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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2020
Or
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             .
 
Commission File Number 001-35726
 
Radius Health, Inc.
(Exact name of registrant as specified in its charter)
Delaware 80-0145732
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
 
950 Winter Street
Waltham, Massachusetts 02451
(Address of Principal Executive Offices and Zip Code)
 
(617) 551-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareRDUSThe Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer 
  
Non-accelerated filer Smaller reporting company 
Emerging growth company 


Table of Contents
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No

Number of shares of the registrant’s Common Stock, $0.0001 par value per share, outstanding as of November 2, 2020: 46,547,387 shares


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RADIUS HEALTH, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2020
TABLE OF CONTENTS
 
   
 
 
 
 7
 
   
   
   


Table of Contents
PART I— FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Radius Health, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share and per share amounts)
September 30,
2020
December 31,
2019
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$81,830 $69,886 
Restricted cash567 567 
Marketable securities43,873 91,015 
Accounts receivable, net21,175 23,289 
Inventory7,506 5,323 
Prepaid expenses11,346 12,131 
Other current assets17,078 846 
Total current assets183,375 203,057 
Property and equipment, net1,276 2,293 
Intangible assets5,984 6,583 
Right of use assets - operating leases4,832 6,704 
Other assets484 514 
Total assets$195,951 $219,151 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  
Current liabilities:  
Accounts payable$15,767 $6,030 
Accrued expenses and other current liabilities63,662 53,030 
Operating lease liability, current2,229 2,198 
Total current liabilities81,658 61,258 
Convertible notes payable208,902 195,591 
Term loan9,941  
Operating lease liability, long term4,031 4,581 
Total liabilities304,532 261,430 
Commitments and contingencies
Stockholders’ equity (deficit):  
Common stock, 0.0001 par value; 200,000,000 shares authorized, 46,548,201 shares and 46,189,870 shares issued and outstanding at September 30, 2020 and December 31, 2019
5 5 
Additional paid-in-capital1,215,769 1,194,327 
Accumulated other comprehensive income82 3 
Accumulated deficit(1,324,437)(1,236,614)
Total stockholders’ equity (deficit)(108,581)(42,279)
Total liabilities and stockholders’ equity (deficit)$195,951 $219,151 
See accompanying notes to unaudited condensed consolidated financial statements.


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Radius Health, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited, in thousands, except share and per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
REVENUES:
Product revenue, net$50,412 $46,766 $148,448 $117,652 
License revenue27,414  27,414  
Total revenue$77,826 $46,766 $175,862 $117,652 
OPERATING EXPENSES:  
Cost of sales - product3,839 3,971 11,771 10,809 
Cost of sales - intangible amortization200 200 599 599 
Research and development, net of amounts reimbursable (a)39,450 31,791 123,340 82,230 
Selling, general and administrative33,692 35,617 108,356 116,918 
Income (Loss) from operations645 (24,813)(68,204)(92,904)
OTHER INCOME (EXPENSE):    
Other (expense) income(87)59 (144)21 
Interest expense(7,069)(6,298)(20,747)(18,500)
Interest income222 1,008 1,272 3,105 
NET LOSS$(6,289)$(30,044)$(87,823)$(108,278)
OTHER COMPREHENSIVE LOSS:    
Unrealized (loss) gain from available-for-sale debt securities(26)66 79 776 
COMPREHENSIVE LOSS$(6,315)$(29,978)$(87,744)$(107,502)
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS - BASIC AND DILUTED (Note 8)$(6,289)$(30,044)$(87,823)$(108,278)
LOSS PER SHARE:    
Basic and diluted$(0.14)$(0.65)$(1.89)$(2.36)
WEIGHTED AVERAGE SHARES:    
Basic and diluted46,493,126 46,141,217 46,395,124 45,975,691 
(a) Amounts reimbursable for the three and nine months ended September 30, 2020 were $15.4 million and $0 for the three and nine months ended September 30, 2019.

See accompanying notes to unaudited condensed consolidated financial statements.


5

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Radius Health, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Nine Months Ended
September 30,
 20202019
CASH FLOWS USED IN OPERATING ACTIVITIES:  
Net loss$(87,823)$(108,278)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization1,616 1,785 
Amortization of premium/discount on marketable securities, net237 (246)
Amortization of debt discount and debt issuance costs13,313 11,638 
Impairment loss on operating lease right of use assets1,510 339 
Stock-based compensation19,821 16,911 
Loss on property and equipment disposals 201 
Changes in operating assets and liabilities:  
Inventory(2,183)1,299 
Accounts receivable, net2,114 (4,770)
Prepaid expenses785 (1,359)
Other current assets(16,232)344 
Operating lease right of use assets1,472 1,507 
Other long-term assets30 132 
Accounts payable9,737 382 
Accrued expenses and other current liabilities10,632 6,879 
Lease liability, operating leases(1,629)(1,704)
Other non-current liabilities (71)
Net cash used in operating activities(46,600)(75,011)
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:  
Purchases of marketable securities(39,916)(36,589)
Sales and maturities of marketable securities86,900 135,500 
Net cash provided by investing activities46,984 98,911 
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:  
Proceeds from exercise of stock options and warrant exercises 3,869 
Proceeds from issuance of term loan10,000  
Payment of debt issuance costs(61) 
Proceeds from issuance of shares under employee stock purchase plan1,621 1,840 
Net cash provided by financing activities11,560 5,709 
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH11,944 29,609 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD70,453 59,881 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD$82,397 $89,490 
SUPPLEMENTAL DISCLOSURES:  
Cash paid for interest$9,658 $9,150 
Cash paid for amounts included in the measurement of operating lease liabilities$1,932 $2,068 
Right of use assets obtained in exchange for operating lease liability$1,110 $8,289 
See accompanying notes to unaudited condensed consolidated financial statements.

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Radius Health, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited, in thousands, except share and per share amounts)
 Stockholders’ Equity (Deficit)
 Common StockAdditional Paid-In Capital 
Accumulated Other
Comprehensive Income
(Loss)
 Accumulated
Deficit
Total Stockholders’ Equity (Deficit)
 SharesAmountAmount Amount AmountAmount
Balance at June 30, 201946,125,197 $5 $1,181,761 $(45)$(1,181,855)$(134)
Net loss(30,044)(30,044)
Unrealized gain from available-for-sale securities66 66 
Share-based compensation expense related to share-based awards for employee stock purchase plan20 20 
Issuance of common stock upon purchase by employee stock purchase plan47,973 813 813 
Share-based compensation expense5,029 5,029 
Balance at September 30, 201946,173,170 $5 $1,187,623 $21 $(1,211,899)$(24,250)
Balance at June 30, 202046,448,491 $5 $1,208,616 $108 $(1,318,148)$(109,419)
Net loss(6,289)(6,289)
Unrealized loss from available-for-sale securities(26)(26)
Vesting of restricted shares39,650  
Issuance of common stock upon purchase by employee stock purchase plan60,060 631 631 
Share-based compensation expense6,522 6,522 
Balance at September 30, 202046,548,201 $5 $1,215,769 $82 $(1,324,437)$(108,581)
See accompanying notes to unaudited condensed consolidated financial statements.






























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Radius Health, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited, in thousands, except share and per share amounts)
Stockholders’ Equity (Deficit)
Common StockAdditional Paid-In CapitalAccumulated Other
Comprehensive Income
(Loss)
Accumulated
Deficit
Total Stockholders’ Equity (Deficit)
SharesAmountAmountAmountAmountAmount
Balance at December 31, 201845,563,693 $5 $1,165,003 $(755)$(1,103,621)$60,632 
Net loss(108,278)(108,278)
Unrealized gain from available-for-sale securities776 776 
Vesting of restricted shares75,331  
Exercise of options341,337 2,869 2,869 
Exercise of warrants81,104 1,000 1,000 
Share-based compensation expense related to share-based awards for employee stock purchase plan456 456 
Issuance of common stock upon purchase by employee stock purchase plan111,705 1,840 1,840 
Share-based compensation expense16,455 16,455 
Balance at September 30, 201946,173,170 $5 $1,187,623 $21 $(1,211,899)$(24,250)
Balance at December 31, 201946,189,870 $5 $1,194,327 $3 $(1,236,614)$(42,279)
Net loss(87,823)(87,823)
Unrealized gain from available-for-sale securities7979 
Vesting of restricted shares242,974  
Issuance of common stock upon purchase by employee stock purchase plan115,357 1,621 1,621 
Share-based compensation expense19,821 19,821 
Balance at September 30, 202046,548,201 $5 $1,215,769 $82 $(1,324,437)$(108,581)
See accompanying notes to unaudited condensed consolidated financial statements.
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Radius Health, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
Radius Health, Inc. (“Radius” or the “Company”) is a science-driven fully integrated biopharmaceutical company that is committed to developing and commercializing innovative endocrine therapeutics. In April 2017, the Company’s first commercial product, TYMLOS® (abaloparatide) injection, was approved by the U.S. Food and Drug Administration (“FDA”) for the treatment of postmenopausal women with osteoporosis at high risk for fracture defined as history of osteoporotic fracture, multiple risk factors for fracture, or patients who have failed or are intolerant to other available osteoporosis therapies. In July 2017, the Company entered into a license and development agreement with Teijin Limited (“Teijin”) for abaloparatide for subcutaneous injection (“abaloparatide-SC”) in Japan, under which the Company received an upfront payment and is entitled to receive milestone payments upon the achievement of certain regulatory and sales milestones, and a fixed low double-digit royalty based on net sales of abaloparatide-SC in Japan during the royalty term. In January 2019, the European Commission adopted a decision refusing approval of the Company’s European Marketing Authorisation Application (“MAA”) for abaloparatide-SC. The Company is developing an abaloparatide transdermal patch, or abaloparatide-patch, for potential use in the treatment of postmenopausal women with osteoporosis. In connection with its strategic plans to focus on bone health and targeted endocrine diseases, in July 2020 the Company entered into a license agreement with Berlin-Chemie AG, a company of the Menarini Group (“Berlin-Chemie”), under which the Company granted Berlin-Chemie an exclusive license to develop and commercialize products containing elacestrant (RAD1901), a selective estrogen receptor degrader (“SERD”), worldwide. Elacestrant is being developed for potential use in the treatment of hormone receptor-positive breast cancer. Further, the Company completed its divestment of its oncology program with the sale of RAD140, an internally discovered non-steroidal selective androgen receptor modulator (“SARM”) the Company was developing for potential use in the treatment of hormone receptor-positive breast cancer, to Ellipses Pharma in September 2020.
The Company is subject to the risks associated with biopharmaceutical companies with a limited operating history, including dependence on key individuals, a developing business model, the necessity of securing regulatory approvals to market its investigational product candidates, market acceptance of the Company’s investigational product candidates following receipt of regulatory approval, competition for its investigational product candidates following receipt of regulatory approval, and the continued ability to obtain adequate financing to fund the Company’s future operations, inclusive of the impacts from the coronavirus disease 2019 (“COVID-19”) pandemic. The Company has incurred losses and expects to continue to incur additional losses for the foreseeable future. As of September 30, 2020, the Company had an accumulated deficit of $1,324.4 million, and total cash, cash equivalents, and marketable securities of $125.7 million.
The ongoing global COVID-19 pandemic has resulted in significant governmental measures being implemented to control the spread of the virus and while the Company cannot predict their scope and severity, these developments and measures have had an effect on the Company’s business, results of operations and financial condition and may adversely affect its business, results of operations and financial condition in the future. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and is taking steps to minimize its impact on its business. However, the full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 pandemic or the effectiveness of actions taken to contain the pandemic or minimize its impact, among others. Furthermore, if the Company or any of the third parties with whom it engages were to experience additional or prolonged shutdowns or other business disruptions, the Company’s ability to conduct its business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on its business, results of operations and financial condition.
Based upon its cash, cash equivalents, and marketable securities balance as of September 30, 2020, the Company believes that, prior to the consideration of revenue from the potential future sales of any of its investigational product candidates that may receive regulatory approval or proceeds from partnering and/or collaboration activities, it has sufficient capital as well as access to other capital discussed in Note 7, “Term Loan and Credit Facility” to fund its development plans, U.S. commercial scale-up and other operational activities, for at least one year from the date of this filing. The Company expects to finance the future development costs of its clinical product portfolio with its existing cash and cash equivalents, and marketable securities, or through strategic financing opportunities that could include, but are not limited to collaboration or partnership agreements, future offerings of its equity, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company fails to obtain additional future capital, it may be unable to complete its clinical trials and obtain approval of certain investigational product candidates from the FDA or foreign regulatory authorities.
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2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation—The accompanying unaudited condensed consolidated financial statements and the related disclosures of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.
When preparing financial statements in conformity with U.S. GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2020. Subsequent events have been evaluated up to the date of issuance of these financial statements. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes, which are contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 27, 2020.
Significant Accounting Policies—The significant accounting policies identified in the Company’s 2019 Form 10-K that require the Company to make estimates and assumptions include: revenue recognition, inventory obsolescence, long-lived assets and intangible assets, accounting for stock-based compensation, contingencies, tax valuation reserves, fair value measures, and accrued expenses. There were no changes to significant accounting policies during the nine months ended September 30, 2020, except for the adoption of the Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) detailed below.
Accounting Standards Updates—Recently Adopted—In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Certain amendments thereto were also issued by the FASB. ASU 2016-13 and the related amendments require that credit losses be reported using an expected losses model, representing the entity’s current estimate of credit losses expected to be incurred. The previous accounting guidance, as applied by the Company through December 31, 2019, was based on an incurred losses model. The standard replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. For available-for-sale debt securities with unrealized losses, ASU 2016-13 and the related amendments now requires allowances to be recorded instead of reducing the amortized cost of the investment. These amendments under ASU 2016-13 are effective for interim and annual fiscal periods beginning after December 15, 2019. The Company adopted ASU 2016-13 as of January 1, 2020 and it did not have a material impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement, or (“ASU 2018-13”). The amendments in ASU 2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments under ASU 2018-13 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-13 on January 1, 2020 and it did not have a material impact on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40) (“ASU 2018-15”). ASU 2018-15 updates guidance regarding accounting for a cloud computing arrangement that is a service contract. The amendments under ASU 2018-15 are effective for interim and annual fiscal periods beginning after December 15, 2019, with early adoption permitted. The Company adopted ASU 2018-15 on January 1, 2020 and it did not have a material impact on the Company’s condensed consolidated financial statements.
Other - In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law and provides an estimated $2.2 trillion to fight the COVID-19 pandemic and stimulate the economy. The business tax provisions of the CARES Act include temporary changes to income and non-income-based tax laws. Some of the key income tax provisions include eliminating the 80% of taxable income limitations by allowing corporate entities to fully utilize net operating loss (“NOL”) carryforwards to offset taxable income in 2018, 2019, or 2020 and reinstating it for tax years after 2020; allowing NOLs generated in 2018, 2019, or 2020 to be carried back five years; increasing the net interest expense deduction limit to 50% of adjusted taxable income from 30% for the 2019 and 2020 tax years; allowing taxpayers with alternative minimum tax credits to claim a refund for the entire amount of the credit instead of recovering the credit through refunds over a period of years, as required by the 2017 Tax Cut and Jobs Act; and allowing entities to deduct more of their charitable cash contributions made
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during calendar year 2020 by increasing the taxable income limitation to 25% from 10%. Companies are required to account for these provisions in the period that includes the March 2020 enactment date (i.e., the first quarter for calendar year-end entities). The Company has assessed the impact of these provisions and they are not material to the Company’s condensed consolidated financial statements or related disclosures. Measures of the CARES Act not related to income-based taxes include allowing an employer to pay its share of Social Security payroll taxes that would otherwise be due from the date of enactment through December 31, 2020 over the following two years and allowing eligible employers subject to closure due to the COVID-19 pandemic to receive a 50% credit on qualified wages against their employment taxes each quarter, with any excess credits eligible for refunds. These measures of the CARES Act are also not material to the Company’s condensed consolidated financial statements as the Company did not apply for any credit during the period.
Accounting Standards Updates, Recently Issued—In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interest period and the recognition of deferred tax liabilities for outside basis differences, and also clarifies and simplifies other aspects of the accounting for income taxes. The amendments under ASU 2010-12 are effective for interim and annual fiscal periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effects the adoption of ASU 2019-12 will have on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). The guidance simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently in the process of determining the effect that the adoption will have on its condensed consolidated financial statements and related disclosures.
3. Marketable Securities
Available-for-sale marketable securities and cash and cash equivalents as of September 30, 2020 and December 31, 2019 consisted of the following (in thousands):
 September 30, 2020
 Amortized Cost ValueGross 
Unrealized 
Gains
Gross 
Unrealized 
Losses
Fair Value
Cash and cash equivalents:    
Cash$55,796 $— $— $55,796 
Money market funds26,034 — — 26,034 
Total$81,830 $— $— $81,830 
Marketable securities:    
Domestic corporate debt securities$38,822 $91 $(3)$38,910 
Domestic corporate commercial paper4,968  (5)4,963 
Total$43,790 $91 $(8)$43,873 
 
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 December 31, 2019
 Amortized Cost ValueGross 
Unrealized 
Gains
Gross 
Unrealized 
Losses
Fair Value
Cash and cash equivalents:    
Cash$34,726 $— $— $34,726 
Money market funds35,160 — — 35,160 
Total$69,886 $— $— $69,886 
Marketable securities:    
Domestic corporate debt securities$41,229 $3 $(3)$41,229 
Domestic corporate commercial paper24,900 5  24,905 
Agency bonds12,391 1 (3)12,389 
US treasury bonds12,492   12,492 
Total$91,012 $9 $(6)$91,015 
The Company reviews marketable securities whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. We evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss on the condensed consolidated balance sheet, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that is not related to credit is recognized in other comprehensive income.
Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense on the condensed consolidated statement of operations. Losses are charged against the allowance when the Company believes the uncollectability of an available-for-sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. The unrealized losses at September 30, 2020 and December 31, 2019 are attributable to changes in interest rates and the Company does not believe any unrealized losses represent credit losses.
As of September 30, 2020 and December 31, 2019, the Company had 2 and 8 available-for-sale debt securities in an unrealized loss position, respectively, for which an allowance for credit losses has not been recorded. The following table summarizes such investments by major security type and length of time in a continuous unrealized loss position as of September 30, 2020 (in thousands).
Less than 12 Months12 months or longerTotal
Fair valueUnrealized lossesFair valueUnrealized lossesFair valueUnrealized losses
Available-for-sale debt securities
Domestic corporate debt securities$4,621 $(3)  $4,621 $(3)
Domestic corporate commercial paper4,964 (5)  4,964 (5)
Total available-for-sale debt securities$9,585 $(8)  $9,585 $(8)
4. Fair Value Measurements
The Company determines the fair value of its financial instruments based upon the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Below are the three levels of inputs that may be used to measure fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
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Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no material transfers between any levels during the nine months ended September 30, 2020. There were no material transfers between any levels during 2019.
The following table summarizes the financial instruments measured at fair value on a recurring basis in the Company’s accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 (in thousands):
 As of September 30, 2020
 Level 1Level 2Level 3Total
Assets    
Cash and cash equivalents:    
Cash$55,796 $ $ $55,796 
Money market funds (1)26,034   26,034 
Total$81,830 $ $ $81,830 
Marketable Securities    
Domestic corporate debt securities (2)$ $38,910 $ $38,910 
Domestic corporate commercial paper (2) 4,963  4,963 
Total$ $43,873 $ $43,873 
 
 As of December 31, 2019
 Level 1Level 2Level 3Total
Assets    
Cash and cash equivalents:    
Cash$34,726 $ $ $34,726 
Money market funds (1)35,160   35,160 
Total$69,886 $ $ $69,886 
Marketable Securities    
Domestic corporate debt securities (2)$ $41,229 $ $41,229 
Domestic corporate commercial paper (2) 24,905  24,905 
Agency bonds (2) 12,389  12,389 
US treasury bonds (2)$ $12,492 $ $12,492 
Total$ $91,015 $ $91,015 
(1)                           Fair value is based upon quoted market prices.
(2)                           Fair value is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. Inputs are obtained from various sources, including market participants, dealers and brokers.
As of September 30, 2020, the carrying amounts of the cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, long-term debt and operating lease liabilities approximated their estimated fair values.
5. Inventory
Inventory consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):
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September 30,
2020
December 31,
2019
Raw materials$4,475 $4,093 
Work in process1,299  
Finished goods1,732 1,230 
Total inventories$7,506 $5,323 
Finished goods manufactured by the Company have a 36-month shelf life from date of manufacture.
6. Convertible Notes Payable
On August 14, 2017, in a registered underwritten public offering, the Company issued $300.0 million aggregate principal amount of 3% Convertible Senior Notes due September 1, 2024 (the “Convertible Notes”). In addition, on September 12, 2017, the Company issued an additional $5.0 million principal amount of Convertible Notes pursuant to the exercise of an over-allotment option granted to the underwriters in the offering. In accordance with accounting guidance for debt with conversion and other options, the Company separately accounted for the liability component (the “Liability Component”) and embedded conversion option (the “Equity Component”) of the Convertible Notes by allocating the proceeds between the Liability Component and the Equity Component, due to the Company’s ability to settle the Convertible Notes in cash, common stock or a combination of cash and common stock, at its option. In connection with the issuance of the Convertible Notes, the Company incurred approximately $9.4 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees, and allocated these costs to the Liability and Equity Components based on the allocation of the proceeds. Of the total $9.4 million of debt issuance costs, $4.3 million was allocated to the Equity Component and recorded as a reduction to additional paid-in capital and $5.1 million was allocated to the Liability Component and is now recorded as a reduction of the Convertible Notes in the Company’s condensed consolidated balance sheet. The portion allocated to the Liability Component is amortized to interest expense using the effective interest method over seven years.
The Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.00% per annum, payable semi-annually in arrears on March 1 and September 1. Upon conversion, the Convertible Notes will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The Convertible Notes will be subject to redemption at the Company’s option, under certain restrictions as noted below, on or after September 1, 2021, in whole or in part, if the conditions described below are satisfied. The redemption of the Convertible Notes may also be subject to certain restrictions included in Note 7, “Term Loan and Credit Facility”. The Convertible Notes will mature on September 1, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms. Subject to satisfaction of certain conditions and during the periods described below, the Convertible Notes may be converted at an initial conversion rate of 20.4891 shares of common stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $48.81 per share of common stock).
Holders of the Convertible Notes may convert all or any portion of their notes, in multiples of $1,000 principal amount, at their option at any time prior to the close of business on the business day immediately preceding June 1, 2024 only under the following circumstances:
(1)if the last reported sale price of the Company’s common stock for at least 20 trading days (whether consecutive or not) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
(2)during the five-business day period after any five-consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;
(3)if the Company calls the Convertible Notes for redemption, until the close of business on the business day immediately preceding the redemption date; or
(4)upon the occurrence of specified corporate events.
As of September 30, 2020, none of the above circumstances had occurred and, as such, the Convertible Notes were not convertible.
Prior to September 1, 2021, the Company may not redeem the Convertible Notes. On or after September 1, 2021, the Company may redeem for cash all or part of the Convertible Notes if the last reported sale price of the Company’s common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30-
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consecutive trading day period ending within five trading days prior to the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. In addition, calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note, if it is converted in connection with the redemption, will be increased in certain circumstances.
The initial carrying amount of the Liability Component of $166.3 million was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The allocation was performed in a manner that reflected the Company’s non-convertible debt borrowing rate for similar debt. The Equity Component of the Convertible Notes of $138.7 million was recognized as a debt discount and represents the difference between the proceeds from the issuance of the Convertible Notes of $305.0 million and the fair value of the Liability of the Convertible Notes of approximately $166.3 million on their respective dates of issuance. The excess of the principal amount of the Liability Component over its carrying amount (the “Debt Discount”) is amortized to interest expense using the effective interest method over seven years. The Equity Component is not remeasured as long as it continues to meet the conditions for equity classification. In connection with issuance of the Convertible Notes, the Company also incurred certain offering costs directly attributable to the offering. Such costs are deferred and amortized over the term of the debt to interest expense using the effective interest method.
The outstanding balances of the Convertible Notes as of September 30, 2020 consisted of the following (in thousands):
2024 Convertible Notes
Liability component:
Principal$305,000 
Less: debt discount and issuance costs, net(96,098)
Net carrying amount$208,902 
Equity component:$134,450 
The Company determined the expected life of the Convertible Notes was equal to their seven-year term. The effective interest rate on the Liability Components of the Convertible Notes for the period from the date of issuance through September 30, 2020 was 13.04%. As of September 30, 2020, the “if-converted value” did not exceed the remaining principal amount of the Convertible Notes. The fair value of the Convertible Notes are based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments, and, therefore, the Convertible Notes are classified within Level 2 in the fair value hierarchy. The fair value of the Convertible Notes, which differs from their carrying value, is influenced by interest rates, the Company’s stock price and stock price volatility. The estimated fair value of the Convertible Notes as of September 30, 2020 was approximately $250.8 million.
The following table sets forth total interest expense recognized related to the Convertible Notes during the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Contractual interest expense$2,288 $2,288 $6,863 $6,863 
Amortization of debt discount4,421 3,865 12,830 11,216 
Amortization of debt issuance costs165 145 480 421 
Total interest expense$6,874 $6,298 $20,173 $18,500 
Future minimum payments on the Company’s long-term debt as of September 30, 2020 are as follows (in thousands):
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Years ended December 31,
Future Minimum Payments
2020$ 
20219,150 
20229,150 
20239,150 
2024314,150 
Total minimum payments
$341,600 
Less: interest
(36,600)
Less: unamortized discount
(96,098)
Less: current portion
 
Long Term Debt
$208,902 
7. Term Loan and Credit Facility
On January 10, 2020, the Company and Radius Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company (collectively, the “Borrowers”), entered into a (i) Credit and Security Agreement, as amended (Term Loan) (the “Term Credit Agreement”) with MidCap Financial Trust, in its capacity as administrative agent (the “Agent”) and as a lender, and the financial institutions or other entities from time to time parties thereto and (ii) Credit and Security Agreement (Revolving Loan) (the “Revolving Credit Agreement,” together with the Term Credit Agreement, the “Credit Agreements”), with the Agent, and the financial institutions or other entities from time to time parties thereto.
The Credit Agreements consist of a secured term loan facility (the “Term Facility”) in an aggregate amount of $55.0 million, which will be made available to the Borrowers under the following four tranches: (i) Tranche 1 - $10.0 million, available at closing; (ii) Tranche 2 - $15.0 million, available no earlier than June 25, 2020, but no later than December 31, 2020; (iii) Tranche 3 - $15.0 million, available no later than December 31, 2021, subject to the Company’s satisfaction of certain conditions described in the Term Credit Agreement; and (iv) Tranche 4 - $15.0 million, available no later than December 31, 2021, subject to the Company’s satisfaction of certain conditions described in the Term Credit Agreement.
The Credit Agreements also consist of a secured revolving credit facility (the “Revolving Facility”, together with the Term Facility, the “Facilities”) under which the Borrowers may borrow up to $20.0 million, the availability of which is determined based on a borrowing base as follows: (i) up to 85% of the net collectible value of the Borrowers’ domestic accounts receivable due from eligible direct and third-party payors, plus (ii) up to 40% of the Borrowers’ domestic eligible inventory, provided that the availability from eligible inventory may not exceed 20% of the total availability at any time. The Borrowers also have the right, subject to certain customary conditions, to increase the Revolving Facility by $20.0 million.
The Facilities have a maturity date of June 1, 2024. The Borrowers guarantee their obligations under the Credit Agreements. The obligations are secured by first priority liens on substantially all of the assets of the Borrowers, including, with certain exceptions, all of the capital stock of the Borrowers’ subsidiaries. On July 23, 2020, the Company entered into a Partial Release and Acknowledgement Agreement (the “Release Agreement”) with the Agent pursuant to which the Agent agreed to release the security interest on certain assets of the Company that are licensed to Berlin-Chemie AG pursuant to the license agreement between the Company and Berlin-Chemie AG.
The proceeds of the Term Facility may be used for (i) transaction fees in connection with the transactions contemplated by the Credit Agreements, (ii) the payment in full on the closing date of certain existing debt, and (iii) working capital needs and general corporate purposes of the Borrowers and their subsidiaries. The proceeds of the Revolving Facility may be used for (i) transaction fees in connection with the transactions contemplated by the Credit Agreements and (ii) working capital needs and general corporate purposes of the Borrowers and their subsidiaries.
Borrowings under the Term Facility will bear interest through maturity at a variable rate based upon the LIBOR rate plus 5.75%, subject to a LIBOR floor of 2.00%. Borrowings under the Revolving Facility will bear interest through maturity at a variable rate based upon the LIBOR rate plus 3.50%, subject to a LIBOR floor of 2.00%.
Subject to the terms and conditions set forth in the Credit Agreements, the Borrowers may be required to make certain mandatory prepayments prior to maturity.
The Credit Agreements contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, will limit or restrict the ability of the Borrowers, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness as noted above in Note 6, “Convertible Notes Payable,” enter into transactions with affiliated persons, make investments, and change the nature of their businesses. The
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Credit Agreements also contain customary events of default, including subject to thresholds and grace periods, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default. In addition, the Credit Agreements require the Borrowers to maintain a minimum level of net revenue, or in the case where the Borrowers fail to maintain a minimum level of net revenue, certain levels of market capitalization and unrestricted cash. As of September 30, 2020, the Company was not in violation of any covenants contained in the Credit Agreements.
As of September 30, 2020, the Company had received net proceeds of approximately $9.8 million from the Term Loan, net of fees and expenses of $0.2 million. The estimated fair value of the Term Facility as of September 30, 2020 was approximately $8.2 million. The outstanding balance of the Term Loan as of September 30, 2020 was (in thousands):
Term loan
Principal$10,000 
Less: debt issuance costs, net(59)
Net carrying amount$9,941 
The following table sets forth total interest expense recognized related to the Term Facility during the three and nine months ended September 30, 2020 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Contractual interest expense$198 $ $573 $ 
Amortization of debt discount1  2  
Total interest expense$199 $ $575 $ 
Future minimum payments on the Term Facility as of September 30, 2020 are as follows (in thousands):
Years ended December 31,
Future Minimum Payments
2020$196 
2021786 
2022786 
20237,044 
20243,611 
Total minimum payments
$12,423 
Less: interest
(2,423)
Less: unamortized issuance costs
(59)
Less: current portion
 
Long Term Debt
$9,941 

8. Net Loss Per Share
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Basic and diluted net loss per share for the periods set forth below is calculated as follows (in thousands, except share and per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
Numerator:    
Net loss$(6,289)$(30,044)$(87,823)$(108,278)
Denominator:    
Weighted-average number of common shares used in loss per share - basic and diluted46,493,126 46,141,217 46,395,124 45,975,691 
Loss per share - basic and diluted$(0.14)$(0.65)$(1.89)$(2.36)
The following potentially dilutive securities, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average shares outstanding, as they would be anti-dilutive. For the three and nine months ended September 30, 2020 and 2019, respectively, all of the Company’s options to purchase common stock and restricted stock units outstanding were assumed to be anti-dilutive as earnings attributable to common stockholders was in a loss position.
Three and Nine Months Ended September 30,
 20202019
Options to purchase common stock5,868,348 4,860,997 
Restricted stock units686,069 655,723 
Performance units70,000 79,000 
The Company has the option to settle the conversion obligation for the Convertible Notes in cash, shares or any combination of the two. As the Convertible Notes are not convertible as of September 30, 2020, they are not participating securities and they will not have an impact on the calculation of basic earnings or loss per share. Based on the Company’s net loss position, there is no impact on the calculation of dilutive loss per share during the three and nine-month periods ended September 30, 2020 and 2019, respectively.
9. Product Revenue Reserves and Allowances
To date, the Company’s only source of product revenue has been from the U.S. sales of TYMLOS, which it began shipping to customers in May 2017. The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2020 and 2019 (in thousands):
Chargebacks, Discounts, and FeesGovernment and other rebatesReturnsTotal
Ending balance at December 31, 2018$3,198 $7,620 $411 $11,229 
Provision related to sales in the current year21,203 44,426 698 66,327 
Adjustments related to prior period sales(27)697  670 
Credits and payments made(19,759)(34,190)(575)(54,524)
Ending balance at September 30, 20194,615 18,553 534 23,702 
Ending balance at December 31, 2019$5,739 $17,280 $1,583 $24,602 
Provision related to sales in the current year16,123 57,120 2,030 75,273 
Adjustments related to prior period sales(107)(1,570) (1,677)
Credits and payments made(20,011)(50,717)(893)(71,621)
Ending balance at September 30, 2020$1,744 $22,113 $2,720 $26,577 
Chargebacks, discounts, fees, and returns are recorded as reductions of trade receivables, net on the condensed consolidated balance sheets. Government and other rebates are recorded as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheets.
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To date, the Company has no bad debt write-offs and the Company does not currently have credit issues with any customers. There were no credit losses associated with the Company’s trade receivables as of September 30, 2020 and 2019.
10. License Revenue and Reimbursable Expenses
General
The Company has generated revenue from contracts with customers, which include upfront payments for licenses.
Berlin-Chemie
On July 23, 2020, the Company entered into a license agreement (“License Agreement”) with Berlin-Chemie under which the Company granted Berlin-Chemie an exclusive license to develop and commercialize products containing elacestrant (RAD1901) worldwide.
The Company and Berlin-Chemie simultaneously entered into a Transition Services Agreement (the “TSA”), pursuant to which the Company agreed to perform certain services for Berlin-Chemie related to the EMERALD Phase 3 monotherapy study until the earlier of the completion of the contemplated services or the filing with the FDA of a New Drug Application for elacestrant. Pursuant to the TSA, Berlin-Chemie agreed to reimburse the Company for all out-of-pocket and full-time employee costs in performing the services, for total estimated reimbursements of $111.5 million. The Company will continue to incur research and development expenses in support of scale up costs under the TSA.
Pursuant to the terms of the License Agreement, Berlin-Chemie made a nonrefundable initial license fee payment to the Company of $30.0 million in July 2020. The Company is also eligible to receive up to $20.0 million in development and regulatory milestone payments and up to $300.0 million in sales milestone payments, with such payments contingent on the achievement of specified milestones with respect to the licensed products. The Company is also eligible to receive tiered royalties on sales of licensed products at percentages ranging from low to mid-teens, subject to certain reductions. Royalties on net sales will be payable on a product-by-product and country-by-country basis until the latest of the expiration date of the last to expire of the relevant patent rights, the expiration of regulatory exclusivity, or ten years from such first commercial sale.
The License Agreement will continue on a licensed product-by-licensed product and country-by-country basis until the last to expire royalty term. Either party may terminate the License Agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party. The Company may terminate the License Agreement for certain patent challenges or if no development, manufacture or commercialization activity occurs in any given 24-month period. Berlin-Chemie may terminate the License Agreement at its discretion for any reason by delivering 180 days’ prior written notice to the Company; provided that such termination will not be effective prior to the third anniversary of the effective date.
The Company determined that the License Agreement and TSA should be combined and evaluated as a single arrangement as they were executed on the same date and negotiated as a package. The arrangement with Berlin-Chemie provides for the transfer of the following goods or services: (i) license, (ii) know-how, (iii) regulatory filings, (iv) inventory, (v) transition services, including certain clinical, manufacturing, regulatory and other services associated with the Phase 3 EMERALD monotherapy study, and (vi) participation in various joint committees.
Management applied the guidance in ASC 606 to identify all distinct goods and services within the arrangement to assess whether there is a unit of account that should be accounted for under ASC 606. Management evaluated all of the promised goods or services within the contract and determined which of those were separate performance obligations. The Company determined that the license granted, at arrangement inception, should be combined with the know-how and regulatory filings as they are not capable of being distinct (the “License”). The Company also concluded that the license rights, know-how, and regulatory filings are capable of being distinct from the supply of inventory, as Berlin-Chemie would be able to benefit from the inventory on its own or with other resources that are readily available, and capable of being distinct from the transition services and participation in joint committees as these are research and development services that can typically be performed by other third parties.
The License is an element of the arrangement that is subject to the revenue recognition accounting guidance, as the performance obligation is an output of the Company’s ordinary activities in exchange for consideration. Conver