12:00 AM
Oct 05, 2009
 |  BioCentury  |  Finance

Ebb & Flow

Of the $6.9 billion in biotech debt raised thus far in 2009, $1.9 billion (28%) was raised in the last two weeks through four financings: three bumped up deals by Elan Corp. plc (NYSE:ELN), Incyte Corp. (NASDAQ:INCY); and UCB Group (Euronext:UCB); and a fourth tied to the telaprevir rights of Vertex Pharmaceuticals Inc. (NASDAQ:VRTX).

Debt deals fell to only $2.6 billion last year with the across-the-board de-leveraging in the financial meltdown. But at this pace, biotech debt this year could reach the $10.3 billion raised in 2007.

Elan will use its $625 million to restructure old debt. EVP, CFO and head of Elan Drug Technologies Shane Cooke told Ebb & Flow the company will use the funds, along with an additional $225 million from this summer's Alzheimer's deal with Johnson & Johnson (NYSE:JNJ), to pay off $850 million in 7.75% notes due in 2011(see BioCentury, Sept. 21).

Elan has already issued a tender offer for the 2011 notes. The swap will reduce Elan's long-term debt to $1.54 billion from $1.77 billion and leaves it with more attractive debt maturity: $300 million in floating rate notes due in 2011; $465 million in 8.875% notes due in 2013; $150 million in floating rate notes due in 2013; and the newly issued 8.75% notes due in 2016.

Elan had proposed to sell $600 million in debt. Cooke said the offering was three times oversubscribed with a mix of existing and new investors.

Cooke said Elan expects to reach profitability by the end of 2010.

On the week, the stock shed $0.41 to $6.79. Separately, Elan disclosed that it received a subpoena from SEC for information on the announcements of two cases of progressive multifocal leukoencephalopathy (PML) in patients receiving autoimmune drug Tysabri and of Phase II data for bapineuzumab to treat mild to moderate Alzheimer's disease (AD) (see B9).

Refi and refocus

Oncology, inflammation and diabetes company Incyte capitalized on positive Phase IIb psoriasis data for its topical formulation of its INCB18424 Janus kinase (JAK) inhibitor to raise $400 million in convertible notes and $139.7 million in a follow-on.

On Sept. 22, the day after announcing the data, Incyte shares hit a 52-week high of $8.13. The company announced the upcoming offerings after market close that day (see BioCentury, Sept. 28).

The debt deal was bumped up from a proposed $250 million, while the equity offering was sold at the proposed 18 million shares at $6.75, a 17% discount to its close the prior day.

The 4.75% convertible senior notes are due in 2015. Like Elan, Incyte used part of the proceeds to repurchase $86.3 million in 3.5% convertible senior notes due in 2011 and $99.9 million in 3.5% convertible subordinated notes due in 2011.

At June 30, Incyte had $401.2 million in long-term debt. It had $140.5 million in cash at June 30, with an operating loss of $65 million in 1H09.

CFO David Hastings told Ebb & Flow that the financings were "important to eliminate the financial overhang on the company."

He expects the company has enough cash to make it through to Phase III data for oral INCB18424's lead indication in myelofibrosis, which is anticipated by YE10, as is an NDA submission. He added that with a partnership, the company could have enough runway to...

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