Alkermes starts exchange for 3.75% convertibles

New York, Nov. 26 - Alkermes, Inc. said it has begun its previously announced exchange offer for its 3.75% convertible subordinated notes due 2007.

The exchange will expire at 5.00 p.m. ET on Dec. 24 unless extended.

As previously announced, Alkermes is offering investors a smaller principal amount of new convertibles with a higher coupon and lower conversion price. The new bonds will also have a longer maturity and structural seniority.

The Cambridge, Mass. pharmaceutical company will also sell up to $50 million of the new convertibles to holders who participate in the exchange.

Alkermes said the exchange will allow it to reduce its debt.

If fully subscribed, the exchange will eliminate $85 million principal amount of convertible notes, allow the company to convert virtually all its debt to equity if the stock rises approximately 75% above its current level and leave interest expense unchanged, the prospectus said. Alkermes will also raise $50 million of new capital.

For each $1,000 principal amount of the existing convertibles, Alkermes is offering $575 principal amount of new 6.52% convertible senior subordinated notes due Dec. 31, 2009, according to the prospectus.

The new securities will convert at a 17½% premium over the average stock closing price for the five trading days ending two trading days before the expiration of the offer.

Interest will be payable in cash or stock at the company's option. If paid in stock the shares will be valued at 90% of the average trading price over five days ending two trading days before the interest payment date.

Alkermes will be able to force conversion of the new notes if the stock trades at 150% of the conversion price for 20 out of 30 trading days.

If a forced conversion occurs before December 2004 holders will receive an additional two years of interest. Similarly if holders voluntarily convert before December 2004 they will receive an additional two years of interest.

The existing notes convert at $67.75 for a ratio of 14.76. The $200 million issue was sold at par in March 2000 with a 12% initial conversion premium.

If the exchange offer is fully subscribed, Alkermes will issue $115 million of the new 6.52% convertibles and sell a further $50 million.

Proceeds from the up to $50 million of new notes will be used for general corporate purposes, including research, development and clinical trials and for manufacturing facilities and equipment.

U.S. Bancorp Piper Jaffray Inc. (877 420-2321, attention Jeffrey Winaker or Brian Sullivan) is the dealer manager for the exchange offer and placement agent for the cash offer. State Street Bank and Trust Co. is exchange agent. The information agent is Georgeson Shareholder Communications Inc. (866 318-0506).

Alkermes develops products based on sophisticated drug delivery technologies via partnerships with several large pharmaceutical companies.

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