Delcath Systems, Inc. (NASDAQ: DCTH) is in the process of raising $35 million through issuance of convertible notes in an arrangement with an institutional investor. The company said the securities will be offered at a discount and that the bulk of the resulting proceeds will be held in restricted accounts.
Delcath Systems, Inc. (NASDAQ: DCTH) is seeking to raise funds for its clinical, commercial and operational needs. Specifically, the company revealed that it was fundraising for a Phase 2 and Phase 3 trials programs of Melphalan/HDS.
$29.2 million will be restricted
Of the $32.2 million net proceeds expected from the securities transaction, $29.2 million will be restricted such that the company cannot access it immediately. The restricted cash will be held in control accounts, but access to the restricted cash will be eased gradually until the company can access the entire amount.
$3 million immediately available
However, $3 million of the securities proceeds will be unrestricted and Delcath Systems, Inc. (NASDAQ: DCTH) can access it immediately. The company will also be free to use the money directly or through its subsidiaries.
According to DCTH, the convertible notes are being offered at an original issue discount of 8%. When it comes to conversion, the company said that the holders of the notes will have the option to convert them at 110% of the market price when the conversion time comes. The conversion price will be determined by the average price of the stock trading for the three days immediately before the closing date.
Retiring the notes
However, Delcath Systems, Inc. (NASDAQ: DCTH) retains the right to redeem the convertible notes after March 31, 2017. The company can use the cash on hand or the restricted cash to retire the notes.
Delcath Systems, Inc. (NASDAQ: DCTH) putting the money to use
Delcath Systems, Inc. (NASDAQ: DCTH) is planning a global Phase 3 study of Melphalan/HDS dubbed FOCUS trial. It also plans a global Phase 2 trial of the compound. As such, the money raised through the securities offering is expected to help it finance these clinical activities and others. Additionally, some of the funds are expected to go into commercial activities as well as working capital.