A.P. Pharma, Inc. (OTCQB: APPA), a specialty pharmaceutical company, today announced that it has entered into definitive agreements with investors, including Tang Capital Partners, LP, for a private placement of up to $4.5 million in convertible notes. The transaction is expected to close on or about April 29, 2011, subject to the satisfaction of certain closing conditions. Upon the closing, an initial amount of $1.5 million will be funded to the Company. Proceeds from the financing will be used to achieve important milestones toward resubmitting the APF530 New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA).
The Company also announced that it has appointed John B. Whelan as president, chief executive officer and a director and Michael A. Adam, Ph.D. as senior vice president and chief operating officer.
“Since taking the position of acting chief executive officer, John has helped the organization move forward in an efficient manner to address the concerns expressed by the FDA in its Complete Response Letter regarding the NDA for our lead product, APF530,” said Paul Goddard, Ph.D., chairman of A.P. Pharma’s board of directors. “Under John’s leadership, the Company has held productive meetings with the FDA and gained agreement on the proposed resolution to some of the issues identified in the Complete Response Letter. As a result of this progress, we were able to secure bridge financing and attract Dr. Michael Adam, who brings over 25 years of experience in drug development, regulatory affairs and pharmaceutical operations, as our chief operating officer.”
Summary of Terms of the FinancingThe $4.5 million of convertible notes issuable pursuant to this transaction have a 10-year term and will be convertible into shares of A.P. Pharma common stock at a conversion rate of 25,000 shares of common stock for every $1,000 of principal that is converted. The convertible notes bear an annual interest rate of 20%, payable quarterly in cash or via addition to the principal amount of the convertible notes at the election of the investors. The initial proceeds from this transaction are $1.5 million. The remaining $3.0 million can be funded to the Company at the investors’ discretion within two years of the closing date. Additional terms of this transaction will be disclosed on a Form 8-K Report to be filed by the Company with the Securities and Exchange Commission.
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