Debt remains a burden to Clovis

Clovis is continuing to demonstrate why taking on debt is a bad idea for loss-making biotechs. It all started in 2014, when Clovis was worth six times more than today, and was on the cusp of becoming a lung cancer player through rociletinib: it raised a $287m convertible, and later topped this up by $300m. The idea was that, by the time the debt matured, Clovis’s shares would be sky high, and the amount of stock needed to repay it would be insignificant. Reality was somewhat different, as rociletinib was discontinued, the stock plummeted, and Clovis embarked on a different path. At the end of last year its gross debt stood at $645m, against a market cap of some $500m, and the company was increasingly occupied by renegotiating various obligations, becoming ever more beholden to its lenders by swapping debt with a 2.5% coupon for later-maturing securities paying out 4.5%; the latest such transaction took place yesterday. In January the group diluted existing shareholders in a debt for equity swap. However, at least Clovis has now managed to launch a drug, Rubraca; things could have been a lot worse.

The history of Clovis's indebtedness
  Principal value ($m)  
Date Debt taken on Debt retired Detail
Sep 2014 286.5   2.5% senior convertible notes due 2021
Apr 2018 300.0   1.25% senior convertible notes due 2025
Aug 2019 264.0   4.5% senior convertible notes due 2024
Aug 2019   190.3 $171.8m of 2024 notes used to repurchase $190.3m of 2021 notes
Jan 2020   124.4 Shares issued at $9.25 to certain holders of 2024 notes
Apr 2020 36.1   4.5% senior convertible notes due 2024
Apr 2020   32.8 $36.1m of 2024 notes used to repurchase $32.8m of 2021 notes
15 Apr pro forma gross debt
2021 (2.5%) notes 31.7
2024 (4.5%) notes 211.0
2025 (1.25%) notes 300.0
Total 542.7

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