By Karen Pihl-Carey
Only two days after it announced a convertible subordinated notes sale, Affymetrix Inc. raised $150 million through a private placement of the notes due 2006.
On Friday, the company said it completed its private placement of $125 million notes and that the purchaser has exercised its option on an additional $25 million.
Bound by SEC rules, the Santa Clara, Calif.-based company has not released the name of the purchaser. Ken Nussbacher, executive vice president at Affymetrix, said the notes are part of a 144A offering in which an investment bank sells them only to qualified institutional buyers.
The money will be paid back at 5 percent interest. The notes are convertible into Affymetrix stock at $123 per share.
"It leaves us at a very solid cash position to go about our business, to focus on building the array market into a significant component of life sciences," Nussbacher told BioWorld Today.
The price at which the notes are convertible is almost a $20 premium over the current share price. At that rate, the deal would enable the holder to convert the notes into about 1.2 million shares of stock.
On Wednesday, Affymetrix disclosed its plans to raise $100 million, and possibly $25 million more, through the issuance of notes. (See BioWorld Today, Sept. 16, 1999, p. 1.)
"This thing sold out in a couple of days, so the reception is obviously a very strong demand," said Mike King, vice president and senior biotechnology analyst at BancBoston Robertson Stephens in New York. "Strategically, it was imperative for Affy to raise this money because the business they are in is very capital intensive and they needed this money to widen their advantage."
The company intends to use the money to expand its manufacturing capacity and to help it continue to grow, Nussbacher said. It would also help fund strategic opportunities, involving new products and alliances.
"The markets have all moved quickly," Nussbacher said. "We want to have the resources to move with it."
Affymetrix, known for its GeneChip technology for acquiring, analyzing and managing genetic information, had $89 million in cash on June 30 and had posted a net loss of $6.9 million on revenues of $21.7 million for the quarter. The company is expected to reach profitability by the fourth quarter of 2000, King said. Nussbacher said the company is comfortable with that expectation.
Last week, the company purchased the DNA array technology company, Genetic MicroSystems Inc., of Woburn, Mass., in a deal expected to involve about 1 million shares of Affymetrix stock. The company had 24.2 million shares outstanding as of June 30.
While the stock (NASDAQ:AFFX) closed Sept. 13 at $121.062 following a favorable ruling by the U.S. Patent and Trademark Office (PTO) regarding a lawsuit by the company, it dipped later in the week, resting at Friday's closing price of $102.75, down 75 cents. On Sept. 10, the PTO denied a request by Incyte Pharmaceuticals Inc., of Palo Alto, Calif., to find two Affymetrix patents in interference with two pending Incyte patents. Affymetrix said the move was an attempt to stall the company's lawsuit against Incyte for patent infringement regarding its use of a chip microarray system. (See BioWorld Today, Sept. 14, 1999, p. 1.)
The $123 per share price for convertible notes is subject to adjustment in certain circumstances, meaning dividends might need to be factored in from time to time. Noteholders receive the same types of securities as shareholders, Nussbacher explained.
Affymetrix will file a registration statement so the holder can resell the notes, as well as any shares issuable upon the conversion of notes, within 90 days of the agreement's closing date.
"In most of these, buyers are convert buyers who want the coupons, so that's a formality that I think only a few people will take advantage of, if any," King said.