Form 4: OrbiMed Israel BioFund Exercises Warrants in BiomX Inc. (PHGE), Acquires Shares and Disgorges Profits

OrbiMed Israel Partners Limited Partnership exercised pre-funded warrants to purchase BiomX Inc. common stock, resulting in the acquisition of shares and a subsequent disgorgement of profits to the issuer.

Summary

• On May 15, 2024, OrbiMed Israel Partners Limited Partnership (OIP) exercised pre-funded warrants to purchase 9,280,408 shares of BiomX Inc.'s common stock at $0.244 per share.
• The exercise was conducted on a cashless basis, leading BiomX to withhold 24,344 shares to cover the exercise price.
• OIP received the remaining 9,256,064 shares.
• The shares withheld are matchable under Section 16(b) of the Securities Exchange Act of 1934 with a portion of OIP's purchase of certain derivative securities on March 15, 2024.
• OIP will disgorge the statutory 'profits' resulting from these transactions to BiomX.
• After the transaction, OrbiMed Israel BioFund GP Limited Partnership beneficially owns 13,773,653 shares indirectly through its relationship with OIP.
• OrbiMed Israel GP Ltd., Carl L. Gordon, and Erez Chimovits also disclaim beneficial ownership except to the extent of their pecuniary interest.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative due to the need for profit disgorgement, which raises concerns about compliance and potential insider trading issues. The warrant exercise itself is a common financial event, but the regulatory aspect tempers the overall sentiment.

Positives

• The exercise of warrants provides BiomX with additional capital, albeit through a cashless transaction where shares are withheld to cover the exercise price.
• The disgorgement of profits by OrbiMed to BiomX ensures compliance with Section 16(b) of the Securities Exchange Act.

Negatives

• The need for OrbiMed to disgorge profits suggests a potential violation of Section 16(b) of the Securities Exchange Act, indicating possible short-swing profits from derivative securities transactions.
• The cashless exercise, while common, dilutes existing shareholders' equity without a direct cash infusion to the company.

Risks

• Potential for future scrutiny regarding compliance with Section 16 of the Securities Exchange Act.
• Continued dilution of existing shareholders due to warrant exercises.
• The company's reliance on warrant exercises for funding may indicate underlying financial challenges.

Future Outlook

The document does not contain specific forward-looking statements regarding BiomX's future performance or financial guidance.

Management Comments

• Carl L. Gordon and Erez Chimovits, through their roles at OrbiMed Israel, exercise investment and voting power over the securities.
• Each of OrbiMed Israel, OrbiMed BioFund, Carl L. Gordon, and Erez Chimovits disclaims beneficial ownership of the securities reported herein for purposes of Rule 16a-1(a) under the Exchange Act, except to the extent of his or its pecuniary interest therein, if any.

Industry Context

BiomX is a biotechnology company, and warrant exercises are a common mechanism for funding in this sector. The involvement of OrbiMed, a well-known healthcare investment firm, suggests institutional interest in the company.

Comparison to Industry Standards

• Warrant exercises are a standard practice in the biotech industry, particularly for companies seeking to raise capital without immediately issuing new equity.
• The disgorgement of profits under Section 16(b) is a regulatory requirement to prevent insider trading and ensure fair market practices, similar to actions taken by other investment firms in comparable situations.
• OrbiMed's investment and subsequent warrant exercise are similar to investments made by other venture capital and private equity firms in small-cap biotech companies, such as those by RA Capital Management or Deerfield Management.

Legal Proceedings

• OIP will disgorge to the Issuer the statutory 'profits' pursuant to Section 16(b) of the Exchange Act that resulted from such transactions.

Stakeholder Impact

• Shareholders may experience dilution due to the exercise of warrants.
• The company benefits from the capital received through the warrant exercise, although it is partially offset by the cashless nature of the transaction.

Key Dates