Tyratech Regulatory News (TYR)

27 Feb 2008 07:01

XL TechGroup, Inc.27 February 2008 Press Release 27 February 2008 XL TechGroup, Inc. ("XL TechGroup" or "the Company") Operating Update XL TechGroup (AIM: XLT), the creator of companies that solve identified, globalunmet market needs, today provides an update on the progress of the Company'sportfolio of businesses. John Scott, CEO of XL TechGroup, commented: "During meetings with ourinstitutional investors in October 2007, a number of anticipated milestones wereflagged for each of the XL TechGroup companies over the subsequent few months.These are outlined in the relevant presentation on our website. At TyraTech,PetroAlgae, DxTech and QuoNova, all of these milestones have either beenachieved or are continuing to make good progress towards completion. We areconfident that the additional milestones anticipated during 2008, especiallythose related to cash generation, should also be successfully achieved, and welook forward to keeping shareholders updated over the coming months." PetroAlgae LLC ("PetroAlgae") - 94.4% owned by XL TechGroup* * as at 31 December 2007 Work has been continuing at PetroAlgae's optimization site in Florida toidentify the most efficient operating parameters that will maximise oil yieldsin a number of differing geographies and climate conditions. A comprehensiveframework has been developed to both explain and predict biomass growth andlipid production. One particular focus has been on confirming CO2 requirements,with research indicating that approximately 240 tons per annum of carbon dioxideis needed for each acre of production. This is a positive development as manypotential licensees already produce significant amounts of CO2 through theirexisting operations and, as a result, they are very interested in the addedbenefits of potential mitigation solutions. Beyond generating oil test samples, the optimization facility is also producingquantities of biomass for process testing and optimization, and is making goodprogress in meeting the remaining plant engineering challenges. All of thiswork is now leading to the design and construction of an initial 5-10 acredemonstration facility adjacent to the existing site in Florida, to be completedin the summer of 2008. Continuous feedback from potential customers andpartners, particularly those outside the USA, has concluded that a more compactfacility than previously anticipated will be sufficient to answer a number ofimportant scalability and other questions. This clearly has significantbenefits for PetroAlgae in terms of both development time and capitalexpenditure. Later in 2008, it is currently anticipated that a larger site ofapproximately 50 acres will be built with a co-development partner in a USlocation adjacent to a CO2 source, such as a power plant. PetroAlgae is in discussions with potential customers and partners whosecombined needs will exceed 2 billion gallons per annum by 2010. These partiesinclude biodiesel refiners, petroleum companies, petrochemical manufacturers,large plantation operators, energy providers, commodity traders, amino acidproducers, animal feed suppliers and government/military organizations. Thefirst non-binding MOUs have been signed, and PetroAlgae continues to anticipatethat its first international licenses will be agreed in 2008, along with itsfirst US joint-venture. The deal structures for international licenses areexpected to produce significant up-front fees, together with milestone paymentsand a long-term royalty tail based on gross revenues. XL TechGroup is also indiscussions with a number of parties that have expressed a serious interest inmaking a strategic investment in PetroAlgae. TyraTech Inc. ("TyraTech") - 47.9% owned by XL TechGroup* * as at 31 December 2007 TyraTech was successfully listed on AIM in June 2007, raising gross proceeds of£25 million. Since its IPO, TyraTech has made very good progress including thefollowing key developments: • successfully completed its first stage of development with Kraft Foods and received the first milestone payment;• received the first milestone payment in its partnership with Syngenta;• announced the US launch of "Natures Natural", a peat replacement and horticulture product;• announced the commercial launch and first sales of its Crawling Insect Spray product, and;• achieved development and financial milestones with Arysta LifeScience Corporation. DxTech LLC ("DxTech") - 83.5% owned by XL TechGroup* * as at 31 December 2007 DxTech is in active discussions with global companies with diagnostic businessesthat have revenues in the US$200 million to US$2 billion range. Each has anaggressive approach to Point-of-Care ("POC") testing, many have visited theDxTech facilities in Merrimack, New Hampshire and Cambridge, UK to conduct duediligence on the technology, and they have expressed a clear interest inproceeding with discussions toward possible partnership agreements. The dealstructures under discussion involve up-front money to DxTech in the form ofdevelopment fees or license fees, as well as performance based milestonepayments. Deals would also include terms regarding supply, distribution andprofit sharing. DxTech intends to target the US POC market with a phased launch of cartridges,starting with a CLIA-waived thyroid series of assays, followed by blood glucoseand haemoglobin A1C in relation to diabetes diagnosis and management, then alipid panel for heart disease diagnosis and management, liver function, andultimately haemotology. DxTech expects to receive FDA clearance in 2009 andCLIA waiver in 2010, with the first revenues from physician offices in the US tostart before the end of 2009. DxTech's technology also has the potential to transform diagnostic testing inemerging-markets such as India, Russia and China. Specific terms of a deal areat an advanced stage of negotiation with a leading company from one of thesecountries, and co-development revenues and licensing fees related to marketsoutside the US are anticipated to begin in 2008. XL TechGroup is also reviewinga number of serious expressions of interest from parties interested in making astrategic investment in DxTech. QuoNova LLC ("QuoNova") - 88.7% owned by XL TechGroup* * as at 31 December 2007 The last year at QuoNova has been characterized by a strategic focus onconsolidating and expanding the anti-virulence technology platform,strengthening the patent position and advancing the selection of developmentcompounds for different applications. This work is being accompanied byprogression of the initial patent portfolio, with the first two patents beingallowed by the US Patent Office. Notable progress has also been made under R&D collaborations. In the woundhealing area, QuoNova's Quorum Sensing Blocker ("QSB") technology has been foundto be effective in a predictive animal model. It has also been shown to behighly efficacious in-vitro in inhibiting biofilm generation by Gram-positivespecies, including resistant strains such as MRSA (methicillin-resistantStaphylococcus aureus) and by clinically relevant fungal pathogens such asCandida sp. QuoNova is preparing for the entry of selected candidates into the regulatorydevelopment process. Further collaborations with academic and industrialpartners are aimed at evaluating effects across a still broader panel ofmicroorganisms, at conducting further proof of concept studies in animal modelsof respiratory and dermatological disease, and at developing specificformulations for a number of separate consumer healthcare and industrialproducts. Successful collaborations will form the basis for future productdevelopment and licensing agreements, and discussions continue to advancetowards the first anticipated deals during 2008. AgCert International plc ("AgCert") - 18.8% owned by XL TechGroup* * as at 31 December 2007 AgCert recently announced that it has so far been unable to reach agreement withall its creditors and customers regarding the renegotiation of contracts, andhas proposed to file a petition for examinership in Ireland. This entails aprocess whereby AgCert is put under the protection of the High Court in Irelandwith a view to allowing a court appointed examiner to formulate and put forwardfor approval a scheme of arrangement with its creditors and members. Theobjective in petitioning for examinership is to address AgCert's obligationswhile maintaining an ongoing business. This action by AgCert has no impact onany XL TechGroup borrowing covenants. To facilitate AgCert's negotiations with its creditors and customers, with thesingle aim of looking to maximise value for all of AgCert's shareholders, XLTechGroup has entered into a loan note agreement with Laurus Master Fund Ltd. ("Laurus") under which XL TechGroup has agreed to pay US$17.8 million plusinterest to Laurus in May 2009. In return, XL TechGroup has received US$9.9million in cash from a third party which has now become AgCert's sole securedcreditor. From XL TechGroup's perspective, the effect of this agreement hasbeen to: • remove a previous commitment to provide a loan of up to €5 million to AgCert in the second quarter of 2008;• add US$9.9 million in cash to XL TechGroup's balance sheet, and;• leave XL TechGroup with a US$7.9 million right to participate alongside AgCert's sole secured creditor under the original debt owed to them by AgCert It is the Company's view that the new agreement with Laurus has left XLTechGroup in an improved position in relation to AgCert than existed before whenXL TechGroup was simply a shareholder with a commitment to lend AgCertadditional funds that would not have been secured in a senior way. The changedposition gives XL TechGroup cause to continue to be optimistic that a stake inan AgCert business with value will be preserved, whether through theexaminership process or otherwise. GenXL LLC ("GenXL") - 42.9% owned by XL TechGroup* * as at 31 December 2007 In March 2007, GenXL announced its first company development agreement withEnGen LLC. The competitive cost and significant performance advantages ofEnGen's proprietary nano-scale polymer technology have now been validated, andit is ready for commercial deployment in ultra-capacitors and lithium-ionbatteries. Negotiations with a number of potential partners are underway,including with the market leader that has validated the technology. In November 2007, GenXL acquired 70% of INSERO which is developing implantabledrug delivery systems, with an initial focus on hypertension, the single leadingcause of premature death worldwide. A major problem with existing hypertensiontreatments is non-compliance and the INSERO technology platform addresses thisdirectly. Feasibility studies with a US company should be completed within thefirst quarter of 2008, and INSERO would then move to negotiate a licensingagreement. XL TechGroup Cash Position As of 31 December 2007, XL TechGroup had cash on hand totalling approximatelyUS$11.4 million. The recent loan note agreement with Laurus provides anadditional US$9.9 million. XL TechGroup currently finances PetroAlgae, DxTech and QuoNova. The first twoof these are now in the fifth (Scale) stage of XL TechGroup's systematic companybuilding methodology, when it is normal for outside strategic and otherfinancing to be introduced. Such discussions have already started for bothPetroAlgae and DxTech, and XL TechGroup anticipates closing on relevantagreements during 2008. Additionally, all three companies are expected to begenerating revenue before the end of 2008. As a result, it is anticipated thatone or more of these companies should no longer be dependant on XL TechGroup forpart or even all of their funding by the end of 2008. Over the last six months, given increased uncertainties in capital and otherfunding markets, XL TechGroup has been successful in reducing the Group'smonthly cash burn, without any significant impact on the planned development ofits existing portfolio of companies. It should also be noted that XL TechGroupcurrently does not expect to launch its next new company before the fourthquarter of 2008. The Board of XL TechGroup has recently approved a 2008 budgetthat results in a cash positive position over the full year, without needing toraise any additional funds in the market or sell any part of the Company'sholding in TyraTech in the market. Including a continuing focus on Groupexpenses, this budget is based on XL TechGroup achieving the following during2008: • international licensing and co-development deals for PetroAlgae• regional licensing and co-development deals for DxTech• co-development and licensing deals for QuoNova• strategic and non-strategic third party investments in DxTech and PetroAlgae• value realisation from the sale of technologies that do not quite make it through XL TechGroup's selection criteria and which are not appropriate for GenXL The Board of XL TechGroup believes that its existing cash resources, combinedwith anticipated cash inflows from anticipated deals as well as the Company'scontinuing ability to leverage its assets, will be sufficient to fund theoverall business through 2008. Change of Auditor XL TechGroup also announces the appointment of Grant Thornton LLP as Auditors tothe Company. This appointment has been approved by the Company's AuditCommittee, and Grant Thornton LLP will conduct the audit of XL TechGroup'saccounts for the year to 31 December 2007. - Ends - For further information:XL TechGroup Inc.John Scott / Harold Gubnitsky Tel: +1 321 409 7403hgubnitsky@xltg.comChris Munden, Director of Investor Relations Tel: +44 (0) 20 7398 7720cmunden@xltg.com www.xltechgroup.com Nomura Code SecuritiesRichard Potts, Corporate Finance Tel: +44 (0) 20 7776 1200 www.nomuracode.com XL TechGroup media enquiries:Abchurch CommunicationsHeather Salmond Tel: +44 (0) 20 7398 7704heather.salmond@abchurch-group.comGareth Mead Tel: +44 (0) 20 7398 7710gareth.mead@abchurch-group.com Switchboard: +44 (0) 20 7398 7700 www.abchurch-group.com This information is provided by RNS The company news service from the London Stock Exchange