UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Item 1.01 Entry into a Material Definitive Agreement.
On February 21, 2020, Theravance Biopharma R&D, Inc., a Cayman Islands exempted company (“Theravance R&D”), a wholly-owned subsidiary of Theravance Biopharma, Inc., a Cayman Islands exempted company (the “Company”), and Triple Royalty Sub II LLC, a Delaware limited liability company (the “Issuer”) and wholly-owned subsidiary of Theravance Biopharma R&D, entered into certain note purchase agreements (each, a “Note Purchase Agreement” and collectively, the “Note Purchase Agreements”), with the note purchaser or note purchasers referenced therein (each, a “Note Purchaser” and collectively, the “Note Purchasers”), relating to the private placement by the Issuer to the Note Purchasers of $400,000,000 aggregate principal amount of the Issuer’s non-recourse Triple II 9.5% Fixed Rate Term Notes due on or before 2035 (the “Notes”) issued under the Indenture, dated as February 28, 2020 (the “Indenture”), by and between the Issuer, U.S. Bank National Association, a national banking association, as initial trustee (in such capacity, the “Trustee”) and solely with respect to certain provisions, the Company. 95% of the Notes were sold to the Note Purchasers pursuant to the Note Purchase Agreements. The remaining 5% of the Notes (the “Retained Notes”) were retained by Theravance Biopharma R&D pursuant to the Sale and Contribution Agreement (as defined below) in order to comply with Regulation RR — Credit Risk Retention (17 C.F.R. Part 246).
The Notes are secured by all of the Issuer’s right, title and interest as a holder of certain membership interests (the “Issuer Class C Units”) in Theravance Respiratory Company, LLC, a Delaware limited liability company (“TRC LLC”). The primary source of funds to make payments on the Notes will be the 63.75% economic interest of the Issuer (evidenced by the Issuer Class C Units) in any future payments made by Glaxo Group Limited (“GSK”) under the Collaboration Agreement, dated as of November 14, 2002, by and between Innoviva, Inc. and GSK, as amended from time to time (net of the amount of cash, if any, expected to be used in TRC LLC pursuant to the TRC LLC Agreement over the next four fiscal quarters) relating to the Trelegy Ellipta program.
The form of Note Purchase Agreement was included as Exhibit 10.68 to the Form 10-K filed with the Securities and Exchange Commission on February 27, 2020 and is incorporated herein by reference.
In connection with the Note Purchase Agreements, the Company entered into a series of related agreements to support and effectuate the issuance and sale of the Notes.
Pursuant to the Sale and Contribution Agreement, dated as of February 28, 2020, (the “Sale and Contribution Agreement”), among Theravance Biopharma R&D, as the transferor, the Issuer, as the transferee, and solely with respect to certain provisions, the Company, (i) Theravance Biopharma R&D sold and contributed to the Issuer all of its right, title and interest as a holder of the Issuer Class C Units; provided, however, that the distribution of net cash payments to the Issuer from TRC LLC will commence with the payment related to the payment of royalties by GSK to TRC LLC in the first fiscal quarter of 2019 and (ii) the Retained Notes were retained by Theravance Biopharma R&D.
Pursuant to the Pledge and Security Agreement, dated as of February 28, 2020 (the “Pledge and Security Agreement”), Theravance Biopharma R&D pledged its equity ownership interests in the Issuer to the Trustee.
Pursuant to the Servicing Agreement, dated as of February 28, 2020 (the “Servicing Agreement”), between the Issuer and Theravance Biopharma US, Inc., a Delaware corporation, as the servicer (the “Servicer”), the Servicer has agreed to monitor, manage and administer the Issuer’s rights and obligations under the TRC LLC Agreement.
Pursuant to the Account Control Agreement, dated as of February 28, 2020 (the “Account Control Agreement”) among the Issuer, as grantor, Theravance Biopharma US, Inc., the Trustee, as the secured party, and the U.S. Bank National Association, as financial institution, the security interest of the Trustee in the Issuer’s rights in the Collection Account was perfected.
Pursuant to the terms of the Indenture, the Notes are not convertible into Company equity and have no security interest in nor rights under any agreement with GSK. The Notes may be redeemed, in whole or in part, at any time on and after February 28, 2022 at specified redemption premiums. The Notes bear an annual interest rate of 9.5%, with interest and principal paid quarterly beginning June 5, 2020. Prior to December 5, 2024, in the event that the distributions received by the Issuer from TRC LLC in a quarter is less than the interest accrued for the quarter, the principal amount of the Notes will increase by the interest shortfall amount for that period. Since the principal and interest payments on the Notes are ultimately based on royalties from product sales, which will vary from quarter to quarter, the Notes may be repaid prior to the final maturity date in 2033.
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The Company used a portion of the net proceeds from this transaction to repay in full the remaining outstanding balance of the $250 million Triple PhaRMASM 9.0% fixed rate term notes due 2033 and intends to use the remainder of the net proceeds, approximately $119 million, to support continued execution of its key development programs. The Notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent an applicable exemption from the registration requirements of the Securities Act.
The Issuer was formed on February 12, 2020 and is governed as a special purpose bankruptcy remote entity under Delaware law by the Amended and Restated Limited Liability Agreement, dated as of February 28, 2020 (the “LLC Agreement”), entered into by Theravance Biopharma R&D as the initial sole equity member of the Issuer.
The Note Purchase Agreements, Indenture, Sale and Contribution Agreement, Pledge and Security Agreement, Servicing Agreement, Account Control Agreement and LLC Agreement are collectively referred to herein as the “Transaction Documents.” The foregoing descriptions of the Transaction Documents do not purport to be complete and are qualified in their entirety by reference to such agreements, copies of which are filed as exhibits hereto and incorporated herein by reference.
The definitions for the Transaction Documents are set forth in the Annex A — Rules of Construction and Defined Terms.
Item 8.01 Other Events.
On March 2, 2020, the Company issued a press release announcing the issuance and sale of the Notes. A copy of the Company’s press release is attached hereto as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
| Exhibit No. | Description |
| 4.1 | Indenture, dated as of February 28, 2020 |
| 10.1 | Sale and Contribution Agreement, dated as of February 28, 2020 |
| 10.2 | Pledge and Security Agreement, dated as of February 28, 2020 |
| 10.3 | Servicing Agreement, dated as of February 28, 2020 |
| 10.4 | Account Control Agreement, dated as of February 28, 2020 |
| 10.5 | Amended and Restated Limited Liability Company Agreement of Triple Royalty Sub II LLC, dated February 28, 2020 |
| 10.6 | Annex A — Rules of Construction and Defined Terms |
| 99.1 | Press Release of Theravance Biopharma, Inc., dated March 2, 2020 |
| 104 | Cover Page Interactive Data File (cover page XBRL tags embedded within the Inline XBRL document) |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THERAVANCE BIOPHARMA, INC. | ||
| Date: March 4, 2020 | ||
| By: | /s/ Andrew Hindman | |
| Andrew Hindman | ||
| Chief Financial Officer | ||