Debt Financing

9 Months Ended

Sep. 30, 2023

Debt Financing Agreements

Debt Financing

9.      Debt Financing

On August 2, 2022 the Company, and the Subsidiary Guarantors, entered into the Financing Agreement with Perceptive. On December 19, 2022, the Financing Agreement was converted to a Note Purchase Agreement between the same parties and under substantially the same terms and conditions as the Financing Agreement, subject to certain customary note constitution terms. On August 10, 2023, the Company and the Subsidiary Guarantors entered into the Consent and Amendment with Perceptive.

The Note Purchase Agreement provides for an initial $75.0 million notes issuance (the “Tranche 1 Notes”).  Pursuant to the Consent and Amendment, the Company may request in its sole discretion, and Perceptive has agreed to subscribe to purchase upon such request, an additional $25.0 million notes issuance (the “Tranche 2 Notes”) at any time before August 2, 2024 subject to the terms of the Note Purchase Agreement. Previously, the Company’s request for issuance of the Tranche 2 Notes was to be determined at Perceptive’s sole discretion. The Note Purchase Agreement matures on August 2, 2026 and is interest-only during the term. The Company has the option to redeem outstanding principal notes at any time along with an applicable early redemption fee. Under the Consent and Amendment, the Note Purchase Agreement was also amended to increase the applicable early redemption fee. Outstanding amounts under the Note Purchase Agreement bear interest at a fluctuating rate per annum equal to 10.00% plus the secured overnight financing rate administered by the Federal Reserve Bank of New York for a one-

month tenor, subject to a 1.00% floor. The annual interest rate was 15.12% at September 30, 2023. As of September 30, 2023, the outstanding balance of the Tranche 1 Notes was $75.0 million plus accrued interest of $2.9 million. During the three-month periods ended September 30, 2023 and 2022, the Company recorded interest expense of $2.9 million and $1.5 million, respectively. During the nine-month periods ended September 30, 2023 and 2022, the Company recorded interest expense of $8.4 million and $1.5 million, respectively.

The Company’s obligations under the Note Purchase Agreement are secured by the Company’s London, UK and Shannon, Ireland manufacturing facilities, $3.0 million of the Company’s cash and the bank accounts of the Subsidiary Guarantors, and the issued and outstanding equity interests of the Subsidiary Guarantors.

The Note Purchase Agreement imposes covenants that include, among other things, enrolling in a Phase III trial for AAV-RPGR on or before June 30, 2023 and ensuring the Company’s Shannon manufacturing facility meets or satisfies all applicable good manufacturing practice requirements on or before December 31, 2023, both of which the Company has achieved, as well as various restrictions on the Company and the Subsidiary Guarantors, including restrictions pertaining to: (i) the incurrence of additional indebtedness, (ii) limitations on liens, (iii) limitations on certain investments, (iv) making distributions, dividends and other payments, (v) mergers, consolidations and acquisitions, (vi) dispositions of assets, (vii) the Company’s maintenance of at least $3.0 million in a U.S. bank account, (viii) transactions with affiliates, (ix) changes to governing documents, (x) changes to certain agreements and leases and (xi) changes in control; however, certain of these restrictions contain exceptions which allow the Company to license, sell and monetize assets in its AAV-hAQP1 program in development to treat radiation-induced xerostomia, its AAV-GAD program in development to treat Parkinson’s disease and its gene regulation platform technologies. As of September 30, 2023, the Company is in compliance with all covenants.

In connection with entering into the Financing Agreement, the Company granted warrants to Perceptive to purchase up to (i) 400,000 ordinary shares of the Company at an exercise price of $15.00 per share and (ii) 300,000 ordinary shares of the Company at an exercise price of $20.00 per share. The warrants are exercisable immediately and expire on August 2, 2027. The Company recorded a debt discount of $2.3 million for the allocated fair value of the warrants.  

The Company also capitalized certain lender and legal costs associated with the Note Purchase Agreement totaling $2.1 million, which were recorded as a discount to the loan. The aggregate discount of $4.4 million is being amortized to interest expense over the term of the Note Purchase Agreement. The Company amortized $0.3 million and $0.2 million of the discount to interest expense during the three-month periods ended September 30, 2023 and 2022, respectively. The Company amortized $0.8 million and $0.2 million of the debt discount to interest expense during the nine-month periods ended September 30, 2023 and 2022, respectively. At September 30, 2023, the remaining unamortized discount was $3.2 million.