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Item 1.01
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Entry into a Material Definitive Agreement
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Indenture
On March 1, 2021, Halozyme Therapeutics, Inc. (the “Company,” “we,” “us” or “our”) completed its previously announced sale of $805.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2027 (the “ Convertible Notes”), including $105.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2027 to be purchased pursuant to the exercise by the initial purchasers of the Convertible Notes (the “Initial Purchasers”) of the option to purchase additional Securities in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Convertible Notes were issued under an indenture, dated as of March 1, 2021, (the “Indenture”) between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Company offered and sold the Convertible Notes in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. The Initial Purchasers offered and sold the Convertible Notes to “qualified institutional buyers” pursuant to the exemption from registration provided by Rule 144A under the Securities Act. The offer and sale of the Convertible Notes and the shares of common stock issuable upon conversion of the Convertible Notes have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and the Convertible Notes and such shares may not be offered or sold absent registration or an applicable exemption from registration requirements, or in a transaction not subject to, such registration requirements.
The Company received net proceeds from the offering of approximately $784.3 million. The Company used a portion of the net proceeds of the offering to enter into privately negotiated agreements with certain holders of its outstanding 1.25% convertible senior notes due 2024 (the “Existing Convertible Notes”) to exchange their Existing Convertible Notes for a combination of cash and shares of its common stock through privately negotiated transactions entered into concurrently with or shortly after the offering (the “Note Repurchases”). In connection with the Note Repurchases, the Company paid approximately $370.2 million in cash, which includes accrued interest, and issued approximately 9.08 million shares of its common stock, to settle such exchanges. In addition, the Company plans to use up to $75.0 million of the net proceeds from the offering to repurchase shares of its common stock under its existing stock repurchase program (the “Share Repurchases”).
The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes, including other repurchases of the Company’s common stock from time to time under its existing stock repurchase program, working capital, capital expenditures, potential acquisitions and strategic transactions.
The Convertible Notes will pay interest semi-annually in arrears on March 1st and September 1st of each year at an annual rate of 0.25% and will be convertible into cash, and, if applicable, shares of the Company’s common stock, at the Company’s election, based on the applicable conversion rate at such time. The Convertible Notes are general unsecured obligations of the Company and will rank senior in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Notes, will rank equally in right of payment with all of the Company’s existing and future liabilities that are not so subordinated, will be effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Company’s current or future subsidiaries.
Holders may convert their Convertible Notes at their option only in the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price 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 per share of Company’s common stock on such trading day and the conversion rate on such trading day; (3) upon the occurrence of certain corporate events or distributions on Company’s common stock, as described in the offering memorandum; (4) if we call such notes for redemption; and (5) at any time from, and including, September 1, 2026 until the close of business on the scheduled trading day immediately before the maturity date. The Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, September 1, 2026 until the close of business on the scheduled trading day immediately preceding the maturity date.
Upon conversion the Company will pay cash or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. The initial conversion rate for the Convertible Notes will be 12.9576 shares of common stock per $1,000 in principal amount of Convertible Notes, equivalent to a conversion price of approximately $77.17 per share of common stock. The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued or unpaid interest.