(Alliance News) - Mereo BioPharma Group PLC on Monday said it has entered into a USD5 million convertible loan financing pact with Novartis AG and added that it has agreed to issue up to USD25 million more of its stock to institutional investor Aspire Capital Fund LLC.
The loan note with the Swiss drug maker can be converted at any time at a price of GBP0.265 per share.
Mereo shares climbed 20% to 30.00 pence each in London on Monday afternoon.
The loan matures three years after its issue and has an annual interest rate of 6%.
Mereo added that, in connection to the note, it has issued a warrant for Novartis to purchase up to 1.4 million of its shares, also at GBP0.265. The warrants can be exercised within five years.
As of February 10, Novartis has a 16% stake in the London-listed firm.
Mereo has already received a USD3 million investment from Chicago-based Aspire, in exchange for 11.4 million of its stock, equivalent to 2.3 million American depositary shares. The ADS stock is priced at USD1.31.
Aspire has agreed to subscribe for up to an additional USD25 million worth of Mereo shares to be exchanged into ADS stock. Any extra investment will be at Mereo's request and the agreement will last for 30 months.
Mereo added: "There are no warrants, derivatives, or other share classes associated with the agreement and Mereo will retain full control over the timing of any subscriptions to be made under the agreement and the amount of ordinary shares to be subscribed by Aspire Capital."
By Eric Cunha; ericcunha@alliancenews.com
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