TIDMMTPH
RNS Number : 1236C
Midatech Pharma PLC
27 September 2018
27 September 2018
Midatech Pharma PLC
("Midatech" or the "Company")
Midatech Announces Proposed Sale of Midatech Pharma US Inc.
("MTP US") to Kanwa Holdings, LP an affiliate of Barings LLC
-- Total consideration of up to $19m, as initial consideration
of $13 million and up to $6 million payable based on MTP US net
sales performance in 2018 and 2019
-- Midatech will, subject to completion of the Sale, become a
pure-play R&D company focused on driving its technologies to
deliver innovative products to patients suffering from oncology and
other rare diseases.
-- Net proceeds of the sale will be used to fund key R&D
priorities of the Company such as the MTD201 Q-Octreotide and
MTX110 programmes toward their next development milestones, as well
as repay the outstanding loan to MidCap Financial
-- Completion will result in annual interest and efficiency
savings of over GBP1/2m in Midatech
-- Sale is conditional on the approval of Midatech Shareholders
at a General Meeting, among other things
-- The transaction is a stock purchase, meaning all US
employees, assets, product licenses and contracts will no longer be
part of Midatech Pharma PLC after closing.
Midatech Pharma Plc (AIM: MTPH, NASDAQ: MTP) announces today
that it has entered into an agreement with Kanwa Holdings, LP
("Purchaser"), an investment vehicle affiliated with Barings LLC
("Barings"), one of the world's leading financial services firms,
to sell Midatech Pharma US Inc. for total consideration of up to
$19.0 million (the "Sale").
The initial consideration for the sale and transfer of the
entire common stock of MTP US is $13.0 million, payable upon
Closing, with up to $6.0 million available by way of further
consideration dependent on the 2018 and 2019 net sales performance
of certain MTP US products, both individually and in aggregate. The
Sale is subject to, among other things, the approval of Midatech's
shareholders.
Commenting on the Sale, Dr Craig Cook, Chief Executive Officer
of Midatech Pharma, said: "The divestment of Midatech's US
commercial arm will allow us to streamline and reshape the business
from a specialty pharma to a pure play biotech company, and focus
all our energy, attention and resources on advancing our
innovative, higher value R&D oncology pipeline. Our
technologies have recently reached key validation milestones in
their development and following completion we intend to accelerate
this momentum for our programs and platforms as we look to unlock
the full value of our pipeline and address diseases with desperate
unmet medical needs."
Commenting on the acquisition, Jon Rotolo, Head of Barings
Alternative Investments' Private Equity and Real Assets team,
added, "We are excited to acquire the Midatech US supportive care
business. We look forward to expanding patient access and
increasing the breadth of therapeutic options available to cancer
patients who experience significant adverse effects and
quality-of-life issues associated with cancer treatments. This
transaction will align with our focus on the specialty
pharmaceutical healthcare sector within our Private Equity and Real
Assets platform."
Principal Terms of the Sale
Under the terms of a stock purchase agreement made between the
Company MTP US and Kanwa Holdings, LP dated 26 September 2018
("Sale Agreement"), and unanimously approved by the Board of
Midatech, the initial consideration is $13.0 million ("Initial
Consideration"), plus up to $6.0 million dependent on the 2018 and
2019 net sales performance of certain MTP US products individually
and in aggregate ("Earn out").
The Sale Agreement anticipates that MTP US is acquired on a
debt-free cash-free basis and accordingly on completion of the sale
("Closing"), Purchaser shall deduct from the Initial Consideration
(and make payment on behalf of Midatech) certain indebtedness of
MTP US, under the loan agreement with MidCap Financial. In
addition, certain transaction expenses attributable to the Sale
shall also be deducted from the Initial Consideration. The amount
of these transaction expenses will be calculated at Closing but are
not expected to exceed $1m.
The Sale is subject to customary closing conditions including,
among other things, approval of the transaction by shareholders of
Midatech. A circular containing a notice of General Meeting of
Midatech Shareholders will be sent to shareholders as soon as
reasonably practicable (the "Circular") and will also be available
on the Company's website. The Circular will include further details
in relation to the Sale and the basis of the Earn out. A further
announcement will be made confirming publication of the
Circular.
Financial effects of sale and use of proceeds
For the financial year ended 31 December 2017, MTP US
contributed GBP6.7 million in net statutory revenues and GBP3.9
million of the Group loss before tax. Consequently, had the Sale
occurred on 1 January 2017, the Group would have reported a loss
before tax for the financial year ended 31 December 2017 of GBP13.4
million compared to the GBP17.3 million reported for the financial
year ended 31 December 2017.
For the six-month period to 30 June 2018, MTP US contributed
GBP3.1 million in net statutory revenues and GBP5.8 million of the
Group loss before tax, including a fair value adjustment of GBP4.7
million arising on the classification of the MTP US business as an
asset held for sale. The net assets classified as held for sale as
at 30 June 2018 were GBP11.2m.
Had the Sale occurred on 1 January 2018, the Group would have
reported a loss before tax from continuing and discontinued
operations for the six-month period ended 30 June 2018 of GBP6.5
million compared to the GBP12.3 million reported for the same
period. As at 31 December 2017, the Group reported net assets of
GBP34.7 million, of which GBP18.6 million were attributed to MTP
US. As at 30 June 2018, Group net assets were GBP23.4 million, of
which GBP11.2 million were attributed to MTP US.
The loss of US revenue resulting from the sale of MTP US is not
anticipated to have a materially negative impact on the cash flow
of the Midatech Group over the short to medium term.
Upon completion of the Sale, Midatech is required to repay its
outstanding loan to MidCap Financial of $7.0 million plus early
repayment fees and deferred interest. The remaining proceeds of the
Sale (i.e. after Midcap repayment and other transaction costs) are
expected to be approximately $4.5 million (before any deferred
consideration which may be received under the Earnout). These
proceeds will be used to fund the ongoing operating expenses of the
core business including the continued development of MTD201/
Q-Octreotide and MTX110.
Background to the Transaction
MTP US is the current commercial arm of Midatech. MTP US is
focused on commercialising oncology supportive care products which
help patients manage the impact of their cancer as well as the side
effects of their cancer therapy.
As previously announced, the Board of Midatech has reviewed a
range of options to meet the cash flow needs of Midatech, including
non-dilutive financing and other strategic alternatives.
Accordingly, the Board has evaluated the sale of MTP US and has
concluded that the Sale optimises shareholder value and also
supplies the Group with additional funding. Further, the Sale will
streamline the Midatech business with a focus on R&D and allow
management to completely focus on advancing on the Company's
R&D pipeline to maximise the value of the business.
Kanwa Holdings, LP is a limited partnership established for the
purposes of acquiring MTP US. It is owned by Funds managed by or
through Barings LLC.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014 (MAR).
- Ends -
For more information, please contact:
Midatech Pharma PLC
Dr Craig Cook, CEO
+44 (0)1235 888 300
www.midatechpharma.com
Panmure Gordon (UK) Limited (Nominated Adviser and Broker)
Corporate finance: Freddy Crossley / Emma Earl
Corporate broking: James Stearns
+44 (0)20 7886 2500
Consilium Strategic Communications (Financial PR)
Mary-Jane Elliott / Nicholas Brown / Angela Gray
+44 (0)20 3709 5700
midatech@consilium-comms.com
Westwicke Partners (US Investor Relations)
Chris Brinzey
+1 339 970 2843
chris.brinzey@westwicke.com
Torreya Capital, LLC
Stephanie LĂ©ouzon/Kelly Curtin
+44 207 451 4550
Barings LLC (Media Relations)
Kelly Smith
+1 980 4175648
Advisers
Torreya Capital, LLC served as financial adviser to Midatech and
Brown Rudnick LLP in the United States and United Kingdom served as
Midatech's legal adviser. McGuireWoods LLP served as Barings' legal
adviser.
About Barings
Barings is a $306+ billion* global financial services firm
dedicated to meeting the evolving investment and capital needs of
our clients. We build lasting partnerships that leverage our
distinctive expertise across traditional and alternative asset
classes to deliver innovative solutions and exceptional service.
Part of MassMutual, Barings maintains a strong global presence with
over 1,800 professionals and offices in 16 countries.
Barings Alternative Investments (BAI), part of Barings LLC, is a
460+ associate team located across 11 countries that manages $49
billion* in client capital. BAI seeks differentiated sources of
returns by incorporating decades of investment experience in
alternative assets offering investors access to a diverse range of
opportunities across private equity, real assets, asset-based
investments and the four quadrants of real estate. The Barings
Private Equity and Real Assets team focuses on control positions in
actively-managed, thematically-driven, asset-based investments that
generate both current income and opportunity for capital
appreciation. Led by a research-intensive investment process that
identifies long-term investment trends, the team invests across
eight specialist sectors in four asset classes: Capital Assets,
Infrastructure, Intangible Assets and Natural Resources.
* As of June 30, 2018.
Forward Looking Statements
Certain statements in this press release may constitute
"forward-looking statements" within the meaning of legislation in
the United Kingdom and/or United States. These statements typically
contain words such as "intends", "expects", "anticipates",
"estimates" and words of similar import. Any forward-looking
statements are based on currently available competitive, financial
and economic data together with management's views and assumptions
regarding future events and business performance as of the time the
statements are made and are subject to risks and uncertainties
because they relate to events and depend on circumstances that will
occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by such forward-looking statements. These
factors include, but are not limited to, factors identified
elsewhere in this press release as well as the following
possibilities: uncertainties as to how our shareholders may vote in
respect to the proposed Sale, the possibility that various closing
conditions for the Sale may not be satisfied or waived, operational
challenges in achieving strategic objectives and executing plans;
future revenues are lower than expected; costs or difficulties
relating to the Sale and the continuation of the Group's business
following the Sale, are greater than expected; competitive
pressures in the industry increase; general economic conditions or
conditions affecting the Group's business following the Sale,
whether internationally or in the places where the Group does
business, are less favourable than expected; and/or conditions in
the securities market are less favourable than expected.
Statements are only made as at the date of this document. The
Company expressly disclaims any obligation to disseminate any
update or revision to any forward looking statement in this
document to reflect any change in the Company's expectations or any
change in events, conditions or circumstances on which any such
statement is based, unless required to do so by applicable law, the
AIM Rules or the rules and regulations of the U.S. Securities and
Exchange Commission.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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