Full Press Release Details
THIS ANNOUNCEMENT, INCLUDING THE APPENDICES AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, JAPAN, NEW ZEALAND OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL. THIS ANNOUNCEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY ORDINARY SHARES OF MIDATECH PHARMA PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
("Midatech", the "Company" or the "Group")
Proposed Placing and Open Offer
Notice of General Meeting
Proposed placing to raise a minimum of 12.0 million and open offer to raise up to 2.0 million to invest in the Company's development pipeline and provide additional working capital
Midatech Pharma (AIM: MTPH; Nasdaq: MTP), the international specialty pharmaceutical company focused on commercialising and developing products in oncology and other therapeutic areas, today announces a proposed placing of new Ordinary Shares ("Placing Shares") with existing and new investors to raise gross proceeds of not less than 12.0 million for the Company (the "Placing").
The net proceeds of the Placing receivable by the Company will be used to invest in expanding and advancing its development pipeline, including for Q-Octreotide (MTD201) and its MTX110/MTX111 treatment for DIPG, in addition to investing in its manufacturing and commercial platform and providing additional working capital to the Group.
The Placing will be conducted by way of an accelerated bookbuilding process (the "Bookbuild") which will be launched immediately following this announcement in accordance with the Terms and Conditions set out in Appendix II. The Placing Shares are not being made available to the public. It is envisaged that the Bookbuild will be closed no later than 4.30 p.m. London time today, 11 October 2016. Details of the number of Placing Shares, the price per Placing Share (the "Issue Price") and the approximate gross proceeds of the Placing will be announced as soon as practicable after the closing of the Bookbuild.
Panmure Gordon (UK) Limited ("Panmure Gordon") is acting as Financial Adviser, Nominated Adviser and Bookrunner in relation to the Placing.
In addition, in order to provide Eligible Shareholders who have not taken part in the Placing with an opportunity to participate at the Issue Price, the Company is making an open offer to all Eligible Shareholders to give them the opportunity to subscribe for new Ordinary Shares ("Open Offer Shares") at the Issue Price to raise gross proceeds of up to c. 2.0 million for the Company (the "Open Offer"). The Open Offer is not underwritten. The net proceeds of the Open Offer receivable by the Company will be utilised as further working capital for the Group.
The terms and conditions of the Open Offer will be set out in the Circular to Shareholders, which will also include a notice convening a General Meeting. It is expected that the Circular will be dispatched on or around 12 October 2016, and will also be available at this time on the Company's website at www.midatechpharma.com.
The Placing and Open Offer are conditional, inter alia, on the approval of the relevant Resolutions by Shareholders at the General Meeting to be held at 10.00 a.m. on 28 October 2016 at the offices of Panmure Gordon, One New Change, London EC4M 9AF and on the Admission of the Placing Shares and Open Offer Shares (respectively) to trading on AIM.
Certain Directors of the Company are also intending to subscribe for Placing Shares in the Placing.
Commenting on the Placing and Open Offer, Dr Jim Phillips, Chief Executive Officer of Midatech Pharma, said: "Midatech is rapidly evolving as a specialty pharma company, and as revenues from our US commercial operations continue to grow, the funds raised in the proposed Placing and Open Offer will provide the Company with additional financial resources to accelerate the development of our diverse, oncology-focused pipeline and to support the working capital requirements of the Group to underpin further growth. We welcome the support from existing and new shareholders and look forward to the announcement of several potential commercial and development milestones in the remainder of this year and through 2017."
Further details of the Placing and Open Offer are set out in Appendix I to this announcement. The capitalised terms used in this announcement have the meaning set out in the Appendix III to this announcement.
The Market Abuse Regulation ("MAR") became effective from 3 July 2016. Market Soundings, as defined in MAR, were taken in respect of the proposed Placing with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in a Market Sounding are no longer in possession of inside information relating to the Company and its securities.
For more information, please contact:
Tel: +44 (0)1235 888 300
Panmure Gordon (UK) Limited (Financial Adviser, Nominated Adviser and lead Bookrunner)
Freddy Crossley / Duncan Monteith
Tel: +44 (0)20 7886 2500
Consilium Strategic Communications (Financial PR)
Mary Jane Elliott / Ivar Milligan / Matthew Neal / Hendrik Thys
Tel: +44 (0)20 3709 5700
Email: midatech@consilium-comms.com
About Midatech Pharma PLC
Midatech is an international specialty pharmaceutical company focused on oncology and other therapeutic areas with a commercial platform and four marketed products in the US. Midatech's strategy is to develop products in-house in oncology and with partners in other indications, and to accelerate growth organically and through strategic acquisitions. The Company's R&D activities are supported by two breakthrough drug delivery technologies. The Group, listed on AIM: MTPH and Nasdaq: MTP, employs c.100 staff in four countries. For further company information see: www.midatechpharma.com
Neither this press release, nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"). The distribution of this press release in other jurisdictions may also be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This press release does not constitute or form part of any offer or invitation to sell or issue, or a solicitation of any offer to acquire, purchase or subscribe for, securities of the Company.
Neither the Placing Shares nor the Open Offer Shares have been, nor will be, registered under the US Securities Act of 1933, as amended (the "US Securities Act") or the securities laws of any state or jurisdiction of the United States, and may not be offered or sold within the United States to, or for the account or benefit of, US person (as that term is defined in Regulation S under the US Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and such other applicable state securities laws.
Accordingly, the Placing Shares and the Open Offer Shares are being offered hereby only (i) outside the United States in reliance upon Regulation S under the US Securities Act in offshore transactions or (ii) to "accredited investors" as defined in Rule 501(a) of Regulation D of the US Securities Act, in reliance on an exemption from, or a transaction not subject to, the registration requirements of the US Securities Act.
Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking statements" within the meaning of legislation in the United Kingdom and/or United States, including (without limitation) those regarding the Placing, the Open Offer and any other potential offering of securities, the Group's financial position, business strategy, products, plans and objectives of management for future operations, and any statement preceded or followed by, or including, words such as "target", "believe", "expect", "aim", "intend", "will", "may", "anticipate", "would" or "could", or negatives of such words. Any forward-looking statements are based on currently available competitive, financial and economic data together with management's views and assumptions regarding future events and business performance as of the time the statements are made and are subject to risks and uncertainties. We wish to warn you that there are some known and unknown factors that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
Reference should be made to those documents that Midatech shall file from time to time or announcements that may be made by Midatech in accordance with the London Stock Exchange AIM Rules for Companies ("AIM Rules"), the Disclosure and Transparency Rules ("DTRs") and the rules and regulations promulgated by the US Securities and Exchange Commission, which contains and identifies other important factors that could cause actual results to differ materially from those contained in any projections or forward-looking statements. These forward-looking statements speak only as of the date of this announcement. All subsequent written and oral forward-looking statements by or concerning Midatech are expressly qualified in their entirety by the cautionary statements above. Except as may be required under the AIM Rules or the DTRs or by relevant law in the United Kingdom or the United States, Midatech does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise arising.
PROPOSED PLACING, OPEN OFFER AND NOTICE OF GENERAL MEETING
The Company has proposed to raise proceeds of not less than 12.0 million before fees and expenses by way of a Placing of Placing Shares with existing and new institutional investors at the Issue Price. Furthermore, the Company has decided to offer all Eligible Shareholders the opportunity to participate in a further issue of new equity in the Company by way of the Open Offer of new Ordinary Shares to Eligible Shareholders at the Issue Price. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility. Assuming a full take-up by Eligible Shareholders under the Open Offer, the issue of the Open Offer Shares will raise further gross proceeds of up to c. 2.0 million for the Company.
The Placing and the Open Offer are each conditional, among other things, upon the passing of the relevant Resolution by the Shareholders at the General Meeting for the purposes of authorising the Directors to allot the Placing Shares and/or the Open Offer Shares (as the case may be) and to dis-apply statutory pre-emption rights in relation thereto. The formal Notice of Meeting is set out in the Circular.
Background to the Placing and Open Offer
Midatech is an international specialty pharmaceutical company focussed on the development and commercialisation of multiple, high-value, targeted therapies for diseases with major unmet medical need. Midatech's strategy is to invest in products and technology, develop its pre-clinical and clinical product pipeline (for both in-house in rare cancers and with others for other indications) and accelerate the growth of its business through strategic acquisitions of complementary products and technology.
Midatech is commercialising oncology treatment and supportive care products through its US commercial organisation, Midatech Pharma US, Inc. ("MTPUS"). In Europe, Midatech is advancing a pipeline of novel clinical and pre-clinical product candidates based on its two proprietary drug delivery platforms, its gold nanoparticle ("GNP") platform technology and its sustained release ("SR") delivery platform technology, through its fully integrated research and development capabilities, with a clear focus on its primary therapeutic area of rare cancers.
The Group's two platform technologies are designed to enable targeted delivery and sustained release of existing therapeutic drugs to the "right place" at the "right time". Midatech's core technology platform is based on a patented form of GNPs, which are developed with the aim of repurposing and improving key parameters of existing and new drugs. This may optimise their distribution, and enable targeting of individual cell types with specific targeting agents to safely deliver a therapeutic payload into the cell. Midatech believes that GNP technology represents the latest generation of nanomedicine and is a fast growing sector within the nanomedicine market with demonstrated safety profile in the clinic to date.
Midatech's secondary platform of patented SR technology involves the consistent and precise encapsulation of active drug compounds within polymer microspheres. The microspheres are designed to release the active drug compound into the body in a highly controlled manner over a prolonged period of time. Midatech believes that sustained release technology can provide the required capacity to sustain the optimal range of drug concentrations, which has wide medical applicability with diverse pharmaceutically active molecules.
The Group has developed a strong intellectual property base and has a wide IP portfolio of 150 granted patents, 92 applications in process and 34 patent families covering a range of diverse technologies. Midatech operates an in-house current Good Manufacturing Practice ("cGMP", a US Food and Drug Administration ("FDA") quality control regulation) nanoparticle manufacturing facility in Bilbao, Spain, which aids in the rapid execution of projects and the retention of control over manufacturing quality, reducing any possible reliance on external manufacturing partners. The site currently has sufficient capacity for manufacturing materials for volumes required in clinical trials, and is undergoing investment to scale-up its production capability for the Company's lead development product, Q-Octreotide, and the products coming from the Group's collaboration with Ophthotech.
On 4 December 2015, Midatech completed the acquisition of DARA BioSciences, Inc., now MTPUS, a specialty pharmaceutical company primarily focussed on the commercialisation of oncology supportive care products. The strategic acquisition of MTPUS provided the Group with a commercial arm in the US. This comprises a field sales organisation, including 25 representatives, in the prescribing oncology markets and a revenue generating portfolio of three marketed and two co-promoted products in Midatech's targeted therapeutic area of oncology.
On 24 December 2015, shortly following the acquisition of MTPUS, Midatech acquired certain assets related to Zuplenz (ondansetron) Oral Soluble Film from Galena Biopharma, Inc. ("Galena"), adding an attractive and complementary approved product to its commercial platform. The total potential consideration payable to Galena includes a $3.75 million upfront payment that was paid upon closing, which the Board considered to be an appealing price for a product that could accelerate the Group's revenue growth by leveraging the existing commercial infrastructure. In addition, there are potential future sales milestone payments to Galena of up to an aggregate of $26 million, consisting of four one-time payments based on quarterly sales achieved in calendar years 2016 and 2017 and annual sales from 2018 to 2022 exceeding specified target sales.
The Directors acted quickly to execute these transactions, which provide an established, specialised oncology-focussed sales channel for the Company's oncology products currently under development. Following the transactions, the Group has, in total, four marketed and two co-promoted products in oncology supportive care which the Directors expect to deliver multiple revenue growth in the current financial year, as follows:
An FDA-approved, marketed anti-emetic oral soluble film used in adult patients for the prevention of highly and moderately emetogenic post-operative, chemotherapy and radiation-induced nausea and vomiting, and for use in paediatric patients for moderately emetogenic chemotherapy induced nausea and vomiting. Currently, 20 million prescriptions are given per annum (p.a.) for this condition, which the Directors estimate as a $10 billion p.a. market. Zuplenz was fully launched by the Group in April 2016, and is under coverage by 11 of 13 major commercial insurers. The product is competitively priced and the Group offers patients a zero co-pay programme. Zuplenz was launched in April 2016, with encouraging early uptake helping drive increasing revenues. MonoSol RX, LLC will exclusively manufacture Zuplenz for marketing by MTPUS in the US through its expanded commercial organisation.
An FDA-cleared oral rinse gel indicated for the management and relief of pain arising from oral lesions of various etiologies. This includes oral mucositis/stomatitis (caused by chemotherapy or radiation therapy) irritation due to oral surgery, traumatic ulcers caused by braces or ill-fitting dentures, disease and diffuse aphthous ulcers. Gelclair was launched in 2013 by MTPUS, with gross sales of $2.1 million and $4.5 million in financial years 2014 and 2015 respectively, and is under coverage by 11 of 13 major commercial insurers. Gelclair continues to consolidate its brand and market leadership in the US for oral mucositis. MTPUS has exclusive US licensed rights to Gelclair from the Helsinn Group in Switzerland.
Oravig (miconazole) is an FDA-approved prescription drug. Oravig is the first and only orally-dissolving buccal tablet approved for oral thrush (oropharyngeal candidiasis) in adults, which is associated with radiotherapy, chemotherapy and HIV patients. Over 4 million prescriptions are written annually for localised treatment of oral thrush, which the Directors estimate as a 300 million p.a. market. Oravig is under coverage by 11 of 13 major commercial insurers, and the Group offers patients a zero co-pay programme. MTPUS has exclusive US licensed rights to Oravig from Onxeo S.A. in France.
An FDA-approved oral solution, Soltamox is the only liquid form of tamoxifen available for sale in the US. Soltamox is used primarily for the chronic treatment of breast cancer or for the prevention of cancer in certain susceptible breast cancer groups. MTPUS has exclusive US licensed rights to Soltamox from UK-based Rosemont Pharmaceuticals.
An artificial saliva spray that is intended to provide relief from chemotherapy/radiation therapy-induced dry mouth. This product is co-promoted with Mission Pharmacal Company of San Antonio, Texas, USA.
A prescription iron supplement indicated for the treatment of all anaemias that are responsive to oral iron therapy. This product is also co-promoted with Mission Pharmacal.
MTPUS and Zuplenz are now fully integrated with the Group, completed quickly and according to plan, with sales performance to date in-line with management expectations. The market share for the Group's products currently remains modest, therefore the Directors believe there is significant opportunity for expansion.
Research and development
Midatech is advancing a high value pipeline of multiple product candidates in discovery, pre-clinical and clinical development for diseases for which there are currently limited or no treatment options available. The Group's pipeline consists of both internally developed products and products which are partnered or in collaboration.
The Group's drug delivery platform technologies have enabled the Group to focus on the use of GNP conjugates and SR formulations for improved delivery of existing medications, which the Directors consider will drive a strong, lower risk development pipeline. The Group's proprietary GNP nanotechnology, leveraging key attributes of multivalency and ultra-small size, is being developed to produce cancer therapies which may optimise and repurpose existing and/or new therapeutics to allow the use of highly toxic drugs to specifically target cell surface receptors unique to tumours. The Directors believe this will both enhance efficacy and reduce off-target dose limiting toxicity and side effects that otherwise damage healthy tissue.
Each of the Group's GNP cancer therapies in research and development is for significant medical disorders with few or no existing clinical therapeutic options. As such, the Directors believe that the Group's GNP therapies, the most advanced of which are for brain and liver cancers, have the potential to be transformative for patients and their families while potentially generating significant revenue for the Group for each respective product.
The Group's proprietary SR microsphere technology is a high precision encapsulation platform enabling tuneable sustained drug release for chronic diseases treatments. Emulsion-free and monodispersed synthesis of the microspheres with active loaded product provides precise control over particle size, morphology, and release kinetics. The Directors believe these attributes provide superior drug loading and release control which are essential for the development of safe and effective therapies, and which may hold significant clinical promise for patients and commercial potential for the Group.
The current products in internal development by the Group include:
Q-Octreotide (MTD201)
Octreotide is an existing controlled-release injectable product used to treat the incapacitating symptoms of metastatic carcinoid tumours. It suppresses or inhibits the debilitating diarrhoea and flushing episodes associated with the disease. Also, beyond oncology it is used to normalise the overproduction of growth hormone in people suffering from acromegaly who have had inadequate response to other therapies. The Group is currently developing a sustained release version of this product, called Q-Octreotide, to compete with the market leader Sandostatin LAR Depot (marketed by Novartis) compared to which the Directors believe Q-Octreotide may have several potential competitive advantages in respect of patient experience, clinical use and economics. Clinical data generated by the Group exhibits favourable release profile data compared to Sandostatin LAR Depot. Midatech plans to begin human bio-equivalence or therapeutic equivalence studies by late 2016 or early 2017, with a potential US launch in 2018 or 2019 (depending on clinical trial outcomes). The market each year for chronic treatment of metastatic carcinoid syndrome and acromegaly is estimated by the Directors to amount to approximately $2 billion p.a. The Company announced its first regional supply agreement in December 2015 for Q-Octreotide with Centurion Pharma, a Turkish company focussed on the development and commercialisation of specialty products for the Turkish market.
Diffuse Intrinsic Pontine Glioma (DIPG) (MTX110/MTX111)
DIPG is an ultra-rare brain tumour disease suffered by children, with up to 300 recorded cases per year in the US and up to 1,000 globally, an orphan indication. There is an expected survival of only 6-8 months from diagnosis, and it is universally fatal. The Group has used its expertise in drug development and nanotechnology to rapidly develop the MTX110 programme in approximately six months, with the first patient dosed February 2016. MTX110 repurposes and solubilises a known histone deacetylase inhibitor (HDACi) chemotherapeutic (the license holder of which the Group is in discussions to secure development rights) to enable local delivery directly to the tumour through an advanced convection enhanced delivery (CED) system (in cooperation with the manufacturer of the CED system). To date, three patients have been dosed with MTX110: two in the UK and one in the US. This treatment is made available on a named patient or compassionate-use basis through leading neuro-surgery and paediatric neuro-oncology centres. The Group is taking steps to prepare for possible expansion of the compassionate use programmes, as well as potential formal clinical development, with a high level of support shown by regulatory agencies. In addition to, and based on the Groups experience and success with MTX110, research on next generation DIPG therapies, MTX111 using the GNP platform, is also underway.
GNP Immunotherapy (MTX102)
Midatech's primary platform GNPs can be chemically linked to molecules of self-peptide or small antigen, so called antigen specific immunotherapy (ASI), that are important in auto immune diseases such as diabetes. The MTX102 vaccine, when administered subcutaneously, has been shown to preferentially target specific immune cells and distribute rapidly to lymphoid tissues around the body resulting in a tolerogenic (rather than immunogenic) response that may dampen unwanted immune response to normal healthy insulin producing beta cells of the pancreas, thus preserving their function. This programme entered its first in-human Phase I study for Type 1 diabetes in September 2016, with the trial results expected in 2017. The trial, conducted at two centres (Cardiff, UK and Link ping, Sweden, is the culmination of a four year European Commission supported consortium programme, EE-ASI, to research beta cell preservation delivering ASI via GNP technology. The nano-vaccine approach also has potential applicability into oncology, where further research has commenced.
Midatech is applying its SR microsphere technology to develop OpsiSporin, a sustained-release formulation of cyclosporin treatment for non-infective uveitis, an inflammatory disease which severely affects structures of the eye resulting in visual disturbances and blindness. Current treatment options are limited and toxic, and the Directors believe that OpsiSporin may provide a unique long acting intravitreal immunosuppressant treatment alternative. This programme is currently in preclinical development, and is anticipated to reach clinical stage in Q4 2017 or Q1 2018.
Glioblastoma (GBM) (MTR103)
Midatech has a programme underway, in collaboration with the Dana Farber Cancer Institute (an affiliate of Harvard Medical School) and other collaborators, to develop GNP conjugates which are targeted to bind to tumour specific receptors on brain cancer GBM cells, with key chemotherapeutic agents released intracellularly. The Directors estimate that each year there are approximately 240,000 cases of brain and nervous system tumours globally, GBM being the most common and most lethal of these with typical survival of one-to-two years despite maximum treatment of surgery, radiotherapy and chemotherapy. Treatment options are poor due to several factors including tumour cell resistance to therapy, toxicity of current therapies and many drugs being unable to cross the blood-brain barrier. Midatech is focussed on attempting to address these limitations of current therapies. Recognition sequences and therapeutics have been identified, and candidate development is on-going with several constructs, from which selection is planned for the fourth quarter of 2016, following which an IND-enabling programme is to start in late 2016 or early 2017. Assuming that this is successful, this will then allow a Phase I study to commence in approximately late 2017 or early 2018 following IND approval. The Group intends to seek orphan designation for the product.
Hepatocellular Carcinoma (HCC) (MTR104)
Liver cancer is the sixth most frequent cancer globally and the second leading cause of cancer death. HCC is formed by hepatocytes that become malignant. Surgical resection is the major treatment option for HCC, but only 10-20% of HCC can be removed completely using surgery. Midatech research is focussed on researching therapies that may help those patients with unresectable or metastatic carcinoma where treatment options are dismal and the typical survival is six months. Several GNP nano-conjugates are being developed that are loaded with combined targeted and cytotoxic moieties. Candidate selection is planned for the fourth quarter of 2016, following which a formal IND-enabling programme is to commence early 2017. If successful, Phase I study would commence in approximately late 2017 or early 2018 following IND approval. As with GBM, this is an orphan indication for which the Group intends to seek orphan designation for the product.
Squamous Cell Carcinoma (MTR105)
The Group has additional GNP cancer therapies in discovery phases for squamous cell carcinoma which is currently in feasibility testing in laboratory-based studies to evaluate skin permeation of GNPs. The Company now intends to complete the feasibility testing to study the optimal GNP-drug construct, before potentially advancing to animal models. Product candidate testing and selection for human evaluation could occur thereafter during 2017.
Immuno-oncology (MTR116/MTR117)
Based on the potential in the field of immunotherapy for autoimmune disease, additional applications are being pursued in the burgeoning field of immunotherapy for oncology. Following detailed analysis of the main immuno-oncology approaches of most relevance for Midatech's GNP delivery and targeting technology, immediate opportunities identified for exploration and feasibility studies have been selected, including:
The Group's platform technologies have continued to deliver interest in new product partnerships and collaborations. Midatech has various current and historic collaborations with a number of specialty and major pharmaceutical companies and universities to develop the Group's platform technologies into a broad number of products in order to achieve a range of potential revenue opportunities within priority therapeutic areas. This includes products currently in development with Ophthotech Corporation (Nasdaq: OPHT), an ocular specialty biopharmaceutical company. The objective of this collaboration is to explore the feasibility of using Midatech's sustained release formulations with certain Ophthotech products.
Midatech's business and commercialisation strategy is based on maturing its technology platforms with a clear focus on rare cancers (and with partners in other indications), along with strategic late stage product-focussed acquisitions. The Directors expect this strategy to drive a commercial pipeline of products with improved essential parameters, over and above the currently marketed source compound, including safety, tolerability, efficacy and compliance profiles.
Midatech's commercialisation strategy intends to build a sustainably profitable and commercially focussed enterprise with revenues generated as follows:
Midatech also aims to expand its vertical integration by leveraging its integrated manufacturing capabilities.
Reasons for the Placing and Open Offer and use of proceeds
The Group has the opportunity to execute on its strategy by investing in, expanding and advancing its development pipeline in addition to investing in its manufacturing and commercial platform.
The Group is currently advancing a number of its clinical programmes, with recent progress in the Group's Q-Octreotide and OpsiSporin programmes adding further credibility and validation to Midatech's clinical platform. Additionally, the Group has also identified new candidates, namely MTX110 and/or MTX111 for DIPG, which now require investment to advance these programmes into the clinic. The Directors believe these products expand the diversity of the pipeline opportunities for value creation and, if approved, could further effectively leverage its US commercial platform to potentially generate additional growing and significant revenues.
The Group also wishes to invest in expanding its vertical integration by scaling-up its internal manufacturing capabilities for its sustained release products. This investment will enable the Group to manufacture most of its own products to commercial scale in-house in the future. This work is on-going and is expected to be completed in late 2016. The Group also intends to invest in expanding its product sales and marketing team in order to accelerate organic revenue growth from its existing US marketed products. Lastly, the Company requires further working capital to support the Company's growth strategy and its commercial operations.
In conclusion, the Company intends to apply the net proceeds of the Placing as follows, which it believes will allow the Company to meets its strategic goals and maximise shareholder value:
The Company intends to utilise the net proceeds of the Open Offer as further working capital for the Group in addition to that provided by the net proceeds of the Placing.
The Board is also evaluating other near-term funding options in addition to the Placing and Open Offer, including debt finance, with the Group currently in advanced negotiation with a provider, which the Directors reasonably believe will be agreed by the end of 2016.
Shareholders are reminded that the Placing and Open Offer are conditional, amongst other things, on the passing of the relevant Resolutions to be proposed at the General Meeting. Should the relevant Resolutions not be passed and the proceeds of the Placing and/or the Open Offer not be received by the Company, and should additional funding including, but not limited to, debt finance not be secured in the short term, the Company would be required to pursue alternative immediate funding solutions which may be on less favourable terms to or more onerous on the Company.
Current trading and outlook
Midatech announced its 2016 interim results for the six months to 30 June 2016 on 2 September 2016. Please refer to the Group's announcement as notified through the Regulatory Information Service and made available on Midatech's website at: www.midatechpharma.com.
Financial highlights for the period included:
The Directors believe that the commercial business is well placed to build on the good performance in the first half of 2016 with continued revenue growth in the second half of 2016. Furthermore, a number of the Group's R&D programmes have reached exciting stages of development and the Directors anticipate positive progress over the remainder of 2016 and the first quarter of 2017. The Group continues to carefully invest in its platform technologies and candidate pipeline.
The Directors continue to look at opportunities to build value for Shareholders going forward despite the difficult market conditions.
The Placing Agreement
On 10 October 2016, the Company and Panmure Gordon entered into the Placing Agreement, pursuant to which the Company appointed Panmure Gordon as the Company's agent to use its reasonable endeavours to procure subscribers for the Placing Shares at the Issue Price. The Placing is not being underwritten by Panmure Gordon. The Company has agreed to pay Panmure Gordon certain commissions and fees in connection with its appointment.
The Placing is conditional, amongst other things, on:
The Placing Agreement contains certain customary warranties given by the Company concerning the accuracy of information given in the Circular and this announcement as well as other matters relating to the Group and its business. The Placing Agreement is terminable by Panmure Gordon in certain circumstances prior to Admission, including for force majeure or in the event of a material adverse change to the business of the Company or the Group. The Company has also agreed to indemnify Panmure Gordon against all losses, costs, charges and expenses which it may suffer or incur as a result of, occasioned by or attributable to the carrying out of its duties under the Placing Agreement in respect of the Placing Shares.
The Placing Shares will be allotted and credited as fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on or after the date on which they are issued.
The Board recognises and is grateful for the continued support received from Shareholders and has therefore decided to provide an opportunity for all existing Eligible Shareholders to participate in a further issue of new Ordinary Shares also at the Issue Price by way of the Open Offer.
The Directors have considered the best way to structure the Open Offer, having regard to, inter alia, the importance of pre-emption rights to all Shareholders, the extent to which there are Overseas Shareholders, the regulatory requirements applicable to companies listed on AIM, cost implications and market risks. After considering these factors, the Directors have concluded that the most suitable structure for the Open Offer, for both the Company and its Shareholders as a whole, is that the Open Offer be made only to Eligible Shareholders who are not resident or located in any Restricted Jurisdiction.
The Open Offer provides an opportunity for all Eligible Shareholders to acquire Open Offer Shares pro rata to their current holdings of Existing Ordinary Shares as at the Record Date with the option for subscribing for more shares pursuant to the Excess Application Facility. The Issue Price for the Open Offer is the same as the Issue Price in the Placing, and the gross proceeds of the Open Offer will raise up to 2.0 million for the Company. Once subscriptions by Eligible Shareholders under their respective Basic Entitlements have been satisfied, the Company shall, in its absolute discretion, determine whether to meet any excess applications in full or in part and no assurance can be given that applications by Eligible Shareholders under the Excess Application Facility will be met in full, in part or at all.