Crossject announced another capital increase (and issue of warrants) that will provide it with c.€7.2m in the short term (before potential exercise of warrants which could provide another €10m). This was bound to happen in our view and, therefore, is no real surprise ahead of the filing and approval grant for Zepizure in the US. That said, this will weigh on the share price in the short term and H1 25 will be key for the group’s credibility. We will amend our numbers in light of the cash inflow and dilution.
The group announced another capital increase and issue of warrants.
The transaction would comprise an issuance of new ordinary shares via a capital increase reserved for a specified category of investors and the concurrent private placement of warrants (“BSA”) giving the right to subscribe to new ordinary shares.
The number of new shares issued was not to exceed 9m with a par value of €0.10 each, which would have represented c.17.43% of the outstanding share capital on a non-diluted basis. The subscription price was to be determined “at least equal to the weighted average by volume of the share prices over the fifteen trading days preceding the date the issue price is set; it being specified that this weighted average may be reduced by a discount of no more than 20%”. The new shares are expected to be admitted to trading “on or about 13 December 2024.
Right after this announcement, the group announced the successful pricing of a reserved capital increase of €7.2m through the issuance of 3,635,756 shares with a nominal value of EUR 0.10 each, representing 8.8% of its current share capital, at a subscription price of €1.6012 per share, and the issuance of 3,635,756 warrants.
The warrants were issued at their fair market value calculated based on the Black Scholes model. The number of ordinary shares issued upon exercise of the warrants was not to exceed 9m ordinary shares. In fact, it was also announced today that 3,635,756 warrants were issued at a price of €0.3788 per warrant, 4 warrants giving the right to subscribe to 5 ordinary shares upon payment of an exercise price of €2.25 per ordinary share.
The proceeds are expected to result in a gross amount of at least €7m in immediate new funding for Crossject (prior to the exercise of warrants which could bring another €10.2m), to be used as follows: 50% for the development of Zepizure, the “EUA” approval of which is still expected in Q125, 20% for the industrial development of Zepizure and 30% for the R&D efforts of other therapeutic entities.
Gemmes Venture, the reference shareholder of Crossject with a c.26% stake in the Company on a non-diluted basis, had informed the Company of its intention to subscribe in the transaction for at least €2m.
Heights had informed the Company of its intention to subscribe in the transaction for €2m under certain conditions (total amount raised of at least €7m and Gemmes subscription of at least €2m).
With this deal, “the Company expects that its net working capital would be sufficient to meet its obligations until the end of H125, allowing it to reach its main EUA regulatory milestone for ZEPIZURE”. Management added that it is “exploring dilutive and non-dilutive financing complements in order to extend its cash runway until the initial payments from its U.S. sponsor are received, such payments being expected in Q3 2025. The Company could also receive additional cash proceeds from the exercise of warrants to fulfil these”. In short, yet another dilution is not excluded in the short-term…and even almost anticipated, so to speak.
Furthermore, Crossject has agreed with Heights Capital Management on amendments of the terms and conditions of the existing convertible bonds issued in February 2024. The amendments include the issuance of a second tranche of approximately €2.5m, no longer conditional upon the ZEPIZURE Emergency Use Authorization by the FDA and an extension of the maturity of the convertible bonds to December 2027 (from February 2027). This confirms our previous belief that the company was not fully financed before Zepizure reaches the market and generates cash (current cash burn, building of working capital, R&D etc…). This is a third round of financing for FY24 alone. One could also add that the amendments of the terms and conditions of the OCAs as well as the new tranche suggest financing is definitely still an issue for the group. This is not new, but not exactly reassuring for minority shareholders…As is the “complexity” of the transaction given the relatively small size of the company.
We will obviously amend our numbers in light of the cash inflow and dilution. The latter will weigh on the share price in the short term, even if it should secure the group’s financing for two reasons: 1 – as stated, an obvious dilution with this transaction and 2 – the still potential next round of financing after H125.
