On November 28, 2023 TME Pharma N.V. (Euronext Growth Paris: ALTME), a biotechnology company focused on developing novel therapies for treatment of cancer by targeting the tumor microenvironment (TME), reported the launch of a 100% guaranteed capital increase through issuance of new shares for €2.7 million gross proceeds with associated warrants potentially raising up to €2.2 million of additional gross proceeds in order to secure financing to reach key regulatory milestones in 2024 (Press release, TME Pharma, NOV 28, 2023, View Source [SID1234638028]). The guaranteed amount is secured by a group of Dutch investors.
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The capital increase is carried out with preferential subscription rights for the company’s shareholders. The preferential subscription rights are detached and their listing begins today, November 28, 2023 (ISIN code of PSR: FR001400M9E2).
The transaction is expected to extend the company’s cash runway from February 20241 into May 2024 with possibility to extend further into July 2024 if the associated warrants expiring in February 2024 are exercised in full, and to September 2024 if both sets of warrants are fully exercised by July 2024. This transaction will reduce the liquidity risk that the company has been facing in recent months. The operation offers current shareholders subscription rights to maintain their holding in the company without being diluted.
"This guaranteed capital injection provides TME Pharma with financing into May 2024, with the possibility of extending our cash runway even further should all the warrants be fully exercised while ensuring minimal dilution to existing shareholders who continue to support our venture," said Aram Mangasarian, CEO of TME Pharma. "This will allow us to achieve our next clinical and regulatory milestones with our lead asset NOX-A12 in newly diagnosed brain cancer patients, including further maturing of the survival data, an Investigational New Drug filing, and potential access to expedited regulatory pathways in the US, such as Fast-Track. We are also announcing the repurchase of almost half our existing outstanding convertible debt, with the remainder locked up until April next year. This is the latest step in our commitment to our shareholders to end the use of convertible bond financing so we can remain focused on our goal of developing novel therapies for cancer patients and bringing them to market."
Key Preferential Rights Issue details2:
Preferential subscription right: 1 preferential subscription right (PSR) will be awarded for 1 ordinary share held on November 27, 2023
Subscription rate: Each 3 PSRs give right to subscribe for 5 ABSA Y (5 new shares with 5 Warrants Y attached)
Subscription price: €0.25 per ABSA Y, representing a 37.5% discount vs. the closing price of EUR 0.4005 of the company’s shares on November 24, 2023
Subscription period: From November 30 to December 11, 2023 (inclusive)
ABSA are shares with warrants attached. There are two types of ABSA: ABSA Y, containing one new share and one Warrant Y, and ABSA Z, containing one new share and one Warrant Z.
Warrants Y:
Each series of 5 Warrants Y entitle a holder to subscribe for 2 ABSA Z (2 new shares with 2 Warrants Z attached)
Warrant Y will have an exercise price of €0.25
Warrant Y maturity: February 16, 2024, with two periods of exercise. Warrants Y that have not been exercised by the end of the exercise period will become null and void. See Warrants Terms & Conditions for further details.
Warrants Z:
Each series of 4 Warrants Z entitle a holder to subscribe for 5 new shares
Warrant Z will have an exercise price of €0.20
Warrant Z maturity: June 30, 2025, with one period of exercise per quarter. Warrants Y that have not been exercised by the end of the exercise period at the latest will become null and void, without value. See Warrants Terms & Conditions for further details.
Illustrative example
A shareholder holding 300 shares of TME Pharma as of November 27, 2023, would be awarded 300 preferential subscription rights (PSRs). Having 300 PSRs entitles the shareholder to acquire 500 ABSA Y, composed of 500 new shares and 500 Warrant Y, for an amount of €125. The 500 Warrant Y entitle them to subscribe for 200 ABSA Z for €50. These 200 ABSA Z are composed of 200 new shares and 200 Warrant Z. The 200 Warrant Z can be exercised for €50 granting 250 new TME Pharma shares. Thus, if this shareholder participates fully in the transaction, they would hold 1250 shares, of which 900 newly acquired for €225.
Timetable of the Rights Issue:
November 17, 2023
Decision of the Board of Directors on the launch of Capital Increase
November 24, 2023
Press release announcing the Capital Increase
Release of the Euronext notice
November 27, 2023
Suspension of the right to exercise dilutive instruments issued by the Company
Accounting day at the end of which the holders of existing shares recorded in their securities accounts will be awarded preferential subscription rights (PSRs)
November 28, 2023
Detachment of PSRs and start of their listing
November 29, 2023
Euronext "Record date"
November 30, 2023
(included)
Opening of the subscription period – Start of the period of PSR exercise
December 07, 2023 (included)
End of PSR listing
December 11, 2023 (included)
Closing of the subscription period – End of the period of PSR exercise
December 13, 2023
Reception of the results of the public offer
December 14, 2023
Decision of the Board of Directors on the issue of the New Shares, and where applicable, the limitation of the Capital Increase, the reallocation of the Capital Increase
December 14, 2023
Distribution of the press release announcing the final amount of Capital Increase
December 18, 2023
Settlement-delivery, listing of New Shares, listing of Warrants Y
December 18, 2023
Resumption of the right to exercise any dilutive instruments issued by the Company, except convertible bonds subject to lock-up until April 1, 2024
Use of Proceeds:
Approximately 1/3rd of the proceeds from the guaranteed part of the capital increase will be used to reach increased data maturity in the ongoing NOX-A12 GLORIA Phase 1/2 trial in glioblastoma, advance the discussions with the US Food and Drug Administration (FDA) past regulatory milestones. Another 1/3rd of proceeds will be used for general corporate purposes including intensifying interactions with investors and potential industry partners. The final 1/3rd will be used to buy back part of the remainder of the convertible debt as described below.
Management believes that the completion of the regulatory milestones with the FDA in Q1-2024 will allow the company to pursue additional non-dilutive and dilutive financing on improved conditions.
Buyback and Lock-up of Convertible Debt key details3:
The company plans to reduce the outstanding convertible debt with part of the guaranteed proceeds from this transaction. As announced on April 18, 2023, the company terminated the agreement with Atlas Special Opportunities, LLC (ASO) other than with regard to already issued convertible bonds (CBs). One of the conditions of the investor group guaranteeing this financing is that TME Pharma repurchase 898 out of 1,898 outstanding convertible bonds for the total amount of €942,900 including 5% premium4 representing approximately 1/3rd of the initial guaranteed part of the funds raised. Furthermore, ASO agrees to a lock-up of the remaining 1,000 convertible bonds until April 1, 2024, in exchange for a flat fee of 100 additional CBs with a nominal value of €100,000. The redemption and lock-up prevent further conversion of CBs to shares and reiterate the company’s commitment to methodically end its reliance on convertible bond financing. The company is evaluating options to repurchase the last part of remaining convertible debt.
Guarantee:
The capital increase of €2.7 million is guaranteed by a group of four investors, whose individual commitment is not representing a concerted action towards the potential control of the company. None of them individually would cross threshold of 50% ownership even if the guarantee was required in full.
Shareholder and Corporate Authorizations:
The issuance of shares in this transaction relies upon the authorizations granted to the Issuer by its shareholders in the annual general meeting (AGM) on June 29, 2023. Issuer has completed and obtained all necessary corporate approvals for the rights issue. In particular, at the AGM held on 29 June 2023, the company’s shareholders approved the authorized capital amounting to € 212,500, divided into 20,000,000 ordinary shares, and 1,250,000 preference shares, each share with a nominal value of € 0.01. In addition, and if and as per the moment the company’s issued and paid-up ordinary share capital will amount to €200,000, comprised 20,000,000 ordinary shares, the transitional provision outlined in article 37 of the company’s articles of association will become effective, according to which the authorized capital of the company amounts to € 900,000 divided into 80,000,000 ordinary shares and 10,000,000 preference shares, each share with a nominal value of € 0.01.
Dilutive Potential:
Shareholders participating fully in the transaction, i.e. purchasing the ABSA Y and exercising Warrants Y and Z will not be diluted, and may increase their percentage shareholding if other investors do not exercise their Warrants.
Table: Dilutive Potential from Transaction Assuming an Existing Shareholder Does NOT Participate in the Transaction
Description
Shares to be issued
(max)
Total shares
outstanding
Dilution (max)
Shareholder
starting with 1%
would then hold
Purchase of ABSA Y
10,825,528
17,320,845
62.50%
0.38%
Exercise of Warrant Y
4,330,211
21,651,057
70.00%
0.30%
Exercise of Warrant Z
5,412,764
27,063,821
76.00%
0.24%
Risk Factors:
The main risk factors relating to the issue are as follows:
the market for preferential subscription rights may offer only limited liquidity and be subject to a high level of volatility;
shareholders who do not exercise their preferential subscription rights would see their stake in the company’s share capital diluted;
the market price of the company’s shares may fluctuate and fall below the subscription price of the New Shares;
the volatility and liquidity of the company’s shares may fluctuate significantly;
if the market price of the company’s shares falls, the value of preferential subscription rights could fall;
the Rights Issue is not subject to a performance guarantee and investors who have acquired preferential subscription rights could sustain a loss equal to the price of acquiring these preferential subscription rights.
The company expects to incur losses for the foreseeable future and will need substantial additional funding in order to complete the development and commercialization of its product candidates, which may not be available on acceptable terms when needed, if at all.
Before deciding to invest, Investors are asked to familiarise themselves with the risks described in the company’s 2022 annual financial report (LINK), and 2023 half-year financial report (LINK), both available on the company website. Key strategic, operational and financial risks are described in the Information Document prepared specifically for this transaction in accordance with the guidelines of the Dutch Authority for the Financial Markets which is available on the company website (LINK).
Potential Conflict of Interest:
Part of the variable remuneration of management relates to corporate goals for advancing the development pipeline of TME Pharma as well as securing the respective funding.
Additional Information:
Additional Information: The characteristics, terms and conditions and dilution resulting from the transaction may be found in the Annex to this press release and in the dedicated Right Issue page on the TME Pharma website: LINK.