IDEC Pharmaceuticals Corp. sold 30-year, zero-coupon senior notes convertible into shares of common stock that it expects to gross $675 million.
The initial purchaser will have a 30-day option to purchase additional notes to cover overallotments, which would give IDEC, of San Diego, about $75 million in additional gross proceeds. IDEC figures to use the funds to repurchase up to $135 million of its outstanding stock (simultaneously with issuing the notes), and for general corporate purposes, including facilities expansion, capital expenditures and working capital.
The notes are being offered to institutional buyers at $592.91 per $1,000 principal amount at maturity. The price represents a yield to maturity of 1.75 percent per annum with an initial conversion premium of 35 percent. Holders of the notes may convert each note into about 7.2 shares of IDEC common stock at any time on or before the maturity date, which means the notes are convertible into about 8.2 million common shares 9.1 million shares if the overallotment option is exercised in full.
Furthermore, the notes may not be redeemed by IDEC prior to the fifth anniversary of their issuance, but are redeemable at that time or after at accreted value. However, noteholders may convert the notes called for redemption into common stock. Holders would have the option to require IDEC to purchase their notes at accreted value on the third, fifth, 10th and 15th anniversaries of note issuance. IDEC may choose to pay the purchase price in cash, cash and stock, or just stock.
Considering IDEC’s pipeline, the company recorded Rituxan sales of $235 million for the first three months of the year, up from $168 million a year ago. Rituxan (rituximab) is the product of a joint business venture between Genentech Inc., of South San Francisco, and IDEC. IDEC’s total revenues for the quarter were $79.7 million and it had net income of $29.7 million, or 17 cents per share on a diluted basis. The company ended the first quarter with $876.4 million in cash, cash equivalents and marketable securities.
In February, IDEC received FDA approval for its product, Zevalin, to treat non-Hodgkin’s lymphoma, making it the first radioimmunotherapy approved in the U.S. Zevalin is a monoclonal antibody linked to the radioisotope Yttrium-90 that targets the CD20 antigen on the surface of mature B cells and B-cell tumors. (See BioWorld Today, Feb. 21, 2002.)