Avid Bioservices, Inc. (NASDAQ:CDMO) (NASDAQ:CDMOP) (the
“company”), a dedicated biologics contract development and
manufacturing organization (CDMO) working to improve patient lives
by providing high quality development and manufacturing services to
biotechnology and pharmaceutical companies, today announced that
its wholly-owned subsidiary, Avid SPV, LLC (the “Issuer”), has
priced its sale of $125 million aggregate principal amount of
exchangeable senior notes due 2026 (the “notes”) in a private
placement to qualified institutional buyers pursuant to Rule 144A
under the Securities Act of 1933, as amended (the “Securities
Act”). The issuance and sale of the notes are scheduled to settle
on March 12, 2021, subject to customary closing conditions. The
Issuer also granted the initial purchasers of the notes a 13-day
option to purchase up to an additional $18.75 million aggregate
principal amount of the notes.
The notes will be senior, unsecured obligations of the Issuer,
will be fully and unconditionally guaranteed by the company on a
senior, unsecured basis, and will accrue interest at a rate of
1.250% per annum payable semi-annually in arrears on March 15 and
September 15 of each year, beginning on September 15, 2021. The
notes will mature on March 15, 2026, unless earlier repurchased,
redeemed or exchanged. Before September 15, 2025, noteholders will
have the right to exchange their notes only upon the occurrence of
certain events. From and after September 15, 2025, noteholders may
exchange their notes at any time at their election until the close
of business on the second scheduled trading day immediately before
the maturity date of the notes. The notes will be settled in cash,
shares of the company’s common stock or a combination of cash and
shares of the company’s common stock, at the Issuer’s election.
The initial exchange rate is 47.1403 shares of the company’s
common stock per $1,000 principal amount of notes (which represents
an initial exchange price of approximately $21.21 per share of the
company’s common stock). The initial exchange price represents a
premium of approximately 32.5% over the last reported sale price of
$16.01 per share of the company’s common stock on March 9, 2021.
The exchange rate and exchange price of the notes will be subject
to adjustment upon the occurrence of certain events.
The notes will be redeemable, in whole or in part, for cash at
the Issuer’s option at any time, and from time to time, on or after
March 20, 2024 if the last reported sale price of the company’s
common stock has been at least 130% of the exchange price then in
effect for at least 20 trading days (whether or not consecutive)
during any 30 consecutive trading day period (including the last
trading day of such period) ending on, and including, the trading
day immediately preceding the date on which the Issuer provides
notice of redemption at a redemption price equal to the principal
amount of the notes to be redeemed, plus accrued and unpaid
interest, if any, to, but excluding, the redemption date.
If a “fundamental change” (as defined in the indenture for the
notes) occurs, then noteholders may require the Issuer to
repurchase their notes for cash. The repurchase price will be equal
to the principal amount of the notes to be repurchased, plus
accrued and unpaid interest, if any, to, but excluding, the
applicable repurchase date.
The net proceeds from the offering are estimated to be
approximately $120.6 million (or approximately $138.7 million if
the initial purchasers fully exercise their option to purchase
additional notes), after deducting the initial purchasers’
discounts and commissions and estimated offering expenses. The
Issuer expects to make an intercompany loan to the company of all
of the net proceeds from this offering. The company intends to use
approximately $11.2 million of such loan to pay the cost of the
capped call transactions described below, and to use up to
approximately $41.3 million of such loan to redeem all of the
company’s outstanding 10.50% Series E Convertible Preferred Stock
(assuming such redemption occurs on April 10, 2021, all such shares
remain outstanding through such date and none of such shares are
converted into the company’s common stock prior to such
redemption). The company intends to use the remaining net proceeds
for working capital and other general corporate purposes. If the
initial purchasers exercise their option to purchase additional
notes, the Issuer expects to make an intercompany loan to the
company of all of the net proceeds from the sale of additional
notes, which the company intends to use to pay the cost of
additional capped call transactions and for working capital and
other general corporate purposes. The company may also use a
portion of such loans for the acquisition of, or investment in,
technologies, solutions or businesses that complement the company’s
business, although it has no commitments to enter into any such
acquisitions or investments at this time.
In connection with the pricing of the notes, the company entered
into privately negotiated capped call transactions with the initial
purchasers or their affiliates (the “option counterparties”). The
capped call transactions cover, subject to customary adjustments,
the number of shares of the company’s common stock that initially
underlie the notes. The capped call transactions are expected to
reduce or offset the potential dilution of the company’s common
stock as a result of any exchange of the notes and/or offset any
potential cash payments the Issuer is required to make in excess of
the principal amount of exchanged notes, as the case may be, with
such reduction and/or offset subject to a cap. If the initial
purchasers exercise their option to purchase additional notes, the
company expects to enter into additional capped call transactions
with the option counterparties. The cap price of the capped call
transactions will initially be approximately $28.02 per share of
the company’s common stock, which represents a premium of
approximately 75.0% over the last reported sale price of the
company’s common stock of $16.01 per share on March 9, 2021, and is
subject to certain adjustments under the terms of the capped call
transactions.
In connection with establishing their initial hedges of the
capped call transactions, the option counterparties and/or their
respective affiliates may purchase shares of the company’s common
stock and/or enter into various derivative transactions with
respect to the company’s 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 the company’s common stock or
the notes at that time.
In addition, the option counterparties and/or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to the company’s common
stock and/or purchasing or selling the company’s common stock or
other securities 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 for the capped call
transactions, which are expected to occur during the 40 trading day
period beginning on the 41st scheduled trading day prior to the
maturity date of the notes). This activity could also cause or
avoid an increase or decrease in the market price of the company’s
common stock or the notes, which could affect the ability of
noteholders to exchange the notes, and, to the extent the activity
occurs during any observation period related to an exchange of
notes, it could affect the number of shares of the company’s common
stock and value of the consideration that holders of the notes will
receive upon exchange of the notes.
Neither the notes, nor any shares of the company’s common stock
potentially issuable upon exchange of the notes, have been, nor
will be, registered under the Securities Act or any state
securities laws and, unless so registered, may not be offered or
sold in the United States absent registration or an applicable
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and other
applicable securities laws.
This press release is neither an offer to sell nor a
solicitation of an offer to buy any securities, nor shall it
constitute an offer, solicitation or sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the
securities laws of any such jurisdiction. The notes will be offered
to qualified institutional buyers pursuant to Rule 144A under the
Securities Act.
About Avid Bioservices,
Inc.Avid Bioservices, Inc. is a dedicated contract
development and manufacturing organization (CDMO) focused on
development and CGMP manufacturing of biopharmaceutical drug
substances derived from mammalian cell culture. The company
provides a comprehensive range of process development, CGMP
clinical and commercial manufacturing services for the
biotechnology and biopharmaceutical industries. With 28 years of
experience producing monoclonal antibodies and recombinant
proteins, the company’s services include CGMP clinical and
commercial drug substance manufacturing, bulk packaging, release
and stability testing and regulatory submissions support. For
early-stage programs, the company provides a variety of process
development activities, including upstream and downstream
development and optimization, analytical methods development,
testing and characterization. The scope of the company’s services
ranges from standalone process development projects to full
development and manufacturing programs through
commercialization.
Forward-Looking Statements
Statements in this press release which are not purely
historical, including statements regarding the company’s
intentions, hopes, beliefs, expectations, representations,
projections, plans or predictions of the future, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include statements regarding the proposed transaction,
the intended use of the net proceeds from the transaction and the
timing of settlement of the transaction, and involve risks and
uncertainties. The company’s business could be affected by a number
of other factors, including the risk factors listed from time to
time in the company’s reports filed with the Securities and
Exchange Commission including, but not limited to, the
company’s annual report on Form 10-K for the fiscal year ended
April 30, 2020 and subsequent quarterly reports on Form 10-Q, as
well as any updates to these risk factors filed from time to time
in the company’s other filings with the Securities and
Exchange Commission. The company cautions investors not to place
undue reliance on the forward-looking statements contained in this
press release, and the company disclaims any obligation, and do not
undertake, to update or revise any forward-looking statements in
this press release except as may be required by law.
Contacts:
Stephanie Diaz (Investors)
Vida Strategic Partners
415-675-7401
sdiaz@vidasp.com
Tim Brons (Media)
Vida Strategic Partners
415-675-7402
tbrons@vidasp.com
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