Genedrive Regulatory News (GDR)

4 Apr 2007 08:00

EpiStem Holdings plc04 April 2007 4th April 2007 EpiStem Holdings Plc. Fundraising and Placing by Teather and Greenwood 2.5m of new Ordinary Shares at 124 pence per share Highlights • EpiStem Holdings Plc Admission to AIM 4th April 2007 • 2.5 million shares successfully placed at 124 pence per share raising £2.6 million net of expenses • EpiStem is a biotechnology company commercialising adult stem cells in the areas of oncology and gastrointestinal diseases • Money will be used to: o enable the partnering of novel therapeutic compounds o widen the diagnostic platform of the existing cash-flow positive fee for service business o general corporate services. • Institutional investors include: o Calculus o Yorkshire Fund Managers o Rensburg Sheppards o Zeus Capital o New Star o Octopus Commenting on the completion of the placing, David Evans, Chairman of EpiStemsaid: "We are delighted at the positive response that we have had from both ourexisting investors and new institutions in supporting the development plans ofthe Company. Alongside our existing list of investors including, Calculus,Yorkshire Fund Managers, Rensburg Sheppards and Jon Moulton, we welcome as newshareholders established institutional investors such as New Star and Octopus. The money raised will allow us to advance our therapeutic candidates leading tolicensing partnerships. We believe candidate therapeutics will enable us toregulate and repair tissue renewal processes providing a new developmentapproach for oncology based diseases. Epithelial cancers account for over 80% ofadult cancers. Our integrated discovery and preclinical platform will enablepharmaceutical companies to access data and therapeutics based on the company'sunrivalled research knowledge in stem cells which has been amassed over 30 yearsoriginally starting at the Paterson Institute at Christie's Hospital,Manchester, UK." Commenting on his new role as CEO, Matthew Walls said: The Company has been able to build a profitable and cash generative servicesupport business alongside an innovative discovery program based on its coretechnology. An AIM quotation gives us the profile to expand our service supportbusiness as well as become a leading supplier of validated candidate noveltherapeutics for a pharmaceutical industry increasingly demanding such targets. The Board has a clear vision of how we will drive both sides of the business togenerate shareholder value. The team is highly professional and has an acutesense of how to commercialise its technology for both short-term expansion andthe long-term growth of the Company. " History EpiStem is a biotechnology company commercialising adult stem cells in the areasof oncology and gastrointestinal diseases as well as cosmeceutical applications.EpiStem develops innovative therapeutics and diagnostic biomarkers and providescontract research services to drug development companies. The Group's expertiseis focused on the regulation of adult stem cells located in epithelial tissue,which includes the gastrointestinal tract, skin, hair follicles, breast andprostate. EpiStem does not conduct research in the areas of embryonic stem cellsor stem cell transplantation. Fundraising and Placing Under the Fundraising and Placing, EpiStem Holdings Plc is issuing 2.5m NewOrdinary Shares representing approximately 38 per cent of the Enlarged ShareCapital. Reasons for Admission and the Placing The Company intends to raise approximately £2.6 million net of expenses pursuantto the Fundraising. The net proceeds of the Fund raising will be used to: • fund further research to enable the commercial partnering oftherapeutic candidate(s) from the Novel Therapies Division; • fund the development of the Company's diagnostic platform based onepithelial stem cell biology; and • general corporate purposes. The Directors also believe that the profile of the Group will be significantlyenhanced as a UK quoted public company. For more information please contact: EpiStem: 0161 606 7263Matthew Walls, Chief Executive Officer Teather & Greenwood: 020 7426 9000Robert NaylorThilo HoffmannSimon Brown MC Bio-Communications Limited: 020 7744 7711Mike Wort, Anna Dunphy In this release reference is made to the Admission Document which is availableon request from the Company at 48 Grafton Street, Manchester M3 9XX or theCompany's website www.epistem.co.uk. Additional Information EpiStem is a biotechnology company commercialising adult stem cells in the areasof oncology and gastrointestinal diseases as well as cosmeceutical applications.EpiStem develops innovative therapeutics and diagnostic biomarkers and providescontract research services to drug development companies. The Group's expertiseis focused on the regulation of adult stem cells located in epithelial tissue,which includes the gastrointestinal tract, skin, hair follicles, breast andprostate. EpiStem does not conduct research in the areas of embryonic stem cellsor stem cell transplantation. EpiStem operates two distinct business divisions, Contract Research Services andNovel Therapies. Contract Research Services Contract Research Services provides specialised preclinical efficacy testingprimarily for drug development companies on a fee for service basis. Thisdivision on a standalone basis is cash generative and profitable, with anestablished five-year track record of providing testing services to over 65company clients primarily in Europe and the United States. Novel Therapies Novel Therapies is focused on developing its own innovative therapeutics anddiagnostic biomarkers. Through its discovery platform, Novel Therapies hasidentified 250 potential drug candidates, of which a subset will undergo furtherevaluation as stem cell regulators for the Group's emerging drug developmentpipeline. Novel Therapies is also conducting feasibility studies with two drugdevelopment companies using its clinical diagnostic biomarker technology. Combined Business Model The Group is exploiting its combined business model to advance its owntherapeutic candidates to late preclinical stage development. The business modelintegrates the discovery efforts of Novel Therapies with the efficacy testingassays of its Contract Research Services Division, to identify and characterisenew drug candidates. Revenues generated by Contract Research Services willassist in offsetting Novel Therapies' investment requirements for the discoveryand development of therapeutics. In February 2007, EpiStem licensed its firstdrug candidate to a clinical development company. With the validation of theNovel Therapies discovery platform and the achievement of discovery milestones,the Directors believe that additional licensing partnerships will be forthcomingfor therapeutics, diagnostics and cosmeceuticals starting in 2008. Company background EpiStem was founded in 2000 by Professor Chris Potten and Dr. Catherine Booth,its co-founders having previously been based in the Paterson Institute at theChristie Hospital in Manchester, UK. Its offices are located in the ManchesterIncubator Building, which is part of the University of Manchester. The Company'sexpertise is based on over three decades of experience in relation to discoveryresearch on the behaviour of adult epithelial stem cells by Professor Potten.Professor Potten received a lifetime fellowship from Cancer Research UK and haspublished over 350 scientific publications, written two and edited nine books.He has received two prestigious prizes for his contributions to radiobiologicalresearch, the Madame Marie Sklodowska-Curie Medal in 1998 and the Weiss Prize in2003. Professor Potten is the Chief Scientific Adviser to the Group. Stem cell assays developed by the founders attracted the attention of drugdevelopment companies and these assays created the core platform for theformation of the Contract Research Services Division. Dr. Booth has built a teamof 13 scientists alongside a business development team of five led by Dr. MarkBryant. Six of the Contract Research Services team have Ph.D. degrees. Dr. Gerard Brady joined EpiStem as Research Director of the Novel TherapiesDivision in 2001. Dr. Brady has applied over two decades of expertise developingspecialised molecular biology tools, including gene profiling of individualcells, with the goal to identify the key regulators of epithelial stem cells. InSeptember 2005, EpiStem hired Dr. Jeffrey Moore to lead the commercialisation ofthe Novel Therapies' technology. Prior to joining EpiStem, Dr. Moore discovereda blood stem cell regulator, founded Phylogix Inc., a therapeutics biotechnologycompany, and raised over $15 million to advance the drug candidate to latepreclinical development. The Novel Therapies team has seven scientists, five ofwhom have Ph.D.degrees. In February 2007, Matthew Walls, an experienced Chief Executive most recently atOxford Biosignals Limited, took on the role of Chief Executive Officer. Matthewhas extensive experience of building and commercialising biotechnology productsand services across the United States and United Kingdom. He succeeds DavidEvans, who had been Executive Chairman since March 2006. David will continue inthe role of Non-executive Chairman, which he fulfils for three other AIM-quotedcompanies in the healthcare sector. John Rylands, now Financial Director, joinedEpiStem in 2002 and has successfully completed several rounds of investmentsupporting the growth of EpiStem. Dr.Robert Nolan, the other Non-executive Director, has extensive pharmaceuticallicensing experience and an active involvement with early stage healthcarecompanies. Contract Research Services Division Contract Research Services provides specialised preclinical assays for drugdevelopment in the areas of oncology supportive care, oncology, inflammatorybowel disease (IBD), and new emerging applications. Introduction to oncology supportive care The effectiveness of chemotherapy and radiation to eradicate cancer depends inpart on oncologists' ability to manage toxic side effects to thegastrointestinal tract, a condition called mucositis. Destruction of theepithelial lining, leading to ulceration and functional impairment, increasesthe risk of infection and treatment delays and causes suffering for the patientmanifested by loss of appetite, diarrhoea, and wasting. Pain induced byulceration in the mouth (oral mucositis) is a major reason why patients eitherdelay or halt chemotherapy and radiotherapy. Better management of mucositisduring cancer treatment would decrease the risk of serious, sometimeslife-threatening infections, reduce overall treatment costs and patientsuffering. Reducing the toxic side effects of cancer therapy remains a majorunmet clinical need. Oncology supportive care The core intestinal stem cell assays used by EpiStem evaluate efficacy, optimisedrug dose/scheduling, and elucidate mode of action in the area of oncologysupportive care. These assays, established over the past decade, have been usedto evaluate more than a dozen supportive care drug candidates in preclinicaldevelopment. Following earlier testing involving Professor Potten and Dr. Booth,two drug candidates have gone on to enter clinical trials, one of which (Amgen'sKepivance(R)) is the first and currently the only drug approved to reduce oralmucositis. Oncology and Inflammatory Bowel Disease Contract Research Services provides a range of established preclinical efficacytesting services to assess anticancer compounds on tumour growth in oncology andthe severity of tissue damage in IBD. The team has developed a variety ofanalytical tools to evaluate drug candidates and is also extending its servicesin oncology and IBD to better assess the nature of these chronic diseases. New emerging areas Intestinal injury is a major component of radiation sickness and the NationalInstitutes of Health in the United States is funding the development of drugsthat will prevent and treat radiation sickness following a nuclear terroristevent. EpiStem is currently evaluating the efficacy of candidate drugs toprotect and/or repair intestinal injury in the radiation/nuclear medicalcountermeasure development programme. Contract Research Services has aspecialised understanding and expertise in the area of skin testing. It providesbespoke skin assays, designed to assess a drug's ability to protect againsttissue damage from chemical and ultraviolet sources. The group has a specificcompetence in growth and differentiation of various skin tissue types. Market overview and opportunity The Directors believe that Contract Research Services' core assays for oncologysupportive care and biodefence will provide the foundation for the division'sfuture sustainability and growth. Oncology supportive care The worldwide market for supportive care products exceeds £6 billion per annum,primarily from Amgen and Johnson & Johnson's blood cell growth regulators. Thegrowing sales of Amgen's Kepivance(R) for oral mucositis reflect an opportunityfor additional therapeutics in this area. Contract Research Services iscurrently evaluating several anti-mucositis candidates. Biodefense EpiStem's biodefense subcontract, which is funded through the University ofMaryland School of Medicine's prime contract with the National Institute of Allergy and InfectiousDiseases of the National Institutes of Health, in the United States, involvesscreening of drug candidates to protect and/or repair intestinal injury followedby more comprehensive studies on selected drugs and is anticipated to continueover three years. EpiStem is currently the primary laboratory in the Universityof Maryland consortium that is evaluating the efficacy of candidate drugs toprotect the epithelial lining in the gut from radiation damage for the radiation/nuclear medical countermeasure development programme. Independently two drugdevelopment companies with biodefence compounds have contracted EpiStem toconduct parallel studies in oncology supportive care. Competition The Directors believe that the Group's intestinal stem cell assays in supportivecare and biodefence have few competitors. The Directors believe that limitedoral mucositis models are conducted through a private contract researchorganisation in the United States. Contract Research Services' oncology and IBDassays operate in a more competitive market with success based on providing anestablished quality of interactive service leading to repeat business. The teamhas built a track record and profitable business based on its expertise in assaydesign, execution and interpretation of results with its customers. Novel Therapies Division EpiStem intends to unlock the commercial value of adult epithelial stem cells bydiscovering the key regulators of stem cells and developing candidatetherapeutics through commercial partnerships with drug development companies.The core value generator in this division is its high resolution, geneexpression profiling technology used to analyse the behaviour of epithelial stemcells. This know how has been generated over five years, profiling a wide rangeof epithelial tissues to elucidate the fundamental mechanisms of stem cellregulation. The Directors believe that control over the regulation of intestinalstem cells will enable EpiStem to develop novel therapeutics to treat mucositis,cancer, IBD, and other epithelial stem cell disorders. The Directors believethat the regulators of intestinal stem cells are largely unknown due to thedifficulties in accessing and evaluating intestinal tissues. Through thecombination of its gene profiling technology and its intestinal stem cellexpertise, the Directors believe that they will be able to overcome thesetechnical obstacles. At the initial proof-of-concept stage, this technologyapproach resulted in the identification of ten potential cell receptor targetsregulated by small molecule drugs. Biological activity was demonstrated in threeout of the ten receptors. One small molecule drug was then selected andcharacterised. In 2004, EpiStem applied for patent protection for itsapplication as an anti-mucositis therapy. In February 2007, EpiStem entered intoits first licensing partnership with a clinical stage company to develop thissmall molecule drug for oncology supportive care and biodefence applications.With the confirmation in 2004 that EpiStem's discovery technology couldsuccessfully identify relevant therapeutic targets, the Novel Therapies teamembarked on a comprehensive programme to identify the key regulators ofintestinal stem cells. The stem cell regulators will themselves be novel proteintherapeutic candidates. In June 2006, the division completed its gene profiling programme ofintestinal stem cells and selected 250 genes that are likely to includecandidate stem cell regulators. EpiStem engaged Eden Biodesign, a contractor atthe National Biomanufacturing Centre in Liverpool, to produce the recombinantproteins. These proteins will initially be evaluated directly in the ContractResearch Services Division's intestinal stem cell assays. EpiStem intends toapply for patent protection of candidate therapeutics identified andcharacterised in these assays. The Directors believe that it is likely that someof the 250 proteins will also regulate epithelial stem cells in other tissues,such as hair follicles to turn on and off hair growth for use in cosmeceuticalapplications. Developing innovative diagnostic biomarkers EpiStem is applying its gene expression profiling technology to determine thefeasibility of using plucked human hairs to guide the clinical development ofnew oncology drugs. Specifically, it is focusing on obtaining proof-of-conceptfor this diagnostic biomarker method to determine drug exposure, dose and dosescheduling, onset of intestinal toxicity, and patient selection. EpiStem alreadyhas two feasibility studies supported by drug development companies to determinethe diagnostic biomarker's technical and biological robustness. The Directorsbelieve that these initial feasibility studies are likely to lead to developmentpartnerships in which EpiStem's plucked hair diagnostic biomarker will beevaluated as part of oncology clinical trials starting in 2007. Market overview and opportunity EpiStem's business model for therapeutics draws on the scientific and commercialvalidation of Amgen Inc.'s blood cell growth regulators. Both companies exploitthe body's own regulators that bind cellular receptors to activate cells. Amgengenerates over £5 billion in annual worldwide revenue from blood regulators thatstimulate production of the oxygen-carrying red blood cells and the infectionfighting white blood cells. The Directors believe that Amgen has sustained andextended its market position over nearly two decades by introducing improvedversions of their patented protein therapeutics. The Directors believe that thisintellectual property strategy coupled with the complexity of proteinmanufacturing processes has protected Amgen from generic drug competition.EpiStem intends to adopt a similar strategic approach for its epithelial stemcell regulator programmes. Wide range of tissue targets and clinical opportunities The potential commercial opportunity to exploit the body's own regulators ofepithelial stem cells could surpass that of the blood cell growth regulators.The epithelium offers a wide range of tissue targets, clinical disorders, androutes of drug delivery. In oncology alone, over 80 per cent. of all adultcancers originate from the epithelium. Commercialisation strategy for therapeutics EpiStem intends to advance its candidate therapeutics to the stage ofproof-of-concept in late preclinical development and then enter into commercialpartnerships with clinical stage development companies. This strategy leveragesthe Company's strengths - discovery through to preclinical efficacy - andprovides an early opportunity to obtain scientific and commercial validation ofits therapeutic business model. The Directors believe the Company is on track toidentify 1-4 candidate stem cell regulators for preclinical development in 2007and enter into additional commercial partnerships in 2008. Future strategy The Company's future strategy is predicated on the continued growth of itsContract Research Services and Novel Therapies Divisions. Based on the alreadyprofitable Contract Research Services Division, the new funding will primarilyunderpin drug development in the Novel Therapies Division. Where appropriate,the Company may consider the acquisition of complementary technologies tostrengthen its business model and accelerate product and service development. Summary financial information 6 months ended Year ended 30 June 31 December 2004 2005 2006 2006 £000's £000's £000's £000's Turnover 704 1,245 901 667 PBT (250) 48 (756) (481) Net assets 99 1,634 1,095 714 Cash at bank 90 1,517 681 328 Current trading statement Since 31 December 2006, the trading of EpiStem's Contract Research ServicesDivision has been in line with management expectations and the Novel TherapiesDivision has concluded an agreement with a clinical stage company tocommercialise its first therapeutic candidate. The Board remains confident thatoverall trading will continue to meet internal expectations. Directors and employees The Board consists of eight Directors in respect of whom brief biographies areset out below. David Evans (aged 46), Non-Executive Chairman David was executive Chairman of EpiStem from 2006 until February 2007. As theformer CFO he guided Shield Diagnostics Ltd. through its IPO and then, as itsCEO, through its merger with Axis Biochemical ASA to form Axis-Shield plc, aFully Listed diagnostics company. In addition to being Chairman of the Companyhe is currently non-executive Chairman of BBI Holdings plc, ImmunodiagnosticSystems Holdings plc and Omega Diagnostics Group plc, all of which are AIMlisted diagnostic companies. MatthewWalls (aged 43), Chief Executive Officer Matthew joined EpiStem in February 2007 as Chief Executive Officer. Matthew isan experienced CEO most recently with Oxford BioSignals Limited where he led thestrategic 'diagnostic' collaboration with Rolls Royce Plc and Covance Inc andcompleted the recent fundraising and repositioning of the medical diagnosticbusiness to the United States. Matthew spent the early part of his career withICI plc progressing through the executive development programme and severalsenior management positions. Matthew headed up the corporate financial andcommercial development of plant biotechnology at AstraZeneca plc prior to itsmerger with Novartis to form Syngenta plc. Matthew has led the growth anddevelopment of several technology and biotechnology companies as CEO includingInternexus Limited and Zylepsis Limited. Matthew holds a non-executive role atRiyada Oxford Investments Limited and is a chartered accountant and a member ofCIMA. John Rylands (aged 52), Financial Director John originally joined EpiStem in 2002 as an investor and non-executive directorand in 2005 he took over his current role. Mr. Rylands worked at NorthernVenture Management, providing corporate finance advice to private companiesbefore joining EpiStem. Until 1999 he was an investor in and consultant to theSDS group of companies. John holds a degree in Economics and Accountancy fromManchester University and is a member of ICAEW. Jeffrey Moore, Ph.D. (aged 47), Managing Director, Novel Therapies Jeffrey joined EpiStem in 2005 in his current role. Prior to joining EpiStem hehad been at Phylogix, a US biotech company based in the Boston area that he hadfounded in 1998. Phylogix business was based on a stem cell preservation factorthat he discovered while leading a team at ImClone Systems Incorporated. Until1992, when he joined ImClone, he had held two postdoctoral fellowships atdifferent research institutes, DNAX Research Institute of Molecular and CellularBiology, Inc. and the Walter and Eliza Hall Institute of Medical Research.Throughout his career Jeffrey has kept a strong interest in stem cell regulationand the potential commercial application of these factors. He holds a Ph.D. fromGeorge Washington University. Professor Chris Potten, Ph.D. (aged 67), Chief Scientific Adviser Chris is a co-founder of EpiStem and the Company capitalises on the results ofthe research that was produced by him and his team at the Paterson Instituteover the past three decades. While not involved in the day to day management ofEpiStem Chris keeps a strong interest in the progress and success of EpiStem andprior to Admission has been its biggest individual shareholder. Catherine Booth, Ph.D. (aged 41), Managing Director, Contract Research Services Catherine is a co-founder of EpiStem and prior to starting EpiStem she workedfor 10 years with Professor Chris Potten at the Paterson Institute. While at thePaterson Institute she developed many of the pre-clinical assays that today arethe core of EpiStem's Contract Research Services Division. Catherine receivedher Ph.D. from the Emmanuel College, University of Cambridge. Gerard Brady, Ph.D. (aged 50), Research Director, Novel Therapies Gerard joined EpiStem shortly after its inception from Manchester Universitywhere he was a lecturer and was previously a Zeneca Fellow. He brought with himimportant technological expertise gained through working on blood stem cells. Ofparticular importance to EpiStem is his expertise in single cell gene analysis,which enables the examination of rare cells such as stem cells. Gerardpreviously held scientific positions in Canada and at EMBL, Heidelberg. Robert Nolan (aged 64), Non-executive Director Robert has been a Non-executive Director of the Company since 2004. He bringswith him a wealth of expertise in partnering and licensing negotiations bothwith small biotech and large pharmaceutical companies. Prior to his retirementhe was Director, Global Licensing at AstraZeneca. He is also a non-executiveDirector of f2g Ltd. The Group employs 29 staff in total all of which are based at the Company'spremises in The Incubator Building, 48 Grafton Street, Manchester M3 9XX. Details of the Placing Under the Placing the Company is issuing 807,628 New Ordinary Shares. ThePlacing Shares represent approximately 12.35 per cent. of the Enlarged ShareCapital immediately on Admission, on the assumption that all of the PlacingShares are issued. The Placing is conditional upon, among other things,Admission. The Placing is not being underwritten. Application has been made for the existing issued Ordinary Shares (including thePlacing Shares and the Preflotation Fundraising Shares) to be admitted totrading on AIM. Dealings on AIM are expected to commence on 4 April 2007 inrespect of the First Admission, 10 April 2007 in respect of the Second Admissionand 11 April 2007 in respect of the Third Admission. In aggregate, the Directorswill be interested in 33.40 per cent. of the Enlarged Share Capital followingAdmission, on the assumption that all of the Placing Shares are issued andcompletion of the Selling Shareholder Placing. Reasons for Admission and the Placing The Company intends to raise approximately £2,558,058 net of expenses pursuantto the Placing and the Preflotation Fundraising. The net proceeds of the Placingand the Pre-flotation Fundraising will be used to: • fund further research to enable the commercial partnering oftherapeutic candidate(s) from the Novel Therapies Division; • fund the development of the Company's diagnostic platform based onepithelial stem cell biology; and • general corporate purposes. The Directors also believe that the profile of the Group will be significantlyenhanced as a UK listed public company. The Directors believe that Admissionwill: • enhance the Group's status; • assist the Company in raising additional capital should this berequired; and • provide liquidity for investors through the ability to buy and sellOrdinary Shares. Lock-in arrangements Under the terms of the Placing Agreement, the Directors have undertaken that,subject to certain limited exceptions, they will not sell or otherwise disposeof, or agree to sell or dispose of, any of their interests in Ordinary Sharesheld by them respectively until one month after the publication of thepreliminary results for the year ended 30 June 2008. In addition orderly marketarrangements apply for a period of 12 months following the expiry of the lock-inperiod referred to above, whereby the Directors have undertaken to sell OrdinaryShares through Teather & Greenwood. Dividend Policy In the medium term it is the Directors' intention to re-invest funds directlyinto the Company rather than to fund the payment of dividends. Thereafter, thepayment of dividends will be subject to the availability of distributablereserves whilst maintaining an appropriate level of dividend cover and havingregard to the need to retain sufficient funds to finance the development of theCompany's activities. Employee Share Option Scheme Immediately following Admission the Company will have granted share options andwarrants to subscribe for up to 1,374,850 Ordinary Shares representing 21.03 percent. of the Enlarged Share Capital. Taking this into account, an additional458,224 Ordinary Shares remain available for reward as options under the ShareOption Schemes and any new share option schemes to be adopted by the Company inthe future. The Directors intend to introduce a Save as You Earn Share OptionScheme and a new performance based EMI share option scheme for employeesfollowing Admission. Dealing arrangements Application has been made for the issued Ordinary Shares (including the PlacingShares and the Pre-flotation Fundraising Shares) to be admitted to trading onAIM and it is anticipated that Admission will become effective and that dealingswill commence on 4 April 2007 in respect of the First Admission, on 10 April2007 in respect of the Second Admission and on 11 April 2007 in respect of theThird Admission. This information is provided by RNS The company news service from the London Stock Exchange