The financing exercise at Sarepta Therapeutics continues as uncertainty remains for the company’s flagship gene therapy Elevidys.
The Massachusetts biopharma has reached an agreement with some investors to extend the maturity date of $700 million of its $1.1 billion debt to 2030. The convertible notes were previously due in 2027.
In exchange for those existing notes, which bore an annual interest rate of 1.25%, Sarepta is giving the investors new notes worth about $602 million with a 4.875% interest rate, plus up to about 6.7 million shares of the company’s common stock and $123 million in cash.
What’s more, the company is raising $20 million in private placement from J. Wood Capital Advisors, which is acting as Sarepta’s financial advisor for the debt refinancing exchange, a securities filing shows.
The latest financial maneuvering comes as Sarepta is navigating choppy waters with its Duchenne muscular dystrophy gene therapy Elevidys. After two patient deaths tied to the one-time treatment, Elevidys’ label is slated to get a black box warning about active liver injury and failure.
Due to safety concerns, delivery of the drug is being paused for patients who can no longer walk independently, as the company works with the FDA on a risk mitigation method. There’s also no guarantee that the drug will ever return to the market for those non-ambulatory patients, especially as Vinay Prasad, M.D., who had pushed for suspending Elevidys supplies to all patients, has returned to the FDA again, leading reviews of cell and gene therapy.
While the new notes come with a higher interest rate, “this refinancing helps to ease some of the recent [balance sheet] concerns stemming from the uncertainty around Elevidys’ ramp in Duchenne muscular dystrophy,” Leerink Partners analysts wrote in an Aug. 21 note.
With commercial demand expected to shrink, Sarepta in July launched a major overhaul, which involves laying off 36% of its workforce and pivoting from gene therapy to RNA interference programs.
In its second-quarter report released in early August, Sarepta said it was “evaluating opportunities to enhance operational efficiency and adjust manufacturing commitments based on latest demand.”
Then contract manufacturer Catalent disclosed this week that it’s laying off 350 employees in its gene therapy division in Maryland “due to an unexpected shift in demand from a large customer.” While Sarepta was not named, Leerink analysts suspected that lower demand for Elevidys may be the trigger.
To stretch its cash runway, the company announced last week a plan to sell more than 9.2 million shares of Arrowhead Pharmaceuticals for $174 million in cash, while transferring 2.6 million shares back to its siRNA partner. The rejig is meant to help Sarepta pay off $100 million in milestone obligations to Arrowhead.
After a series of intensive measures to improve its financial position, Sarepta appears to have completed setting itself up for Elevidys uncertainty.
“With our go-forward cash flows and liquidity, we believe we are well positioned to fully fund our pipeline and meet our near-term obligations,” Sarepta CEO Doug Ingram said in a statement Aug. 21. “This allows us to focus on our base business and the upcoming readouts from our pipeline, including our siRNA programs, as we continue to pursue our mission to transform the lives of patients with rare diseases.”
Sarepta did not immediately respond to Fierce Pharma’s request for further comment on its financing plans.