DAIWA NEW ISSUE COLOR: THRX
$250m (+37.5m) sub cb cmoing tonight from MER. Terms: 10y,2-2½% up 27½-32½%, full pctns. UOP=GSK milestone payments/repay debt 05/13=FDA approval on Relvar/Breo, filed for approval on Anoro (both respiratory drugs & partnered w/Glaxo). 3rd GSK partnered drug P3 in ’13. Others in Pipeline=5xP2 & 2xP1. Pari 3% cb ~L210 (35vol) w/1.7y exp life. We’d use L+650 (see CREDIT COLOR). 10y sub cb on a CCC credit w/low SBV would normally signal trouble on a large move lower but for Glaxo’s 27% stake.This is why we’d use 35 vs 30vol 4 model.Brw=50bp.Theo=97½/100¼/103⅛ Enhanced eqty yield trade, not a hedge trade. We like story but structure does not take our breath away. Understanding eqty x/over demand is key. We’d only play at CHEAP w/out them (Co filing/bbg)
* Biotech focus on respiratory, bacterial infections, & central nervous system/pain.
PF Cash $604mm
PF Debt $423mm
LTM EBITDA $(137)mm
LTM FCF $(132)mm
Yrs Cash 4.6yrs
Mkt Cap $2225mm
* THRX filed for FDA approval of 2 drugs Relvar/Breo & Anoro, both COPD (respiratory) treatments partnered with GSK. Expect to hear from FDA in May on first. Would receive royalty on sales. Third GSK partnered drug to start P3 this yr. Pipeline incl 5 other P2 drugs & 2 P1 drugs. Astellas term agreement early ’12, looking at options for Vibativ (inject antibiotic). Two converts are the only debt & both are subordinated.
* Our assigned spread —>L+650<— Src: Bloomberg, Co Filings