Full Press Release Details
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
("Midatech", "Company"
Strategic Investment to Raise 8
Licence Agreement for the Greater China
Area and certain South East Asian Countries
Proposed Grant of Warrants
Proposed non-executive director
Midatech Pharma (AIM: MTPH, Nasdaq: MTP),
the R&D company focused on delivering innovative oncology and rare disease products to patients, is pleased to announce
that further to the announcements made by the Company on 20 December 2018 and 25 January 2019 (the "Prior Announcements")
regarding a potential investment and licence agreement with an Asian based strategic investor, the Company has entered into conditional
agreements to raise approximately 8 million (before costs) by way of a subscription for new ordinary shares in the Company
at a price of 3.85 pence per share (the "Issue Price") (the "Proposed Subscription"). As detailed below,
the Company also intends to raise further funds through a placing and open offer on the same terms as the Proposed Subscription
at the Issue Price of 3.85 pence.
Conditional on completion of the Proposed
Subscription, the Company has entered into a licence agreement for the development and commercialisation of the Group's pipeline
of products in Greater China and certain South East Asian countries ("Licence Agreement"). Pursuant to the Licence
Agreement, the licensees will be responsible for funding the development and commercialisation of the Group's product in
these territories and, subject to certain milestones being achieved, the Company will be eligible to receive regulatory and sales
based milestone payments as well as royalty payments. Further terms of the Licence Agremeent are described below.
to the Proposed Subscription, CMS Medical Venture Investment (HK) Limited ("CMS
Venture") and A&B (HK) Company Ltd ("A&B") have each conditionally subscribed for 103,896,103 Units at
the Issue Price, with each Unit being defined as one new ordinary share in the Company ("New Share") and one warrant
to subscribe for one New Share at an exercise price of 50 pence per warrant ("Warrant). The net proceeds of the Proposed
Subscription after costs relating to both the Proposed Subscription and the Licence Agreement is expected to be approximately 7.4
million. Further details of the Proposed Subscription and the Licence Agreement (together "the Proposals") are set
CMS Venture is a wholly
owned subsidiary of China Medical System Holdings Limited ("CMS").
CMS is a well-established, innovation-driven specialty pharma with a focus on sales and marketing in China. CMS is committed to
offering competitive products and services to meet China's unmet medical needs with a strong and professional sales and marketing
network as well as a promotion platform covering the whole Chinese market. CMS is listed on the Hong Kong Stock Exchange (HK:867)
with a market capitalisation of approximately HK$18.40 billion (c. 1.797 billion) as at 28 January 2019. The CMS Group had
revenues of RMB 5,348.8 million (c. 600.2 million) in 2017 and approximately 2,800 promotional staff. A&B is related
to CMS by virtue of each of A&B and CMS having a common ultimate shareholder, Mr. Lam Kong.
The Proposals are conditional on, amongst
other things, the Directors of the Company obtaining appropriate Shareholder authorities at a General Meeting and Admission (defined
below). The terms of the Proposals also give rise to certain considerations under the Takeover Code as a result of the proposed
issue of shares and warrants to CMS Venture and A&B (together the "Subscribers"). CMS, (including its subsidiary
CMS Venture), A&B and Mr. Lam Kong together comprise a concert party (the "Concert Party"). In the absence of any
other equity being raised, including any from the proposed placing and open offer, upon completion of the Subscription, the Concert
Party would have an aggregate shareholding in the Company of approximately 77.3 per cent. of the enlarged Share Capital. The issue
of the Warrants to the Subscribers would mean that, if exercised (and assuming no other new Ordinary Shares are issued prior to
any such exercise), the Concert Party's aggregate shareholding would increase to up to 415,584,412 Ordinary Shares, representing
up to 87.2 per cent. of the then further enlarged share capital of the Company. Accordingly, completion of the Subscription and
the Licence Agreement is also conditional on a waiver of Rule 9 of the Takeover Code being permitted by the Takeover Panel, which
would be subject to the approval by the independent shareholders of the Company of a waiver of any obligation of the Concert Party
(or any of its members) to make a mandatory general offer to the Company's shareholders under Rule 9 of the Takeover Code
upon issue of the New Shares arising from the Subscription and upon exercise of the Warrants granted to the Subscribers ("Panel
It is proposed that the general meeting
to approve the Panel Waiver and other resolutions in connection with the Proposed Subscription will occur around the week commencing
18 February and admission of the 207,792,206 New Shares to be issued upon completion to the Subscribers ("Subscriber Shares")
to trading on AIM ("Admission") will occur shortly thereafter.
The Company intends to publish a circular
setting out full details of the Panel Waiver, further information on the Concert Party and the Company together with notice of
the general meeting (the "Circular") as soon as possible.
In the event that shareholder approval
for the resolutions described above is not forthcoming at a general meeting, neither the Subscription or the Licence Agreement
will proceed and the Directors believe it is unlikely that the Company will be able to continue as a going concern. The Company
currently only has sufficient working capital until approximately mid-March 2019.
Use of Proceeds and MTD201 study design
The proceeds of the Proposed Subscription
will be used to provide working capital to the Group. In particular the proceeds will provide funding to allow the Group to continue
to pursue further development of the Company's lead product, MTD201 (Q-Octreotide), which uses the Company's Q-Sphera
sustained release platform to formulate a long-acting delivery of octreotide for the treatment of acromegaly and neuroendocrine
The leading product currently in the $2
billion octreotide market is Sandostatin LAR ("SLAR") from Novartis, and pursuant to the recent Phase
I exploratory study conducted by the Company comparing bioequivalence between MTD201 and SLAR in healthy human volunteers which
completed in August 2018, the Directors believe that MTD201 produces a safe and effective sustained delivery profile of octreotide,
with further advantageous characteristics compared to SLAR, which the Directors believe supports the continued development of a
long-acting octreotide product alternative to SLAR for treatment of these diseases.
In view of the distinct profile of MTD201
compared to SLAR, the Company recently sought guidance from the United States Food and Drug Administration ("FDA")
on the study design and regulatory route for MTD201 with regards to a pivotal trial. Taking into account the regulatory feedback
on study design and commercial considerations, the pivotal trial for MTD201 is expected to be either a multi dose study in healthy
volunteers or a study in patients. Based on external quotes received by the Company, the Directors believe costs for these types
of studies could be in the region of approximately 5 million to 7 million (excluding the cost of MTD201 production)
with regulatory marketing authorisation submissions currently planned for 2021 subject to successful commercial scale-up of MTD201
manufacturing. The Company is seeking further funding in the form of loans or grants to support the manufacturing scale-up costs
of MTD201 which are expected to be approximately 15 million in aggregate.
The Company is focused on seeking the quickest,
most efficient and potentially valuable route to market for MTD201. In view of this, in addition to continuing discussions with
the FDA, the Company is seeking feedback on MTD201 trial design from the European Medicines Agency. The future trial design will
be subject to the customary regulatory approvals and further announcements will be made in due course.
Whilst the Company is still targeting
commencement of a pivotal trial for MTD201 in H2 2019, this remains subject to regulatory approvals. Shareholders should note that
the proceeds of the Subscription alone (excluding any proceeds from the Proposed Placing and Open Offer) will not provide sufficient
funding to enable the Company to complete a pivotal trial for MTD201 and may not be sufficient to provide meaningful interim data
from the trial. In addition the net Subscription Proceeds will not be sufficient to fund the manufacturing scale-up costs of MTD201.
The net Subscription Proceeds, excluding
any proceeds from the Proposed Placing and Open Offer, are expected to provide working capital for the Group until Q4 2019 (i.e.
less than 12 months).
Any additional funds received through the
Proposed Placing and Proposed Open Offer (described below) or potentially grant or loans received (subject to any restrictions)
will extend this cash runway. The Group will also continue to explore opportunities for non-dilutive funding in the form of licences
with regards to MTD201, MTX110 and the Company's technology platforms Q-Sphera, MidaCore and MidaSolve.
Subject to funding, the Directors believe
that the next 18 months will be key to unlocking the potential of Midatech's technology platforms and product programmes.
Clinical data is expected on three programmes: for carcinoid cancer and acromegaly, brain cancer, and the Group's autoimmune