Term Loan Facility

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Term Loan Facility

8. Term Loan Facility

2024 EIB Term Loan Facility

On December 19, 2024, IO Biotech ApS (the “Borrower”) entered into a Finance Contract with the EIB, establishing three tranches of potential financing in an aggregate principal amount of up to €37.5 million, subject to certain conditions precedent.

Pursuant to the Finance Contract, the Company (through the Borrower) will have €10.0 million available to draw in an initial tranche of the term loan facility (“Tranche A”), subject to satisfaction of certain customary conditions and the issuance of warrants pursuant to a Warrant Issuance Agreement (described below). The Company believes that we have satisfied the specified business conditions of the Tranche A loan to draw up to €10.0 million before payment of certain fees and transaction related expense. The Borrower has six months from the date of the Finance Contract to satisfy the conditions for the Tranche A loan.

The Finance Contract provides for two potential additional term loan tranches in principal amounts of €12.5 million (“Tranche B”) and €15.0 million (“Tranche C” and, together with Tranche A and Tranche B, each a “Tranche”), respectively, each of which is subject to specified conditions, including, but not limited, the issuance of warrants and achievement of certain clinical trial and other milestones. We believe that the Tranche B loan business conditions have been satisfied to draw up to €12.5 million before payment of certain fees and transaction related expense, subject to certain customary conditions, including the completion of the Tranche A draw. The Borrower has twenty-four months from the date of the Finance Contract to satisfy the conditions of the Tranche B loan. The Borrower has thirty-six months to satisfy the conditions for Tranche C, which include raising an additional $50.0 million in cash and submission of an application for marketing authorization for IO102-IO103, which in the U.S. is known as Cylembio® (imsapepimut and etimupepimut, adjuvanted), in the U.S. or the EU and the completion of the Tranche A and Tranche B draw, respectively.

Each of the Tranche A, Tranche B, and Tranche C loans will bear interest at a fixed rate of 8% that accrues annually and will become payable at their respective maturity dates, which will be six years after disbursement of such loan.

Any unpaid balance owed under the Finance Contract may be accelerated upon an Investment Cost Reduction Event, a Change-of-Control Event, a Change-of-Law Event, an Illegality Event or a Voluntary Non-EIB Prepayment Event (each as defined in the Finance Contract included within Part IV - Item 15. Exhibits, Financial Statement Schedules of this Annual Report on Form 10-K).

If the Borrower elects to voluntarily prepay any Tranche, the Borrower will be required to additionally pay to EIB a prepayment fee ranging from 5% of the Tranche, if repaid within twelve months of disbursement of such Tranche, to 1% of the Tranche, if repaid after the third anniversary of disbursement of such Tranche. No such prepayment fee is payable after the fourth anniversary of disbursement of the applicable Tranche.

The Finance Contract also contains various financial and non-financial covenants that the Borrower must comply with., including customary conditions with respect to material adverse changes and substantial changes to the general nature of business, which leave significant discretion on the side of the EIB.

Concurrently with the execution of the Finance Contract, the Borrower entered into a non-binding side letter, pursuant to which EIB may, in its discretion and subject to approvals by its investment committee, make available to the Borrower an additional €20.0 million in funding related to the Company’s ongoing clinical trials.

In connection with the Finance Contract, the Company also entered into a warrant issuance agreement (the “Warrant Issuance Agreement”) on December 19, 2024, pursuant to which the Company agreed to issue to EIB certain warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in connection with the disbursement of each of the Tranche A loan (such warrants, the “Tranche A Warrants”), Tranche B loan (such warrants, the “Tranche B Warrants”) and Tranche C loan (such warrants, the “Tranche C Warrants” and, together with the Tranche A Warrants and the Tranche B Warrants, the “Warrants”). The number of shares for which the Warrants will be exercisable will be determined at the time of issuance of each Warrant in accordance with the formulas set forth in the Warrant Issuance Agreement, which formulas generally provide that the number of shares will decrease as the price of the Common Stock increases.

Under the terms of each Warrant, each share of Common Stock issuable upon exercise thereof shall have an exercise price equal to the greater of (x) the Company’s 5-Day VWAP on the date of execution of the applicable Warrant and (y) the applicable “Minimum Price” as defined in Nasdaq Rule 5635(d), in each case subject to adjustment. The Tranche A Warrant shall become initially exercisable on the date of disbursement of the Tranche A loan; the Tranche B Warrant shall become initially exercisable on the date of disbursement of the Tranche B loan; and the Tranche C Warrant shall become initially exercisable on the date of disbursement of the Tranche C loan. Each Warrant shall be exercisable until the earlier of one day prior to the closing of an Acquisition (as such term is defined in the applicable Warrant included within Part IV - Item 15. Exhibits, Financial Statement Schedules of this Annual Report on Form 10-K) and twenty years following the date of issuance.

Under the terms of each Warrant, the Company will have a call option to repurchase the Warrants upon a Change of Control Event, a Qualifying Tender Offer, or a Transformational Transaction (each, as defined in the Warrant). In connection with an exercise of the Company’s call option, the purchase price for the shares issuable upon exercise of the portion of the Warrant subject to the call option would be equal to the greater of (x) 30% of the amount disbursed under the Finance Contract as of the date of the call option multiplied by a fraction, the numerator of which is (i) the number of Warrant Shares (as defined in the Warrant Agreement) purchasable under the Warrant Agreement and (ii) the denominator which is the number of shares of Common Stock purchasable with respect to all Warrants under the Warrant Issuance Agreement, whether or not remaining outstanding, and (y) the aggregate value of the Warrant Shares purchasable upon exercise of the call option in the event of any of a Qualifying Tender Offer, Transformational Transaction or other transaction, in each case as calculated in accordance with the terms of the Warrant Agreement.

Under the terms of the Warrant Issuance Agreement, EIB will have a put option to sell the Warrants to the Company on or following the maturity date of the applicable Tranche or upon the occurrence of an Event Date (as defined in the Warrant Issuance Agreement), subject to certain limitations in the event that the Company publishes a Material Press Release (as defined in the Warrant Issuance Agreement included within Part IV - Item 15. Exhibits, Financial Statement Schedules of this Annual Report on Form 10-K). In connection with an exercise of EIB’s put option, the purchase price for the shares purchasable in connection with the put option would be equal to (x) in the case of a Qualifying Tender Offer (as defined in the Warrant Issuance Agreement), the aggregate price per share of Common Stock being offered minus the aggregate Strike Price (as defined in the Warrant Issuance Agreement) payable to the Company with respect to the Warrants for which the put option is being exercised and (y) in all other cases, an amount equal to the aggregate Fair Market Value (as defined in the Warrant Issuance Agreement) of the Warrant Shares purchasable upon exercise of the put option minus the aggregate Strike Price payable to the Company with respect to the Warrants for which the put option is being exercised.

The Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with EIB related to the issuance of the Warrants. Under the terms of the Registration Rights Agreement, the Company has agreed to prepare and file, by the later of (i) 30 days after the date of issuance of any of the Warrants and (ii) May 15, 2025 (the “Filing Deadline”), one or more registration statements with the Securities and Exchange Commission (the “SEC”) to register for resale the common stock issued under the Warrant Issuance Agreement and to cause the applicable registration statements to become effective within a specified period after the Filing Deadline.

As of December 31, 2024, Tranches available to us had not been drawn upon. As such, the Company does not have outstanding current or long-term debt on the consolidated balance sheet as of December 31, 2024 or as of the date these financial statements are issued. Additionally, no Warrants were issued as of December 31, 2024 or as of the date these financial statements are issued in connection with the Warrant Issuance Agreement and Finance Contract with the EIB.