Serial private-investment-in-public-equity issuer Northwest Biotherapeutics (NWBO) has agreed to purchase $11 million of convertible senior notes from bondholders affiliated with Whitebox Advisors.
The notes were due March 10, 2017 but the investors and the company have agreed to a series of payments over the next four months, with the Whitebox investors receiving common shares in addition to the repayment of the notes.
The original notes were issued in August 2014 and matured in August 2017. But Northwest was obligated to make an offer in January of this year to buy the notes back for cash. When Whitebox accepted the offer, the biotechnology company was in turn obligated to close the deal by March 10.
The day before the purchase was due, the company signed an agreement which called for Northwest to immediately pay Whitebox $500,000 plus accrued interest through the stated maturity at 7% per year with the retirement of $500,000 in bonds. Whitebox will also receive common shares worth $1.5 million at a share price of 37 cents a share.
Northwest also agreed to pay Whitebox $500,000 plus accrued interest at 7% at the earliest of the third business day following any new funding by the company or March 31, along with the note retirement of $500,000 to occur when all of the obligations under the repurchase agreement are completed.
On April 19, Northwest is obligated to pay $2 million plus interest as well as retirement of $2 million in notes. On May 20, the company will pay $2.5 million plus interest and retire $2.5 million in notes. The company will pay $5.5 million plus interest and retire $5.5 million in bonds.
Finally, Northwest agreed that if the company raises more than $15 million during the period of note repurchase, 30% of the proceeds will go towards repurchasing notes within three days of the financing event, with the prepayments going toward the latest scheduled note payment then due.
The company noted that it pre-funded the interest payments on the notes to the original due date so the company will not dip into operating funds to make the interest payments.
Northwest is a clinical stage biotech company focused on developing immunotherapy vaccines to treat cancer and solid tumor cancers. Its lead product is DCVax, which is a platform technology that uses activated dendritic cells to reinvigorate and educate the immune system to attack cancers.
Whitebox is a Minneapolis-based investment advisor with to hedge funds and certain other institutional investors.
Northwest has not yet filed its 10-K and the last financial filing is for the quarter ending Sept. 30, 2016. At that time, the Bethesda, Md.-based immunotherapy company had just $802,000 in cash in its coffers. It posted a net loss of $29.2 million on revenues of $159,000. The company used $9.8 million in cash for operations, a burn rate of about $3.3 million per month.
Looking at the cash balance of the company at the end of last September, making the initial note payment would seem impossible, but Northwest raised $10 million on Dec. 28 by selling 28.5 million common shares at 35 cents each. The transaction with Heights Capital Management and InterCoastal Capital also included 5-year warrants to purchase 14.2 million shares at 35 cents each.
According to FactSet Research Systems, Heights holds 5.27% of Northwest and InterCoastal 2.86%. Other investors include Woodford Investment Management LLP with 15.8% and Cognate Bioservices Inc. at 8.7%.
The company lists $48.9 million in assets and total liabilities of $53.9 million as of Sept. 30 including a $135,000 6% senior unsecured note that matured in 2011, an 8% unsecured note for $50,000 held by a related party, and a mortgage for 10.3 million at 12%.
The company received good news from the FDA last month when the agency said it was lifting the clinical hold on the company's flagship drug DCVax-L Phase lll trial, which had been on hold since August 2015. DCVax-L is a brain cancer vaccine. The FDA noted that while progression free survival events had been reached, the trials were still short of overall survival events.
Since July 2004, the company has raised $304.7 million in 24 PIPE transactions that include 7 debt deals, a pair or equity lines and 15 sales of common shares.