Shareholder Dilution Looms as Patrys Raises $1.77M for R&D Push

Capital Raise Overview

Patrys Limited (ASX, PAB), a biotechnology company focused on innovative therapeutics, has launched a pro-rata non-renounceable entitlement offer to raise up to approximately $1.77 million. The offer price is set at $0.001 per share, with shareholders entitled to subscribe for three new shares for every four shares held, plus one free-attaching share for every four shares subscribed. This capital raising is fully underwritten by Templar Corporate Pty Ltd, ensuring the company secures the targeted funds regardless of shareholder uptake.

Strategic Use of Funds

The proceeds from the entitlement offer will primarily support Patrys’ ongoing research and development efforts, particularly advancing PAT-DX3, a promising therapy targeting inflammatory diseases through inhibition of NETosis. The funds will also bolster working capital, maintain and enhance the company’s intellectual property portfolio, and support business development activities including partnering and out-licensing opportunities. The company has been actively engaging with third parties interested in its NETosis-targeting therapeutics, highlighting a strategic focus on collaboration and commercialization.

Secondary Offers and Shareholder Approvals

Alongside the entitlement offer, Patrys is conducting secondary offers involving the issuance of options and shares to placement participants, the underwriter, and the lead manager. These offers are contingent on shareholder approval at an upcoming general meeting scheduled for early October 2025. The secondary offers aim to remove trading restrictions on options and satisfy fee obligations to Templar Corporate, the underwriter and lead manager. If approved, these issuances will further increase the company’s capital base and option pool.

Impact on Shareholding and Control

The entitlement offer will significantly increase the number of shares on issue from approximately 2.37 billion to over 4.58 billion, with a further increase to nearly 4.89 billion shares upon completion of the placement and secondary offers. Shareholders who do not participate in the entitlement offer face dilution of approximately 51.61%. The underwriter, currently not a shareholder, could acquire up to 48.39% of the company’s shares if the shortfall is fully subscribed by it, although measures are in place to prevent any single party exceeding 19.9% voting power. Directors Peter Christie and Anton Uvarov have committed to sub-underwrite portions of the offer, further aligning management with the capital raising.

Risks and Market Context

Patrys’ prospectus highlights the speculative nature of investing in biotechnology companies, noting risks related to product development, regulatory approvals, funding requirements, and market competition. The company’s financial position includes a going concern note, underscoring the importance of this capital raise. Broader economic and geopolitical factors, including ongoing global conflicts, may also influence market conditions and investor sentiment. Nonetheless, the company’s focus on advancing PAT-DX3 and its intellectual property portfolio positions it to capitalize on emerging opportunities in inflammatory disease therapeutics.

Next Steps for Investors

Shareholders are encouraged to carefully consider the offer and seek professional advice. The upcoming general meeting will be pivotal in determining approval of the secondary offers and placement shares to directors. The success of the entitlement offer and subsequent capital structure changes will be closely watched by the market, as they will shape Patrys’ capacity to progress its clinical programs and commercial strategy.