Nashville, June 13 - Genentech Inc. sold $2 billion of bonds in three tranches in a drive-by offering that received a rousing response, with buyside sources saying the books were oversubscribed to the tune of double-digit multiples by midday.
The $500 million of five-year notes, with a 4.4% handle, priced at 99.992 to yield 4.402% or 45 basis points over Treasuries.
The $1 billion of 10-year 4.75% notes priced at 99.937 to yield $4.758% or 60 basis points over Treasuries.
The 30-year bonds, with a 5.25% coupon, priced at 99.85 to yield 5.26% or 87 basis points over Treasuries.
The spreads came in line with price talk.
Goldman Sachs & Co. and Citigroup Global Markets Inc. are joint bookrunners on the Rule 144A deal, being offered with registration rights.
"This is a great story, the news flow is very positive and the earnings [Monday] is just the latest bit," said one market source. "We kept hearing the book [on the bond offering] getting bigger and bigger, and, to our dismay, that means allocations were getting smaller and smaller. But, hey, we'll take what we can get."
Like most other buyers putting orders in for the Genentech bonds, he was not overly concerned about terms on the A1/A+ rated issues.
"There just isn't a lot of biotech issues in this rating category. The only other A rated biotech is the other giant, Amgen. The next is Genzyme, but that takes you down to another category as they are triple-B," said the buysider. "Needless to say, the response was pretty overwhelming."
Co-managers of the senior bond offering include BNP Paribas, Credit Suisse First Boston, UBS Investment Bank, JPMorgan Securities, Lehman Brothers and Morgan Stanley.
San Francisco-based Genentech, the world's largest biotech with a market capitalization of more than $90 billion, said it would use $585 million of bond proceeds to reduce or repay leases, including a synthetic lease related to its manufacturing facility in Vacaville, Calif. The company said it also intends to fund upgrade, start-up and validation costs at the biologics manufacturing facility in Oceanside, Calif., recently bought from Biogen Idec Inc. for $408 million.
The balance of proceeds, Genentech said, will be used for general corporate purposes, which may include additional capital expenditures, working capital, stock repurchases, research and development expenses and acquisitions of or investments in products, technologies, facilities and businesses.
Genentech shares rose 79 cents on Wednesday, or 0.92%, to close at $86.68.
That came on the heels of a 2.86% spike in the shares on Tuesday in response to the earnings released after Monday's close. The company reported second quarter net income rose 63% to $328.6 million from $201.8 million a year before, and on a GAAP basis was up 73% to $296.2 million from $170.8 million. Sales rose 39% to $1.274 billion from $913 million while operating revenues were 35% higher at $1.527 billion from $1.128 billion.
For the full year, Genentech forecast a 35% gain in EPS on a non-GAAP basis. The company noted that it has more than 30 products in the pipeline, primarily in oncology and immunology.
| Issuer: | Genentech Inc.
|
| Issue: | Senior notes
|
| Bookrunners: | Goldman Sachs, Citigroup
|
| Co-managers: | BNP Paribas, Credit Suisse First Boston, UBS Investment Bank, JPMorgan Securities, Lehman Brothers, Morgan Stanley
|
| Amount: | $2 billion
|
| Pricing date: | July 13
|
| Settlement date: | July 18
|
| Distribution: | Rule 144A, with registration rights
|
|
|
| Tranche A
|
| Amount: | $500 million
|
| Maturity: | July 15, 2010
|
| Coupon: | 4.40%
|
| Price: | 99.992
|
| Yield: | 4.402%
|
| Spread: | 45 bps over Treasuries
|
| Call: | Make-whole at 10 bps over Treasuries
|
| Price talk: | 45 bps over Treasuries
|
|
|
| Tranche B
|
| Amount: | $1 billion
|
| Maturity: | July 15, 2015
|
| Coupon: | 4.75%
|
| Price: | 99.937
|
| Yield: | 4.758%
|
| Spread: | 60 bps over Treasuries
|
| Call: | Make-whole at 15 bps over Treasuries
|
| Price talk: | 60 bps over Treasuries
|
|
|
| Tranche C
|
| Amount: | $500 million
|
| Maturity: | July 15, 2035
|
| Coupon: | 5.25%
|
| Price: | 99.85
|
| Yield: | 5.26 %
|
| Spread: | 87 bps over Treasuries
|
| Call: | Make-whole at 20 bps over Treasuries
|
| Price talk: | 87 bps over Treasuries
|
|
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