Saniona proposes financing of up to SEK 158 million:
In addition, Saniona enters into a loan facility agreement of SEK 25 million to Formue Nord
The directed issue
Saniona completes a directed issue to Formue Nord at a subscription price of SEK 25 per share and 1 million shares. The subscription price corresponds to a discount of 10.2 percent based on VWAP 10 days. It entails a dilution of 3.4 percent for existing shareholders.
Our take on the directed issue- We would have wanted to see the directed part being carried out to a more well-renowned, institutional investor with a long-term focus. Our knowledge of Formue Nord and their track record is limited.
Saniona has entered into a loan facility agreement with Formue Nord of SEK 25 million, which is conditional upon approval at extraordinary general meeting resolves to approve the issue of warrants (see below). Any loans drawn carries market interest rates and shall be repaid in February 2021 at the latest.
Our take on the loan facility– Our general take is that loss-making biotech companies should seek equity funding and not enter into loan agreements.
Rights issue and the directed unit issue of warrants
Saniona has issued a directed issue of warrants, free of payments to Formue Nord, the strike price at SEK 25-30 per share. The directed issue is of 465,518 units, where one unit consists of three warrants in three different series (TO1, TO2, and TO3).
Saniona has also issued free of payment warrants to existing shareholders at the same strike price as the directed issue. Saniona’s shareholders have preferential rights to subscribe for one unit per 29 existing shares (1:29). The rights issue consists of 1,014,224 units in total. Each unit consists of one warrant of series TO1, one warrant of series TO2, and one warrant of series TO3. Each warrant gives the holder the right to subscribe for one new share in Saniona.
The utilization periods are:
11-25 May 2020 for TO1
7-21 September 2020 for TO2
6-20 April 2021 for TO3
Our take on the issue of warrants – The issue of warrants to existing shareholders is a rather good structure. It is better than a rights issue of stock with preferential rights to existing shareholders, which would likely be to a hefty rebate, causing pressure on the stock price. Moreover, no guarantors are involved which makes it cheaper. Lastly, as the warrants are utilized over three occasions, the last occasion is in April 2021, the attractiveness of the TO’s and participation rate will depend on the success in Saniona’s pipeline. Saniona buys itself time with this structure and can continue to approach investors meanwhile. Also, Saniona has an extensive news flow the coming year; phase 2a results in Hypothalamic Obesity, a possible launch with tesofensine in Mexico against obesity and the initiation of a phase 2b/3 program in Prader-Willi syndrome.
Concluding remarks and impact on our valuation
This is a funding structure that involves several components. Our overall impression is that it is a mixed bag; it could have been worse; it could have been better. Top on our wish list was a directed issue to well-renowned institutions that entailed an immediate and durable solution to the funding situation. The stock price, which never lies (!) traded mostly flat on Friday, closing eventually at +1.3 percent (SEK 31.95 per share). As we considered a future capital funding in our latest valuation, our Base Case stands at SEK 95 per share. We are working on a more thorough review of the case.
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