Ironwood Pharmaceuticals, Inc. (NASDAQ: IRWD) today announced the completion of a debt offering of $175 million. Ironwood intends to use the net proceeds from this transaction to fund its research and development efforts and to support the commercial launch of LINZESS™ (linaclotide), in addition to general corporate purposes.
Ironwood issued $175 million in aggregate principal amount of Linaclotide PhaRMA SM 11% Notes due on or before June 15, 2024. The notes bear an annual interest rate of 11%, with interest paid quarterly beginning June 15, 2013, and principal expected to be paid quarterly beginning March 15, 2014. After the interest-only period, Ironwood will make quarterly payments on the notes equal to the greater of (i) 7.5% of net sales of LINZESS in the United States for the preceding quarter (“the synthetic royalty amount”) and (ii) accrued and unpaid interest on the notes (“the required interest amount”). Principal on the notes will be repaid in an amount equal to the synthetic royalty amount minus the required quarterly interest amount, when this is a positive number, until the principal has been paid in full. Given the principal payments on the notes are based on the synthetic royalty amount, which will vary from quarter to quarter, the notes may fully be repaid prior to the final maturity date in 2024.
The notes are solely secured by a security interest in a segregated bank account established to receive the required interest amount (during the interest-only period) or the synthetic royalty amount (after the interest-only period), and all amounts credited from time to time to this account. The notes are not convertible into Ironwood equity. The notes may be redeemed at any time prior to maturity, in whole or in part, at the option of Ironwood at specified redemption premiums.
“This non-dilutive financing enhances our cash position and provides us with additional strategic optionality as we continue to advance our broader pipeline and execute on the launch of LINZESS,” said Michael Higgins, Chief Financial Officer and Chief Operating Officer of Ironwood Pharmaceuticals. “The structure of this financing provides us with financial flexibility as we continue working toward our goal of building an enduring pharmaceutical company that helps people lead better lives.”