VBI Vaccines Initiates Restructuring Proceedings Under CCAA to Implement a Review of its Strategic Alternatives

Rhea-AI Summary

VBI Vaccines Inc. (Nasdaq: VBIV) has initiated restructuring proceedings under the Companies' Creditors Arrangement Act (CCAA) in Canada. The Ontario Superior Court of Justice has issued an initial order granting the company protection, including a stay of proceedings and approval of a DIP Loan. Ernst & Young Inc. has been appointed as the monitor during the restructuring process.

VBI intends to fund the CCAA process through cash on hand and a DIP Loan from K2 HealthVentures The company plans to seek approval for a sale and investment solicitation process (SISP) to identify potential purchasers of its assets. VBI will also file for Chapter 15 bankruptcy in the US and commence proceedings under Israeli Insolvency Law to protect its subsidiaries and assets in those countries.

As a result, VBI expects its common shares to cease trading on the Nasdaq Capital Market and anticipates ceasing reporting as a public company.

Positive

• Secured DIP Loan from K2 HealthVentures to fund CCAA process
• Planned sale and investment solicitation process (SISP) to identify potential asset purchasers

Negative

• Initiated restructuring proceedings under CCAA due to financial difficulties
• Expected delisting from Nasdaq Capital Market
• Ceasing operations as a public reporting company
• Potential sale of company assets

Financial Analyst

VBI Vaccines' initiation of restructuring proceedings under CCAA is a significant development that signals severe financial distress. This move typically indicates a company's inability to meet its financial obligations and is often a last resort before potential bankruptcy. The key points to consider are:

• The company has obtained debtor-in-possession (DIP) financing from K2 HealthVentures , which suggests an urgent need for liquidity.
• VBI plans to initiate a sale and investment solicitation process (SISP), indicating a potential sale of assets or the entire company.
• The company expects to cease trading on Nasdaq and stop reporting as a public company, which will significantly impact shareholders.
• VBI is seeking protection in multiple jurisdictions, including the U.S. and Israel, to safeguard its subsidiaries and assets.

For investors, this news is highly negative. The restructuring process often leads to significant dilution or complete loss of value for existing shareholders. The cessation of public reporting will also reduce transparency and liquidity for investors. The company's future is now uncertain, with potential outcomes ranging from a successful restructuring to liquidation.

Legal Expert

The CCAA filing by VBI Vaccines presents several critical legal implications:

• The Initial Order grants VBI protection from creditors, allowing the company to continue operations while restructuring its debt and exploring strategic alternatives.
• The appointment of Ernst & Young as the Monitor ensures oversight of the restructuring process, providing transparency and protection for stakeholders.
• The DIP Loan approval is crucial, as it provides necessary funding during the restructuring period, but also creates a new secured creditor with priority over existing creditors.
• The planned Chapter 15 filing in the U.S. and proceedings under Israeli Insolvency Law demonstrate a comprehensive approach to protect VBI's global assets and operations.

From a legal standpoint, this process offers VBI a controlled environment to address its financial challenges. However, it also signals potential risks for various stakeholders:

• Shareholders may face significant dilution or loss of equity value.
• Unsecured creditors might recover only a fraction of their claims, if anything at all.
• Employees could face uncertainty regarding job security and benefits.

The success of the SISP will be important in determining the ultimate outcome for all parties involved. Stakeholders should closely monitor court proceedings and any announcements regarding potential buyers or investors.

Biotech Industry Analyst

VBI Vaccines' restructuring under CCAA highlights the challenging landscape for biotech companies, especially those without a steady revenue stream from marketed products. Several industry-specific factors are worth noting:

• The biotech sector has faced significant headwinds recently, with tightening capital markets making it difficult for companies to raise funds.
• VBI's situation underscores the high-risk nature of vaccine development, where substantial investments are required before generating revenue.
• The company's 3-antigen hepatitis B vaccine, PreHevbrio, approved in 2021, likely faced challenges in market penetration and revenue generation.
• This restructuring may impact ongoing research and development efforts, potentially delaying or halting promising vaccine candidates in VBI's pipeline.

For the broader biotech industry, VBI's situation serves as a cautionary tale about the importance of robust financial planning and diverse product portfolios. It may also lead to increased scrutiny of biotech companies' cash runways and commercialization strategies by investors and analysts.

The outcome of VBI's restructuring could have ripple effects on investor sentiment towards small and mid-cap biotech companies, potentially making fundraising more challenging for firms with similar profiles. However, it may also create opportunities for larger pharmaceutical companies or well-funded biotechs to acquire valuable assets or technologies at discounted prices through the SISP process.

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- VBI Vaccines Inc. (Nasdaq: VBIV) (VBI), a biopharmaceutical company driven by immunology in the pursuit of powerful prevention and treatment of disease, today announced that the Ontario Superior Court of Justice (Commercial List) (“Court”) has issued an initial order (“Initial Order”) granting the company protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (“CCAA”). The Initial Order provides for, among other things: (i) a stay of proceeding in favour of VBI, (ii) approval of the DIP Loan (as described below), and (iii) the appointment of Ernst & Young Inc. (“EY”) to serve as monitor (“Monitor”) in the Court during the restructuring (“Restructuring Process”).

The decision to seek creditor protection was made in the best interest of its stakeholders after careful evaluation of VBI’s financial situation and all available alternatives following consultation with its legal and financial advisors. The board of directors of VBI will remain in place and VBI will remain responsible for the sale process under the supervision of the CCAA Court and the general oversight of the Monitor. VBI intends to fund the CCAA process from cash on hand as well as through the authorized interim debtor-in-possession financing (“DIP Loan”) entered into with K2 HealthVentures LLC (“K2HV”), as the secured creditor and DIP lender.

VBI intends to seek approval of a sale and investment solicitation process (“SISP”), which, if approved, would allow interested parties to participate in the process in accordance with the SISP procedure. VBI intends to use this process to build on the work it undertook prior to the filing to identify one or multiple purchasers of its assets on an efficient basis. The SISP, if approved by the CCAA Court, will be administered by VBI, with the assistance of its financial advisor and the Monitor, EY. Additional detail relating to the SISP will be disclosed in due course.

VBI intends to commence a case under Chapter 15 of the United States Bankruptcy Code to seek recognition and enforcement in the United States of the CCAA Court’s orders, and to commence a case under the relevant provisions of the Israeli Insolvency and Economic Rehabilitation Law, 2018 (“Israeli Insolvency Law”), to protect VBI’s subsidiaries and assets located in the United States and Israel, respectively.

The Company has notified Nasdaq of the foregoing and expects its common shares will cease trading on the Nasdaq Capital Market upon such date that Nasdaq determines. The Company expects to cease reporting as a public reporting company.

Stikeman Elliott LLP, Haynes and Boone, LLP, Morris, Nicols, Arsht & Tunnell LLP, and Pearl Cohen Zedek Latzer Baratz are acting as legal advisors to VBI. EY is acting as financial advisor to VBI in connection with the CCAA process and the proposed SISP.

Additional information regarding the CCAA proceeding can be found on the Monitor’s website here, or by contacting the Monitor at vbi.monitor@ca.ey.com or 1-888-338-1764.

About VBI Vaccines Inc.

VBI Vaccines Inc. (“VBI”) is a biopharmaceutical company driven by immunology in the pursuit of powerful prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B, coronaviruses, and cytomegalovirus (CMV), as well as aggressive cancers including glioblastoma (GBM). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.

Website Home: http://www.vbivaccines.com/

News and Resources: http://www.vbivaccines.com/news-and-resources/

Investors: http://www.vbivaccines.com/investors/

Cautionary Statement on Forward-looking Information

Certain statements in this press release that are forward-looking and not statements of historical fact are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are forward-looking information within the meaning of Canadian securities laws (collectively, “forward-looking statements”). The Company cautions that such forward-looking statements involve risks and uncertainties that may materially affect the Company’s results of operations. Such forward-looking statements are based on the beliefs of management as well as assumptions made by and information currently available to management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, risks and uncertainties regarding the Company’s ability to successfully complete a sale process under Chapter 15 and/or the CCAA and/or Israeli Insolvency Law; potential adverse effects of the Restructuring Proceedings on the Company’s liquidity and results of operations; the Company’s ability to obtain timely approval by the applicable courts in Canada, US, and Israel, with respect to the motions filed in or in connection with the Restructuring Proceedings; objections to the Company’s sale process, the DIP Loan, or other pleadings filed that could protract the restructuring proceedings; employee attrition and the Company’s ability to retain senior management and other key personnel due to the distractions and uncertainties, including the Company’s ability to provide adequate compensation and benefits during the Restructuring Proceedings; the Company’s ability to comply with the restrictions imposed by the DIP Loan and other financing arrangements; the Company’s ability to maintain relationships with suppliers, customers, employees and other third parties and regulatory authorities as a result of the Chapter 15, CCAA filings, and proceedings under the Israeli Insolvency Law; the applicable rulings in the Restructuring Proceedings, including the approval of the DIP Loan, and the outcome of the Restructuring Proceedings generally; the length of time that the Company will operate under Chapter 15, CCAA protection, and protection under the Israeli Insolvency Law, and the continued availability of operating capital during the pendency of the proceedings; risks associated with third party motions in the Restructuring Proceedings and/or under Israeli Insolvency Law, which may interfere with the Company’s ability to consummate a sale; and increased administrative and legal costs related to the Chapter 15, the CCAA proceedings, and proceedings under Israeli Insolvency Law, and other litigation and inherent risks involved in a bankruptcy process, the Company’s ability to regain and maintain compliance with the listing standards of the Nasdaq Capital Market, the Company’s ability to satisfy all of the conditions to the consummation of the transactions with Brii Biosciences, the Company’s ability to comply with its obligations under its loan agreement with K2 HealthVentures, the impact of general economic, industry or political conditions in the United States or internationally; the impact and continuing effects of the COVID-19 epidemic on our clinical studies, manufacturing, business plan, and the global economy; the ability to successfully manufacture and commercialize PreHevbrio/PreHevbri; the ability to establish that potential products are efficacious or safe in preclinical or clinical trials; the ability to establish or maintain collaborations on the development of pipeline candidates and the commercialization of PreHevbrio/PreHevbri; the ability to obtain appropriate or necessary regulatory approvals to market potential products; the ability to obtain future funding for developmental products and working capital and to obtain such funding on commercially reasonable terms; the Company’s ability to manufacture product candidates on a commercial scale or in collaborations with third parties; changes in the size and nature of competitors; the ability to retain key executives and scientists; and the ability to secure and enforce legal rights related to the Company’s products. A discussion of these and other factors, including risks and uncertainties with respect to the Company, is set forth in the Company’s filings with the SEC and the Canadian securities authorities, including its Annual Report on Form 10-K filed with the SEC on March 13, 2023, and filed with the Canadian security authorities at sedarplus.ca on March 13, 2023, as may be supplemented or amended by the Company’s Quarterly Reports on Form 10-Q. Given these risks, uncertainties and factors, you are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. All such forward-looking statements made herein are based on our current expectations and we undertake no duty or obligation to update or revise any forward-looking statements for any reason, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730295745/en/

VBI

Email: IR@vbivaccines.com

Source: VBI Vaccines Inc.

FAQ

Why did VBI Vaccines (VBIV) file for creditor protection under CCAA?

VBI Vaccines filed for creditor protection under CCAA after careful evaluation of its financial situation and available alternatives, in consultation with legal and financial advisors. The decision was made in the best interest of its stakeholders.

What is the restructuring process for VBI Vaccines (VBIV) under CCAA?

The restructuring process for VBI Vaccines under CCAA includes a stay of proceedings, approval of a DIP Loan, and appointment of Ernst & Young Inc. as monitor. The company plans to seek approval for a sale and investment solicitation process (SISP) to identify potential asset purchasers.

How will VBI Vaccines (VBIV) fund its operations during the CCAA process?

VBI Vaccines intends to fund its operations during the CCAA process through cash on hand and an authorized interim debtor-in-possession financing (DIP Loan) entered into with K2 HealthVentures

What will happen to VBI Vaccines (VBIV) stock on Nasdaq?

VBI Vaccines expects its common shares to cease trading on the Nasdaq Capital Market upon a date determined by Nasdaq. The company also anticipates ceasing operations as a public reporting company.