1. Date of the board of directors resolution for the change: May 7, 2021
2. Effective registration date of the original plan: Mar 25, 2019
3. Major change Reason for the change:
The Company’s fundraising in 2018 with total amount of NT$ 2,025,000,000 was originally planned to be used for the development of five R&D projects: OBI-866, OBI-999, OBI-898, OBI-998, and OBI-3424. As the preclinical results of OBI-898 and OBI-998 did not meet expectation, the Company decided to halt subsequent development activities in order to protect shareholders’ interests and ensure the best use of the funds. In consideration of the potential depletion of working capital in the future and possible difficulty in obtaining bank financing, the Company intends to allocate the remaining balance of NT$ 957,115,000 from the two aforementioned projects as of the end of March 2021 into supporting other R&D activities and the company’s operational needs.
4. Content of each and every successive previously changed plan for raising of funds before and after change:
Total capital requirement based on the original plan was NT$ 2,029,105,000. Difference of NT$ 4,105,000 between the plan and the fundraising of NT$ 2,025,000,000 is supported by the Company’s existing funds.
5. Projected timetable for execution:
(1) New drug development projects: 2019Q1~2023Q4
(2) Replenishing operating capital: 2021Q2~2022Q2
6. Projected completion date: 2023Q4
7. Projected possible benefits:
(1) New drug development projects: No change for OBI-866, OBI-999, and OBI-3424
(2) Replenishing operating capital: The planned amount to be reallocated into operating capital is NT$ 957,115,000. Based on the historical interest expense in 2020, it is estimated that a total of NT$ 9,547,000 can be saved in 2021, and NT$ 12,730,000 annually in 2022 and thereafter. The updates on fund allocation will not only efficiently minimize the financial risk and potential interest expense since the company will no longer require further bank financing, but also support operating needs and allow flexibility, which overall allows the Company’s ability to adjust for any potential operational risks.
8. Difference from original projected benefits:
With the change, estimated licensing fee of from OBI-898 and OBI-998 projects will be reduced by NT$ 2,850,000,000. In terms of the interest expense, it is estimated that a total of NT$ 9,547,000 can be save in 2021, and NT$ 12,730,000 in 2022 and thereafter.
9. Effect of the current change on shareholder equity:
As OBI-898 and OBI-998 preclinical, including DMPK and toxicology, results did not meet expectation. Low success rate and large R&D spending would likely not be in favor for future commercialization. Thus, the company has decided to halt subsequent development activities. In consideration of the possible difficulty in obtaining bank financing for biotech companies, the Company has decided to suspend projects that do not show signs for success. However, the Company continues to develop SSEA-4 based antibodies and ADCs. The development of OBI-898 and OBI-998 not only built the fundamental scientific knowledge, but also aid future development of other SSEA-4 based products. In addition to supporting R&D projects noted during 2018 fundraising, operational expense such as administrative, human resource, and other R&D activities also needs to be funded. Available funds to support 2021 operating expense is inadequate. Given that financing is challenging for biotech companies, funds originally allocated for the aforementioned projects will be more efficiently utilized if allocated to support operating needs. It will provide flexibility to the company during risk situations, without imposing adverse effect to the shareholders’ interest.
10. Abstract of the original lead underwriter’s appraisal opinion:
Since preclinical results of OBI-898 and OBI-998 did not meet expectations, OBI has decided to halt subsequent development activities in order to protect shareholders’ interests and ensure the best use of the funds. In consideration of the potential depletion of working capital in the future and possible difficulty in obtaining bank financing, OBI intends to allocate the remaining balance of NT$ 957,115,000 from the two aforementioned projects as of Q1 2021 into supporting other R&D activities and the Company’s operational needs. This change should not impose any adverse effect to the shareholders’ interest. After reviewing the rationale for the change of plan, progress monitoring, and performance monitoring, no major findings were noted.
11. Any other matters that need to be specified:
The change to the plan of 2018 cash capital increase was approved by the Board of Directors on May 7, 2021. The Board will propose to the 2021 shareholders’ meeting for acknowledgment