aibioTScan Therapeutics agrees to sell $30.0 million of pre-funded warrants to Lynx1
Tickers TCRX
TScan sold pre-funded warrants for 7,500,000 voting shares at $4.00 each in a registered direct offering to Lynx1 entities, for about $30.0 million gross. It says cash will fund operations into the first quarter of 2027, on assumptions that may prove wrong.
Key facts
- Company
- TScan Therapeutics, Inc. (NASDAQ: TCRX)
- News type
- Financings
- Primary source
- TScan Therapeutics, Inc. 424B5 (2024-12-26)
The offering
TScan Therapeutics, Inc. (Nasdaq: TCRX) agreed on December 26, 2024 to sell pre-funded warrants to purchase 7,500,000 shares of voting common stock in a registered direct offering. Each warrant is sold at $4.00 and carries an exercise price of $0.0001 a share, so the buyer pays nearly all of the cost up front. Gross proceeds are about $30.0 million before offering expenses, and the company estimates net proceeds of about $29.8 million.
The buyers are Lynx1 Capital Management LP, an existing shareholder, and an investment fund that Lynx1 advises. The offering was made directly to the investors on a best efforts basis, without a placement agent, underwriter, broker or dealer. Goodwin Procter LLP of Boston will pass on certain legal matters for the offering. The closing was expected on or about December 27, 2024, under a shelf registration on Form S-3 declared effective on May 16, 2023.
Because the purchase price is paid up front, the company will receive nominal proceeds, if any, when the warrants are exercised. It intends to use the net proceeds for general corporate purposes, and it says management will have broad discretion over how they are spent.
The price
The last reported sale price of the voting common stock on the Nasdaq Global Market on December 24, 2024 was $2.91 a share. The pre-funded warrants were sold at $4.00 each, with a further $0.0001 a share to exercise.
The overhang
As of September 30, 2024, TScan had 49,077,536 shares of voting common stock and 4,276,588 shares of non-voting common stock outstanding. It also had pre-funded warrants outstanding for up to 65,587,945 voting shares, each exercisable at $0.0001. That overhang already exceeds the voting common stock outstanding.
The new warrants add to it. The prospectus says the voting common stock outstanding immediately after the offering would be 49,077,536 shares, or 56,577,536 shares if investors exercised all of the new pre-funded warrants. It also warns that purchasers in this offering will suffer immediate and substantial dilution.
The cash and the runway
As of September 30, 2024, TScan had cash, cash equivalents and marketable securities of $271.1 million. Assuming the $29.8 million in net proceeds, the company expects that cash to fund operating expenses and capital spending into the first quarter of 2027. The company says that estimate rests on assumptions that may prove to be wrong, and that it could use its capital in ways that change the timing.
The prospectus supplement does not report TScan's net loss or cash used in operations. The net proceeds are small next to the existing balance of $271.1 million.
Risks the prospectus flags
The prospectus supplement says buyers of the pre-funded warrants will suffer immediate dilution of $1.95 per share against net tangible book value, calculated on an as adjusted pro forma basis, and that future equity or convertible debt issuances could dilute them further. It points to a sales agreement with Wedbush Securities Inc. for up to $75.0 million of stock. It also describes a Loan and Security Agreement dated September 9, 2022 with K2 HealthVentures LLC, under which the lender converted $15 million of principal into 3,134,796 voting shares on November 20, 2024. TScan is an emerging growth company and a smaller reporting company, and only its voting class of common stock trades on Nasdaq.
What comes next
The closing was expected on or about December 27, 2024. The new warrants can then be exercised at the nominal $0.0001 price, as can the existing 65,587,945 pre-funded warrants.