Item 1.01 Entry into a Material Definitive Agreement.
Purchase Agreement
On
November 8, 2017, Sarepta Therapeutics, Inc. (the Company) entered into a Purchase Agreement (the Purchase Agreement) with the several initial purchasers named in Schedule 1 thereto (the Initial Purchasers),
for whom J.P. Morgan Securities LLC and Goldman, Sachs & Co. LLC acted as representatives (the Representatives) relating to the sale of $475 million aggregate principal amount of 1.50% Convertible Senior Notes due 2024 (the
Notes) to the Initial Purchasers. The Company also granted the Initial Purchasers an option to purchase up to an additional $95 million aggregate principal amount of the Notes solely to cover over-allotments, which was exercised in
full on November 9, 2017.
The Purchase Agreement includes customary representations, warranties and covenants. Under the terms of
the Purchase Agreement, the Company has agreed to indemnify the Initial Purchasers against certain liabilities.
The foregoing description
of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 1.1 to this Current Report on
Form 8-K
and
is incorporated herein by reference.
Indenture and the Notes
The Notes were issued by the Company on November 14, 2017, pursuant to an Indenture, dated as of such date (the Indenture),
between the Company and U.S. Bank National Association, as trustee (the Trustee). The Notes will bear cash interest at the annual rate of 1.50%, payable on May 15 and November 15 of each year, beginning on May 15, 2018, and will
mature on November 15, 2024 unless earlier converted or repurchased. The Company will settle conversions of the Notes through payment or delivery, as the case may be, of cash, shares of common stock of the Company or a combination of cash
and shares of common stock, at the Companys option (subject to, and in accordance with, the settlement provisions of the Indenture). The initial conversion rate for the Notes is 13.6210 shares of common stock (subject to adjustment as provided
for in the Indenture) per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $73.42 per share, representing a conversion premium of approximately 40% above the closing price of the Companys
common stock of $52.44 per share on November 8, 2017.
Holders of the Notes may convert their Notes at their option at any time prior
to the close of business on the business day immediately preceding May 15, 2024 in multiples of $1,000 principal amount, only under the following circumstances:
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during any calendar quarter commencing after the calendar quarter ending on December 31, 2017 (and only during such calendar quarter), if the last reported sale price of the Companys common stock for at least
20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the
Notes on each applicable trading day;
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during the five business day period after any five consecutive trading day period (the measurement period) in which the trading price (as defined in the Indenture) per $1,000 principal amount of
Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Companys common stock and the conversion rate for the Notes on each such trading day; or
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upon the occurrence of specified corporate events described in the Indenture.
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On or
after May 15, 2024 until the close of business on the second scheduled trading day immediately preceding November 15, 2024, holders may convert their Notes, in multiples of $1,000 principal amount, at the option of the holder
regardless of the foregoing circumstances.
If the Company experiences a fundamental change, as described in the Indenture, prior to the
maturity date of the Notes, holders of the Notes will, subject to specified conditions, have the right, at their option, to require the Company to repurchase for cash all or a portion of their Notes at a repurchase price equal to 100% of the
principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but not including, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date of
the Notes, the Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such corporate event.
The Indenture provides for customary events of default. In the case of an event of default with respect to the Notes arising from specified
events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. If any other event of default with respect to the Notes under the Indenture occurs or is continuing, the Trustee or
holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare the principal amount of the Notes to be immediately due and payable.
In certain circumstances if, at any time during the
six-month
period beginning on, and including, the
date that is six months after the last date of original issuance of the Notes, the Company fails to timely file certain documents or reports required under the Securities Exchange Act of 1934, as amended, or the Notes are not otherwise freely
tradable by holders of the Notes other than the Companys affiliates, additional interest will accrue on the Notes during the period in which its failure to file has occurred and is continuing or such Notes are not otherwise freely tradable by
holders other than the Companys affiliates.
In addition, if, and for so long as, the restrictive legend on the Notes has not been
removed, the Notes are assigned a restricted CUSIP number or the Notes are not otherwise freely tradable by holders other than the Companys affiliates (without restrictions pursuant to U.S. securities laws or the terms of the Indenture or the
Notes) as of the 380th day after the last date of original issuance of the Notes, the Company will pay additional interest on the Notes during the period in which the Notes remain so restricted.
The foregoing description of the Indenture and the Notes does not purport to be complete and is qualified in its entirety by reference to each
of the Indenture and form of Note, which are filed as Exhibits 4.1 and 4.2 to this Current Report on
Form 8-K
and are incorporated herein by reference.
Capped Call Transactions
In
connection with the offering of the Notes, on November 8, 2017, the Company entered into capped call transactions with JPMorgan Chase Bank, National Association, London Branch and Goldman Sachs & Co. LLC (each, a
Counterparty, and together the Counterparties, and such transactions, the Base Capped Call Transactions). In connection with the Initial Purchasers exercise in full of their over-allotment option, on
November 9, 2017, the Company entered into additional capped call transactions with the Counterparties (together with the Base Capped Call Transactions, the Capped Call Transactions).
The Capped Call Transactions have an initial strike price of approximately $73.42 per share, which corresponds to the initial conversion price
of the Notes and is subject to anti-dilution adjustments generally similar to those applicable to the Notes, and have a cap price of approximately $104.88 per share, which is subject to certain adjustments under the terms of the Capped Call
Transactions. The Capped Call Transactions cover, subject to anti-dilution adjustments, 7,763,970 shares of the Companys common stock, which is the same number of shares of the Companys common stock initially underlying the Notes.
The Capped Call Transactions are expected generally to reduce the potential dilution to the Companys common stock upon conversion of the
Notes in the event that the market price per share of the Companys common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions as adjusted pursuant to the
anti-dilution adjustments. If, however, the market price per share of the Companys common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be
dilution upon conversion of the Notes to the extent that such market price exceeds the cap price of the Capped Call Transactions.
The Company has been advised that, in connection with establishing their initial hedges of the
Capped Call Transactions, the Counterparties or their respective affiliates purchased shares of the Companys common stock and/or entered into various derivative transactions with respect to the Companys common stock, in each case,
concurrently with, or shortly after, the pricing of the Notes. This activity may impact the market price of the Companys common stock or the Notes.
In addition, the Company has been advised that the Counterparties or their respective affiliates may modify their hedge positions by entering
into or unwinding various derivative transactions with respect to the Companys common stock and/or by purchasing or selling the Companys common stock or other securities of the Company in secondary market transactions following the
pricing of the Notes and prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of the Notes). This activity could also impact the market price of the Companys common stock or the
Notes, which could affect the ability of holders to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of the Notes, it could affect the number of shares of the Companys common stock
and value of the consideration that holders will receive upon conversion of the Notes.
The Company intends to exercise options it holds
under the Capped Call Transactions whenever Notes are converted on or after May 15, 2024, and expects that upon any conversions of Notes prior to May 15, 2024, or any repurchase of Notes by the Company, a corresponding portion of the
Capped Call Transactions will be terminated. Upon such termination, the Company expects to receive from the Counterparties shares of its common stock, cash, or a combination thereof, in each case, with an aggregate market value equal to the then
current value of the Capped Call Transactions or portion thereof, as the case may be, being early terminated, subject to the terms of the Capped Call Transactions. As a result, the Company may not receive the full expected benefit of the Capped Call
Transactions. The Company has been advised that the Counterparties or their respective affiliates, in order to unwind their hedge positions with respect to those exercised or terminated options, are likely to buy or sell shares of the Companys
common stock or other securities or instruments of the Company, including the Notes, in secondary market transactions or unwind various derivative transactions with respect to such common stock. These unwind activities could have the effect of
increasing or decreasing the trading price of the Companys common stock and the Notes and could have the effect of increasing or decreasing the value of the consideration that holders of the Notes will receive upon conversion of the Notes.
The Capped Call Transactions are separate transactions entered into by and between the Company and the Counterparties and are not part of
the terms of the Notes. Holders of the Notes will not have any rights with respect to the Capped Call Transactions.
The description of
the Capped Call Transactions in this report is a summary and is qualified in its entirety by the terms of each of the confirmations for the Capped Call Transactions filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to this Current Report on
Form 8-K,
which are incorporated herein by reference.