BioWorld International Correspondent
Active Biotech AB is seeking SEK150 million (US$20 million) in new funding via a rights issue of about 3.7 million convertible debentures, priced at SEK40 each.
Existing shareholders will be entitled to subscribe for one debenture for each nine shares currently held. Each debenture will be convertible to one share in the company, at a conversion price of SEK40, and will yield an annual rate of interest of 2 percent. Conversion will be permitted throughout the term of the debt, through its maturity date on June 30, 2009. From Jan. 1, 2007, Active Biotech will be entitled to redeem the debentures if its average share price after that date has exceeded the conversion price for 30 straight days. Debenture holders will have 30 days to decide whether to accept or to request conversion to equity.
MGA Holding AB, of Stockholm, Sweden, the personal investment vehicle of company Chairman Mats Arnhög, which holds a 28.9 percent stake in the company, has agreed to underwrite the entire issue. Shareholders must first agree to the transaction. An extraordinary general meeting will be held during November, said Active Biotech Chief Financial Officer Hans Kolam, after publication of the company’s third-quarter results on Nov. 5. The company anticipates acceptance.
“The money will be in the bank sometime in mid-December,” Kolam said.
The transaction should double Lund, Sweden-based Active Biotech’s reserves. It held SEK149.9 million in cash and equivalents at the end of the second quarter and then received an up-front payment of $5 million from Teva Pharmaceutical Industries Ltd., of Jerusalem, as part of a development deal involving its multiple sclerosis drug laquinimod. (See BioWorld International, June 16, 2004.)
“We are not in an urgent need of funding. What is always important is to get the money when it is possible to do so,” Kolam said. The company plans to use the cash to fund its three remaining projects that are not yet partnered: TTS CD3, in a dose-escalating Phase I trial in non-small-cell lung carcinoma patients; TASQ, an oral prostate cancer treatment, which has completed a Phase I trial in healthy volunteers and is due to enter a Phase I trial in patients in the fourth quarter; and 57-57, a treatment for systemic lupus erythematosus, which is due to enter a Phase I trial this quarter.
The choice of funding instrument represents something of a new departure for Swedish biotechnology companies. Typically, they undertake rights offerings directed at their shareholders when they need more cash. Active Biotech netted SEK216.7 million via that route last year, but preferred this time to protect its shareholders from more dilution.
“Our internal belief is that the current share price doesn’t really reflect the true value of the company,” Kolam said. Based on Monday’s closing share price of SEK46.5, the company was valued at about SEK1.6 billion.
In parallel with the fund-raising efforts, Active Biotech is pressing ahead with a rolling program of layoffs, which it introduced earlier this year as it exited from early discovery research. The company employed 175 people at the start of the process.
“Entering into 2005, we will end up with, I would say, approximately 90 employees,” Kolam said.