recently announced that it has completed its public offering of
$287.5 million convertible subordinated notes, due in 2023,
including $37.5 million of notes sold to underwriters to cover
the over-allotment options.
Pertaining to the public offering, Theravance entered into
privately-negotiated capped call option transactions. The total
cost associated with the capped call options was $36.8 million.
These options are expected to bring down the potential dilution
upon conversion of the notes if the market price of Theravance's
shares, measured under the terms of the capped call transactions,
exceeds the strike price of the transactions. The strike price
initially corresponds to the conversion price of the notes.
Moreover, it is subject to customary anti-dilution adjustments.
The anti-dilutive effect of the transactions will be limited in
the event of the market price of Theravance's shares exceeding
$38.00. We note that $38.00 per share is the initial cap price of
the capped call transactions.
Theravance intends to utilize the net proceeds from the offering
to make milestone payments to pharma major
) in the event of any of its pipeline candidates, being developed
in collaboration with the latter, gaining approval. Theravance
also intends to use the net proceeds to pay for the cost of
entering into the capped call option transactions.
We are positive on Theravance's pipeline programs in
collaboration with Glaxo. Earlier in the month, the companies
announced the submission of a marketing application to the
European Medicines Agency (EMA) for their pipeline candidate
UMEC/VI (proposed trade name: Anoro). The companies are looking
to get the candidate approved in the EU as a maintenance
bronchodilator therapy (once daily) to relieve symptoms in adults
suffering from chronic obstructive pulmonary disease (COPD).
Glaxo/Theravance are also seeking US approval of the candidate
for the COPD indication. UMEC/VI is a combination of a
long-acting muscarinic antagonist/LAMA (GSK573719 or umeclidinium
bromide/UMEC) and a long-acting beta2 agonist/LABA
(vilanterol/VI). We note that Glaxo along with Theravance is also
developing other COPD candidates including Breo (proposed brand
name Relvar in the EU, formerly known as Relovair) and MABA
Theravance carries a Zacks Rank #3 (Hold). We have a similar
stance on Glaxo. Large-cap pharma companies that currently look
). Both the companies carry a Zacks Rank #2 (Buy).
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