UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 1.01 | Entry into a Material Definitive Agreement. |
On January 4, 2023 (the “Closing Date”), 89bio, Inc. (the “Company”) and certain of its subsidiaries party thereto, as co-borrowers (together with the Company, the “Borrowers”), entered into a Loan and Security Agreement (the “Loan Agreement”) with the lenders referred to therein (the “Lenders”), K2 HealthVentures LLC (“K2HV”), as administrative agent for the Lenders, and Ankura Trust Company, LLC, as collateral agent for the Lenders. The Loan Agreement provides up to $100.0 million principal in term loans (the “Term Loan”) consisting of a first tranche of $25.0 million funded at closing, two subsequent tranches totaling $25.0 million to be funded upon the achievement of certain time-based, clinical and regulatory milestones, and a subsequent fourth tranche of up to $50.0 million upon the Company’s request, subject to review by the Lenders of certain information from the Company and discretionary approval by the Lenders. The Term Loan matures on February 1, 2027; provided, that the maturity date may be extended to August 1, 2027 if the second and third tranches are funded and the Company achieves certain other financing milestones.
The obligations of the Borrowers under the Loan Agreement are secured by certain assets of the Borrowers, including substantially all of the assets of the Company, excluding the Company’s intellectual property.
The Term Loan bears a variable interest rate equal to the greater of (i) 8.45% and (ii) the sum of (a) the Prime Rate as reported in The Wall Street Journal plus (b) 2.25%. The Company may prepay, at its option, all, but not less than all, of the outstanding principal balance and all accrued and unpaid interest with respect to the principal balance being prepaid of the Term Loan, subject to a prepayment premium to which the Lenders are entitled and certain notice requirements.
The Lenders may elect at any time following the Closing Date and prior to the full repayment of the Term Loan to convert any portion of the principal amount of the term loans then outstanding, up to an aggregate of $7.5 million in principal amount, into shares of the Company’s common stock (the “Conversion Shares”), at a conversion price equal to 130% of the lowest Trailing Three-Day VWAP (as defined in the Loan Agreement) for the period commencing December 15, 2022 through and including the 15th VWAP Trading Day (as defined in the Loan Agreement) following the Closing Date, subject to certain beneficial ownership limitations.
The proceeds of borrowings under the Loan Agreement are expected to be used for working capital and general corporate requirements.
The Loan Agreement contains customary representations and warranties and affirmative and negative covenants, including covenants that limit or restrict the ability of the Borrowers or their subsidiaries to, among other things, dispose of assets, make changes to their business, management, ownership or business locations, merge or consolidate, incur additional indebtedness, pay dividends or other distributions or repurchase equity, make investments, and enter into certain transactions with affiliates, in each case subject to certain exceptions. In addition, starting in January 2024, the Company must maintain minimum unrestricted cash and cash equivalents equal to 5.0 times the average monthly consolidated change in cash and cash equivalents measured over the trailing three-month period.
The Loan Agreement contains customary events of default, including a change in control. Upon the occurrence and continuation of an event of default, all amounts due under the Loan Agreement become (in the case of a bankruptcy event), or may become (in the case of all other events of default and at the option of the administrative agent), immediately due and payable.
In addition, under the Loan Agreement, the Company agreed to issue to K2HV a warrant to purchase up to that number of shares of the Company’s common stock (the “Warrant”) equal to the quotient of 2.0% of the aggregate funded Term Loan amount divided by the warrant price. The warrant price will be equal to the Lowest Trailing Three-Day VWAP for the period commencing on December 15, 2022 through and including the 15th VWAP Trading Day following the Closing Date. The Warrant will be issued on the 16th VWAP Trading Day following the Closing Date. The Company intends to amend this Current Report on Form 8-K following the issuance of the Warrant to provide the number of shares subject to the Warrant and the warrant price. The number of shares of common stock for which the Warrant is exercisable and the warrant price are subject to certain proportional adjustments.
The Loan Agreement and the Warrant each provide the Lenders with certain piggyback registration rights with respect to the Conversion Shares and the shares issuable upon exercise of the Warrant.
The foregoing descriptions of the Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Loan Agreement filed as Exhibit 10.1 attached hereto. The Company will file the Warrant with an amendment to this Current Report on Form 8-K.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item 1.01 above regarding the Loan Agreement is incorporated by reference into this Item 2.03.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information set forth in Item 1.01 above regarding the Warrant and the Conversion Shares is incorporated by reference into this Item 3.02. The issuance of shares of the Company’s common stock underlying the Warrant and the Conversion Shares will be made in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D thereunder.
| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
EXHIBIT INDEX
| Exhibit No. |
Description | |
| 10.1 | Loan and Security Agreement, dated as of January 4, 2023, among 89bio, Inc., 89bio Management, Inc., 89Bio Ltd., K2 HealthVentures LLC and Ankura Trust Company, LLC | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| 89bio, Inc. | ||||||
| Date: January 6, 2023 | By: | /s/ Rohan Palekar | ||||
| Rohan Palekar | ||||||
| Chief Executive Officer | ||||||