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THIS ANNOUNCEMENT, INCLUDING THE APPENDICES AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA,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
7.00 a.m. (BST): Midatech Pharma (AIM: MTPH; Nasdaq: MTP), the international specialty pharmaceutical company focused on the research and development of a pipeline of medicines for oncology and related therapeutic areas, today announces a proposed placing of new Ordinary Shares ("Placing Shares") with existing and new investors to raise gross proceeds of up to approximately 6 million for the Company (the "Placing").
The Company has high-value lead programmes based on its three innovative platform technologies:
Each of these programmes is progressing through pre-clinical and clinical development, which the Directors believe are poised to deliver key value drivers in the next 9-18 months. The Company has the opportunity through its lead development programmes to deliver high value returns in the short-to-medium term by leveraging the Group's established US commercial infrastructure as those products potentially complete clinical development and come to market.
Recent challenges have temporarily slowed the Company's development programme progression and reduced its ability to invest in key programmes, including the requirement to complete the in-licensing of an oncology compound for MTX110 ahead of trials ( 0.8 million impact); US commercial organisation margins and costs being under pressure ( 4.1 million impact against internal forecasts) including increased sales and marketing costs and one-off reorganisation costs, and delays to its key MTD201 and MTD119 programmes as manufacturing was scaled-up and clinical study designs were adapted and finalised in conjunction with regulatory feedback. Consequently, the Company's cash position has been significantly reduced, impairing progress in its lead programmes.
Midatech intends to raise 6 million by way of the Placing to invest in progressing the Group's three lead development programmes, each of which has key value inflections in 2017-18.
In particular, the proceeds of the Placing (after fees and expenses) will provide the company with additional working capital to help fund:
The proceeds of the Placing will not themselves provide the Company with sufficient working capital for its anticipated requirements over the next twelve months. Accordingly, the Company is also in the process of negotiating a potential revised debt facility with a number of new providers in addition to its existing provider in order to help with the Company's ongoing working capital requirements. Whilst there can be no assurance that these negotiations will be successful, the Directors reasonably believe that these negotiations could be agreed by the end of 2017. Furthermore, the Board will continue to assess the market value of certain of the Company's assets so that non-dilutive funding could be available, if required, to drive long term value for the Group without a reliance on equity funding.
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, 28 September 2017. 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 Broker 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 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 a Circular to Shareholders, which will also include a notice convening a General Meeting to be held at 10.00 a.m. on 16 October 2017 at the offices of Panmure Gordon, One New Change, London, EC4M 9AF. It is expected that the Circular will be dispatched to Shareholders no later than Friday 29 September 2017 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 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 proposed Placing and Open Offer, Dr Jim Phillips, Chief Executive Officer of Midatech Pharma, said: "The Placing today will help Midatech progress its three key development projects. These programmes all have key value inflection points over the next 18 months and the potential to deliver high value returns through the Midatech US commercial arm in the next few years, leveraging our established sales infrastructure. Today's Placing also assists the Company in pursuing our goal of retaining the rights to our key development programmes through to commercialisation thereby pursuing the creation of maximum value for shareholders."
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 Broker)
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 the research and development of a pipeline of medicines for oncology and related therapeutic areas, and marketing these through its established US commercial operation which includes four cancer care supportive products and two further co-promoted products. Midatech's strategy is to internally develop oncology products, and to drive growth both organically and through strategic acquisitions. The Company has three high value lead programmes progressing through pre-clinical and clinical development, which the Directors believe are poised to deliver key value drivers in the next 9-18 months. The Company's R&D activities are focused on three innovative platform technologies to deliver drugs at the "right time, right place": gold nanoparticles ("GNPs") to enable targeted delivery; Q-Sphera polymer microspheres to enable sustained release ("SR") delivery; and Nano Inclusion ("NI") to provide local delivery of therapeutics, initially to the brain. The Group has a full service US sales and marketing oncology supportive care commercial platform which is set to break-even on a standalone basis over the next six-to-nine months, and through which to launch its own products as they potentially achieve approval. The Company employs over 100 staff across Europe and the US, and its ordinary shares are admitted to trading on AIM (MTPH) and are quoted on the NASDAQ Capital Market (MTP) through American depositary receipts. For further company information see: www.midatechpharma.com
Panmure Gordon (UK) Limited, which is regulated in the UK by the Financial Conduct Authority, is acting for the Company and no one else in connection with the Placing, and will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to its clients nor for providing advice in relation to the contents of this Announcement or any matter, transaction or arrangement referred to in it.
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 announcement 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 or financing arrangements, 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 up to approximately 6 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 million for the Company.
The Company has lead development programmes based on its three innovative platform technologies progressing through pre-clinical and clinical development, which the Directors believe are poised to deliver key value drivers in the next 9-18 months. The Company has the opportunity through its three lead development programmes to deliver high value returns in the short-to-medium term by leveraging the Company's established US commercial infrastructure as those products potentially complete clinical development and come to market.
Recent challenges have temporarily slowed the Company's development programme progression and reduced its ability to invest in key programmes, including the requirement to complete the in-licensing of an oncology compound for MTX110 ahead of trials ( 0.8 million impact); US commercial organisation margins and costs being under pressure ( 4.1 million impact against internal forecasts) including increased sales and marketing costs and one-off reorganisation costs, and delays to its key MTD201 and MTD119 programmes as manufacturing was scaled-up and clinical study designs were adapted and finalised in conjunction with regulatory feedback. Consequently, the Company's cash position has been significantly reduced, impairing progress in its lead programmes.
The net proceeds of the Placing will be used to provide the Company with additional working capital to invest in progressing the Group's three lead development programmes, each of which have key value inflections in 2017-18.
The proceeds of the Placing will not themselves provide the Company with sufficient working capital for its anticipated requirements over the next twelve months. Accordingly, the Company is also in the process of negotiating a potential revised debt facility with a number of new providers in addition to its existing provider in order to help with the Company's ongoing working capital requirements. Whilst there can be no assurance that these negotiations will be successful, the Directors reasonably believe that these negotiations could be agreed by the end of 2017. Furthermore, the Board will continue to assess the market value of certain of the Company's assets so that non-dilutive funding could be available, if required, to drive long term value for the Group without a reliance on equity funding.
The Placing and the Open Offer are each conditional, among other things, upon the passing of the relevant Resolutions 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. A further Resolution is also proposed in order to top-up existing authorities granted at the Company's 2017 AGM to reflect the increase in share capital as a result of the Placing and Open Offer. 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 focused on the research and development of a pipeline of medicines for oncology and related therapeutic areas, and marketing these through its established US commercial operation which includes four cancer care supportive products and two further co-promoted products. Midatech's strategy is to internally develop oncology products, and to drive growth both organically and through strategic acquisitions. The Company has three high value lead programmes progressing through pre-clinical and clinical development, which the Directors believe are poised to deliver key value drivers in the next 9-18 months. The Company's R&D activities are focused on three innovative platform technologies to deliver drugs at the "right time, right place": gold nanoparticles ("GNPs") to enable targeted delivery; Q-Sphera polymer microspheres to enable sustained release ("SR") delivery; and Nano Inclusion ("NI") to provide local delivery of therapeutics, initially to the brain. The Group has a full service US sales and marketing oncology supportive care commercial platform which is set to break-even on a standalone basis over the next six-to-nine months, and through which to launch its own products as they potentially achieve approval. The Company employs over 100 staff across Europe and the US, and its ordinary shares are admitted to trading on AIM (MTPH) and are quoted on the NASDAQ Capital Market (MTP) through American depositary receipts.
Platform technologies
The Group has three proprietary platform technologies for the targeted delivery and controlled release of existing therapeutic drugs to the "right place" at the "right time". The technologies use known and approved therapeutic agents, reducing development risk.
Midatech's core patented gold nanotechnology platform has been developed with the aim of repurposing and improving key parameters of existing and new drugs. The current focus of the Company's GNP platform is to target specific tumour cells with selected targeting agents that deliver a therapeutic payload directly to the tumour cell and reduce the collateral damage on normal off target cells. The Directors believe the key attributes of the GNPs both enhance efficacy and reduce dose limiting toxicity and side effects that otherwise damage healthy tissue.
Midatech's secondary platform, Q-Sphera, is a sustained release technology which 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. The sustained release technology can provide the required capacity to control and sustain the optimal range of drug release into the body over several months, which the Directors believe has wide medical applicability with diverse pharmaceutically active molecules in oncology and beyond.
Midatech's third platform based on its NI technology allows for the delivery of water insoluble drugs into the body via water soluble complexes without the efficacy of the active drug compound being affected. This allows drugs to be delivered directly into brain tumours by convection enhanced delivery, a process undertaken by a series of catheters being fixed directly into the substance of the tumour.
Midatech has focused its cancer programs to prioritise potential treatments for carcinoid cancer, liver cancer and childhood brain cancer. The Company's target liver cancer and brain cancer markets are candidates for orphan designations. A disease or condition designated as "orphan" is defined as a disease or condition that affects fewer than 200,000 people in the United States where no therapies or only limited therapies exist.
The Group has developed a strong intellectual property base and has a wide IP portfolio of 95 granted patents, 48 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) manufacturing facility in Bilbao, Spain, which produces Midatech's development pipeline products. This in-house capability allows the Company to maintain control of intellectual property and know-how, costs, resources and project timelines.
Research and development
Midatech is advancing multiple, high value targeted therapies in pre-clinical and clinical development, based on its key technology platforms, for diseases for which there are currently limited or no treatment options available. The Company's in-house product development is primarily focused on its three lead research and development programmes, each of which, if successful, in the Directors' opinion could potentially transform the business, both in terms of the potential impact on patients' lives and well-being, and in driving revenue growth and future profitability. The Company has the opportunity through its three lead development programmes to deliver high value returns in the short-to-medium term by leveraging the Group's established MTPUS commercial infrastructure as those products potentially complete clinical development and come to market. Important progress has been made on the Company's carcinoid cancer, childhood brain cancer (DIPG) and liver cancer programmes in the past twelve months, with each respective programme moving towards pivotal human studies in the 2017/18 timeframe and possessing key value inflection points over the next 18 months.
The current products in internal development by the Group include:
Q-Octreotide (MTD201)
The MTD201 programme uses the Company's Q-Sphera platform to formulate a long-acting dose of Octreotide, an existing therapeutic, for the treatment of carcinoid cancer and acromegaly, which can cause debilitating morbidity and mortality for patients. It is the most important form of treatment for carcinoid syndrome that occurs with carcinoid tumours. Midatech has developed a sustained release version of this product, Q-Octreotide, which if approved is expected to be interchangeable and compete with the market leader Sandostatin LAR Depot (SLAR, marketed by Novartis). In addition to being interchangeable with SLAR, the Directors believe Q-Octreotide may have several potential competitive advantages in respect of patient experience, clinical use and economics. Pre-clinical data generated by the Company exhibits favourable release profile data compared to Sandostatin LAR Depot. Over the last year, the Company has completed the formulation of the product and the clinical trial manufacture, and completed pre-clinical testing. The Company has submitted a clinical trial application (CTA) for a first in-human study of MTD201, with a novel design that provides different options to establish equivalence and approval. The Company expects to enter the clinic in Q4 2017 pending regulatory approval, with initial results due in Q2 2018 and full results in H2 2018, following which a regulatory submission to the FDA will be made in late 2018/early 2019 if the product shows bioequivalence to SLAR. Initial pre-marketing preparation work and branding of Q-Octreotide is underway. The market each year for chronic treatment of carcinoid syndrome and acromegaly is estimated by the Directors to amount to approximately $2 billion per annum (p.a.), and the Directors believe that Q-Octreotide has a market potential of at least $100 million p.a., representing c. 5 per cent. of the available market.
Diffuse Intrinsic Pontine Glioma (DIPG) (MTX110)
MTX110 is a treatment for DIPG, an ultra-rare childhood brain tumour disease, with up to 300 recorded cases per year in each of the US and UK, and up to 1,000 globally. It is an orphan indication, for which there is currently no satisfactory treatment. There is an expected survival of only nine months from diagnosis, and it is universally fatal. The only current standard of care is palliative focal radiotherapy and chemotherapy, and new therapeutic strategies are urgently needed. One of the potential key reasons for the failure of treatment is the blood-brain and blood-tumour barriers, which prevent potentially effective therapeutic agents from reaching the tumour. Direct delivery by convection-enhanced catheter can overcome these barriers and ensure adequate drug delivery to tumour cells; however, the drugs must be water soluble at physiological pH in order to be delivered to the brain by such convection-enhanced techniques. The Company has sought the most potent compounds against DIPG cell lines, selected the best candidate of these compounds, and using its NI technology, solubilised it to enable administration via convection-enhanced techniques.
MTX110 repurposes and solubilises a known histone deacetylase enzyme inhibitor (HDACi) chemotherapeutic, panobinostat, which is in-licensed from Novartis. The NI technology platform enables local delivery directly to the tumour, diffusing into it and around it. This technique allows for elevated drug concentrations to be delivered to the tumour, while at the same time minimising systemic toxicity and peripheral side-effects. An investigational new drug (IND) application for MTX110 has been submitted and clinical trials are expected to start in Q4 2017 pending regulatory approval, which may lead to a proposed regulatory filing, with interim analysis possible during 2018. If the clinical trial is successful, expedited approval will be sought from regulators. Following requests from DIPG physicians, the product has also been made available on a compassionate use basis with several patients under treatment, with MTX110 well tolerated in these patients thus far. The Directors estimate the total addressable market to be approximately $100 million globally, with peak sales estimated of up to $50 million p.a.
Hepatocellular Carcinoma (HCC) (MTD119)
MTD119 is a targeted therapy treatment using the Company's GNP technology for hepatocellular carcinoma (HCC), which accounts for most liver cancers and is the third leading cause of cancer deaths worldwide with almost 800,000 deaths in 2015 (WHO, 2017). Prognosis is poor with median survival of less than one year in patients where surgical intervention is unsuccessful or not possible. In this group of patients the only option is chemotherapy, of which there are limited options currently and with which successful outcomes are rare and short lived. Sorafenib (Nexavar), the current standard of care, has projected 2018 annual sales of c.$1 billion.
The Company's GNPs combine target motifs together with chemotherapeutics, making it possible to alter the biodistribution of toxic chemotherapeutics to focus on the tumour and spare normal tissues. This shift in biodistribution can significantly improve the therapeutic index of treatments for this devastating disease. The pre-clinical programme for MTD119 was completed in Q3 2017, with studies demonstrating potent anti-tumour activity in vivo in all efficacy models. Peak reduction in tumour growth due to MTD119 was more than six-fold (mean reduction more than three-fold) compared to sorafenib and with improved overall survival. The specific targeting of maytansine to tumour cells by MTD119 also resulted in significantly improved tolerability. Candidate selection is now complete and MTD119 has entered formal IND application enabling studies, with completion of the first study expected in H1 2018 and completion of the remainder of the studies in Q3 2018. This will be followed by an expected IND submission to the FDA for first in-human studies to commence in H2 2018. MTD119 has the potential for Orphan drug designation and accelerated US approval. The HCC market is forecast by the Directors to represent $1 billion by 2024 with peak sales of up to $250 million p.a., and MTD119 is seeking to be a first-line therapy.
Broader development pipeline
MTR103 is a programme for Glioblastoma Multiforme ("GBM"). 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. MTR103 candidate development is on-going in pre-clinical studies. The Group intends to seek orphan designation for MTR103 pending successful completion of the pre-clinical programme.
In immunotherapy, the Company's nanotechnology is being developed for cutting edge applications in immuno-oncology, as well as autoimmune disease. MTX102 will complete its first in-human study for the antigen specific immunotherapy of Type 1 diabetes in H1 2018. The Company intends to out-license this product upon successful clinical data. In immuno-oncology, Midatech is utilising its GNP technology to target tumour-associated macrophages and for developing a next-generation therapeutic cancer vaccine for delivery of cancer antigens to stimulate the immune system.
Midatech has a balanced portfolio of fast-growth marketed oncology treatments and supportive care products being currently sold in the US, and an effective and established commercial platform to market and sell its own development pipeline products as they come to market in the future. The US entity was formed by the acquisition of DARA BioSciences, now MTPUS, in December 2015, which brought three cancer supportive care products (and two co-promoted products), along with an established oncology-focused sales and marketing capability. Midatech further acquired certain assets related to Zuplenz (ondansetron) Oral Soluble Film from Galena Biopharma, Inc. ("Galena") shortly following the acquisition of MTPUS, adding a further attractive and complementary approved product to its commercial platform.
The six products marketed in the US for oncology treatment and supportive care, which the Directors expect to deliver continued revenue growth in the current financial year, are as follows:
An FDA-approved, marketed anti-emetic oral soluble film used in adult patients for the prevention of highly and moderately emotegenic post-operative, chemotherapy and radiation-induced nausea and vomiting, and for use in paediatric patients for moderately emotegenic chemotherapy induced nausea and vomiting. Currently, 20 million prescriptions are given p.a. for this condition, which the Directors estimate as a $10 billion p.a. market.
An FDA-cleared oral rinse gel indicated for the management and relief of pain arising from oral mucositis and other oral lesions of various etiologies, including oral mucositis/stomatitis (caused by chemotherapy or radiation therapy) irritation due to oral surgery. 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. Gelclair is protected by a United States issued patent which expires in 2021. The Company intends to undertake a label-expansion study versus standard of care in stem cell transplant patients for Gelclair commencing in Q4 2017, which is expected to complete approximately twelve months later.
Oravig (miconazole) is an FDA-approved prescription drug, the first and only orally-dissolving buccal tablet approved for the treatment of 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. MTPUS has exclusive US licensed rights to Oravig from Onxeo S.A. in France.
An FDA-approved oral solution, Soltamox (tamoxifen citrate) oral solution is the only liquid form of tamoxifen available for sale in the US 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. Soltamox is protected by a United States issued patent which expires in June 2018.
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 is now a fully integrated commercial platform, with 20 sales representatives and 5 field sales managers with access and established relationships in the highest prescribing oncology markets. MTPUS is focused on expanding the uptake of its supportive care product portfolio in the oncology market, through field based promotion, non-personal promotion, co-promotion partnerships, and general practitioners in oncology and specialty pharmacy relationships. MTPUS is also working to leverage its current product portfolio in indicated non-oncology markets through non-personal promotion and strategic partnerships.
MTPUS is on-trend to break even on a standalone basis within the next six-to-nine months, with strong growth in gross sales (an increase of 42 per cent. in the six months to 30 June 2017 compared to the same period in the prior year) and its first two EBITDA positive trading months in July and August 2017.
Midatech's primary objective for its business and commercialisation strategy is to grow its revenues by bringing its innovative development pipeline products for oncology to market, and launching these through the Group's US commercial infrastructure that is already established for its supportive care oncology products. The clear aim is thus to maximise shareholder value through a profitable and self-sustaining business based on addressing significant unmet needs for patients and clinicians.
The Group's strategic priorities are to grow revenues from its existing products (which the Directors believe will be profitable on a standalone basis and generate free cash flow to support the Company's R&D) and to take its three key R&D investment programmes efficiently through drug development and into commercialisation, providing the Group with the opportunity to increase its revenues substantially over the next five-to-ten years as those products come to market, leveraging the Group's commercialisation capabilities. The MTPUS sales and marketing platform will generate revenue and significantly higher margin for its own products compared to a strategy of out-licensing its products: the Group will be able to book the full sales value, and retain the entire gross margin (after operating expenditures) from the sales transaction, which is approximately an additional potential retained contribution of c.$50 million for every additional $100 million of US net sales.
Midatech also aims to expand its vertical integration by leveraging its integrated manufacturing capabilities, as was shown by the Group's investment in its Bilbao facility which completed in March 2017.
In support of and in addition to the above, Midatech may from time to time seek value accretive and synergistic target companies and portfolios that would accelerate its own product recurring revenues and profitability via products in market.
Reasons for the Placing and Open Offer and use of proceeds
The Group is driving key value inflection points in its lead development projects over the next 9-18 months. The Company has the opportunity through its three lead development projects to deliver high value returns in the short-to-medium term by leveraging the Group's established MTPUS commercial infrastructure as those products potentially complete clinical development and come to market.
Recent challenges have temporarily slowed the Company's development programme progression and reduced its ability to invest in key programmes, including the requirement to complete the in-licensing of an oncology compound for MTX110 ahead of trials ( 0.8 million impact); US commercial organisation margins and costs being under pressure ( 4.1 million impact against internal forecasts) including increased sales and marketing costs and one-off reorganisation costs, and delays to its key MTD201 and MTD119 programmes as manufacturing was scaled-up and clinical study designs were adapted and finalised in conjunction with regulatory feedback. Consequently, the Company's cash position has been significantly reduced, impairing progress in its lead programmes.
Midatech intends to raise 6 million in new equity capital to invest in progressing the Group's three lead development programmes, each of which has key value inflections in 2017-18.
In particular, the net proceeds of the Placing will provide the company with additional working capital to help fund:
The Directors believe this interim funding will allow the Company to achieve the milestones listed above and add significant incremental value that will prepare the Company for further later stage fundraising to complete the clinical development of its key development programmes and support the Company's strategy of retaining the rights to its key development programmes through to commercialisation.
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 proceeds of the Placing will not themselves provide the Company with sufficient working capital for its anticipated requirements over the next twelve months. Accordingly, the Company is also in the process of negotiating a potential revised debt facility with a number of new providers in addition to its existing provider, in order to help with the Company's ongoing working capital requirements. Whilst there can be no assurance that these negotiations will be successful, the Directors reasonably believe that these negotiations could be agreed by the end of 2017. Based on these on-going discussions, the Directors are confident that additional working capital will become available on terms acceptable to the Board and shareholders to support the Group's growth strategy and commercial operations for the near-to-medium term, that is, for greater than twelve months from Admission.
The Board is committed to continuing to reduce costs across the business, including an immediate substantial reduction in senior management compensation until there has been a significant recovery in the Company's share price. Further, a reduction in the costs and, in due course, the size of the Board itself, is being undertaken, such that the total Board costs on an annualised basis will be significantly lower to that of last year.
The Board will continue to have discussions with potential partners and other third parties to assess the market value of certain of the Company's assets so that non-dilutive funding could be available, if required, to drive long term value for the Group without a reliance on equity funding.
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. The Open Offer is conditional on the Placing, which means that should the Placing not go ahead, neither shall the Open Offer. Shareholders should be aware that 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 it be unable to raise additional capital, including, but not limited to, debt financing, in sufficient amounts and on terms acceptable to the Company, the Company would need to immediately pursue additional or alternative funding sources which, if they are available at all, may be expensive and/or onerous for the Company, and which could include the potential sale of certain of the Company's assets or may require the Company to significantly delay, scale back or discontinue the development or commercialisation of its product candidates.
If the Company raises additional funds through the issuance of debt securities or additional equity securities, it could result in substantial dilution to Shareholders, increased fixed payment obligations and any securities issued may have rights senior to those of the Ordinary Shares and could contain covenants that would restrict its operations and potentially impair its competitiveness, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact the Company's ability to conduct its business. Any of these events could significantly harm the Company's business, financial condition and prospects.
Current trading and outlook
Midatech announced its 2017 interim results for the six months to 30 June 2017 on 28 September 2017. 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 Company's key pipeline R&D products have all reached critical points in their development, with pivotal human studies due to commence in the second half of 2017 or early in 2018. The Directors believe that these programmes are all poised to drive significant value for Midatech. The Company's commercial business continues to enjoy strong growth and, notwithstanding the challenges in maintaining margins, the Directors anticipate that it will become profitable on a month-to-month basis by early 2018.