Item 1.01 Entry into a Material Definitive Agreement.
Indenture
On November 18, 2019, Halozyme Therapeutics, Inc. (the "Company," "we," "us" or
"our") completed its previously announced sale of $400.0 million in aggregate
principal amount of 1.25% Convertible Senior Notes due 2024 (the " Convertible
Notes") in a private placement to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended (the "Securities Act").
The Convertible Notes were issued under an indenture, dated as of November 18,
2019, (the "Indenture") between the Company and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"). In addition, the initial
purchasers of the Convertible Notes (the "Initial Purchasers") exercised their
option to purchase an additional $60.0 million in aggregate principal amount of
the Convertible Notes. The offer and sale of the Convertible Notes and the
shares of common stock issuable upon conversion of the Convertible Notes have
not been registered under the Securities Act, or the securities laws of any
other jurisdiction, and the Convertible Notes and such shares may not be offered
or sold absent registration or an applicable exemption from registration
requirements, or in a transaction not subject to, such registration
requirements.
The Company received net proceeds from the offering of approximately $446.9
million. The Company plans to use up to $200.0 million of the net proceeds from
the offering to repurchase shares of the Company's common stock, including
approximately $143.1 million to repurchase approximately 8.1 million shares of
its common stock concurrently with the offering in privately negotiated
transactions effected through one or more of the Initial Purchasers or an
affiliate thereof and $50 million to repurchase approximately 2.1 million shares
of its common stock, pursuant to and subject to adjustment as provided in the
ASR Agreement as described below.
The Company used approximately $26.1 million of the net proceeds from the
offering to repay all outstanding amounts under its loan agreement with Oxford
Finance and Silicon Valley Bank and intends to use the remainder of the net
proceeds for general corporate purposes, including additional share repurchases
subsequent to the offering and working capital.
The Convertible Notes will pay interest semi-annually in arrears on June 1st and
December 1st of each year, beginning on June 1, 2020, at an annual rate of 1.25%
and 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, based on the applicable conversion rate at such time. The Convertible
Notes are general unsecured obligations of the Company and will rank senior in
right of payment to all of the Company's indebtedness that is expressly
subordinated in right of payment to the Convertible Notes, will rank equally in
right of payment with all of the Company's existing and future liabilities that
are not so subordinated, will be effectively junior to any of the Company's
secured indebtedness to the extent of the value of the assets securing such
indebtedness and will be structurally subordinated to all indebtedness and other
liabilities (including trade payables) of the Company's current or future
subsidiaries.
Holders may convert their Convertible Notes at their option only in the
following circumstances: (1) during any calendar quarter commencing after the
calendar quarter ending on March 31, 2020, if the last reported sale price per
share of the Company's common stock exceeds 130% of the conversion price for
each of at least 20 trading days during the 30 consecutive trading days ending
on, and including, the last trading day of the immediately preceding calendar
quarter; (2) during the five consecutive business days immediately after any
five consecutive trading day period (such five consecutive trading day period,
the "measurement period") in which the trading price per $1,000 principal amount
of notes for each trading day of the measurement period was less than 98% of the
product of the last reported sale price per share of Company's common stock on
such trading day and the conversion rate on such trading day; (3) upon the
occurrence of certain corporate events or distributions on Company's common
stock, as described in the offering memorandum; (4) if we call such notes for
redemption; and (5) at any time from, and including, June 1, 2024 until the
close of business on the scheduled trading day immediately before the maturity
date. The Convertible Notes will be convertible, regardless of the foregoing
circumstances, at any time from, and including, June 1, 2024 until the close of
business on the scheduled trading day immediately preceding the maturity date.
Upon conversion, the Company will pay or deliver, as applicable, 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 initial conversion rate for the
Convertible Notes will be 41.9208 shares of common stock per $1,000 in principal
amount of Convertible Notes, equivalent to a conversion price of approximately
$23.85 per share of our common stock. The conversion rate is subject to
adjustment as described in the Indenture.
Subject to certain exceptions, holders may require the Company to repurchase,
for cash, all or any portion thereof in an authorized denomination of their
Convertible Notes upon a "Fundamental Change" (as defined in the Indenture) at a
price equal to 100% of the principal amount of the Convertible Notes being
repurchased plus any accrued and unpaid interest, if any, up to, but excluding,
the "Fundamental Change Repurchase Date" (as
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. . .
Item 1.02 Termination of a Material Definitive Agreement.
In connection with the sale of the Convertible Notes, the Company used
approximately $26.1 million of the net proceeds from the offering to repay all
outstanding amounts under the Loan and Security Agreement, dated as of June 7,
2016 by and among the Company, Oxford Finance and Silicon Valley Bank (the "Loan
Agreement"). On November 18, 2019 the Company satisfied and discharged all
obligations under, and terminated, the Loan Agreement. The summary of certain
provisions of the Loan Agreement is contained in the Form 8-K filed by the
Company on June 8, 2016, and the description of the Loan Agreement is qualified
in its entirety by reference to the full text of the Loan Agreement, which the
Company filed as an exhibit to its Quarterly Report on Form 10-Q for the fiscal
quarter ending June 30, 2016.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 is incorporated herein by reference into
this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference.
Based on the initial maximum conversion rate of 56.5930 shares of common stock
per $1,000 principal amount of notes, a maximum of approximately 26.0 million
shares of common stock are initially issuable upon conversion of the Convertible
Notes. The Company offered and sold the Convertible Notes in reliance on the
exemption from registration provided by Section 4(a)(2) of the Securities Act.
The Initial Purchasers offered and sold the Convertible Notes to "qualified
institutional buyers" pursuant to the exemption from registration provided by
Rule 144A under the Securities Act. The offer and sale of the Convertible Notes
and the shares of common stock issuable upon conversion of the Convertible Notes
have not been and will not be registered under the Securities Act. Any shares of
common stock issued upon conversion of the Convertible Notes will be issued
pursuant to Section 3(a)(9) of the Securities Act as an exchange with existing
security holders.
Item 8.01 Other Events.
ASR Agreement
On November 15, 2019, the Company entered into an accelerated share repurchase
agreement (the "ASR Agreement") with Bank of America, N.A. ("BofA") to
repurchase the Company's common stock using the proceeds of the offering of the
Convertible Notes.
Under the ASR Agreement, on November 18, 2019, the Company paid BofA an initial
purchase price of $50.0 million in cash and received an initial delivery of
approximately 2.1 million shares of common stock. The total number of shares of
common stock to ultimately be purchased by the Company under the ASR Agreement
will generally be based on the average of the daily volume-weighted average
prices of the common stock during the term of the ASR Agreement. Upon final
settlement of the ASR Agreement, the Company may be entitled to receive
additional shares of common stock from BofA or, under certain circumstances
specified in the ASR Agreement, the Company may be required to deliver shares of
common stock or make a cash payment, at its option, to BofA. The ASR Agreement
contains provisions customary for agreements of this type, including provisions
for adjustments to the transaction terms, the circumstances generally under
which the ASR Agreement may be accelerated, extended or terminated early by BofA
and various acknowledgments, representations and warranties made by the parties
to one another. The ASR Agreement is scheduled to expire in approximately 13
weeks, but may conclude earlier at BofA's option.
Item 9.01.
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