- The Company reports preliminary
revenue for the first quarter ending March 31, 2019 of at least $35
million
- The Company reiterates financial
guidance for 2019
- Transactions expected to close on or
about April 3rd
- Endologix management to host
conference call today at 8:30 a.m. ET
Endologix, Inc. (Nasdaq: ELGX) (the “Company”), a developer and
marketer of innovative treatments for aortic disorders, today
announced that it has entered into a definitive agreement to raise
approximately $52 million gross cash proceeds through the issuance
of approximately 7.9 million new shares of the Company’s common
stock at a purchase price of $6.61 per share. The Company’s net
proceeds, after payment of estimated financial advisor fees but
before other transaction expenses, is expected to be approximately
$49 million. The primary use of this capital will be for working
capital and general corporate purposes.
In a separate transaction, the Company also entered into an
exchange agreement with two holders of the Company’s 3.25% Senior
Convertible Notes due 2020 (the “3.25% Notes”), pursuant to which
these investors exchanged an aggregate of approximately $73 million
of 3.25% Notes plus accrued interest for approximately $67 million
of 5.0% Convertible Senior Notes due 2024 (the “5.0% Notes”) at the
rate of $900 principal amount of 5.0% Notes for every $1000
principal amount of 3.25% Notes. This agreement will replace the
Company’s existing 3.25% Convertible Senior Notes due 2020 for
those investors.
The Company and Deerfield also agreed to amend their existing
facility agreement and credit agreement to, among other things,
extend near-term mandatory amortization payments, provide for
certain conversion rights and obligations pertaining to the
Company’s debt to Deerfield, and provide Endologix with certain
covenant relief with respect to certain of its existing revenue and
global excess liquidity covenants.
“Today’s announcement represents another step forward for
Endologix. The transactions announced today will allow us to focus
our efforts on continued execution while investing in bringing
evidence-driven products to market,” said John Onopchenko, Chief
Executive Officer of Endologix, Inc. “Our supportive partners
worked diligently with us to structure these transactions, and I am
proud of our team’s persistence in getting this agreement
finalized, ensuring that we can continue to deliver innovation to
patients in need.”
Vaseem Mahboob, Chief Financial Officer of Endologix, Inc.,
commented, “The financing announced today will strengthen our
balance sheet and provide us with a clear path to achieving
operating cash flow breakeven in 2021. We are excited to continue
working towards re-establishing durable, predictable growth in the
markets we serve. We will remain focused on managing operating
expenses while increasing commercial productivity and strategically
investing in innovative therapies and related clinical studies for
the treatment of AAA.”
DLA Piper and Jefferies LLC served as legal counsel and
financial advisor to the Company, respectively.
The Company is reporting preliminary revenue for the first
quarter ending March 31, 2019 of at least $35 million. The Company
is reiterating its previously communicated full-year 2019 revenue
guidance of at least $140 million.
The Company's management will be hosting a conference call today
at 8:30 a.m. ET to discuss the financing transactions. Details on
the conference call are provided below.
Equity Financing
March 31, 2019, the Company, Inc. entered into a purchase
agreement with select institutional investors and certain other
accredited investors, including members of the Company’s management
and board of directors, whereby the Company agreed to issue and
sell to the investors, and the investors agreed to purchase, an
aggregate of 7,889,552 shares of the Company’s common stock at a
price per share of $6.61, for an aggregate cash purchase price of
approximately $52.15 million. For any investor whose purchase of
the equity shares would result in its beneficially owning in excess
of 19.99% of the shares of the common stock outstanding immediately
after giving effect to the issuance, in lieu of issuing the blocked
shares which such investor would have received, the Company will
issue to such investor a pre-paid warrant to purchase shares of
common stock equal to the number of blocked shares that would have
been received for the equity offering price per share. Each
pre-paid warrant will be exercisable upon issuance, provided that
such exercise does not result in the issuance of blocked shares,
and will expire ten years from the date of issuance. The Company
currently expects the conditions to closing contemplated by the
purchase agreement to be satisfied, and the closing contemplated
thereunder, to take place on or about April 3, 2019.
Convertible Note Exchange
On March 31, 2019, the Company and two investors holding $73.355
million of the principal amount of the Company’s 3.25% Convertible
Senior Notes due 2020 entered into an exchange agreement providing
for the exchange of the holders’ existing notes for new 5.00%
Voluntary Convertible Senior Notes due 2024 and new 5.00% Mandatory
Convertible Senior Notes due 2024. The exchanging holders will
receive $900 principal amount of new notes for every $1000
principal amount of existing notes plus accrued interest exchanged
pursuant to the exchange agreement. The Company will issue $25.0
million of principal amount of the new mandatory notes and $42.02
million of principal amount of the new voluntary notes to the
holders. The Company currently expects the conditions to closing
contemplated by the exchange agreement to be satisfied, and the
closing contemplated thereunder to take place, on or about April 3,
2019.
The new voluntary notes and new mandatory notes will be governed
by separate indentures, each dated as of the closing of the
exchange, by and between the Company and Wilmington Trust,
National Association, as trustee. The new notes will accrue
interest at a rate of 5.00% per year, payable semi-annually in
arrears on April 1 and October 1 of each year, commencing October
1, 2019. The new notes will mature on the anniversary of the
closing date in 2024, unless earlier purchased, redeemed or
converted in accordance with the terms of the indenture.
The new voluntary notes will be convertible at the option of
each holder into shares of common stock at any time on or after
July 1, 2020, but prior to the close of business on the business
day immediately preceding January 1, 2024, provided that, except if
the Company undergoes a fundamental change (as defined in the new
voluntary notes Indenture) and for certain other customary
circumstances of conversion, each holder may not convert more than
30% the initial aggregate principal amount of his or her
outstanding new voluntary notes per calendar quarter. Thereafter,
until the close of business on the business day immediately
preceding the maturity date, the new voluntary notes will be
convertible at the option of the holder at any time regardless of
the conditions described in this paragraph. The initial conversion
rate of the new voluntary notes in a voluntary conversion is
0.12103 shares of the Company’s common stock per $1.00 principal
amount of the new notes, which is equivalent to an initial
conversion price per share equal to 125% of the equity offering
price. The conversion rate is subject to adjustment upon the
occurrence of certain specified events. Except if the Company
undergoes a fundamental change (as defined in the new voluntary
notes indenture) and for certain other customary circumstances of
conversion, in no event prior to the close of business on the
business day immediately preceding January 1, 2024 may the new
voluntary notes be converted in a calendar quarter unless the
closing sale price of the Company’s common stock for at least
twenty trading days during the period of thirty consecutive trading
days ending on the last trading day of the immediately preceding
calendar quarter is greater than or equal to 110% of the equity
offering (subject to adjustment upon the occurrence of certain
specified events).
The new mandatory notes provide for the mandatory conversion of
$1,666,666 of the aggregate principal amount each calendar month
for fifteen consecutive months beginning on the calendar month
beginning with May 1, 2019, if and only if at the end of the prior
calendar month the trailing average volume weighted average price
(VWAP) of the last five trading days of the prior calendar month is
greater than 100% of the equity offering Price. In the event of a
mandatory conversion, $1,666,666 of the new mandatory notes would
mandatorily convert at a conversion rate of 0.15129 shares of the
Company’s common stock per $1.00 principal amount of the new notes,
which is equivalent to a price per share equal to the equity
offering price. The new mandatory notes will be convertible at the
option of each holder into shares of common stock at the voluntary
conversion price at any time prior to the close of business on the
business day immediately preceding January 1, 2024, provided that,
except if the Company undergoes a fundamental change (as defined in
the new mandatory notes indenture) and for certain other customary
circumstances of conversion, each holder may not convert more than
30% of the initial aggregate principal amount of his or her
outstanding new mandatory note per calendar quarter, and provided
further, that (i) voluntary conversions may be effected only if the
voluntary conversion threshold has been achieved and (ii) a
voluntary conversion may not take place in the same calendar
quarter as a mandatory conversion. Thereafter, until the close of
business on the business day immediately preceding the maturity
date, the new mandatory notes will be convertible at the option of
the holder at any time regardless of the conditions described in
this paragraph.
The indentures will provide that in no event may a holder
convert, whether in a voluntarily conversion or a mandatory
conversion or otherwise, into shares of common stock if such
conversion would result in the holder beneficially owning more that
9.5% of the Company’s outstanding common stock.
Amendment to Deerfield Facility Agreement
On March 31, 2019, the Company entered into a second amendment
to Amended and Restated Facility Agreement and First Amendment to
Amended and Restated Guaranty and Security Agreement with Deerfield
Private Design Fund IV, L.P. and certain of its related funds and
affiliates, dated August 9, 2018, as amended by that certain First
Amendment to Amended and Restated Facility Agreement, dated
November 20, 2018. The facility amendment provides for, among other
things, the reduction in the global excess liquidity covenant from
$22.5 million to $17.5 million and the reduction of the minimum net
revenue financial covenants. In addition, the percentage of the
$120.0 million of first out waterfall loans due on April 2, 2021
decreased from 33.33% to 16.67% of the first out waterfall loans
outstanding on such date, while the percentage of the remainder of
the first out waterfall loans due on April 2, 2022 remained at 50%
of the first out waterfall loans outstanding on such date.
The facility agreement provides for the exchange of the existing
notes representing the first out waterfall loans for amended notes
that provide that in the event that, in any calendar month
beginning April 1, 2019 and ending June 30, 2020, if (A)(i) the
arithmetic mean of the volume weighted average prices of the
Company’s common stock (VWAP) on the five consecutive trading days
ending on the 15th calendar day (or, if not a trading day, the
first trading day thereafter) and (ii) the closing price for the
Company’s common stock on the mandatory conversion measurement
date, both exceed $6.625 (as may be adjusted to reflect certain
events) and (B)(i) the VWAP on the five consecutive trading days
ending on (and including) the third trading day immediately prior
to the mandatory conversion measurement date and (ii) the closing
price for the Company’s common stock on the initial mandatory
conversion measurement date both exceed the fixed conversion price,
Deerfield shall be obligated to convert $1,666,666 of the principal
amount of the loan into shares of common stock at a fixed
conversion price of $6.625, up to a maximum aggregate amount of
$25.0 million over the mandatory conversion period.
Deerfield also has the option to convert up to an additional
$50.0 million of the Company’s outstanding debt at the greater of
the fixed conversion price and 85% of the arithmetic average of the
volume weighted average price of the Company’s common stock on each
of the fifteen consecutive trading days prior to the conversion
date. The Company has the option to require conversion of the
voluntary conversion amount (less the amount of prior voluntary
conversions) if the Company’s 15-day VWAP is greater than 175% of
the fixed conversion price. The first amendment waterfall notes
also provide that in no event may Deerfield convert, whether
voluntarily or mandatorily, into shares of common stock if such
conversion would result in Deerfield beneficially owning more that
4.985% of the Company’s outstanding common stock. The first out
waterfall notes also revises Deerfield’s existing right to convert
a portion of the outstanding principal amount of
the first-out waterfall loan into a maximum of 1,430,000
shares of the Company’s common stock from the current conversion
price of 96% of the arithmetic average of the volume weighted
average price of the Company’s common stock on each of the three
consecutive trading days prior to the conversion date to the
greater of (i) the fixed conversion price or (ii) the 96% VWAP
price.
Further, the facility amendment also provides, upon the
effectiveness, for an increase of $5,000,000 in the amounts payable
to the holders of the first out waterfall notes as a fee upon
termination (or reduction, or required reduction, of the
outstanding amounts under the first out waterfall notes to less
than $10,000,000) under the facility agreement and to reimburse
Deerfield for all expenses incurred by Deerfield in connection with
the negotiation and documentation of the facility amendment. Also,
the existing right of the Company to satisfy interest payments on
the first out waterfall loans with up to 250,000 shares of its
common stock has been removed.
The facility amendment is conditioned upon completion of the
financing with gross proceeds to the Company of at least $40.0
million and the closing of the transactions contemplated by the
exchange agreement, amongst other conditions. Accordingy, it is
expected to become effective on or about April 3, 2019.
In connection with entry into the facility amendment, the
Company is amending warrants to purchase 647,001 shares of common
stock previously issued to Deerfield pursuant to the Company’s
prior facility agreement with Deerfield dated, April 3, 2017 and
warrants to purchase 875,001 shares of common stock previously
issued in August 2018 to Deerfield pursuant to the facility
agreement in order to reduce the exercise price of the warrants to
the equity offering price. All other material terms and conditions
of the warrants will remain the same.
Amendment to Deerfield Credit Agreement
On March 31, 2019, the Company entered into a Second Amendment
to Credit Agreement and First Amendment to Guaranty and Security
Agreement with Deerfield ELGX Revolver, LLC and certain of its
affiliates, dated August 9, 2018, as amended by that certain first
amendment to credit agreement, dated November 20, 2018. The credit
amendment includes conforming revisions to reflect the changes in
the facility amendment. In addition, the credit amendment extends
the maturity date of the credit agreement to the earlier of (i)
April 2, 2023 or (ii) the date the loans pursuant to the facility
agreement have been repaid in full.
Conference Call Information
The Company's management will host a conference call today at
8:30 a.m. ET (5:30 a.m. PT) to discuss the financing
transactions.
To participate in the conference call, dial 877-407-9716
(domestic) or 201-493-6779 (international) and enter the passcode
13689366.
This conference call will also be webcast and can be accessed
from the “Investors” section of the Company’s website at
www.endologix.com. The webcast replay
of the call will be available at the same site approximately one
hour after the end of the call.
A recording of this call will also be available from 11:30 a.m.
ET on Monday, April 1, 2019, until 11:59 p.m. ET on Monday, April
8, 2019. To hear this recording, dial 844-512-2921 (domestic) or
412-317-6671 (international) and enter the passcode 13689366.
About Endologix, Inc.
The Company develops and manufactures minimally invasive
treatments for aortic disorders. The Company's focus is in
endovascular stent grafts for the treatment of abdominal aortic
aneurysms (AAA). AAA is a weakening of the wall of the aorta, the
largest artery in the body, resulting in a balloon-like
enlargement. Once an AAA develops, it continues to enlarge and, if
left untreated, becomes increasingly susceptible to rupture. The
overall patient mortality rate for ruptured AAA is approximately
80%, making it a leading cause of death in the U.S. For more
information, visit www.endologix.com.
The Nellix® EndoVascular Aneurysm Sealing System and Ovation
Alto® Abdominal Stent Graft System, the Company's next generation
Ovation system device, are approved only as investigational devices
and are not currently approved for commercial purposes in any
market.
Forward Looking Statements
This press release contains certain forward-looking information
about Endologix, Inc. that is intended to be covered by the safe
harbor for "forward-looking statements" provided by the Private
Securities Litigation Reform Act of 1995, as amended.
Forward-looking statements are statements that are not historical
facts. Words such as "expect(s)," "feel(s)," "believe(s)," "will,"
"may," "anticipate(s)" and similar expressions are intended to
identify forward-looking statements. These statements include, but
are not limited to, statements about the Company's expectations
regarding its capital raising efforts, including the closing of the
equity offering, the convertible note exchange, and the amendments
to the Company’s credit facility and related guaranty and security
and the Company's intended use of proceeds. All such statements are
subject to certain risks and uncertainties, many of which are
difficult to predict and generally beyond the control of the
Company, which could cause actual results to differ materially from
those expressed in, or implied or projected by, the forward-looking
information and statements. These risks and uncertainties include,
but are not limited to, risks related to continued market
acceptance of the Company’s products; the success of the Company’s
restructuring and strategic initiatives; the success of clinical
trials relating to the Company’s products; the Company’s product
research and development efforts; uncertainty in the process of
obtaining and maintaining regulatory approval for the Company’s
products; the Company’s ability to protect its intellectual
property rights and proprietary technologies; and other economic,
business, competitive and regulatory factors. Please refer to the
Company’s filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K for the year ended
December 31, 2018, for more detailed information regarding these
risks and uncertainties, as well as other factors that may cause
actual results to differ materially from those expressed or implied
by the forward-looking statements. Readers are cautioned not to
place undue reliance on the forward-looking statements, which speak
only as of the date of this press release. Endologix undertakes no
obligation to update or review any forward- looking statements in
this press release to reflect new information, events or
circumstances after the date they are made, or to reflect the
occurrence of unanticipated events.
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version on businesswire.com: https://www.businesswire.com/news/home/20190401005390/en/
Endologix, Inc.Vaseem Mahboob, CFO(949) 595-7200
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