ADC Therapeutics SA completed a series of strategic transactions in which it:
- Settled in full the $115 million aggregate principal amount of senior secured convertible notes held by Deerfield Management Company ("Deerfield") due May 2025 for (i) $117.3 million in cash including the contractual exit fee on principal repayment, (ii) 2,390,297 common shares approximately equal to the value of the remaining interest due on the convertible debenture to the end of term, and (iii) warrants to purchase an aggregate of 4,412,840 common shares at exercise prices of $24.70 and $28.07 per share;
- Entered into a share purchase agreement with certain funds of Owl Rock, a division of Blue Owl Capital Inc., for an investment of $6.25 million for 733,568 common shares.
"We are pleased to enter into this agreement with Owl Rock and Oaktree, the proceeds of which will be used to pay the cash consideration in the exchange of the secured convertible credit notes held by Deerfield," said Ameet Mallik, Chief Executive Officer of ADC Therapeutics. "This new debt facility has a term of seven years and enables us to continue maximizing the potential of ZYNLONTA and advancing our pipeline of novel antibody drug conjugates for hematologic malignancies and solid tumors. The continued equity support of Deerfield and the additional equity support from Owl Rock is also very positive, and we are pleased to maintain our cash runway into early 2025 as this deal is approximately cash neutral during that timeframe."
Pursuant to the loan and guaranty agreement, the Company completed an initial drawdown of $120 million on August 15, 2022. This amount was used by the Company to fund the cash consideration as part of the settlement of Deerfield’s senior secured convertible notes. Up to two additional tranches in the amount of $27.5 million each can be drawn by the Company upon meeting certain conditions within 18 months. The term loan matures on August 15, 2029 and accrues interest at an annual rate of secured overall financing rate (SOFR) plus 7.50% or a base rate plus 6.50% for the first five years of the term loans and at an annual rate of SOFR plus 9.25% or a base rate plus 8.25% thereafter. In addition, the Company issued to the lenders under the term loan warrants to purchase an aggregate number of common shares equal to $4.375 million divided by the volume weighted-average price of the common shares for the ten trading days prior to their issuance and the ten trading days on and after their issuance, which warrants are exercisable for ten years from their issuance.
Owl Rock also agreed to purchase 733,568 common shares for $8.52 per share, which represents the 5-day volume-weighted average price as of Friday, August 12, 2022. The transaction is expected to close upon registration of the necessary share capital increase with the commercial register in Switzerland.
Sandip Agarwala, Managing Director with Owl Rock commented, "This transaction displays our ability to integrate our life sciences sector expertise and tailored multi-security approach to help provide growth capital to companies like ADC Therapeutics. We are pleased to invest in ADC Therapeutics’ strong team, portfolio and track record of success in developing and commercializing life-saving cancer therapies including ZYNLONTA."
"We are excited to partner with ADC Therapeutics as it continues to develop a pipeline of novel ADCs for hematologic malignancies and solid tumors," said Aman Kumar, Co-Portfolio Manager of Life Sciences Lending at Oaktree. "This is an important time in the Company’s development with its first product approval validating its first-in-class ADC platform. This commitment of capital represents our belief in the long-term potential of ADC Therapeutics and we look forward to working with the Company’s leadership team during this next phase of growth."
Elise Wang, Partner, Head of Private Equity Capital Markets at Deerfield said: "We have been a supporter of ADC Therapeutics dating back to its successful IPO in May 2020 as both an equity investor in the IPO and also providing the convertible debenture that is being retired today. We are very pleased to take a significant portion of the repayment consideration in ADCT stock and look forward to continuing to support the company going forward."
Morgan Stanley & Co. LLC acted as the sole placement agent to ADC Therapeutics on this transaction.