DXB Announce Rights issue to raise $12M for FSGS
Our 2021 Biotech Pick of the Year, Dimerix (ASX:DXB), announced a non-renounceable entitlement offer to raise up to $12M to progress its Phase 3 clinical trial for FSGS, a rare kidney disease.
This is a critical time for DXB and DXB shareholders such as ourselves as DXB approaches a key catalyst - the interim analysis point of its Phase 3 trial.
Interim results from the Phase 3 trial are on track to be delivered by Q12024, as of the latest investor presentation.
We think it is a sensible move by DXB to shore up its balance sheet ahead of these results and the rights issue gives enough runway for the company to achieve its objectives at this important juncture.
DXB’s $12M raise is split into two components - an entitlement offer and a convertible note agreement.
- Entitlement offer looking to raise up to $8.56m
The entitlement offer is on a 1 for 3 basis, meaning existing shareholders will be eligible to subscribe for 1 new DXB share for every 3 shares they currently hold.
The new shares are being offered at 8c per share.
The offer also comes with free options (2 free options for every 2 new shares purchased). DXB is calling them “short term” and “long term” options with the following terms:
- Short term - unlisted option exercisable at 12.6c per share expiring 31 March 2024.
- Long term - (to be listed) option exercisable at 15.4c per share expiring 30 June 2025.
Interestingly, the entitlement offer is also being partially underwritten by both directors (and their associates) as well as the broker involved in the raise (Bell Potter).
The directors and their associates have committed to taking $1.15M in entitlements with a $500k sub-underwriting agreement & Bell Potter have partially underwritten ~$4.05M of the raise.
Underwriting in a tough market is always good to see because it signals that investors are willing to back the company while also providing certainty to the company over a portion of the capital being raised.
Below is the timetable for the entitlement offer:
- Convertible note - raising $3.5M (with options for a further $8.5M).
The convertible note deal is with a US-based investment fund managed by Mercer Street Capital Partners.
The deal is for a maximum of $12M split across two tranches:
- Tranche 1 - $3.5 million
- Tranche 2 - $8.5 million (subject to mutual agreement of the Company and Mercer).
The notes have a 18 month expiry and will be converted at 11c per share (if converted during the first three months) OR at the lesser of 11c/90% of 2 day Volume Weighted average Price (VWAP) from a 15 day period.
Ultimately, the notes will have a maximum conversion price of 11c per share and a floor price of 5c per share.
What’s next for DXB:
While the company continues patient recruitment for its Phase 3 trials our focus in the short term will be to see how much of the entitlement offer gets taken up.
