Xbrane Announces A Preferential Issue Of Units Of Approximately SEK 343 Million

The Board of Directors of Xbrane Biopharma AB (publ) ("Xbrane" or the "Company"), announces today a rights issue of units of approximately SEK 343 million, consisting of shares and warrants of series TO1 (the "Rights Issue"). If warrants of series TO1 are fully exercised, Xbrane will receive up to an additional approximately SEK 78 million. Rights issue is subject to approval at an extraordinary general meeting. The extraordinary general meeting is scheduled to be held on February 22, 2024 and the notice will be published through a separate press release today. The purpose of the Rights Issue is primarily to finance preparatory activities for the launch of Ximluci in the US, the launch of Ximluci PFS, production of clinical material for BIIB801, development and production of clinical material for Xdivane, general corporate purposes and prepayment in cash of the next six (6) the amortizations of convertible bonds to CVI, Investments Inc. ("CVI"). In total, approximately 83 percent of the Rights Issue is covered by subscription obligations and letters of intent, as well as guarantee commitments, corresponding to approximately SEK 285 million.

Summary

• The board of Xbrane has today decided to, subject to subsequent approval from the extraordinary general meeting, carry out the rights issue and proposed for the extraordinary general meeting to make decisions on the necessary changes to the articles of association regarding the limitations on the number of shares and the share capital. The extraordinary general meeting is scheduled to be held on February 22, 2024 and the notice will be published through a separate press release today.
• All existing shareholders receive one (1) unit right for each share owned on the record date, which is expected to be around February 26, 2024. One (1) unit right gives the right to subscribe for one (1) unit. One (1) unit consists of fifty (50) newly issued shares and nine (9) warrants of series TO1.
• The subscription price is SEK 11.5 per unit, corresponding to a subscription price of SEK 0.23 per share. The warrants are issued free of charge. The subscription price when exercising the warrants of series TO1 will amount to SEK 0.29 per warrant, corresponding to a premium of approximately 26.1 percent of the subscription price for the shares in the Rights Issue. The warrants will be available for trading on the Nasdaq First North Growth Market.
• The subscription price of SEK 0.23 per share corresponds to a discount of approximately 39.0 percent compared to the theoretical price after separation of unit rights, based on the closing price of Xbrane's share on Nasdaq Stockholm on January 19, 2024, which is the last trading day before the Rights Issue's publication.
• In the case of full subscription in the Rights Issue, Xbrane will receive approximately SEK 343 million before deductions for transaction costs.
• Upon full utilization of the warrants of series TO1, which expire on December 16, 2024, the Company may receive additional cash of up to approximately SEK 78 million.
• The subscription period in the Rights Issue is expected to run from and including 28 February 2024 to and including 13 March 2024.
• Existing shareholders, including Systematic Group AB as well as certain board members and senior executives, including CEO Martin Åmark, CFO Anette Lindqvist and chairman of the board Anders Tullgren, have undertaken or submitted declarations of intent to subscribe for units corresponding to approximately 16.3 percent of the rights issue, corresponding to approximately 55, SEK 8 million.
• A number of investors, including the existing shareholder Systematic Group AB and the bridging financing providers, have undertaken to guarantee approximately 66.7 percent of the Rights Issue, corresponding to approximately SEK 229 million, for a guarantee compensation of eleven (11) percent of the guaranteed amount in cash compensation or shares.
• In total, approximately 83.0 percent of the Rights Issue is covered by subscription obligations, letters of intent and guarantee commitments, corresponding to approximately SEK 285 million.
• Existing shareholders, representing approximately 22.7 percent of the total number of votes in the Company, have undertaken or expressed their intention to vote for the approval of the Rights Issue at the extraordinary general meeting, including the necessary amendments to the articles of association.
• In connection with the publication of the Rights Issue, the Company has entered into a bridging financing agreement of approximately SEK 50 million at an interest rate of 1.0 percent per month. The Company expects to utilize this bridging financing until the completion of the Rights Issue.

Xbrane's CEO Martin Åmark comments : "With this rights issue, we are creating the right conditions to reach our most important upcoming milestones: the closest to the launch of Ximluci in the USA, further launching Ximluci as a pre-filled syringe to accelerate sales in Europe, and finally manufacturing clinical material for BIIB801 and Xdivane. It also means that we can immediately resolve amortizations on outstanding convertible loans until January 2025 after which we expect to be able to amortize in cash based on positive operating cash flow.”

Background and motive
Xbrane is a Swedish commercial biosimilar developer with its own manufacturing platform that ensures high yields and low product costs, validated through development and commercialization partnerships with STADA and Biogen.

The company's leading product, Ximluci, is a biosimilar to the VEGf+Fa inhibitor Luncentis targeting a global market of 13 MUSD. Ximluci received European approval in November 2022, a marketing authorization by the MHRA in January 2023 and is currently being launched with biosimilar specialist STADA in Europe. On April 24, 2023, Xbrane announced the submission of the BLA for Ximluci to the FDA, with approval in the US planned for April 2024. As of July 2023, Xbrane and STADA are engaged in collaborative discussions for US commercialization expected to be completed in H1 2024, in time for launch in the U.S. In November 2023, Xbrane announced that it had implemented a cost-cutting program that involved focusing the Company's development portfolio and reducing the number of employees, in order to achieve positive cash flow as soon as possible, no later than the first quarter of 2025.

The Company is also developing the only known biosimilar candidate under development referring to the TNF inhibitor Cimzia together with Biogen and has a portfolio of two independent oncology biosimilars enabling partnerships in the short term.

Use of issue proceeds
The net proceeds from the Rights Issue, provided that the Rights Issue is subscribed to the amount intended to be covered by subscription obligations, letters of intent and guarantee commitments, will primarily finance:

1. Launch of Ximluci in the US and launch of Ximluci PFS (approximately 40 percent);
2. Production of clinical material for BIIB801 triggering milestone payments from commercialization partner Biogen (approximately 10 percent);
3. Development and production of clinical material for Xdivane (approximately 15 percent);
4. General business purposes (about 7 percent); and
5. Cash advance payment of the next six (6) amortizations to CVI in relation to the convertible bonds (approximately 28 percent).

Assuming the successful implementation of the business plan, including timely FDA approval for Ximluci and a secured partnership for Xdivane, the net proceeds from the Rights Offering are expected to meet the Company's working capital requirements until the first quarter of 2025, when the Company expects to have achieved positive operating cash flow on a monthly basis. Should the Rights Issue be subscribed for an amount higher than the amount covered by the subscription bonds, letters of intent and guarantee commitments, the additional cash will be used to finance activities (i), (ii) and (iii) proportionately.
In the event of full utilization of the warrant series, the Company is expected to receive a cash flow of up to approximately SEK 78 million, which the Company intends to use to initiate the development of a new biosimilar candidate.

Change of agreement in relation to convertible bonds
In connection with the publication of the Rights Issue, the Company has entered into an agreement with CVI to change certain conditions for the Company's outstanding convertible debentures to CVI, essentially the following: –

• CVI to waive its right to adjust the conversion rate for conversion of the convertibles to shares of 125 percent of the subscription price in the event of a new issue of shares in the Company until January 2025
• CVI to waive its right to advance planned amortizations regarding the convertibles until January 2025 –
• CVI to postpone upcoming amortizations on January 26, 2024 and March 26, 2024 until the Rights Issue is completed
• The Company must pay CVI for the next six (6) amortizations in cash through liquid obtained from the Rights Issue –Price at which the convertible debentures can be converted into shares remains SEK 91.375 per share on the outstanding part of the convertible debentures
• The convertible debentures must return to the terms originally signed from January 2025 and, assuming the Company successfully implements the existing business plan, amortizations should thereafter be made in cash
• If the Rights Issue has not been completed before 30 April 2024, the above changes will not come into force and the terms of the convertible bonds will revert to the terms set out when the agreement was originally signed.

Conditions for the Rights Issue and bridging financing
Shareholders who are registered in the Xbrane share register on the record date, which is expected to be February 26, 2024, will receive one (1) unit right for each share held in the Company. The unit right entitles the holder to subscribe for new units with preferential rights. One (1) unit right entitles the holder to subscribe for one (1) unit. One (1) unit consists of fifty (50) newly issued shares and nine (9) warrants of series TO1. The subscription price is SEK 11.5 per unit, corresponding to SEK 0.23 per share (the warrants are issued free of charge), which means that Xbrane will receive gross cash of approximately SEK 343 million before deductions for transaction costs, provided that the Rights Issue is fully subscribed. Upon full exercise of warrants of series TO1, which expire on December 16, 2024, the Company will receive additional liquid of up to approximately SEK 78 million. In addition, investors are offered the opportunity to sign up for subscription of units without the support of unit rights.

Each warrant of series TO1 entitles the holder to subscribe for one (1) new share in the Company during the period beginning December 2, 2024 through December 16, 2024. The exercise price for the warrants of series TO1 will be SEK 0.29. The warrants will be available for trading on the Nasdaq First North Growth Market.

Provided that the Rights Issue is fully subscribed, the number of shares in Xbrane will increase by a maximum of 1,490,518,200 shares, from 29,810,364 shares to a maximum of 1,520,328,564 shares. The share capital will increase by a maximum of approximately SEK 334,153,404.64 from approximately 6,683,068.09 to a maximum of SEK 340,836,472.73. Shareholders who choose not to participate in the Rights Issue will, through the Rights Issue, have their share diluted by up to 98.0 percent (based on the total maximum number of outstanding shares in the Company after the Rights Issue). These shareholders have the opportunity to compensate themselves financially for this dilution effect by selling their received unit rights.

Upon full exercise of the warrants of series TO1 covered by the Rights Issue, the number of shares will increase by 268,293,276 and the share capital will increase by approximately SEK 60,147,612.84, which, assuming that the Rights Issue is fully subscribed, corresponds to a dilution effect of approximately 15.0 percent of the total number of shares and votes in the Company.

The full terms of the Rights Issue and information about the Company will be presented in a prospectus which is expected to be published on the Company's website around February 27, 2024.

In connection with the publication of the Rights Issue, the Company has entered into a bridging financing agreement of approximately SEK 50 million at an interest rate of 1.0 percent per month. The Company expects to utilize this bridging financing until the completion of the Rights Issue.

Subscription commitments and guarantee commitments
Existing shareholders, including Systematic Group AB, have undertaken or submitted declarations of intent to subscribe for units corresponding to approximately 15.8 percent of the Rights Issue, corresponding to approximately SEK 54.1 million. In addition, certain board members and senior executives, including CEO Martin Åmark, CFO Anette Lindqvist and board chairman Anders Tullgren, have committed to subscribe for units representing approximately 0.5 percent of the rights issue, corresponding to approximately SEK 1.7 million. In total, these subscription obligations represent approximately 16.3 percent of the Rights Issue, corresponding to approximately SEK 55.8 million.

A number of investors, including the existing shareholder Systematic Group AB and the bridging financing providers, have entered into an agreement to guarantee approximately 66.7 percent of the Rights Issue, corresponding to approximately SEK 229 million, for an issue commission of eleven (11) percent of the guaranteed amount in cash compensation or by obtaining of newly issued shares in the Company where the subscription price for these newly issued shares must be the same as the subscription price per share in the Rights Issue. Information about any new issue of shares to investors who have chosen to receive their issue commission in shares will be made public after the subscription period has ended.

In total, approximately 83.0 percent of the Rights Issue is covered by subscription obligations and guarantee commitments, corresponding to approximately SEK 285 million.

The board's decision on the rights issue is subject to approval at the extraordinary general meeting. Current shareholders, representing approximately 22.7 percent of the total number of votes in the Company, have undertaken or expressed their intention to vote for the approval of the Rights Issue and the necessary amendments to the articles of association at the extraordinary general meeting.

Lock-up commitments
Prior to the publication of the Rights Issue, board members and senior executives who own shares in the Company have entered into lock-up commitments which, among other things, mean that they have, with certain customary exceptions, undertaken not to sell shares in the Company. The existing shareholders Systematic Group AB and STADA Arzneimittel AG have also entered into customary lock-up commitments. All lock-up commitments cease to apply on the day that falls 180 days after the publication of the outcome of the Rights Issue.
Furthermore, the Company has committed to Sole Manager and Bookrunner, with customary exceptions, not to issue additional shares or other share-related instruments for a period of 180 days after the end of the subscription period.

Preliminary schedule for the Rights Issue
The schedule below for the Rights Issue is preliminary and may be adjusted.

Adviser
Pareto Securities has been appointed Sole Manager and Bookrunner. Baker & McKenzie Advokatbyrå KB is legal advisor to the Company. The law firm Delphi KB is acting as legal advisor to Pareto Securities in connection with the Rights Issue. Nordic Issuing acts as issuing institution in connection with the Rights Issue.

This information constitutes inside information that Xbrane Biopharma is obliged to make public under the EU Market Abuse Regulation.

About us
Xbrane Biopharma AB develops biological medicines based on a patented platform technology that provides significantly lower production costs compared to competing systems. Xbrane has a portfolio of biosimilar candidates targeting EUR 53 million in estimated annual peak sales of the respective reference product. The lead candidate Ximluci was granted market approval in Europe and was launched in the first quarter of 2023. Xbrane's headquarters are in Solna, just outside Stockholm. Xbrane is listed on Nasdaq Stockholm under the ticker XBRANE. For more information, please visit http://www.xbrane.com .