Exelixis gets option to extend private placement notes, issue more

Investors receive two-year warrants for 1 million shares

By Angela McDaniels

Tacoma, Wash., Jan. 22 - Exelixis, Inc. amended its note purchase agreement and issued warrants for 1 million shares on Wednesday, according to an 8-K filing with the Securities and Exchange Commission.

The purchase agreement is with Deerfield Private Design Fund, LP and Deerfield Private Design International, LP. They purchased $124 million principal amount of secured convertible notes for $80 million under the agreement in June 2010.

The amendment gives the company the option to extend the maturity date of the notes to July 1, 2018 from July 1, 2015.

In order to exercise the extension option, the company must provide a notice prior to March 31, 2015.

Under the terms of the extension option, the company has the right to require Deerfield Partners, LP and Deerfield International Master Fund, LP to acquire $100 million principal amount of notes.

Amendment

If the extension option is exercised, the interest rate would be 7.5% in cash plus 7.5% in kind beginning July 2, 2015. Currently, the interest payment is $6 million per year.

The amendment provides that the company's existing obligation to make annual mandatory prepayments equal to 15% of certain revenues from collaborative agreements, licenses, joint ventures, partnerships or other collaborative arrangements received during the prior fiscal year will continue to apply, and the maximum prepayment amount will continue to be $27.5 million per year. However, the company will only be obligated to make such prepayment after exercise of the extension option if Deerfield elects to receive the prepayment.

The amendment provides that the company may voluntarily prepay the notes prior to July 1, 2015 at par plus accrued interest plus all interest that would have accrued through maturity.

If the extension option is exercised, the company will have the option to voluntarily prepay the notes at 105% of par plus accrued interest plus, if prior to July 1, 2017, all interest that would have accrued through July 1, 2017.

The company continues to have the right to convert all or a portion of the notes into common stock. Interest payment and any prepayments can also be made in stock.

Warrants

In connection with the amendment, Deerfield Partners and Deerfield International Master Fund received two-year warrants for 1 million shares of common stock.

The exercise price is $9.70 per share, which is a 17.7% premium to the company's $8.24 (Nasdaq: EXEL) closing share price on Jan. 21.

If the company exercises the extension option, the exercise price will be reset to the lower of (a) the existing exercise price and (b) 120% of the volume-weighted average price of the common stock for the 10 trading days immediately following the date of the extension election.

If the extension option on the notes is exercised, the warrants will be extended by two years.

Exelixis is a South San Francisco, Calif.-based biotechnology company.

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