The Board�of Medgenics (AIM:MEDG) (AIM:MEDU) (�Medgenics� or the
�Company�) announces proposals�to facilitate a proposed fundraising
through the issue of convertible debentures.
In order to facilitate the proposed fundraising, it is
necessary:
- 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
- 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.
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.
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