Episurf Medical AB (publ) (”Episurf Medical” or the “Company”) today announces that the board has resolved on a share issue of SEK 98.3 million through a partially guaranteed preferential rights issue (the “Rights Issue”). 70.0 per cent of the Rights Issue has been guaranteed through subscription commitments and guarantee undertakings, corresponding to approximately SEK 68.8m. In addition, declarations of intention to subscribe for up to their pro rata share has been received from existing shareholders Rhenman Partners Asset Management AB and a small cap fund owned by a Swedish pension company. Subscription commitments, Guarantee commitments and declarations of intention to subscribe for shares amounts to, in total approximately SEK 76.0m

The board’s resolution is subject to approval by the extraordinary general meeting (“EGM”) to be held on May 7, 2019. In order to allow the Rights Issue, the board of directors also proposes amendments to the articles of association. Notice to shareholders of the EGM will be published through a separate press release. In connection with the Rights Issue, the board has decided to publish the financial report for the first quarter on 18 April 2019, ahead of the previously announced date.

The board has furthermore resolved not to call upon any additional tranches under the previously announced financing agreement with L1 Capital and has decided to terminate the agreement.

Background and motive

Episurf Medical addresses major medical needs not met by today’s orthopaedic industry, with a vision to help more people return to living their lives as they wish. To fulfil this vision, Episurf Medical’s business idea is to provide orthopaedic surgeons with clinically first-class patient-specific treatment alternatives through Episurf Medical’s proprietary technology for imaging analysis, implant design and manufacturing. The Company recently announced that the 500th Episealer® surgery had been planned and the clinical results to date are compelling.

Episurf Medical’s operational strategy is based on four cornerstones:

  • Develop clinical and health economic data to support the Episealer® technology.
  • Establish the Episealer® technology with a large user base of orthopaedic surgeons and Key Opinion Leaders globally.
  • Ensure production and reimbursement opportunities for highly profitable products.
  • Ensure technological relevance and a high degree of innovation.

At the end of 2017, the results from the first multicenter study were published in a peer-reviewed journal, which showed good to excellent results. Additional case studies and patient follow-ups three to five years after surgery strengthen the Company’s view that the Episealer® technology will deliver excellent long-term results. Episealer® is now being evaluated in several clinical studies and the Company is at the very beginning of a large multicenter study in the US and Europe.

In December 2018, the Company received approval from the Food and Drug Administration (FDA) to initiate a major multicenter study in the US and Europe, which will form the basis of the Company’s future application for market approval in the USA. This study has been named EPIC-knee study. In February 2018, the Company announced its long-term financial targets.

The Company foresees the following development during the years to come, divided into three main phases:

  • The first phase spans over the coming 12 months. During this period, the Company’s costs will increase in connection with the recruitment of clinics, and surgeries being carried out in the EPIC-knee-study. During this period, the Company also expects clinical results from the on-going European multicenter study to be presented. The Company furthermore expects clinical results from the first comparative study carried out at the university hospital Charité in Berlin, as well as the first 5-year data from Episealer® patients.
  • After that, the Company will enter into a phase where the Company anticipates the financial result to develop positively, through higher sales and lower costs. This phase is expected to start when the patients in the FDA-study enter the follow-up period which runs over 24 months.
  • In the third phase, after approximately 12 months of recruitment and 24 months of follow-up, the Company will strive to as soon as possible submit an application for market approval in the USA. As previously announced, the Company will evaluate the possibility to carry out a launch in the USA together with a partner.

The clinical performance of the Episealer® implant is the single most important factor for the Company now preparing to expand its operations in existing, as well as into new, markets. In view of the fact that more money will be required to execute the set strategy, the board of Episurf Medical have resolved, subject to approval by the EGM, on a Rights Issue which is covered by subscription and guarantee commitments up to 70.0 per cent, corresponding to approximately SEK 68.8 million. In addition, declarations of intention to subscribe for up to an additional SEK 7.1m have been received by the Company.

The Company intends to use approximately 35 percent of the net proceeds from the Rights issue to finance the EPIC-Knee study, and approximately 65 percent to finance the continued expansion of the European business, which includes commercialisation efforts and investments in clinical studies.

Comments from the CEO, Pål Ryfors:

“I am very happy for the strong support among our shareholders in preparing for this financing. We are executing on a very clear strategy, and we have a great deal of visibility into the next milestones. The Episealer® technology is revolutionary and patients who previously been told to wait for decades for a knee replacement, suddenly have a new option. We have several patients who have had the implant for more than five and six years, and the clinical pipeline is very exciting. We are taking the right steps for future value creation” says Pål Ryfors, CEO Episurf Medical.

The Rights Issue in summary

  • The board of directors of Episurf Medical has resolved, subject to approval by the EGM, on a preferential right issue of SEK 98.3m.
  • The terms of the Rights Issue stipulate that for each (1) existing share, two new shares will be issued at issue price of SEK 1.40 per new share. If fully subscribed, a total of 70 227 372 new shares will be issued, and the total proceeds will amount to SEK 98 318 320.80.
  • Current shareholders have entered into subscription commitments in the Rights Issue of a total of SEK 15.8m, corresponding to approximately 16.1 percent of the Rights Issue. An additional SEK 53.0m, corresponding to 53,9 percent of the Rights Issue, is covered by guarantee commitments.
  • The board of directors’ resolution is subject to approval by the EGM to be held on May 7, 2019. Notice of the EGM will be published through a separate press release.
  • In order to allow the Rights Issue, the board of directors proposes amendments to the articles of association pertaining to the limits of the share capital and number of shares. Complete proposal will be presented at the latest three weeks ahead of the EGM.
  • The record date for participation in the Rights Issue is May 14, 2019.
  • The subscription period in the Rights Issue takes place between May 15 and May 29 2019.

The Rights Issue

On 5 April, 2019, the Board of Episurf Medical resolved, subject to approval by the Extraordinary General Meeting, on a share issue of up to 70 227 372 shares with preferential rights for the Company’s existing shareholders. The subscription price amounts to SEK 1.40 per share, meaning that the Company will receive up to approximately SEK 98.3m, before issue costs, through the Rights Issue if fully subscribed.

For each class A share and each class B share held on the record date of 14 May, 2019, shareholders will receive two (2) subscription rights of class A and class B respectively. One (1) class A subscription right entitles to subscription of one (1) class A share and one (1) class B subscription right entitles to subscription of one (1) class B share. If not all shares issued in the Rights Issue are subscribed for with subscription rights (primary preferential right), the Board of Directors shall decide on the allotment of new shares of class A and B subscribed for without subscription rights in accordance with the following:

1)      Firstly, shares not subscribed for with primary preferential right shall be offered to all shareholders for subscription (subsidiary preferential right). If shares thus offered for subscription are insufficient for the subscription that takes place through a subsidiary preferential right, the shares shall be divided among subscribing parties in relation to the previous shareholding. To the extent this cannot take place, the shares shall be divided by the drawing of lots.

2)      Secondly, the shares shall be allotted to others that have subscribed for new shares without subscription rights, pro rata to the number of shares that each has applied to subscribe for.

3)      Ultimately, the shares shall be allotted to those who guaranteed the Rights Issue pursuant to separate guarantee commitments with the Company, with allocation in relation to the size of their respective commitments.

Record date for participation in the Rights Issue is May 14, 2019, and the subscription period takes place during the period May 15 – May 29, 2019. The last day of trading in Episurf Medical’s share including the right to participation in the Rights Issue is May 10, 2019. Trading in subscription rights of series B shall take place on Nasdaq Stockholm during the period May 15 – May 27 2019.

Existing shareholders, together representing 19.1 per cent of the number of shares and 20.1 per cent of the number of votes, have undertaken to vote in favor of the Rights Issue at the AGM and subscribe for up to their pro rata shares in an amount of SEK 15.8m, corresponding to approximately 16.1 percent of the share issue. In addition, the Rights Issue is covered by guarantee commitments amounting to approximately SEK 53.0m, corresponding to approximately 53.9 percent of the share issue. Thus, the Rights Issue is covered up to 70.0 percent by subscription and guarantee commitments. The subscription and guarantee commitments have not been secured. In addition, declarations of intention to subscribe for up to an additional SEK 7.1m have been received by the Company.

The Board’s decision on implementing the Rights Issue is subject to approval from the EGM to be held on May 7, 2019. Notice to the EGM will be published through a separate press release.

Full terms and conditions for the Rights Issue as well as other information about the Company will be disclosed in the prospectus published no later than the day before the subscription period starts.

Change of reporting date for earnings report for the first quarter

In conjunction with the Rights Issue, the board has decided to publish the financial report for the first quarter 2019 on April 18, 2019, ahead of the previously announced date.

Financing agreement with L1 Capital

In February 2018, the Company entered into a financing agreement with L1 Capital. The Company today announces that the Company intends to terminate the financing agreement and therefore will not call upon any additional financing tranches. Only one tranche has been utilized, in conjunction with the entry into force of the agreement in the spring of 2018.

Preliminary time plan for the Rights Issue

May 7, 2019                          EGM

May 10, 2019                        Last day of trading including the right to receive subscription rights

May 13, 2019                        First day of trading excluding the right to receive subscription rights

May 14, 2019                        Record date for participation in the Rights Issue

May 15 – May 27, 2019         Trading in subscription rights

May 15 – May 29, 2019         Subscription period

June 4, 2019                         Publication of the outcome in the Rights Issue

Financial and legal advisors

Redeye AB act as financial advisors and DLA Piper Sweden act as legal advisor to Episurf Medical in connection with the rights issue.

 

Summary from extra ordinary meeting