Innovate Biopharmaceuticals Announces Entry Into Securities Purchase Agreement to Fund Initiation of the First Phase 3 Celiac Disease Clinical Trial

Innovate Biopharmaceuticals (NASDAQ:INNT) has announced it has entered into an agreement with SDS Capital Partners II LLC providing for the sale by the company at a price of US$2.33 per share of up to 4.29 million shares of its common stock.

As quoted in the press release:

The Company intends to use the net proceeds from this offering to fund initiation of the first Phase 3 clinical trial of its lead program for celiac disease, INN-202, and for working capital and general corporate purposes.

The 12 month warrants will be immediately exercisable at a price of $4.00 per share for one year, and the five year warrants will be exercisable beginning on the six month anniversary of their issuance at a price equal to the greater of (a) 125% of the volume weighted average price of the Common Stock for the 20 day period prior to the closing date of the private placement and (b) the closing price of the Common Stock immediately prior to the closing date of the private placement. If the volume weighted average price of our stock exceeds $5.25 for 10 consecutive days following their issue dates, we will have the right to call the 12 month warrants for cash exercise. The exercise prices of the warrants will be subject to adjustment for, among other things, stock splits, reverse splits, and similar capital transactions, and the warrant holders will have certain rights on an as-exercised basis as holders of Common Stock in the event of certain distributions and fundamental transactions. The warrants will be exercisable on a “cashless” basis only in certain circumstances.

The Agreement contains customary representations, warranties, covenants, closing conditions and indemnification obligations. The Agreement contains a 45 day prohibition on certain sales or issuances of Common Stock or securities convertible or exchangeable into Common Stock without the prior written consent of the Purchasers, subject to certain exceptions. The Company has agreed to file a registration statement for resale of the shares underlying the warrants within 60 days of the date of the Agreement.

The Shares are being issued pursuant to the Company’s shelf registration statement declared effective by the Securities and Exchange Commission on July 13, 2018 and a prospectus supplement dated March 17, 2019 to the registration statement. The issuance of the warrants is being made in reliance on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for the offer and sale of securities not involving a public offering and Regulation D promulgated thereunder.

Click here to read the full press release.