Item 1.01 Entry into a Material Definitive Agreement.
On January 31, 2020, CTI BioPharma Corp. ( the “Company”) entered into an Investment Agreement (the “Investment Agreement”) by and among the following existing stockholders of the Company (or affiliates thereof): BVF Partners L.P. (“BVF”), Stonepine Capital, L.P., OrbiMed Private Investments VI, LP and New Enterprise Associates, Inc. (collectively, the “Investors”). Pursuant to the Investment Agreement, the Investors have agreed to, severally and not jointly, purchase shares of the Company’s common stock, par value $0.001 (“Common Stock”), and/or series X convertible preferred stock, par value $0.001(“Series X Preferred”), having an aggregate value equal to the value of all shares of Common Stock and/or Series X Preferred (if any) offered but not purchased pursuant to the exercise of rights in the Company’s rights offering (the “Rights Offering”), including any exercise of rights by the Investors, up to a total value of $60,000,000 (the “Backstop Commitment”). The Investment Agreement contains customary representations, warranties and covenants by the parties.
Each share of Series X Preferred will be convertible into 10,000 shares of Common Stock at the option of the holder at any time; subject to certain limitations, including, that the holder will be prohibited from converting Series X Preferred into Common Stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of Common Stock above a conversion blocker, which is initially set at 9.99% of the total Common Stock then issued and outstanding immediately following the conversion of such shares of Series X Preferred. In the event of the Company’s liquidation, dissolution or winding up, holders of Series X Preferred will participate pari passu with any distribution of proceeds to holders of Common Stock and series O convertible preferred stock (“Series O Preferred”). Holders of Series X Preferred are entitled to receive dividends on shares of Series X Preferred equal (on an as-if-converted-to-Common Stock basis) to and in the same form as dividends actually paid on the Common Stock or other junior securities of the Company. Shares of Series X Preferred will generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series X Preferred will be required to amend the terms of the Series X Preferred.
The Investors are existing stockholders of the Company. BVF owns approximately 11.95% of the Company’s outstanding Common Stock (or 23.1% if all of the Series O Preferred shares held by BVF were converted into Common Stock), and Stonepine Capital, L.P., OrbiMed Private Investments VI, LP and New Enterprise Associates, Inc. own 6.23%, 8.62% and 5.59% of the Company’s outstanding Common Stock, respectively. To date, none of the Series O Preferred has been converted into shares of Common Stock. One of the Company’s directors, Matthew Perry, is President of BVF. Mr. Perry recused himself from the approval by the Company’s Board of Directors of the Investment Agreement and the Backstop Commitment. The Company will not pay a fee to any Investor in connection with the Backstop Commitment.
The above description of the Investment Agreement does not purport to be complete and is qualified in its entirety by reference to the Investment Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K, which is incorporated by reference herein. A summary of the rights, preferences and privileges of the Series X Preferred Stock described above does not purport to be complete and is qualified in its entirety by reference to a Form of the Certificate of Designation of Preferences, Rights and Limitations of Series X Convertible Preferred Stock, which is included as Exhibit A to the Investment Agreement.