Elicio Therapeutics Announces Closing of Private Placement of $20.0 Million Convertible Note

Rhea-AI Summary

Elicio Therapeutics (Nasdaq: ELTX) has announced the closing of a $20.0 million private placement of a 3.0% Senior Secured Convertible Promissory Note due February 15, 2026. The note was purchased by GKCC, , an entity controlled by an Elicio board member. Key details include:

- Initial conversion price: $5.81 per share (135% of closing price on August 9, 2024)
- Interest: 3% per annum, payable quarterly in cash
- Maturity date: February 15, 2026
- Use of proceeds: Working capital and general corporate purposes

The convertible note is secured and senior to other obligations. Elicio granted customary registration rights for shares issuable upon conversion. This private placement was conducted under Section 4(a)(2) of the Securities Act of 1933.

Positive

• Secured $20.0 million in funding through convertible note issuance
• 3% interest rate, lower than typical market rates
• Conversion price set at 35% premium to current stock price, potentially reducing dilution

Negative

• Potential dilution for existing shareholders if note is converted to common stock
• Increased debt obligation on the company's balance sheet
• Related party transaction with board member-controlled entity as purchaser

Financial Analyst

Elicio Therapeutics' $20 million convertible note private placement is a significant move to bolster its financial position. The 3% interest rate is relatively low, indicating favorable terms for the company. The conversion price of $5.81, set at a 35% premium to the current stock price, suggests confidence in future stock appreciation. However, the involvement of a board member in the transaction raises potential conflict of interest concerns. The 18-month maturity provides short-term stability but may create pressure if the company doesn't achieve significant milestones by early 2026. This funding should extend Elicio's runway, important for a clinical-stage biotech, but investors should monitor cash burn and clinical progress closely.

Biotech Industry Expert

This financing deal is a double-edged sword for Elicio. While it provides essential capital for advancing their novel immunotherapy pipeline, the terms suggest a challenging fundraising environment for clinical-stage biotechs. The secured nature of the note and involvement of an insider indicate external interest. However, the funding allows Elicio to continue its critical work in cancer immunotherapies. Investors should focus on upcoming clinical milestones, particularly in their lead programs, as these will be important for validating the company's technology and potentially attracting more favorable financing terms in the future.

Corporate Governance Specialist

The transaction raises governance concerns due to the involvement of a board member-controlled entity as the purchaser. While not uncommon in biotech, this insider financing warrants scrutiny. The secured nature of the note gives the board member significant leverage over the company's assets. Shareholders should examine the board's decision-making process and ensure adequate safeguards are in place to manage potential conflicts of interest. The granting of registration rights to the purchaser is standard but further tilts the balance in favor of the insider. This deal underscores the importance of robust corporate governance practices in protecting minority shareholders' interests.

BOSTON, Aug. 12, 2024 (GLOBE NEWSWIRE) -- Elicio Therapeutics, Inc. (Nasdaq: ELTX, “Elicio Therapeutics” or “Elicio”), a clinical-stage biotechnology company developing a pipeline of novel immunotherapies for the treatment of cancer, announced today that it entered into a securities purchase agreement dated August 12, 2024, pursuant to which Elicio has sold and issued a principal amount of $20.0 million in the form of a 3.0% Senior Secured Convertible Promissory Note due February 15, 2026 (the “Convertible Note”) in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The purchaser of the Convertible Note was GKCC, LLC, an entity controlled by a member of Elicio’s Board of Directors (the “Purchaser”).

The Convertible Note will be a senior, secured obligation of Elicio and its affiliates, and interest will accrue and be payable quarterly in cash on the principal amount equal to 3% per annum, with an initial interest payment date of June 30, 2025. The Convertible Note will mature on February 15, 2026 (the “Maturity Date”), unless earlier converted in accordance with the terms of the Convertible Note.

The Convertible Note will be convertible into shares of Elicio’s common stock (the “Common Stock”), at the option of the Purchaser at any time prior to the Maturity Date. The initial conversion price is $5.81 per share of the Common Stock, which is equal to approximately 135% of the closing price of Elicio’s common stock on August 9, 2024.

Jones acted as financial advisor for Elicio for the private placement.

Elicio intends to use the net proceeds from the sale of the Convertible Note for working capital and general corporate purposes.

In addition, Elicio granted the Purchaser certain customary registration rights with respect to the shares of Common Stock issuable upon conversion of the Convertible Note. For a full description of the foregoing transactions and agreements related thereto, see the Form 8-K filed by Elicio with the Securities and Exchange Commission (the “SEC”) on or about the date hereof.

The offer and sale of the Convertible Note and the shares of Common Stock issuable upon conversion of the Convertible Note, if any, have not been registered under the Securities Act or the securities laws of any other jurisdiction, and the Convertible Note and any such shares may not be offered or sold absent registration or an applicable exemption from such registration requirements.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any securities, including the Convertible Note or Elicio common stock, nor shall there be any sale of securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

About Elicio Therapeutics, Inc.
Elicio Therapeutics, Inc. (Nasdaq: ELTX) is a clinical-stage biotechnology company advancing a pipeline of novel lymph node-targeted immunotherapies for the treatment of some of the most aggressive cancers. By combining expertise in immunology and immunotherapy, Elicio is harnessing the natural power of the immune system with the AMP technology, which allows for therapeutic payloads to be delivered directly to the lymph nodes, with the goal of enhancing the immune system’s cancer-fighting capabilities. By targeting cancer immunotherapies to the core of the immune response, AMP aims to optimize the lymph nodes’ natural ability to educate, activate and amplify cancer-specific T cells, which are essential for recognizing and eliminating tumor cells. Engineered to synchronize immunity in these highly potent sites, AMP is built to enhance the magnitude, potency, quality and durability of the immune response to drive antitumor activity. Elicio’s R&D pipeline includes off-the-shelf therapeutic cancer vaccines ELI-002, (targeting mKRAS-driven cancers) as well as ELI-007 and ELI-008 (targeting BRAF-driven cancers and p53 hotspot mutations, respectively). For more information, please visit www.elicio.com.

Cautionary Note on Forward-Looking Statements

Certain statements contained in this communication regarding matters that are not historical facts, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Elicio undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except to the extent required by law. Elicio uses words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and similar expressions to identify these forward-looking statements that are intended to be covered by the safe-harbor provisions of the PSLRA. Such forward-looking statements include statements regarding, among other things, the intended use of proceeds from the offering of Elicio’s securities. Such forward-looking statements are based on Elicio’s expectations and involve risks and uncertainties; consequently, actual results may differ materially from those expressed or implied in the statements due to a number of factors.

New factors emerge from time to time, and it is not possible for Elicio to predict all such factors, nor can Elicio assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. These risks are more fully discussed in Elicio’s Annual Report on Form 10-K filed with the SEC on March 29, 2024, as amended on April 29, 2024, under the heading “Risk Factors,” and any subsequent reports and other documents filed from time to time with the SEC. Forward-looking statements included in this release are based on information available to Elicio as of the date of this release. Elicio does not undertake any obligation to update such forward-looking statements to reflect events or circumstances after the date of this release, except to the extent required by law.

Investor Relations Contact
Brian Piekos
Elicio Therapeutics
IR@elicio.com
857-209-0153

FAQ

What is the size and terms of Elicio Therapeutics' (ELTX) recent convertible note offering?

Elicio Therapeutics (ELTX) issued a $20.0 million 3.0% Senior Secured Convertible Promissory Note due February 15, 2026. The note has an initial conversion price of $5.81 per share and pays 3% interest annually.

Who purchased Elicio Therapeutics' (ELTX) convertible note in the August 12, 2024 private placement?

The convertible note was purchased by GKCC, , an entity controlled by a member of Elicio Therapeutics' Board of Directors.

How does Elicio Therapeutics (ELTX) plan to use the proceeds from the August 2024 convertible note offering?

Elicio Therapeutics intends to use the net proceeds from the sale of the Convertible Note for working capital and general corporate purposes.

What is the maturity date of Elicio Therapeutics' (ELTX) convertible note issued on August 12, 2024?

The convertible note issued by Elicio Therapeutics (ELTX) on August 12, 2024, has a maturity date of February 15, 2026, unless earlier converted.