Item 1.01 Entry into a Material Definitive Agreement
Indenture
On August 18, 2022, Halozyme Therapeutics, Inc. (the "Company," "we," "us" or
"our") completed its previously announced sale of $720.0 million in aggregate
principal amount of 1.00% Convertible Senior Notes due 2028 (the " Convertible
Notes"), including $95.0 million in aggregate principal amount of 1.00%
Convertible Senior Notes due 2028 purchased pursuant to the exercise by the
initial purchasers of the Convertible Notes (the "Initial Purchasers") of the
option (the "Notes Option") to purchase additional Securities 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 August 18, 2022, (the "Indenture")
between the Company and The Bank of New York Mellon Trust Company, N.A., as
trustee (the "Trustee"). 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 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
$701.4 million. The Company expects to use a portion of the net proceeds to
repay all of the $250.0 million outstanding under its term loan facility due
2026. The Company used a portion of the net proceeds of the offering to enter
into privately negotiated agreements with certain holders of its outstanding
1.25% convertible senior notes due 2024 (the "Existing Convertible Notes") to
exchange their Existing Convertible Notes for a combination of cash and shares
of its common stock through privately negotiated transactions consummated
concurrently with or shortly after the offering (the "Note Repurchases"). In
connection with the Note Repurchases, the Company paid approximately
$77.6 million in cash, which includes accrued interest, and issued approximately
1.51 million shares of its common stock, to settle such exchanges. In addition,
the Company used approximately $90.0 million of the net proceeds from the
offering to repurchase shares of its common stock under its existing stock
repurchase program (the "Share Repurchases") concurrently with the closing of
the offering. The Company previously announced Share Repurchases for the
remainder of the calendar year 2022 of up to $200.0 million, a $100.0 million
increase from the previously announced amount, with such remaining additional
repurchases to commence immediately following the closing of the offering.
The Company intends to use the remainder of the net proceeds from the offering
for general corporate purposes, including other repurchases of the Company's
common stock from time to time under its existing stock repurchase program,
working capital, capital expenditures, potential acquisitions and strategic
transactions.
The Convertible Notes will pay interest semi-annually in arrears on February
15th and August 15th of each year at an annual rate of 1.00% and will be
convertible into cash, and, if applicable, 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 December 31, 2022, 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, February 15, 2028 until the
close of business on the second scheduled trading day immediately before the
maturity date.
The initial conversion rate for the Convertible Notes will be 17.8517 shares of
common stock per $1,000 in principal amount of Convertible Notes, equivalent to
a conversion price of approximately $56.02 per share of common stock. The
conversion rate will be subject to adjustment in some events but will not be
adjusted for any accrued or unpaid interest.
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Subject to certain exceptions, holders may require the Company to repurchase,
for cash, all or part 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 defined
in the Indenture). In addition, upon a "Make-Whole Fundamental Change" (as
defined in the Indenture) prior to the maturity date of the Convertible Notes,
the Company will, in some cases, increase the conversion rate for a holder that
elects to convert its Convertible Notes in connection with such Make-Whole
Fundamental Change. The Company may not redeem the Convertible Notes prior to
August 15, 2025 and on or before the 30th scheduled trading day immediately
before the maturity date.
The Indenture contains certain events of default after which the Convertible
Notes may be due and payable immediately. Such events of default include,
without limitation, the following: (1) a default in the payment when due
(whether at maturity, upon redemption or repurchase upon fundamental change or
otherwise) of the principal of, or the redemption price or fundamental change
repurchase price for, any Convertible Note; (2) a default for 30 days in the
payment when due of interest on any Convertible Note; (3) the Company's failure
to deliver, when required by the Indenture, a fundamental change notice or other
notices pursuant to the Indenture; (4) a default in the Company's obligation to
convert a Convertible Note in accordance with the Indenture upon the exercise of
the conversion right with respect thereto, if such default is not cured within
two business days after its occurrence; (5) a default in the Company's
obligations described in the Indenture with respect to consolidation, merger and
sale of assets of the Company; (6) a default in any of the Company's obligations
or agreements under the Indenture or the Convertible Notes (other than a default
set forth in the preceding (1), (2), (3), (4) or (5)) where such default is not
cured or waived within 60 days after notice to the Company by the Trustee, or to
the Company and the Trustee by holders of at least 25% of the aggregate
principal amount of Convertible Notes then outstanding, which notice must
specify such default, demand that it be remedied and state that such notice is a
"notice of default"; (7) a default by the Company or any of the Company's
subsidiaries with respect to any one or more mortgages, agreements or other
instruments under which there is outstanding, or by which there is secured or
evidenced, any indebtedness for money borrowed of at least $50.0 million (or its
foreign currency equivalent) in the aggregate of the Company or any of the
Company's subsidiaries, whether such indebtedness exists as of the date the
Company first issues the Convertible Notes or is thereafter created, where such
default: (x) constitutes a failure to pay the principal of, or premium or
interest on, any of such indebtedness when due and payable at its stated
maturity, upon required repurchase, upon declaration of acceleration or
otherwise, in each case after the expiration of any applicable grace period; or
(y) results in such indebtedness becoming or being declared due and payable
before its stated maturity, in each case where such default is not cured or
waived within 30 days after notice to the Company by the Trustee or to the
Company and the Trustee by holders of at least 25% of the aggregate principal
amount of Convertible Notes then outstanding; and (8) certain events of
. . .
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.
Item 9.01.
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HALOZYME THERAPEUTICS, INC. 
