RNS Number : 5191J
Osmetech PLC
04 December 2008
Osmetech plc
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN
PROPOSED PLACING OF UP TO 688,490,518 NEW ORDINARY SHARES
Introduction
Osmetech plc announces today that it and Canaccord Adams have placed 688,490,518 new Ordinary Shares at 1p per share with certain of the
Company's shareholders. Of these new Ordinary Shares, 241,686,998 have been placed firm, with the balance of 446,803,520 new Ordinary
Shares being placed subject to shareholder approval at an extraordinary general meeting of the Company to be convened on or around 22
December 2008. The placing of the Firm Placing Shares will raise gross proceeds for the Company of �2.4 million, and the placing of the
Conditional Placing Shares will raise an additional �4.5 million for the Company. The Firm Placing Shares and the Conditional Placing Shares
represent 338 per cent. of the existing issued share capital of the Company, and the placing price of 1p per share represents a discount of
71 per cent. to the closing price of an Ordinary Share on 3 December 2008, being the latest date prior to the issue of this announcement. As
a result of the Placing, Efficacy Biotech Master Fund Limited and its Affiliates, Schroders and Gartmore will, when taken together with their existing shareholdings in the Company, own 40.06 per
cent., 12.51 per cent. and 18.66 per cent. respectively of the Enlarged Share Capital of the Company.
Efficacy Biotech Master Fund Limited, Schroders and Gartmore, who are all participating in the Placing at the Placing Price, are
considered to be Substantial Shareholders under the AIM Rules and as a result are considered to be Related Parties for the purposes of the
AIM Rules. The Directors consider, having consulted with the Company's nominated adviser, Canaccord Adams, and having regard to the
Company's financial position, that the terms of the placing of the Firm Placing Shares and Conditional Placing Shares with Efficacy Biotech
Master Fund Limited, Schroders and Gartmore are fair and reasonable insofar as the shareholders of the Company are concerned.
Canaccord Adams has agreed conditionally, pursuant to the Placing Agreement, to use its reasonable endeavours to place the Placing
Shares (save for those Placing Shares to be placed with Efficacy Biotech Master Fund and its Affiliate) at the Placing Price. The Placing
has not been underwritten, and is conditional upon the conditions to the Placing Agreement being satisfied, and it not being terminated in
accordance with its terms. This Announcement sets out further information on the Company and the background to and reasons for the Placing.
Definitions used in this Announcement are set out at the end of this Announcement.
Background to and Reasons for the Placing
The Global molecular diagnostics market and the knowledge and understanding of healthcare technology companies is heavily centred on the
US. A significant number of emerging healthcare technology companies trade on NASDAQ. Consequently, on 12 September 2008 Osmetech announced
proposals to undertake an issue of American Depositary Shares and obtain a listing of such shares on the NASDAQ Global market. As market
conditions have deteriorated, the Directors have concluded that in the current market environment there is insufficient interest to proceed
with the ADS Issue and the NASDAQ Listing at this time and, given the Company's urgency to secure additional working capital, have concluded
that it is in the best interests of the Company and shareholders as a whole to proceed with the Placing. On 2 December 2008, the Company
filed an application for withdrawal of the US registration statement relating to the ADS Issue with the US Securities and Exchange
Commission.
As at 30 November 2008, the Group's cash balances stood at approximately �644,671 ($981,060). Without an immediate injection of further
funding, the Company would not be in a position to continue to trade. The Firm Placing and the Conditional Placing are being proposed at a
price of 1p per new Ordinary Share which is a substantial discount to the closing price of an Ordinary Share on 3 December 2008, the last
trading day prior to the issue of this Announcement. However, in view of prevailing market conditions and the Company's immediate need for
funds, this price represents the best available terms that could be obtained by the Board.
The Board has been able to secure funding of �6.9 million ($10.6 million) pursuant to the Firm Placing and the Conditional Placing from
Efficacy Biotech Master Fund Limited and its Affiliates, Gartmore and Schroders (and certain other of the Company's existing shareholders),
who are the Company's principal shareholders. In view of the time and cost associated with the production of a prospectus, the Board is
unable to make a general offer available to shareholders through a rights issue or other pre-emptive offer. The Board has also considered
various other funding options, including raising funding through debt, but in the limited time available to the Board, and the difficulty in
raising debt funding in the current economic climate, the only realistic funding option available to the Company is to raise funds from its
existing principal shareholders.
Current Trading and Prospects
Revenues in the six months ended 30 June 2008 were �127,994 and increased by 83 per cent. over revenues of �70,061 for the corresponding
period in 2007. Revenues for the eleven-month period ended 30 November 2008 increased to $586,314 (�312,140). Revenues were principally from
sales of the Company's eSensor Cystic Fibrosis Carrier Detection Test for use on the eSensor 4800 System. For the next twelve months, the
Company expects further growth in product revenues from sales of its eSensor Warfarin Sensitivity Test, eSensor Extended Warfarin
Sensitivity Test, eSensor 2C9 Genotyping Test and eSensor Cystic Fibrosis Carrier Detection Tests.
The Company had 10 eSensor 4800 Systems in commercial use at customer sites as of 30 June 2008, which had increased to 16 at 30 November
2008. The intention is to upgrade existing eSensor 4800 System customers to the second generation platform, the X-T8, following FDA
clearance for the Company's eSensor XT-8 Cystic Fibrosis Test expected in 2009. Clinical trials are due to commence next week after
successful pre-clinical trials completed in November.
The XT-8 roll out continues to progress well and the Directors believe that the rate of new placements compares favourably to the
competition. The Company has a significant active lead list which is being converted into evaluations and customers. At 30 November 2008,
there were 18 eSensor XT-8 Systems in use, including 14 under evaluation. To date no instruments under evaluation with potential customers
have been returned to the Company, which the Directors believe is a strong endorsement of the XT8 and Osmetech's business model. In
particular, the Company's business decision to place the instruments at no cost to the customer on a reagent rental basis has been
appreciated by customers, especially given the reduction in hospital capital expenditures as a result of the current economic climate. A
number of end-users have reported a very positive experience with the instrument, and the Company believes such experiences will help create
customer demand for the XT-8, especially as the menu of available tests increases.
Use of Proceeds
The issue of the Placing Shares will raise approximately �6.7 million ($10.3 million) net of estimated expenses for the Company.
The Company intends to use the net proceeds of the Placing for the following purposes:
1. to meet the initial costs of rationalising the structure of the business - approximately $1 million;
2. to continue the development and obtain regulatory clearance for further tests for the eSensor XT*8 System;
3. to fund sales, marketing and service personnel and marketing initiatives in connection with further placements of eSensor XT*8
Systems and launches of new tests; and
4. the remainder for additional working capital, general corporate purposes and to explore opportunities to expand its current business
through strategic alliances and licenses with other businesses.
The expected use of the net proceeds of the placing of the Placing Shares referred to above represents the Directors' current intentions
based on the Company's present plans and business condition. The Company will retain broad discretion in the allocation and use of the net
proceeds. Assuming that no further funds are raised by the Company, either through capital, licensing, collaborations or other commercial
activities, the net proceeds of the placing of the Placing Shares are expected to provide sufficient funds to support the business until the
third quarter of 2009.
If shareholders were not to approve the First Resolution to be proposed at the EGM, the Conditional Placing would not proceed, and the
Company would therefore only receive the �2.4 million ($3.7 million) from the Firm Placing. The funds from the Firm Placing would be
sufficient to carry out the rationalisation programme referred to above, but absent further sources of funding, the Company would not have
sufficient working capital to trade beyond the end of January 2009.
The rationalisation programme is anticipated to result in a consolidation of the Company's operations in Pasadena and result in a
significant reduction in both operating costs and in the number of employees. This should not impact the Company's ability to increase the
installed base of XT-8s, expand the menu of tests, meet customer demand or grow sales revenues in the short to medium term. Longer term, the
Directors expect to augment the Company's new product development activities by collaborating more with third parties prepared to fund the
development of specific tests for the XT-8 System.
Strategy
The Company's overall objective is to continue to expand the use of its eSensor platform by providing a growing menu of tests on an
easy-to-use, fast and cost-effective platform. To achieve this objective, the Company intends to broaden its menu of tests and build an
installed base of customers. The Company is focussing its efforts upon the development and launch of new tests outlined below.
Notwithstanding the receipt of the net proceeds of the Placing, the Board is considering all strategic options to maximise shareholder
value, including attracting further funding into the business, either through investors or commercial partners, a merger of the business
with a complementary third party business, or the sale of the Company.
Osmetech's Business
Osmetech is wholly focussed on the molecular diagnostics market, the fastest growing sector of the worldwide in-vitro diagnostics
market. This is centred on its proprietary technology and intellectual property portfolio built around the acquisition of Clinical Micro
Sensors, Inc. from Motorola in 2005.
Osmetech develops, manufactures and markets an advanced molecular diagnostic platform, the eSensor platform, which enables hospitals and
reference laboratories to perform simple, rapid and cost-effective DNA, RNA and protein testing. The Company's eSensor platform, which
utilises a well-established electrochemical detection technology, is designed to support a broad menu of tests and provide accurate results
while minimizing technician involvement. This unique platform permits multiplexing, or simultaneously running multiple tests on individual
samples, and random access testing, or the ability to initiate tests while other tests are in progress. The Directors believe that the
Company's eSensor platform has broad applicability, and Osmetech is currently developing tests for a variety of diagnostic applications in
pharmacogenetics, genetic diseases and infectious diseases.
In July 2008, the Company received 510(k) clearance from the FDA for its eSensor XT-8 System, as well as its eSensor Warfarin
Sensitivity Test, and has recently commenced marketing these products. The eSensor XT-8 System is the successor to the Company's eSensor
4800 System, for which, together with its eSensor Cystic Fibrosis Carrier Detection Test, the Company received 510(k) clearance from the FDA
in 2006. While marketing a limited number of eSensor 4800 Systems to validate the Company's technology and build a commercial
infrastructure, the Company developed its second-generation eSensor XT-8 System, incorporating the feedback from the FDA clearance process
and field use of the eSensor 4800 System.
The Directors believe that the features of the cost-effective eSensor XT-8 System can provide a significant additional source of revenue
to hospitals that currently outsource their molecular diagnostic testing to reference laboratories, as well as to reference laboratories
that do not currently perform molecular diagnostic testing.
Osmetech's Tests
The Company received 510(k) clearance from the FDA for its eSensor Warfarin Sensitivity Test together with the eSensor XT-8 System in
July 2008. The eSensor Warfarin Sensitivity Test is a personalised medicine test that determines how an individual metabolizes and responds
to the drug Warfarin, which is the most commonly prescribed oral anti-coagulant in North America and Europe. If administration of Warfarin
is not managed carefully, life threatening side effects may occur. The test analyzes three biomarkets associated with Warfarin metabolism.
The Company also recently launched a drug metabolism test for CYP2C9 biomarkers, available for research use only. In addition, in 2006, the
Company received 510(k) clearance for a Cystic Fibrosis carrier detection test for use with the eSensor 4800 System.
The Company is also currently developing a number of additional tests for its second-generation, eSensor XT-8 System.
* eSensor Extended Warfarin Sensitivity Test. Based on the eSensor Warfarin Sensitivity Test, this test incorporates a number of
additional markers, including the exclusively-licensed CYP450-4F2 biomarker. Clinical trials have now been completed and the Company remains
on track to submit an application for 510(k) clearance by the end of 2008.
* eSensor XT-8 Cystic Fibrosis Test. This is a test for pre-conception screening of cystic fibrosis gene carriers for use with the
eSensor XT-8 System. In 2006, the FDA cleared the Company's related test for the first generation eSensor 4800 System. The Company expects
to submit an application for 510(k) clearance for the second generation XT-8 System in early 2009.
* Respiratory Pathogen Test Panel. This is a test panel currently in development to detect major respiratory viruses and aid in the
identification of bacterial and viral infections. This test is currently in development and the Company expects to submit an application for
510(k) clearance when development is completed.
* Venous Thrombosis Test. This is a genetic test for the most common mutations associated with increased risk of blood clots, which
can lead to stroke and pulmonary embolism. This test is currently in development and the Company expects to submit an application for 510(k)
clearance when development is completed.
Additionally, the Company seeks to develop and commercialise new tests for detecting human genetic markers, infectious diseases and
cancer that are based on biomarkers that are established or have been validated by scientific studies. The Company will also look to
collaborate with strategic partners in order to obtain the funding for these development projects and achieve further market penetration of
its products.
Board Structure
With effect from Second Admission, it is anticipated that the following changes to the board of Osmetech will become effective. Jon Faiz
Kayyem and Mark Lappe, Managing Partners of Efficacy Capital Ltd, will become non-executive Chairman and non-executive director
respectively. Daryl Faulkner will step down as Chairman but will remain as a non-executive director. The current non-executive directors,
Gordon Hall and Gordon Kuenster will leave the board.
Related Party Transaction
Efficacy Biotech Master Fund Limited, Schroders and Gartmore, who are all participating in the Placing at the Placing Price, are
considered to be Substantial Shareholders under the AIM Rules and as a result are considered to be Related Parties for the purposes of the
AIM Rules. The Directors consider, having consulted with the Company's nominated adviser, Canaccord Adams, and having regard to the
Company's financial position, that the terms of the placing of the Firm Placing Shares and Conditional Placing Shares with Efficacy Biotech
Master Fund Limited, Schroders and Gartmore are fair and reasonable insofar as the shareholders of the Company are concerned. The
shareholdings of Efficacy Biotech Master Fund and its Affiliates, Schroders and Gartmore prior to, and after the placing of the Placing
Shares are set out below:
At the date of this Announcement Immediately following the placing of the
Firm Placing Shares and Conditional
Placing Shares
Number of Ordinary % of issued share Number of Ordinary % of issued share
Shares held capital Shares held capital
Efficacy Biotech Master Fund 32,525,000 15.99 357,284,678 40.06
Limited and its Affiliates
Schroders 27,175,507 13.36 111,613,023 12.51
Gartmore 24,055,762 11.82 166,435,601 18.66
Extraordinary General Meeting
A circular convening an Extraordinary General Meeting of the Company to authorise the Directors to allot the Conditional Placing Shares
is expected to be posted to shareholders shortly.
Contacts
For further information contact:
Osmetech plc: +44 (0) 20 7849 6027
James White, Chief Executive
David Sandilands, Finance Director
Madano Partnership: +44 (0) 207 593 4000
Matthew Moth
Mark Way
Canaccord Adams Limited: +44 (0) 20 7050 6500
Robert Finlay
Henry Fitzgerald-O'Connor
General
Canaccord Adams, which is authorised and regulated by the Financial Services Authority, is acting exclusively for the Company and no-one
else in relation to the Placing and will not be responsible to any person other than the Company under FSMA, the rules of the FSA or
otherwise for providing the protections afforded to its clients or for any matter concerning the Placing or for providing advice in relation
to the Placing or in relation to the contents of this Announcement or any other transaction, arrangement or matter referred to herein.
This Announcement is for information purposes only and does not constitute an offer to issue or sell, or the solicitation of an offer to
subscribe for or acquire, any securities to any person in any jurisdiction, including without limitation in the United States, Canada,
Australia or Japan. This Announcement is not an offer of securities for sale in the United States. Securities may not be offered or sold in
the United States absent registration under the Securities Act or an exemption therefrom. The Company has not registered and does not intend
to register any of its Ordinary Shares under the Securities Act. No Placing Shares will be offered or sold to the public in the United
States.
The distribution of this Announcement in certain jurisdictions may be restricted by law. Persons into whose possession this Announcement
comes are required by the Company and Canaccord Adams, to inform themselves about and to observe any such restrictions.
Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.
DEFINITIONS
In this Announcement:
"ADS Issue" means the previously proposed issue of American Depositary Shares in connection with the previously proposed listing on the
NASDAQ Global Market;
"Affiliate" means in relation to a person (the "first person") each of its holding companies, subsidiaries, branches, associated
undertakings and affiliates (affiliates having the meaning given in Rule 405 or in Rule 501(b) of the Securities Act, as applicable in the
context used) (including, without limitation, joint venture partners) from time to time (and subsidiaries of any such subsidiaries,
branches, associated undertakings, affiliates and holding companies) (including, without limitation, joint venture partners) and each of
their and the first person's respective officers, directors, supervisory board members, employees, representatives, controlling persons,
shareholders and agents from time to time, and includes, in relation to Efficacy Biotech Master Fund Ltd, Crown Taylor Money Purchase
Pension Plan;
"AIM Rules for Companies" means the AIM Rules for Companies published by London Stock Exchange;
"AIM Rules for Nominated Advisers" means the AIM Rules for Nominated Advisers published by London Stock Exchange;
"AIM Rules" means together, the AIM Rules for Companies and the AIM Rules for Nominated Advisers, both published by London Stock
Exchange governing admission to and the operation of AIM;
"AIM" means the AIM market of the London Stock Exchange;
"Announcement" means this announcement;
"Board" or "Directors" means the board of directors of the Company;
"Canaccord Adams" means Canaccord Adams Limited;
"Company" or "Osmetech" means Osmetech plc;
"Conditional Placing" means the conditional placing of the Conditional Placing Shares;
"Conditional Placing Shares" means 446,803,520 new Ordinary Shares, comprising 236,047,143 new Ordinary Shares which have been placed by
Canaccord Adams with certain of the Company's institutional shareholders and 210,756,377 new Ordinary Shares placed with Efficacy Biotech
Master Fund Limited and its Affiliate directly by the Company, and which are (subject, inter alia, to the passing of the First Resolution to
be proposed at the EGM), expected to be admitted to AIM on or around 23 December 2008;
"Enlarged Share Capital" means the issued share capital of the Company as enlarged by the issue of the Placing Shares;
"Extraordinary General Meeting" or "EGM" means the Extraordinary General Meeting of the Company proposed to be convened by the Company
to be held on or around 22 December 2008;
"Firm Placing" means the placing of the Firm Placing Shares;
"Firm Placing Shares" means 241,686,998 new Ordinary Shares, comprising 127,683,697 new Ordinary Shares which have been placed firm by
Canaccord Adams with certain of the Company's institutional shareholders and 114,003,301 new Ordinary Shares placed with Efficacy Biotech
Master Fund Limited and its Affiliate directly by the Company, and which are expected to be admitted to AIM on 8 December 2008;
"First Admission" means the admission of the Firm Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules;
"First Resolution" means the resolution to be set out in the notice of Extraordinary General Meeting granting authority to the Directors
to allot the Conditional Placing Shares;
"FDA" means the US Food and Drug Administration;
"FSA" means the Financial Services Authority;
"FSMA" means the Financial Services and Markets Act 2000, as amended;
"Group" means the Company and its subsidiaries;
"London Stock Exchange" means London Stock Exchange plc;
"Ordinary Shares" means ordinary shares of 0.10 pence each in the share capital of the Company;
"Placing" means the placing of the Placing Shares at the Placing Price by Canaccord Adams on behalf of the Company;
"Placing Agreement" means the agreement dated 3 December 2008 between the Company and Canaccord Adams relating to the Placing;
"Placing Price" means 1 pence per Placing Share;
"Placing Shares" means together the Firm Placing Shares and the Conditional Placing Shares;
"NASDAQ Listing" means the previously proposed listing of American Depositary Shares on the NASDAQ Global Market;
"Regulatory Information Service" means any of the regulatory information services included within the list maintained on the London
Stock Exchange's website;
"Second Admission" means the admission of the Conditional Placing Shares to trading on AIM becoming effective on accordance with the AIM
Rules;
"Securities Act" means the US Securities Act of 1933, as amended;
"Substantial Shareholder" means as that term is defined in the AIM Rules;
"UK" or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland;
"United States" or "US" means the United States of America, its territories and possessions, any State of the United States and the
District of Columbia;
"$" means the lawful currency of the United States; and
"�" means the lawful currency of the United Kingdom.
In this announcement UK Sterling amounts have been converted into US Dollars (and vice versa) at the noon buying rate of the Federal
Reserve Bank of New York for the date specified next to such amounts or, where no date is specified, at an exchange rate of �1 = $1.5396.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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