On February 3, 2023, DURECT Corporation ("DURECT"), reported that it has entered into a securities purchase agreement (the "Purchase Agreement"), with two institutional healthcare investors (the "Purchasers"), relating to the purchase and sale of an aggregate of (i) 1,700,000 shares (the "Shares") of its common stock, par value $0.0001 per share ("Common Stock"), (ii) pre-funded warrants to purchase 300,000 shares of Common Stock, and (iii) accompanying common warrants, to purchase an aggregate of 2,000,000 shares of Common Stock in a registered direct offering (the "Offering") (Filing, 8-K, DURECT, FEB 7, 2023, View Source [SID1234626913]). The aggregate gross proceeds to DURECT from the Offering were $10.0 million before deducting placement agent fees and other estimated offering expenses payable by DURECT and excluding the proceeds, if any, from the exercise of the pre-funded warrants and common warrants issued in the Offering.
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The pre-funded warrants are exercisable immediately following the closing date of the Offering and have an unlimited term and an initial exercise price of $0.00001 per share. The common warrants will be immediately exercisable and have a five year term and an initial exercise price of $5.00 per share. The combined offering price is $5.00 per Share and accompanying common warrant, or in the case of pre-funded warrants, $4.99999 per pre-funded warrant and accompanying common warrant. A holder (together with its affiliates) may not exercise any portion of a pre-funded warrant or common warrant to the extent that the holder would own more than 4.99% (or, at the election of the holder 9.99%) of DURECT’s outstanding Common Stock immediately after exercise.
The common warrants include full ratchet anti-dilutive adjustment rights in the event DURECT issues shares of Common Stock or Common Stock equivalents in the future with a value less than the then effective exercise price of such common warrants subject to certain customary exceptions. The common warrants also include certain rights upon "fundamental transactions" as described in the common warrants, including the right of the holders thereof to receive from DURECT or a successor entity the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of Common Stock in such fundamental transaction in the amount of the Black Scholes value (as described in such common warrants) of the unexercised portion of the applicable common warrants on the date of the consummation of such fundamental transaction. In addition, a holder of a common warrant may also effect an "alternative cashless exercise" on or prior to the six (6) month anniversary of the original issuance date. In such event, the aggregate number of shares of our Common Stock issuable in such alternative cashless exercise shall equal the product of (x) the aggregate number of shares of our Common Stock that would be issuable upon exercise of the common warrant in accordance with the terms of such common warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 0.66.
The Purchase Agreement contains customary representations, warranties and agreements by DURECT, customary conditions to closing, and indemnification obligations of DURECT and the Purchasers. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of the Purchase Agreement and as of a specific date, were solely for the benefit of the parties to the Purchase Agreement, and may be subject to limitations agreed upon by the contracting parties.
DURECT engaged Cantor Fitzgerald & Co. and Oppenheimer & Co. Inc. to act as lead placement agents in the Offering. DURECT has agreed to pay the placement agents a cash fee equal to 6.0% of the aggregate gross proceeds generated from the Offering and to reimburse certain expenses of the placement agents in connection with the Offering in an amount not to exceed $150,000.
DURECT intends to use the proceeds from the Offering primarily for general corporate purposes, which may include clinical trials, research and development activities, capital expenditures, and selling, general and administrative costs, facilities expansion, and to meet working capital needs. The closing of the Offering is expected to occur on February 8, 2023, subject to customary closing conditions.
The Offering is being made pursuant to DURECT’s registration statement on Form S-3 (File No. 333-258333), previously filed with the U.S. Securities and Exchange Commission ("SEC") on July 30, 2021, and declared effective by the SEC on August 16, 2021, and a prospectus supplement thereunder.
A copy of the form of common warrant is filed as Exhibit 4.1 hereto, a copy of the form of pre-funded warrant is filed as Exhibit 4.2 hereto and the Purchase Agreement is filed as Exhibit 10.1 hereto. The foregoing descriptions of the terms of the Purchase Agreement and the pre-funded and common warrants are qualified in their entirety by reference to such exhibits. A copy of the opinion of Orrick, Herrington & Sutcliffe LLP relating to the legality of the issuance and sale of the Common Stock and pre-funded and common warrants in the Offering is attached to this Current Report on Form 8-K as Exhibit 5.1.