MPM.L Regulatory News (MPM)

27 Jan 2005 07:02

RII PLC27 January 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR IN TOTHE UNITED STATES, CANADA, JAPAN OR AUSTRALIA 27 January 2005 RII Plc ("RII" or "the Company") Proposed Acquisition of BioPartners Limited Placing of 400,000,000 Ordinary Shares at 0.75p per share Approval of Rule 9 Waiver Admission of the enlarged Share Capital to trading on AIM Change of name to Minster Pharmaceuticals plc and Notice of Extraordinary General Meeting 1. Introduction The Board of RII ("the Board" or "the Directors") announced today that the Company has entered into a conditional agreement to acquire the entire issued share capital of BioPartners and to change its name to Minster Pharmaceuticals plc ("the Proposals"). In addition, it has, subject to approval at EGM, effected the Placing of 400,000,000 Ordinary Shares of 0.1p each in the capital of the Company at a price of 0.75p per share (the "Placing") and is applying for the entire issued share capital of the Company to be admitted to trading on AIM. 2. Background to RII The Company was listed on AIM in September 1995 as Riceman Insurance Investments plc. The principal activity was to be the establishment and management of insurance companies in the Commonwealth of Independent States. Associated offices were set up in Moscow, Tashkent, Baku, and Tiblisi. The business developed until the Russian economic crisis in 1998, after which it went into decline. On 13 March 2001 the Company sold its entire operating business for a total consideration of US$300,000. Robert Stubbs was appointed Chairman and Chief Executive on 17 October 2003 with a view to seeking an acquisition of a suitable business which would provide a basis to build shareholder value. The Company changed its name to RII plc on 21 October 2003. In order to make the Company a more attractive proposition to an incoming business, the Company raised £450,000 before expenses on 6 April 2004. This was achieved by way of a placing of 27,536,231 Ordinary Shares at 0.345p per share and the issue of convertible loan notes. The Company now has no business or employees. In late 2004 the Board identified BioPartners as a potential acquisition for the Company. Negotiations were commenced and terms were agreed in principle leading to this announcement. On 17 January 2005, the Company announced that it was in discussions regarding a transaction that would constitute a reverse takeover, pursuant to the AIM Rules, if concluded. Trading in the Ordinary Shares was then suspended. 3. BioPartners Limited ("Biopartners") History and background to BioPartners BioPartners was established in January 2001 as a drug development company. Its aim was to acquire potentially valuable compounds from major pharmaceutical companies, academia and the biotech industry and progress them to proof of concept stage, with a view to then seek partnering for further development or selling the rights to exploit the compounds. BioPartners outsources development work, including clinical trials, and exploits the development and project management skills of the founder and CEO, Dr Paul Sharpe, and other specialist contributors. It operates from leased premises near Saffron Walden, south of Cambridge. Its first assets were two licences granted by SmithKline Beecham plc ("SB") (a member of the GlaxoSmithKline group ("GSK")) in 2001. These licences gave BioPartners exclusive rights to develop and exploit the compounds Sabcomeline and Tonabersat ("the Compounds") on a worldwide basis. Sabcomeline is targeted primarily at schizophrenia. The rights granted to BioPartners in relation to tonabersat are being addressed to pre-emptive or prophylactic treatment of migraine. In the last few months a possible additional use for sabcomeline in the treatment of insulin resistant diabetes has been identified. Dr Sharpe had managed the development work on the Compounds during his time at SB up to the end of 1998. The patents of the Compounds are currently held by SB subject to the licences to BioPartners. Since it was established in 2001, BioPartners has raised approximately £600,000 to progress its business. The majority of its funds have been directed to the further development of the Compounds. BioPartners has had no revenues as yet from the exploitation of products derived from the Compounds. It is anticipated that, at the appropriate time, it will negotiate development and marketing agreements with partners in respect of products derived from the Compounds. The directors of BioPartners and the Board now consider it appropriate that BioPartners attains a public quotation on a market for smaller growth companies, such as AIM. Such a quotation is expected to raise the profile and standing of BioPartners with potential licence partners and other business groups and suppliers and to provide access to institutional and other potential investors. Licences In addition to royalties on sales of products derived from either of the Compounds, the Company is obliged under the two licences to make non-refundable and non-recoverable milestone payments to GSK as set out below: For tonabersat: £5 million on the initiation of the first Phase III Clinical Trial; and £10 million on the first commercial sale of a product containing tonabersat in a major market. For sabcomeline: £3 million on the initiation of the first Phase III Clinical Trial; and £10 million on the first major market filing for a product containing sabcomeline. These milestone payments are not expected to become due in the 12 months following Admission. The Compounds (1) Tonabersat • Tonabersat is aimed at the prevention and treatment of migraine. In a Phase II program conducted by SB in the late 1990s in over 800 patients with established migraine headache, tonabersat showed, in the opinion of Dr Sharpe and others, clear evidence of activity and was well tolerated, with few side effects and no apparent significant cardiovascular liability. Development work on the Compound was discontinued at about the time of the merger of SB with Glaxo Wellcome in 2001. • GSK has continued to develop compounds of the same class for indications including migraine. • BioPartners believes that there is a potential role for tonabersat in the management of migraine. When BioPartners acquired the licence the mode of action of tonabersat was not well established and indeed, it is only relatively recently that the basic mechanism of action of this class of benzopyran compounds has been discovered. Studies at GSK have led to a clearer understanding of the precise mode of action of these compounds, which are now described by GSK as 'gap junction blockers'. The effects demonstrated for these benzopyrans on brain function, including inhibition of cortical spreading depression, indicate potential for the prevention of migraine as well as the treatment of established headache. • Currently, clinical trials of tonabersat in migraine have involved single dose acute treatment only. Establishment of tonabersat in prophylactic therapy will involve chronic administration to patients over a period of months. (2) Sabcomeline • Sabcomeline is a direct muscarinic cholinergic agonist with functional selectivity for M1 and M4 receptors. It had been progressed by SB through development for Alzheimer's Disease, including clinical trials in over 2,500 patients. As a result, there is a substantial dossier showing the compound to be well tolerated with few significant side effects when taken for up to a year. Although the compound was not taken forward by SB for Alzheimer's Disease because it failed its primary endpoints, an improvement in secondary behavioural endpoints was observed in some of those receiving sabcomeline. Clinicians supported the view that this was indicative of a potential role for sabcomeline in management of schizophrenic patients. Dr Sharpe believes that the safety and tolerability profile of sabcomeline would potentially be attractive for schizophrenic patients where long term continuous therapy is often indicated, but is frequently not achieved as a result of patient non-compliance, reflecting in part the side effects of existing drugs. • Since the grant of the licence in respect of sabcomeline, BioPartners has conducted an exploratory Phase II clinical trial which has shown some evidence of activity, predominately against negative symptoms of schizophrenia and associated cognitive decline. GSK conducted studies in parallel with those carried out by BioPartners. Having reviewed the data from studies, GSK concluded that it did not wish to elect to take back the development and marketing as permitted under the terms of the licence. Current activities of BioPartners BioPartners has undertaken limited studies on tonabersat. These have included astudy to evaluate the extent of binding of the compound to the HERG potassiumchannel. This study was undertaken as a prelude to further clinical development. The Directors of BioPartners are in discussions to formulate plans formechanistic studies with key opinion leaders and are also developing plans forproof of concept studies with contract research organisations. BioPartners is at present exploring options with other parties for the furtherdevelopment of sabcomeline in the indications of schizophrenia and type 2diabetes. Future Business Strategy BioPartners aims during 2005 to initiate a clinical programme to progresstonabersat to the stage of proof of concept. At the same time, BioPartners mayinitiate a preliminary programme on the possibility of using sabcomeline fordiabetes, probably through a development partner. BioPartners will also seek adevelopment partner for sabcomeline in the schizophrenia indication. Dependingon the availability of future funds, the Company may seek further assets towhich it can apply its development expertise, primarily but not exclusively, inthe field of CNS compounds. BioPartners expects to remain for the foreseeable future a development company,reliant on outsourcing its clinical trials and contracting for the services andfacilities needed to progress the development of its compounds. It will recruitfurther senior management as required and retain the services of its presentscientific advisors, who include internationally acknowledged experts in thefield of migraine. BioPartners may recruit further advisors in the CNS anddiabetes fields if needed for its development programme. Potential market (1) Tonabersat • According to a report from pharmaceutical and health-care researchers Decision Resources Inc., the migraine drug market will double from US$2.86 billion in 2002 to about US$5.6 billion in 2012 in the United States, France, Germany, Italy, Spain, the United Kingdom and Japan. The report also predicts that the triptan drug class will hold 75 per cent. market share through 2012. • In these seven markets, more than 74 million people suffered from migraine in 2002, according to this report, but up to 65 per cent. of those afflicted in these markets remain undiagnosed. Diagnosis rates are on the rise, however, due to advertising campaigns from the drug makers and other awareness campaigns. • In a trial conducted jointly by key international opinion leaders and GSK a majority of migraineurs were able to predict the onset of an attack up to 48 hours or even earlier before the onset of the headache. BioPartners is therefore considering positioning the Compound for the prophylactic or pre-emptive treatment of migraine. Recently, topiramate (sold as Topamax by Johnson & Johnson) has shown a significant reduction in frequency of migraine, which could expand the prophylactic market. (2) Sabcomeline • Schizophrenia is a chronic condition. Age of onset is typically late teens or early 20s and, while some recover, in many it is a progressive condition. The National Institute of Mental Health has estimated that schizophrenia affects 1.5 million people in the U.S. This remains a very difficult condition to treat and the older drugs have significant side effect issues and, whilst the newer drugs are better, there is still room for improvement. However, even with sub-optimal treatment, the markets' drug spend continues to grow at over 15 per cent. per annum. 4. Patents The patents and other intellectual property to the Compounds are owned and currently maintained by GSK. Tonabersat is covered by three worldwide patent filings, one provides generic protection for the Compound and its use in treating migraine, the second covers a process of production and the third provides specific protection for the current form of the Compound. The patents of the third case expire in the US in 2015 but may be extended for up to 5 years. No third party issues have been identified which would inhibit commercialisation of the Compound. The original patents to sabcomeline owned by GSK expire in April 2010 in Europe and October 2011 in the USA, but Biopartners has been advised that it should be possible to extend the patent life for five years. Eli Lilly has obtained grant of claims to the use of xanomeline and sabcomeline for the treatment of schizophrenia and other psychotic conditions in the USA, but could not commercialise sabcomeline without infringing the rights of GSK/BioPartners. 5. The Acquisition and the Placing Acquisition Agreement The consideration for the Acquisition is a maximum of 1,613 million new Ordinary Shares. Financing the new business The Company has raised from investors £2,695,000 (net of the cash expenses of these Proposals) via the Placing, which is conditional upon, inter alia, RII shareholder approval. The Placing will provide additional working capital for the Company for the next 12 months. With the funds available to the Company, it is proposed to commence a Phase II clinical trial with tonabersat. This will be outsourced and project managed by the Company. At the same time, the Company proposes to seek a development partner in order to set up some initial studies on the possible use of sabcomeline in diabetes. The balance of the funding will be used to repay a bank overdraft of £260,000 and other creditors amounting in total to about £391,000 and for additional working capital. Although the Directors are of the opinion that the Company, following the completion of the Placing, will have sufficient working capital at Admission for its present requirements, that is for at least the 12 months following Admission, the Company may need to raise further funds after this period in order to implement fully its business plan and, in due course, to satisfy the milestone payments under the licences. Milestone payments may be funded wholly or in part by partnering arrangements or by other external funding methods including the issue of further Ordinary Shares. Change of name To reflect the new direction of the Company, it is proposed, subject to RII shareholder approval, that the Company changes its name to Minster Pharmaceuticals plc. 6. Admission and Dealings Application has been made to the London Stock Exchange for all the Ordinary Shares in issue following approval of the Proposals by the RII Shareholders and the waiver by the Panel on Takeovers and Mergers of any requirement for a general offer to be made under Rule 9 of the City Code on Takeover and Mergers to be admitted to trading on AIM. It is expected that Admission of the Ordinary Shares will become effective and dealings will commence in such shares on 25 February 2005. CREST accounts of placees, whose shares are held via that system, will be credited on Admission and certificates in respect of other placees will be sent to them within 21 days thereof. 7. Directors, Proposed Directors and Scientific Advisers The Board of Directors of the Company is currently Robert Stubbs and Clive McGuire. At Admission Robert Stubbs will step down as Chairman of the Company, but will remain as a Non-Executive Director. Dr Paul Sharpe will become the Chairman and Chief Executive Officer of the Company, Robert Aubrey the Chief Operating Officer and Peter Blower an Executive Director. Clive McGuire will resign from the board. The biographies of the Proposed Directors are set out below: Dr Paul Sharpe, Chairman and Chief Executive Officer Dr Sharpe MD(Lond) FFPM (UK) (aged 57 years) has over 30 years' experience in pharma organisations and the Medicines Control Agency, now known as the Medicines and Healthcare Products Regulatory Agency. From 1991 to 1998 he was with SmithKline Beecham plc as Vice President, Neuroscience Project Management. In this capacity he had major roles in the development of Requip and Paxil/ Seroxat. He developed an R&D portfolio management process at SB, which was featured in the Harvard Business Review, March-April 1998. After leaving SB in 1998 he joined Oxis International Inc, a NASDAQ quoted company, as CEO, leaving in 2001, before establishing BioPartners in 2001. He is also Visiting Professor in Pharmaceutical Medicine at Imperial College, London. Robert Aubrey, Chief Operating Officer Mr Aubrey MBA BSc (Eng) (aged 66 years) is a graduate of the NY Stern Business School with extensive senior management experience in international businesses, including Staveley Industries plc and Westinghouse Electric Corp Inc. He has also taken general management roles in venture capital start ups and is experienced in the commercialisation of university technology spin outs. Peter Blower, Executive Director Dr Blower PhD DSc CBiol FIBiol (aged 56 years) has been involved in medical research and development for over 30 years, his career having begun in 1969 when he joined Beecham plc's Research Division as a research biologist. Subsequently Dr Blower moved through various roles within Beecham plc and post-merger with SmithKline Beecham plc where in 1991 he was appointed as Director, Gastrointestinal Product Support. This was followed by promotions to Director, Product Support Programmes and then to Director, New Neuroscience Products. In March 2000, Dr Blower left SmithKline Beecham and has since then been providing independent advice on technical development, market analysis and strategic marketing of therapeutic agents and biotechnology devices to multinational companies, smaller start-up companies and Governmental organisations such as the US Defense Advanced Research Projects Agency. It is intended that as soon as practical Dr Paul Sharpe will step down as Chairman and an independent non executive chairman will be appointed in his place. Following Admission it is also intended to appoint a finance director to the board. Scientific Advisers BioPartners has a number of scientific advisers including those mentioned below. The scientific advisers provide expert advice regarding developments in understanding of migraine and similar phenomena or conditions of interest. They also advise BioPartners on the design and implementation of development programmes for BioPartners' assets. Professor Stephen Silberstein Prof Silberstein is Director of the Headache Centre at Thomas Jefferson University Medical Centre, Philadelphia. He is a past President of the American Academy of Neurology and President elect of the American Headache Society. Professor Richard Lipton Prof Lipton is a consultant neurologist at the Albert Einstein College of Medicine, New York and a past President of the American Headache Society. 8. Extraordinary General Meeting and Document Availability A circular to shareholders, which comprises the Admission Document and notice to RII Shareholders convening an Extraordinary General meeting to be held at the offices of Beachcroft Wansbroughs, 100 Fetter Lane, London EC4A 1BN on 21 February 2005, is being posted today. Copies of the Admission Document are available from the offices of the Company at 56 Queen Anne Street, London W1G 8LA. This information is provided by RNS The company news service from the London Stock Exchange