e-Therapeutics to raise £40 million to advance...

e-Therapeutics to raise £40 million to advance lead cancer drug and exploit network pharmacology platform

e-Therapeutics plc

Drug discovery and development company e-Therapeutics plc (AIM: ETX) proposes to raise £40 million (approximately £39 million net) through an issue of new ordinary shares to existing and new institutional investors. The new shares will be priced at 32p, a premium of 4% to the closing mid-market price on the last dealing day before this announcement. Irrevocable undertakings of support have been received from shareholders representing approximately 86% of the Company’s equity in advance of a general meeting where approval for the issue will be sought.

Following the proposed issue, the Company will have pro-forma net cash and liquid resources of approximately £48 million. Together with expected receipts from R&D tax credits and interest, these resources are intended to support all of the Company’s currently planned discovery and development activities into 2017, by which time the Directors believe an out-licensing deal could be concluded for the Company’s lead cancer drug, ETS2101.

The principal planned uses of the Company’s enlarged cash resources are:

• to complete phase I trials for ETS2101 and advance the drug seamlessly into and through the next phase of its clinical development, which is expected to include a randomised phase II trial in brain cancer (glioma) and a phase Ib/II trial that will explore the drug’s activity in four to six other cancer indications. e-Therapeutics plans to spend around £25 million on this programme for ETS2101 and expects to complete the studies in time to conclude a licensing deal or deals during 2017 if the data are supportive;
• to continue investment in new drug discovery using the Company’s network pharmacology platform. The Directors are confident that sustained investment in the platform and its application to drug discovery will yield new drug candidates that will drive future value in the business; and
• to advance newly discovered drugs and existing product assets into and through preclinical and clinical development, with the aim of building an increasingly diverse and mature portfolio of drug candidates.

Professor Malcolm Young, Chief Executive Officer of e-Therapeutics, said: “We appreciate the continuing support of existing investors and are also pleased to have attracted significant new investors to the Company. With our financial position secure we are well placed to build further shareholder value based on our innovative platform and product portfolio.”

Dr Daniel Elger, Chief Financial Officer of e-Therapeutics, added: “This fundraising provides us with the resources needed for significant investment in new drug discovery and to take our lead cancer drug ETS2101 through efficacy-focused trials that could lead to a lucrative licensing deal.”

The funds to be raised through the new issue will include a substantial further investment by Invesco Asset Management Limited, whose shareholding will increase from 45.92% to 49.90% after completion. The Takeover Panel has granted an Accelerated Rule 9 Waiver in respect of the acquisition of new shares by Invesco.

A circular to shareholders, including a notice convening a general meeting, will be dispatched shortly and will also be available on the Company's website at www.etherapeutics.co.uk.

e-Therapeutics plc
Malcolm Young / Daniel Elger
Tel: [phone]
www.etherapeutics.co.uk

Panmure Gordon (UK) Limited
Investment Banking: Fred Walsh / Grishma Patel
Corporate Broking: Adam Pollock / Hannah Woodley
Tel: [phone]
www.panmure.com

College Hill
Melanie Toyne Sewell / Stefanie Bacher / Rebecca Caygill
Tel: [phone]
E-mail:[e-mail]

Parkwalk Advisors
Parkwalk Blueprint
Steve Medlicott / Andrew Burdis
Tel: [phone]
E-mail:[e-mail]
E-mail:[e-mail]

CommStrat Group (US)
Ted Agne
Tel: [phone]
E-mail:[e-mail]

About e-Therapeutics

e-Therapeutics is an AIM-listed biotechnology company with a proprietary platform in network pharmacology, an innovative new approach to drug discovery based on advances in network science and chemical biology. The Company’s discovery and development activity is focused in cancer and disorders of the nervous system. e-Therapeutics is based at sites in Oxford and Newcastle, UK. For more information about the Company please visit www.etherapeutics.co.uk.

Additional details of the transaction

Unless otherwise stated, all defined terms used in this announcement bear the same meaning as those defined in the Circular to shareholders.

1) Details of the share issue

The Company proposes to raise gross proceeds of £40 million (approximately £39 million net of estimated expenses) through the issue of New Shares. In order to allow investments made by certain VCT Investors and EIS Investors to qualify under VCT and EIS legislation, a portion of the New Shares will first be issued to VCT and EIS Investors (the “First Placing”). On the following business day, the remaining New Shares will be issued to other investors (the “Second Placing”). The Second Placing is conditional upon, inter alia, Completion of the First Placing.

The Placing Price represents a premium of 4% to the closing mid-market price of 30.75 pence on 8 February 2013, being the last dealing day prior to the announcement of the Placings. The New Shares will represent approximately 47.5% of the Enlarged Share Capital.

The New Shares will rank pari passu with the existing Ordinary Shares in all respects including the right to receive all dividends or other distributions declared, made or paid by the Company by reference to record dates falling after their respective dates of allotment.

The Placings are conditional, inter alia, upon:

• The Resolutions to approve the issue being passed at the forthcoming General Meeting; and

• Admission occurring on or before 8.00 a.m on 15 March 2013 (or such later date as the parties may agree).

2) Background to and reasons for the Placings

e-Therapeutics is a drug discovery and development company with a proprietary platform technology in network pharmacology, a novel means of discovering drugs based on network science and chemical biology.

The Company’s core strategy is to discover drugs using its platform technology and then advance the most promising of these through clinical trials to a point where they can be out-licensed to larger companies. The Board expects that licensing deals will provide the Company with revenues in the form of upfront and progress-based milestone payments and royalties on any product sales. The Company may also derive future revenues from drug discovery collaborations with partners.

The Company has advanced two drugs into clinical trials: ETS2101 is in phase I trials for cancer and ETS6103 is in phase II development for major depressive disorder. An additional candidate to treat infections with the bacterium C. difficile is undergoing preclinical evaluation. The Board considers the cancer drug ETS2101 to be the Company’s most important product asset.

The Company plans to add further candidates to its development pipeline through its in-house discovery effort, which currently is mainly being applied to cancer and degenerative diseases of the nervous system. At least one new candidate is expected to enter development by the end of 2013.

The costs of completing the current phase I trials of ETS2101 and the planned phase IIb trial of ETS6103 are covered by the cash resources available to the Company before the Placings.

The principal reasons for the Placings are:

• to advance the Company’s cancer drug ETS2101 seamlessly into and through the next phase of its clinical development. The Directors believe that prospects for partnering ETS2101 will be significantly better, and any licensing deal for the drug considerably more lucrative, if the Company completes further clinical trials following the current phase I studies. The proposed Placings will provide sufficient funds for the Company to conduct a controlled phase II trial to evaluate the drug in its lead indication of brain cancer and also conduct a phase Ib/II study to evaluate the drug in approximately four to six other cancers;
• to continue investment in new drug discovery using the Company’s network pharmacology platform. The Directors believe that sustained and substantial investment in the platform and its application to drug discovery will yield new drug candidates that will drive future value in the business. Availability of funds from the Placings will enable the Company to plan a long-term campaign of discovery work in the fields of cancer and central nervous system disorders; and
• to advance newly discovered drugs and, potentially, certain existing product candidates into and through preclinical and clinical development. The Directors anticipate that the building of a well-balanced business will be aided by continuing investment in candidates at various stages of development

3) Use of Proceeds

The Company expects to deploy the approximately £39m net proceeds of the Placing together with its existing resources of approximately £9m (and such funds as are available from Research and Development tax credits and interest earned during the period over which these resources are deployed) to advance the Company’s lead drug ETS2101 into and through further clinical trials that will include patients with a number of different cancers; to support additional drug discovery and drug development activities for other drug candidates; and for general corporate purposes. The Company conducts regular reviews of its discovery and development portfolios, as a result of which the allocation of resources to particular programmes is set and adjusted. The Directors currently expect that approximately £25m of the resources available after the Placing will be deployed to advance ETS2101.

The Directors intend that the resources available following the Placings should support all of the Company’s currently planned discovery and development activities into 2017, by which time the Directors believe an out-licensing deal could be concluded for ETS2101 if data from its trials are supportive.

4) General meeting

The Placings are conditional on the passing of two resolutions (“the Resolutions”) to be considered at a general meeting of the Company to take place at St Ann’s Wharf, 112 Quayside, Newcastle upon Tyne, NE1 3DX, UK, on 27 February 2013 at 9.30 a.m. (the “General Meeting”). The Resolutions are as follows:

• Resolution 1 is an ordinary resolution to authorise the Directors to allot the New Shares; and
• Resolution 2 is a special resolution to disapply pre-emption rights in relation to the issue of shares including the New Shares

A notice convening the General Meeting is included in the Circular to shareholders.

5) Irrevocable Undertakings

Irrevocable commitments and letters of intent to vote in support of the resolutions to approve the Placings amounting to approximately 86% of the Company’s existing issued share capital have been obtained in advance of the General Meeting, including approximately 8% from the Directors. Accordingly the resolutions are expected to be passed, in line with the Directors’ unanimous recommendation to shareholders to vote in favour of the Placings.

6) Recommendation

The Directors believe that the Placings are in the best interests of the Company and its shareholders. Accordingly, the Directors recommend that shareholders vote in favour of the resolutions, as they have irrevocably committed to do in respect of their individual holdings amounting in aggregate to approximately 8% of the current issued share capital.

7) Waiver of Rule 9

The Placings gives rise to certain considerations under Rule 9 of the Takeover Code.

Under Rule 9 of the Code, where any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares already held by that person and an interest in shares held or acquired by persons acting in concert with that person) carry 30% or more of the voting rights of a company which is subject to the Code, that person is normally required to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights in that company to acquire the balance of their interests in the company.

Rule 9 of the Code also provides that, among other things, where any person who, together with persons acting in concert, is interested in shares which in aggregate carry not less than 30% but not more than 50% of the voting rights of a company which is subject to the Code, and such person, or any person acting in concert with them, acquires an additional interest in shares which increases the percentage of shares carrying voting rights in which he or she is interested, then such person is normally required to make a general offer to all the holders of any class of equity share capital or other class of transferable securities carrying voting rights of that company to acquire the balance of their interests in the company.

An offer under Rule 9 must be in cash (or with a cash alternative) and at the highest price paid within the preceding 12 months for any shares in the company by the person required to make the offer or any person acting in concert with him or her.

Following completion of the Placings, Invesco will have increased its interest in shares carrying voting rights of the Company from approximately 45.92% to 49.90%, which without a waiver of the obligations under Rule 9 would oblige Invesco to make a general offer to Shareholders under Rule 9 of the Code.

8) Dispensation from General Offer

Under Note 1 on the Notes on the Dispensations from Rule 9 of the Code, the Takeover Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 of the Code (a “Rule 9 Offer”) if, inter alia, the shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him or her (the “Independent Shareholders”) pass an ordinary resolution on a poll at a general meeting (a “Whitewash Resolution”) approving such a waiver. The Takeover Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Code) if Independent Shareholders holding more than 50% of the company’s shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were such a resolution to be put to the shareholders of the company at a general meeting.

The Company has obtained such written confirmation from the Independent Shareholders and the Panel has accordingly waived the requirement for a Whitewash Resolution. Accordingly, by voting in favour of the Resolutions to be proposed at the General Meeting, the Placings will be effected without the requirement for the Rule 9 Offeror to make a Rule 9 Offer.

Shareholders should note that, following the Placings, Invesco will not be entitled to increase its interest in the voting rights of the Company without incurring a further obligation under Rule 9 of the Code to make a general offer (unless a dispensation from this requirement has been obtained from the Panel in advance).

Shareholders should also note that, following completion of the Placings, Invesco will control 49.90% of the voting rights of the Company and that this will increase the percentage of the Ordinary Shares that are not in public hands (as defined in the AIM Rules). This may in turn have the effect of reducing the liquidity of trading in the Ordinary Shares on AIM. Invesco’s stake in the voting rights of the Company will also mean that Invesco will be able, if it so wishes, to exert significant influence over resolutions proposed at future general meetings of the Company. Although it is not the current intention of Invesco to seek a resolution at a general meeting of the Company to de-list the Ordinary Shares from AIM, Invesco could, if it so wishes in the future, propose and exert significant influence over the result of such a resolution.

9) Independent Shareholders

Independent Shareholders (who together are the beneficial owners of 47,123,890 Ordinary Shares, representing 34.1% of the Company’s current issued share capital carrying voting rights as at the date of this document) have written to the Takeover Panel confirming that they would vote in favour of a Whitewash Resolution were such a resolution to be put to the shareholders of the Company at a general meeting.