On May 5th, Genetic Analysis AS (“Genetic Analysis” or the “Company”) announced a placement of a directed issue of NOK 12.8m before transactions related costs of NOK 0.6m, which is conditional on approval from the annual general meeting on May 19th. The subscription price amounts to NOK 0.86 per share and is based on the average volume weighted trading price on Spotlight Stock Market the last 15 trading days up to and including April 24th, 2025. The directed rights issue consists of 14,890,576 new shares, which equals a dilution effect of approximately 30% for existing shareholders.
Analyst Group’s View of the Directed Issue
In our initiation analysis of Genetic Analysis, we emphasized that the Company remains in an early stage of commercialization and that earnings are expected to fluctuate between quarters, which means that the need for external capital to finance continued growth initiatives cannot be ruled out. Hence, the announced share issue comes as no major surprise, and the proceeds are intended to be used for commercial investments connected to the existing cooperation with Ferring Pharmaceuticals and other initiatives to increase the presence of the Company’s diagnostic platform GA-map®.
In December 2024, Genetic Analysis announced the partnership with Ferring Pharmaceuticals, which consists of the development of a rapid microbiome-based PCR test, combining Genetic Analysis GA-map® platform with Ferring’s Microbiome Health Index biomarker. Analyst Group views this as a validation of the platform and an indication of an expected market shift towards a more diagnostic approach, as the test is expected to be used to follow up on how individual patients respond to Ferring Pharmaceuticals Rebyota drug, the first fecal microbiota product approved by the FDA. Moreover, we anticipate that the proceeds will be allocated towards growth initiatives in the USA, as this is the largest microbiome market, partly due to a more advanced research and development culture, which is expected to create the largest growth opportunities for Genetic Analysis in that market. Hence, we believe the proceeds from the directed issue will be allocated in strategically important initiatives to drive the Company’s growth going forward.
Terms, Dilution and Investors in the Directed Issue
The subscription price of NOK 0.86 is based on the average volume-weighted trading price on Spotlight Stock Market during the last 15 trading days up to and including April 24th, 2025. As the share price has increased since April 24th, the subscription price means a discount of 59% compared to the closing price of NOK 2.12 on May 2nd. Through the directed share issue, existing shareholders will experience a dilution effect amounting to 30%.
The investors in the directed share issue are a limited number of existing shareholders, including members of the Board of Directors and the management team, where the latter accounts for 23% of the proposed directed issue, which instills confidence in the Board and management’s commitment to the Company. The remainder of the issue is subscribed by existing shareholders, including Genetic Analysis largest shareholder Bio-Rad Inc.
Subsequent Offering Towards Existing Shareholders who do not Participate in the Directed Issue
The Company intends to carry out a subsequent offer directed towards shareholders who were not invited to participate in the directed issue, in order to give them the opportunity to subscribe for new shares at the same subscription price as applied in the directed issue. The subsequent offering will be for subscription of shares totaling around NOK 6m. However, this issue is conditional on the directed issue being approved by the Annual General Meeting and on the existence of a significant gap between the subscription price and the observed trading price on Spotlight Stock Market, such that it justifies the expenses related to issuing the subsequent offering.
Receives Committed Grant Offer to Further Development of the Company’s Diagnostic Platform
Genetic Analysis also announced that the Company has received a committed grant offer from Innovation Norway related to further development of the Company’s diagnostic product related to Clostridium difficile. The grant amounts to NOK 1.125m and is conditional on the Company raising at least NOK 2.5m in proceeds from an equity offering, which will be fulfilled if the directed issue is approved.
Proposals for two new Board Members
Genetic Analysis also announced proposed changes to the Board, as the election committee has proposed the appointment of Mr. Morten Jurs as the new Chairman of the Board, and Mr. Ove Öhman as a new board member. The proposed change in leadership follows the decision by Dr. Jethro Holter, the current Chairman, to step down from his role and not seek re-election. Dr. Holter’s decision is a result of his new role as CEO of AdjuTec Pharma, which he wants to focus on full-time going forward.
Analyst Group considers the newly proposed board members to have relevant experience to drive Genetic Analysis continued focus on further commercializing the GA-map® platform. Moreover, the proposed new board members are subscribers in the directed rights issue, as Morten Jurs will subscribe for NOK 0.3m and Ove Öhman will subscribe for NOK 0.5m, which instills further confidence.
In conclusion, Analyst Group considers the announced directed share issue as no major surprise, as we expect the Company to continue to invest in commercial activities for the GA-map® platform, with an increased focus on the US market, which we consider a good strategic investment for the Company’s future growth. However, given that the subscription price is based on the average volume-weighted trading price up to and including April 24th, the directed issue is made at a discount of 59% compared to the closing price of NOK 2.12 on May 2nd, as the share price increased between April 24th and the announcement of the directed share issue. Existing shareholders who do not participate in the directed share issue are intended to be offered the opportunity to subscribe for shares at the same price as the directed issue, NOK 0.86, in a subsequent offering. Nevertheless, the directed issue results in a dilution effect of 30% for existing shareholders.
