It was after the stock market closed on Friday that the medical technology company BrainCool announced that it has filed a police report against its former CEO Martin Waleij, after it was discovered that he had taken out a loan of 7,65 million kronor to himself. Waleij has now been dismissed without severance pay and his option program is considered forfeited. The market reacted negatively to the news and by lunchtime on Monday the share had traded down by approximately 42 percent.
FDA application is being processed
BrainCool also announced that it has reviewed all of the company's press releases from the past two years. During this review, it became clear that the headline in one of these, from June 23, 2023, was misleading. The press release claimed that it had received "Breakthrough Device Classification for new stroke therapy from FDA". The correct thing to say is that BrainCool has applied for "Breakthrough Device". The application is therefore under processing. The company emphasized that the press release was otherwise correct.
Organizational changes
At the same time, the company is making a number of organizational changes. Mohammed Fazel has been appointed as the lead clinical studies manager for the company's products, while the US manager Christian Strand will be globally responsible for all distribution relationships. Both are now also part of the management team.
Capital raising drives commercialization forward
Finally, BrainCool reported a capital requirement of SEK 85-95 million that will be met by conducting a rights issue. The background is to cover the forfeited options that, upon exercise in April, would have brought the company approximately SEK 16 million, as well as to cover the prohibited loan taken by Waleij.
In addition to covering the above total of approximately SEK 24 million, the company also wants to finance the continued expansion with BrainCool SystemAmong other things, the money will go towards increasing production capacity and thus the profitability of the product and its disposable products.
The company also wants to prepare a launch of RhinoChill System when the Cottis II study is completed. This includes investments to certify and obtain market approval for the product under the new European MDR regulations. Investments will also be required in new tooling for the upcoming manufacturing of the RhinoChill System. Finally, funds will be required to prepare for the commercialization of Coral System in oncology, which may include a smaller clinical trial in the US.
Strengthened financing opens the door to loan agreements with the EIB
Another reason for carrying out a larger issue, according to BrainCool, is the loan financing agreement of EUR 12,5 million that was concluded with European Investment Bank in 2023. In order to utilize either of the two loan tranches from the EIB, the company must first reach certain milestones and meet established solvency requirements, which means a need for a strengthened financial position and thus greater equity. If the milestones have been reached and the requirements are met, BrainCool can choose to utilize the first EIB tranche.
Support from the six largest shareholders
On Sunday, BrainCool announced that it had held discussions with a number of the company's major shareholders over the weekend. The purpose has been to gauge interest in participating in the proposed new share issue. Six of the company's largest shareholders, who together represent approximately 22 percent of the company's capital and votes, state that they are positive about subscribing for shares in the new share issue, at least in proportion to their current ownership. The terms of the new share issue will be published as soon as a prospectus has been prepared.