 changed to net cash used in
financing activities in 2022, a change of $21.5 million primarily due to the
absence of significant activities that occurred in 2021; in the first half of
2021, net proceeds from an issuance of common stock of $32.1 million were
partially offset by debt repayments of $10.1 million and related financing cost
payments of $0.2 million .
Forward-looking factors
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:
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the extent to which we in-license, acquire or invest in products, businesses and technologies;
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the timing and extent of our manufacturing and capital expenditures;
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our ability to maintain or expand our relationships and contracts with our commercial partners;
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our ability to grow and diversify our business with new customers, including our ability to meet desired project outcomes with development customers;
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our ability to regain profitability;
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our ability to comply with stringent
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our ability to raise additional funds through equity or debt financings or sale of real estate or other assets;
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the costs of maintaining, enforcing and defending intellectual property claims;
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our ability to regain, and maintain, compliance with the Nasdaq continued listing standards;
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the extent to which health epidemics and other outbreaks of communicable diseases, including the ongoing COVID-19 pandemic, could disrupt our operations or materially and adversely affect our business and financial conditions; and
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the extent to which inflation, global instability, including political instability, such as a deterioration in the relationship between the US andChina or escalation in conflict betweenRussia andUkraine , including any additional resulting sanctions, export controls or other restrictive actions that may be imposed by theU.S. and/or other countries against governmental or other entities in, for example,Russia , may disrupt our business operations or financial condition or the financial condition of our customers and suppliers. We anticipate raising funds from real estate asset sales to reduce our outstanding debt principal. There are a number of risks and uncertainties that could impact real estate values and or our ability, if any, to successfully monetize the sale of any non-core real-estate assets including, but not limited to, market forces, economic conditions, revenue concentration, debt levels, geographic location, interest rates, results of engineering plans, geotechnical surveys, coverage density, physical characteristics of the land (e.g. rock, wetlands delineation, streams, powerlines, topography, zoning), ability to reach acceptable contractual terms and obtaining the required approvals and release(s) from our senior secured lender. We may also use existing cash and cash equivalents on hand, additional debt, equity financing, sale of other assets or out-licensing revenue or a combination thereof to fund our operations or acquisitions. If we increase our debt levels, we might be restricted in our ability to raise additional capital and might be subject to financial and restrictive covenants. Our shareholders may experience dilution as a result of the issuance of additional equity or debt securities. This dilution may be significant depending upon the amount of equity or debt securities that we issue and the prices at which we issue any securities.
Contractual commitments
The table below reflects our contractual commitments as of
Payments due by period
Less than More than
(in millions) Total 1 year 1-3 years 3-5 years 5 years
Debt obligations (1):
Principal $ 106.5 $ 2.0 $ 104.1 $ 0.1 $ 0.3
Interest 15.0 9.7 5.1 0.1 0.1
Purchase obligations (2) 10.6 0.7 9.9 - -
Operating leases (3) 9.9 1.2 2.4 2.1 4.2
Other long-term liabilities (4) - - - - -
Total $ 142.0 $ 13.6 $ 121.5 $ 2.3 $ 4.6
(1)
Debt obligations consist of principal, an exit fee of 1% of that principal, and
interest on $100.0 million of outstanding term loans under our credit facility
with Athyrium, $6.1 million of notes issued to the former members of IriSys and
another small loan. Because the Athyrium term loans bear interest at a variable
rate based on LIBOR, we estimated future interest commitments utilizing the
LIBOR rate as of June 30, 2022 . In accordance with U.S. GAAP, the future
interest obligations are not recorded on our consolidated balance sheet.
(2)
Purchase obligations consist of cancelable and non-cancelable purchase
commitments related to inventory, capital expenditures and other goods or
services. In accordance with
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We are party to two operating leases for development facilities inCalifornia andGeorgia that end in 2031 and 2025, respectively. The leases each include options to extend at our discretion.
(4)
We have entered into employment agreements with each of our named executive officers that provide for, among other things, severance commitments of up to$1.3 million should we terminate the named executive officers for convenience or if certain events occur following a change in control. In addition, we would be subject to other contingencies of up to$3.8 million in the aggregate if certain events occur following a change in control. Because these obligations are contingent, the amounts are not included in the table above.
Critical accounting policies and estimates
Our critical accounting policies and estimates are disclosed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report.
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