LONDON (Alliance News) - Epistem Holdings PLC Thursday said it has raised GBP6.5 million through a large and conditional placing of shares priced at a discount, and warned shareholders that the company will be broke later this year if they fail to support the deal.
The biotechnology company had already said it was considering raising equity funding at the end of March, but the placing is conditional and will require shareholder approval at a general meeting on July 11.
Epistem said it only has enough funds to last until the third quarter of this year without the proceeds from the placing, and although the placing Thursday comprised of a large amount of shares, the company said shareholders could face more severe dilution by not approving the placing.
"If [the placing is rejected by shareholders], the company would only have sufficient working capital to trade into the middle of the third quarter of 2016 without taking any mitigating action and, therefore, the board would need to seek alternative financing which may or may not be forthcoming," said Epistem.
Cash at the end of May stood at around GBP1.2 million.
"The directors consider that such a scenario would not be in the best interests of the company or its shareholders and that any alternative financing, if available, could be on less favourable terms than the placing and could risk leading to substantial dilution for shareholders," Epistem added.
A total of 8.1 million shares will be issued under the placing, priced at 80.0 pence per share, and cornerstone investor Calcius Capital has backed the deal by subscribing for 3.1 million of those shares.
Epistem shares were down 11% to 80.0 pence per share on Thursday morning.
The shares would represent almost 44% of the company;s enlarged share capital and the price is more than an 11% discount to Epistem's closing share price on Wednesday.
If approved, Calcius Capital's stake in Epistem following the placing would be 16.7%.
Another significant shareholder, Odey Asset Management LLP, has also subscribed to a large amount of the placing shares and certain directors of Epistem have also agreed to take part.
"If the company were to be unsuccessful in pursuing alternative financing, the company could be obliged to cease operations, the consequences of which could include insolvency proceedings and shareholders potentially losing all or a very significant part of the value of their shareholding. Accordingly, it is very important that shareholders vote in favour of the resolutions in order that the placing may proceed," said Epistem.
The net proceeds of the placing are expected to total around GBP6.1 million after costs.
"We are excited in the future of Genedrive in bringing the power of hospital-based, central laboratory diagnostics closer to the point of need and the patient setting. These new funds put us in a strong position to deliver on Genedrive's potential and expand its testing capabilities," said Chief Executive David Budd.
Genedrive is the company's point-of-care molecular diagnostic platform which provides genotyping and sequence analysis, and has been approved and launched in India to test for TB - but Epistem is aiming to develop a pipeline of tests for other infectious diseases such as HCV, HIV and HBV, it said.
The funds from the placing are expected to allow Epistem to progress its products and technology and the company has forecast its strategy would allow the business to become self-sustainable from 2018 onwards - if shareholders back the proposals.
Epistem said it expects to deliver revenue of GBP4.6 to GBP5.0 million for the full year to the end of July 2016, which would be up from GBP4.5 million last year.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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