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Targovax announces that the TG01 study in multiple myeloma at Oslo University Hospital has received regulatory approvals to proceed
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Targovax annonserer finansiering på inntil 300 millioner til utvikling av kreftmedisin og ny sirkulær RNA plattform
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Transcript : Targovax ASA, Q4 2022 Earnings Call, Feb 16, 2023
02/16/2023 | 04:00am EST
[Presenter Speech
Erik Wiklund (Executives)
Welcome to Targovax and the presentation of our Fourth Quarter Results for 2022. My name is Erik Digman Wiklund and I’m the CEO at Targovax. During 2022, we have made important progress on all of our R&D programs and this sets us up for success in 2023. For the ONCOS-102, our lead clinical asset, we published a promising phase 1 results in prestigious journals and scientific conferences and based on the strong data, we are now preparing to set-up a phase 2 trial to demonstrate and validate these data in the larger setting. This trial is called SOPHOS-213, preparations are going forward according to plan and we’re planning to open up prestigious cancer centers in the USA and Europe later this year for enrollment of patients.
Second, Circular RNA, we’ve established a new cutting-edge Circular RNA program from scratch. We’ve hired the discovery of Circular RNA, Dr. Thomas Hansen and he is running this program for us. In just 12 months, we’ll achieve technical proof-of-concept for our vector delivery system. And in addition, we have filed critical IP applications to carve-out territory for Targovax in this space.
Moreover, TG01, our KRAS cancer vaccine here with enhance the product format and we’re bringing it back into the clinic in a creative way where we use collaborative setups and external sources of funding in order to bring the program forward at low-cost to Targovax. 2 externally sponsored trials are set to open or are open and will soon enroll patients.
In order to execute on these programs, we are relying on having external partners. On the business development side, we have forged a strategic relationship with Agenus, who are supplying checkpoint inhibitors to several of our trials, both on ONCOS-102 and the TG vaccine and in addition, they are supplying us with the next-generation adjuvant QS21 to boost immunogenicity of TG01. In order to run this internally, we’ve retooled organization, we’ve hired key people in finance and in business development and importantly we built a new scientific team at the Karolinska Institute in Stockholm, where we’re running our Circular RNA program.
Now we’re set-up well, we’re going to deliver in 2023 and in order to achieve that, we need the finances in order and let me hand over to Lubor Gaal, CFO to give you an update on this front.
Presenter Speech
Lubor Gaal (Executives)
Thanks, Erik. I have the pleasure to present fourth quarter results, as well as talking about the convertible bond financing with Atlas that were announced earlier this morning. So let me first talk to you about the fourth quarter results. Our spending in the fourth quarter reflects our strategy to support all our research areas, which Erik just explained, to add sufficiently to the next value inflection point. So investment reflects the initiation of the phase 2 study for ONCOS-102, it reflects the 2 clinical studies for TG01 one in Oslo and one in Norway and the USA. And of course, it reflects our investment into Circular RNA platform that will be the engine of growth for Targovax going forward.
Overall, we spent NOK 30 million in the fourth quarter, which brings our cash balance to NOK 66 million at the end of fourth quarter. So on the right-hand side, you can see our cap table, you can see that we spent NOK 30 million in the fourth quarter, bringing the balance to NOK 66 million. Our market cap remains around NOK 200 million and our daily trading volume respect shows a healthy interest in the Targovax shares.
So now let me switch the story and talk about convertible bond financing from Atlas that we announced earlier this morning. But before I talk about the bond, let me explain a little bit the backdrop of the financing. 2022 was a tough year to raise money for public biotech companies, not just in Norway, but globally. 2022 saw a drop about 70% in investments into global biotech companies, in Norway that drop was 80%. As you can see, there were only 2 public biotech transaction in Norway in 2022, this reflects the lowest investment in Norwegian biotech companies for 5 years.
Against this challenging backdrop, we were able to secure NOK 300 million financing from Atlas Capital markets. So let me way to give you a high-level overview of this convertible bond. The total amount, as we said is up to NOK 300 million. We can call it in different tranches and over a period of 36 months. These tranches will be available to us every 3 months, but what is really important that Targovax remains in control when and if we call those tranches. We will call these tranches very carefully only when we actually need to resources to advance our research programs going forward.
So why did we choose Atlas Capital Markets? Atlas Capital Markets, an experienced international investor to provide growth capital to biotech companies like Targovax, they invest globally, but with a focus in Europe. Atlas – you typically invest in companies, which shows high-potential for growth and Atlas was specifically attracted to our strategy of supporting late-stage assets like ONCOS-102, but also investing heavily into novel platforms like Circular RNA, which will – will be the platform for growth for Targovax.
So Atlas is great – growth potential and Targovax and wants to support us and give us this necessary resources to advance our research programs to the next value inflection point. So now let me go back to the convertible bond and explain you a little bit more about how this will work.
So when we decide that we need more resources, we will call a tranche from Atlas Capital Markets. Atlas will then send us the cash and it will be 90% of the nominal value that we call in that tranche. Once we receive the cash, we will issue a convertible bond to Atlas Capital Markets. Atlas will hold this convertible bonds until they decide that they want to convert them into shares that can be at any day-after the convertible bonds up to the 36 months in 2026.
Once they – once they send a request that they want to convert the bond into shares, we will issue a stock market notice to inform all our shareholders, well, how much do you want to convert, what will be the price of the conversion? How many shares will be issued in response of that. So there will be full transparency to you, our shareholders and we’ll keep you informed about the developments of this convertible bond.
Of course this and then we can do this every 3 months, but as I said, we’ll be very careful when to draw these convertible bonds and we will only draw money when we needed to advance our research programs. Of course, this agreement is subject to your approval, our shareholders. So our AGM notice will go out shortly and we expect that the AGM will happen in early March, where this AGM notice of course has much more details about this convertible bonds, but I’m happy to take any questions in our Q&A session to explain convertible bonds in more details.
And with that, I hand back to our CEO, Erik.
Presenter Speech
Erik Wiklund (Executives)
So with this financing, we now have access to the necessary capital to advance all our 3 R&D programs. Starting off ONCOS-102, our lead clinical-stage asset. We are setting up a phase 2 trial in melanoma and this we’re calling SOPHOS-213. To remind you in phase 1, we demonstrated strong response rates. 35% is the best published response rate in this late-stage patient population. It compares favorably to other companies that have published data in the same indication and this gives us confidence to move the program forward.
The plan now is to run a larger phase 2 trial to validate this data and combined with both CTLA-4 and PD-1 checkpoint inhibition, which we believe can boost response rate even further. With this, we have partnered with Agenus, who will supply their next-generation checkpoint inhibitors and the trial is planned to be set up at prestigious cancer centers in the USA and in Europe in second quarter of this year.
Let me explain how the trial works, it’s a 2-part trial. In the first part, we’re going to try and increase dose of ONCOS-102. In the phase 1, we didn’t see any safety signals and we saw an association between level of virus and the response rates. We believe by increasing the dose, we may also enhance the efficacy.
So we tried the higher dose in the first part. Once that is confirmed to be safe, we plan to bring the high dose forward into part 2 and then what we’re doing is, number one, we combine with a PD-1 checkpoint inhibitor. Number 2, we combine with botensilimab, a second generation CTLA-4 from Agenus. And it’s really the third step, this cohort number 4. This is the key. Here, we want to do the triple combination of ONCOS-102, PD-1 and CTLA-4 and this triple we think has the potential to really boost the response rate up and beyond the 35% and establish ONCOS-102 as a class leader in PD-1 resistant melanoma.
This study is designed with several to deal with several important aspects. Number one, we have been in dialog with the regulatory authorities and we’re answering here important regulatory questions to set the program up for subsequent registrational trials. So we’re doing our homework from a regulatory perspective.
Secondly, we want to be able to out-license ONCOS-102 based on data from this trial. So we design the trial with a size and combinations that make it attractive to potential partners in the future. And we are convinced that both strategically and scientifically this triple combination with a unique CTLA-4, second generation CTLA-4 has the potential to really generate class-leading data and make us – make us the leader in PD-1 resistant melanoma. So that’s the plan for ONCOS-102, SOPHOS-213 is a study, it will open later this year.
On Circular RNA, this is an emerging area of strong interest and growing interest in the pharmaceutical industry. First, mRNA product was approved only 2.5 years ago. And here on this graph, we show you the sales for the top-selling drugs in 2022 and you can see 2 of the top 4 drugs actually are mRNA products. They sold for more than $50 billion last year. Now this is a special situation with the COVID vaccines, but industrial, the therapeutic potential and the commercial value of these products and how they can be leveraged as drugs in the future.
However, mRNA faces several issues, mRNA is unstable, it’s immunogenic. It’s difficult to deliver and it’s difficult to use the therapeutic payload for solid tumors. We believe that Circular RNA consoles many of these issues that are facing mRNA. Circular RNA was actually discovered by Targovax scientist myself and the Head of Research at Targovax, Thomas Hansen and we published the first paper on Circular RNA back in 2011.
This discovery has now led to several companies setting up in the USA based on the discovery, which has now been advanced to a stage where you can use Circular RNA as a novel messenger RNAs that are more stable. This is also evidenced by a recent deal by Merck, who partnered with oRNA Therapeutics in the USA, were very significant financials for an early-stage preclinical program.
Building on the Circular RNA discovery, preclinical stage US biotechs have been able to attract very significant funding. We give you 2 examples here of oRNA and [ Laurent ], these are the 2 most famous Circular RNA companies and you can see, they have raised several $100 million in early-stage around to build this platform into future potential therapeutics.
What they are doing is synthetic Circular RNA, they’re effectively doing mRNA, just using circular RNA as the modality. So it’s a synthetic Circular RNA and it’s geared towards vaccines and gene therapy that’s the approach they are taking. At Targovax, we have a different angle to Circular RNA. We have developed a vector system which we call, circade.
Circade is a DNA-based system that we use to express the Circular RNA. So our product is not the Circular RNA itself, but the recipe for to sell or in the patient to make that Circular RNA and this setup we can use to create multifunctional products that are highly versatile and have excellent stability. We have already established technical proof-of-concept and we filed critical patent applications to protect our technology.
Using vector system offer several advantages over traditional synthetic RNA approaches. So here, we compare versus synthetic circRNA and synthetic mRNA on the table. There are many aspects to discuss here, but I’d like to highlight 2 specific points. One, we have a delivery around the solid tumors. Currently, there are no other effective ways to get RNA carrying therapeutic payloads into tumors. We already have a clinically validated system based on our clinical experience for how to do this and we know we can do it and we know how it performs over time. So we’re building on this to develop a solid tumor approach for Circular RNA, which is unique as far as we know.
Secondly, we’re relying on manufacturing technology, which is commercially available, robustly known and we already have established, we already have clinical manufacturing ongoing. For Circular RNA, manufacturing did not yet exist. This is a new therapeutic concept, so no one is ever produced it at scale. This will take time and resources to achieve and we believe this gives us a head start. So our aim is to be the first company into the clinic with a Circular RNA therapeutic product in solid tumors. And we aim to achieve that already in 2025, which would be a remarkable feat given we only started this program one year ago.
So to sum up, we’re now set up for success in 2023. ONCOS-102 is ready to enter clinical phase 2 trial in combination with the PD-1 and CTLA-4. Second, our Circular RNA program, here we’re starting important vivo work to validate our findings in the model system. We believe with these data in hand and a robust IP portfolio, we should be able to start having business development discussions, which could enable early partnering as soon as last quarter of this year or in 2024.
And on the KRAS program, 2 trials are open. They are ready to recruit patients. We expect this to get going very soon and these are trials that are run with academic collaborators at low cost at Targovax, creating broad optionality for the future for the KRAS program.
So with that, I wrap up the formal part of our presentation and we are happy to take questions from the audience and I welcome Lubor back to join me on stage.
Presenter Speech
Lubor Gaal (Executives)
Thank you, Erik.
Answer
Unknown Executive (Executives)
So we’ve got some questions on – from the web. Congratulations on the financing. Just wondering why did you choose Atlas?
Answer
Lubor Gaal (Executives)
Yes, very good question. We, of course, evaluated many different opportunities and options and through negotiations and we received many offers from interested parties. We compare those offers very carefully and the combination of the features that Atlas offered to us made them the preferred scenario. Of course, we also appreciate the background that Atlas has an experienced investor supporting small biotech companies, who have a large opportunity for growth and taking a long-term view and then, of course, offering us a large amount to advance all our research program. So it was a combination of many different factors and that made Atlas the most attractive option for us.
Answer
Erik Wiklund (Executives)
Yes, just to reiterate that, this is a specialist investor. This is what they do, these type of financing, they do a lot of them for biotech and we believe these were clearly the best terms we found out there.
Answer
Unknown Executive (Executives)
Do you know if Atlas is going to be a long-term investor in the company? Or are they going to sell converted shares in the market when they are converted?
Answer
Lubor Gaal (Executives)
I would say both. I mean, clearly, they provide this capital resources for us over the next 3 years, so that makes them, of course, a long-term investor that will support our growth on the long-term and they see growth potential. So they wouldn’t have offered us such a long facility if they didn’t believe in us long-term. But clearly, they – once they convert the convertible – and they can hold convertible bonds for the entire 36 months period. But once they will convert the bonds, they will then decide to shed trade those shares in a short period of time.
Answer
Unknown Executive (Executives)
What is the restrictions for Atlas when it comes to selling Targovax shares in the market?
Answer
Lubor Gaal (Executives)
That was a very important point. So I mean, first of all, of course, it was very important for us to stay in control of this convertible bond. So again, it’s only we can call the bond. So it’s – we are in full control. The Atlas cannot force us to take any tranches or any convertible bonds. So we’ll only draw from them when we need it. And then when they have the convertible bond turned into shares, they will trade very carefully not to impact our share price. They agreed to a limitation of 25% of the weekly trading volume, which I thought was a very fair share, very fair amount. Otherwise, there are no other really restrictions.
Answer
Unknown Executive (Executives)
Thank you. And then we have a question on melanoma. What is the progress in melanoma phase 2 trial, the SOFOS trial?
Answer
Erik Wiklund (Executives)
We are currently in discussions with prestigious cancer centers both in the U.S.A. and Europe. We are preparing to open the trial. It will probably be in the second quarter of this year. There are quite long bottlenecks, both regulatory wise and at sites post COVID. So it does take a while to get through the bureaucratic mill to get things set up and ready for enrollment, but we do anticipate that first patient should be dosed in the second quarter of this year.
Answer
Unknown Executive (Executives)
And there are a couple of questions on Circular RNA. What is the potential value of Circular RNA? And what kind of strategic options are you looking for in Circular RNA?
Answer
Erik Wiklund (Executives)
So Circular RNA is emerging as a new RNA therapeutic class of very high interest and it’s difficult at this stage to put the number on what the value is, but you can look at, for instance, a deal done by Merck. They were willing to invest $150 million upfront, plus $100 million of investment in oRNA Therapeutics to partner on the program, which really is very early stage. It’s preclinical with some in vivo data. So if you use that as a benchmark, I think that illustrates the potential of this modality.
Now we are still quite early in our process. We only worked on this for one year, but we’re making important progress. And our aim is to, of course, capitalize on this as we move forward and get partners to enable us to develop more broadly and show the platform potential of what we’re trying to achieve.
Answer
Lubor Gaal (Executives)
Yes, I think I would add that like considering that the advantages that Circular RNA offers over messenger RNA, you can see the big investment into the messenger RNA field, how many programs are in development. And Circular RNA is supposed to be better than plain linear RNA. So the potential is huge, but Erik is right, we can’t put a number at this point in time.
Answer
Erik Wiklund (Executives)
And then to the strategic options question, when we talk to both investors and partners, we get a lot of interest for the Circular RNA program. Now this kind of early-stage platform development attracts a different type of investor who are interested in – don’t necessarily buy into listed shares. So we are trying to structure ourselves and establish opportunities that enables us to tap into that source of capital as well.
Answer
Lubor Gaal (Executives)
But in addition, of course, we are in discussions with pharma companies and other companies who are interested in Circular RNA and we’re exploring, of course, with them how we could collaborate in the future on our platform and then exploring different avenues for collaboration. So there is interest also, of course, from the industry and working with us, but it will take some time to make that work.
Answer
Unknown Executive (Executives)
Thank you. There are no further questions.
Answer
Erik Wiklund (Executives)
So thank you very much. With that, we wrap up our 4Q presentation and don’t hesitate to contact us if you have questions. Thank you.
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Transcript : Targovax ASA - Special Call
02/28/2023 | 04:00am EST
Presenter Speech
Erik Wiklund (Executives)
[ Foreign Language ] Over to you, Lubor.
Presenter Speech
Victor Levitsky (Executives)
Thank you very much, EriK. As EriK was saying, we spend – we have been through a very thorough process to evaluate many different options to arrive at Atlas, and there were a lot of different factors that were speaking in favor of them. And I will not repeat them again. So just saying that Atlas has emerged as a very good option for Targovax, providing the financing that we needed in this current situation, which were available to us.
So what is this financing? And I would like you to walk through again with some of the mechanics. And I will try to answer many questions that have come in the meantime since we announced this financing at our quarterly presentation some weeks ago. So let me go to the next slide. Just to recap again, we’re looking at a convertible bond financing of up to NOK300 million. There is a 2% fee for this trans facility that we paid to Atlas. As we said, we can draw this money in different tranches when we want, at a time that we want. The sizes are variable, and I will explain in a minute why they have different sizes. The first tranche at NOK37.5 million is larger than all the other tranches because we will pay that transaction fee from the proceedings of that first tranche.
Overall, we can draw up to 12 tranches in a period of 36 months. As I said, 1 tranche every 3 months, but there is no obligation to do so. If there’s no need for another tranche, then we don’t need to draw it and then we can delay it as much as we want. That was very important for us that we stay in control of the entire convertible bond on financing. The investor cannot force us to take any tranche or take any convertible bond. So we only – we redecide when we need to grow more money and then we will contact [ Technical Issues ] to draw more from this convertible bond facility.
So let me then walk you through how this would work when we call the tranche. So again, we decide that we want to draw money from this facility. We inform the investor. In the next step, we will receive the cash from the investor at 90% of the nominal value. As you can see, each bond had NOK2.5 million as value, and we will receive NOK2.3 million in return. Then, of course, we need to issue the bonds and depending, of course, how much we draw from in each tranche at the terminal months. As I said in the first – the first tranche of NOK37.5 million would be, meaning that we would have 15 convertible bonds, regularly, mostly NOK25 million, and then it would have 10 different convertible bonds. Very important for us.
There aren’t no strings attached to these convertible bonds. There are no warrants that we need to issue with them. There’s no interest rate and there’s also no collateral. So these are very clean bonds. And then, of course, very importantly, the investor can convert the bonds to shares at any time that they decide. There is a mechanism how to determine the conversion price and the number of shares for each bond, and I will go through that in more detail in the next slide.
Very importantly, of course, for us that once the investor has shares that the trading is controlled and that they will sell those shares on the open market in controlled fashion. And Atlas fully understood that point and agreed to a maximum trading limit of 25% in any given way that they want to trade. And very important, of course, to us, and I think to all our shareholders is that there is no short selling allowed except for one exception, which we’re going to talk about in much more detail later in the presentation.
So let’s move on. And then, of course, this can be repeated every time, and like we call a tranche. And so this could be every 3 months or it could be much less frequent.
So let me move on to some questions that we have received, and we’ll address them one by one.
So the first question is what is the transaction fee?
As I said before, it is a 2% fee for the entire amount that we – is available to us. So at NOK300 million, that’s NOK6 million, and it will be paid from the first – from the proceeding of the first tranche. So we were able to reduce the cash need from us and then really raise the money for the fee through issuing more convertible bonds.
When we’ll recall the first tranche?
So clearly, of course, very importantly, our goal would be mid-March, but that, of course, depends on the approval. First of all, we need, of course, the approval of this agreement. We cannot call the tranche without getting a positive vote in the AGM on the 9th of March. We, as a management, are not authorized to enter into this agreement without the support of your shareholders. So clearly, first, we need to have a positive vote at the AGM so that we can enter into this agreement, then there will be a few more technicalities to complete for registration and then we will call the tranche, and most likely this all be done by mid of March.
Will you make an announcement?
Absolutely. Of course, we’ll be very transparent in every step of this process. Each time we ask for a tranche, we will inform all the shareholders how much a tranche will be and how many bonds we will have to issue. And then, of course, also when Atlas will convert bonds into shares, we will issue a press release every time they decide – so this will be a very transparent process. We’ll keep you very much informed of every single step in this converted bond facility.
So maybe that’s an important point for you and a shareholder. What is actually the net proceeds from the first tranche?
And I think it’s very important we walk you through this. So as we said, we would anticipate to ask for a tranche of NOK37.5 [ Phonetic ] million that will create – we have to issue then 15 convertible bonds of NOK2.5 million each. The reason why we’re asking for such a high tranche at the beginning is because we need to pay the transaction fee. So that’s why it’s a little bit more than the other tranches. And as you can see, there’s a subscription fee of 8%, though we get – we paid NOK3 million as well. So in the end, the total net proceeds from this NOK37.5 million tranche is NOK28.5 million, which we then received in our banking amount.
And what happens when Atlas receives the convertible bonds?
Basically, Atlas is a financial investor. They are expected to convert according to the shares over time. And Atlas is not expected to be a long-term shareholder. Meaning, that bonds for a variable amount of time. But once they convert the bonds into shares, they will start trading shares on the open market, and you will see more shares floated in the stock exchange.
So just move on to some other questions. So how are the bonds converted to shares?
I think that’s very important and that has some implication also later for the one exception to the short selling bond. Atlas will send a conversion notice to Targovax and then we issue immediately – a stock issue notice to you to inform you that Atlas wants to convert the convertible bonds into shares. So we’ll initiate the share transfer process. Very importantly, unfortunately, this is not an instant process. It takes some time.
So what is the conversion notice?
The conversion is basically a simple letter saying Atlas, how many convertible bonds they want to convert?
What is the conversion price? And therefore how many shares do we need to issue for those bonds?
Maybe very important how is this conversion price calculated because that really determines the number of shares we have to issue for each convertible bond. And basically, it is the arithmetic mean of the value-weighted average price of 3 days out of 15 days. So you have to imagine this following way. Atlas will send us the conversion notice and then they will specify the price. The price will be taken out of 3 days of the prior 15 trading days. So they can choose the 3 days that – from those 15 days, then we take the mean – the arithmetic mean and then this will determine the share price – at the conversion price what we need to convert the convertible bonds.
What does that mean? Will Atlas get a discount on our share price?
No. The price is 100% of the VWAP average. But what can happen is following. Since they can select the 3 days out of the 15 days, of course, there can be a variation. And depending on how share price moves, they will either lead to a discount, the same price or even at a higher price. It really depends how the share price is moving through in the 15 days. Of course, in an up market where the share price is moving, it can be that the share price is lower. If our share price will be flat and stable, then they would get the same conversion price as the trading price that day. So it really depends a little bit on the fluctuation of our share price.
So now very important, I think we’re moving to a different topic. As I mentioned earlier, it’s like other trading limits for Atlas. Clearly, we are concerned that they – once they convert bonds, I mean you can imagine 2.5 million bonds will then be converted to shares at the current price that would lead to a number of above 2.5 million shares. And we wanted to make sure that these shares will be sold in an orderly fashion without much impact on our share price. We try to limit this by limiting their trading volume, and they agreed to that. So they will never trade more than up to 25% in any given week that they are trading.
What happens if they exceed that 25% limit?
Then very simply, they need to buy back the shares that they sold too much. So then they will have to buy back on the open market shares back because sometimes it’s very difficult for them to predict directly how much 25% will be in a week. So we felt out that this was a fair mechanism to compensate if there is any miscalculation on their behalf.
Is Atlas allowed to short sell shares?
That was, of course, a very important point, and we will go into that more detail now. No, there’s a clause in the investment agreement contract which we’ll share with you that they will not – they are not allowed to sell shares short, but there is one exception for short-term hedging. So let me now explain you that exception.
Basically, as I said before, they send us a conversion notice when they want to basically convert the bonds into shares. When we get that notice, we will issue the process to get them the shares. Unfortunately, that process is not instantly. It doesn’t have at the push a button. So in this period, that they don’t have the [ Technical Issues ] they can actually already start coming to us. So this explains some of the EBITDA on the next slide.
So what Atlas [ Technical Issues ] would be violation of our pact, and that it is where they are doing short selling would be excluded from and of conversion price of the shares. So as I said before, the conversion price is determined by the 3 out of 15 trading days. No day with a short selling is allowed to be included in those 3 days. So that would exclude them from using those days and determining the conversion price of future shares.
So I think it’s very important that I explain to you again the process, how do we covert shares and how does that affect the short survey by Atlas, if at all. So let me go through this portions again. So Atlas will inform us that they want to convert the bonds into shares. And during that point – actually, sorry, – sorry, let me back up, sorry. As long as Atlas holds convertible bonds, they cannot short sell anything. They’re not allowed to short sell our shares at all.
So what happens when Atlas sends us the conversion notice? At that point in time, they are basically saying, I want to convert my bonds into shares and are basically theoretically in possession of shares, but they don’t physically have them into account. At this point in time, they want to start selling the shares, take advantage of certain positive development of our stock market in our shares. Again, here, the short selling, we had a trading limit applies – 25% trading limit applies and this applies also to all its affiliates and subsidiaries. So we, of course, are very much interested in having the shares transferred to them as soon as possible. So we will immediately, of course, first, of course, issue a press release through your shareholders to inform you, of course, that this process is taking place, and we’ll immediately work with our agents to transfer them the shares as soon as possible. Unfortunately, as I said, this is not instantly, it’s not electronically possible. There’s a few steps in between, also a registration of the shares with the stock market. So unfortunately, this takes a little bit of time. In our experience or what we’ve been told this can take up to 2 or 3 business days. We, of course, will make everything possible to reduce that time to what is technically possible to make it as short as possible.
During this time that we are processing their applications to convert into shares and us issuing the shares, they again continue to sell within the trading limits that we have agreed. Then finally, we will successfully transfer the shares and then no short selling is allowed anymore. And then, of course, they only have to sell their shares that they have in their possession with the same trading limits. I hope that makes it clear.
The intent is that there is no short selling at all, but because we cannot transfer their shares to them instantly when they convert bonds into shares, we have allowed them selling once do they have sent us the conversion notice. And this process can be repeated every time they want to convert bonds into shares. I hope with that, I have answered a lot on clarity.
So let me finish with a few more questions that we received.
Why has the investment agreement not be disclosed to your information?
As you all know, we – when we announced the EGM, we sent out the EGM notice and we published a bond agreement. There’s also an investment agreement. This was not published. Why was it not published? Because it’s not standard to publish full agreements between parties because they may contain business-sensitive information. We understand that a lot of shareholders are very interested in what is written in this agreement because not everything that we have said to you can be found in the bond agreement. So we had to enter the bond agreement with Nordic trustee because they’re managing the bond process for on on behalf of Atlas, and then there is agreement with Atlas as well. We fully understand that shareholders want to get full clarity on the investment agreements that they ask, of course, better we will disclose the investment agreement. And we have agreed with Atlas that we can disclose our commercial section of the agreement and we’ll make it available later today on our website so that people can read the relevant sections, which we have discussed in this meeting today so that you have a full picture of the entire agreement and the entire conditions with Atlas.
There was a question, are the bonds tradable?
No, the bonds are not tradable. Atlas is the principal holder of the bonds, and there are for organizational purposes, administrative purposes, likely to be able to assign those bonds to their affiliates. And so that is allowed and we will also disclose in the document later today who are these affiliates are. So there will be their name. This was a very limited number of affiliates that can – that we have this sponsor signed. Any other transfer to any other party would need to have our approval first.
Of course, very important, I think people are concerned about short selling or for short term hedging by Atlas, should you be concerned?
We are very mindful of this is a difficult situation or a difficult position by our shareholders. We hope you understand that this is unfortunately a technical necessity that we had to allow them in a very short period where technically short selling is possible because the transfer of share is not instantly. We have renegotiated or continued to negotiate with Atlas to improve and tighten up our position so that really there aren’t any exceptions. And a new wording in the bond agreement has been introduced to make this clearer and also an investment agreement. And so we will issue a slightly revised bond agreement today to make it clear that we have tried to take the best and have done the best to improve the conditions for Targovax shareholders and reduce the possibility of short-term hedging.
So of course, Erik touched on this in the beginning, and I’m going to give details why Atlas and why convertible bond structure. And again, we have value at many different options throughout the year, I mean, 2022, of course, and then also early '23. And we believe that the current convertible bond financing is the best financial instrument available to Targowek at this point in time, as I will say, the market is [ Technical Issues ] for public biotech companies, not just in Norway, but worldwide, by the way specifically. And again, we believe that Atlas provides a lot of the flexibility and criteria that Targowek needs right now in order to continue its good work on all the – on the research programs.
I think with that, I complete the question session and invite now questions from the audience. As Eric was saying, question in English will be answered by me in English and question Norwegian to be answered by Erik.
Question and Answer Operator Message
Operator (Operator)
Thank you, Lubor. We have gotten several questions in already. We start with the English ones. As far as I can read from the bond agreement, there was no explicit point to prohibit the bonds to be sold exchange or transferred. Do you have any assurance in writing that prohibits the sale transfer exchange of the convertible bond away from Atlas or it affiliates?
Answer
Victor Levitsky (Executives)
Yes, as explained, that’s correct. In the bond agreement, this topic is not dealt within a bond agreement, but it’s covered in investment agreement. This section will be shared later today. And as I said, they are able to assign the bonds to their affiliates and subsidiaries but not to any other party that would need our approval first.
Question and Answer Operator Message
Operator (Operator)
Thank you. If the bonds cannot be held by anyone other than the affiliates of Atlas special operations, how do you define affiliates? And do you have, in any way, ensure since what happens if Atlas special operation itself changes ownership management or wants to change its strategy?
Answer
Victor Levitsky (Executives)
As we said, there is a limited number of affiliates, which we are aware of. And this will – the name of the affiliates will be shared later today in the agreement. That doesn’t mean the investment agent. So we very well know who these companies are and who these affiliates are. The second part of the question is a bit of difficult to answer. Of course, there is a provision in the contract that assigns this contract to any successor of Atlas special operations that need to maintain the same conditions of this agreement. So we have taken care of that, should Atlas should be acquired, the conditions of this agreement remain in force.
Question and Answer Operator Message
Operator (Operator)
Thank you. Does the investment agreement in any way regulate the situation where the conversion into shares would increase the holding of shares by more than 1/3 outstanding shares in Targovax? If so, how is this regulated?
Answer
Victor Levitsky (Executives)
Yes. I think it’s very important to understand how this convertible bond will work. I mean when we call a tranche, we will issue bonds. So Atlas will hold bonds actually. And only when they – and so they will never really don’t hold any shares. But when they convert the bonds into shares, I mean, our assumption is that they will convert, I don’t know, between 1 and 3 or 1 in 4 bonds every time. We have no idea when. We will find out this later.
That would definitely not represent any of our shares. And since they are not going to hold those shares long term or selling, it is not anticipated that they will hold such a high number of shares.
Question and Answer Operator Message
Operator (Operator)
Thank You. And one more is, as Atlas cannot convert shares based on 3 days with a lower share price in a 15 days period, the conversion price could therefore as be affected by sales in the market by Atlas or its affiliates even if it’s still limited to selling 25% of a weeks volume. In my opinion, you should everything clause in the bond agreement that Atlas is not involved in trading of the shares in the 15-day period than despite the conversion price.
Answer
Victor Levitsky (Executives)
Yes. That’s a very good point. And of course, I’ll say I’m happy to debate topic with Atlas to redetermine a fair determination of this conversion price, we negotiate many different options. And the solution that you see is the best that we could negotiate for Targovax at this point of time.
Question and Answer Operator Message
Operator (Operator)
Thank you. And then we move on to questions in Norwegian. Then it’s Eric. [ Foreign Language ]
Answer
Erik Wiklund (Executives)
[…]
[ Foreign Language ] Thank you all. Thank you, Lubor. Bye-bye.
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Da ser det ut som at jeg kan gå inn å endre på stemmenerettene mine angående den forestående transaksjonen!
Kanskje Targovax ikke er så uinvesterbar lenger!
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