SCHEDULE: CASI Pharma Secures $5M Convertible Note for China Trials

CASI Pharmaceuticals, Inc. has secured a $5 million convertible promissory note from ETP Global III Fund LP, marking the first tranche of a $20 million financing initiative.

Summary

• CASI Pharmaceuticals, Inc. (the "Company") has issued a Convertible Promissory Note with a principal amount of US$5,000,000 to ETP Global III Fund LP (the "Holder").
• This note is the initial tranche of a larger US$20,000,000 convertible note financing agreement.
• The note bears a simple interest rate of 12% per annum, payable quarterly, with the first payment due on April 1, 2026.
• The maturity date for the note is December 26, 2028.
• The Holder has the option to convert the outstanding principal and accrued interest into Ordinary Shares between the 91st day after the closing date (December 27, 2025) and the maturity date.
• The Company also has the option to convert the note into Ordinary Shares at maturity.
• The conversion price will be the volume-weighted average closing price of the Company's Ordinary Shares over the five trading days preceding the conversion notice, with a floor of US$1.00 and a cap of US$2.00 per share.
• Proceeds from this note are primarily designated for clinical trials in China for CID-103 and general company operations, with restrictions on significant U.S. clinical trial investments without Holder approval.
• The note is classified as general unsecured debt and is subordinate to the Company's secured debt.
• Dr. Wei-Wu He, Ph.D., and affiliated entities, including ETP Global Fund III L.P., collectively beneficially own 34.8% of the Company's Ordinary Shares, including 5,000,000 shares issuable upon conversion of this note (assuming a US$1 conversion price).

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive development, as it secures crucial funding for clinical trials and operations, which is vital for a biotech company. However, the high interest rate and potential for dilution introduce some caution.

Positives

• Secures US$5,000,000 in financing, providing capital for ongoing clinical trials in China for CID-103 and general operations.
• The financing is part of a larger US$20,000,000 initiative, indicating potential for further capital infusion.
• The conversion price has a floor of US$1.00, which provides some protection against excessive dilution if the stock price falls significantly below that level at the time of conversion.

Negatives

• The note carries a relatively high interest rate of 12% per annum, increasing the Company's debt servicing costs.
• The note is general unsecured debt and is subordinate to the Company's secured debt, placing it lower in priority during liquidation.
• Potential for significant dilution if the note is converted into Ordinary Shares, especially if the conversion occurs at the lower end of the conversion price range (US$1.00).
• Restrictions on the use of proceeds, specifically prohibiting significant investment in U.S. clinical trials without the Holder's prior written approval, could limit strategic flexibility.

Risks

• Failure by the Company to repay the Outstanding Balance in full on or prior to the Maturity Date.
• The Company or any of its subsidiaries becoming unable to pay its debts as they become due or otherwise becoming insolvent.
• Commencement of any bankruptcy, insolvency, or similar proceedings against the Company or its subsidiaries.
• Appointment of a receiver, trustee, liquidator, custodian, sequestrator, or similar official over the Company or its subsidiaries' property.
• Failure of the Company to pay the principal and unpaid accrued interest of the Note in accordance with its terms.
• Failure of the Company to perform, comply with, or observe any term, covenant, or agreement set forth in the Purchase Agreement or the Note.
• Any representation, warranty, or other statement of material fact made by the Company being knowingly incorrect in any material respect when made.
• The Note being general unsecured debt and subordinate to the Company's secured debt, increasing risk for the Holder in case of financial distress.

Future Outlook

The Company intends to substantially employ the proceeds from this note for clinical trials in China to achieve value-creating milestones for CID-103 and for general operations. This indicates a strategic focus on advancing its pipeline in the Chinese market.

Management Comments

• David Cory, CEO of CASI Pharmaceuticals, Inc., executed the Convertible Promissory Note.
• Wei-Wu He, Ph.D., as founder and managing partner of ETP entities and trustee of HE Family GRAT, and President of Huiying Memorial Foundation, signed the Schedule 13D, indicating his continued significant involvement and influence.

Industry Context

StockSavvy.ai notes that securing convertible debt financing is a common strategy for biotechnology companies like CASI Pharmaceuticals, Inc., especially those focused on clinical development, to fund research and development without immediate equity dilution at potentially unfavorable valuations. The focus on clinical trials in China for CID-103 aligns with the growing importance of the Chinese pharmaceutical market for drug development and commercialization. The 12% interest rate is relatively high, reflecting either the Company's risk profile or current market conditions for such financing.

Comparison to Industry Standards

• The 12% simple annual interest rate on the convertible note is on the higher side compared to typical corporate debt for more established pharmaceutical companies, which might secure financing at single-digit rates. However, for a clinical-stage biotech company, this rate can be within the expected range, reflecting the inherent risks of drug development.
• The conversion price range of US$1.00 to US$2.00 provides a defined band for potential dilution, which is a standard feature in convertible notes. The assumed conversion at US$1.00, given a recent VWAP of US$0.98, suggests the financing is structured to convert at or near current market prices, which is common for growth-stage companies seeking capital.
• The use of proceeds for clinical trials in China for CID-103 is consistent with industry trends where companies are increasingly leveraging global markets for drug development and commercialization, particularly in large and rapidly growing markets like China. This strategy is comparable to other biotechs expanding their clinical footprint internationally.

Related Party Transactions

• ETP Global III Fund L.P., the Holder of the convertible note, is an entity controlled by Dr. Wei-Wu He, Ph.D., who is also a significant beneficial owner of CASI Pharmaceuticals, Inc. and associated with other reporting persons in the Schedule 13D filing.

Stakeholder Impact

• **Shareholders**: Potential for dilution upon conversion of the note into Ordinary Shares. The 12% interest rate will impact earnings. However, the financing supports the Company's strategic objectives, which could ultimately benefit shareholders if clinical trials are successful.
• **Creditors**: The convertible note is general unsecured debt and subordinate to secured debt, meaning existing secured creditors maintain priority.
• **Employees**: Continued funding for operations and clinical trials helps ensure job security and supports ongoing research and development efforts.
• **Customers/Patients**: The funding for CID-103 clinical trials in China could lead to new treatment options becoming available in the future.

Next Steps

• The Company will continue to conduct clinical trials in China for CID-103, utilizing the proceeds from this financing.
• Interest payments on the note will commence on April 1, 2026, and continue quarterly.
• The Holder may elect to convert the note into Ordinary Shares starting 91 days after December 27, 2025, until the maturity date.
• The Company may elect to convert the note into Ordinary Shares at maturity on December 26, 2028.

Key Dates

Recommendation

The financing provides essential capital for CASI Pharmaceuticals' clinical development, which is a positive for a biotech company. However, the high 12% interest rate and the potential for dilution from the convertible note warrant a 'hold' recommendation. Investors should monitor the progress of CID-103 clinical trials and the Company's overall financial health, especially given the subordination of this debt, before making further investment decisions. The significant beneficial ownership by related parties also adds a layer of consideration.

Keywords

CASI Pharmaceuticals, Convertible Note, Debt Financing, Clinical Trials China, CID-103, SEC Filing, Schedule 13D, Beneficial Ownership, ETP Global III Fund, Biotechnology Financing