LONDON - Peptide Therapeutics Group plc launched a four-for-five rights issue of 29 million new shares to raise #20.6 million (US$33.8 million) net of expenses, following its agreement to acquire OraVax Inc., of Cambridge Mass., which was announced last November. OraVax's partner, Pasteur Merieux Connaught (PMC), of Lyon, France, has agreed to subscribe the pounds sterling equivalent of US$3 million for new ordinary shares in Peptide at 78 pence per share, and the two companies have entered an alliance for the exploitation of OraVax's ChimeriVax technology.
Peptide, based in Cambridge, said the agreement with PMC could be worth up to US$60 million in milestones and license fees, plus royalties on sales of products employing ChimeriVax technology. As a result of signing the collaboration with PMC, Peptide has agreed to increase its offer for OraVax from US$15 million to a maximum of US$20 million. Peptide's share price fell by 7.5 pence, to #1.085, last Friday, when the rights issue, at a 33 percent discount to the Jan. 28 closing price of #1.16, was launched.
The acquisition of OraVax for US$20 million remains conditional upon the approval of Peptide and OraVax shareholders. PMC's decision to invest in Peptide is also conditional upon completion of the acquisition. John Brown, CEO of Peptide, said the collaboration with PMC around ChimeriVax was an important validation for the enlarged group.
The acquisition is also conditional on Peptide raising the additional funds, which together with existing cash resources are needed to meet London Stock Exchange regulations on working capital.
Under the first element of the deal, PMC will be granted a worldwide exclusive license to use ChimeriVax technology to develop vaccines for Japanese encephalitis and tick-borne encephalitis, with PMC funding all future research and development costs.
Second, PMC and Peptide/OraVax will jointly develop a vaccine for hepatitis C, with both parties sharing costs and revenues equally.
"We are extremely pleased to have expanded the relationship with PMC," Brown said. "We see great advantage in working together to exploit all applications of ChimeriVax technology, for each of which there is a strong medical need. We are bringing together complementary vaccine product portfolios and considerable expertise in the development of therapeutic and preventive vaccines which are aimed, in particular, at the travelers' market and treatment of infectious diseases."
The merged company's most advanced product is Arilvax, a yellow fever vaccine developed by OraVax, which is approved in several countries and due to enter Phase III trials in the U.S. in 1999.
Proceeds of the rights issue will be used to satisfy the financing condition in the acquisition agreement; to progress and accelerate existing research and development programs; and to exploit new opportunities. If the acquisition is not completed, the money will be reallocated across the group to ensure continued development of the business. At the end of 1998, Peptide had approximately #10 million in cash, less than 12 months' money at the current burn rate.