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Allurion Closes $48 Million Convertible Senior Secured Note Financing with RTW Investments
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Rhea-AI Summary
Allurion Technologies, Inc. (NYSE: ALUR) closes a $48 million convertible senior secured note financing with RTW Investments, reducing interest expenses, extending cash runway, and strengthening the partnership. The transaction simplifies the capital structure, lowers the interest rate to 6%, and extends the maturity of the debt. The funding will be used to repay existing term loans, providing operational flexibility and enhancing future prospects.
Positive
Reduces annual interest expenses by prepaying existing term loan
Lengthens maturity of debt from June 2027 to April 2031
Allows interest payments to be made in-kind for the first three years
Strengthens partnership with RTW Investments
Extends expected cash runway in advance of AUDACITY FDA trial read-out
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Insights
The securing of a $48 million convertible note by Allurion Technologies signifies a strategic financial restructuring aimed at optimizing the company's capital allocation. The prepayment of the existing term loan corresponds with a reduction in annual interest expenses. This maneuver not only enhances near-term cash flow but simultaneously bolsters operational flexibility, which can be paramount for Allurion's ongoing clinical trials and overall growth strategy. Moreover, the adjustment in interest rate to 6% and the extension of the debt maturity to 2031 will likely alleviate immediate financial pressures, enabling the firm to allocate resources towards strategic initiatives rather than debt service. The in-kind interest payment option for the initial three years further underscores the benefit, as it conservatively manages cash outflow during this pivotal period. Investors should note, however, the potential dilution effects of convertible notes upon conversion and the implications this financing may have on the equity structure of the company in the long term.
The capital infusion via the convertible note serves a critical function in the context of Allurion's AUDACITY FDA trial read-out. The increased cash runway preceding this event is indicative of the company's commitment to their obesity treatment's regulatory progress. The outcome of the trial will be a significant catalyst for the company's stock and the enhanced financial position should provide sufficient cushioning through this period. The results could potentially impact Allurion's market share in the obesity management sector. For investors, it's essential to monitor clinical trial outcomes closely, as positive results could lead to increased demand for Allurion's products and services, driving revenue growth. On the other hand, any negative outcomes could have the opposite effect and the strategic financial moves made now could mitigate some of the associated risks.
Simplifies capital structure through prepayment of existing term loan
Extends expected cash runway in advance of AUDACITY FDA trial read-out
Strengthens long-term partnership with RTW Investments
NATICK, Mass.--(BUSINESS WIRE)--
Allurion Technologies, Inc. (NYSE: ALUR) (“Allurion” or the “Company”), a company dedicated to ending obesity, today announced the closing of a $48 million convertible senior secured note financing with certain entities managed by RTW Investments, LP (“RTW”). Proceeds will be used to repay in full the Company’s obligations under its existing term loan with Fortress Credit Corp., reducing the Company’s interest expense and increasing operational flexibility.
Management anticipates this transaction will better position the business for the future. Of note, the convertible notes reduce the interest rate on the Company’s debt to 6%, lengthen the maturity over Allurion’s existing term loan by nearly four years, from June 2027 to April 2031, and allow for interest payments to be made in-kind for the first three years. The net benefit of these changes, together with the amended terms of Allurion’s existing Royalty Interest Financing Agreement with RTW, extends the Company’s expected cash runway in advance of the AUDACITY FDA trial read-out, which is anticipated by year-end.
"RTW’s investment underscores our shared belief in the long-term potential of the Allurion Program,” said Dr. Shantanu Gaur, Founder and CEO of Allurion. “Our impressive clinical results and continued growth in procedural volume in our foreign markets give us confidence that Allurion will be a significant player in obesity management. The investment furthers our long-term partnership with RTW and provides us additional flexibility to achieve our long-term goals,” Dr. Gaur continued.
“We are pleased to strengthen our relationship with Allurion as it continues its mission to end obesity around the world. The Allurion Program is a proven weight-loss method, and we eagerly await the results of its U.S. FDA trial,” said Roderick Wong, M.D., Managing Partner and Chief Investment Officer of RTW Investments, LP.
About the Notes
The notes bear interest at the rate of 6% per annum, with the Company’s option to pay interest in kind for the first three years, and mature on April 16, 2031. The notes may be converted at the option of the noteholders into common stock of Allurion, subject to certain conditions and limitations, at a 35% conversion premium to the lower of (i) the 30-day VWAP at signing and (ii) the price per share in the Company’s next equity offering. The Company has agreed to customary registration rights with respect to the shares of common stock issuable upon conversion of the notes. The notes may be redeemed by Allurion at its option under certain circumstances following the fourth anniversary of the date of issuance.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Additional information about the notes and the terms of the note purchase agreement will be filed with the U.S. Securities and Exchange Commission (the “SEC”) and will be available on the SEC’s website at www.sec.gov.
About Allurion
Allurion is dedicated to ending obesity. The Allurion Program is a weight loss platform that features the Allurion Gastric Balloon, the world’s first and only swallowable, procedure-less intragastric balloon for weight loss, and offers access to the Allurion Virtual Care Suite, including the Allurion Mobile App for consumers, Allurion Insights for health care providers featuring the Coach Iris AI Platform, and the Allurion Connected Scale. The Allurion Virtual Care Suite is also available to providers separately from the Allurion Program to help customize, monitor and manage weight loss therapy for patients regardless of their treatment plan: gastric balloon, surgical, medical or nutritional. The Allurion Gastric Balloon is an investigational device in the United States.
For more information about Allurion and the Allurion Virtual Care Suite, please visit www.allurion.com
Allurion is a trademark of Allurion Technologies, Inc. in the United States and countries around the world.
About RTW
RTW Investments, LP is a global, full life-cycle investment firm and company builder that focuses on identifying transformational and disruptive innovations across the biopharmaceutical and medical technologies sectors. As a leading partner of industry and academia, RTW combines deep scientific expertise with a solution-oriented investment approach to support emerging medical therapies and the companies and/or academics developing them.
Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of the U.S. federal and state securities laws. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions and include statements regarding the simplification of Allurion’s capital structure, availability of cash runway, operational flexibility, procedure growth, Allurion’s expectations for, and market acceptance of, the Allurion Program, and Allurion’s ability to compete with other weight loss products, improve its market position, scale its business and achieve long-term goals. Forward-looking statements are predictions, projections and other statements about future events that reflect the current beliefs and assumptions of Allurion’s management based on information currently available to them and, as a result, are subject to risks and uncertainties. Many factors could cause actual future results or developments to differ materially from the forward-looking statements in this communication, including but not limited to (i) the ability of Allurion to obtain and maintain regulatory approvals for and successfully commercialize the Allurion Program, including the Allurion Balloon and the Allurion Virtual Care Suite (“VCS”), (ii) the timing of, and results from, our clinical studies and trials, (iii) the evolution of the markets in which Allurion competes, (iv) the ability of Allurion to defend its intellectual property, (v) the impact of the COVID-19 pandemic, the Russia and Ukraine war, and the Israel-Hamas conflict on Allurion’s business, (vi) Allurion’s expectations regarding its market opportunities, including those for the VCS platform, (vii) the risk of economic downturns and a changing regulatory landscape in the highly competitive industry in which Allurion operates, and (viii) the ability of Allurion to comply with the covenants and terms and conditions of the note purchase agreement. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the “Risk Factors” section of Allurion’s Annual Report on Form 10-K filed on March 26, 2024 and other documents filed by Allurion from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Allurion assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Allurion does not give any assurance that it will achieve its expectations.
What is the purpose of Allurion closing a $48 million convertible senior secured note financing with RTW Investments?
The purpose is to simplify the capital structure, reduce interest expenses, extend the cash runway, and strengthen the partnership.
How does the financing impact Allurion's debt?
The financing reduces the interest rate to 6%, extends the maturity of the debt from June 2027 to April 2031, and allows interest payments to be made in-kind for the first three years.
Who is involved in the financing deal with Allurion?
RTW Investments is involved in the $48 million convertible senior secured note financing with Allurion.
What is the expected outcome of the financing for Allurion?
The expected outcome is to better position the business for the future, provide operational flexibility, and enhance long-term prospects.
How does the financing impact Allurion's partnership with RTW Investments?
The financing strengthens the long-term partnership with RTW Investments, showcasing shared belief in the Allurion Program's potential.
