Ebb & Flow
With capital markets tight, biotech companies are looking for non-dilutive ways to guarantee access to new funds should they need them. Last week, Micromet (NASDAQ:MITI) and Newron (SWX:NWRN) both secured equity agreements that provide them with access to working in the coming two to three years. Cancer, inflammation and autoimmune company Micromet has the option to draw on $75 million from Kingsbridge Capital, while CNS and inflammation company Newron has access to up to CHF30 million ($24.8 million) from YA Global Investments.
Neither company is strapped for cash, but both see the deals as strengthening their future negotiating positions with potential partners as well as providing financial security in the coming years. Micromet recently completed a PIPE that raised $40 million (see BioCentury, Oct. 6). Newron still has about $50 million in the bank from its 2006 IPO, which raised CHF118.1 million ($97.5 million) (see BioCentury, Dec. 11, 2006).
In both cases, the investment companies have agreed not to short the company's stock.
Micromet's agreement expands an existing $25 million committed equity financing facility (CEFF) it established in 2006 but never used. The deal allows the biotech to draw down up to $10 million or 1.5% of its market cap at any one time between now and Dec. 1, 2011, in exchange for newly issued shares.
Kingsbridge would purchase the stock at discounts ranging from 6-14% depending on the average market price of the stock during an eight-day period before the purchase.
"The CEFF is a marvelous tool for creating a backstop or insurance in the environment we have today. It also provides us with additional financial strength and flexibility about how much you draw and when you draw," Micromet CFO Buck Phillips told Ebb & Flow.
Under the terms of Newron's equity funding agreement, the biotech has the option to put newly issued shares to a total value of up to CHF30 million over 36 months. YA Global can either accumulate these shares up to a maximum holding in Newron of 9.99 % or place them in the market.
The subscription price for the newly issued Newron shares will be calculated on the basis of the daily volume weighted average price of the shares over five consecutive trading days following the date of the company's notice to draw on the facility, less a 5% discount. Newron will pay YA Global a one-time commitment fee of CHF300,000 as well as a legal and structuring fee.
"The control and flexibility provided by this additional source of financing will give us the option to raise significant funds over a period of three years