C4X Discovery Holdings plc
(“C4XD”, “C4X Discovery” or the “Company”)
Proposed Placing to raise approximately £15.0 million
Advancing the next wave of out-licensing opportunities
21 October 2020 - C4X Discovery Holdings plc (AIM: C4XD), a pioneering Drug Discovery company, today announces a proposed conditional placing to raise approximately £15.0 million, made up of:
- EIS/VCT Placing Shares to be offered to VCTs or those investors seeking to claim EIS relief in relation to their investment; and
- Units, each comprising one General Placing Share and one Warrant, to be offered to those investors who are neither VCTs nor seeking EIS relief.
Throughout the rest of this Announcement “Relevant Securities” or “Relevant Security” shall mean either the EIS/VCT Placing Shares or the Units as the context requires.
The Relevant Securities will be placed at an Issue Price of 14.0 pence per Relevant Security to raise approximately £15.0 million before expenses (the "Placing").
The Issue Price for each Relevant Security represents a discount of approximately 11.1 per cent. to the closing middle market price of 15.75 pence per existing ordinary share on 20 October 2020, being the last practicable date prior to the date of this Announcement.
The net proceeds of the Placing (excluding any proceeds arising from exercise of the Warrants) will be used to strengthen the Company’s balance sheet as partnering discussions and strategic collaborations progress, to advance the core investment portfolio to near-term inflexion points and to continue to apply C4XD’s technologies to validate the next generation of commercially-attractive targets and programmes. The net proceeds of the Placing are expected to provide the Company with at least twelve months working capital.
Panmure Gordon is acting as nominated adviser, sole broker and sole bookrunner to the Company.
The Placing will be conducted by way of an accelerated bookbuilding process (the "Bookbuild") which will be launched immediately following this Announcement in accordance with the terms and conditions set out in Appendix I. The Relevant Securities are not being made available to the public. It is envisaged that the Bookbuild will be closed by no later than 4.30 p.m. BST today, 21 October 2020, although Panmure Gordon and the Company reserve the right to amend this timeframe at their discretion. Details of the number of Relevant Securities and the approximate gross proceeds of the Placing will be announced as soon as practicable after the closing of the Bookbuild. The Placing is not underwritten.
Today, Panmure Gordon entered into a placing agreement with the Company in relation to the Placing (the “Placing Agreement”) pursuant to which Panmure Gordon, as agent for and on behalf of the Company, has conditionally agreed to use its reasonable endeavours to place the Relevant Securities with certain institutional investors. The Placing is conditional upon, inter alia:
- the passing of the Resolutions to ensure the Directors have the necessary authorities and powers to allot the Relevant Securities;
- Admission of the Placing Shares to trading on AIM becoming effective; and
- the Placing Agreement between the Company and Panmure Gordon not having been terminated.
A General Meeting is being convened for the purpose of considering and, if thought fit, passing the Resolutions at 11.00 a.m. on 9 November 2020. Further details of the General Meeting will be included in the Circular. It is expected that the Circular will be dispatched on or around 22 October 2020 and will also be available on the Company's website at www.c4xdiscovery.com.
Commenting on the Placing, Clive Dix, CEO of C4X Discovery, said:
“Whilst 2020 has presented many challenges to the pharmaceutical industry, at C4XD, we have continued to make significant headway across our portfolio. Indivior has taken our first partnered molecule into a Phase 1 clinical trial for the treatment of opioid addiction with topline data expected next year. Our key programmes continue to demonstrate progress and generate positive data. As we continue to drive forward potential partner discussions across the portfolio, we appreciate the ongoing support we have received from our shareholders and partners, and remain focused on, and confident in, delivering the next generation of out-licensing opportunities.”
Background to the Proposed Placing
Using cutting-edge drug discovery technologies and expertise, C4XD aims to efficiently deliver world leading medicines which are developed by our partners for the benefit of patients. The Company’s goal is to drive returns through early-stage revenue-generating licensing deals for its high value pre-clinical asset portfolio with the pharmaceutical industry. C4XD aims to provide a highly valuable and differentiated approach to drug discovery through its enhanced DNA-based target identification and candidate molecule generation capabilities, generating differentiated candidates across multiple disease areas.
C4XD completed its first licensing deal in March 2018 with Indivior UK Limited (“Indivior”) to further develop and commercialise C4XD's oral Orexin-1 receptor antagonist ("C4X_3256"), also known as INDV-2000, for the treatment of addiction. Under the terms of the agreement, C4XD received an upfront payment of US$10 million and could receive up to US$284 million of potential development, regulatory and commercialisation milestones in addition to royalties. In turn, Indivior received a global and exclusive licence to C4X_3256 and all other compounds in the same patent family and is responsible for the cost and execution of all further development of C4X_3256 in multiple indications. In September 2019, Indivior announced that it had been awarded a NIH HEAL grant for the application entitled “Clinical Evaluation of C4X_3256, a non-opioid, highly-selective Orexin-1 Receptor Antagonist for the Treatment of Opioid Use Disorder”, providing funding for key Phase I and Phase II enabling studies. In July 2020, Indivior commenced a Phase I clinical trial for C4X_3256, for the treatment of opioid dependence with the first patient now dosed. This single ascending dose study in healthy volunteers is anticipated to complete by the end of 2020, with topline data expected next year.
In November 2018, C4XD announced that it had entered into a discovery partnership with LifeArc®, a UK medical research charity. C4XD and LifeArc are collaborating to progress medicinal chemistry efforts on a novel, commercially attractive programme with applicability across oncology and inflammation indications. The LifeArc risk-share collaboration on an oral small molecule inhibitor programme for the treatment of haematological cancers and inflammatory disease continues to progress well with the initial phase successfully completed, despite being impacted by COVID-19. Three novel series have been identified by harnessing C4XD's Conformetrix technology and data obtained in 2020 has demonstrated functional cell activity and oral bioavailability. Optimisation studies continue to increase cellular potency with the aim of showing in vivo inhibition of the target for a prototype molecule.
In October 2019, the Company announced an update on the oral IL-17 inhibitor programme. C4XD has identified small molecules that can selectively block IL-17 activity whilst keeping molecular size of the molecule in the traditional "drug-like" range. A novel, potent oral series of IL-17 inhibitors that significantly reduce IL-17 induced inflammation in vivo, is being optimised towards candidate shortlist. Progress by Leo Pharma A/S, having recently filed an IND for the first oral IL-17 inhibitor has intensified the Company’s commercial discussions with potential partners. The oral IL-17 inhibitor programme is a significant opportunity across multiple indications.
In October 2019, the Company also announced an update on the oral NFR-2 activator programme. C4XD is progressing a series of novel potent activators of the NRF-2 pathway for the treatment of a variety of inflammatory diseases. The identified series of keap-1 inhibitors has been found to significantly activate NRF-2 following oral dosing, providing anti-inflammatory and anti-oxidant activity. In C4XD studies, multiple lead compounds show greater than a 12-hour duration of action following low oral dosing on activation of NRF-2 in key tissues such as the lung, the liver and in blood. More recently, one of C4XD's lead NRF-2 activator molecules, has also been shown to significantly inhibit the disease score in a pre-clinical model of inflammatory bowel disease (IBD) in a dose-related manner. The Company has received non-binding term sheets for SCD and IBD indications and is currently under CDA for pulmonary arterial hypertension (PAH), however, progression into IND enabling studies is now considered to be required in order to increase value and further differentiate from competitor series.
In August 2020, the Company announced that significant progress has been made on C4XD's early oral inhibitor programme targeting α4β7 integrin for the treatment of IBD. Effective antibody therapy against this target is already approved, removing the clinical target risk, but effective oral therapy remains highly sought after. C4XD has identified a second series of novel, potent and selective inhibitors providing a further competitive edge for this programme. This reaffirms the capability of C4XD's Conformetrix technology to discover novel chemical scaffolds for high-value challenging drug targets. Both series have recently demonstrated oral bioavailability in PK studies with the current focus on improving PK properties to demonstrate functional inhibition of α4β7 integrin in vivo following oral dosing. The Company is currently generating improved molecules to move to in vivo studies and despite being early stage, the Company is in discussion with several potential partners, which are under CDA.
Finally, in August 2020, C4XD announced that it has entered a new collaboration with the GEN-COVID consortium, a network of more than 20 hospitals in Italy led by Professor Alessandra Renieri of the University of Siena. The collaboration will use the unique mathematical genetic analysis methodology of Taxonomy3® to investigate the role genetics plays in the widely varied disease susceptibility, severity and prognosis observed between individuals with COVID-19. Taxonomy3® will analyse genetic data from a significant number of COVID-19 positive patients collected by the consortium to identify genes associated with severe COVID-19 disease. The aim is to identify a unique genetic signature that can successfully predict mild vs. severe disease to inform treatment of patients at risk. The analysis may also uncover novel biology driving severity of the disease which may inform potential novel drug targets for treatment.
Reasons for the Proposed Placing
The next stage of C4XD’s development will focus on out-licensing assets for clinical development to leading pharma companies. To support the Company’s execution of its strategy, C4XD is seeking to raise approximately £15.0 million by way of the Placing to further support corporate development and on-going commercial activities. In particular, the Company intends to use the net proceeds of the Placing (excluding any proceeds arising from exercise of the Warrants) to:
- strengthen the balance sheet as partnering discussions and strategic collaborations progress;
- progress the core investment portfolio to near-term inflection points; and
- continue to apply C4XD’s technologies to validate the next generation of commercially attractive targets and programmes.
On 29 April 2020, C4XD announced its interim results for the six months ended 31 January 2020. Investment in R&D was £3.6 million in the six months ending 31 January 2020, down £1.3 million from the £4.9 million in the six months ended 31 January 2019. The Company had cash and cash equivalents (unaudited) at 31 July 2020 of approximately £5.6 million.
The Directors believe that C4XD’s combination of state-of-the-art proprietary technologies, highly experienced scientific team, and industry experience puts the Company in a strong position to fulfil the pharmaceutical industry’s demand for high quality early-stage drug candidates. By ensuring clear line of sight to commercialisation at the outset, the Company now aims to build on its existing licence with Indivior to generate a stream of other potentially high-value partnering opportunities and revenue generating R&D partnerships. The Company remains confident about the its opportunities and the future of UK drug discovery.
Details of the Placing and the Warrants
The Company proposes to raise approximately £15.0 million (before expenses) by way of a conditional, non-pre emptive placing of EIS/VCT Placing Shares and Units, each at the Issue Price. The Relevant Securities will, pursuant to the Placing Agreement, be placed by Panmure Gordon, as agent for the Company, with institutional and other professional investors.
EIS and VCT investors should note that it is intended that Admission of the EIS/VCT Placing Shares (expected to be on 10 November 2020 (“First Admission”)) will occur on the Business Day immediately before Admission of the General Placing Shares (expected to be on 11 November 2020 (“Second Admission”)). The placing of the EIS/VCT Placing Shares is conditional, amongst other things, on the Placing Agreement not having been terminated in accordance with its terms prior to First Admission. The placing of the Units is conditional, amongst other things, on the Placing Agreement not having been terminated in accordance with its terms prior to Second Admission.
The Placing Agreement contains provisions entitling Panmure Gordon to terminate the Placing Agreement prior to First Admission (in respect of the EIS/VCT Placing Shares) or Second Admission (in respect of the General Placing Shares) becoming effective. If this right is exercised, the Placing will lapse (but not in respect of the EIS/VCT Placing Shares if First Admission has occurred at that time).
The Issue Price represents a discount of approximately 11.1 per cent. to the closing mid-market price of the Ordinary Shares of 15.75 pence on 20 October 2020 (being the last practicable date prior to the date of this Announcement). The Placing Shares will be issued credited as fully paid and will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid following Second Admission.
The Placing is not being underwritten.
The Placing Agreement is conditional upon, inter alia, the approval of the Resolutions by Shareholders at the General Meeting (further details of which are set out below), First Admission occurring on or before 8.00 a.m. on 10 November 2020 (or such later date as Panmure Gordon and the Company may agree, being not later than 8.00 a.m. on 24 November 2020), Second Admission occurring on or before 8.00 a.m. on 11 November 2020 (or such later date as Panmure Gordon and the Company may agree, being not later than 8.00 a.m. on 25 November 2020), and the Placing Agreement not having been terminated prior to First Admission or Second Admission (as the case may be).
The Placing Agreement contains warranties from the Company in favour of Panmure Gordon in relation to (amongst other things) the Company and its business. In addition, the Company has agreed to indemnify Panmure Gordon in relation to certain liabilities it may incur in undertaking the Placing. Panmure Gordon has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, for a material breach of any of the warranties or for force majeure.
Each Warrant shall confer on the holder thereof the right, on any Business Day during the Exercise Period, the right to subscribe for one Ordinary Share at the Exercise Price for cash. On the expiry of the Exercise Period any unexercised Warrants and any rights thereunder shall lapse. The Warrants are non-transferable (subject to certain limited exceptions) and may be exercised in whole or in part, provided that any partial exercise of a Warrant by a holder is subject to a minimum exercise price of the lesser of £1,000,000 (in aggregate) or the balance of their Warrants then outstanding.
The Warrants are expected to be issued in certificated form within approximately 2 weeks following Second Admission and may be exercised for the issue of new Ordinary Shares at any time within the Exercise Period. The Warrants will be unlisted and no application will be made for the Warrants to be admitted to trading on AIM.
It is the Directors’ understanding that the Warrants will not be a qualifying holding for VCTs and that for the purpose of the Enterprise Investment Scheme, the Warrants may impact an EIS investor’s eligibility for tax relief in relation to EIS/VCT Placing Shares subscribed for (and any new Ordinary Shares issued as a result of exercise of Warrants held by such EIS investor). Accordingly, the Warrants are not being offered to VCTs or those investors seeking to claim EIS relief in relation to their investment.
EIS and VCT
It is expected that the EIS/VCT Placing Shares rank as "eligible shares" and will be capable of being a "qualifying holding" for the purposes of investment by VCTs, and that the Company expects it can issue EIS 3 "compliance certificates" for the purpose of EIS.
Investors considering taking advantage of EIS relief or making a qualifying VCT investment are recommended to seek their own professional advice in order that they may fully understand how the relief legislation may apply in their individual circumstances. Any Investor who is in any doubt as to his taxation position under the EIS and VCT legislation, or who is subject to tax in a jurisdiction other than the UK, should consult an appropriate professional adviser. As noted above, investors subscribing for EIS/VCT Placing Shares will not receive accompanying Warrants as part of their subscription.
Applications will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. No application will be made for the Warrants to be admitted to trading on AIM.
It is expected that, subject to the passing of the Resolutions at the General Meeting, First Admission will occur and dealings in the EIS/VCT Placing Shares will commence on 10 November 2020 at 8.00 a.m. (or such later date as Panmure Gordon and the Company may agree, being not later than 8.00 a.m. on 24 November 2020); and Second Admission will occur and dealings in the General Placing Shares will commence on 11 November 2020 at 8.00 a.m. (or such later date as Panmure Gordon and the Company may agree, being not later than 8.00 a.m. on 25 November 2020).
The Company will be seeking specific authorities from Shareholders to allot the Placing Shares and grant the Warrants proposed to be issued in connection with the Placing by way of the Resolutions that will be proposed at the General Meeting, details of which will be included in the Notice of General Meeting in the Circular.
Action to be taken in respect of the General Meeting
The Company continues to closely monitor the COVID-19 situation, including UK Government legislation and guidance, and will continue to do so in the lead up to the General Meeting. The health of our Shareholders, employees and stakeholders is extremely important to us. Given this, the Board has taken the decision that Shareholders, advisers and other guests will not be allowed to attend the General Meeting in person and anyone seeking to attend the General Meeting will be refused entry.
As such, Shareholders should note they are not entitled to attend the General Meeting in person unless notified otherwise via the Company’s website at www.c4xdiscovery.com and an announcement via a Regulatory Information Service.
The Directors consider that the Placing and the Resolutions are in the best interests of the Company and its Shareholders as a whole and accordingly recommend that Shareholders vote in favour of the Resolutions, as they will undertake to do in respect of their own legal and/or beneficial shareholdings, amounting, in aggregate, to 2,543,625 Ordinary Shares (representing approximately 2.13 per cent. of the Existing Ordinary Shares).
This Announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section of this Announcement. Investors who have chosen to participate in the Placing, by making an oral or written offer to acquire the Relevant Securities, will be deemed to have read and understood this Announcement in its entirety (including the Appendices) and to be making such offer on the terms and subject to the conditions herein, and to be providing the representations, warranties, agreements, acknowledgements and undertakings contained in the Appendix.
The capitalised terms not otherwise defined in the text of this Announcement are defined in Appendix II.
This Announcement is released by C4X Discovery Holdings plc and contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with the Company’s obligations under Article 17 of MAR.
For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, the person responsible for arranging the release of this Announcement on behalf of the Company is Bradley Richard Hoy, a director of the Company.