Paradigm’s Options Program Could Raise $111.96 Million to Fund Phase III Trial

Strategic Capital Raise Through Options

Paradigm Biopharmaceuticals Ltd (ASX:PAR), a late-stage drug developer focused on unmet medical needs, has announced a dual-options program designed to both reward existing shareholders and secure incremental funding for its ongoing clinical development. The Loyalty Options Offer grants eligible shareholders one Loyalty Option for every four shares held as of 7 February 2025, exercisable at $0.65 within 12 months. This initiative requires no upfront payment, effectively providing a bonus opportunity to shareholders.

Complementing this is the Piggyback Options Offer, which is contingent upon the exercise of Loyalty Options. For every two Loyalty Options exercised, shareholders will receive one Piggyback Option exercisable at $1.00, with a longer expiry of 24 months post Loyalty Options expiry. Together, these offers could raise up to approximately $111.96 million if fully subscribed and exercised.

Funding the Next Phase of Clinical Development

The capital raised through these options is earmarked primarily for Paradigm’s Phase III clinical trial costs. This trial focuses on injectable pentosan polysulfate sodium (iPPS) for osteoarthritis, a condition with significant unmet needs due to its inflammatory and degenerative nature. Paradigm’s Managing Director, Paul Rennie, emphasised that the program is a way to reward shareholder loyalty while enabling participation in the company’s growth trajectory as it approaches critical clinical milestones.

With approximately 389 million shares currently on issue, the Loyalty Options could add nearly 97.4 million options, and if exercised, would increase shares outstanding by over 97 million. The subsequent Piggyback Options could add another 48.7 million options, potentially diluting existing shareholders but providing vital funding to advance the company’s pipeline.

Non-Renounceable and Automatic Issuance

Notably, the Loyalty Options are issued for nil consideration and automatically allocated to eligible shareholders without the need for application forms. The offers are non-renounceable, meaning shareholders cannot transfer their entitlements, which underscores the company’s intent to reward existing investors directly. The company will seek ASX quotation for the Loyalty Options but does not currently intend to list the Piggyback Options.

While the program offers a clear path to capital, it carries inherent risks typical of clinical-stage biopharmaceutical companies. These include the uncertainty of clinical trial outcomes, regulatory approvals, and market acceptance. Paradigm’s prospectus details these risks extensively, reminding investors of the speculative nature of the investment.

Market and Regulatory Context

Paradigm operates in a highly regulated environment, with the success of its lead product dependent on positive Phase III trial results and subsequent regulatory approvals. The company’s strategy to raise funds incrementally through options rather than a traditional capital raise may be viewed favorably by shareholders seeking to avoid immediate dilution while retaining upside potential.

Given the company’s recent progress, including positive interactions with the US FDA and the commencement of its Phase III osteoarthritis trial, this capital raise is timely. It aligns shareholder interests with the company’s clinical and commercial milestones, potentially positioning Paradigm for value creation if the trials succeed.