aibioChannel Therapeutics (now Pelthos Therapeutics) closes merger and $50.1 million private placement
Tickers PTHS
The July 1, 2025 closing included a one-for-ten reverse stock split, a name change and royalty sales to Nomis RoyaltyVest, Ligand and Madison Royalty LLC. The shares were to trade as PTHS.
Key facts
- Company
- Pelthos Therapeutics Inc. (AMEX: PTHS)
- News type
- Mergers
- Primary source
- Pelthos Therapeutics Inc. Form 8-K filed July 2, 2025 (SEC EDGAR)
Channel Therapeutics Corporation (now Pelthos Therapeutics Inc.) said in a Form 8-K filed July 2, 2025 that it completed its merger with LNHC, Inc. on July 1, 2025 and closed a $50.1 million private placement of Series A Convertible Preferred Stock the same day. The company also changed its name and carried out a one-for-ten reverse stock split. The 8-K describes the deal, and a press release covers the split and the planned symbol change from CHRO to PTHS.
The private placement
The company sold 50,100 shares of Series A Convertible Preferred Stock at $1,000 per share to investors that include Ligand, under a securities purchase agreement signed with the merger agreement. The investors paid in cash or by converting principal and interest on an outstanding convertible note. Gross proceeds were approximately $50.1 million, made up of approximately $50.0 million in cash and approximately $0.1 million of converted note principal and interest, before estimated expenses. The press release says the approximately $50 million was to come from strategic investors led by Murchinson.
Each preferred share converts at the holder's option into common stock at $1,000 plus any declared and unpaid dividends, divided by a conversion price that was adjusted to $10 for the reverse split. Holders cannot convert if they would own more than 49.9% of the common stock (for Ligand) or 4.99% (for the other investors), though a holder can change its limit on 61 days' notice, but not above 9.99%. Immediately after the closing, certain investors converted 23,810 preferred shares into 2,381,000 common shares.
A registration rights agreement requires a resale registration statement to be filed and declared effective within 120 days after the closing, or 150 days if the SEC reviews it.
The merger, split and new name
A merger subsidiary merged with and into LNHC, which survives as a wholly owned subsidiary. The name change and reverse split took effect on July 1, 2025. The company issued approximately 31,279 shares of Series A Preferred Stock to Ligand at the effective time, leaving approximately 57,569 shares outstanding. On a fully diluted basis, the company's pre-merger securityholders owned approximately 7.9% and LNHC securityholders approximately 55.8%.
A June 27, 2025 press release said the split would cut outstanding shares from approximately 6,485,007 to approximately 648,501 and help meet the NYSE American's initial listing requirements.
Royalties sold to fund the deal
As an inducement to sign the purchase agreement, the company and LNHC sold part of their ZELSUVMI revenue to Nomis RoyaltyVest LLC (NRV), Ligand and Madison Royalty LLC. During the Initial Royalty Term, NRV receives a 5.3% royalty, Ligand a 1.7% royalty and Madison a 1.5% royalty on net sales of the covered products worldwide. Afterward the rates fall to 4.24%, 1.36% and 1.2%. Madison acts for certain members of the company's management team and other assignees. Ligand is therefore both an investor in the company and a buyer of its royalties.
Going concern
Channel's Form 10-K, filed March 27, 2025, describes a clinical stage biopharmaceutical company with a limited operating history. Its auditor's report on the 2024 and 2023 financial statements contains a going concern qualification. That report cites recurring losses from operations and an accumulated deficit at December 31, 2024. The 10-K says the company is not yet producing sufficient revenue to sustain its operating costs and depends on raising capital to continue. It puts the accumulated deficit at approximately $21.5 million and the 2024 net loss at approximately $8.0 million, against approximately $7.4 million in 2023.
Board and management
The board grew from five to seven seats. Francis Knuettel II, Todd Davis, Ezra Friedberg and Chia-Lin Simmons resigned from the old board, and Dr. Richard Malamut, Scott Plesha, Peter Greenleaf, Matthew Pauls, Todd Davis, Richard Baxter and Ezra Friedberg were appointed. Knuettel's employment as Chief Executive Officer ended at closing, along with that of Chief Medical Officer Dr. Eric Lang. Plesha became Chief Executive Officer, President and Director, Knuettel became Chief Financial Officer, and Sai Rangarao became Chief Commercial Officer.