| Item 1.01 | Entry into a Material Definitive Agreement. |
Closing of Convertible Senior Notes Offering
On February 19, 2019, Inovio Pharmaceuticals, Inc. (the “Company”) completed its previously announced private placement of $70.0 million aggregate principal amount of its 6.50% convertible senior notes due 2024 (the “Notes”) to Piper Jaffray & Co. and Cantor Fitzgerald & Co., as representatives of the initial purchasers (together, the “Initial Purchasers”), who subsequently resold the Notes to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The Company has also granted the Initial Purchasers an option to purchase, for settlement on or before March 1, 2019, up to $20.0 million aggregate principal amount of additional Notes, $15.0 million of which remains unexercised as of the date hereof. The Company estimates that the net proceeds from the offering will be approximately $67.6 million (or approximately $82.1 million if the initial purchasers exercise in full the remainder of their option to purchase additional Notes), after deducting the Initial Purchasers’ discount and estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for general corporate purposes, including clinical trial expenses, research and development expenses, general and administrative expenses and manufacturing expenses, and for other business development activities.
The Indenture
The Notes were issued pursuant to an indenture, dated as of February 19, 2019 (the “Indenture”), between the Company and U.S. Bank National Association, as trustee. The Notes will mature on March 1, 2024, unless earlier repurchased, redeemed or converted. The Company will pay interest on the Notes at an annual rate of 6.50%, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on September 1, 2019.
Noteholders may convert their Notes at their option only in the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2019 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock for each of at least 20 trading days, whether or not consecutive, during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price on the applicable trading day; (ii) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) if the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day; (iii) upon the occurrence of certain corporate events or distributions on the Company’s common stock; (iv) if the Company calls the Notes for redemption; and (v) at any time from, and including, November 1, 2023 until the close of business on the scheduled trading day immediately before the maturity date of the Notes. The Company will settle conversions by paying or delivering, as applicable, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at its election, based on the applicable conversion rate(s).
The Notes are convertible at an initial conversion rate of 185.8045 shares of common stock per $1,000 principal amount of Notes, subject to adjustment under the Indenture, which is equal to an initial conversion price of approximately $5.38 per share of common stock. If a “make-whole fundamental change” (as defined in the Indenture) occurs, then the Company will in certain circumstances increase the conversion rate for a specified period of time.
The Notes will be redeemable, in whole or in part, at the Company’s option at any time, and from time to time, on or after March 1, 2022 and on or before the 45th scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid, if any, to, but excluding, the redemption date but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. If a “fundamental change” (as defined in the Indenture) occurs, then, except as described in the Indenture, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
The Indenture includes customary terms and covenants, including certain events of default after which the Notes may be due and payable immediately. The following events are considered “events of default,” which may result in acceleration of the maturity of the Notes:
