PERTH, Australia – Sydney-based Cyclopharm Ltd. raised AU$30 million (US$23.19 million) in a private placement that will enable the company to launch its Technegas combination product in the U.S.

Technegas is a nuclear medicine functional lung ventilation imaging agent that is currently under FDA review. The product produces a gas-like substance that is inhaled, allowing clinicians to see functional ventilation through the lungs. 

The FDA has waived the $2.9 million application fee for the NDA, according to Cyclopharm, and FDA approval is anticipated in the second quarter. A pre-approval audit is scheduled for the week of March 29. Given the backlog of FDA audits, the company viewed the announcement of the audit as a nod to the clinical importance of Technegas in fighting COVID-19.

The phase III trial supporting the NDA was a noninferiority structural ventilation study comparing Technegas with Xenon-133 in 240 patients. The trial met both primary and secondary safety and efficacy endpoints.  

Roughly 30% of pulmonary embolisms are fatal if left untreated, and there are about 3 million cases diagnosed per year. Diagnosis is confirmed either through a CT pulmonary angiogram (CTPA) or a nuclear medicine ventilation-perfusion study. Nuclear medicine using a 3D imaging is the most accurate method of diagnosis, according to the company.

“Cyclopharm recently gained the support of the Society of Nuclear Medicine and Molecular Imaging, which asked the FDA to fast track approval of the Technegas NDA, citing the risks of coronavirus transmission from existing inhalation products Xenon-133 and a wet aerosolized nuclear imaging agent (DTPA), which are the two products that Cyclopharm will be seeking to largely displace with Technegas,” wrote Bioshares analysts David Blake and Mark Pachacz.

The U.S. market, which represents the largest single market for Technegas, is currently valued at $90 million a year, and Cyclopharm hopes to capture 80% of the market within five years. The company said that reimbursement in the U.S. is firmly established, and Technegas would be immediately reimbursed for the full cost of its consumables on the first day.

“U.S. market access can be expected to be reasonably quick given a request from 90 nuclear medicine physicians to urgently approve Technegas in light of the concerns of existing products in the potential spread of the coronavirus, from reimbursement via existing payor codes, and the availability of a leasing arrangements that does not require an up-front capital expenditure by customers,” the Bioshares analysts said.

The placement

The placement consisted of 11.5 million new fully paid ordinary shares priced at AU$2.60 per share. The issue price represented a 4.1% discount to Cyclopharm’s one-month volume weighted average share price (VWAP) prior to the announcement.

Cornerstone investors included Perennial Value Management, Investors Mutual and Regal Funds Management. Existing shareholders Karst Peak and Australian Ethical also participated in the placement.  Bell Potter Securities Ltd. acted as lead manager and bookrunner.

The company will also be conducting a share purchase plan offer (SPP) to existing eligible shareholders who have a registered address in Australia, New Zealand or the U.K. at the same AU$2.60 per share price. The SPP aims to raise up to AU$1.5 million.

Funds raised will be used to build up Technegas generator assets as part of the U.S. rollout strategy using a new service model. Under that model, the sales strategy will involve placement of generators for no capital cost to customers, supporting rapid penetration in the U.S. market, with focus on securing high margin recurring consumables revenue.

Roughly 75% of sales are generated from consumables, and only 15% is generated from capital equipment sales, with the remaining 10% going to service costs, which will now increase as a proportion of overall revenue.

Funds will also support expanding the use of Technegas beyond the pulmonary embolism market into chronic obstructive pulmonary disease (COPD) and asthma.

Technegas is currently available in 60 countries, and more than 4.3 million patient procedures have been performed since the product was approved. Europe represents 62% of the company’s global revenue. Total global sales were AU$67.6 million from 2015 to 2019.

With a market cap of AU$236 million, Cyclopharm’s shares on the Australian Securities Exchange (ASX:CYC) were up 5% on the news, trading at AU$3.10 per share on market close Jan. 25.