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InterMune, AŞ Message Board

  • jacosa jacosa Jan 15, 2013 3:32 PM Flag

    1/14 Financing announcement?

    A little odd. Wonder what can be read into it. The bond offering may be seen as rolling over the existing issue in a favorable interest rate environment. It would be unpleasant to have to refinance that chunk of debt at the same time as the US rollout of Esbriet was being planned.

    The stock issue is harder to interpret. Proceeds to the company ought to be in the same ganeral range as the bond offering. That is smallish compared to the cost of the US rollout. To be sure, if European sales come in at the top of the plausible range, and FDA approval comes a little late, there might be enough money to pull it off. But more likely there's something else going on.

    In the case I love to reflect on, Incyte made a moderate financing deal on unfavorable terms which gave it the flexibility to get excellent terms on later, larger deals. There doesn't seem to be any other deal imminent here. The stock sale could as well have been put off another year on the basis of anything clearly visible. This might imaginable be preparation for development of "Son of Perfenidone" or for a pivotal trial of perfenidone against a new indication. Management hints at possible acquisitions, but it's hard to imagine one that wouldn't be a distraction from the main task--building the Esbriet business.

    Perhaps it's something as simple as a nice deal offered by the famously charitable Goldman, Sachs.

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    • The EPS denominator just got bigger. Not that EPS is meaningful in this case. It just makes it more difficult in the future.

      • 1 Reply to pooping_bull
      • This was about the least dilutive way to get money now. New stock sold essentially at market and the convert essentially replacing an existing convert (although with more shares offered on conversion). The forced conversion clause avoids the possibility of going for years under the threat of having a 10MM share block appear suddenly.

        Up in the air whether it was a good time to issue stock. That $60MM a quarter meme stuck pretty hard, and it may be that management and the bankers thought a substantially higher stock price was unlikely until it is achieved (which figures to be more than a year in the future, when money to start the US rollout will already be needed).

    • i thought it a little odd also that they have not announced the offering price on the share sale? Normally this would have been done yesterday or this morning-also highly unusual that the stock price opened down but then came all the way back.
      Possibly someone bought all the shares? or they had a hard time getting the right price and they were not expecting that-this delay gave folks a chance to get out at higher prices or folks to buy in low?
      We should know more ah today-but very odd.

      • 1 Reply to blackhawk4652000
      • Now we know the terms, and they look pretty favorable. Hard to argue with 250 basis points AND a forced conversion feature if the bonds become an overhang. Something close to the full over-allotment taken, which shows that SOME investment bankers like Intermune's prospects (Is OUR investment banker still reading this board? A 'howdy' would be appreciated). Net proceeds now look like about $50MM more than they looked like yesterday, which might actually be enough to do the US rollout under plausible assumptions.

        I've realized a possible reason for the stock issue. Clue is that the amount approximates the amount of bonds. It is normal to hedge a convertible bond holding with short sale of a substantial fraction of the equivalent stock. There are formulae, which I neither know nor understand, but for an old-ish (say, maturing in 2015) and far-from-the-money issue the short amount is modest. For a newer and near-the-money issue the short amount is larger. Without a concurrent stock offering, ITMN might have become difficult to borrow, reducing the attractiveness of the bonds.