Delcath Systems, Inc. (NASDAQ: DCTH), a specialty pharmaceutical and medical device company focused on oncology with an emphasis on the treatment of primary and metastatic liver cancers, announces it has entered into a securities purchase agreement with an institutional investor to issue $35.0 million of senior convertible notes (the Notes) and related common stock purchase warrants. The Notes will be issued at an 8% original issue discount. The aggregate proceeds of$32.2 million will be used to fund the Company's ongoing operations, commercial activities and clinical development programs, including its global Phase 3 trial with Melphalan/HDS in hepatic dominant ocular melanoma (the FOCUS Trial) and its global Phase 2 program with Melphalan/HDS in hepatocellular carcinoma (HCC) and intrahepatic cholangiocarcinoma (ICC).
Of the $32.2 million in aggregate proceeds, $3 million will be unrestricted and immediately and freely available for use by the Company and its subsidiaries. The remaining $29.2 million will be subject to a cash covenant restricting its use and requiring it to be held in certain control accounts of the Company. Subsequently, $3.0 million of the restricted cash shall become unrestricted cash on the 20th trading day after the later of the stockholder approval of the transaction in accordance with NASDAQ rules, or the six-month anniversary of the closing date (such 20th trading day, the Trigger Date). Thereafter, the remaining $26.2 million of restricted cash will become unrestricted in equal quarterly installments starting the 30th trading day after the Trigger Date, such that the balance will become unrestricted by December 29, 2017, subject to the fulfillment of certain equity conditions.
The Notes will be convertible, at the option of the holder, at 110% of the market price (the Conversion Price) into a fixed number of common shares. The market price will be determined on the closing date and will be based on the Volume Weighted Average Price (VWAP) of the three trading days immediately prior to the closing date. Commencing on the 20th trading day after the six-month anniversary of the closing date, and for each 20th trading day period thereafter, the Notes will amortize in equal installments payable in common stock (at the installment conversion price with pre-delivery and a $0.05 floor), subject to the fulfillment of certain equity conditions, or, at the Company's option, in cash.
The Company has the right to redeem the notes with restricted cash or any other cash of the Company, at its option, at any time after the earlier of March 31, 2017 or such time as at least $18 million of restricted cash shall have become unrestricted cash under the terms of the Notes.
Roth Capital Partners acted as sole placement agent for the offering.
About Delcath Systems
Delcath Systems, Inc. is a specialty pharmaceutical and medical device company focused on oncology with a principal focus on the treatment of primary and metastatic liver cancers. Our proprietary Melphalan Hydrochloride for Injection for use with the Delcath Hepatic Delivery System (Melphalan/HDS) is designed to administer high-dose chemotherapy to the liver while controlling systemic exposure. In April 2012 we obtained authorization to affix a CE Mark to our second-generation system, which is currently marketed in Europe as a device under the trade name Delcath Hepatic CHEMOSAT® Delivery System for Melphalan (CHEMOSAT). In the U.S. the Melphalan/HDS system is considered a combination drug and device product, and is regulated as a drug by the U.S. Food and Drug Administration (FDA). Melphalan/HDS has not been approved for sale in the U.S. We have commenced our global Phase 3 FOCUS clinical trial for Patients with Hepatic Dominant Ocular Melanoma (OM) and a global Phase 2 clinical trial in Europe and the U.S. to investigate the Melphalan/HDS system for the treatment of primary liver cancer (HCC) and intrahepatic cholangiocarcinoma (ICC).
