ERYTECH extends its cash horizon by implementing a convertible bond financing

Agreement with Alpha Blue Ocean and European High Growth Opportunities Securitization Fund for the issuance of zero-coupon convertible notes with share warrants attached

LYON,France and CAMBRIDGE, Mass., June 25, 2020 (GLOBE NEWSWIRE) -- ERYTECH Pharma (Euronext: ERYP - Nasdaq: ERYP), a clinical-stage biopharmaceutical company developing innovative therapies by encapsulating therapeutic substances in red blood cells, announced today the signature of an agreement allowing the issuance for the benefit of Luxembourg-based European High Growth Opportunities Securitization Fund, represented by its asset manager European High Growth Opportunities Manco SA (entities related to Alpha Blue Ocean) of convertible notes whereby the Investor committed to subscribe up to a maximum of EUR 60 million in the event of conversion of all the notes, subject to the regulatory limit of 20% dilution, currently representing approximately EUR 30 million, unless further authorized. The notes come with share warrants representing 10% of the nominal amount of the issued notes whose exercise price will reflect a 20% premium over the lowest volume-weighted average daily price of the share over the reference period preceding the issue of the first tranche.

"We are pleased to extend ERYTECH’s cash horizon with this flexible financing facility,” said Eric Soyer, CFO and COO of ERYTECH. “The facility provides ERYTECH with tailor-made terms to best preserve the Company’s and its shareholders’ interests as the Company enters in the final stage of its advanced clinical program. The financing facility comprises zero-coupon notes and the limited discount on conversion, as well as a moderate warrant coverage with clear interest alignment between ERYTECH and Alpha Blue Ocean."

"ERYTECH’s encapsulation technology is in our view one of the most promising therapeutic alternatives for the proper administration of high-toxicity or difficult to deliver drugs and holds the promise to cover a wide range of diseases were effective therapies are not currently available. We are excited to be part of a company at the forefront of disruptive therapy development, whose mission is perfectly aligned with ABO’s: committed to a better tomorrow » adds Pierre Vannineuse, CEO of Alpha Blue Ocean."

Main characteristics of the note warrants, notes and warrants

This financing line aims at improving the Company's financial strength and extending its cash horizon for the next key development milestones of the Company.

Terms and conditions of the issuance and legal framework

The issuance of the 1,200 note warrants (bons d'émission) (the "Notes Warrants" or "BEOCABSA") and of the tranches of convertible bonds (the "Notes") with warrants attached (the "Warrants" and together with the Notes, the "OCABSA") will be made pursuant to the 25^th resolution of the extraordinary general shareholder's meeting held on June 21, 2019 (the "Shareholder's Meeting").

According to this resolution, the Shareholder's Meeting delegated to the Company's board of directors (the "Board of Directors"), with the option of sub-delegation, its authority to decide the capital increase with cancellation of preferential subscription rights of shareholders to the benefit of several categories of persons, up to a maximum nominal amount of 1 million euros, i.e. 10 million shares, and a maximum nominal amount of debt securities of 150 million euros.

It being specified that this issuance will not give rise to the filing of an admission prospectus with the AMF.

Therefore, the maximum number of new shares to be admitted on Euronext Paris resulting from the conversion of the Notes and the exercise of the Warrants (the "New Shares") to be issued is 10 million shares capped at 20 % of the number of shares admitted to trading during the last twelve months at the date of their issuance (the "20 % Threshold").  On an indicative basis, at the closing share price as of June 24, 2020 (EUR 8.72), the 20% Threshold limit would allow for the drawdown of approximately 10 tranches for an amount of approximately EUR 30 million. Additional issuance above this 20% Threshold will be subject to further authorization.

On June 24, 2020, ERYTECH Pharma (the "Company")'s Chief Executive Officer decided to issue 1,200 Note Warrants for free under the conditions described below, in accordance with the provisions of article L. 225-138 of the French Commercial Code and the sub-delegation granted by the Board of Director's in its meeting of June 8, 2020 using the 25^th resolution of the Shareholders' Meeting (the "Resolution"), for the benefit of European High Growth Opportunities Securitization Fund, represented by its asset manager European High Growth Opportunities Manco SA (entities related to Alpha Blue Ocean) (the "Investor"). The Note Warrants may be exercised in tranches over a period of 24 months from June 25, 2020, i.e. until June 25, 2022.

The issuance of the first tranche of OCABSA to the benefit of the Investor is expected to take place in July 2020 upon exercise of 60 Note Warrants and will give rise to the issuance of 60 Notes with Warrants attached for a total subscription price of EUR 2,940,000. 

Issuance and main characteristics of the Note Warrants

The holders of the Note Warrants are required, upon request of the Company, to subscribe to an OCABSA tranche per exercise of 60 Note Warrants, or of 30 Note Warrants if the Issuer's market capitalization is lower to 50 million euros during 20 consecutive Trading Days (a "Market Event"), it being specified that this reduction in the size of the tranches, which can only occur on the Issuer's request, will automatically lapse once this threshold is exceeded again without any conditions of duration. "Trading Day" means any day during which Euronext in Paris is open for business, subject to certain exceptions including days when the total value of shares traded is less than 100,000 euros.

Each exercise of a Note Warrant will give rise to the issuance of 60 Notes (or of 30 Notes in case of a Market Event), with Warrants attached.

The Note Warrants are freely transferable to any affiliate of the Investor but may not be transferred to a third party other than an affiliate without the prior consent of the Company. They will not be the subject of a request for admission to trading on Euronext Paris regulated market ("Euronext Paris") and will therefore not be listed.

The Issuer may decide, within the limits of the 20% Threshold, whether or not to request the subscription of a tranches within 24 months of the issuance of the Note Warrants, it being specified that as from the first tranche’s disbursement, the Investor shall also have the right to request the issuance of two tranches.

After the drawdown of the first tranche and until June 25, 2022, the Company may request the drawdown of a tranche by the Investor at the earliest of the following dates:

1. the Trading Day following the conversion or redemption of all Notes issued under the previous tranche; and
2. the Trading Day following the expiry of a 20 Trading Day period following the drawdown of the previous tranche, subject to the extension of this period in the event of the occurrence of certain events.

Any request for a drawdown by the Company will be subject to the satisfaction of certain conditions precedent, including (i) the fact that the Company's closing price on Euronext Paris has been 150% higher than the nominal value of the Company's shares¹  for more than 60 Trading Days prior to the request, or (ii) the fact that the Company has a number of shares that may be issued corresponding to at least 175% of the number of shares issuable upon conversion of the outstanding Notes and of the Notes to be issued upon the drawdown request.

The Company may, as from the second tranche and in certain circumstances, request the simultaneous payment of two tranches.