MEDG Medgenics(Regs)

 

TIDMMEDG 
 
RNS Number : 9944R 
Medgenics Inc 
11 May 2009 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
11 May 2009 
 
 
Medgenics, Inc. ('Medgenics' or the 'Company') 
 
 
Medgenics requests Stockholder Action in connection with 
fund raising through the proposed issue of convertible debentures 
 
 
The Board of Medgenics (AIM: MEDG & MEDU) announces proposals to facilitate a 
proposed fundraising through the issue of convertible debentures. 
In order to facilitate the proposed fundraising, it is necessary: 
1.to amend the Company's amended and restated certificate of incorporation (the 
"Restated Certificate") to repeal Article XII of the Restated Certificate, which 
currently grants Stockholders preemptive rights in certain circumstances; 
compliance with which will otherwise unduly delay and hinder this proposed 
fundraising effort; and 
2.    to obtain sanction and approval from Stockholders to the issue of 
convertible debentures (or other debt securities) in the original principal 
amount of up to US $5 million, (with discretion for the directors to increase 
the principal amount to up to US $7 million) notwithstanding that such 
borrowings level may be in excess of the limit prescribed by Article VIII of the 
Company's Amended and Restated By-Laws. 
Background 
The Company has regularly reported progress in relation to the Phase I/II 
clinical trial of EPODURE over the months since the trial commenced in August 
2008. The ongoing trial, which to date has treated a total of seven patients 
suffering from chronic renal failure, has been successful in demonstrating that, 
with a single treatment, EPODURE is safe and effective in providing more than 5 
months' sustained anemia treatment and, more broadly, has demonstrated the 
safety and effectiveness of the Group's Biopump platform technology. These 
results have, in turn, drawn active interest from large pharmaceutical and 
medical device companies from which the Company hopes to find long term 
strategic partners. 
Since the initial announcement of positive preliminary results in its Phase I/II 
clinical trial in November 2008 and in tandem with the implementation of the 
Company's strategy for seeking out strategic partnering opportunities, the 
directors have focused on raising further capital for the Company. This capital 
is required to ensure the Group's ability to: continue to finance its 
operations; pursue strategic partnering alliances with major corporations; 
continue its device development program; advance the development of additional 
products towards clinical trial and commercialisation; and, most importantly, 
conclude the Phase I/II clinical trial of EPODURE. 
Notwithstanding these efforts, the main focus of the board in its fundraising 
endeavours, which has been to seek to raise additional funding though a 
significant equity raise, has been frustrated to date due, in large part, to 
general market conditions in the UK, the USA and Israel and, more pertinently, a 
lack of investor appetite for early-stage "biotech" stocks since the Company's 
admission to AIM. However, the directors believe that the Company may be able to 
raise much needed capital through the issue of convertible debentures (the 
"Debentures"). It is proposed that the Debentures will not be redeemable by the 
Company, unsecured, mature on the second anniversary of the date of issuance and 
accrue interest at a rate of 10% per annum. In the event of default under the 
Debentures, it is contemplated that the interest rate shall increase 2% per 
month for every month the Debentures are in default to a maximum of 18% per 
annum.  The terms of the Debentures currently contemplate that they will 
automatically convert into Common Shares, together with the issuance of a 
significant amount of warrants to the Debenture holders upon conversion of the 
Debentures, if the Company completes a qualified transaction, such as a public 
offering of securities in the U.S. or certain merger transactions. Such warrants 
will be immediately exercisable upon issuance and shall expire five years from 
the date of issuance. The exercise price under the warrants shall be 110% of the 
pricing in the applicable qualified transaction. 
On the assumptions that: the conversion price of the Debentures is US $0.07; the 
full conversion of US $5 million in principal amount of Debentures; no 
conversion of accrued interest and issuance of 10% broker warrants as commission 
(the "Assumptions"), the conversion in full of the Debentures will give rise to 
the issuance of 71,428,571 new Common Shares, equivalent to approximately 37 per 
cent of the outstanding Common Shares as enlarged by such issue. Based on the 
Assumptions, the maximum number of Common Shares to be issued on exercise in 
full of the warrants issued under these arrangements will be 28,571,728 Common 
Shares, which would result in an additional US $2,199,999 in proceeds to the 
Company upon payment of the exercise price. It should be noted, however, that 
there can be no assurance that the actual conversion price will not be less or 
greater than the assumed $0.07 conversion price or that the other Assumptions 
will, ultimately, be proved to be correct. 
It should be noted, however, that, as the Company engages in its fundraising 
efforts, it may be necessary to amend the above terms, including in ways that 
may cause additional dilution to the current Stockholders. Furthermore, there 
can be no assurance that the Initial Fundraising will be consummated or, if 
consummated, that the same can be achieved on the terms described above. 
Initially, the Company is seeking to commence a private offering (the "Private 
Offering") of Debentures and warrants to accredited investors to raise up to US$ 
5 million (with the option to increase such amount to up to US $7 million in 
aggregate).  The securities offered in the Private Offering will not be or have 
not been registered under the U.S. Securities Act of 1933 (as amended) (the 
"Act") and may not be offered or sold in the United States absent registration 
or an applicable exemption from the registration requirements.  The Private 
Offering is contingent on the Stockholders' approval of the resolutions set out 
in the form of Written Consent of Stockholders which is to be posted to 
Stockholders this week (the "Written Consent"). 
SHOULD THE RESOLUTIONS SET OUT IN THE WRITTEN CONSENT NOT BE APPROVED AND 
CONSENTED TO BY STOCKHOLDERS HOLDING THE REQUISITE NUMBER OF THE ISSUED COMMON 
SHARES, THEN, IN THE ABSENCE OF ANY ALTERNATIVE FINANCE BEING ARRANGED AND MADE 
AVAILABLE WITHIN A VERY SHORT PERIOD OF TIME, IT IS UNLIKELY THAT THE COMPANY 
AND ITS SUBSIDIARY (THE "GROUP") WILL BE ABLE TO MEET THEIR FINANCIAL 
OBLIGATIONS OR CONTINUE THEIR OPERATIONS AND MAY, THEREFORE, BE UNABLE TO 
CONTINUE THE PHASE I/II CLINICAL TRIAL OF EPODURE THROUGH TO CONCLUSION. 
Preliminary announcement of results 
The preliminary announcement of the results of the Group for the year ended 31 
December 2008 is due to be published during the week of 18 May 2009. 
Recommendation 
The directors consider that the resolutions set out in the Written Consent are 
in the best interests of the Company and its Stockholders as a whole and are 
required at this time to allow the Company to continue its business operations 
and promote the success of the Group for the benefit of its Stockholders. 
Accordingly, the directors unanimously recommend that stockholders vote in 
favour of and approve and consent to the resolutions set out in the Written 
Consent of Stockholders as the directors themselves intend to do (or, as 
appropriate, intend to procure that the holders of Common Shares in which they 
are interested do) in relation to holdings amounting in aggregate to of 
35,505,614 Common Shares (representing approximately 30 per cent. of the 
existing Common Shares and voting rights in the Company). 
 
 
This press release does not constitute an offer to sell or the solicitation of 
an offer to buy nor will there be any sale of these securities in any state or 
jurisdiction in which such offer, solicitation or sale would be unlawful prior 
to registration or qualification under the securities laws of such state or 
jurisdiction. 
 
 
 
 
A full copy of the letter to stockholders and of the Written Consent will be 
posted on the Company's website at: www.medgenics.com following the posting of 
those documents to Stockholders this week. 
 
 
#### 
 
 
For further information, contact: 
 
 
+-----------------------------------------------+-------------------------------+ 
| Medgenics, Inc.                               | Phone: +972 4 902 8900        | 
| Dr. Andrew L. Pearlman                        |                               | 
|                                               |                               | 
+-----------------------------------------------+-------------------------------+ 
| Grayling (Financial PR)                       | Phone: +44 (0)7900 053 536    | 
| Jonathan Shillington                          |                               | 
| Alistair Scott                                |                               | 
|                                               |                               | 
+-----------------------------------------------+-------------------------------+ 
| Blomfield Corporate Finance Limited           | Phone: +44 207 489 4500       | 
| (Nominated Adviser)                           |                               | 
| James Pinner                                  |                               | 
| Alan MacKenzie                                |                               | 
|                                               |                               | 
+-----------------------------------------------+-------------------------------+ 
| SVS Securities plc (Broker)                   | Phone: +44 207 638 5600       | 
| Ian Callaway                                  |                               | 
|                                               |                               | 
+-----------------------------------------------+-------------------------------+ 
 
 
 
 
  Notes to Editors 
 
 
Medgenics, Inc. is a clinical-stage biopharmaceutical company developing its 
unique tissue-based Biopump platform technology to provide sustained-action 
protein therapy for the treatment of a range of chronic diseases. 
Medgenics currently has two products in development based on this technology: 
  *  EPODURE - producing erythropoietin (EPO) to treat anemia 
  *  INFRADURE - producing interferon-alpha (IFN-a) to treat Hepatitis-C 
 
 The Company's ongoing Phase I/II clinical trial for EPODURE in anemic patients 
continues to demonstrate proof of concept of the Biopump.  Designed to produce 
and deliver a therapeutic dose of EPO steadily for up to six months or more, 
EPODURE Biopumps are already maintaining effective anemia treatment for more 
than 5 months in earliest patients in the ongoing study, even with the low dose 
levels administered to date. 
Medgenics intends to develop its innovative products and bring them to market 
via strategic partnerships with major pharmaceutical and/or medical device 
companies, starting with EPODURE and INFRADURE. 
Medgenics plans to raise the requisite funds during 2009, to enable it to follow 
the current trial of EPODURE with a Phase IIb clinical trial in the US starting 
in 2010, and in addition, to commence a Phase I/II trial of INFRADURE in 
Hepatitis-C patients in Israel also during 2010. 
Beyond this, Medgenics plans to develop and/or out-license a pipeline of future 
Biopump products targeting the large and rapidly growing global protein therapy 
market, which is forecast to reach US $87 billion by 2010. Other potential areas 
include multiple sclerosis (interferon-B), hemophilia (Factor VIII), pediatric 
growth hormone deficiency (human growth hormone) and diabetes (insulin). 
Founded in 2000, Medgenics is a US-incorporated company with major operations in 
Misgav, Israel. Medgenics was admitted to the London AIM in December 2007 (AIM: 
MEDG and AIM: MEDU). 
 www.medgenics.com 
 
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS 
This release contains forward-looking statements, which include all statements 
other than statements of historical fact, including (without limitation) those 
regarding the Company's financial position, business strategy, plans and 
objectives of management for future operations. These statements relate to 
future events, prospects, developments and strategies. Forward-looking 
statements are sometimes identified by their use of the terms and phrases such 
as 'estimate,' 'project,' 'intend,' 'forecast,' 'anticipate,' 'plan,' 'planning, 
'expect,' 'believe,' 'will,' 'will likely,' 'should,' 'could,' 'would,' 'may' or 
the negative of such terms and other comparable terminology. All such 
forward-looking statements are based on current expectations and are subject to 
risks and uncertainties. Should any of these risks or uncertainties materialize, 
or should any of the Company's assumptions prove incorrect, actual results may 
differ materially from those included within these forward-looking statements. 
Accordingly, no undue reliance should be placed on these forward-looking 
statements, which speak only as of the date made. The Company expressly 
disclaims any obligation or undertaking to disseminate any updates or revisions 
to any forward-looking statements contained herein to reflect any change in the 
Company's expectations with regard thereto or any change in events, conditions 
or circumstances on which any such statements are based. As a result of these 
factors, the events described in the forward-looking statements contained in 
this release may not occur. 
 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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