Theravance to Offer $250 Million Convertible Subordinated Notes Due 2023
Theravance (NASDAQ: THRX), a biopharmaceutical company with a pipeline of internally discovered product candidates and strategic collaborations with pharmaceutical companies, announced today its intention to offer, subject to market conditions and other factors, $250 million aggregate principal amount of convertible subordinated notes due 2023 (the "notes") in an underwritten public offering. The notes will be convertible at the option of the holders into shares of the Company's common stock at any time on or prior to the second business day preceding the maturity date. The Company also expects to grant the underwriters an option to purchase up to $37.5 million aggregate principal amount of additional notes. The interest rate, conversion price and other terms of the notes will be determined by the Company and the underwriters. BofA Merrill Lynch is acting as the sole book-running manager for the offering.
The Company intends to use the net proceeds of the offering for potential milestone payments to GlaxoSmithKline plc if there is any approval or launch of products under the parties' long-acting beta2 agonist (LABA) collaboration, including RELVAR™ or BREO™ (fluticasone furoate/vilanterol), ANORO™ (umeclidinium bromide/vilanterol), or vilanterol, for the potential repayment of debt, and for other general corporate purposes. The Company also intends to use a portion of the net proceeds of the offering to pay for the cost of entering into capped call transactions with one or more of the underwriters or their affiliates (the "hedge counterparties") covering the aggregate number of shares of common stock underlying the notes. If the underwriters exercise their option to purchase additional notes, the Company may enter into additional capped call transactions with the hedge counterparties. The capped call transactions are expected generally to reduce the potential dilution upon conversion of the notes in the event that the market price of the Company's common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which initially corresponds to the conversion price of the notes, and is expected to be subject to customary anti-dilution adjustments. However, if the market price of the Company's common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, the anti-dilutive effect of the capped call transactions will be limited.
For any conversions of notes prior to the close of business of the 95th scheduled trading day immediately preceding the maturity date, including without limitation upon an acquisition of the Company or similar business combination, a corresponding portion of the capped call transactions will be terminated. Upon such termination, the portion of the capped call transactions being terminated will be settled at fair value (subject to certain limitations), which the Company expects to receive from the hedge counterparties, and no payments will be due to the hedge counterparties.
The Company has been advised that, in connection with establishing their initial hedges of the capped call transactions, the hedge counterparties (or their affiliates) expect to enter into various derivative transactions with respect to the Company's common stock concurrently with, and/or purchase the Company's common stock shortly after, the pricing of the notes. These activities could have the effect of increasing, or reducing the size of any decrease in, the price of the notes and/or the Company's common stock concurrently with, or shortly after, the pricing of the notes. In addition, the hedge counterparties (or their affiliates) are likely to modify their hedge positions by entering into or unwinding various derivative transactions with respect to the Company's common stock and/or by purchasing or selling the Company's common stock or other of its securities in secondary market transactions following the pricing of the notes and prior to the maturity date of the notes (and are likely to do so during a specified averaging period under the capped call transactions preceding the maturity date, and on or around any earlier conversion date related to a conversion of the notes). The effect, if any, of any of these transactions and activities on the market price of the Company's common stock or the notes will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of the Company's common stock, which could affect the value of the notes and the value of any of the Company's common stock holders of the notes receive upon any conversion of the notes.
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