Drug delivery firm Nektar Therapeutics priced its offering of $100 million in notes reported earlier this week.
The San Carlos, Calif.-based company, which previously went by the name Inhale Therapeutics Systems Inc., sold the 3 percent convertible subordinated notes due in 2010 to qualified institutional buyers. They are convertible into Nektar common shares at a rate of about 88.1057 shares per $1,000 principal amount of notes, the equivalent of an initial conversion price of $11.35 per share.
The company's stock (NASDAQ:NKTR) gained 44 cents Thursday to close at $9.15.
The total figure could reach $125 million if an overallotment option is exercised in full.
"We wanted to get some additional capital into the company, because we're experiencing a lot of demand for our technologies right now," Nektar Chairman Robert Chess told BioWorld Today, adding that the company has signed 11 deals covering 13 molecules since the start of last year. "Several products have been approved, through our partners, and we wanted to expand some of our capacity to meet that demand."
For the first quarter ended March 31, Nektar reported $358 million in cash, cash equivalents and short-term investments. It reported 55.1 million shares outstanding.
Recently approved products include several therapies based on the company's PEGylation technology - Pegasys for the treatment of hepatitis C, from Basel, Switzerland-based F. Hoffmann-La Roche Ltd.; Neulasta (pegfilgrastim) to treat infection caused by chemotherapy, from Thousand Oaks, Calif.-based Amgen Inc.; and Somavert to treat acromegaly, from Peapack, N.J.-based Pharmacia Corp.
Nektar also said it would use a portion of the funding to pay down debt, as it reaches agreements with a number of holders of prior convertible notes and debentures to repurchase certain outstanding obligations in exchange for about $17.2 million in cash.
"With the good terms you can get in the convert market, we took the opportunity to pay back some of our old debt," Chess said.
Nektar, which said it could opt to use additional portions of the proceeds to repurchase additional notes and debentures, said it also plans to spend the money on general corporate purposes, including investments in or accelerating various product development programs, and undertaking potential acquisitions and developing technologies.
Over the past several months, the company has shifted its strategy somewhat to develop its technologies through proof of principle in humans, whereas in the past it generally looked to partner prior to that point. Its Proprietary Products Unit already produced its first clinical candidate - an inhaled product described as a supergeneric small molecule.
"The funds also give us more options to bring products into the clinic and invest more in them by either taking them further or through some profit-sharing arrangements in carrying products forward," Chess said. "We're still a partner-based business, but it would allow us to invest further in bringing products into the clinic for improved economics."
He added that Nektar's delivery-based products would continue to be based on the application of its pulmonary, PEGylation and particle-engineering platforms to low-risk molecules, such as those off patent or in late-stage clinical development.
Except pursuant to a limited pledge of collateral equal to the initial six payments of interest on the notes, they will be subordinated to all present and future senior debt of Nektar. It said it expects the offering to close Monday.