Nuvation Bio Inc. (NYSE:NUVB) said it plans to offer $200 million of convertible senior notes due 2032, an announcement that coincided with an 11.8% drop in its shares during pre-market trading on Thursday.
The company granted underwriters a 30-day option to purchase up to an additional $30 million of notes to cover over-allotments. According to the terms disclosed, the securities will be general unsecured obligations, will bear interest payable semiannually, and will mature on July 1, 2032, unless they are earlier converted, redeemed or repurchased.
Upon conversion, Nuvation Bio will, at its election, pay or deliver cash, shares of its Class A common stock, or a combination of both. The interest rate, the initial conversion rate and other material terms of the notes will be set at the time of pricing.
The company said it expects to allocate net proceeds from the offering to several uses. These include entering into capped call transactions, repaying in full all obligations under its senior secured loan agreement, and funding general corporate purposes, which the company listed as working capital, operating expenses, capital expenditures and general administrative expenses.
In connection with the pricing of the notes, Nuvation Bio also expects to enter into capped call transactions with the underwriters or their affiliates and other financial institutions. The company described these capped calls as designed to reduce potential dilution to its Class A common stock if the notes are converted, and to offset any cash payments that exceed the principal amount of converted notes, subject to a cap.
Jefferies LLC, Citigroup and Cantor Fitzgerald & Co. are named as joint bookrunning managers for the offering, with RBC Capital Markets, LLC serving as a bookrunner.
Nuvation Bio is an oncology-focused company developing cancer therapies. Its pipeline includes taletrectinib, characterized as a next-generation ROS1 inhibitor; safusidenib, described as a brain-penetrant IDH1 inhibitor; and a drug-drug conjugate program.
Summary
Nuvation Bio disclosed a $200 million convertible senior note offering due in 2032 with a 30-day over-allotment option for up to $30 million. The securities will be unsecured and pay interest semiannually. Proceeds are expected to cover capped call transactions, repay a senior secured loan in full, and support general corporate needs. The announcement was followed by an 11.8% pre-market decline in the company's stock.
- Key points
- Convertible senior notes offering of $200 million, with an additional $30 million over-allotment option for underwriters.
- Notes are general unsecured obligations, interest payable semiannually, maturing July 1, 2032 unless earlier converted, redeemed or repurchased.
- Net proceeds to fund capped call transactions, repay the senior secured loan in full, and cover working capital, operating expenses, capital expenditures and general administrative expenses.
- Risks and uncertainties
- Potential dilution to Class A common stock upon conversion of the notes, although capped call transactions are intended to reduce that dilution - impacts equity holders and the broader biotech sector.
- Key economic terms - including interest rate and initial conversion rate - have not yet been established and will be set at pricing, introducing uncertainty for investors and capital markets participants.
- The notes are general unsecured obligations, which carries credit-related risk compared with secured debt - relevant to creditors and fixed-income investors.
The company provided details on the mechanics of the offering and the planned use of proceeds, but left final pricing terms to be determined at the offering's pricing. Market reaction to the announcement was immediate, with shares falling in pre-market trading on the same day the offering was disclosed.