FWP 1 d250076dfwp.htm FREE WRITING PROSPECTUS Free Writing Prospectus

Filed pursuant to Rule 433 under the Securities Act of 1933

Issuer Free Writing Prospectus dated November 2, 2011

Relating to Preliminary Prospectus Supplement dated November 2, 2011

Registration Statement No. 333-162731

PRICING TERM SHEET

DATED NOVEMBER 2, 2011

HUMAN GENOME SCIENCES, INC.

3.00% CONVERTIBLE SENIOR NOTES DUE 2018

The information in this pricing term sheet relates only to the offering of the 3.00% Convertible Senior Notes due 2018 and supplements Human Genome Sciences, Inc.’s preliminary prospectus supplement, dated November 2, 2011, including the documents incorporated by reference therein, and the accompanying base prospectus dated October 29, 2009 (together, the “Preliminary Prospectus”), and supersedes the information in the Preliminary Prospectus to the extent inconsistent with the information in the Preliminary Prospectus. In all other respects, this term sheet is qualified in its entirety by reference to the Preliminary Prospectus. Terms used herein but not defined herein shall have the respective meanings as set forth in the Preliminary Prospectus. The Issuer has increased the offering of the notes to $430.0 million aggregate principal amount (or $494.5 million if the option to purchase additional notes is exercised in full). Corresponding changes will be made wherever applicable in the Preliminary Prospectus, including as discussed below.

 

Issuer:    Human Genome Sciences, Inc.
Exchange/Symbol for the Issuer’s Common Stock:    NASDAQ: HGSI
Title of Securities:    3.00% Convertible Senior Notes due 2018
Distribution:    Registered
Aggregate Principal Amount Offered:    $430.0 million ($494.5 million if the option to purchase additional notes is exercised in full)
Maturity Date:    November 15, 2018, unless earlier repurchased or converted
Interest Rate:    3.00% per year, accruing from November 7, 2011
Interest Payment Dates:    May 15 and November 15, beginning May 15, 2012
Last Sale Price:    $10.25 per share of the Issuer’s common stock on the NASDAQ on November 1, 2011
Conversion Premium:    30.0% above the Last Sale Price
Initial Conversion Rate:    75.0469 shares of the Issuer’s common stock per $1,000 principal amount of the notes
Initial Conversion Price:    Approximately $13.33 per share of the Issuer’s common stock


Use of Proceeds:   

The Issuer intends to use approximately $43.7 million of the net proceeds of the offering to fund the cost of the capped call transactions described below that the Issuer will enter into with one or more counterparties (the “hedge counterparties”) in connection with the pricing of the notes. If the underwriters exercise their option to purchase additional notes, the Issuer may use a portion of the net proceeds from the sale of such additional notes to fund the cost of entering into additional capped call transactions with the hedge counterparties.

 

The Issuer intends to use the remaining net proceeds from the offering for general corporate purposes, which may include repurchases of the Issuer’s outstanding 2012 Notes before their scheduled maturity date on August 15, 2012, or repayment of the 2012 Notes at maturity unless the 2012 Notes are converted into our common stock.

Capped Call Transaction:    In connection with the pricing of the notes, the Issuer will enter into capped call transactions with the hedge counterparties with respect to the number of shares of the Issuer’s common stock initially issuable upon conversion of the notes. If the underwriters exercise their option to purchase additional notes, the Issuer may enter into additional capped call transactions with the hedge counterparties with respect to the number of shares of our common stock initially issuable upon conversion of the additional notes. The capped call transactions will cover the number of shares of the Issuer’s common stock initially issuable upon conversion of the notes or additional notes, as applicable, with an initial strike price equal to the initial conversion price of the notes and with a cap price initially equal to $18.45, or approximately 180% of the Last Sale Price (in each case subject to certain anti-dilution adjustments).
Ranking:    Senior Unsecured
Pricing Date:    November 2, 2011
Trade Date:    November 2, 2011
Closing Date:    November 7, 2011
Settlement:    DTC
CUSIP:    444903 AN8
ISIN:    US444903AN84
Underwriters:    Citigroup Global Markets Inc.
Adjustment to Conversion Rate Upon a Make-Whole Fundamental Change:    If a “make-whole fundamental change” (as defined in the Preliminary Prospectus) occurs, the Issuer will, under certain circumstances, increase the conversion rate for the notes. The following table sets forth the number of additional shares per $1,000 principal amount of notes by which the conversion rate shall be increased upon conversion in connection with a make-whole fundamental change:

 

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Effective Date

  Stock Price  
  $10.25     $11.00     $12.00     $15.00     $20.00     $25.00     $30.00     $35.00     $40.00     $50.00     $75.00  

November 7, 2011

    22.5141        19.7838        16.7163        10.8276        6.6736        4.9395        3.8899        3.1466        2.6008        1.8437        0.8675   

November 15, 2012

    22.5141        19.7916        16.5163        10.3650        6.0960        4.4602        3.5077        2.8422        2.3538        1.6749        0.7955   

November 15, 2013

    22.5141        19.8482        16.3623        9.8459        5.3685        3.9373        3.0845        2.5013        2.0734        1.4802        0.7092   

November 15, 2014

    22.5141        19.8355        16.1208        9.1766        4.6699        3.2967        2.5932        2.1125        1.7545        1.2580        0.6080   

November 15, 2015

    22.5141        19.7061        15.7142        8.3856        3.7522        2.5929        2.0504        1.6755        1.3956        1.0048        0.4901   

November 15, 2016

    22.5141        19.2830        14.9519        7.1926        2.6942        1.8208        1.4491        1.1876        0.9915        0.7174        0.3539   

November 15, 2017

    22.5141        18.2125        13.3819        5.2070        1.3765        0.9727        0.7778        0.6390        0.5348        0.3890        0.1947   

November 15, 2018

    22.5141        15.8622        8.2864        0.0000        0.0000        0.0000        0.0000        0.0000        0.0000        0.0000        0.0000   

The exact stock price and effective date may not be set forth in the table above, in which case:

 

   

if the stock price is between two stock prices in the table or the effective date is between two effective dates in the table, the number of additional shares will be determined by straight-line interpolation between the number of additional shares set forth for the higher and lower stock prices and the earlier and later effective dates, as applicable, based on a 365-day year;

 

   

if the stock price is more than $75.00 per share (subject to adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate; and

 

   

if the stock price is less than $10.25 per share (subject to adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate.

Notwithstanding the foregoing, in no event will the total number of shares of common stock issuable upon conversion exceed 97.5610 per $1,000 principal amount of notes, subject to adjustment in the same manner, at the same time and for the same events as the conversion rate as set forth under “Description of the notes—Conversion rights—Conversion Rate Adjustments” in the Preliminary Prospectus.

The Issuer’s obligation to satisfy the additional shares requirement could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

 

 

CAPITALIZATION

The “Capitalization” section on page S-25 of the Preliminary Prospectus is hereby replaced in its entirety with the “Capitalization” section set forth below, giving effect to the increased size of this offering to $430.0 million aggregate principal amount (or $494.5 million if the option to purchase additional notes is exercised in full):

The following table sets forth our cash, cash equivalents and investments and our capitalization as of September 30, 2011:

 

   

on an actual basis;

 

   

as adjusted to give effect to the payment at maturity of our outstanding 2 1/4% Convertible Subordinated Notes due 2011 on October 15, 2011; and

 

   

as further adjusted to give effect to the sale of $430.0 million aggregate principal amount of notes in this offering after deducting estimated offering expenses payable by us (assuming no exercise of the underwriters’ option to purchase additional notes) and the use of proceeds described in “Use of Proceeds.”

You should read this information in conjunction with our financial statements and other financial information that are included or incorporated by reference in the Preliminary Prospectus.

 

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     As of September 30, 2011  
     Actual     As Adjusted     As Further
Adjusted
 
    

(Unaudited)

(In thousands, except for share and per share
data)

 

Cash, cash equivalents and investments

      

Cash and cash equivalents

   $ 37,660      $ 37,660      $ 411,604   

Marketable securities

     502,137        422,908        422,908   

Marketable securities, non-current

     —          —          —     

Restricted Investments

     79,921        79,921        79,921   
  

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents and investments

   $ 619,718      $ 540,489      $ 914,433   
  

 

 

   

 

 

   

 

 

 

Capitalization

      

Debt:

      

2 1/4% Convertible Subordinated Notes due 2011(1)

   $ 78,346      $ —        $ —     

2 1/4% Convertible Subordinated Notes due 2012(1)

     194,456        194,456        194,456   

3.00% Convertible Senior Notes due 2018 offered hereby(3)

     —          —          314,209   

BioMed lease financing

     251,744        251,744        251,744   
  

 

 

   

 

 

   

 

 

 

Total debt

   $ 524,546      $ 446,200      $ 760,409   
  

 

 

   

 

 

   

 

 

 

Stockholders’ equity:

      

Common stock—$.01 par value per share; shares authorized—400,000,000; shares issued and outstanding—198,664,617(2)

   $ 1,987      $ 1,987      $ 1,987   

Additional paid-in capital (3) (4)

     3,161,193        3,161,193        3,233,253   

Accumulated other comprehensive income

     5,598        5,598        5,598   

Accumulated deficit

     (2,719,981     (2,719,981     (2,719,981
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     448,797        448,797        520,857   
  

 

 

   

 

 

   

 

 

 

Total Capitalization

   $ 973,343      $ 894,997      $ 1,281,266   
  

 

 

   

 

 

   

 

 

 

 

(1) In October 2004, we issued $280.0 million aggregate principal amount of our 2011 Notes of which $78.3 million in aggregate principal amount remained outstanding as of September 30, 2011, and in August 2005, we issued $230.0 million aggregate principal amount of our 2012 Notes of which $206.7 million in aggregate principal amount remained outstanding as of September 30, 2011. Pursuant to ASC 470-20, these notes are recorded at a discount offset by the amount of the discount being reflected as additional paid-in capital. The discount is amortized over the term of the notes.

 

(2) The number of shares shown as issued and outstanding in the table above excludes:

 

   

an aggregate of approximately 5,039,430 shares and 11,624,827 shares of our common stock issuable upon conversion of our outstanding 2011 Notes and 2012 Notes, respectively, at an applicable conversion price of approximately $15.55 and $17.78 per share, respectively;

 

   

an aggregate of approximately 32,270,167 shares (or 37,110,692 shares if the underwriters exercise their option to purchase additional notes in full) of our common stock issuable upon conversion of the notes offered hereby at an applicable conversion price of approximately $13.33 per share;

 

   

25,938,193 shares of our common stock issuable upon the exercise of options outstanding as of September 30, 2011, having a weighted-average exercise price of $16.40 per share;

 

   

376,809 shares of our common stock issuable upon the vesting of restricted stock unit awards outstanding as of September 30, 2011; and

 

   

an aggregate of 5,701,431 and 596,625 shares of our common stock reserved as of September 30, 2011 under our Amended and Restated Stock Incentive Plan and our Employee Stock Purchase Plan, respectively.

 

(3) Amounts shown below reflect the application of ASC 470-20, which requires issuers to separately account for the liability and equity components of convertible debt instruments that may settle in cash (such as the notes and our existing convertible notes). In accordance with ASC 470-20, we estimate that $430.0 million aggregate principal amount of the notes will be recognized as follows (in thousands):

 

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Liability component

  

Principal

   $ 430,000   

Less: debt discount

     (115,791
  

 

 

 

Net carrying amount

   $ 314,209   
  

 

 

 

Equity component

   $ 115,791   
  

 

 

 

The equity component associated with the notes is reflected in the capitalization table as an increase to additional paid-in capital, as further adjusted.

 

(4) Additional paid-in capital, as further adjusted, has also been reduced by $43.7 million, representing the cost of the capped call transactions entered into in connection with the pricing of the notes. No impact for deferred taxes is recorded due to our full valuation allowance position for tax.

 

 

The Issuer has filed a registration statement (including the preliminary prospectus supplement dated November 2, 2011 and an accompanying prospectus dated October 29, 2009) with the SEC, for the offering to which this communication relates. Before you invest, you should read the relevant preliminary prospectus supplement, the accompanying prospectus and the other documents the Issuer has filed with the SEC for more complete information about the Issuer and the offering. You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, copies may be obtained from offices of Citigroup Global Markets Inc. at Brooklyn Army Terminal, 140 58th Street, 8th Floor, Brooklyn, NY 11220, telephone number (800) 831-9146 or email at batprospectusdept@citi.com.

This communication should be read in conjunction with the preliminary prospectus supplement dated November 2, 2011 and the accompanying prospectus dated October 29, 2009. The information in this communication supersedes the information in the preliminary prospectus supplement and the accompanying prospectus to the extent inconsistent with the information in such preliminary prospectus supplement and the accompanying prospectus.

ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER EMAIL SYSTEM.

 

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