Redwood Pharma carries out a rights issue with the aim of replacing the existing credit facility

On August 25, 2019, the Board of Directors of Redwood Pharma AB (publ) decided to carry out a rights issue of shares which, upon full subscription, will provide the company SEK 11.5 million before issue costs of approximately SEK 0.3 million. The reason for the issue is mainly to liquidate the remaining part of the convertible facility that has existed since 2018.

The Board of Directors of Redwood Pharma AB (publ) ("Redwood Pharma" or "the Company"), supported by authorization from the Annual General Meeting on May 7, 2019, has decided to issue shares with preferential rights for existing shareholders ("Rights Issue"). The terms of the Rights Issue mean that eight (8) existing shares entitle the holder to subscribe for one (1) new share at the price of SEK 7.25. The subscription period runs from September 4 to September 23, 2019.

Through the subscription, the Company will raise up to SEK 11.5 million before issue costs, which are estimated to amount to SEK 0.3 million. The issue is not secured by subscription agreements or guarantee agreements.

Through the Rights Issue, the company's share capital, at full subscription, increases by SEK 317,112.60 from SEK 2,536,902 to SEK 2,854,014.60. In this case, the number of shares will increase by 1,558,563 from 12,684,510 to 14,270,073 shares.

Background and intentions

Due to the rights issue that was implemented in the spring of 2018 and the convertible facility that was included at the same time, the Company raised sufficient capital to complete the Phase II trial of RP101. However, only SEK 5 million of the SEK 15 million facility have been drawn to date.

The costs for conducting the clinical trial continue according to plan, without significant deviations or increased costs.

The Board is of the opinion that the facility was very well adapted to the needs of the Company, but that recent discussions about such financing solutions can have other and negative effects for the Company and its owners. The general objection to this type of convertible facility is that existing shareholders may suffer from difficult predictable dilution effects and that the periods of increasing sales pressure that may arise after completed conversions offset a market price trend.

In the light of the above, the Board of Directors chose in spring 2019 to no longer utilize the convertible facility until further notice, and at the same time commenced work on finding a solution to completely or partially liquidate the scheme. The short-term capital requirement was solved by acquiring a bridge loan totaling SEK 4.5 million from three parties, of which SEK 3 million from two private investors and SEK 1.5 million from Formue Nord Markedsneutral A / S, which issued the convertible facility.

The present rights issue is aimed at offering the Company's shareholders an opportunity to raise the necessary capital for the Company's business with issue funds and thereby, depending on the outcome, reduce or eliminate the need to further utilize the convertible facility.

Prior to the new issue, Formue Nord has extended the time for the utilization of the convertible facility from originally December 31, 2019 to June 30, 2020. This is only for the purpose of securing the Company's access to necessary capital in the event of a weak outcome in the Rights Issue. Upon full subscription, the Board will not utilize any additional portion of the SEK 10 million remaining of the facility.

The arrangement does not entail costs for the Company, except for certain issue administrative costs and interest costs for the bridge loan.

The issue proceeds will be used to cover the completion of the ongoing Phase II trial of RP101 (SEK 6 million), business development / licensing of RP101 and general operating costs (SEK 3 million), cash repayment of the bridge loan from Formue Nord (SEK 1.5 million) and for the evaluation of new application areas for the Company's so-called delivery substance IntelliGel (SEK 1 million).

The remaining part of the bridge loan (SEK 3 million) will, to the extent possible, be offset against shares in the Rights Issue, and, if there is insufficient capacity, against shares in a directed issue on similar terms, which will be presented in more detail in the issue memorandum which will be published before the subscription period begins.

CEO's comments

“Through a rights issue, we now offer our shareholders with equity to finance Redwood Pharma's operations past the time when we expect the results of the ongoing clinical trial and well into 2020. We will only utilize the existing credit facility, which we have also extended by six months, to the extent that the issue is not fully subscribed. Against this background, we do not believe that a guarantee for the issue is needed, which means that it can be implemented in a very cost-effective manner, ”says Martin Vidaeus, CEO of Redwood Pharma.

Preliminary timetable for the Rights Issue (all dates refer to 2019)

August 29    Last day for trading with the Redwood Pharma share with the right to receive subscription rights

August 30    First day of trading in the Redwood Pharma share without the right to receive subscription rights

September 2    Record day for the right to receive subscription rights in the Rights Issue

September 3   Publication of issue memorandum

September 4    The subscription period begins

                        Trading in subscription rights begins

                        Trading in paid subscribed shares (BTA) begins

September 19    Last day for trading in subscription rights

September 23    Last day of subscription period

September 26   Publication of outcome of the Rights Issue

For more information:
Martin Vidaeus, CEO Redwood Pharma AB (publ.)
Tel: +46 (0) 70 232 29 29
E-mail: martin.vidaeus@redwoodpharma.com

This information is information that Redwood Pharma AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, August 25, 2019.

About Redwood Pharma
Redwood Pharma develops ophthalmic products for unmet medical needs. The Company’s first project is the development of drug candidate RP101 with a known active substance against chronic dry eye in postmenopausal women who have moderate to severe symptoms. With the drug delivery platform IntelliGel the release of active substances is controlled. Through the use of IntelliGel, Redwood Pharma can also improve dosing of other established drugs. Redwood Pharma’s strength lies in formulation and early clinical development.  Revenues will be generated through licensing agreements with pharmaceutical companies that have capabilities to manufacture and sell commercial products worldwide.

Redwood Pharma AB (publ.) is listed on Spotlight Stock Market, a Swedish Multilateral Trading Facility (Ticker: REDW.ST, ISIN: SE008294789).

For more information visit: www.redwoodpharma.com