Gastrointestinal treatments firm Salix Pharmaceuticals (NASDAQ:SLXP) aims to raise $600 million in debt financing.
The Raleigh, North Carolina company has priced the $600 million offering of convertible senior notes, which is open to qualified institutional investors. Salix could raise up to $90 million more if purchasers exercise overallotment options. Interest on the notes will be 1.5 percent starting on March 16, 2012 and will be payable twice a year. The notes will mature on March 15, 2019.
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Under certain circumstances, the notes will be convertible into cash, Salix common stock, or a combination of the two. The initial conversion rate will be 15.1947 shares of Salix’s common stock per $1,000 principal amount of notes. That amounts to an initial conversion price of approximately $65.81 per share of common stock — a nearly 35 percent premium over Salix’s $48.75 per share closing price on March 12. Salix said that the conversion rate and the conversion price could be adjusted to reflect events such as distributions of dividends or stock splits.
Salix’s drug portfolio and drug pipeline focus on gastrointestinal treatments. The company generated $540.4 million in 2011 revenue, a 60 percent increase compared to 2010. Salix expects U.S. Food and Drug Administration decisions on two drug candidates in 2012. Relistor is under review for the additional indication of treating opioid-induced constipation and has a Prescription Drug User Fee Act (PDUFA) approval date of April 27. Crofelemer is under priority review as a potential treatment of diarrhea in HIV/AIDS patients. That compound has a June 5 PDUFA action date.
Salix will use proceeds from the offering to repurchase outstanding convertible senior notes that are due in 2028. The company also plans to repurchase up to $75 million of its outstanding common stock and will also use proceeds for corporate purposes that include possible additional repurchases of outstanding debt, commercialization of product candidates, clinical trials, research and development expenses and general and administrative expenses.