NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA OR IN ANY OTHER JURISDICTION IN WHICH OFFERS OR SALES WOULD BE PROHIBITED BY APPLICABLE LAW. THIS ANNOUNCEMENT IS NOT AN OFFER TO SELL OR A SOLICITATION TO BUY SECURITIES IN ANY JURISDICTION, INCLUDING THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, NEW ZEALAND AND THE REPUBLIC OF SOUTH AFRICA. NEITHER THIS ANNOUNCEMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE BASIS OF, OR BE RELIED UPON IN CONNECTION WITH, ANY OFFER OR COMMITMENT WHATSOEVER IN ANY JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 2014/596/EU. IN ADDITION, MARKET SOUNDINGS WERE TAKEN IN RESPECT OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.
Proposed Placing and Open Offer
- £12m minimum raise including the proposed Placing and Subscription
Midatech Pharma (AIM: MTPH, Nasdaq: MTP), the R&D company focused on delivering innovative oncology and rare disease products to patients, announces a proposed issue of Units (each Unit comprising one New Ordinary Share and one Warrant) at an issue price of 3.85 pence per Unit to raise a minimum of approximately £4.0 million before expenses (the "Placing").
In addition, to provide Qualifying Shareholders with an opportunity to participate in the fundraise at the Issue Price, subject to the successful closing of the Placing, the Company proposes to make an Open Offer to all Qualifying Shareholders to raise additional gross proceeds of up to approximately £0.75 million for the Company. The Open Offer is intended to be made on the basis of 0.318 Units for every 1 Existing Ordinary Share held by the Qualifying Shareholder on the Record Date.
The Issue Price of 3.85 pence represents a discount of approximately 6.1 per cent. to the closing mid-market price of 4.10 pence per Ordinary Share on 1 February 2019, the latest practicable date prior to the announcement of the opening of the Placing.
The Placing and Open Offer follows the Company's announcement on 29 January 2019 (the "Subscription Announcement") that it has entered into conditional agreements with a subsidiary of China Medical System Holdings Limited ("CMS") and A&B (HK) Company Ltd to raise £8 million in aggregate through the issue of 207,792,206 Units at the Issue Price (the "Subscription"). Subject to completion of the Subscription and Admission, the Company has entered into the CMS Licence Agreement for the development and commercialisation of the Group's pipeline of products in Greater China and certain countries in south east Asia. The Placing and Open Offer Units are priced on identical terms as the Subscription.
Completion of the proposed Subscription, Placing and Open Offer (together the "Capital Raising") is subject inter alia to Shareholder approval. In the event that Shareholder approval for the Resolutions is not forthcoming at the General Meeting, neither the Subscription, the Placing Agreement, the Open Offer or the CMS 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.
The net proceeds of the Placing, when combined with the net proceeds of the Subscription, are expected to provide the Company with an estimated cash runway through Q1 2020. Based on current expectations on trial design, clinical trial approvals and associated costs, the Directors believe that this funding would allow the Company to deliver top line data readout on a pivotal MTD201 clinical trial and potentially interim efficacy data on MTX110's open label study.
Subject to regulatory acceptance of proposed trial design, successful outcome of the trial and successful scale-up of manufacturing, the intention is to file an NDA in 2021.
In addition to the Capital Raising, the Company will continue to focus on pursuing non-dilutive funding in the form of loans and grants to support the manufacturing scale-up costs for MTD201 which are estimated to be approximately €14.8 million. Successful scale-up will be required ahead of an NDA for MTD201. In particular, the Company has now completed its submission to the Spanish Government for a loan to support the Group's manufacturing scale-up capabilities, which, if successful, is expected to cover up to 75% of the qualifying manufacturing scale-up cost. The outcome of this loan application is expected to be known around the end of H1 2019. Further funding, potentially in the form of additional non-dilutive financing, will be required to complete the scale-up.
The Company also continues to explore opportunities for additional non-dilutive funding in the form of licence agreements for its lead products in unencumbered core and non-core territories.
The Company is committed to continued cost reduction across the business and as such will reduce the existing Board by three Non-Executive Directors effective on Admission. In addition the Company will be conducting a full review of all members of the Board, and where appropriate considering new members, in consultation with its Nomad and significant shareholders; taking into account such shareholders input. It is expected that the review be completed within two months from Admission.
The Directors estimate that the trial cost for MTD201 will be approximately £5 million to £7 million; on Admission the Directors have agreed such funds will be segregated into an account to be held specifically to fund the trial.
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. GMT, 5 February 2019. Details of the number of Placing Shares and the approximate gross proceeds of the Placing will be announced as soon as practicable after the closing of the Bookbuild. Neither the Placing nor Open Offer is underwritten.
The Placing and Open Offer is conditional upon, inter alia:
· the passing of the Resolutions in order to ensure that the Directors have the necessary authorities and powers to allot the New Ordinary Shares;
· admission of the New Ordinary Shares to trading on AIM becoming effective; and
· the Placing Agreement between the Company, Stifel and Panmure Gordon not having been terminated.
As noted above and in the Subscription Announcement, the Subscription is also conditional on Shareholder approval of the Resolutions. The terms of the Subscription give rise to certain considerations under the Takeover Code as a result of the proposed issue of Subscription Shares and Subscriber Warrants to the Subscribers. CMS, (including its subsidiary CMS Venture), A&B (HK) and Mr. Lam Kong together comprise a concert party (the "Concert Party"). Excluding the Placing Shares and the Open Offer Shares, 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 (excluding any shares which may be issued pursuant to the Placing or Open Offer). Accordingly, completion of the Subscription and the CMS 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 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 Subscription Shares arising from the Subscription and upon exercise of the Subscriber Warrants granted to the Subscribers ("Panel Waiver"). There is no guarantee that the Independent Shareholders will approve the Panel Waiver. If the Panel Waiver is not approved, neither the Subscription, the CMS Licence Agreement, the Placing or the Open Offer will proceed and, as noted above, it is unlikely that the Company will be able to continue as a going concern.
The Company intends to publish a circular setting out full details of the Panel Waiver, further information on the Concert Party, and subject to the successful closing of the Placing, the terms and conditions of the Open Offer together with application forms for the Open Offer and notice of general meeting (the "Circular") as soon as possible after closing of the Bookbuild. It is expected that the Circular will be dispatched on or around 5 February 2019, and will also be available at this time on the Company's website at www.mdsitalia.com.
The General Meeting convened for the purpose of considering the Panel Waiver and the Resolutions is expected to be held in the week commencing 25 February 2019 and, subject to the necessary Resolutions being passed, Admission will occur shortly thereafter. For the avoidance of doubt, the Subscription is not conditional on the Placing or Open Offer and neither the Subscription or Placing are conditional on the Open Offer.
Panmure Gordon (UK) Limited is acting as Nominated Adviser and Joint Bookrunner and Stifel is acting as Joint Bookrunner to the Company and no one else in relation to the Placing. Accordingly, they will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to their clients nor for providing advice in relation to the contents of this Announcement or any matter, transaction or arrangement referred to in it.
It is intended that certain Directors will participate in the Open Offer. An announcement will be made following the Open Offer period to confirm the Directors' holdings where applicable.
Commenting on the proposed Subscription, Placing and Open Offer, Craig Cook, CEO of Midatech Pharma, said: "Midatech is delighted to have found in CMS and A&B (HK) a strategic development partner and investor and is pleased to provide existing and new investors with the opportunity to invest in the Company's future on the same terms as CMS and A&B (HK). We believe that Midatech is poised for a transformational period of growth with our R&D pipeline. With this planned funding, we hope to expand our planned pivotal MTD201 trial, currently scheduled to start around mid-2019. We also intend to support the US MTX110 Phase I/II trial currently ongoing and, looking further out, to progress our diversified pipeline of oncology and rare disease treatments"
The terms not otherwise defined in the text of this Announcement are defined in Appendix III.
For further information, please contact:
Midatech Pharma PLC
Craig Cook, Chief Executive Officer 01235 888300
Panmure Gordon (UK) Limited (NOMAD and Joint Bookrunner)
Freddy Crossley, Emma Earl (Corporate Finance) 020 7886 2500
James Stearns (Corporate Broking)
Stifel Nicolaus Europe Limited (Joint Bookrunner)
Jonathan Senior, Ben Maddison 0207 710 7600
Consilium Strategic Communications
Mary-Jane Elliott, Nicholas Brown, Angela Gray 0203 709 5700