Cytokinetics, Incorporated (Nasdaq: CYTK) today announced that it
has agreed to sell an aggregate of $120.0 million principal amount
of its 4.00% convertible senior notes due 2026, or the notes, in an
underwritten public offering. Cytokinetics has granted the
underwriters a 30-day option to purchase up to an additional $18.0
million aggregate principal amount of the notes in connection with
the offering, solely to cover over-allotments. The aggregate
principal amount of the offering was increased from the previously
announced offering size of $100.0 million. The offering is expected
to close on November 13, 2019, subject to customary closing
conditions.
Cytokinetics intends to use the net proceeds
from the proposed offering to fund (i) the continued development of
and commercial readiness activities associated with omecamtiv
mecarbil, (ii) the continued clinical development of CK-274 and
related compounds in indications associated with hypertrophic
cardiomyopathies and related diseases associated with diastolic
dysfunction and cardiac fibrosis, including heart failure with
preserved ejection fraction, (iii) the continued clinical
development of reldesemtiv in patients with amyotrophic lateral
sclerosis and spinal muscular atrophy, including potential Phase 3
clinical trials and other commercial readiness activities, and (iv)
working capital and other general corporate purposes, including
tenant improvement of the new facility Cytokinetics plans to move
into in 2021, capital expenditures, debt service or retirement of
debt, including existing debt outstanding under Cytokinetics’ loan
and security agreement. Cytokinetics also intends to use a
portion of the net proceeds from the proposed offering to pay the
cost of the capped call transaction described below.
The notes will be senior unsecured obligations
of Cytokinetics and will bear interest at a fixed rate of 4.00% per
year, payable semi-annually in arrears on May 15 and November 15 of
each year, commencing on May 15, 2020. The notes will mature on
November 15, 2026, unless earlier converted, redeemed or
repurchased. Prior to the close of business on the business
day immediately preceding July 15, 2026, the notes will be
convertible at the option of the holders only upon the satisfaction
of certain conditions. Thereafter, the notes will be convertible at
the option of the holders at any time until the close of business
on the scheduled trading day immediately before the maturity date.
Upon conversion, Cytokinetics will pay or deliver, as the case may
be, cash, shares of its common stock or a combination of cash and
shares of its common stock, at its election. The initial conversion
rate will be 94.7811 shares per $1,000 principal amount of notes
(equivalent to an initial conversion price of approximately $10.55
per share), subject to adjustment upon the occurrence of specified
events.
Cytokinetics may not redeem the notes prior to
November 20, 2023. Cytokinetics has the right, at its election, to
redeem all, or any portion, of the notes, at any time and from time
to time, on a redemption date occurring on or after November 20,
2023 and, in the case of any partial redemption, on or before the
60th scheduled trading day before the maturity date, for cash, but
only if the last reported sale price per share of Cytokinetics’
common stock exceeds 130% of the conversion price then in effect
for a specified period of time ending on the trading day
immediately before the date the notice of redemption is sent, at a
redemption price equal to 100% of the principal amount of the notes
to be redeemed, plus accrued and unpaid interest to, but excluding,
the redemption date.
Morgan Stanley & Co. LLC and Mizuho Securities are acting as
joint book-runners for the offering. JMP Securities is acting as
lead manager, and H.C. Wainwright & Co. is acting as co-manager
for the offering.
In connection with the pricing of the notes,
Cytokinetics has entered into a privately negotiated capped call
transaction (together with any additional capped call transactions
entered into in connection with the exercise by the underwriters of
their over-allotment option as described below, the capped call
transactions), with one of the underwriters in the offering or its
affiliate, or the capped call counterparty. The capped call
transactions will cover, subject to customary adjustments, the
number of shares of Cytokinetics’ common stock that will initially
underlie the notes. The capped call transactions are generally
expected to reduce the potential dilution of Cytokinetics’s common
stock and/or offset any cash payments Cytokinetics is required to
make in excess of the principal amount of converted notes, as the
case may be, as a result of any conversion of the notes, with such
reduction and/or offset subject to a cap based on the cap price.
The cap price of the capped call transactions will initially be
approximately $14.07 per share, which represents a premium of
approximately 70% over the per share closing price of
Cytokinetics’s common stock of $8.275 per share on November 7,
2019, and is subject to certain adjustments under the terms of the
capped call transactions. If the underwriters in this offering
exercise their over-allotment option, Cytokinetics expects to use a
portion of the net proceeds from the sale of the additional notes
to enter into an additional capped call transaction with the capped
call counterparty.
In connection with establishing its initial
hedge of the capped call transactions, the capped call counterparty
or its affiliates have advised Cytokinetics that it or its
affiliates expect to purchase Cytokinetics’ common stock and/or
enter into various derivative transactions with respect to
Cytokinetics’ common stock concurrently with, or shortly after, the
pricing of the notes, including with certain investors in the
notes. This activity could increase (or reduce the size of any
decrease in) the market price of Cytokinetics’ common stock or the
notes at that time.
In addition, the capped call counterparty or its
affiliates may modify its hedge positions by entering into or
unwinding various derivatives with respect to Cytokinetics’ common
stock and/or purchasing or selling Cytokinetics’ common stock or
other securities of Cytokinetics in secondary market transactions
following the pricing of the notes and prior to the maturity of the
notes (and are likely to do so on each exercise date of the capped
call transaction, which are expected to occur during the 60 trading
day period beginning on the 61st scheduled trading day prior to the
maturity date of the notes, or following any termination of any
portion of the capped call transaction in connection with any
repurchase, redemption or early conversion of the notes). This
activity could also cause or avoid an increase or decrease in the
market price of Cytokinetics’ common stock or the notes, which
could affect noteholders’ ability to convert the notes and, to the
extent the activity occurs during any observation period related to
a conversion of the notes, affect the amount and value of the
consideration that noteholders will receive upon conversion of the
notes.
An automatic shelf registration statement
relating to the notes was previously filed with the Securities and
Exchange Commission, or SEC, and became immediately effective on
November 6, 2019. The offering will be conducted by means of a
prospectus supplement and accompanying prospectus. The final
prospectus supplement and the accompanying prospectus relating to
and describing the terms of the proposed offering will be filed
with the SEC and, when filed, will be available on the SEC’s
website at www.sec.gov. Copies of the final prospectus supplement
and the accompanying prospectus related to the offering may also be
obtained by contacting: Morgan Stanley & Co. LLC, Attention:
Prospectus Department, 180 Varick Street, 2nd Floor, New York, New
York 10014; or Mizuho Securities USA LLC, Attn: Equity Capital
Markets, 320 Park Avenue, 12th Floor, New York, NY 10022-6815, by
telephone (212) 205-7600, or by email: US-ECM@us.mizuho-sc.com.
This press release shall not constitute an offer
to sell or the solicitation of an offer to buy the notes, nor shall
there be any sale of the notes in any state or jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
state or jurisdiction.
About Cytokinetics
Cytokinetics is a late-stage biopharmaceutical
company focused on discovering, developing and commercializing
first-in-class muscle activators and next-in-class inhibitors as
potential treatments for debilitating diseases in which muscle
performance is compromised and/or declining.
Forward-Looking Statements
Certain of the statements made in this press release are forward
looking, such as those, among others, relating to Cytokinetics’
expectations regarding the completion of the offering and the
capped call transactions. Actual results or developments may differ
materially from those projected or implied in these forward-looking
statements. Factors that may cause such a difference include,
without limitation, risks and uncertainties related to market and
other conditions and the satisfaction of customary closing
conditions related to the offering. You should not place undue
reliance on these forward-looking statements, which apply only as
of the date of this press release. Additional risks and
uncertainties relating to the offering, Cytokinetics and its
business can be found under the heading “Risk Factors” in
Cytokinetics’ Annual Report on Form 10-K for the year ended
December 31, 2018 and other filings with the SEC, and in the
preliminary prospectus supplement related to the offering, filed
with the SEC on November 6, 2019. Except as otherwise required by
law, Cytokinetics does not undertake any obligation to update
forward-looking statements and expressly disclaims any obligation
or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in its expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are
based.
Contact:CytokineticsDiane WeiserVice President, Corporate
Communications, Investor Relations(415) 290-7757
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