With a Whole Lot of Spending to Do, Vertex Seeks Some $400 Million in Stock and Note Offerings
Vertex Pharmaceuticals (NASDAQ: VRTX) is turning to the market for an infusion of new cash after a series of delays and disappointments that have nudged the Cambridge, MA-based firm’s stock steadily downward for the last several months. The biotech, whose shares were trading around $40 in September, last night priced an underwritten offering of 6 million shares of its common stock at $17.14 per share. At the same time, the firm inked a deal to sell $250 million worth of convertible senior subordinated notes due in 2013. If over allotments are exercised in both categories, the gross receipts from the offerings could surpass $400 million.
Vertex could use the cash. The company announced on Monday after the end of trading that it expects to spend a half billion dollars or so on R&D in 2008—a figure that seemed to concern some analysts and investors. Yesterday’s close of $17.14 was down almost 6 percent from Monday’s close.
The Motley Fool’s Brian Lawler points out that Vertex’s R&D budget is now about half the size of Biogen Idec’s (NASDAQ: BIIB), even though Vertex has only one drug approaching FDA approval—the hepatitis C treatment telaprevir—and an eighth the market cap of its fellow Cambridge biotech. But even so, likely because of the massive potential market for a hepatitis C drug, investors close to Vertex seem to think the company is a smart buy. Research firm Morningnotes wrote in a note yesterday afternoon (funny, I know): “We are hearing the common issue was covered inside of the first hour of marketing by the top shareholders.” The convertible note offering was oversubscribed as well, the note added.
Shares of Vertex opened at $18.41 on the news of the deal, up 7.4 percent from yesterday’s close.