Adial Pharmaceuticals Announces a Warrant Inducement Transaction for $2.75 Million in Gross Proceeds

Rhea-AI Summary

Adial Pharmaceuticals (NASDAQ: ADIL) has entered into a warrant inducement agreement with an existing healthcare-focused institutional investor. The agreement involves the immediate exercise of existing Series B and C Warrants to purchase up to 3,718,440 shares of common stock at a reduced exercise price of $0.74, generating gross proceeds of $2.75 million.

In exchange, the investor will receive new unregistered warrants in a private placement: Series B-1 warrants for up to 2,482,270 shares and Series C-1 warrants for up to 4,025,000 shares, both with a $0.74 exercise price. The transaction is expected to close around May 5, 2025. The company plans to use the proceeds for working capital and general corporate purposes.

Positive

• Immediate cash injection of $2.75 million to strengthen working capital
• Support from existing healthcare-focused institutional investor showing confidence in the company

Negative

• Potential future dilution from new warrant issuance totaling 6,507,270 shares
• Reduced warrant exercise price of $0.74 indicates discount to market price

Insights

Financial Analyst

Adial secured $2.75M through warrant exercise at reduced price, trading immediate dilution for needed capital while creating potential future dilution.

This warrant inducement transaction represents a strategic financial maneuver by Adial Pharmaceuticals to secure $2.75 million in immediate funding. The company has convinced an existing healthcare-focused institutional investor to exercise warrants at a reduced price of $0.74 per share, which generates immediate capital while creating dilution through the issuance of approximately 3.7 million new shares.

In exchange for this immediate exercise, Adial is issuing new unregistered warrants (Series B-1 and C-1) that could result in additional future dilution of up to 6.5 million shares if exercised after stockholder approval. The structure suggests a carefully balanced approach to capital raising - obtaining needed funds now while creating potential for future financing without immediate additional dilution.

For a clinical-stage biopharmaceutical company, maintaining sufficient working capital is crucial for advancing development programs. The stated use of proceeds for "working capital and general corporate purposes" provides flexibility but offers limited insight into specific development priorities. The participation of an existing investor provides some validation, though the reduced exercise price may indicate the original warrants were underwater relative to current market price.

This transaction demonstrates how clinical-stage biotech companies must often make difficult financing decisions, balancing immediate capital needs against shareholder dilution. While this $2.75 million strengthens Adial's balance sheet in the near term, the transaction's structure - including the need for special inducements to attract investment - suggests challenging capital market conditions for the company.

GLEN ALLEN, Va., May 02, 2025 (GLOBE NEWSWIRE) --  Adial Pharmaceuticals, Inc. (NASDAQ: ADIL) (“Adial” or the “Company”), a clinical-stage biopharmaceutical company focused on developing therapies for the treatment and prevention of addiction and related disorders, today announced its entry into a warrant inducement agreement with an existing healthcare-focused institutional investor of the Company for the immediate exercise of existing Series B Warrants (the "Series B Warrants") to purchase up to 1,418,440 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and Series C Warrants (the "Series C Warrants", and together with the Series B Warrants the "Existing Warrants") to purchase up to 2,300,000 shares of Common Stock at a reduced exercise price of $0.74 for gross cash proceeds of approximately $2.75 million, before deducting financial advisor fees and other transaction expenses. The Company intends to use the net proceeds from the offering for working capital and other general corporate purposes.

A.G.P./Alliance Global Partners is acting as the financial advisor in this warrant inducement transaction.

In consideration for the immediate exercise in full of the Existing Warrants, the investor will receive, in a private placement, new unregistered (i) Series B-1 warrants to purchase up to 2,482,270 shares of Common Stock (the "Series B-1 Warrants"), and (ii) Series C-1 Warrants to purchase up to 4,025,000 shares of Common Stock (the "Series C-1 Warrants", and together with the Series B-1 Warrants the "New Warrants"). The New Warrants will have an exercise price of $0.74 and will be exercisable upon stockholder approval. The Series B-1 Warrants will expire five years from the date of such approval and the Series C-1 Warrants will expire eighteen months from the date of such approval. The closing of the warrant inducement transaction is expected to occur on or about May 5, 2025, subject to satisfaction of customary closing conditions.

The private placement of the New Warrants and the shares of Common Stock underlying the New Warrants offered to the institutional investor will be made in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder. Accordingly, the securities issued in the Concurrent Private Placement may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.

This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in this Offering, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.

About Adial Pharmaceuticals, Inc.

Adial Pharmaceuticals is a clinical-stage biopharmaceutical company focused on the development of treatments for addictions and related disorders. The Company's lead investigational new drug product, AD04, is a genetically targeted, serotonin-3 receptor antagonist, therapeutic agent for the treatment of Alcohol Use Disorder (AUD) in heavy drinking patients and was recently investigated in the Company's ONWARD™ pivotal Phase 3 clinical trial for the potential treatment of AUD in subjects with certain target genotypes (estimated to be approximately one-third of the AUD population) identified using the Company's companion diagnostic genetic test. ONWARD showed promising results in reducing drinking in heavy drinking patients, and no overt safety or tolerability concerns. AD04 is also believed to have the potential to treat other addictive disorders such as Opioid Use Disorder, gambling, and obesity. Additional information is available at www.adial.com.

Forward-Looking Statements

This communication contains certain “forward-looking statements” within the meaning of the U.S. federal securities laws. Such statements are based upon various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. The forward-looking statements include without limitation, statements regarding the closing of the private placement, the satisfaction of the closing conditions of the private placement, and the use of net proceeds from the private placement as well as the potential of AD04 to treat other addictive disorders such as opioid use disorder, gambling, and obesity. Any forward-looking statements included herein reflect our current views, and they involve certain risks and uncertainties, including, among others, market and other conditions, our ability to pursue our regulatory strategy, our ability to maintain our Nasdaq listing, our ability to advance ongoing partnering discussions, our ability to obtain regulatory approvals for commercialization of product candidates or to comply with ongoing regulatory requirements, our ability to develop strategic partnership opportunities and maintain collaborations, our ability to obtain or maintain the capital or grants necessary to fund our research and development activities, our ability to retain our key employees or maintain our Nasdaq listing, our ability to complete clinical trials on time and achieve desired results and benefits as expected, regulatory limitations relating to our ability to promote or commercialize our product candidates for specific indications, acceptance of our product candidates in the marketplace and the successful development, marketing or sale of our products, our ability to maintain our license agreements, the continued maintenance and growth of our patent estate and our ability to retain our key employees or maintain our Nasdaq listing. These risks should not be construed as exhaustive and should be read together with the other cautionary statement included in our Annual Report on Form 10-K for the year ended December 31, 2024, subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it was initially made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

Investor Contact

Crescendo Communications, LLC
David Waldman / Alexandra Schilt
Tel: 212-671-1020
Email: adil@crescendo-ir.com

FAQ

What is the size of Adial Pharmaceuticals' (ADIL) warrant inducement transaction in May 2025?

Adial Pharmaceuticals' warrant inducement transaction will generate gross proceeds of $2.75 million through the exercise of existing warrants at $0.74 per share.

How many new warrants will ADIL issue in the May 2025 private placement?

ADIL will issue new unregistered warrants for up to 6,507,270 shares total, consisting of Series B-1 warrants for 2,482,270 shares and Series C-1 warrants for 4,025,000 shares.

What is the exercise price of ADIL's new warrants issued in May 2025?

The new Series B-1 and Series C-1 warrants will have an exercise price of $0.74 per share.

How will Adial Pharmaceuticals use the proceeds from the May 2025 warrant exercise?

Adial Pharmaceuticals intends to use the net proceeds for working capital and other general corporate purposes.

When will ADIL's new warrants expire?

The Series B-1 warrants will expire five years from stockholder approval, while the Series C-1 warrants will expire eighteen months from stockholder approval.