Form 4: Athyrium Funds Restructures Biora Therapeutics Convertible Notes and Warrants

Athyrium Opportunities III Co-Invest 1 LP and related entities have entered into a Convertible Notes Exchange Agreement with Biora Therapeutics, Inc. to restructure their holdings of convertible notes and warrants.

Summary

• Athyrium Opportunities III Co-Invest 1 LP, along with affiliated entities, has entered into a Convertible Notes Exchange Agreement with Biora Therapeutics, Inc.
• The agreement involves the restructuring of 11.00%/13.00% Convertible Senior Secured Notes due 2028.
• The restructuring includes resetting the conversion price to 1,321.571348 shares per $1000 principal amount.
• It also creates two tranches of notes: Payment Priority Notes and Payment Junior Notes.
• Athyrium Opportunities III Acquisition LP will exchange $666,842 of notes for Payment Priority Notes, and Co-Invest LP will exchange $2,093,144 for Payment Priority Notes.
• The remaining notes held by Acquisition LP ($3,778,858) and Co-Invest LP ($11,861,062) will be Payment Junior Notes.
• The closing of the exchange is scheduled for on or about August 15, 2024.
• Warrants will be amended to reduce the strike price to $0.60 and limit exercise to 20% of outstanding common stock as of March 8, 2024, pending stockholder approval.
• 20% of the warrants will be redeemable under certain conditions following stockholder approval, and the exercise period will be extended.
• The amended warrants are subject to limitations on exercise if the holder's beneficial ownership exceeds a set percentage of outstanding common stock.

Sentiment

Score: 6

Explanation: The document describes a financial restructuring, which is neither inherently positive nor negative. The sentiment is neutral, reflecting a necessary step for the company's financial management.

Positives

• The restructuring may provide Biora Therapeutics with more flexible financing terms.
• The reduced warrant strike price could incentivize warrant exercise, potentially providing additional capital to the company.
• The extension of the warrant exercise period provides more time for the warrants to become valuable.

Negatives

• The limitation on warrant exercise to 20% of outstanding common stock (pending stockholder approval) could restrict Athyrium's ability to fully realize the value of the warrants in the short term.
• The creation of Payment Priority Notes could disadvantage holders of Payment Junior Notes in the event of a default.

Risks

• The restructuring is subject to closing conditions, including the closing occurring on or about August 15, 2024.
• The amended warrants are subject to stockholder approval, which may not be obtained.
• Limitations on conversion and exercise based on beneficial ownership could restrict Athyrium's ability to fully realize the value of its holdings.
• The value of the convertible notes and warrants is dependent on the future performance of Biora Therapeutics' common stock.

Future Outlook

The transactions contemplated by the Exchange Agreement are scheduled to close on or about August 15, 2024, pending satisfaction of customary closing conditions and stockholder approval.

Industry Context

Convertible note restructurings are common in the biotech industry, especially for companies seeking to manage their debt and extend their cash runway. The terms of the restructuring, including the conversion price and warrant amendments, will impact the company's capital structure and potential dilution to existing shareholders.

Comparison to Industry Standards

• Similar convertible note restructurings have been observed in other small-cap biotech companies facing liquidity constraints.
• The reset of the conversion price and amendment of warrant terms are typical strategies to incentivize noteholders to support the company's long-term growth.
• The 49.9% ownership limitation is a common provision to avoid triggering change-of-control provisions or other regulatory hurdles.

Stakeholder Impact

• Shareholders may experience dilution if the convertible notes are converted into common stock.
• Noteholders will have their notes restructured with potentially different payment priorities.
• Employees' job security is indirectly affected by the company's financial stability.

Next Steps

• Closing of the Exchange Agreement on or about August 15, 2024.
• Obtaining Applicable Stockholder Approval for warrant amendments.
• Potential exercise of warrants following stockholder approval.

Key Dates

Keywords

Biora Therapeutics, Athyrium, Convertible Notes, Warrants, Restructuring, Exchange Agreement, Beneficial Ownership, Payment Priority Notes, Payment Junior Notes