IVEVF - Inventiva announces a financing of approximately €35.7 million from new and existing investors consisting of a €30.6 million reserved capital increase and a €5.1 million issuance of royalty certificates | Benzinga

Daix (France), Long Island City (New York, United States), August 31, 2023 – Inventiva (NASDAQ:IVA) (the "Company"), a clinical-stage biopharmaceutical company focused on the development of oral small molecule therapies for the treatment of patients with non-alcoholic steatohepatitis ("NASH") and other diseases with significant unmet medical needs, today announced an approximately €35.7 million financing.

The financing consists of two transactions: (i) a capital increase reserved to specified categories of investors (the "Capital Increase"), for an amount of €30,587,269 million through the issuance of 9,618,638 newly-issued ordinary shares with a nominal value of €0.01 per share (the "New Shares"), at a subscription price of €3.18 per share and (ii) the issuance of royalty certificates (the "Royalty Certificates"), for an amount of €5.1 million (together with the Capital Increase, the "Transaction").

Frederic Cren, Chief Executive Officer of Inventiva, said: "We are very pleased with this transaction and especially of the support from existing and new investors: a testament of the potential of our pipeline and particularly of our lead compound in development, lanifibranor. The proceeds of this financing will contribute to the development of lanifibranor and extend our cash runway beyond two key milestones: the recruitment of the last patient of our pivotal phase III clinical trial in NASH expected before the end of the year and the publication of the results of the trial combining lanifibranor with SGLT2 inhibitor empagliflozin expected for the first quarter of 2024."

Reasons for the issuance and use of the proceeds of the Transaction

The Company intends to use the net proceeds from the Capital Increase, together with its available cash, according to the following:

• 95% of the net proceeds for the Phase III evaluation of lanifibranor in the treatment of patients suffering from NASH; and
• 5% of the net proceeds for its other pre-clinical and clinical programs, in particular Yap-Tead, as well as for general corporate purposes.

In the Company's opinion, before the Capital Increase and the issuance of the Royalty Certificates, the Company's net working capital is not sufficient to meet its obligations over the next twelve months. As of June 30, 2023¹, the Company's cash and cash equivalents are estimated to be €31.2 million, short-term deposits to €0.05 million², and long-term deposits to €9.3 million³, compared to €86.7 million, €1.0 million and €0.7 million as of December 31, 2022. This cash position enables the Group to continue its activities until end of fourth quarter 2023.

To cover its obligations until the end of August 2024, based on its current business plan, the Company estimates that its additional cash requirements will amount to €80.0 million.

Following completion of the Capital Increase and the issuance of Royalty Certificates, the Company will have sufficient net working capital to meet its current obligations until the beginning of the second quarter of 2024, and will have net working capital until the beginning of the third quarter of 2024, subject the disbursement of the European Investment Bank second tranche of the €25 million loan (the "EIB Financing") in accordance with the terms of the financing agreement entered into with the Company on 16 May 2022 (see the Company's press release of July 4, 2022 detailing the conditions precedent to the granting of EIB Financing) and subject to other sources of financing expected by the end of 2023. As a result, the Company will not have sufficient net working capital over the next twelve months after the Capital Increase and the issuance of the Royalty Certificates.

To date, and subject to the settlement and delivery of the New Shares, the remaining conditions precedent to the EIB Financing are as follows: (i) the receipt by the Company of at least €70 million (it being specified that as of today, the Company has already reached an amount of approximately €22.5 million, which does not include the amount raised under the Transaction) and (ii) operating targets. The Company expects to meet these conditions by the end of 2023.

In addition to the proceeds of the Capital Increase and the Royalty Certificates, the Company plans to extend its expected financing horizon through :

• additional financing through the issuance of equity or debt securities, public offerings or private placements, or bank loans;
• the sale of ADSs under the At-the-Market financing program;
• strategic transactions such as business development partnerships and/or licensing agreements;
• milestone payments that may be received in connection with partnerships.

Should the above measures fail to materialize, the Company would have to raise new financing to ensure the continuity of its business.

Main characteristics of the Transaction

Capital Increase

The Company's Board of Directors, by virtue of the powers granted to it by the 6^th resolution of the shareholders' general meeting of January 25, 2023 (capital increase without the exercise of preemptive subscription rights in favor of specific categories of beneficiaries) and in accordance with Articles L. 225-138 et seq. of the French Commercial Code (Code de commerce) has decided on August 30, 2023 to proceed with the Capital Increase and has determined the final number of ordinary shares offered and the subscription price.

The specific categories of persons defined by the 6^th resolution of the shareholders' general meeting include: (i) natural or legal persons (including companies) trusts or investment funds, or other investment vehicles, in any form, established under French or foreign law, which regularly invest in the pharmaceutical, biotechnological or medical technology sectors; and/or (ii) companies, institutions or entities, in any form, French or foreign, exercising a significant part of its activities in the pharmaceutical, cosmetic or chemical sectors, or medical devices and/or technologies, or researching in such sectors; and/or (iii) French or foreign investment services companies, or any foreign establishment having an equivalent status, able to guarantee the completion of an issue intended to be placed with the persons referred to in (i) and/or (ii) above, and, in this context, to subscribe to the securities that are being issued.

Qatar Holding LLC, a new investor, has agreed to subscribe to the Capital Increase for an amount of approximately €16.4 million corresponding to 5,157,233 New Shares, representing an approximate 9.97% stake in the Company.

 Sofinnova Partner and Yiheng Capital, which are existing shareholders of the Company, participated in the Transaction.
Sofinnova Partner, which held a 8.0% stake in the Company, prior to the Capital Increase, subscribed to the Capital Increase for an amount of approximately €5.4 million corresponding to 1,688,327 New Shares. After the Capital Increase, Sofinnova Partner will hold 9.8% of the share capital of the Company, on a non-diluted basis.

Yiheng Capital, which held a 6.3% stake in the Company prior to the Capital Increase, subscribed to the Capital Increase for an amount of approximately €3.8 million corresponding to 1,200,750 New Shares. After the Capital Increase, Yiheng Capital will hold 7.4% of the share capital of the Company, on a non-diluted basis.

The price of the New Shares was decided by the Board of Directors on August 30, 2023, pursuant to the delegation of authority granted by the 6th resolution of the shareholders' general meeting, and is equal to the weighted average of the prices quoted for the last 10 trading sessions on the regulated market of Euronext Paris prior to the setting of the price (i.e. the trading sessions of August 29, 28, 25, 24, 23, 22, 21, 18, 17 and 16, 2023, i.e. €3.34), less a discount of around 5%, i.e. €3.18. The price of the New Shares represents discount of 0.22% compared with the volume-weighted average price of the Company's shares during the trading session preceding the setting of the issue price in the amount of €3.19.

Settlement and delivery of the New Shares is expected to occur on September 5, 2023. The New Shares will be fungible with the existing shares of the Company and will be admitted to trading on the regulated market of Euronext Paris under ISIN FR0013233012.

Investors participating in the Capital Increase have agreed to a six (6) month lock-up on the New Shares subject to a number of customary exceptions. 

Royalty Certificates

The Royalty Certificates are being issued pursuant to a decision of Board of Directors on August 30, 2023, in accordance with the provisions of Article L. 228-36-A of the French Commercial Code (Code de commerce) to some of the investors as the ones who participated in the Capital Increase.

The Royalty Certificates give the holders thereto the right to an annual payment of royalties (the "Royalties") equal to 2% of the future net sales of lanifibranor (the "Product"), if any, beginning on the fiscal year following the start of the sales of the Product following the granting of the market authorization (Autorisation de mise sur le marché) for the Product in (i) the United States or (ii) the countries of the European Union or (iii) the United Kingdom, whichever occurs the first.

The aggregate amount of Royalties that may be paid under the Royalty Certificates is capped at €92.1 million globally corresponding to three times of the amount of gross proceeds from the Transaction (not including subscriptions received solely in connection with the Capital Increase). The net proceeds from the issuance of the Royalty Certificates will be used for the Phase III evaluation of lanifibranor in the treatment of patients suffering from NASH.

The Royalty Certificates do not have any additional financial rights besides the right to Royalties referred to above. Specifically, the Royalty Certificates do not grant any financial rights on any other products that may be developed by the Company beyond lanifibranor.

The subscription price for the Royalty Certificates is €5.1 million and has been calculated based on the net present value (NPV) of expected cash flows related to the Royalty Certificates. The NPV calculation depends strongly on assumptions made by the Company with regards to the chances of success of its studies, the commercialization calendar of lanifibranor, the market size addressed by lanifibranor, the market share of the product and the discount rate. In the process of setting the discount rate, the Company analyzed the expected cash flow derived from its business plan as regards to its market capitalization.

The Royalty Certificates have a term of 15 years following their issuance and do not provide for an accelerated repayment in case of change of control. The Company may at any time repurchase in full the Royalty Certificates by paying an amount equal to (i) the global cap of €92.1 million minus any Royalties paid prior to such repurchase or (ii) a price to be agreed between the Company and the holders of the Royalty Certificates. The Company may also redeem the Royalty Certificates from each holder, subject to offering such redemption to every holders. Lastly, the Company has a pre-emptive right in the event of the sale of Royalty Certificates by a holder.

The Royalty Certificates are subject to a six month lock-up period after which they will become freely transferable (in whole, but not in part) only to qualified institutional buyers, as defined in Rule 144A under the U.S. Securities Act of 1933, as amended, or qualified investors pursuant to Article 2(e) of Regulation (EU) 2017/1129. The Company has a preemptive right on any transfer of Royalty Certificates.

The payment of Royalties in the event of the commercialization of the Product (2% of sales of the Product in the United States, in European Union countries and in the United Kingdom) will result in a decrease in cash flow generated by sales of the Product, which will have an unfavourable effect on the Company's financial position, particularly at the beginning of the commercialization phase.

Settlement and delivery of the Royalty Certificates is expected to occur on September 5, 2023. The Royalty Certificates will not be listed on any stock exchange and will not be assigned an ISIN.

Impact of the Capital Increase on the share capital

Following the settlement and delivery of the New Shares, expected to occur on September 5, 2023, the Company's total share capital will be equal to €517,528.07 million divided into 51,752,807 shares.

For illustration purposes, the impact of the issuance of the New Shares on the ownership of a shareholder holding 1% of the Company's share capital prior to the Capital Increase and not subscribing to it, is as follows:

(1) Calculations are based on the assumption that all share subscription warrants (BSA), warrants for the subscription of business creators' shares (BSPCE) and stock options (options de souscription d'actions) will be exercised and that all free shares allocated will vest.

Impact of the Capital Increase on shareholders' equity

For illustration purposes, the impact of the issuance of the New Shares on the Company's equity per share (calculation made on the basis of the Company's equity at June 30, 2023) is as follows:

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