Idorsia Shares Plunge After Proposing Changes to Bond Terms

Idorsia Ltd (SIX: IDIA) shares took a significant hit recently, dropping as much as 16%, following the company's announcement that it intends to propose changes to the terms of its outstanding convertible bond (ISIN: CH0426820350) maturing on January 17, 2025. The proposed changes aim to avoid short-term liquidity constraints in connection with the redemption of the bonds.

On November 27, 2024, Idorsia entered exclusive negotiations with an undisclosed party for global rights to aprocitentan, a potential blockbuster drug. However, the company also announced plans to streamline its business to reduce costs and restructure its outstanding debt. Given the near-term maturity of the bonds and the inability of the company to repay them at maturity, Idorsia is exploring all options to extend its operational cash runway and bridge to a potential binding offer.

Idorsia's CEO, André C. Muller, commented on the situation: "Exclusive negotiations with the undisclosed party for global rights to aprocitentan continue, but it is unlikely that an agreement will be reached in the coming weeks. Regardless of the outcome, given the near-term maturity and the inability of the company to repay the bonds at maturity, an extension to the CB 2025 is required, so a bondholder meeting will be called in the coming days. This extension is expected to be a first step in a larger restructuring in which we would amend the terms of both the convertible bonds 2025 and 2028."

Idorsia plans to call a bondholder meeting in accordance with articles 1164 et seqq. of the Swiss Code of Obligations and will propose to the bondholders to modify the terms of the Bonds to, among others, extend the maturity date. Financial Update Idorsia's Chief Financial Officer, Arno Groenewoud, commented on the company's financial status: "We ended 2024 with a cash balance exceeding 100 million Swiss francs thanks, in part, to the sale of daridorexant inventory to Nxera and a royalty monetization transaction for vamorolone with R-Bridge Healthcare Fund. As a result, the company has a cash runway to the end of the first quarter 2025, assuming we are able to extend the maturity of the CB2025."

The guidance for 2024 published in December 2024 remains in place. Idorsia will call a bondholder meeting in accordance with the required procedures and will provide further updates as the situation develops.



Idorsia's proposed changes to the bond terms have raised concerns among investors, with Vontobel flagging potential dilution of existing shareholders depending on how many bondholders opt to be repaid in shares. The proposed changes include amending the conversion price to CHF 6.00 per Idorsia share (from CHF 33.95), extending the maturity date by six months to January 17, 2025, and giving Idorsia the option to call the bonds at par, in full or in part, at any time upon giving ten trading days' notice.



Idorsia's bond restructuring proposal highlights the company's ongoing efforts to address its liquidity constraints and extend its cash runway. While the proposed changes may have short-term implications for Idorsia's share price and market valuation, the company's long-term prospects could be improved by successfully navigating its current financial challenges. Investors should closely monitor the situation and consider the potential long-term benefits of Idorsia's restructuring efforts.