TELA Bio, Inc S-1, filed Jun 23, 2020

TELA Bio, Inc. (TELA)

S-1 2020-06-23

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Title of Each Class of Securities to be Registered	Amount to be Registered(1)		Proposed Maximum Offering Price Per Share(2)			Proposed Maximum Aggregate Offering Price(1)(2)			Amount of Registration Fee
Common stock, $0.001 par value per share		3,450,000		$	21.59		$	74,485,500		$	9,669

	PROSPECTUS SUMMARY					1
	RISK FACTORS					15
	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS					17
	USE OF PROCEEDS					19
	DIVIDEND POLICY					20
	CAPITALIZATION					21
	DILUTION					23
	MANAGEMENT					25
	PRINCIPAL STOCKHOLDERS					28
	DESCRIPTION OF CAPITAL STOCK					30
	MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS					33
	UNDERWRITING					37
	LEGAL MATTERS					44
	EXPERTS					44
	WHERE YOU CAN FIND MORE INFORMATION					44
	INCORPORATION OF CERTAIN INFORMATION BY REFERENCE					44

	Year ended December 31,						Three months ended March 31,
	2019			2018			2020			2019
	(in thousands, except share and per share data)
Statement of Operations:
Revenue		$	15,446		$	8,274		$	3,726		$	3,306
Cost of revenue (excluding amortization of intangible assets)			5,870			4,547			1,450			1,432
Amortization of intangible assets			304			785			76			76
Gross profit			9,272			2,942			2,200			1,798
Operating expenses:
Sales and marketing			18,060			13,646			5,269			3,995
General and administrative			6,223			4,899			2,518			1,324
Research and development			4,151			4,339			912			1,659
Gain on litigation settlement			—			(2,160)			—			—
Total operating expenses			28,434			20,724			8,699			6,978
Loss from operations			(19,162)			(17,782)			(6,499)			(5,180)
Other (expense) income:
Interest expense			(3,609)			(1,802)			(879)			(912)
Loss on extinguishment of debt			—			(1,822)			—			—
Change in fair value of preferred stock warrant liability			(5)			244			—			36
Other income			351			70			158			90
Total other (expense) income			(3,263)			(3,310)			(721)			(786)
Net loss			(22,425)			(21,092)			(7,220)			(5,966)
Accretion of redeemable convertible preferred stock to redemption value			(7,783)			(8,823)			—			(2,025)
Net loss attributable to common stockholders		$	(30,208)		$	(29,915)		$	(7,220)		$	(7,991)
Net loss per common share, basic and diluted(1)		$	(17.10)		$	(101.41)		$	(0.63)		$	(27.00)
Weighted average common shares outstanding, basic and diluted(1)			1,766,412			294,988			11,406,783			295,992

	As of March 31, 2020
	Actual			As Adjusted(2)
	(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments		$	46,700		$	105,188
Working capital(1)			51,081			109,569
Total assets			58,841			117,329
Long-term debt with related party			30,381			30,381
Total stockholders’ equity			24,227			82,715

	As of March 31, 2020
(in thousands, except share and per share data)	Actual			As Adjusted
	(Unaudited)
Cash, cash equivalents and short-term investments		$	46,700		$	105,188
Long-term debt with related party		$	30,381		$	30,381
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized and no shares issued or outstanding, actual and as adjusted			—			—
Common stock, $0.001 par value; 200,000,000 shares authorized, actual and as adjusted; 11,407,998 shares issued and 11,407,600 shares outstanding, actual; 14,407,998 shares issued and 14,407,600 shares outstanding, as adjusted			11			14
Additional paid-in capital			199,287			257,772
Accumulated other comprehensive income			8			8
Accumulated deficit			(175,079)			(175,079)
Total stockholders’ equity			24,227			82,715
Total capitalization		$	54,608		$	113,096

Assumed public offering price per share			$	20.90
Historical net tangible book value per share as of March 31, 2020	$	1.88
Increase in net tangible book value per share attributable to new investors participating in this offering		3.66
As adjusted net tangible book value per share after this offering				5.54
Dilution per share to new investors participating in this offering			$	15.36

	Shares Beneficially Owned
Name of Beneficial Owner	Number of Shares		Percentage Before this Offering		Percentage After this Offering
5% or Greater Stockholders
Quaker BioVentures II, L.P.(1)		1,769,196		15.5%		12.3%
RTW Investments, LP(2)		1,139,358		10.0%		7.9%
EW Healthcare Partners 2-UGP, LLC(3)		769,231		6.7%		5.3%
Orbimed Private Investments IV, LP(4)		3,058,267		26.7%		21.2%
Signet Healthcare Partners Accredited Partnership III, LP(5)		618,609		5.4%		4.3%
Pacira BioSciences, Inc.(6)		774,056		6.8%		5.4%
Named Executive Officers and Directors
Antony Koblish(7)		287,657		2.5%		2.0%
Maarten Persenaire, MD(8)		96,196		*		*
E. Skott Greenhalgh, PhD(9)		48,697		*		*
Kurt Azarbarzin(10)		10,282		*		*
Federica O’Brien(11)		1,999		*		*
Adele Oliva(12)		1,770,528		15.5%		12.3%
Vince Burgess(13)		19,064		*		*
Lisa Colleran(14)		666		*		*
Doug Evans(15)		666		*		*
All executive officers and directors as a group (11 persons)		2,253,369		19.3%		15.4%

Underwriter	Number of Shares
Jefferies LLC
Piper Sandler & Co.
Canaccord Genuity LLC
JMP Securities LLC
Total		3,000,000

	Amount to be Paid
SEC registration fee		$	9,669
FINRA filing fee			11,673
Printing and engraving fees			100,000
Legal fees and expenses			220,000
Accounting fees and expenses			100,000
Transfer agent and registrar fees and expenses			5,000
Miscellaneous expenses			3,658
Total		$	450,000

	1.1*			Form of Underwriting Agreement
	3.1			Fourth Amended and Restated Certificate of Incorporation (incorporated by reference to exhibit 3.1 of the Company’s Current Report on Form 8-K filed on November 19, 2019)
	3.2			Second Amended and Restated Bylaws (incorporated by reference to exhibit 3.2 of the Company’s Current Report on Form 8-K filed on November 19, 2019)
	4.1			Specimen Common Stock Certificate of the Company (incorporated by reference to exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	4.2			Amended and Restated Investors’ Rights Agreement (incorporated by reference to exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	4.3			First Amendment and Joinder to Amended and Restated Investors’ Rights Agreement (incorporated by reference to exhibit 4.3 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	5.1*			Opinion of Pepper Hamilton LLP
	10.1			Form of Indemnification Agreement by and between the Company and its individual directors and officers (incorporated by reference to exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.2			TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.3			Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.4			Second Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.5			Third Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.6			Fourth Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.7			Fifth Amendment to the TELA Bio, Inc. 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.8			Form of Incentive Stock Option Agreement pursuant to the 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.9			Form of Nonstatutory Stock Option Agreement pursuant to 2012 Stock Incentive Plan (incorporated by reference to exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.10			TELA Bio, Inc. Amended and Restated 2019 Equity Incentive Plan (incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-39130), dated June 4, 2020)

	10.11			Form of TELA Bio, Inc. 2019 Equity Incentive Plan Stock Option Grant Notice and Stock Option Agreement (incorporated by reference to exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.12			TELA Bio, Inc. 2019 Employee Stock Purchase Plan (incorporated by reference to exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.13			TELA Bio, Inc. Non-Employee Director Compensation Policy (incorporated by reference to exhibit 10.13 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.14			Amended and Restated Employment Agreement, dated October 25, 2019, by and between the Company and Antony Koblish (incorporated by reference to exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.15			Amended and Restated Employment Agreement, dated October 25, 2019, by and between the Company and Maarten Persenaire, M.D. (incorporated by reference to exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.16			Amended and Restated Employment Agreement, dated October 25, 2019, by and between the Company and Skott Greenhalgh (incorporated by reference to exhibit 10.21 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.17			Amended and Restated Employment Agreement, dated October 25, 2019, by and between the Company and Nora Brennan (incorporated by reference to exhibit 10.31 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.18			Credit Agreement, dated November 16, 2018, by and between the Company and OrbiMed Royalty Opportunities II, LP (incorporated by reference to exhibit 10.22 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.19#			Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated July 16, 2015, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.23 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.20#			Amendment to Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated November 26, 2015, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.24 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.21#			Amendment to Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated January 3, 2019, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.25 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.22#			Addendum to the Second Amended and Restated License, Product Development and Supply Umbrella Agreement, dated August 27, 2019, by and between the Company and Aroa Biosurgery Ltd. (incorporated by reference to exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on March 30, 2020)
	10.23#			Addendum to the Second Amended and Restated License, Product Development and Supply Agreement, dated February 15, 2020, by and between the Company and Aroa Biosurgery Limited (incorporated by reference to exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 15, 2020)
	10.24			Lease between the Company and Liberty Property Limited Partnership, dated January 31, 2013 (incorporated by reference to exhibit 10.26 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.25			First Amendment to Lease between the Company and Liberty Property Partnership, dated June 19, 2014 (incorporated by reference to exhibit 10.27 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)

	10.26			Second Amendment to Lease between the Company and WPT Land 2 LP (as successor in interest to Liberty Property Limited Partnership), dated January 17, 2018 (incorporated by reference to exhibit 10.28 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	10.27			Employment Agreement, dated January 17, 2020, by and between the Company and Peter Murphy (incorporated by reference to exhibit 10.26 to the Company’s Annual Report on Form 10-K filed on March 30, 2020)
	21.1			Subsidiaries of the Registrant (incorporated by reference to exhibit 21.1 to the Company’s Registration Statement on Form S-1 (File No. 333-234217), dated November 7, 2019)
	23.1*			Consent of KPMG LLP
	23.2*			Consent of Pepper Hamilton LLP (included in Exhibit 5.1)
	24.1*			Power of Attorney (included on signature page to this Registration Statement on Form S-1)

Name	Title	Date
/s/ Antony Koblish Antony Koblish	President, Chief Executive Officer and Director (Principal Executive Officer)	June 23, 2020
/s/ Nora Brennan Nora Brennan	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	June 23, 2020
/s/ Doug Evans Doug Evans	Chairman, Board of Directors	June 23, 2020
/s/ Kurt Azarbarzin Kurt Azarbarzin	Director	June 23, 2020
/s/ Vince Burgess Vince Burgess	Director	June 23, 2020
/s/ Lisa Colleran Lisa Colleran	Director	June 23, 2020

If to the Representatives:		Jefferies LLC
		520 Madison Avenue
		New York, New York 10022
		Facsimile: (646) 619-4437
		Attention: General Counsel

		Piper Sandler & Co.
		800 Nicollet Mall
		Minneapolis, MN 55402
		Attention: Legal Department

with a copy to:		Latham & Watkins LLP
		885 3rd Avenue
		New York, New York 10022
		Facsimile: (212) 751-4864
		Attention: Nathan Ajiashvili

If to the Company:		TELA Bio, Inc.
		1 Great Valley Parkway, Suite 24
		Malvern, Pennsylvania 19355
		Facsimile: (610) 644-3769
		Attention: Chief Executive Officer

with a copy to:		Pepper Hamilton LLP
		2 Logan Square, Suite 3000
		Philadelphia, Pennsylvania 19103
		Facsimile: (215) 981-4750
		Attention: Rachael M. Bushey and Jennifer L. Porter

	Very truly yours,

	TELA BIO, INC.

	By:
		Name:
		Title:

Underwriters		Number of Firm Shares to be Purchased
Jefferies LLC		[ • ]
Piper Sandler & Co		[ • ]
Canaccord Genuity LLC		[ • ]
JMP Securities LLC		[ • ]
Total		[ • ]


Signature


Printed Name of Person Signing

(Indicate capacity of person signing if signing as custodian or trustee, or on behalf of an entity)

	Very truly yours,


	/s/ Pepper Hamilton LLP Pepper Hamilton LLP