LONDON Shareholders in Therapeutic Antibodies Inc. (TAB) must decide on Nov. 6 if they will give the go-ahead to a heavily discounted rights issue or face the prospect that the company be declared insolvent.
On Oct. 26, TAB said it was raising #7.5 million (US$12.4 million) through a placement of 21.3 million shares at #0.40 per share, a 52.9 percent discount to the closing share price on Friday, Oct. 23. The disclosure sparked a #0.30 fall in the stock price to #0.55. TAB floated in July 1996 at a price of #5.25 per share.
Underlining the difficulties facing the U.K. biotechnology sector, TAB said subscribers for the new shares ¿could not be procured at a level in excess of that price. The directors have exhausted all other methods by which the company is able to raise the funds required for its continued operations.¿
In total, the refinancing will raise #11.5 million. In addition to the new share placement, it involves the conversion of US$2.9 million of loan notes into 4.4 million new shares, and the conversion of US$2 million of preferred stock into 2.9 million new shares. The placement is underwritten by Panmure Gordon.
The company¿s chairman, Stuart Wallis, said, ¿I am very pleased with the result of the refinancing, despite the very difficult market conditions in which we find ourselves, and I believe that this fund raising will prove a turning point in the company¿s history.¿
The low level of the company¿s funds and the state of the market meant there was no alternative but to go for a discounted rights issue. ¿In the absence of a placing, [the directors] would have to take action to protect the company from its creditors through formal insolvency proceedings, or pursue alternative courses of action which may result in there being negligible remaining shareholder value,¿ Wallis said.
TAB, focused on polyclonal antibodies, also said it will move its headquarters from Nashville to the U.K., where most of its operations are based. The company said this would make its shares more attractive to institutional investors.
Funds raised are expected to be sufficient to see TAB through to the commercial launch of several products, bringing it to the point where revenues will sustain research and development. The company has restructured its operations, development portfolio and board of directors in the past few months, following the appointment of Andrew Heath as CEO in February. In September, Wallis, previously CEO of the pharmaceutical group Fisons, became chairman, an appointment which coincided with the resignation of seven directors.
The review of the portfolio resulted in the scrapping of TAB¿s Phase IIb clinical trial of CytoTAb, its drug for the treatment of septic shock, because it was too expensive. Data from the 81 patients enrolled to date will be analyzed and available by early 1999, but TAB will not take the development forward without a partner, and is not actively seeking one.
However, as a result of the trials to date, the company believes it has developed a significant understanding of the use of antibodies to neutralize tumor necrosis factor (TNF), and so is continuing with CytoTAb trials in other indications. These include Crohn¿s disease, acute graft-vs.-host disease, bypass surgery and cerebral malaria, where small numbers of patients will be required to provide proof of concept. The aim is to attract partners in these indications.
TAB plans to conduct a Phase I trial in Crohn¿s disease, and expects to submit an investigational new drug application (IND) before the end of this year, with the trial beginning in the first quarter of 1999. The company is encouraged by the recent FDA approval of Centocor¿s Remicade, a monoclonal antibody treatment for the disease. It believes CytoTAb, a polyclonal antibody, will prompt a greater neutralization of TNF with a similar safety profile.
The data from a subset of patients treated with CytoTAb for acute graft-vs.-host disease is being analyzed. The company said further work will depend on this analysis showing positive results.
In bypass surgery, TAB is planning a pilot clinical study in association with the Baylor College of Medicine, in Houston. TNF levels in the plasma of patients undergoing bypass surgery can become elevated, due to the tendency of the cardiac bypass machine to induce an inflammatory response. An IND will be submitted before the end of this study.
In cerebral malaria, TAB launched a 100-patient Phase II trial in Thailand earlier this year. It completed enrollment in September 1998, and results are expected by mid-1999.