BioPharma Credit loan to Sarepta, as FDA approves Vyondys
BioPharma Credit (BPCR), the LSE-listed life sciences debt investor, is to extend a loan of up to $350m to the US listed biotech, Sarepta Therapeutics (Nasdaq: SRPT), as part of a $500m senior secured term loan arranged by its manager Pharmakon Advisors, with the remainder provided by Biopharma Credit Investments V, a separate unlisted limited partnership from the same stable. Under the terms of the transaction, BPCR will provide $350m in two equal tranches ($175m at close and up to an additional $175m by 31 December, 2020; with BioPharma-V investing up to $150m in parallel. The loan will mature in December 2023 and will bear interest at 8.5%/year with a one-time consideration of 1.75% of principal on upon funding and an additional 2.0% payable upon the repayment.
This loan should met BPCR’s commitment to deploy a large part of its cash pile ($613m as of 30 September) by the year end. This came about largely as a result of GlaxoSkithKline acquisition of Tesaro – to whom BPCR had extended a $300m loan. In November, BPCR entered two new term loan agreements totalling up to $170m with US biotechs, Akebia and Epizyme.
The loan to Sarepta came hours after the FDA granted the company an accelerated approval to Vyondys 53 (golodirsen) for a specific sub-type of Duchenne muscular dystrophy (DMD), although the loan is unlikely to have been contingent on the regulatory outcome. The FDA’s decision came as a surprise to many observers as the agency had issued a complete response letter – effectively a rejection – of the product in August, citing risk of infections related to intravenous infusion ports and renal toxicity in preclinical models. Sarepta’s stock rose by 31% on the news, giving it a market capitalisation of $9.8bn.
At the last balance sheet date, Sarepta held $1,048m in cash and investments and had $436m in convertible debt. At the time the convertible debt was issued in 2017, Sarepta negotiated a number of capped call transactions with investors, which were designed to limit potential dilution on conversion. The cap price of these transactions was initially set at $104.88/share. As the conversion price and/or cap is likely to be well below the current share price ($132/share), it would appear that Sarepta may be looking to use the BPCR debt to redeem its convertible, rather than allowing it to convert.