Plethora Solutions Holdings Plc Regulatory News (PLE)

13 Jan 2006 07:30

Plethora Solutions Holdings PLC13 January 2006 For immediate release 13 January 2006 Plethora Solutions Holdings plc Proposed Acquisition of Timm Medical Technologies, Inc. Proposed Placing of Ordinary Shares of 1p each at 220p per share and Notice of Extraordinary General Meeting Plethora Solutions Holdings PLC ("Plethora" or the "Company", AIM : PLE), theUK-based speciality pharmaceutical company focused on urology, is pleased toannounce the proposed acquisition of Timm Medical Technologies, Inc., a US-basedurology products sales and marketing subsidiary of Endocare, Inc., for a totalconsideration of US$9.5 million. Plethora also announces the Proposed Placing of 3,200,000 new ordinary shares at220p per share, fully underwritten by Collins Stewart. Key points : The Acquisition Timm markets products for the treatment of erectile dysfunction (ED) to urologyclinics through a US-based speciality sales team. • An established brand for urology products recognised internationally. o Reimbursable vacuum therapy devices for safe and effective front line treatment of ED - non-invasive and drug-free. o US market for ED treatments estimated at US$1.6 billion in 2004.• Established revenues and profitable. o In the year ended 31 December 2004 Timm had revenues of US$8.5m. o In the 11 months ended 30 November 2005 Timm had revenues of US$8.4m. o In the 11 months ended 30 November 2005 Timm had operating profits before exceptional items of US$1.0m. o As at 30 November 2005 Timm had net assets, excluding amounts owed by the parent undertaking and to be satisfied prior to closing, of US$ 6.5m Benefits and opportunities of Acquisition • Product revenues from direct sales in the USA .• Growth potential from sales to ED patient groups contraindicated for treatment with oral ED drugs.• Near term opportunity to increase revenue by exploiting existing distribution channels in non US markets.• Complementary to ongoing Plethora initiatives in urology. Steven Powell, Chief Executive of Plethora, commented : "The acquisition of Timm represents a significant growth opportunity forPlethora. We will be gaining access to an established and proven product for thetreatment of ED which will generate significant revenues and enhance our profilein the US urology market. The Board believes there is considerable scope for thedevelopment of Timm's business by leveraging its established sales force withnew and existing product opportunities. "2005 was a good year for the Company with our flotation on AIM and strong newsflow from our product pipeline culminating in the publication of positiveresults from the Phase II trial of PSD502, our treatment for prematureejaculation. "We are pleased with the response received by both existing and new shareholdersand we look forward to the continued growth and development of Plethora in thecoming year as we continue to drive forward our therapeutic development pipelinewhile maximising the benefits of integrating Timm into the Company." For further information contact: Steven Powell Tel : 020 7269 8630Plethora Solutions Tim Mickley Tel : 0207 523 8350Collins Stewart Tim Anderson, Isabel Podda Tel : 020 7466 5000Buchanan Communications PLACING STATISTICS Placing Price 220p Number of Existing Ordinary Shares 22,222,420 Number of Placing Shares being issued pursuant to the Placing 3,200,000 Number of Ordinary Shares in issue following Admission 25,422,420 Number of Placing Shares as a percentage of the Enlarged Issued Share Capital 12.6% Proceeds of the Placing available to the Company (net of expenses) £6,350,000 EXPECTED TIMETABLE OF EVENTS Latest time and date for receipt of Forms of Proxy for theExtraordinary General Meeting 10.00 a.m. on 4 February 2006 Extraordinary General Meeting 10.00 a.m. on 6 February 2006 Admission and commencement of dealings in Placing Shares 8.00 a.m. by 8 February 2006 CREST stock accounts credited with Placing Shares inuncertificated form by 8 February 2006 Share certificates for Placing Shares in certificated formdispatched by 11 February 2006 Extract from Chairman's Letter to Shareholders 1. Introduction Plethora and Endocare announced today that they had reached agreement on theproposed acquisition of Timm by the Company. Details of the Acquisition, and the reasons for and benefits of the Acquisition,together with further information on Timm, are set out below. Afterconsultation with the London Stock Exchange the acquisition of Timm is not beingtreated as a "Reverse take-over" as defined by the AIM Rules. However, due tothe size of the transaction in relation to the Company, the Directors areseeking the approval of the acquisiton by Shareholders at an EGM. TheAcquisition is conditional therefore, amongst other things, upon the approval ofShareholders. The Company also announces that it proposes to raise £7,040,000 (beforeexpenses) by means of a Placing of 3,200,000 new Ordinary Shares at the PlacingPrice. The proceeds will be used to satisfy the cash consideration due toEndocare under the terms of the Stock Purchase Agreement and provide additionalworking capital for the Enlarged Group. The Placing is conditional, inter alia,on the passing of the Resolutions and on Admission. The Placing, which has been fully underwritten by Collins Stewart, comprises3,200,000 new Ordinary Shares, which are proposed to be placed with new andexisting investors. In order to attract the necessary interest in the Placing from institutionalinvestors, the Placing Price has been set at a level of 220 pence, whichrepresents a discount of 7.8 per cent. to the middle market price of 238.5 penceper Existing Ordinary Share at the time of agreeing the Placing, being the closeof business on 12 January 2006. The Directors believe that pricing the Placingat this level of discount, is in the best interests of the Company, in order toattract a greater level of institutional shareholders into the Shareholder base,and to provide certainty of funds to be raised in the Placing. 2. The Acquisition Plethora, Timm and the Seller have entered into a Stock Purchase Agreementpursuant to which Plethora will acquire Timm, a wholly owned subsidiary ofEndocare, for a total consideration of US$9,500,000 of which US$8,075,000 willbe paid in cash and US$1,425,000 satisfied by the issue by Plethora of theConvertible Note which may be converted into new Ordinary Shares or repaid byPlethora in accordance with its terms. The Stock Purchase Agreement is conditional, inter alia, on the approval ofShareholders. The boards of both companies have unanimously approved the termsof the Acquisition. 3. Background to and reasons for the Acquisition The Board believes that the acquisition of Timm is complementary to the corebusiness and corporate objectives of Plethora. Timm is headquartered in the United States and would provide Plethora withdirect access to the world's single largest pharmaceutical market and enhancethe Group's commercial visibility. Timm has significant sales and marketingexperience in urology and men's health and, through its field force, has directaccess to urologists and other medical specialists, with the potential to reachprimary health care providers. The Directors believe that the sales force iscapable of supporting additional urology or men's health medical devices andpharmaceutical products that might be acquired through licensing or co-promotionagreements, without significant additional marketing costs, which would, inturn, reduce the development cash burn. Timm holds a leading position in asignificant niche market, with only limited competition and identified potentialfor expansion. Moreover, Timm is a revenue generating, profitable business. 4. Information on Timm Company Background Timm was founded in 1996 and is located in the United States. It marketsproducts and services for the diagnosis and treatment of erectile dysfunction(ED) and has a direct sales force in the United States and access tointernational markets through distributors. Products and services Background: Erectile dysfunction Erectile dysfunction, the persistent inability to attain and maintain anerection sufficient to permit satisfactory sexual intercourse, afflicts asubstantial proportion of men of all nationalities. The prevalence of EDreported in international surveys ranges from 10% to 24%. ED prevalenceincreases with age and is almost threefold greater in men aged 70 or more thanin men aged 40 to 49 years. The most common cause of ED is damage to the nerves, blood supply, smoothmuscles and fibrous tissues resulting from diseases such as diabetes, kidneydisease, chronic alcoholism, multiple sclerosis, atherosclerosis, vasculardisease, and neurologic and spinal injury. A variety of commonly prescribedmedicines can induce ED. ED Treatment Options ED can be treated by either pharmacological or non-pharmacological means or by acombination of treatments. A number of oral phosphodiesterase type 5 (PDE5)inhibitors including sildenafil (Viagra(R)), vardenafil (Levitra(R)) andtadalafil (Cialis(R)) are approved as first-line treatments for ED. These agentsare widely prescribed and had combined global sales of $2.5 billion in 2004. ThePDE5 inhibitors are associated with a number of side effects including headache,flushing and dyspepsia and are contraindicated in patients taking nitratemedications and may be hazardous in individuals with certain cardiovascularconditions or whose drug regimens might prolong the half-life of PDE5inhibitors. Alternative ED medications include sublingual apomorphine (Uprima(R)) and prostaglandin E1 (alprostadil), which are either injected into thepenis (intracavernosal therapy: Caverject(R)) or placed in the urethra(intraurethral therapy: MUSE(R)). Alprostadil therapy can result in persistentand painful erection (priapism) and is contraindicated in patients with medicalconditions such as sickle cell disease and haematological cancers. Non-pharmacological treatments include inflatable or malleable prostheticdevices which are surgically implanted into the penis. Implantation can resultin penile shortening and complications such as infection. This category oftreatment also includes vacuum erection devices which have a long history of usein ED. An external cylinder is typically placed over the penis and air is pumpedout by hand or electric motor to give a partial vacuum, resulting in engorgementof the penis. A constriction ring is applied to the base of the penis tomaintain the erection. Vacuum devices are non-invasive and fast-acting with a low incidence of sideeffects and are suitable for a wide range of patients with either chronic oroccasional ED, including patients in which oral ED drugs are contraindicated.The efficacy rates of vacuum device treatment has been reported as being 80% orgreater in clinical studies. Potential use of vacuum devices in radical prostatectomy patients: penilerehabilitation All men treated for localized prostate cancer by either radical prostatectomy orradiotherapy can expect some degree of ED and the condition may persist longinto the recovery period. Prostate cancer screening has led to the detection ofmore cases in younger men and an increasing focus on restoring sexual activityafter treatment. Studies indicate that early penile rehabilitation can reduce the impact of ED.Nerve damage after radical prostatectomy causes a loss of natural nocturnalerections, reducing blood flow to the penis which causes fibrosis of the peniletissue. Early penile rehabilitation is aimed at increasing blood flow to thepenis so that the penile tissue is maintained while nerve function is restored.The efficacy of oral ED drugs is greatly reduced in patients with nerve damageso alternative treatments are required. A recent prospective clinical study compared the benefits of early penilerehabilitation using vacuum devices, intracavernous injection and intraurethraldrug therapy in patients who had undergone radical prostatectomy for localizedprostate cancer. Seventy four patients were offered the use of a vacuum device,of which 60 were compliant (81%). After six months, 32% of patients were ableto maintain natural erections sufficient for intercourse and all were sexuallyactive. In comparison, 68 patients were offered intraurethral therapy and 56%were compliant. Of these, 39% were able to maintain natural erections and 74%were sexually active. Twenty two patients used intracavernous injection (with orwithout concomitant use of an oral ED drug) and 50% were able to maintainnatural erections and 96% were sexually active. Of 35 patients who did notundergo early penile rehabilitation, only 11% were able to have naturalerections and 37% were sexually active. This suggests that, although not yetapproved by the FDA for use in penile rehabilitation, vacuum devices are ofsimilar efficacy to non-oral pharmacological treatments in improving ED in thispatient group. Market potential and competitive positioning Timm estimates that there are more than 30 million ED sufferers in North Americaand the major European countries. The availability of oral drugs has resulted inan expansion of the ED market and created greater awareness of the condition andtreatment options in the minds of patients and medical professionals. While oraldrugs dominate the ED market, they are not universally effective and arecontra-indicated for a significant number of individuals, such as an estimated1.2 million American men aged between 45 and 64 who receive nitrate medicationsfor angina. The Board believes that there are substantial market opportunities withinpatient groups where oral ED medications are known to have lower efficacy, suchas in diabetics or where contraindicated because of concomitant use of nitrateor anti-hypertensive drugs. According to the American Cancer Society, around 230,000 new cases of prostatecancer will be diagnosed in the United States during 2005. The majority willhave localized (Stage II) disease at diagnosis and between 25 and 30% of thispatient group will be treated by radical prostatectomy, giving a potentialpenile rehabilitation treatment population of around 50,000 patients each yearin the United States alone. At an average cost of $375 per device, the radicalprostatectomy patient population alone represents a $19 million marketopportunity. The Directors estimate that there are over 3 million American ED sufferers inwhom oral ED medications are not the therapy of choice because of the risk ofadverse events related to nitrate or BPH drug use or underlying diabetes. Thecombined market potential for vacuum devices in these patient groups isestimated to be in excess of $128 million per year at an uptake of 10%. Competition in this market could arise from other sellers of vacuum medicaldevices and from approved non-oral pharmacological treatments. The Companybelieves that, in the absence of supporting clinical evidence, there is onlylimited competition from currently marketed oral ED drugs. Product Range Timm's vacuum device product range encompasses both manual and electricallyoperated devices and retention rings and lubricants for use with these products.Marketing approval for the product range was granted by the FDA in 1998. TheTimm product is reimbursable in the US, Germany and the UK. For diagnosis, Timm offers an ambulatory diagnostic tool used to measure thefrequency, rigidity and duration of both nocturnal and provocative erections.The diagnostic system is used by physicians, pharmaceutical researchers andacademics. 5. Principal Terms and Reasons for The Placing The Company announced today that it was raising approximately £6.3 million, netof expenses, through the Placing of 3,200,000 new Ordinary Shares. The PlacingPrice represents a discount of approximately 7.8 per cent. to the closingmid-market price of 238.5p per Ordinary Share as at 12 January 2005, the latestpracticable date prior to the announcement of the Placing. The Placing Shareswill rank in full for all dividends and otherwise pari passu with the ExistingOrdinary Shares. It is expected that the Placing Shares will be admitted to trading on AIM by 8February 2006. The Placing, which has been fully underwritten by CollinsStewart, is conditional, inter alia, upon: • the approval of the Resolutions at the EGM;• the Stock Purchase Agreement not having been terminated in accordance with its terms;• the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and• Admission of the Placing Shares. The Placing is to be effected on behalf of the Company by Collins Stewart on theterms of the Placing Agreement. Of the net proceeds of £6,350,000 the Company will use approximately £4,588,000to satisfy the cash consideration due to Endocare under the terms of the StockPurchase Agreement. The balance will be used to satisfy transaction fees andprovide additional working capital for the Enlarged Group. The Placing Agreement contains warranties given by the Company with respect toits business and the Group and certain matters connected with the Placing. Inaddition, the Company has given indemnities to Collins Stewart in connectionwith the Placing and Collins Stewart's performance of services in relation tothe Placing. Collins Stewart is entitled to terminate the Placing Agreement inspecified circumstances. The Placing Shares represent approximately 12.5 per cent. of the Enlarged IssuedShare Capital. The Company has received irrevocable undertakings from certainmajor shareholders and each of the Directors to vote in favour of theResolutions to be proposed at the EGM. 6. Extraordinary General Meeting and action to be taken An EGM will be held at Morrison & Foerster, 7th Floor, CityPoint, One RopemakerStreet, London, EC2Y 9AW at 10 a.m. on 6 February 2006. The Resolutions to beproposed at the EGM are to approve the Acquisition and to empower the Directorsto allot equity securities for cash and to do so otherwise than in accordancewith the Shareholders' statutory pre-emptory provisions, as set out in the Act,in connection with the Placing. This information is provided by RNS The company news service from the London Stock Exchange