TIDMTYR TIDMAPH TIDMTYRU
RNS Number : 2190Y
TyraTech, Inc.
04 December 2017
TYRATECH, INC.
("TyraTech" or the "Company")
PROPOSED SALE OF VAMOUSSE(R) FOR INITIAL CONSIDERATION OF $13
MILLION IN CASH
NEW STRATEGIC FOCUS ON ANIMAL HEALTH
Tender Offer to Shareholders and Notice of Special Meeting of
Shareholders
TyraTech Inc. (AIM: TYR, and TYRU), the life sciences company
focused on nature-derived insect and parasite control products,
today announces that it has agreed the sale of its human lice
products brand Vamousse(R) to Alliance Pharma PLC (AIM: APH)
("Alliance") for an initial cash consideration of $13 million ("the
Disposal"). The Company may also be entitled to further payments of
up to $4.5 million based on the achievement of agreed sales
performance targets for Vamousse(R) in 2019 and 2020.
The Disposal is subject to the approval of TyraTech
Shareholders. The Company will today be sending a circular to all
Shareholders ("Circular") which sets out details of the terms of
the Disposal and contains a notice of the Special Meeting to be
convened to approve the Disposal. A copy of the Circular will be
available on the Company's website, www.tyratech.com, later
today.
The Board has decided that the Company will apply up to $8.5
million of the proceeds from the Disposal towards an invitation to
qualifying Shareholders to tender their Shares in the Company for
sale to the Company at a tender price of 3 pence per Share ("Tender
Offer"). This represents a 118 per cent. premium to the closing
mid-market price for the Company's restricted Shares and a 85 per
cent. premium for the Company's unrestricted Shares as at Friday 1
December, 2017. Shareholders are not obliged to tender any of their
Shares if they do not wish to do so. Shareholders who choose to
participate in the Tender Offer will be guaranteed to have accepted
in the Tender Offer valid tenders to the Company in respect of 57%
of their Shares (rounded down to the nearest whole number of
Shares). Shareholders may tender up to 100% of their Shares,
although the final number of Shares which will be purchased by the
Company will depend upon the number of Shareholders who elect to
remain invested in the Company. The details and mechanism of the
Tender Offer will be set out in the Circular.
The remaining proceeds from the Disposal, after the costs and
expenses of the Disposal and the Tender Offer, together with any
element of the $8.5 million not used in the Tender Offer, will be
used to ensure continuity of the Company's operations, pursue the
full US Environmental Protection Agency ("EPA") registration of
Guardian(R) and, most importantly, begin the implementation of its
animal health strategy, further details of which are set out below
and in the Circular.
Following the Disposal and Tender Offer, TyraTech intends to
focus on the opportunities within the estimated $6 billion
addressable animal health market for control of insects and
parasites, a sector in which it already has considerable management
experience and new products in commercial stages.
If the Disposal does not proceed, the Board has determined that
the Company lacks the necessary resources from operating cash flow
alone to fully develop the commercial potential of Vamousse(R) as
well as unlock the larger growth opportunities of the animal health
business. Consequently, the Company would need to raise funds, but
that might be more dilutive in those circumstances and there is no
guarantee that the Company would be able to do so in any case. The
Company also may not have sufficient working capital to fund its
present business. Therefore, if the Disposal does not proceed, the
Company may enter liquidation which the Board believes would
produce a less advantageous result for Shareholders as a whole.
Background to the Disposal
In February 2017, the Board implemented a strategic review to
determine the most effective way to unlock the future growth
potential of the Company's assets and maximise Shareholder value.
The Board determined that the Company lacked the necessary
resources from operating cash flow alone to fully extract value
from both its human and animal health businesses. The Board
considers that in the medium term, more value could be realised by
focusing on the larger animal health segment with its unmet needs,
and because Vamousse(R) is an established brand, its divestment
could release value for Shareholders and realign the Shareholder
base towards investors more interested in the agriculture and
animal health markets. By 2016, Vamousse(R) provided a positive
direct contribution margin of US$2.2 million from net sales of
US$6.6 million. Direct contribution constitutes Vamousse(R) net
sales less associated cost of sales and sales and marketing
expenses for the brand. To help achieve these strategic objectives,
the Board has agreed the sale of Vamousse(R) to Alliance followed
by the Tender Offer, which will be contingent upon completion of
the Disposal.
The initial consideration for Vamousse(R) is a cash payment of
$13 million. The Board believes that this provides clear validation
of the value and efficacy of the Company's technology. This was
also underscored in July 2017 when a major global consumer products
company chose TyraTech's nature-derived technologies to develop and
commercialize a range of pest control household products.
The Company has a number of additional products that have
demonstrated early commercial success under the Guardian(R),
PureScience and OutSmart brands, together with a pipeline of new
products that it hopes to be able to successfully commercialize.
The Board believes that there is strong customer demand for
products to control insects and parasites that are safe and
effective.
The sale of Vamousse(R) and implementation of the Tender Offer
will return value to Shareholders who wish to participate in the
Tender Offer. The Directors believe that the re-alignment of the
Shareholder base and reduction in the number of outstanding Shares
will put the Company in a better position to raise capital to
implement its animal health strategy described below.
Use of proceeds
Following an analysis of the Company's financial position and
contractual obligations, and being mindful of the opportunities for
the Company in the animal health sector, the Board has decided to
apply up to a maximum of $8.5 million of the Vamousse(R) initial
sale proceeds towards a Tender Offer to Shareholders. The Board
believes that given its legal and other obligations this represents
the maximum amount that could be applied towards the Tender Offer
at this time.
The remaining $4.5 million will be utilised as follows:
-- to finance the costs and fees payable in respect of the
Disposal and the Tender Offer (including legal fees, taxes, and
broker's fees) as to approximately $1.9 million;
-- the balance will be applied to working capital to meet the
Company's ongoing obligations following the Tender Offer,
including, inter alia:
o compliance with Delaware General Corporate Law, which places
obligations on the Company to hold sufficient cash and appropriate
reserves following the Tender Offer;
o existing obligations to:
-- Alliance under the Asset Purchase Agreement (as to be
summarized in the Circular); and
-- Envance Technologies LLC ("Envance") in respect of the Joint
Development and License Agreement between Envance and a major
global consumer products company as announced in July 2017.
In addition to fulfilling the Company's obligations described
above the Board intends to restructure the Company to focus on the
animal health sector. It anticipates that during the next twelve
months it will utilize remaining staff and assets to:
-- expand geographically and increase the market penetration of
the PureScience Poultry Mite Dust and the PureScience Fly Control
products for swine;
-- complete field studies to demonstrate the efficacy of these
products in the European environment, in particular for the control
of poultry red mites;
-- complete pilot studies for main products controlling internal
parasites in production animals; and
-- follow the EPA registration process for Guardian(R).
The Company has other assets and potential income streams which
could contribute to funding the development plan which are
described in the Circular.
However, it is difficult to quantify the possible contribution
from these other income streams at present and therefore that the
Company's ability to follow its strategy in animal health and to
take advantage of this material market opportunity will require
additional funding. The Company is in early stage discussions with
a number of parties in this regard. The Directors intend that
future investment will be staged over time to coincide with
specific development progress.
Future strategy
The global population is on track to swell from the present 7
billion to over 9 billion people in the next 30 years.
One of the main challenges of sustaining this growth will be to
improve the efficiency of agricultural production-specifically, the
production of animal proteins. At the same time, customers are
asking for better quality food, without added chemicals, hormones,
antibiotics or pesticides, which are increasingly ineffective as
resistance develops. Regulatory authorities are also reducing the
permitted quantities and types of synthetic pesticides.
TyraTech aims to tackle some of these major issues by developing
nature-derived technology that allows an effective control of
insects and parasites, even those that are resistant to traditional
chemical pesticides, with formulations that are safe for the
animal, the environment and the food chain
The strategic focus of the Company on the animal health business
is determined by the following fundamental reasons:
-- animal health parasite control represents an addressable
market estimated at more than $6 billion, whereas, human health
insect and parasite control is limited mainly to two categories
(head lice and insect repellent) representing less than $800
million combined;
-- the animal health market presents large unmet needs to feed a
growing population and a strong consumer demand for food,
uncontaminated by pesticides;
-- the Company has a strong portfolio of patents (36 granted, 32
pending) with most applications in animal health;
-- the Company has a diversified pipeline of more than 15 new
products at various stages of development targeting the animal
health market;
-- the Company has good evidence from previous trials already
undertaken with Mondelez Global LLC (previously Kraft Foods Inc.)
that its technology is effective against intestinal parasites in
swine;
-- the Company has already tested the technology by the launch
of PureScience and Outsmart products in respectively the poultry
and equine markets.
Focus on implementing the animal health strategy
TyraTech has already made significant progress in
commercialising its technology to benefit animal health with two
brands: PureScience and OutSmart.
In 2015, TyraTech entered the animal health market with the
launch of its PureScience brand products to answer livestock
producers' need for effective, safe and more practical solutions to
insect and parasite control in US poultry production. The
PureScience brand is distributed by MWI Animal Health, a subsidiary
of AmerisourceBergen, (NASDAQ:ABC), a leading US animal health
distribution company, and is building a strong customer base ,
including the biggest producers of eggs and poultry in the US
(CalMaine Foods; Perdue; Tyson).
The line is expected to expand to swine and bovine operations.
In 2017, the Company and its partner, SmartPak, a leading
distributor of equine products in the US, launched a fly repellent
for horses under the SmartPak brand name OutSmart.
Customers in the food production industry are cautious and
typically try new products at a small number of facilities until
they gain confidence. Nevertheless, the PureScience and OutSmart
products already launched are expected to produce gross revenues in
the region of $0.8 million in 2017 and there are good signs of
growing market acceptance. However, these existing products address
smaller markets and the Directors believe that much larger
opportunities in the animal health market can be addressed. These
early commercial successes in smaller markets give confidence that
the Company can tackle the biggest problems facing farmers all
around the world in controlling insects and parasites.
TyraTech's development plan
Based on these early commercial successes, TyraTech has built an
ambitious development program for products targeting the $6 billion
p.a. animal health insect and parasite control addressable
market.
The first objective is to accelerate the development and
commercialization of products that are currently in the late stage
of final testing by the Company. The commercialization of existing
products will also be expanded. These products are destined mostly
for the control of insects in the production animal housing as well
as some external parasites and represent an estimated global market
segment of $500 million.
Because of the safety profile of the formulations, most should
benefit from an abbreviated registration process as they are
classified as low toxicity biocides (EPA; EMEA). This would reduce
the cost of development and the time to market.
The second and most important objective is to accelerate the
development of products targeting the bigger market segment of
controlling internal parasites of production animals, estimated at
$3 billion p.a. These internal parasites cause the most damage to
animals by reducing feed efficiency, causing lesions in the
digestive tract and, overall, reducing animal productivity and
disease resistance.
Over the next three years, TyraTech's development plan will be
to expand the commercialization of existing products and those
currently in late stage development and move its products targeting
internal parasites in production animals from optimizing the
formulations to pivotal studies and field testing. Subsequent years
will be focused on obtaining full registration as feed additives or
drugs and commercialization (or license) of these products.
Taxation
The attention of the Shareholders is drawn to Part IV of the
Circular, which provides summaries of certain UK and US taxation
consequences for Shareholders of accepting the Tender Offer. In
particular, Shareholders who have acquired their Shares through the
Enterprise Investment Scheme in the last three years may lose their
entitlements to tax reliefs as a result of the Tender Offer,
whether or not they decide to participate in it. Such Shareholders
should review Part IV of the Circular and consult their
appropriately qualified independent financial adviser immediately
if they are in any doubt as to the action they should take.
Circular and Notice of Special Meeting
The Disposal is conditional upon approval by a simple majority
of the Common Shares issued and outstanding and entitled to vote at
a Special Meeting of TyraTech Shareholders ("Special Meeting"). The
Company will today be sending a circular to all Shareholders which
sets out in detail the terms of the Disposal and contains a notice
of the Special Meeting which will be held at 3.00 p.m. (EST) on 27
December 2017 at the Company's principal offices, 5151 McCrimmon
Parkway, Suite 275, Morrisville NC 27560 USA.
AIM Rules
Following the Disposal, as the Company's other business streams
will continue to operate, the Company will not, following the
Disposal, be deemed to become a cash shell under AIM Rule 15.
Board Recommendation
The Board believes that the Disposal and the passing of the
Resolution is in the best interests of the Company and its
Shareholders as a whole. Accordingly, the Board will unanimously
recommend that Shareholders vote in favour of the Resolution to
sell Vamousse(R) as they intend to do in respect of their own
beneficial interests in Common Shares, amounting to 9,191,527
Common Shares in aggregate, representing 2.50% of the issued Common
Shares in the Company.
The Directors will make no recommendation to Shareholders in
relation to whether or not tendering for sale any of their Shares
pursuant to the Tender Offer is in their best interests. The
Directors have authorised the Tender Offer as a means to offer
partial liquidity to qualifying Shareholders, but are not in a
position to recommend that Shareholders accept or reject the Tender
Offer, as the Company itself is making the Tender Offer to its
Shareholders. Whether or not qualifying Shareholders decide to
tender any of their Shares will depend, among other things, on that
Shareholder's circumstances, including their desire for liquidity
and their tax position, and on their view of the Company's
prospects and future funding requirements, and the management's
experience and ability to develop the animal health division of the
Company. The Directors are not able to conduct individual
assessments of these factors for each Shareholder and, therefore,
make no recommendation to Shareholders as to whether to participate
in the Tender Offer. Shareholders in any doubt as to the action
they should take should consult an appropriately qualified
independent financial advisor, including those authorised under the
FSMA.
Bruno Jactel, Chief Executive of TyraTech commented:
"The sale of Vamousse demonstrates the strength of our
technology. The Tender Offer provides Shareholders with the
opportunity to realise value should they so wish. Our focus now is
on building the future of TyraTech in the animal health segment. I
strongly believe that TyraTech's technology can help solve some of
the big issues in the production of animal proteins by reducing the
usage of pesticides and allowing the customers to enjoy clean and
safe food. The focus on animal health will also allow us to capture
opportunities in a much bigger market than the human health market
for control of insects and parasites. To succeed in this estimated
$6 billion addressable market for animal health, we will be
focusing upon the expansion of existing products already launched
in the US (PureScience and Outsmart), and leveraging a strong
pipeline of products and an experienced management team. The
opportunity requires new investment funding and shareholders who
share our vision to exploit the investment proposition".
..-ends-
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
For further information:
TyraTech Inc.
Bruno Jactel, Chief Executive Tel: +1 919 415
Officer 4340
Erica H. Boisvert, Chief Financial Tel: +1 919 415
Officer 4287
www.tyratech.com
SPARK Advisory Partners Limited
(Nominated Adviser) Tel: +44 20 3368
Matt Davis / Mark Brady 3551
Allenby Capital Limited (Broker)
Chris Crawford Tel: +44 20 3328
5656
Belvedere Communications (PR) Tel: +44 20 3567
John West / Kim van Beeck 0510
This information is provided by RNS
The company news service from the London Stock Exchange
END
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