UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
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| Item 1.01 | Entry into a Material Definitive Agreement. |
Convertible Note Offering
On September 16, 2019, Apellis Pharmaceuticals, Inc. (the “Company”) completed its previously announced private offering of $220.0 million aggregate principal amount of its 3.500% convertible senior notes due 2026 (the “notes”). The notes were sold under a purchase agreement, dated as of September 11, 2019, entered into by and between the Company and each of Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several initial purchasers named therein (collectively, the “Initial Purchasers”), for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company also granted the Initial Purchasers an option to purchase within a 13-day period from, and including, September 16, 2019 up to an additional $33.0 million aggregate principal amount of the notes, solely to cover over-allotments.
The net proceeds from the sale of the notes were approximately $212.9 million after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by the Company. The Company used $28.4 million of the net proceeds from the offering to pay the cost of the capped call transactions described below.
The Company intends to use the remainder of the net proceeds from the sale of the notes to fund clinical development of APL-2, including preparation of a New Drug Application submission, to support the potential commercialization of APL-2, including the build-out of a commercial infrastructure and sales force, conduct research activities, repay in full the amount owed under a promissory note and for working capital and other general corporate purposes.
Indenture and the Notes
On September 16, 2019, the Company entered into an indenture (the “Indenture”) with respect to the notes with U.S. Bank National Association, as trustee (the “Trustee”). The notes are senior unsecured obligations of the Company and bear interest at a rate of 3.500% per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2020. The notes will mature on September 15, 2026, unless earlier converted, redeemed or repurchased in accordance with their terms.
The notes are convertible into shares of the Company’s common stock at an initial conversion rate of 25.3405 shares per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $39.46 per share of common stock). The initial conversion price represents a premium of approximately 25.0% over the last reported sale price of $31.57 of the Company’s common stock on the Nasdaq Global Select Market on September 11, 2019. The conversion rate is subject to customary anti-dilution adjustments. In addition, following certain events that occur prior to the maturity date or if the Company deliver a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its notes in connection with such corporate event or a notice of redemption, as the case may be, in certain circumstances as provided in the Indenture.
Prior to March 15, 2026, the notes are convertible only upon the occurrence of certain events. On or after March 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date of the notes, holders may convert the notes at any time. Upon conversion of the notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election.
Prior to September 20, 2023, the Company may not redeem the notes. The Company may redeem for cash all or a portion of the notes, at its option, on or after September 20, 2023 if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If the Company undergoes a “fundamental change,” as defined in the Indenture, prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their notes at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding notes may declare 100% of the principal of, and accrued and unpaid interest, if any, on, all the notes to be due and payable.
The foregoing description of the Indenture and the notes does not purport to be complete and is qualified in its entirety by reference to the full text of the Indenture (and the form of note included therein), a copy of which is filed with this Current Report on Form 8-K as Exhibit 4.1 hereto and is hereby incorporated herein by reference
Capped Call Transactions
On September 11, 2019, concurrently with the pricing of the notes, the Company entered into capped call transactions with JPMorgan Chase Bank, National Association and Jefferies International Limited (the “option counterparties”).
The capped call transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be, in the event that the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, is greater than the strike price of the capped call transactions, which is initially $39.4625 (the conversion price of the notes) and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of such notes. If, however, the market price per share of the Company’s common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions, which is initially $63.14 per share, representing a premium of 100% above the last reported sale price of $31.57 per share of its common stock on The Nasdaq Global Select Market on September 11, 2019, there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions.
If the Initial Purchasers of the notes exercise their option to purchase additional notes, the Company intends to use a portion of the net proceeds from the sale of the additional notes to pay the cost of additional capped call transactions with the option counterparties.
The foregoing description of the capped call transactions does not purport to be complete and is qualified in its entirety by reference to the full text of the Form of Capped Call Transaction Confirmation, a copy of which is filed with this Current Report on Form 8-K as Exhibit 10.1 hereto and is hereby incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K under the heading “Indenture and the Notes” is incorporated herein by reference.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information set forth under Item 1.01 of this Current Report on Form 8-K under the heading “Convertible Note Offering” is incorporated herein by reference.
The Company offered and sold the notes to the Initial Purchasers in reliance on the exemption from the registration requirements provided by Section 4(a)(2) of the Securities Act and were resold only to qualified institutional buyers pursuant to Rule 144A of the Securities Act. The Company will settle conversions of the notes by paying and/or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. Neither the notes nor the underlying shares of common stock have been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Company does not intend to file a shelf registration statement for the resale of the notes or any common stock issuable upon conversion of the notes.
| Item 8.01 | Other Events. |
On September 16, 2019, the Company issued a press release announcing the closing of the notes offering. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Cautionary Note Regarding Forward-Looking Statements
Statements in this Current Report on Form 8-K and the exhibits attached hereto about future expectations, plans and prospects, as well as any other statements regarding matters that are not historical facts, may constitute “forward-looking statements” within the meaning of The Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements relating to Apellis’ use of the net proceeds of the offering. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the factors discussed in the “Risk Factors” section of Apellis’ Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on July 31, 2019 and the risks described in other filings that Apellis may make with the Securities and Exchange Commission. Any forward-looking statements contained in this press release speak only as of the date hereof, and Apellis specifically disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit |
Description | |||
| 4.1 |
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| 4.2 |
Form of 3.500% Convertible Senior Note due 2026 (included within Exhibit 4.1) | |||
| 10.1 |
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| 99.1 |
Press Release, dated September 16, 2019, of Apellis Pharmaceuticals, Inc. | |||
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Apellis Pharmaceuticals, Inc. | ||||||
| Date: September 16, 2019 |
By: |
/s/ Cedric Francois | ||||
| Cedric Francois, M.D., Ph.D. | ||||||
| President and Chief Executive Officer | ||||||