Biotech Values

[DewDiligence]

AMRN ($1.37, -10%) hits 4-year low on equity-for-debt swap:

http://finance.yahoo.com/news/amarin-announces-private-exchange-transactions-090000791.html

Amarin Corporation plc announced today that it and its wholly owned subsidiary, Corsicanto Limited…have entered into separate, privately negotiated exchange agreements with certain holders of its outstanding 3.50% Exchangeable Senior Notes due 2032 issued on January 9, 2012 pursuant to which the Issuer will exchange $118.734 million in aggregate principal amount of the 2012 Notes for $118.734 million in aggregate principal amount of new 3.50% May 2014 Exchangeable Senior Notes due 2032. Following the closing of these transactions, $31.266 million in aggregate principal amount of the 2012 Notes will remain outstanding with terms unchanged.

The 2014 Notes will be exchangeable into American Depositary Shares of Amarin at the option of the holders at an initial exchange rate of 384.6154 ADSs per $1,000 principal amount of 2014 Notes (equivalent to an initial exchange price of approximately $2.60 per ADS), subject to adjustment in certain circumstances.

In other words, $118.7M (about 80%) of the old non-convertible debt has been exchanged for new debt that’s convertible into stock at $2.60 per share. (Under most circumstances, the share price must be >=$2.86 to enable the new debt-holders to convert.)

Inasmuch as the new debt pays the same 3.5% interest rate as the old debt, the convertibility provision is a give-away by the company that can be interpreted as an act of desperation, IMO. If all $118.7M of the new debt is eventually converted into stock, 45.7M new common shares will be issued—a 27% expansion in the number of shares outstanding.