Gunsynd Regulatory News (GUN)

15 Jul 2008 07:00

SYNTOPIX GROUP PLC

PROPOSED FUNDRAISING

Syntopix Group plc ('Syntopix Group' or 'the Company') (AIM:SYN), the company focused on antimicrobial pharmaceutical research and development, announces it is proposing to raise £1.5 million (approximately £1.49 million net of expenses) pursuant to a placement of 2,000,756 ordinary shares of 10 pence each in the Company (the "Placing Shares") at an issue price of 75 pence per share (the "Placing Price") ("Placing").

The funds raised under the Placing will be used for additional working capital to fund Syntopix Group's ongoing research and business development activities and in maintaining and further developing Syntopix Group's intellectual property portfolio.

Approval of the Company's shareholders is required in order to complete the issue of the Placing Shares. Accordingly, notice has been sent convening a General Meeting of the Company, to be held at the Company's registered office, Institute of Pharmaceutical Innovation, University of Bradford, Bradford, BD7 1DP at 10.00am on 6 August 2008 (the "General Meeting"), to approve (in accordance with the Company's Articles of Association) the issue of 2,000,756 Placing Shares.

Members of the Board will be subscribing for, in aggregate, 66,000 Placing Shares under the Placing (representing 3.30 per cent. of the Placing). In addition, IP2IPO Limited (a subsidiary of IP Group plc)  will be subscribing for 435,711 Placing Shares and IP Venture Fund, a fund managed by Top Technology Ventures Limited (a subsidiary of IP Group plc), will be subscribing for 435,711 Placing Shares (together representing 43.55 per cent. of the Placing).

The Placing

As previously announced, the Company has been seeking to raise new capital as additional working capital to fund Syntopix Group's ongoing research and business development activities and for maintaining and further developing Syntopix Group's intellectual property portfolio.

Since its admission to AIM in March 2006, Syntopix Group has continued to progress its drug development programme in dermatology and to enhance its profile amongst prospective partners. The Company has continued to work on the discovery of compounds and combinations of compounds for use in the treatment of acne and the prevention and treatment of superficial skin infections due to Staphylococcus aureus including MRSA. Its library of compounds now stands at 1,400 compounds and continues to grow.

In December 2007, Syntopix Group signed an exclusive evaluation agreement with a major consumer healthcare company to evaluate the Company's library of compounds for their potential usefulness in oral healthcare. In addition, the Company has recently announced that it has entered into a Joint Development Agreement with Procter & Gamble, the world's largest consumer goods product company, to investigate the use of Syntopix Group's antimicrobial technology with the objective of improving the efficacy of one of Procter & Gamble's major consumer healthcare brands. 

Syntopix Group also announced in February 2008 positive results from its first Phase II proof-of-concept clinical study in subjects with acne-prone skin. The results demonstrated that the Company's product reduced the total number of acne spots to a significantly greater extent than a currently marketed cosmetic product.

There is a continuing demand for new antimicrobial products. The directors believe that the main drivers behind this demand are the need for new cost-effective antimicrobials in the consumer health care market and the increase in antibiotic resistance. The directors further believe that Syntopix Group can provide such cost-effective and safe antimicrobials from its library of existing compounds and combinations of compounds and is able to generate, from its research activities, further potentially promising synergistic combinations. Syntopix Group's short to medium term intention is therefore to seek to license its compounds to suitable partners in the cosmetics and/or the consumer healthcare industries.

Whilst the Company has made significant progress during the financial year to date, consistent with statements made in Syntopix Group's 2007 Annual Report and the Interim Results for the 6 months ended on 31 January 2008 published in April 2008, Syntopix Group now requires additional funding to enable its planned development programme to continue. 

The Board is of the opinion that, without completion of the Placing, the working capital currently available to Syntopix Group is not sufficient for its requirements for the next 12 months following the date of this announcement.

In order to resolve this situation, the Board has considered various options to refinance the Company. These have included granting an early licence of, or entering into a strategic partnership in respect of, its existing compounds as well as considering an issue of equity in the Company to potential new and existing investors.

Due to the Company's present financial position and the stage of development of its business and compounds, the Board does not believe that the licensing of, or the entering into of a strategic partnership in respect of, any of its compounds and intellectual property would result in the Company achieving a fair value for any such compounds. The Board do not consider that any such licensing or partnership arrangements would therefore be in the best interests of the Company or shareholders as a whole.

The Board has, in consultation with KBC Peel Hunt Limited, held meetings with a number of prospective new investors and with certain of the Company's major shareholders (by size), and has concluded that, in light of those discussions, current market conditions and the time constraints which the Company is under, the proposed Placing represents the best financing option currently available to the Company. 

The Board decided not to make the Placing open to all the Company's shareholders on a pre-emptive basis as it felt that to do so would have resulted in both the Company incurring additional expense and with the fund raising being delayed without any certainty that all of the funds required would be raised. The Company also believes that it would be unlikely to obtain underwriters for a pre-emptive issue at a reasonable price.

The Interim Results of Syntopix Group for the 6 months ended on 31 January 2008 reported wider first-half pre-tax losses following an increase in its research and development expenses for the period. Whilst revenue increased to £36,666 for the period from £2,500 reported a year ago, research and development costs rose to £668,883 from £490,763 previously.

Since the publications of the Interim Results, Syntopix Group has traded in line with expectations. 

Following the Placing the Company will have cash resources of approximately £1,765,000.

As IP2IPO Limited is participating in the Placing and is a related party (as defined in the AIM Rules), owing to Alan Aubrey's involvement in IP Group plc (the parent company of IP2IPO Limited) as both Chief Executive Officer and as a shareholder, he is required to abstain from voting on the resolutions to be proposed at the General Meeting and is not an independent director for the recommendation made below.

The directors of the Board (excluding Alan Aubrey) (the "Independent Directors") consider that the Placing is in the best interests of the Company and its shareholders as a whole. In addition, the Independent Directors, having consulted with KBC Peel Hunt Limited, the nominated adviser to the Company, consider that the participation of IP2IPO and Alan Aubrey in the Placing is fair and reasonable insofar as shareholders are concerned. Accordingly, the Independent Directors recommend that shareholders vote in favour of the resolutions to be proposed at the General Meeting, as they intend to do in respect of their own shareholdings, amounting in aggregate to 902,987 Ordinary Shares (representing approximately 15.75 per cent. of the current issued share capital of the Company). 

The Placing Shares represent approximately 25.87 per cent. of the enlarged issued share capital of the Company. The Placing Price represents a discount of approximately 22 per cent below the closing mid-market price on 14 July 2008. The Placing is conditional on (i) the passing of the resolutions at the General Meeting; (ii) the Company raising a minimum of £1.2 million; and (iii) admission of the Placing Shares to trading on AIM.

Application will be made (conditional on approval at the General Meeting) for admission of Placing Shares to the AIM market of London Stock Exchange plc and dealings are expected to commence on 12 August 2008. The Placing Shares will rank pari passu in all respects with the existing ordinary shares of the Company.

Following completion of the Placing, the following will have the shareholdings and percentages set opposite their names below:

The total number of ordinary shares of 10 pence of the Company in issue following the Placing will be 7,733,357 with each share carrying the right to one vote. There are no shares held in treasury.

Stephen Jones, CEO, commented: 'We are very pleased to have received commitments to complete the proposed Placing from new and existing investors. The Placing will enable the Company to move to capitalise on the progress announced in recent months and to move to the next stage in its development. The Board encourages shareholders to support the resolutions at the General Meeting.'

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