CervoMed Announces Up to $149.4 Million Private Placement Financing Joined by Leading Healthcare Investors
- CervoMed Inc. secures $50 million financing upfront
- Potential for an additional $99.4 million tied to warrants
- Pro forma cash and cash equivalents expected to last through 2025
- Securities purchase agreement for private placement with institutional investors
- None.
Insights
The infusion of $50 million in financing for CervoMed Inc., with the potential for an additional $99.4 million, signals a robust vote of confidence from investors, particularly those specialized in healthcare. This capital increase is a substantial move, as it extends the company's operational runway through the end of 2025. This is particularly relevant for a clinical-stage company where cash flow is typically negative and dependent on capital markets or partnership deals to fund research and development.
Investors and stakeholders should note the premium pricing of the Series A warrants, which is set at a 100% premium to the last sale. This could indicate a bullish outlook from investors on the company's prospects or a strategic move by the company to incentivize long-term investment over quick profits. However, the pre-funded warrants with an exercise price of just $0.001 may raise concerns about potential dilution for existing shareholders if a large number of shares are introduced to the market.
For the stock market, the announcement of such a deal can often lead to increased volatility in the company's shares. The impact on the stock price could go either way, depending on how the market interprets the news. On one hand, the funding secures the company's short-term future, but on the other hand, the potential dilution might be seen unfavorably.
The strategic decision by CervoMed to secure funding through a private placement rather than a public offering could be indicative of the current market conditions. Private placements are often quicker and may involve less regulatory scrutiny than public offerings, which can be advantageous in a volatile market. The participation of specialized healthcare investors like RA Capital Management and Armistice Capital suggests a targeted approach to fundraising, leveraging investors' expertise and potentially opening doors to strategic partnerships.
The allocation of funds towards the Phase 2b RewinD-LB clinical trial for neflamapimod is a critical aspect of the company's pipeline. The success of this trial could be a significant catalyst for CervoMed's stock, as dementia with Lewy bodies (DLB) represents a high unmet medical need and a potentially lucrative market. Investors should monitor the progress of this trial closely, as positive top-line data could lead to a substantial increase in the company's valuation.
The biotech sector, particularly companies like CervoMed that are in the clinical stage developing treatments for neurological disorders, is highly research-intensive and requires substantial capital. The financing deal is a critical component for CervoMed's continued research and development efforts in the competitive space of age-related neurologic disorders. The focus on DLB is noteworthy as it is a condition that lacks effective treatments, making any progress in this area particularly impactful.
From an industry perspective, the terms of the financing deal, including the use of warrants, are not uncommon in biotech. They provide investors with the potential for future equity at a set price, which can be attractive if the company's stock price appreciates. However, the specifics of the deal, such as the 100% premium on the Series A warrants, will be closely scrutinized by industry observers for implications on the company's valuation and investor sentiment.
Funding from new investors, including RA Capital Management, Armistice Capital, Special Situations Funds and Soleus Capital
Pro forma cash and cash equivalents from upfront proceeds expected to provide runway through the end of 2025
BOSTON, March 28, 2024 (GLOBE NEWSWIRE) -- CervoMed Inc. (NASDAQ: CRVO), a clinical-stage company focused on developing treatments for age-related neurologic disorders (the “Company”), today announced that it has entered into a definitive securities purchase agreement for a private placement to sell an aggregate of 2,532,285 units (the “Units”), each Unit comprised of (i) (A) one share of its common stock or (B) one pre-funded warrant to purchase shares of its common stock, and in each case, (ii) one Series A warrant to purchase shares of its common stock to a select group of institutional and accredited healthcare specialist investors in a private placement. A Unit comprised of one share of common stock and one Series A warrant shall have a purchase price of
The pre-funded warrants have an exercise price of
The Company anticipates the possible gross proceeds from the private placement to be approximately
The financing is being led by RA Capital Management and includes participation from other new institutional investors, including Armistice Capital, Special Situations Funds and Soleus Capital.
Morgan Stanley and Canaccord Genuity are acting as placement agents for the private placement. Brookline Capital Markets, a division of Arcadia Securities, LLC, is acting as a financial advisor to the Company.
The Company intends to use the net proceeds from the proposed financing to fund research and development of its clinical-stage product candidate, neflamapimod, working capital and general corporate purposes. The upfront proceeds from this financing, combined with current cash and cash equivalents but excluding any additional proceeds that may be received upon the exercise of Series A warrants, are expected to fund current operations through the end of 2025.
The offer and sale of the foregoing securities are being made in a transaction not involving a public offering and the securities to be sold in the private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or other applicable jurisdiction’s securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws. Pursuant to the securities purchase agreement, the Company has agreed to file a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) registering the resale of the shares of common stock issued in the private placement and the shares of common stock issuable upon the exercise of the pre-funded warrants and Series A warrants issued in the private placement no later than the 60th day after the closing of the private placement.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any offer, solicitation or sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any offering of the securities under the resale registration statement will only be made by means of a prospectus.
About CervoMed
CervoMed is a clinical-stage company focused on developing treatments for age-related neurologic disorders. The company is currently developing neflamapimod, an investigational orally administered small molecule brain penetrant that inhibits p38MAP kinase alpha (p38α). Neflamapimod has the potential to treat synaptic dysfunction, the reversible aspect of the underlying neurodegenerative processes that cause disease in DLB and certain other major neurological disorders. Neflamapimod is currently being evaluated in a Phase 2b clinical trial in patients with DLB.
Forward-Looking Statements
This press release includes express and implied forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, regarding the intentions, plans, beliefs, expectations or forecasts for the future of the Company, including, but not limited to, the timing, size and expectation of the closing of the private placement; expectations regarding market conditions, the satisfaction of customary closing conditions related to the private placement and the anticipated use of proceeds therefrom; the achievement of clinical and development milestones, including the completion and achievement of primary endpoints of the Company’s Phase 2b clinical trial; and projected cash runway. Terms such as "believes," "estimates," "anticipates," "expects," "plans," "intends," "may," "could," "might," "will," "should," "approximately," "potential" or other words that convey uncertainty of future events or outcomes may identify these forward-looking statements. Although there is believed to be reasonable basis for each forward-looking statement contained herein, forward-looking statements by their nature involve risks and uncertainties, known and unknown, many of which are beyond the Company's control and, as a result, actual results could differ materially from those expressed or implied in any forward-looking statement. Particular risks and uncertainties include, among other things, those related to: the satisfaction of the closing conditions to and consummation of the Company’s anticipated private placement; the Company's available cash resources and the availability of additional funds on acceptable terms; the results of the Company’s clinical trials; the likelihood and timing of any regulatory approval of neflamapimod or the nature of any feedback the Company may receive from the U.S. Food and Drug Administration; the ability to implement business plans, forecasts, and other expectations in the future; general economic, political, business, industry, and market conditions, inflationary pressures, and geopolitical conflicts; and the other factors discussed under the heading "Risk Factors" in the Company's Quarterly Report on Form 10-Q for the three-month period ended September 30, 2023 filed with the SEC on November 13, 2023, and other filings that the Company may file from time to time with the SEC. Any forward-looking statements in this press release speak only as of the date hereof (or such earlier date as may be identified). The Company does not undertake any obligation to update such forward-looking statements to reflect events or circumstances after the date of this press release, except to the extent required by law.
Investor Contact:
PJ Kelleher
LifeSci Advisors
Investors@cervomed.com
617-430-7579
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