Harmony Biosciences Holdings, Inc. 10-Q

Item 1A. Risk Factors. Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties set forth in our Annual Report on Form 10-K, as well as described below and the other information included or incorporated by reference in this Quarterly Report on Form 10-Q before making an investment in our common stock. Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. See “Part I—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below. Our Blackstone Credit Agreement contains restrictive and financial covenants that may limit our operating flexibility. Our Blackstone Credit Agreement contains certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event that, we or our subsidiaries engage in new lines of business, incur additional indebtedness or liens, make certain investments, make certain payments, pay cash dividends, merge with other companies or consummate certain changes of control, make certain acquisitions, transfer or dispose of certain assets, liquidate or dissolve, amend certain material agreements, enter into sale and leaseback transactions, enter into various other specified transactions, or change our name, location, or executive office without notice. We, therefore, may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lenders, or in certain cases Blackstone on their behalf, or prepay the outstanding amount under the Blackstone Credit Agreement. The Blackstone Credit Agreement also contains a financial covenant that requires us to maintain at all times cash and cash equivalents in certain deposit accounts in an amount at least equal to $10.0 million. Our obligations under the Blackstone Credit Agreement are secured by all of our assets, with certain exceptions. We may not be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under the Blackstone Credit Agreement. Furthermore, our future working capital, borrowings or equity financing could be unavailable to repay or refinance the amounts outstanding under the Blackstone Credit Agreement. In the event of a liquidation, the lenders under the facility would be repaid all outstanding principal and interest prior to distribution of assets to unsecured creditors, and the holders of our common stock would receive a portion of any liquidation proceeds only if all of our creditors then existing, including the lenders under the Blackstone Credit Agreement, were first repaid in full. Our failure to comply with the covenants or other terms of the Blackstone Credit Agreement, including as a result of events beyond our control, could result in a default under the Blackstone Credit Agreement that could materially and adversely affect the ongoing viability of our business. Blackstone and the other Lenders may elect to accelerate the repayment of all unpaid principal of the Loans, accrued interest and other amounts owed under the Blackstone Credit Agreement upon consummation of a specified change of control transaction or the occurrence of certain events of default (as specified in the Blackstone Credit Agreement), including, among other things: ● our default in a payment obligation under the Blackstone Credit Agreement; ● our breach of the restrictive covenants or other terms of the Blackstone Credit Agreement; ● our breach of reporting obligations; ● our failure to properly maintain the collateral; 41 Table of Contents ● the termination or materially adverse amendment of a permit or authorization related to one of our products that is not revoked within 90 days; ● a specified change of control transaction occurring under the License Agreement; ● with respect to WAKIX or another material product, a governmental authority (i) asserting that such product lacks a material authorization, which assertion is not withdrawn or resolved within 90 days or (ii) taking certain regulatory actions resulting in a discontinuance, withdrawal or delay of such product which would reasonably be expected to last for more than 90 days; ● a recall that would reasonably be expected to result in a material adverse effect; ● our entry into a settlement agreement with a government authority resulting in liability greater than $2.0 million; ● our material breach under or the early termination of one of our key intellectual property licensing or supply chain agreements; and ● certain specified insolvency and bankruptcy-related events. Subject to any applicable cure period set forth in the Blackstone Credit Agreement, all amounts outstanding with respect to the Loans (principal and accrued interest), as well as any applicable prepayment premiums or interest “make-whole” payments, would become due and payable, and upon the occurrence of a payment event of default and following acceleration of the Loans, all past due obligations shall bear interest at a default interest rate that is 2.00% higher than the otherwise applicable rate. Our assets or cash flow may not be sufficient to fully repay our obligations under the Loans if the obligations thereunder are accelerated upon any events of default. Further, if we are unable to repay, refinance or restructure our obligations under the Loans, the Administrative Agent on behalf of the Lenders could proceed to protect and enforce their rights under the Blackstone Credit Agreement and other loan documents by exercising such remedies (including foreclosure on the assets securing our obligations under the Blackstone Credit Agreement and the other loan documents) as are available to the Administrative Agent and the Lenders and in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any covenant or other agreement contained in the Blackstone Credit Agreement or other loan documents or in aid of the exercise of any power granted in the Blackstone Credit Agreement or other loan documents. Such repayment could have a material adverse effect on our business, operating results and financial condition. We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future. Consequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases. We have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. Furthermore, our Blackstone Credit Agreement contains negative covenants that limit our ability to pay dividends. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds . None. 42 Table of Contents Item 3. Defaults upon Senior Securities. None. Item 4. Mine Safety Disclosures. Not applicable.