Angiotech Pharmaceutical's board of directors has created a new subsidiary, Angiotech Pharmaceutical Interventions (API), which will primarily include business assets other than the intellectual property and royalty revenue related to the Taxus coronary stent system.
The Vancouver, B.C.-based Angiotech said it will contribute to API certain business assets and intellectual property.
The company also has entered into a note purchase agreement with Ares Management and New Leaf Venture Partners, under which the investors will purchase between $200 and $300 million of convertible notes issued by API that will be convertible into a significant minority equity interest in API. The net proceeds will be used to reduce Angiotech’s existing debt, pursuant to tender offers announced and commenced concurrent with this announcement, according to Angiotech.
Shareholders may benefit from the future performance of API based on retaining a significant continuing equity interest in the newly formed subsidiary.
The transaction is subject to approval of the company’s shareholders and other customary closing conditions, Angiotech said.
“This transaction offers Angiotech the opportunity for meaningful reduction of debt and interest expense, and allows us to raise a total amount of proceeds greater than would have been reasonably achievable through the consolidated company’s capital alternatives,” said Thomas Bailey, chief financial officer.
The company said that debt and cash interest expense reduction that may be achieved, combined with the equity value of its ownership stake in API, should improve its ability to continue to meet its debt obligations should royalties received from its partner Boston Scientific decline from current levels as a result of additional competitive entrants into the market for drug-eluting stents.