Item 1.01 Entry into a Definitive Material Agreement.
License Agreement with First Wave Bio, Inc.
On December 31, 2020, AzurRx BioPharma, Inc. (the
“Company”) entered into a License Agreement (the
“License Agreement”) with First Wave Bio, Inc.
(“First Wave”), a privately-held Delaware corporation.
Pursuant to the License Agreement, First Wave granted the Company a
worldwide, exclusive right to develop, manufacture, and
commercialize First Wave’s proprietary immediate release and
enema formulations of niclosamide for the fields of treating Immune
Checkpoint Inhibitor-Associated Colitis (“ICI-AC”) and
Severe Acute Respiratory Syndrome Coronavirus 2
(“COVID”) gastrointestinal infections (“GI”)
in humans (the “Product”). The Product uses
First Wave’s proprietary formulations of niclosamide, a
pro-inflammatory pathway inhibitor. The Company plans to commence
in 2021 both a Phase 2 trial of the Product for COVID in GI and a
Phase 1b/2a trial for ICI-AC.
In consideration of the license and other rights granted by First
Wave, AzurRx will pay First Wave a $9.0 million upfront cash
payment and an additional payment of $1.25 million due on June 30,
2021. In addition, AzurRx is obligated to pay potential milestone
payments to First Wave totaling up to $37.0 million for each
indication, based upon the achievement of specified development and
regulatory milestones. The Company is also obligated to pay First
Wave royalties as a mid-single digit percentage of net sales of the
Product, subject to specified reductions. The Company is also
obligated to issue to First Wave junior convertible preferred
stock, initially convertible into $3.0 million worth of common
stock, par value $0.0001 per share (the “Common Stock”)
of the Company, based upon the volume weighted average price of the
Common Stock for the five-day period immediately preceding the date
of the License Agreement, or $0.9118 per share. The preferred stock
will convert automatically into Common Stock upon the Stockholder
Approval (as defined and further described below). The purchase
agreement pursuant to which the preferred stock is issued will
contain customary demand and piggyback registration rights with
respect to the Common Stock issuable upon conversion.
The Company is now solely responsible, and has agreed to use
commercially reasonable efforts, for all development, regulatory
and commercial activities related to the Products in the ICI-AC and
COVID fields. The Company may sublicense its rights under the
License Agreement and, if it does so, will be obligated to pay
milestone payments and royalties to First Wave based on the
sublicensee’s development and commercialization of the
Licensed Products.
Pursuant to the License Agreement, First Wave retains rights to
develop and commercialize the licensed niclosamide formulations
outside the ICI-AC and COVID fields, and to develop and
commercialize other niclosamide formulations that are not licensed
to Company. However, if prior to April 30, 2021, First Wave seeks
to outlicense, sell to or otherwise grant rights to a third party
related to any products containing niclosamide for use outside the
ICI-AC or COVID fields to develop or commercialize a product
containing niclosamide for use outside of the Field then First Wave
shall provide to AzurRx written notice of such proposal, in
reasonable detail and AzurRx shall have the right and option to
negotiate with First Wave with respect to a definitive agreement
for the acquisition of First Wave. Pursuant to the License
Agreement, the Company grants First Wave a worldwide,
non-exclusive, royalty-free, perpetual, irrevocable license for use
outside the ICI-AC and COVID fields, with the right to grant
sublicenses, under any Program IP and other intellectual property
owned by the Company and incorporated into the
Product.
The License Agreement terminates on a country-by-country basis and
product-by-product basis upon the expiration of the royalty term
for such product in such country. Each royalty term begins on the
date of the first commercial sale of the licensed product in the
applicable country and ends on date of expiration of the last to
expire royalty term with respect to the country. The License
Agreement may be terminated earlier in specified situations,
including termination for uncured material breach of the License
Agreement by either party, termination by AzurRx in specified
circumstances, termination by First Wave in specified
circumstances, termination by AzurRx for convenience with advance
notice, and termination upon a party’s insolvency or
bankruptcy. After expiration of the royalty term, AzurRx shall have
a non-exclusive, fully-paid, perpetual, royalty-free right and
irrevocable license with respect to any Product in any country
within the Territory.
In certain circumstances set forth in the License Agreement, in the
event that First Wave seeks to outlicense, sell or otherwise grant
to a third party rights relating to its proprietary formulations of
niclosamide (or any products containing niclosamide) for use
outside the ICI-AC and the COVID field, then First Wave must
provide the Company written notice and engage in good faith
negotiations with the Company for a period of time to try to reach
agreement on the terms of an acquisition of First Wave by the
Company. In the event that First Wave and the Company fail to reach
an agreement, then First Wave shall be free to negotiate a
transaction, and the right of first refusal shall be of no further
force or effect.
The License Agreement also contains customary representations,
warranties and covenants by both parties, as well as customary
provisions relating to indemnification, confidentiality and other
matters.
A copy of the License Agreement will be filed as an exhibit in an
amendment to this Current Report on Form 8-K or in a subsequent
periodic report to be filed under the Securities Exchange Act of
1934, as amended (the “Exchange Act”).
Registered
Direct Offering and Concurrent Private Placement
On December 31, 2020, the Company entered into a securities
purchase agreement (the “Purchase Agreement”) with a
single institutional investor, pursuant to which the Company agreed
to sell in a registered direct offering (the “Registered
Direct Offering”) 5,333.3333 shares of Series C 9.00%
Convertible Junior Preferred Stock, par value $0.0001 per share
(the “Series C Preferred Stock”), at a price of $0.75
per share, initially convertible into an aggregate of 5,333,334
shares of Common Stock, which is equivalent to the Issuable Maximum
(as defined below), at an initial stated value of $750.00 per share
and a conversion price of $0.75 per share.
The investor is anticipated to convert all of its Series C
Preferred Stock issued in the Registered Direct Offering, effective
immediately upon the closing. Upon such conversion, in lieu of the
issuance of shares of Common Stock, the Certificate of Designations
of the Series C Preferred Stock (the “Series C Certificate of
Designations”) provides for the issuance of pre-funded
warrants (the “Pre-funded Warrants”) to purchase Common
Stock, with an exercise price of $0.001 per share and no expiration
term, if necessary to comply with the Beneficial Ownership
Limitation contained therein (as defined and further described
below). Accordingly, the investor is expected to receive upon the
closing of the Registered Direct Offering an aggregate of 3,400,000
shares of Common Stock and Pre-funded Warrants to purchase up to
1,933,334 shares of Common Stock.
Concurrently with the sale of the Series C Preferred Stock in the
Registered Direct Offering, in a private placement offering
pursuant to the Purchase Agreement (the “Private
Placement” and, together with the Registered Direct Offering,
the “Offerings”), the Company also agreed to sell to
the investor an additional 5,333.3333 shares of Series C Preferred
Stock at the same price as the Series C Preferred Stock offered in
the Registered Direct Offering, which share are convertible into an
aggregate of 5,333,334 shares of the Company’s Common Stock,
together with warrants (the “Private Placement
Warrants”) to purchase up to an aggregate of 10,666,668
shares of Common Stock, with an exercise price of $0.80 per share
and an expiration term of five and one-half years from the date of
issuance.
The aggregate gross proceeds from the Offerings, excluding the net
proceeds, if any, from the exercise of the Private Placement
Warrants will be approximately $8.0 million, and the closing is
expected to occur on January 5, 2021 (the “Closing
Date”).
The net proceeds to the Company from the Offerings, after deducting
the placement agent’s fees and expenses and estimated
offering expenses, are expected to be approximately $6.8 million.
The Company intends to use the net proceeds to fund the payment of
cash consideration to First Wave under the License Agreement, and
for other general corporate purposes.
Pursuant to the Purchase Agreement, the Company must hold a meeting
of its stockholders not later than March 31, 2021 (the
“Meeting Deadline”) to seek such approval as may be
required from the stockholders of the Company (the
“Stockholder Approval”), in accordance with applicable
law, the applicable rules and regulations of the Nasdaq Stock
Market, the Company’s certificate of incorporation and bylaws
and the General Corporate Law of the State of Delaware with respect
to the issuance of shares of Common Stock upon conversion or
exercise of the Series C Preferred Stock and the Warrants sold in
the Private Placement and the related transactions described
herein, including (x) an increase in the number of authorized
shares of Common Stock above 150,000,000 and (y) the potential
issuance of shares of Common Stock in excess of the Issuable
Maximum.
The Series C Preferred Stock issuable in the Registered Direct
Offering, together with any Common Stock and/or Pre-Funded Warrants
issuable upon conversion thereof and any Common Stock issuable upon
exercise of the Pre-funded Warrants, are being issued pursuant to
an effective registration statement on Form S-3 (File
No. 333-231954) that the Company filed with the Securities and
Exchange Commission (“SEC”) on June 21, 2019 and that
was declared effective on June 25, 2019 , and a base prospectus
thereunder. The Company will file a prospectus supplement with the
SEC in connection with the sale of such securities.
The Series C Preferred Stock being sold in the Private Placement
and the Private Placement Warrants, together with any Common Stock
and/or Pre-Funded Warrants issuable upon conversion or exercise
thereof, as the case may be, are being sold and issued without
registration under the Securities Act of 1933 (the
“Securities Act”) in reliance on the exemptions
provided by Section 4(a)(2) of the Securities Act as transactions
not involving a public offering and Rule 506 promulgated under the
Securities Act as sales to accredited investors, and in reliance on
similar exemptions under applicable state laws.
In the Purchase Agreement, the Company has agreed not to (i) issue,
enter into any agreement to issue or announce the issuance or
proposed issuance of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for shares of
Common Stock or (ii) file any registration statement or any
amendment or supplement thereto, in each case other than as
contemplated pursuant to the Registration Rights Agreement (as
defined below) for a period ending at the later of (a) 30 days
after the resale registration statement has been declared effective
by the SEC or (b) the day of the Stockholder Approval. In addition,
the Company has agreed not to effect or enter into an agreement to
effect any issuance of Common Stock or any securities convertible
into or exercisable or exchangeable for shares of Common Stock
involving a variable rate transaction (as defined in the Purchase
Agreement) until the one-year anniversary of the date of the
Purchase Agreement, subject to certain exceptions.
The Purchase Agreement contains customary representations,
warranties and agreements by the Company, customary conditions to
closing, indemnification obligations of the Company and the
purchaser, including for liabilities arising under the Securities
Act, other obligations of the parties and termination provisions.
The representations, warranties and covenants contained in the
Purchase Agreement were made only for the purposes of such
agreement and as of specific dates, were solely for the benefit of
the parties to such agreement, and may be subject to limitations
agreed upon by the contracting parties.
The form of the Purchase Agreement, including the form of the
Series C Certificate of Designations, is filed as Exhibit 10.1 to
this Current Report on Form 8-K. The summaries of the terms of
these documents herein are subject to, and qualified in their
entirety by, such documents, which are incorporated herein by
reference.
Placement Agent Compensation
H.C. Wainwright & Co., LLC (“Wainwright”) acted as
exclusive placement agent for the Offerings pursuant to an
engagement letter dated as of October 13, 2020 (the
“Engagement Letter”). The Company has agreed to pay
Wainwright a cash fee equal to 8.0% and a management fee equal to
1.0% of the aggregate gross proceeds received by the Company in the
Offerings, or approximately $0.7 million. Pursuant to the
Engagement Letter, the Company also agreed to issue to Wainwright
or its designees warrants (the “Wainwright Warrants”)
exercisable for up to 746,667 shares of Common stock, which is
equal to 7.0% of the amount determined by dividing the gross
proceeds of the Offerings by the offering price per share of Common
Stock, or $0.75. The Wainwright Warrants will have substantially
the same terms as the Private Placement Warrants, except with an
exercise price of $0.9375, or 125% of the per share price of the
Series C Preferred Stock issued in the Offerings. The Wainwright
Warrants will not be exercisable until the Stockholder Approval is
obtained. The Wainwright Warrants and the shares issuable upon
exercise of the Wainwright Warrants will be issued in reliance on
the exemption from registration provided by Section 4(a)(2) of the
Securities Act as transactions not involving a public offering and
in reliance on similar exemptions under state laws. The Company
will also reimburse Wainwright $35,000 for non-accountable
expenses, up to $125,000 for legal fees and expenses and other
out-of-pocket expenses and $12,900 for clearing
fees.
Pursuant to a separate advisory engagement letter with Wainwright,
also dated as of October 13, 2020, as amended, the Company has
previously paid Wainwright a $150,000 cash retainer fee for
services related to exploring certain potential acquisition
transactions with First Wave, and the Company became obligated to
pay an additional $150,000 fee upon entry into the License
Agreement, in each case as advisory fees.
Terms of Series C Preferred Stock
Under the Series C Certificate of Designations, each share of
Series C Preferred Stock will be convertible, subject to the
Beneficial Ownership Limitation and the Issuable Maximum, at either
the holder’s option or at the Company’s option at any
time, into Common Stock at a conversion rate equal to the quotient
of (i) the $750 stated value (the “Series C Stated
Value”) plus all accrued and accumulated and unpaid dividends
on such share of Series C Preferred Stock divided by (ii) the
initial conversion price of $0.75, subject to specified adjustments
for stock splits, cash or stock dividends, reorganizations,
reclassifications other similar events as set forth in
the Series C Certificate of Designations.
The Series C Preferred Stock contains limitations that prevent the
holder thereof from acquiring shares of Common Stock upon
conversion that would result in the number of shares beneficially
owned by such holder and its affiliates exceeding 9.99% of the
total number of shares of Common Stock outstanding immediately
after giving effect to the conversion (the “Beneficial
Ownership Limitation”). The Series C Certificate of
Designations provides for the issuance of Pre-funded Warrants to
the extent necessary to comply with the Beneficial Ownership
Limitation.
Until the
Company has obtained the Stockholder Approval, the Company may not
issue, upon conversion of the Series C Preferred Stock and certain
related transactions, a number of shares of Common Stock which
would exceed 6,186,966 shares of Common Stock in the aggregate,
which amount is equal to 19.99% of the shares of Common Stock
issued and outstanding on December 31, 2020, subject to adjustment
for forward and reverse stock splits, recapitalizations and the
like (the “Issuable Maximum”). The Issuable Maximum
shall be applied collectively, when any conversions of Series C
Preferred Stock are aggregated together with all shares of Common
Stock issuable upon conversion or exchange of any securities issued
in certain related transactions to the Offerings, including (i) any
shares of preferred stock issuable to First Wave as consideration
for the License Agreement, (ii) any Wainwright Warrants and (iii)
any securities issuable to holders of the Exchange Rights (as
defined and further described below) as a result of the Offerings.
Any conversions of Series C Preferred Stock will be processed in
the order in which the Company receives such conversion request
from the holders of Series C Preferred Stock, and not on a pro rata
basis.
Each holder of shares of Series C Preferred Stock, subject to the
preference and priority to the holders of our Series B Convertible
Preferred Stock, is entitled to receive dividends, commencing from
the date of issuance of the Series C Preferred Stock. Such
dividends may be paid only when, as and if declared by the
Company’s board of directors, out of assets legally available
therefore, quarterly in arrears on the last day of March, June,
September and December in each year, commencing on the date of
issuance, at the dividend rate of 9.0% per year. Such dividends are
cumulative and continue to accrue on a daily basis whether or not
declared and whether or not the Company has assets legally
available therefore.
Under the Series C Certificate of Designations, each share of
Series C Preferred Stock carries a liquidation preference equal to
the Series C Stated Value plus accrued and unpaid dividends thereon
and any other fees or liquidated damages then due and owing
thereon.
The holders of the Series C Preferred Stock have no voting rights.
We may not take the following actions without the prior consent of
the holders of at least a majority of the Series C Preferred Stock
then outstanding: (a) alter or change adversely the powers,
preferences or rights given to the Series C Preferred Stock or
alter or amend the Series C Certificate of Designations, (b)
authorize or create any class of stock ranking as to dividends,
redemption or distribution of assets upon a Liquidation (as defined
in the Series C Certificate of Designations) senior to, or
otherwise pari passu
with, the Series C Preferred Stock,
(c) amend our certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the
holders of the Series C Preferred Stock, (d) increase the number of
authorized shares of Series C Preferred Stock, or (e) enter into
any agreement with respect to any of the
foregoing.
The foregoing summary of the terms of the Series C Certificate of
Designations is subject to, and qualified in their entirety by, the
form of such document, which is incorporated herein by
reference.
Terms of the Pre-Funded Warrants
The Pre-funded Warrants are exercisable at a price of $0.001 per
share and are not subject to expiration. The Company is prohibited
from effecting an exercise of any Pre-funded Warrants to the extent
that such exercise would result in the number of shares of Common
Stock beneficially owned by such holder and its affiliates
exceeding 4.99% of the total number of shares of Common Stock
outstanding immediately after giving effect to the exercise, which
percentage may be increased or decreased at the holder’s
election not to exceed 9.99%.
The form of the Pre-funded Warrants is filed as Exhibit 4.1 to this
Current Report on Form 8-K. The foregoing summary of the terms of
the Pre-funded Warrants is subject to, and qualified in its
entirety by, the form of such document, which is incorporated
herein by reference.
Terms of Private Placement Warrants
The Private Placement Warrants are exercisable at a price of $0.80
per share, for that number of shares of Common Stock (the
“Warrant Shares”) equal to 100% of the total number of
shares of Common Stock issuable upon conversion of the shares of
Series C Preferred Stock purchased in the Offerings, or 10,666,668
shares in the aggregate. The Private Placement Warrants expire on
July 5, 2026. The holders of the Private Placement Warrants may
exercise the Private Placement Warrants on a cashless basis, solely
to the extent no resale registration statement is available at the
time of exercise. The Company is prohibited from effecting an
exercise of any Private Placement Warrants to the extent that such
exercise would result in the number of shares of Common Stock
beneficially owned by such holder and its affiliates exceeding
4.99% of the total number of shares of Common Stock outstanding
immediately after giving effect to the exercise, which percentage
may be increased or decreased at the holder’s election not to
exceed 9.99%. The Private Placement Warrants provide for a
Black-Scholes payout upon certain fundamental change transactions
relating to the Company, as specified therein.
Until the Stockholder Approval is obtained, the Company may not
issue any shares of Common Stock upon exercise of the Private
Placement Warrants.
The form of the Private Placement Warrants is filed as Exhibit 4.2
to this Current Report on Form 8-K. The foregoing summary of the
terms of the Private Placement Warrants is subject to, and
qualified in its entirety by, the form of such document, which is
incorporated herein by reference.
Registration Rights Agreement
In connection with the Offerings, the Company entered into a
registration rights agreement, dated as of December 31, 2020 (the
“Registration Rights Agreement”), with the investor
named therein, pursuant to which the Company will undertake to
file, within 30 days following the Closing Date, a registration
statement to register the shares of Common Stock issuable upon: (i)
the conversion of the Series C Preferred Stock sold in the Private
Placement, (ii) the exercise of the Private Placement Warrants and
(iii) the exercise of any Pre-funded Warrants issued upon the
conversion of the Series C Preferred Stock sold in the Private
Placement (the “Registrable Securities”); and to cause
such and to cause such registration statement to be declared
effective under the Securities Act as promptly as possible after
the filing thereof, but in any event no later than 120 days
following the Closing Date, and shall use its best efforts to keep
such registration statement continuously effective under the
Securities Act until the date that all Registrable Securities
covered by such registration statement have been sold or are
otherwise able to be sold pursuant to Rule 144. The Registration
Rights Agreement provides for liquidated damages to the extent that
the Company does not file or maintain a registration statement in
accordance with the terms thereof.
The form of the Registration Rights Agreement is filed as Exhibit
10.2 to this Current Report on Form 8-K. The foregoing summary of
the terms of this document is subject to, and qualified in its
entirety by, such document, which is incorporated herein by
reference.
Exchange Right
Under
the Certificate of Designations of the Company’s issued and
outstanding Series B Convertible Preferred Stock (the “Series
B Certificate of Designations”), each holder of the
Company’s Series B Convertible Preferred Stock, par value
$0.0001 per share (the “Series B Preferred Stock”), has
the right to exchange the stated value, plus accrued and unpaid
dividends, of the Series B Preferred Stock for shares of Series C
Preferred Stock and Private Placement Warrants on a
dollar-for-dollar basis with investors in the Offerings, in lieu of
any cash subscription payments therefor (the “Exchange
Right”).
In
connection with any exercise of any Exchange Right, under Nasdaq
Listing Rule 5635 and related guidance, prior to obtaining the
Stockholder Approval, conversions into Common Stock at the reduced
conversion price of $0.75 per share applicable to the Series C
Preferred Stock will not be permissible in excess of the Issuable
Maximum (as defined and further described above), except to the
extent such conversions do not exceed the amount previously
issuable upon conversion of the Series B Preferred Stock at the
prior conversion price of $0.77 per share, which was the applicable
conversion price at the time of the Company’s stockholder
approval for the Series B Preferred Stock obtained on September 11,
2020.
Any
issuance by the Company of Series C Preferred Stock and Private
Placement Warrants pursuant to the Exchange Right, and of the
shares of Common Stock issuable upon the conversion or exercise
thereof (or any Pre-funded Warrants, as applicable), are not
anticipated to be registered under the Securities Act and are
anticipated to be made pursuant to the exemptions provided by
Section 3(a)(9) under the Securities Act, or another applicable
exemption therefrom. Accordingly, any such securities are not
anticipated to be freely transferable without restriction, pursuant
to the exemption provided by Rule 144 under the Securities Act,
except following the expiration of an applicable holding period, as
determined in accordance with Rule 144(d), which for non-affiliates
of the Company is generally six months from the date of the
original investment.