Ixico Regulatory News (IXI)

28 Feb 2008 07:01

Phytopharm PLC28 February 2008 28 February 2008 Phytopharm plc Proposed Placing and Open Offer to raise £8.6 million Phytopharm plc, the pharmaceutical development and functional food company,today announces that it proposes to raise approximately £8.6 million (£7.4million net of expenses) by way of a Placing and Open Offer. The proceeds of thefundraising will principally be used, together with the Company's existingfunds, to further develop and exploit the potential of the product candidates inits clinical pipeline. The Placing and Open Offer Proposed Placing and Open Offer of 38,929,048 New Ordinary Shares at 22p pershare • Issue price of 22p per share which represents a discount ofapproximately 6.4 per cent. to the middle market price of 23.5p at the close ofbusiness on 27 February 2008 (being the last business day preceding theannouncement of the Placing and Open Offer) • Placing and Open Offer to raise approximately £8.6 million (£7.4million net of expenses) • The Placing is fully underwritten by KBC Peel Hunt • Under the Open Offer, 22,854,630 Placing Shares (representingapproximately 58.7 per cent. of the Placing and Open Offer) are to beconditionally placed with institutional and other investors, subject to clawbackto satisfy valid applications by Qualifying Shareholders • Additionally, undertakings to subscribe for 16,074,418 New OrdinaryShares, in aggregate, have been received from Existing Ordinary Shareholders • The Placing and Open Offer is subject to the approval of Shareholdersto be sought at the EGM to be held on 27 March 2008 Reasons for the Placing and Open Offer Phytopharm plans to use the proceeds of the Placing and Open Offer, togetherwith its existing funds, to further develop and exploit the potential of theproduct candidates in its clinical pipeline for working capital and generalcorporate purposes and, resources permitting, to progress its pre-clinicalpipeline as and when opportunities arise. The additional financial strengthresulting from the Placing and Open Offer may also enhance the Company's abilityto negotiate more favourable terms when out-licensing. Commenting on the proposed Placing and Open Offer, Dr Daryl Rees, ChiefExecutive, said: "We are very pleased with the strong support from both ourexisting and new institutional investors for the Placing and Open Offer. The newfunds will enable the Company to progress a Phase II trial with CoganeTM forParkinson's disease and alongside additional support from charitableorganisations to progress a Phase II trial with MyoganeTM for motor neuronedisease. With a strengthened balance sheet and a product pipeline showingprogress across all programmes, I believe that the Company can deliversignificant value for shareholders." Enquiries U.K. Investor Relations FD KBC Peel Hunt (Sponsor, Stockbroker and Underwriter)Phytopharm plc David Yates Capel IrwinDr Daryl Rees CEO John Dineen Matt GoodePiers Morgan CFO +44 207 831 3113 +44 207 418 8900+44 1480 437 697 This summary should be read in conjunction with the full text of the followingannouncement. Annex I sets out a summary of the risk factors. Annex II sets out the definitions of terms used in the announcement. This announcement shall not constitute, or form part of, an offer of, or thesolicitation of any offer to subscribe for or buy any of the New Ordinary Sharesto be issued or sold in connection with the Placing and Open Offer. Offersshould only be made on the basis of the information contained in the Prospectus.Further details relating to the Placing and Open Offer and the Company will beissued in due course. The Prospectus will contain a notice convening the EGM. Disclaimer This Announcement does not constitute an offer to sell or an invitation orsolicitation to purchase or subscribe for any securities. The Placing and OpenOffer will be made solely by the Prospectus which will contain the full termsand conditions of the Placing and Open Offer, including details of how thePlacing and Open Offer may be accepted. Any acceptance or other response inrelation to the Placing and Open Offer should be made only on the basis of theinformation contained in the Prospectus. The making of the Placing and Open Offer in jurisdictions outside the UnitedKingdom or to Overseas Shareholders or to nominees of or trustees for OverseasShareholders may be prohibited or affected by the laws or regulatoryrequirements of the relevant overseas jurisdictions. Such Overseas Shareholdersshould inform themselves about and observe any applicable legal requirements ofsuch jurisdictions. Any such Overseas Shareholder will be responsible forpayment of any such issue, transfer or other taxes, duties or other requisitepayments due in such jurisdiction by whomsoever payable. Any New Ordinary Shares issued or to be issued pursuant to the Prospectus havenot been and will not be registered under the United States Securities Act of1933, as amended (the "Securities Act"), or any relevant securities laws of anystate of the United States. Subject to certain exceptions, such New OrdinaryShares may not be offered, sold or delivered in the United States or to or forthe account or benefit of U.S. persons, as such terms are defined in RegulationS under the Securities Act. This announcement contains certain forward looking statements with respect tothe financial condition, results of operations and business achievements/performance of the Company and certain of the plans and objectives of themanagement of the Company with respect thereto. These statement may generally,but not always, be idenitified by the use of words such as "should", "expects","estimates", "believes" or similar expressions. This presentation also containsforward looking statements attributable to certain third parties relating totheir estimates regarding the growth of markets and the demand for products. Bytheir nature, forward looking statements involve risk and uncertainty becausethey reflect the Company's current expectations and assumptions as to futureevents and circumstances that may not prove accurate. Circumstances could causethe Company's actual financial condition, results of operations and businessachievements/performance to differ materially from the estimates made or impliedin such forward looking statements. Not for release, publication or distribution in whole or in part, directly orindirectly, in or into the United Stated, Canada, Australia or Japan. Anyfailure to comply with this restriction may constitute a violation of UnitedStates, Canadian, Australian, or Japanese securities laws. Phytopharm plc Proposed Placing and Open Offer Introduction Phytopharm is proposing to raise approximately £8.6 million (£7.4 million net ofexpenses) pursuant to the Placing and Open Offer. The Placing Price of 22p perNew Ordinary Share represents a discount of approximately 6.4 per cent to themiddle market price for an existing Ordinary Share of 23.5p on 27 February 2008(the last business day immediately preceding the announcement of the Placing andOpen Offer). The Placing has been fully underwritten by KBC Peel Hunt. In view of its size,the Placing and Open Offer is conditional upon, amongst other things, theapproval of Shareholders, which is to be sought at an Extraordinary GeneralMeeting to be held on 27 March 2008. Information about Phytopharm Phytopharm is a pharmaceutical development and functional food company. TheCompany's products are developed from medicinal plants, thereby reducing thedevelopment risk, cost and time to market of a product. The Company is currently conducting development and commercialisation of novelpharmaceutical and functional food products within the following health areas. • Parkinson's disease, Alzheimer's disease and neuropsychiatric disorders (CoganeTM); • ALS and other orphan motor neurone diseases (MyoganeTM); • weight management (Hoodia extract); • canine skin disorders (Phytopica (R)); • asthma and COPD (PYM60061 series); and • memory and concentration (PYM60086 series) Phytopharm has one marketed product, Phytopica(R), which is generating revenues,and four further programmes in clinical development: CoganeTM for Parkinson'sdisease, CoganeTM for Alzheimer's disease, MyoganeTM and Hoodia extract.Phytopharm receives reimbursement of its development expenditure, includingstaff costs, in respect of its Hoodia extract product, which was licensed toUnilever in December 2004. The Company's development programmes are focussed ondeveloping products to target markets estimated to be worth approximately $80billion per annum in aggregate. The Company's strategy is to maximise shareholder value through the developmentof novel products in areas of high unmet health needs to deliver cures andrelieve suffering for longer healthier lives. The Company's aim is to seek licences with multinational partners with up-frontpayments, milestones or stage payments payable to the Company on completion ofagreed research and development targets and submission of regulatory documentsand, eventually, payment of royalties on sales of commercialised products. Thesize of any such payments to the Company will vary depending on each product'smarket potential, maturity of development and robustness of the data generated. Key Strengths The Directors believe the Company has the following key strengths: • Medicinal plants - the Directors believe that focusing on products developed from medicinal plants with a history of use reduces the product development risk, cost and time to market. • Virtual operation - as a virtual company, the Company's model is centred on a lean cash burn with all laboratory, manufacturing and clinical work out-sourced to specialists, while core competencies such as strategy and management are maintained in-house. • Balanced portfolio - the Company is developing a broad, balanced portfolio of products with diversified risk and substantial potential value. • Partnerships with charitable organisations - close collaboration with charitable organisations enhances the Company's interaction with scientists and clinicians, who lead and develop expert opinion and cash grants from these charities accelerate its development programmes, increasing their value. Phytopharm receives strategic financial support from The Cure Parkinson's Trust and the Michael J Fox Foundation for its pharmaceutical product, CoganeTM, for Parkinson's disease. Reasons for the Placing and Open Offer and Use of Proceeds Phytopharm plans to use the proceeds of the Placing and Open Offer, togetherwith its existing funds, to further develop and exploit the potential of theproduct candidates in its clinical pipeline for working capital and generalcorporate purposes of the Company and resources permitting, to progress itspreclinical pipeline as and when opportunities arise. The additional financialstrength resulting from the Placing and Open Offer may also enhance theCompany's ability to negotiate more favourable terms when out-licensing. If the Resolution is not passed at the EGM or the Placing and Open Offer doesnot proceed for any other reason, the Company will not have sufficient funds todevelop its CoganeTM and MyoganeTM programmes on the timescale set out in thisdocument and the programmes would be delayed until the full expenditure requiredfor proof of concept studies on each programme was obtained through charities,or until the Company had sufficient cashflows from its Hoodia and Phytopica(R)programmes. If the Company was not able to attract additional funding, theDirectors would consider out-licensing one or both of these products at theircurrent stages of development in order to ensure their continuing developmentand to enhance the prospects of a return of value to shareholders. The Directorsconsider that such out-licensing may be possible but consider that this courseof action would not maximise shareholder value. The Board would also considersignificant restructuring of its operations to reflect the fact that only theHoodia extract and Phytopica(R) programmes were being developed in the shortterm, and would implement a cost reduction programme to reflect moreappropriately the smaller scale of activities being undertaken. Thisrestructuring would severely limit the Company's ability to capitalise on thefuture growth opportunities provided by its other programmes. The specific areas to which funds will be applied include those listed below,however, these plans may change over time as a result of regular portfolioreviews undertaken by the Company: Clinical development of CoganeTM (approximately £5 million) Phase II proof of concept clinical study to demonstrate efficacy in Parkinson'sdisease patients. The Company is in negotiations with various Parkinson'sdisease charities to raise further non-dilutive financing to support thesetrials. Working capital and general purposes (approximately £2.4 million) Working capital and general corporate purposes, including administrativeoverheads and business development. The Company is in negotiations with variousmotor neurone disease charities to raise additional non-dilutive financing tosupport a Phase II proof of concept clinical study to demonstrate efficacy inALS patients. If the Company is successful in obtaining these grants itanticipates that this study will require additional further expenditure of £1.4million by the Company in addition to the amounts which are currently beingnegotiated with the charities. Assuming the Placing and Open Offer has beencompleted, this amount would be funded out of these working capital resources. Further Sources of Funding The Company may secure additional support from charities to fund the developmentof CoganeTM and MyoganeTM, as previously described. The Company also expects tocontinue to generate on-going revenues from Phytopica(R), together with rebatesunder the Research & Development tax credit arrangements and following thecommercialisation of its Hoodia extract, royalties on sales and any futureequity issues. These potential sources of funds together with the Company'scurrent cash resources will be used to finance the Company's core overheads andcurrent development programmes. Phytopharm expects to invest any resulting cashsaved into developing its other programmes including potential veterinaryapplications for Hoodia extract and CoganeTM which typically have lowerdevelopment costs and more rapid development timelines, as well as into itsother preclinical programmes such as those for Prader-Willi Syndrome andvascular dementia (memory and concentration). Current Trading and Prospects The Company announced its preliminary results for the 13 months ended 30September 2007 on 29 November 2007, and published its annual report and accountsfor the period on 16 January 2008. As at 30 September 2007, Phytopharm had £2.24million in cash and cash equivalents. Since that date, the Company has continuedto incur losses and utilise cash resources, in line with Directors'expectations, as it continues to incur expenditure to progress the developmentof its product candidates and early stage programmes. Additionally, the Companyhas recently received commitment for US$1.16 million funding from the Michael JFox Foundation. The Directors expect that net cash outflows will continue in theshort term, thereafter the Company's net financial position may be significantlyimproved depending on the commercial success of the Hoodia programme. TheDirectors believe that the Placing and Open Offer will leave the Company in astronger position to continue the development of the business in the interveningperiod, and to commercialise its products through licences, leading to revenuegeneration with the aim of building a profitable company in the medium term. Principal Terms of the Placing and Open Offer The Issue Price of 22p per New Ordinary Share represents a discount ofapproximately 6.4 per cent to the middle market price for an existing OrdinaryShare of 23.5p on 27 February 2008. Under the Open Offer, QualifyingShareholders may subscribe for: 7 New Ordinary Shares for every 10 Existing Ordinary Shares Fractions of New Ordinary Shares will not be allocated to QualifyingShareholders in the Open Offer and entitlements to apply for New Ordinary Shareswill be rounded down to the nearest whole number of New Ordinary Shares.Accordingly, Qualifying Shareholders with less than 2 Existing Ordinary Shareswill not be entitled to apply for any New Ordinary Shares. New Ordinary Sharesrepresenting the aggregate of fractional entitlements will be taken up under thePlacing for the benefit of the Company. The Placing and Open Offer is conditional on, among other things, the passing ofcertain resolutions. The New Ordinary Shares will, when issued and fully paid, rank pari passu in allrespects with the Existing Ordinary Shares. The latest time for applications and payment in full under the Open Offer to bereceived or settlement of the relevant CREST instruction (as appropriate) is11.00 a.m. on 20 March 2008. It is expected that the results of the Open Offerwill be announced by the Company to a Regulatory Information Service as soon aspossible after the results are known on 20 March 2008. Application has been made to the UKLA for the New Ordinary Shares to be admittedto the Official List. Application has also been made to the London StockExchange for the New Ordinary Shares to be admitted to trading on its market forlisted securities. It is expected that Admission to listing of such securitieswill become effective and dealings on the London Stock Exchange will commence on28 March 2008. CREST Holdings of Ordinary Shares traded on the London Stock Exchange in certificatedand uncertificated form will be treated as separate holdings for the purpose ofcalculating Qualifying Shareholders' entitlements under the Open Offer. Qualifying Shareholders who, at the Record Date, hold Ordinary Shares incertificated form will be allotted all Open Offer Shares to which they areentitled under the Open Offer (and for which they validly apply) in certificatedform to the extent their entitlement arises as a result of so holding OrdinaryShares in certificated form. Qualifying Shareholders who, at the Record Date, hold their Ordinary Shares inuncertificated form will be allotted all Open Offer Shares to which they areentitled (and for which they validly apply) in uncertificated form to the extentthat their entitlement arises as a result of so holding Ordinary Shares inuncertificated form. The Company reserves the right to allot and/or issue any Open Offer Shares incertificated form. Director's intentions The Directors intend to take up their entire entitlement under the Open Offeramounting to 44,620 Open Offer Shares. Furthermore, Daryl Rees, Piers Morgan,Alistair Taylor, Sandy Morrison and Peter Blower have agreed to subscribe for atotal of up to 303,634 New Ordinary Shares under the terms of the Placingsubject to clawback. Other information The full terms and conditions of the Placing and Open Offer, are set out in theProspectus, which is expected to be despatched to Shareholders, today, 28February 2008. The Prospectus will also contain a notice of the ExtraordinaryGeneral Meeting which is expected to be held on 27 March 2008. Expected timetable of principal events It is currently anticipated that the Placing and Open Offer will proceed inaccordance with the following timetable: Record Date for entitlement under the Open Offer 26 February 2008Open Offer Entitlements credited to stock account in CREST of Qualifying CREST 29 February 2008ShareholdersRecommended latest time for requesting withdrawal of Open Offer Entitlements 4.30 p.m. on 14 March 2008from CRESTLatest time for depositing Open Offer Entitlements in CREST 3.00 p.m. on 17 March 2008Latest time and date for splitting of Application Forms (to satisfy bona fide 3.00 p.m. on 18 March 2008market claims only)Latest time and date for receipt of completed Application Forms and payment in 11.00 a.m. on 20 March 2008full under the Open Offer or settlement of relevant CREST instruction (asappropriate)Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 25 March 2008Extraordinary General Meeting 10.30 a.m. on 27 March 2008Admission and commencement of dealings in New Ordinary Shares 8.00 a.m on 28 March 2008CREST members' accounts credited in respect of New Ordinary Shares in 28 March 2008uncertificated formDespatch of definitive share certificates for New Ordinary Shares in 8 April 2008certificated form by not later thanNote:References in this announcement are to London time unless otherwise stated The dates set out in this expected timetable of principal events may be adjustedby Phytopharm plc and KBC Peel Hunt, in which event details of the new dateswill be notified to the Financial Services Authority, the London Stock Exchangeand, where appropriate, to Shareholders. Annex I Risk Factors • The Company has a history of operating losses. • Until the Company's current product sales increase substantially, or until the Company brings further products to market, it is dependent on sources of financing which may be uncertain and if obtained may have preferred rights to holders of Ordinary Shares. • Insufficient funding may result in a reduction of expenditure on certain programmes. • Loss of key employees is likely to negatively impact the Company. • Development of pharmaceutical products and functional foods is lengthy and expensive with no guarantee they will reach market. • Any product successfully launched will need to continue to meet regulatory and safety standards or face withdrawal from the market. • A delay to market of one of the Company's products may adversely affect the launch of other products being developed by the Company. • Development and marketing risks may impact on the business of the Company especially in light of the competitive and fast moving nature of the healthcare industry. • Governments may introduce further legislation which could impact on the Company's business. • CoganeTM has not yet been proven to modify neurological diseases in patients and the eventual formulation for CoganeTM may need to be different from that currently being developed and the Company may fail to develop a suitable alternative formulation. • MyoganeTM has not yet been proven to modify neurological diseases in patients and the eventual formulation for MyoganeTM may need to be different from that currently being developed and the Company may fail to develop a suitable alternative formulation. • Hoodia extract has not completed its development and Phytopharm, in conjunction with its partner Unilever, may not be able to develop an appropriate consumer product that will be suitable for launch. • Phytopica(R) may not be approved for launch in any additional territories. • The Hoodia plant is a protected species and requires permits for its export, but such permits may not be obtainable in the future. • MyoganeTM, Hoodia extract and Phytopica(R) are all extracted from crops which are commercially cultivated. • Agricultural issues can significantly impact the commercial cultivation of the relevant crops. • Results of previous clinical trials may not predict the results of subsequent clinical trials and programmes may fail to meet safety and efficacy standards. • Safety concerns and side effects could lead to a product being discontinued or withdrawn from the market. • The Company's success will depend on third party acceptance of the Company's products. • There are market entry concerns especially if similar products are in existence. • The Company faces competition from others that may be stronger than the Company in certain areas. • The Company may not be able to obtain export licences for its products. • The Company must ensure competitive pricing of its products. • The Company must protect its intellectual property rights or risk others using them. • Even if the Company has registered a patent there are risks that it has not been applied for in time or that it is not valid or unenforceable. • The Company's success is dependent on its collaborators and contractors. • If Phytopharm fails to show regular progress in the development of certain programmes, it may be obliged to return product rights to the product owner. • Phytopharm may not continue to receive financial support from charities for certain of its development programmes. • The Company carries insurance although there is no guarantee that it is sufficient for all possible claims. • The Company is potentially at risk of litigation from a large number of persons. • The Company may need to litigate to protect its intellectual property. • Adverse publicity and demonstrations connected with the Company could damage its public reputation. • The Company may suffer exchange rate exposure on expenditure in other currencies to those in which it holds its cash and cash equivalents. • A change in the taxation regime in the UK may prevent the Company from obtaining Research and Development tax credits, or utilising its accumulated tax losses to reduce any future tax liability. Annex II Definitions The following definitions apply throughout this announcement: "Admission" the admission of the New Ordinary Shares to the Official List and to trading on the market for listed securities of the London Stock Exchange"Application Form" the application form on which Qualifying Shareholders may apply for Open Offer Shares under the Open Offer"Board" the board of directors of the Company"Company" Phytopharm plc, a public limited company, registered in England and Wales with registration number 3131723"CREST" the system for the paperless settlement of trades in securities and the holding of uncertificated securities in accordance with the CREST Regulations"CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time"Directors" or "Board" the directors of the Company"Disclosure and Transparency Rules" the disclosure and transparency rules made by the Financial Services Authority"Enlarged Issued Share Capital" the issued ordinary share capital of the Company following the issue of New Ordinary Shares"Excluded Territory" the United States, Canada, Australia and Japan and any other jurisdictions where the extension or availability of the Placing or the Open Offer would breach any applicable law"Existing Ordinary Shares" the 55,612,926 Ordinary Shares of 1p each in issue at the date of this announcement"Existing Shareholders" holders of Existing Ordinary Shares"Extraordinary General Meeting" or " the extraordinary general meeting of the Company to be held on 27 MarchEGM" 2008, including any adjournment thereof"Financial Services Authority" or "FSA the regulatory body in UK which oversees the proper functioning of the" financial market"FSMA" the Financial Services and Markets Act 2000 as amended from time to time"Fundraising" the fundraising by the Company by way of the Placing and Open Offer"Group" or "Phytopharm" the Company, its subsidiaries and its subsidiary undertakings"KBC Peel Hunt" KBC Peel Hunt Ltd of 111 Old Broad Street, London EC2N 1PH"Listing Rules" the listing rules made by the UK Listing Authority for the purpose of Part IV of FSMA"London Stock Exchange" London Stock Exchange plc or its successor(s)"Money Laundering Regulations" the Money Laundering Regulations 1993 (SI 1993 No. 1933), as amended by the Money Laundering Regulations 2003 (SI 2003 No. 3075)"New Ordinary Shares" the 38,929,048 ordinary shares of 1p each in the capital of the Company to be issued by the Company pursuant to the Placing and Open Offer"Official List" the Official List of the UK Listing Authority"Open Offer" the conditional offer to Qualifying Shareholders, constituting an invitation to subscribe for 38,929,048 New Ordinary Shares (which have been conditionally placed, subject to clawback to satisfy valid applications by Qualifying Shareholders) on the terms and subject to the conditions set out in the Prospectus and the Application Form to be sent to Qualifying Shareholders"Open Offer Entitlements" an entitlement to subscribe for New Ordinary Shares allocated to a Qualifying Shareholder pursuant to the Open Offer"Open Offer Shares" the 38,929,048 New Ordinary Shares to be offered to Qualifying Shareholders under the terms of the Open Offer"Ordinary Shares" the ordinary shares of 1p each in the capital of the Company"Overseas Shareholder" a Shareholder with a registered address outside of the United Kingdom"Placees" the persons with whom the conditional placing of all the New Ordinary Shares (subject (in the case of the Open Offer Shares) to the entitlements of Qualifying Shareholders under the Open Offer) will have been made"Placing" the conditional placing of 22,854,630 New Ordinary Shares at the Issue Price by KBC Peel Hunt pursuant to the Placing Agreement as described in this document being the Open Offer Shares other than those for which undertakings to take up Open Offer entitlements have been received"Placing Shares" the 22,854,630 New Ordinary Shares placed with the Placees"Placing and Open Offer agreement" the placing and open offer agreement, dated 27 February 2008, entered into by the Company and KBC Peel Hunt"Placing Price" 22p per New Ordinary Share"Prospectus" the prospectus to be sent to shareholders detailing, inter alia, the terms of the Placing and Open Offer"Prospectus Rules" the prospectus rules made by the UK Listing Authority for the purpose of Part IV of the Financial Services and Markets Act 2000"Qualifying Shareholder" holders of Ordinary Shares on the register of members of the Company at the Record Date (but excluding any Overseas Shareholder who has a registered address in an Excluded Territory)"Record Date" the close of business in London on 26 February 2008 in respect of the entitlements of Qualifying Shareholders under the Open Offer"Regulatory Information Service" one of the regulatory information services authorised by the UK Listing Authority to receive, process and disseminate regulatory information from listed companies"Resolution" resolution 1 set out in the notice of EGM incorporated at the end of the Prospectus"Securities Act" the United States Securities Act of 1933, as amended, and rules and regulations promulgated thereunder"Shareholders" the holders of shares in the capital of the Company"UK Listing Authority" or "UKLA" the Financial Services Authority acting in its capacity as the competent authority for the purposes of FSMA"United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland"United States" or "US" the United States of America, its territories and possessions This information is provided by RNS The company news service from the London Stock Exchange