Summary of the Offering

• The total proceeds from the Offering including full exercise of warrants is expected to amount to a maximum of approx. SEK 216 million before deduction of costs related to the Offering.
• The terms of the Rights Issue imply that shareholders in ExpreS[2]ion have the preferential right to subscribe for new shares with including warrants free of charge (together referred to as "Units"). One (1) existing share held on the record date of October 1, 2020, entitles to one (1) Unit right. Three (3) Unit rights entitles to subscription of one (1) Unit. One (1) Unit comprise of two (2) new shares, one (1) warrant of series TO4 free of charge and one (1) warrant of series TO5 free of charge.
• The Rights Issue comprises of a total of 10,910,594 new shares.
• The subscription price is SEK 24 per unit, corresponding to SEK 12 per share and a discount of approx. 51 percent compared with 30 days volume-weighted average price ("VWAP") on Nasdaq First North Growth Market Stockholm.
• Three (3) warrants of series TO4 entitles the holder to subscribe for one (1) share in the Company during the period from April 12, 2021 to April 26, 2021. Strike price for warrants will correspond to 70 percent of the VWAP of the Company's share price on Nasdaq First North Growth Market during the period from March 29, 2021 to April 9, 2021, but at least SEK 6 and a maximum of SEK 22 per share.
• Three (3) warrants of series TO5 entitles the holder to subscribe for one (1) share in the Company during the period from September 6, 2021 to September 20, 2021. Strike price for warrants will correspond to 70 percent of the VWAP of the Company's share price on Nasdaq First North Growth Market during the period from August 23, 2021 to September 3, 2021, but at least SEK 6 and a maximum of SEK 25 per share.
• Through the Rights Issue, the Company will receive approx. SEK 131 million before deduction of costs related to the Offering. Upon full exercise of warrants the Company may receive up to an additional approx. SEK 85 million.
• The Rights Issue is a 100 percent guaranteed through subscription commitments of approx. SEK 26 million, corresponding to approx. 20 percent of the Rights Issue and guarantee undertakings of approx. SEK 105 million, corresponding to approx. 80 percent of the Rights Issue. Members of the Board of Directors and the senior management have committed to subscribe for Units. A group of investors that have entered into guarantee undertakings have also entered into a subscription commitment of SEK 24 million in the Rights Issue through overtaking Unit rights from larger shareholders.
• Nyenburgh Holding B.V., a specialist life science investor, is participating in the Rights Issue by a subscription undertaking of SEK 11 million by takeover of Unit rights. Nyenburgh Holding B.V. have also entered into a top guarantee undertaking, which refers to the space between approx. 92 percent up to 100 percent, corresponding to SEK 10 million of the Rights Issue. The remaining guarantors have entered into a bottom guarantee undertaking, which refers to the amount from subscription commitments up to approx. 92 percent, corresponding to approx. SEK 95 million of the Rights Issue.
• Record date for participation in the Rights Issue is October 1, 2020.
• Subscription period of the Rights Issue runs from October 5 up until October 19, 2020.
• The total net proceeds from the Offering will be used to i) support the continued development of the COVID-19 vaccine, ii) in-license and develop the breast cancer vaccine AV001 from AdaptVac, (iii) further advance one or more influenza vaccine candidates, iv) advance one or more clinical stage malaria vaccines, and v) strengthen the Company's capabilities and support research and development activities in ExpreS[2]ion and AdaptVac.
• The Board's decision of the Rights Issue is subject to approval by the EGM to be held on September 23, 2020. Notice of the EGM is published through a separate press release today.
• The Company has arranged a bridge loan of SEK 20 million from a group of investors that have entered into subscription and/or guarantee undertakings in the Offering, which is to be repaid with proceeds from the Rights Issue.   

Bent U. Frandsen, CEO in ExpreS[2]ion says: "Over the coming years our company will be moving up the biopharmaceutical value chain. We will keep our own drug candidates longer, make larger investments and in some instances also assume more risk. But in return we will have the possibility to reap far greater rewards for our shareholders, as witnessed by our decision earlier this year to initiate the COVID-19 vaccine development program. The board, our employees and I are all extremely grateful for the support investors have shown us and look forward to a new and exciting phase in the company's life."

Background and Reasons

ExpreS[2]ion was conceived as a service company ten years ago focused on using state-of-the-art protein engineering skills and technology to help its clients solve their most difficult protein expression problems. Over the years the service business has established the Company in a broad international industrial and scientific network, and today ExpreS[2]ion's assistance is sought by universities and companies from all over the world.

However, the Company believes that the appointment of Bent U. Frandsen as new CEO and the subsequent decision to initiate an accelerated program to develop a vaccine against COVID-19 has created the foundation for a strategic change. The Company believes it has amassed the scientific tools, experience and international networks required to develop its own pipeline of vaccines and immunotherapy drugs. In just three months, the Company and its partners moved the COVID-19 vaccine from concept to a Good Manufacturing Practice-certified contract manufacturer-partnership with AGC Biologics and global license agreement with Bavarian Nordic. The vaccine has shown impressive proof of concept data in animal models and is expected to enter clinical trial before the end of 2020. The Company believes that the speed at which this vaccine was developed demonstrates the Company's capabilities as well as the power of the combination of the ExpreS[2] and cVLP technology platforms.

Concurrent with the launch of the COVID-19 vaccine program in February 2020, the Company took out an exclusive option to in-license AdaptVac's HER2 cVLP therapeutic breast cancer vaccine AV001. The Company believes the preclinical results coming out of AV001 are very promising. Monoclonal antibody products are available today for the treatment of metastatic breast cancer, but an unmet need remains for an active immunotherapy product against this terrible disease. Many patients experience adverse side effects and/or diminishing effects from the monoclonals whereas the published preclinical data shows that AV001 retained strong anti-tumour effects even after Herceptin (approx. USD 7 billion in annual sales) had stopped working. The Company plans to develop AV001 up to and including clinical phase I/II trials before seeking an out-licensing partner.

The proceeds from the Offering allow the Company to effectuate the new strategy described in the 2020 Q1 interim report on May 20, 2020 under which the Company will combine its successful service business with the creation of an in-house pipeline of biopharmaceutical drug and vaccine candidates to maximize shareholder returns, as further detailed below.

Use of Proceeds

The total proceeds from the Offering including full exercise of warrants are expected to amount to a maximum of approx. SEK 216 million before deduction of costs related to the Offering. ExpreS[2]ion's existing working capital is not sufficient to effectuate the new strategy in the coming twelve month period. The proceeds from the Offering are expected to enable ExpreS[2]ion to reach a number of key value inflection points and to provide, in conjunction with revenue from the Company's service business and continued payments under public grants already awarded, the necessary working capital up to and including H1 2022. The net proceeds from the Offering will be used - in prioritized order - to the Company's strategic objectives under the following headlines:

• Advance COVID-19 vaccine into human trials in Q4 2020 in collaboration with the Company's academic and commercial partners (approx. 4 percent)

Under the recently announced out-licensing agreement Bavarian Nordic will assume all further costs associated with the clinical development and commercialisation of the COVID-19 vaccine developed by AdaptVac and ExpreS[2]ion. However, the Company will still be incurring certain costs as a member of the EU sponsored PREVENT-nCoV consortium and will continue to support the COVID-19 program in various ways. The vaccine is expected to enter the first clinical Phase I/IIa safety trial before the end of 2020, with headline results from this trial announced towards the end of Q1, 2021. The trial will test the vaccine's safety as well as surrogate markers of efficacy (immune response). The vaccine is expected to enter phase III trials in H1 2021, subject to funding, and be ready for market launch in H2 2021, subject to regulatory approval.

• Exercise the option to in-license the HER2 breast cancer vaccine AV001 from AdaptVac and advance it into human trials in 2022 (approx. 58 percent)

Under the terms of the Company's agreement with AdaptVac the Company may execute the in-licensing option on or prior to February 26, 2021. The proceeds will be applied to the in-licensing as well as the predominantly external costs associated with advancing AV001 towards human trials. The Company expects that the GMP process as well as the formulation and analytical methods for the vaccine will be developed by H1 2021. Preclinical tox studies will be concluded by H2 2021, with the application to start human clinical trials (CTA) then submitted to the regulatory authorities in H1 2022. The first clinical trial of AV001 will be a phase I/IIa trial with safety as the primary endpoint and various surrogate markers of efficacy as secondary endpoints. ExpreS[2]ion plans to initiate out-licensing discussions following this trial.

• Advance next generation influenza vaccine (approx. 12 percent)

ExpreS[2]ion is a partner in INDIGO, an international consortium led by the University of Amsterdam that is developing two novel influenza vaccine concepts, one of which relies on the ExpreS[2] technology. The Company expects to advance and further support the clinical and commercial development of one or more influenza vaccine candidates during 2021.

• Advance certain malaria vaccines in preclinical and clinical development (approx. 2 percent)

Five clinical stage malaria vaccines currently rely on the Company's ExpreS[2] technology. The Company is a member of a number of publicly funded research consortia, including with the Jenner Institute at the University of Oxford and the University of Copenhagen. The Company will advance and further support the clinical and commercial development of certain malaria vaccine candidates. Phase IIa results from the RH5.1 vaccine are expected to be published before the end of 2020. An additional phase Ia trial in a malaria endemic region in Africa will be launched during 2021 with an alternative adjuvant.

• Strengthen the Company's capabilities, pipeline and technology platform (approx. 24 percent)

As ExpreS[2]ion moves up the biopharmaceutical value chain its resources within clinical trial design, regulatory affairs, formulation, upscaling and project management will gradually be strengthened. In addition to the recent hire of Keith Alexander as the Company's new CFO, ExpreS[2]ion will augment certain other administrative and IT functions to meet the increased demand for quality assurance, documentation, reporting and data gathering associated with clinical trials. The Company will also explore bolt-on deals or technology asset acquisitions in support of its current activities and support further research and development activities in ExpreS[2]ion and AdaptVac. This includes exploring whether additional cancer vaccines and/or immunotherapy drugs aimed at chronic diseases such as allergy for which promising early results exist should be advanced into preclinical development.

Upon full exercise of warrants, the Company may receive up to an additional SEK 85 million. The warrants of series TO4 and TO5 offered as part of the Rights Issue may be exercised in the period from April 12, 2021 to April 26, 2021 and September 6, 2021 to September 20, 2021 respectively. Should the market price of the Company's shares at one or both of these future time points be below the lower band of the warrant exercise price of SEK 6 some or all of the warrants are unlikely to be exercised and fewer or no additional proceeds will be realised from this part of the Offering than currently expected. If so, the Company will reduce its spending, including on new research and development activities and the hiring of additional personnel to ensure that its cash resources still enable the Company to finance its activities up to and including H1 2022 as previously described, however in such a way that the Company's plans for the COVID-19 vaccine program and the HER-2 breast cancer program are not affected.

The Rights Issue

Shareholders registered in the Company's shareholder register on the record date have pre-emptive rights to subscribe for Units in the Rights Issue. One (1) existing share held on the record date of October 1, 2020, entitles to one (1) Unit right. Three (3) Unit rights entitles to subscription of one (1) unit consisting of two (2) new shares and two (2) warrants free of charge of series TO4 and TO5. In addition, investors are offered the opportunity to subscribe for Units without the support of Unit rights. The subscription price is SEK 24 per Unit, corresponding to SEK 12 per share.

Three (3) warrants of series TO4 entitles the holder to subscribe for one (1) share in the Company during the period from April 12, 2021 to April 26, 2021. Strike price for warrants will correspond to 70 percent of the VWAP of the Company's share on Nasdaq First North Growth Market during the period from March 29, 2021 to April 9, 2021, but at least SEK 6 and a maximum of SEK 22 per share.

Three (3) warrants of series TO5 entitles the holder to subscribe for one (1) share in the Company during the period from September 6, 2021 to September 20, 2021. Strike price for warrants will correspond to 70 percent of the VWAP of the Company's share on Nasdaq First North Growth Market during the period from August 23, 2021 to September 3, 2021, but at least SEK 6 and a maximum of SEK 25 per share.

Through the Rights Issue, the Company will initially receive approx. SEK 131 million before deduction of costs related to the Offering. Upon full exercise of warrants, the Company may receive up to an additional approx. SEK 85 million.

The Company has arranged a bridge loan of SEK 20 million from a group of investors that have entered into subscription and/or guarantee undertakings in the Offering, which is to be repaid with proceeds from the Rights Issue.

If all of the Units are not subscribed for with Unit rights, the board will decide on allotment of Units subscribed for without Unit rights. Allotment will then be made firstly to persons who have applied for subscription without unit rights and who have subscribed for Units with Unit rights, regardless of whether or not the subscriber was a shareholder on the record date, and in case of oversubscription, allocation shall be made in relation to the total number of Units allotted through exercise of Unit rights, and to the extent that this is not possible, by drawing of lots. Secondly, allocation shall be made to other persons who have applied for subscription without Unit rights, and in the case of oversubscription, pro rata to the number of Units subscribed for in the application form, and to the extent that this is not possible, by drawing of lots. Finally, allotment of the remaining Units shall be made to the investors who have provided guarantees and in accordance with the conditions of their respective guarantee.

Subscription of Units with use of Unit rights shall be made by cash payment during the period October 5 - October 19, 2020. Application for subscription of Units without use of Unit rights shall be made during the same period.

For existing shareholders not participating in the Rights Issue, a dilution corresponding to 40.0 percent of the total number of shares and votes in the Company following the Rights Issue will arise. Shareholders who choose not to participate in the Rights Issue have the opportunity to compensate for the economic dilution by selling their Unit rights. The Unit Rights will be traded on Nasdaq First North Growth Market during the period from October 5 up until October 15, 2020.

Full subscription in the Rights Issue implies that the number of shares in the Company increases by 10,910,594 new shares from 16,365,891 shares to 27,276,485 shares, which corresponds to a dilution of 40.0 percent of the number of shares and the votes in the Company. Upon full exercise of the warrants in the Rights Issue, the number of shares will increase by 3,636,864 to a maximum of 30,913,349 shares, corresponding to a dilution of approx. 11.8 percent of the number of shares and the votes in the Company considering full subscription in the Rights Issue.

The full terms and conditions of the Rights Issue and information about the Company will be included in a prospectus expected to be published on the Company's website on or around September 28, 2020.

Subscription- and guarantee undertakings

The Rights Issue is guaranteed up to 100 percent through subscription commitments of approx. SEK 26 million, corresponding to approx. 20 percent of the Rights Issue. All members of the Board of Directors and the CEO have committed to subscribe for shares for a total of approx. SEK 1.8 million.

In addition, the Company has received guarantee undertakings with external investors of approx. SEK 105 million, corresponding to approx. 80 percent of the Rights Issue. Nyenburgh Holding B.V. have entered into a top guarantee undertaking, which refers to the space between approx. 92 percent up to 100 percent, corresponding to SEK 10 million of the Rights Issue. The remaining guarantors have entered into a bottom guarantee undertaking, which refers to the amount from subscription commitments up to approx. 92 percent, corresponding to approx. SEK 95 million of the Rights Issue.

A group of investors that have entered in to a guarantee undertaking have also entered into a subscription commitment in the Rights Issue which requires takeover of Unit rights from larger shareholders consisting of founders, board members and/or management of ExpreS[2]ion. Cash commission is payable under the guarantee undertakings of ten (10) percent of the guaranteed amount. No cash or other assets have been pledged and no other collateral has been provided to secure the commitments. Further information regarding the parties who have entered into guarantee undertakings will be included in the prospectus that is expected to be published around September 28, 2020 in accordance with the below preliminary timetable.

 

Timetable for the Rights Issue

EGM September 23, 2020
Prospectus published (Sweden) Around September 28, 2020
Last day of trading in shares September 29, 2020
including right to receive Unit
rights
First day of trading in shares September 30, 2020
excluding right to receive Unit
rights
Prospectus published (Denmark) Around September 30, 2020
Record date for participation in October 1, 2020
the Rights Issue
Subscription period October 5 - October 19, 2020
Trading in Unit rights October 5 - October 15, 2020
Trading in BTUs (Paid subscribed October 5, 2020 - until the
Units) Offering is registered with
SCRO
Announcement of final outcome in Around October 26, 2020
the Rights Issue

Prospectus

A prospectus with full terms and conditions regarding the Rights Issue will be available prior to the commencing of the subscription period on ExpreS[2]ion's website (www.expres2ionbio.com) and Arctic Securities website (www.arctic.com/secse). The prospectus will be passported to Denmark and thus also available for Danish investors.

Advisors

Arctic Securities AS, filial Sverige and Translution Capital A/S act as financial advisors to the Company in connection with the Capitalization. Arctic Securities is the Company's issuing agent whereas Baker Mckenzie is the Company's legal advisor in connection with the Offering.

 

Certified Adviser

Svensk Kapitalmarknadsgranskning AB

Telefon: +46 11 32 30 732

E-post: ca@skmg.se