Ebb & Flow

In its $31 million financing this month, Savient Pharmaceuticals Inc. (NASDAQ:SVNT) employed a novel warrant structure that allowed it to finance ahead of a significant binary event without having to provide an upfront premium based on a worst-case outcome. At the same time, investors still will garner a significant warrant discount if the news is bad.

Savient is facing a July 30 PDUFA date for its Krystexxa pegloticase for treatment failure gout.

The registered direct offering sold 5.9 million units at $5.23. Each unit consists of a share and a warrant to purchase 0.85 shares. The initial exercise price of the warrants is $10.46 per share, roughly double the $5.27 stock price on April 2, the day before the financing was announced. Going forward, the exercise price and expiration date vary based on FDA's response to the BLA for Krystexxa.

According to Savient, if FDA issues "a complete response letter" for Krystexxa, the exercise price changes to the weighted average price of the stock in the five days following the 10th trading day after a public announcement of the agency's response. In that case, the exercise price will not exceed the original price or be less than $1.56.

The exercise window also varies based on FDA's response. With a "'complete response letter' constituting approval or rejection," according to the company, then the warrants expire nine months after the public announcement of the response.

If the company receives "a 'complete response letter' that does not constitute an approval or rejection," the warrants expire on the earlier of two dates: 15 months after the public announcement of the letter or nine months after the date at which all the issues in the complete response have been addressed.

If FDA

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