Biotie Therapies Corp. ("Biotie" or the "Company") announces plans to strengthen its capital structure to finance a Phase 3 double-blinded clinical trial, including the open label extension, of its lead product candidate tozadenant (the "Tozadenant Phase 3 Trial") by in aggregate approximately EUR 95 million through a directed issue of up to EUR 42.5 million convertible promissory notes (the "Convertible Notes") and other equity-based instruments (the "Warrants") to certain US investors and certain existing shareholders, as well as a US public offering (the "US IPO") and potential other offerings in connection with the US IPO. The issue of the Convertible Notes and Warrants, as well as the US IPO, is conditional on the granting of necessary authorizations and election of new Board members by an Annual General Meeting of Biotie expected to be held in May 2015 (the "AGM").
Investment by US investors and existing shareholders
Biotie has on 23 April 2015 entered into an agreement (the "Agreement") with certain US based investors, including Vivo Capital, OrbiMed, Versant Ventures and investment funds managed by the Baupost Group (the "Investors") whereby the Investors will make an initial investment as a convertible loan in the Company by means of subscribing for Convertible Notes in an aggregate principal amount of approximately EUR 27.5 million. Each Convertible Note would entitle the holder to convert such Convertible Note into one new share in the Company. The subscribers of the Convertible Notes will for each Convertible Note also receive one Warrant entitling the holder to subscribe for one new or treasury share in the Company.
Further, certain existing shareholders of the Company have indicated that they will subscribe for a minimum of EUR 0.5 million each and in aggregate up to EUR 15 million of the Convertible Notes, and will also receive Warrants, on the same terms as the Investors.
The convertible loan, represented by the Convertible Notes, will be subscribed for and the proceeds thereof will be paid to the Company shortly after the AGM and each Convertible Note will have a conversion price of EUR 0.15 per share. The Convertible Notes can be converted by their holders at any time prior to the repayment of the Convertible Notes. The Convertible Notes automatically convert into new shares in the Company upon completion of the US IPO and, should the US IPO not take place, the Company can force the conversion of the Convertible Notes at any time after 1 May 2016. The Convertible Notes can be repaid by the Company after 1 May 2035 if, and to the extent, they have not been converted. The Investors may also declare the Convertible Notes to be repaid in the event of certain defaults by the Company, including but not limited to the event that the aggregate gross proceeds of the Convertible Notes, the US IPO and potential other offerings prior to the completion of the US IPO would exceed USD 95 million.
Each Warrant entitles the holder to subscribe for one new or treasury share in the Company at a subscription price of EUR 0.17. The Warrants, irrespective of the contemplated US IPO, may be exercised for a period of five (5) years from a date falling five (5) months after issuance of the Warrants.
The conversion price of the Convertible Notes and exercise price of the Warrants have been determined by considering the share price of the Company's shares in public trading on NASDAQ OMX Helsinki Ltd, the non-secured and interest free nature of the Convertible Notes as well as availability and terms of possible other financing alternatives.
The maximum number of shares in the Company to be issued under the Convertible Notes and Warrants amounts to 562,000,000 shares representing approximately 123 per cent of the existing shares and votes in the Company, half of which will be used for the short-term Convertible Notes and the other half for the long-term Warrants.
As part of the Agreement, the election of two (2) new members of the Board of Directors will be proposed to the AGM, the election of whom is a condition to the obligations of the Investors to subscribe for the Convertible Notes.
The obligations of the Investors under the Agreement are subject to certain additional conditions, including no material adverse change related to Biotie and the validity of certain representations and warranties. In relation to the issuance of Convertible Notes, the Agreement includes certain indemnification undertakings in the event of a qualified breach of the Company's representations and warranties, in which case Biotie would have an obligation to indemnify the Investors against damages resulting from such breach in certain situations, however, not to exceed a maximum amount corresponding to the Investors' total investment in the issuance of Convertible Notes. In connection with the issue of Convertible Notes and Warrants, the Company will undertake to enable certain sales of the Company's shares under the U.S. Securities Act of 1933.
Biotie also announces that it intends to conduct a US IPO and listing on the Nasdaq Global Market of American Depositary Receipts representing the Company's shares. The Company will remain a Finnish company, and its ordinary shares will continue to be listed on NASDAQ OMX Helsinki Ltd.
The maximum number of new shares in the Company to be issued in the US IPO and potential other offerings in connection with the US IPO amounts to 530,000,000 shares representing approximately 42 per cent of the shares and votes in the Company after such US IPO and potential other offerings in connection with the US IPO (including the dilution resulting from the automatic conversion of the Convertible Notes at the US IPO, but excluding the dilution resulting from the potential exercise of the Warrants).
Use of Proceeds
The Company intends to use the proceeds of the Convertible Notes and the US IPO and potential other offerings in connection with the US IPO, together with its current liquid assets and future revenue from Lundbeck in respect of Selincro to finance the Tozadenant Phase 3 Trial at least through to the next major milestone, namely top-line data on the primary endpoint at 24 weeks, which is currently expected by the end of 2017. Further information on the contemplated Tozadenant Phase 3 Trial may be found from the Company's release of 23 April 2015.
Rationale for the transaction and shareholder support
The Board of Directors, having considered various strategies for financing the Tozadenant Phase 3 Trial, has concluded that the issuance of the Convertible Notes and Warrants, and the carrying out of the US IPO and potential other offerings in connection with the US IPO, is the most favorable option for the Company to raise the large amount of capital required to conduct such a study. This strategy will enable the product to move quickly into clinical trials for the benefit of patients, and consequently, to maximize the value of tozadenant to the Company and its shareholders. There are, therefore, weighty financial reasons from the Company's perspective for deviating from shareholders' pre-emptive subscription rights in the issuance of Convertible Notes and Warrants, and shares in the US IPO.
The Board of Directors will convene the AGM to decide on the necessary authorizations and election of new Board members relating to the transaction announced herein. Existing Biotie shareholders representing in aggregate more than 50 per cent of the Company's total number of shares and votes have indicated that they will support the granting of such authorizations and the election of new Board members at the AGM.
The Board will decide on the detailed terms and conditions of the issuance of Convertible Notes and Warrants pursuant to the Agreement as well as the detailed terms and conditions of the US IPO and potential other offerings in connection with the US IPO provided that the AGM grants the necessary authorizations.
The issuance of the Convertible Notes and Warrants is expected to take place shortly after the AGM, and the US IPO is expected to complete by the middle of 2015, which would allow the recruitment into the Tozadenant Phase 3 Trial to commence as planned.
Timo Veromaa, President and Chief Executive Officer of Biotie commented: "We are delighted to have these leading investors contributing to the finance of the clinical development of our lead product candidate tozadenant, for which we have worldwide rights. Parkinson's disease remains an area of high unmet medical need and these funds, together with the proposed US IPO, will allow us to commence a pivotal Phase 3 clinical trial that we believe could form the basis for approval of tozadenant by the FDA as an adjunctive treatment to levodopa in Parkinson's".
Biotie Therapies Corp.
President and CEO
For further information, please contact:
Virve Nurmi, Investor Relations Manager, Biotie Therapies Corp.
NASDAQ OMX Helsinki Ltd
Biotie is a specialized drug development company focused on products for neurodegenerative and psychiatric disorders. The current development products include tozadenant for Parkinson's disease, which is transitioning into Phase 3 development, and two additional compounds which are in Phase 2 development for cognitive disorders including Parkinson's disease dementia, and primary sclerosing cholangitis (PSC), a rare fibrotic disease of the liver. Biotie's development has already delivered Selincro (nalmefene) for alcohol dependence, which received European marketing authorization in 2013 and is currently being rolled out across Europe by partner Lundbeck.
Tozadenant is an oral, selective adenosine A2a receptor antagonist which has previously reported positive data from a 420-patient Phase 2b study evaluating tozadenant in Parkinson's patients experiencing levodopa related end-of-dose 'wearing-off'. Full data from this trial was published in Lancet Neurology in 2014. The trial met its primary endpoint of a highly significant decrease in "off" time vs. placebo, as well as demonstrating efficacy across multiple secondary endpoints. The Phase 3 protocol will largely replicate that of the Phase 2b study. Biotie expects that the published Phase 2b study will be considered the first of two pivotal studies required for registration for tozadenant in Parkinson's patients with end-of-dose 'wearing-off'.