Disposal of BTK inhibitor drug development program

RNS Number : 5002M

Redx Pharma plc

31 July 2017

 

31 July 2017

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THE ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

REDX PHARMA PLC (in administration)

("Redx" or "the Company")

Disposal of BTK inhibitor drug development program

Redx, the drug discovery and development company, announces that Jason Baker and Miles Needham of FRP Advisory LLP, joint administrators of the Company and of its subsidiary, Redx Oncology Limited, has entered into an unconditional agreement (on behalf of the Companies) on Friday 28 July 2017 for the disposal to Loxo Oncology, Inc., the US-based NASDAQ-quoted biopharmaceutical company, of certain patents, intellectual property, contracts for product manufacture, and physical materials relating to Redx's BTK inhibitor drug development program for the sum of US$40 million.  

Further details of the Disposal are set out in the Appendix to this announcement. 

Jason Baker, joint administrator of the Company, commented:

"We are pleased to have taken a significant step forwards in line with our strategy towards the rescue of the Companies as going concerns. Today's unconditional agreement is for the realisation of certain of the Group's intellectual property assets, the proceeds from which will allow for the creditors of the Companies to be paid in full and provide working capital for the Group's continuing business, thus restoring the Companies to solvency. The administrators anticipate that, upon their review and approval of the management's final business plan, the Company will be set to exit administration. Upon exit from administration the directors of the Company will be in a position to request the lifting of the suspension of the Company's shares from trading on AIM. Until the exit from administration we shall continue with the discharge of our statutory duties as administrators in the interests of all creditors."

For further information, please contact:

Redx Pharma Plc (in administration)
Contact for the Joint Administrators: James Rossiter (Morgan Rossiter)	T: + 44 203 195 3240
Cantor Fitzgerald Europe (Nomad & Broker)
Phil Davies/ Michael Reynolds	T: [phone]
WG Partners LLP (Joint Broker)
Claes Spång/ Chris Lee/ David Wilson	T: [phone]

About Redx Pharma Plc (in administration)

Company website: redxpharma.com

Notes:

Jason Baker and Miles Needham have been appointed as joint administrators of Redx Pharma plc (in administration). The company's affairs, business and property are being managed by the joint administrators.

Redx is focused on the discovery and development of proprietary, small molecule therapeutics to address areas of high, unmet medical need, principally in cancer and fibrosis, providing a pipeline of assets to larger and emerging companies. By improving the characteristics of existing drug classes to create highly differentiated, novel, best-in-class/first-in-class drugs, Redx has already established a broad portfolio of proprietary drug programs.

APPENDIX

Background to and reasons for the Disposal

The Company was incorporated in 2010 and admitted to trading on AIM in March 2015. It is the parent company of three subsidiaries, including Oncology, and holds all intellectual property relating to the Group's pharmaceutical discoveries. The research activities of the Group are undertaken by the subsidiaries, funded by the Company.

The Group is focused on the discovery and development of proprietary, small molecule therapeutics to address areas of high-unmet medical need, in cancer and fibrosis. By improving the characteristics of existing drug classes, the Group aims to create differentiated, novel drugs. The Group has an established portfolio of proprietary drug programs that it is developing alone and in partnership with leading pharmaceutical companies and healthcare bodies.  Redx Pharma's leading asset, RXC004 (porcupine inhibitor), is about to enter Phase I clinical development for gastric, biliary and pancreatic cancers, and for combination with checkpoint inhibitors. RXC005 (reversible BTK inhibitor) is focused on treating patients with chronic lymphocytic leukaemia who have become resistant to ibrutinib, and will be entering studies in the coming months to enable submission of an Investigational New Drug (IND) application in 2018.

Oncology owes LCC approximately £3.5m pursuant to a loan entered into in 2012 (which consists of the initial facility amount of £2m together with interest accrued amounting to £1.5m). The loan is secured via a debenture dated 1 June 2012 and is cross-guaranteed by the Company and secured via a fixed and floating charge over its assets.

The LCC loan was initially due for repayment after two years, but the term was subsequently extended in 2014 for a further year and in 2015 for a further two years resulting in the loan becoming due on 31 March 2017.  On 24 May 2017, LCC appointed Jason Daniel Baker and Miles Andrew Needham as Joint Administrators to the Companies.  Upon the appointment of the Joint Administrators in respect of the Company, the Company requested the suspension of the trading of its shares in accordance with the AIM Rules.

The Joint Administrators' actions

On their appointment the Joint Administrators determined that it would likely be possible to rescue the Companies as going concerns and that two primary strategies would be run concurrently in order to achieve this objective:

·                to explore the feasibility of raising additional funding from existing shareholders in order to repay all creditors and rescue the Companies as going concerns;

·                to realise certain of the Group's intellectual property assets, the expected proceeds from which would likely be sufficient to rescue the Companies as going concerns.

Having considered the options of raising funds or a sale of intellectual property assets, the Joint Administrators (after discussing with the Company's leading / major shareholders) believed the sale of the assets to Loxo Oncology, Inc. would lead to the best outcome for creditors and the Company's other stakeholders alike.

Summary of the terms of the Disposal and the Sale Agreement

In the Sale Agreement the Companies have assigned to Loxo Oncology, Inc. whatever rights, title and interest they have in and to the Assigned Rights, and have novated to Loxo Oncology, Inc. the Related Agreements, for US40 million paid in a single upfront cash payment on the signing of the Sale Agreement.  No further royalties, licence fees, milestones or other payments are due to the Companies under the Sale Agreement.  No representations or warranties have been given to Loxo Oncology, Inc. in respect of the Assigned Rights or the Related Agreements. Redx is subject to non-competition provisions for three years following the sale.

Information on the Assigned Rights

BTK is a key biological enzyme target which has been validated by the approval of the drug ibrutinib (Imbruvica™) in the treatment of a range of blood cancers, such as chronic lymphocytic leukaemia. The Assigned Rights represent all the Companies' rights to the BTK discovery program, including RXC005, a reversible BTK inhibitor which has shown potent inhibitory activity towards wild-type (normal) BTK as well as mutant BTK (C481S), the latter of which is refractory to ibrutinib inhibition.

The continuing business of the Group

The proceeds of the Disposal will be used to repay in full all the creditors of the Companies and to provide working capital for the Group's continuing business.

Following the Disposal the Group retains the remainder of its portfolio of proprietary drug programs of which the principal is RXC004, an oral, small molecule Porcupine inhibitor in development both as a monotherapy and in combination with checkpoint inhibitors for difficult to treat cancers.  Given that the Assigned Rights comprise only part of the Company's broad drug development activities, the Company is expected to continue the same general business as previously.

On 23 June 2017 the Company announced that it had received approval from the UK Medicines and Healthcare Products Regulatory Agency (MHRA) and the Ethics Review Committee for its Clinical Trial Application (CTA) for RXC004. The approval provides permission for Redx to initiate a Phase I study of RXC004 in patients.

Next steps for the Administration processes

Pursuant to the Sale Agreement, the Joint Administrators have agreed that they shall remain in office for a period to oversee the fulfilment of certain of the Companies' obligations to Loxo, with a longstop date of 12 weeks from the date of the Sale Agreement.  In addition, the Joint Administrators are awaiting a finalised business plan from management, in order to satisfy themselves that the Companies are rescued as going concerns.  Once that has been reviewed (and on the assumption a viable plan is presented) it will be the Joint Administrators' view that the objectives of the administrations have been achieved and, subject to the relevant terms of the Sale Agreement referred to above, they will file the relevant forms at the Companies Court and on Companies House.  Once this step has occurred, the Companies will exit administration and return to the control of the management. 

It is the understanding of the Joint Administrators that, once the administrations have ended, the directors of the Company will request the lifting of the suspension of the Company's shares from trading on AIM.

In the interim, all creditors and members will receive a more detailed statutory report detailing the Joint Administrators proposals shortly. 

Definitions

In this announcement the following terms shall, where the context so requires, have the following meanings:

AIM	the AIM Market operated by the London Stock Exchange;
AIM Rules	the AIM Rules for Companies of the London Stock Exchange from time to time;
Assigned Rights	means such of the following rights, as are held by the Companies: ·                the Patents; and ·                intellectual property rights in the Data Package;
BTK Companies	Bruton's tyrosine Kinase (Uniprot # Q06187); Redx and Oncology;
Data Package	means documents, product samples and other materials identified as categories 1 to 4 in Schedule 3 of the Sale Agreement, where "documents " as used in this definition shall include all documents identified as follows, if they exist (as noted in Schedule 2 of the Sale Agreement), and in each case solely to the extent they relate to the BTK Program (if documents include content which is not created  in relation to the BTK Program, then the latter shall be redacted before they are made available to LOXO): ·              the results of all trials or tests undertaken by or on behalf of REDX and analyses of those results; ·              pre-clinical test reports and all clinical or other test or trial results; ·              laboratory notebooks; ·              regulatory documents; ·              documentation related to the Patents;
Disposal	the disposal of the Assigned Rights and the Related Agreements to Loxo Oncology, Inc. on and subject to the terms of the Sale Agreement;
Group	Redx and its subsidiaries;
Joint Administrators	Jason Baker and Miles Needham, both of FRP Advisory LLP;
LCC	Liverpool City Council;
London Stock Exchange	London Stock Exchange plc;
Loxo	Loxo Oncology, Inc.;
Oncology	Redx Oncology Limited, a subsidiary of the Company;
Patents	any and all of the patents and patent applications (including applications in draft form, if any, and any and all rights to file patent applications existing as of the Effective Date of the Sale Agreement) relating to the REDX BTK Program, including those referred to in Schedule 2 of the Sale Agreement, including any PCT applications (including national phases thereof), divisionals, continuations, continuations in part, patents issuing therefrom, including extensions (such as patent term extensions), reissues, re-examinations, and any supplementary protection certificates allowed on the foregoing;
REDX BTK Program	means REDX's research program for the development of small molecules each of which has an intended primary mode of action as a  BTK inhibitor, including the drug candidate known as "RXC005";
Related Agreements	the contracts for product manufacture and other issues relating to RXC005.

 

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