TIDMORPH
RNS Number : 2669V
Open Orphan PLC
13 April 2021
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ANNOUNCEMENT
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
THE MARKET ABUSE REGULATIONS (EU) NO. 596/2014 ("MAR"). WITH THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION
SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE
PUBLIC DOMAIN.
Open Orphan plc
("Open Orphan" or the "Company")
Potential demerger of certain non-core assets
Proposed Capital Reduction, Distribution in Specie and notice of
General Meeting
Open Orphan plc (AIM: ORPH), a rapidly growing specialist
pharmaceutical services clinical research organisation (CRO) and a
world leader in vaccine and antiviral testing using human challenge
clinical trials, announces that it is at an advanced stage in
planning for a possible spin-out of certain non-core Development IP
Assets. These Development IP Assets are a portfoilio of
intellectual property and development assets, including HVO-001
which has potential application in the treatment of respiratory
disease. These do not include the equity interests in Imutex
Limited and PrEP Biopharm Limited.
The Board believes that to maximise shareholder value that the
Development IP Assets are best developed separately from the core
services business. Furthermore, such a spin-out transaction could
provide the opportunity to secure separate financial resources for
these assets, to enable accelerated development of these assets and
achievement of commercial milestones. A spin-out transaction would
also allow Shareholders to benefit from both the value of the
development assets and the standalone value of the core services
business, as they progress through their own key milestones.
To this end, a circular (a "Circular") is being sent to
shareholders today providing background to, details of and reasons
for, a proposed Reduction of Capital and Distribution in Specie, to
facilitate the possible spin-out and admission to AIM of the
Company's non-core Development IP Assets. The reduction in capital
will also allow for the Company to pay dividends and distributions
to shareholders should the Board deem it appropriate in the
future.
The Board has decided to take the necessary preliminary steps in
preparation for a potential spin-out, including incorporating a new
subsidiary, further details of which are outlined in the Circular.
The Company has decided to proceed in obtaining the approvals
necessary for the Reduction of Capital and the Distribution in
Specie which are required to implement the demerger.
Notwithstanding that the Company is seeking the necessary approvals
for the Reduction of Capital and the Distribution in Specie now,
these considerations remain at an early stage, and there can be no
guarantee that the Reduction of Capital and/or the Distribution in
Specie will be completed. HMRC advance clearance for the Demerger
has been successfully obtained so any distribution would be exempt
for income tax purposes and have no capital gains implications for
UK shareholders. Further announcements will be made at the
appropriate time.
Notice of General Meeting
The Circular contains a notice convening the General Meeting to
be held at 11 a.m. on 29 April 2021 at which the Resolutions will
be proposed.
Full details are outlined in the Circular, which will be posted
to Shareholders today and will shortly be available, in accordance
with AIM Rule 20, here:
https://www.openorphan.com/investors/circulars-and-admission-document
Cathal Friel, Executive Chairman, said: "I am delighted that we
are putting in place the first steps needed to enable the
monetisation of some of our non-core assets. Over the last year we
have been busy transforming Open Orphan into a profitable
enterprise with a world leading position testing vaccines and
antivirals using human challenge studies. We now have an
opportunity to deliver significant further shareholder value by the
Demerger of these non-core assets. Their development and
commercialisation can be accelerated through the Demerger, which
offers the opportunity to access financing as a separate public
company listed on AIM and a separate business focussed on the
successful commercialisation of pharmaceutical products.
"It is well known in the global public markets that value is
better recognised in the life sciences space when profitable
services businesses are viewed separately from pharmaceutical
development businesses that have different funding needs. This is
now an excellent opportunity for shareholders in Open Orphan to
maximise value through separate shareholdings in both a profitable
pharma services company as well as an exciting pharma products
commercialisation company. I believe that both are well positioned
for success as we head into a decade of exponential capital
investment across a broad range of infectious disease and
respiratory illnesess. This is a sector that has been
under-invested in the last thirty years and as such, will be one of
the more exciting growth opportunities within the life sciences
industry."
Definitions contained in the Circular have the same meaning as
in this announcement.
Open Orphan plc www.openorphan.com
Cathal Friel, Executive Chairman +353 (0) 1 644 0007
Arden Partners plc (Nominated Adviser
and Joint Broker) +44 (0) 20 7614 5900
John Llewellyn-Lloyd / Benjamin Cryer
/ Nick Wright
finnCap plc (Joint Broker) +44 (0) 20 7220 0500
Geoff Nash / James Thompson/ Richard
Chambers
Davy (Euronext Growth Adviser and Joint
Broker) +353 (0) 1 679 6363
Anthony Farrell
Walbrook PR (Financial PR & IR) +44 (0)20 7933 8780 or openorphan@walbrookpr.com
Paul McManus / Sam Allen / +44 (0)7980 541 893 / +44 (0)7748 651
Lianne Cawthorne 727 /
+44 (0)7584 391 303
The information provided below includes information contained
within the Circular, which should be read as a whole.
Introduction
Open Orphan is a pharmaceutical service/contract research
company that is a world leader in testing vaccines and antivirals
using human challenge clinical trials. The Company provides
services to Big Pharma, biotech and government/public health
organisations. This was described in the Company's admission
document dated 9 December 2019, following the acquisition of hVIVO
by Open Orphan (the "Acquisition"). Since the Acquisition, the
enlarged group has pursued a services led strategy centred around
its leading position in vaccine and antiviral testing using human
challenge clinical trials. The Group further provides a suite of
consulting and clinical trial services to pharmaceutical and
biotech companies as a leading Clinical Research Organisation
("CRO").
The Group has continued to develop this services-led strategy
since the Acquisition and has completed a post-merger restructuring
and integration of its operations to drive efficiency and
competitiveness in order to increase profitability. This
restructuring, combined with renewed interest and investment in the
treatment and prevention of respiratory disease, has resulted in
the strong performance of the Group and its CRO services.
Prior to the Acquisition, hVIVO had made significant investments
and had developed a portfolio of intellectual property covering the
treatment and prevention of respiratory and infectious disease.
Having repositioned the Group's services the Directors have
undertaken a review of the Group's non-core assets. In order for
some of these assets to achieve their full commercial potential
further investment and deployment of management resource would be
required. As a result of having refocused the Group on services,
the Directors have taken the strategic decision to demerge certain
development assets from the existing CRO business to maximise the
future potential and value of both businesses. The Directors are
now undertaking the required preliminary steps in order that they
may execute a demerger of the Group's wholly owned Development IP
Assets later this year. This demerger would exclude the Group's
equity interests in Imutex Limited and PrEP Biopharm Limited. Such
a demerger would include certain intellectual property surrounding
these Development IP Assets. The Company will update Shareholders
in due course on its final plans and the timing of an expected
demerger. The demerger would allow for any required future
investment in the Development IP Assets without consuming existing
Group funds or management resource.
The Development IP Assets include HVO-001 with the Demerger
intended to enable accelerated development of this asset utilising
an outsourced partnership model and separate management team. It is
also intended to provide the financial resources required to
rapidly develop this molecule. A spin-out transaction of the
Development IP Assets could also allow Shareholders to benefit from
both the value of the Development IP Assets including HVO-001 and
the standalone value of the remaining business as it progresses
through its own key milestones.
The Board is now taking the necessary preliminary steps in
preparation for a potential spin-out of its wholly owned
Development IP Assets, including the incorporation of a new
subsidiary, ORPH Pharma IP, further details of which are set out
below. The Company has decided to proceed with obtaining the
approvals necessary for the Reduction of Capital and the
Distribution in Specie which are required to implement the
Demerger. Notwithstanding that the Company is seeking the necessary
approvals for the Reduction of Capital and the Distribution in
Specie now, these proposals remain at an early stage and there can
be no guarantee that the Reduction of Capital and/or the
Distribution in Specie will be completed. Further announcements
will be made at the appropriate time.
Demerger
As announced, the Company has been evaluating its plans for the
Development IP Assets, including HVO-001. HVO-001 is an orally
available, small molecule immunomodulator drug with potential as a
treatment for severe influenza and symptoms requiring treatment in
hospital with the drug unaffected by viral heterogeneity. It has
the potential to treat a broad range of serious unmet needs in
patients suffering from severe and fatal respiratory disease.
Having considered these plans in further detail, the Board has
decided that a spin-out and admission to AIM of the wholly owned
Development IP Assets may provide the opportunity to secure
separate financial resources for the Development IP Assets, with
the goal of enabling accelerated development of the asset portfolio
and achievement of development and commercial milestones. It is
anticipated that a spin-out pursuant to the Demerger would allow
the Company's shareholders to benefit from both the value of the
Development IP Assets and the standalone value of the remaining
business as they progress through their own key milestones.
The Company has completed various initial steps in anticipation
of the implementation of the potential Demerger, including the
transfer by HSL to ORPH Pharma IP, the Company's recently
incorporated wholly owned subsidiary, of the intellectual property
relating to the Development IP Assets including HVO-001. Pursuant
to the assignment and licence agreement executed by HSL in favour
of ORPH Pharma IP, HSL has assigned its interest in certain patents
and patent applications to ORPH Pharma IP and licensed to ORPH
Pharma IP certain trademarks, know-how, data and challenge agents;
and, in addition, HSL has sub-licensed and sub-contracted in favour
of ORPH Pharma IP its rights and obligations in relation to certain
further intellectual property. As part of the foregoing, HSL will
execute in favour of ORPH Pharma IP certain customary documents
which will allow ORPH Pharma IP to register itself formally as the
proprietor of the transferred intellectual property.
The next steps involve the Reduction of Capital to create
distributable reserves to allow the Distribution in Specie to be
declared pursuant to which the Demerger will be implemented and the
Development IP Assets moved to Newco.
The Directors believe that the Development IP Assets have the
potential to deliver significant upside value for Shareholders. The
Directors are therefore exploring funding options for that
business, including equity funding, and the Directors intend on
conducting initial market soundings in order to assist them in
determining the feasibility of Newco being admitted to trading on
AIM should the Demerger take place. Further announcements will be
made at the appropriate time.
The value of the proposed Distribution in Specie (the "Value")
has not yet been determined and the number of Newco Ordinary Shares
(the "Ratio") that each Shareholder would receive pursuant to the
proposed Distribution in Specie has not yet been determined. If the
results of the market sounding exercise for Newco are positive, the
Board intends to declare the Distribution in Specie shortly prior
to completion of the Fundraising and subsequent Admission, at which
point the Value and the Ratio will be determined and announced to
Shareholders via an RIS. The distribution in specie of the entire
issued share capital of ORPH Pharma IP by the Company to Newco will
be in return for Newco allotting and issuing Newco Ordinary Shares
to Open Orphan Shareholders who are registered on the Open Orphan
register of members at the specified demerger record date at a time
and date to be determined by the Company and notified to the
Shareholders in due course, on the basis of the determined Ratio
(save that fractions of a Newco Ordinary Share will not be
issued).
The Company plans to use an external agent to establish a trust
over the legal interest in the Newco Ordinary Shares allotted and
issued pursuant to the Demerger, from the allotment and issue of
such shares until the end of the Lock-In Period, pursuant to a
nominee arrangement. The intention is that, following the end of
the Lock-In Period, the agent will transfer legal title to the
Newco Ordinary Shares to those beneficially entitled to them.
Shareholders should therefore be aware that if the Demerger is
implemented they will not be able to sell, transfer or deal in the
Newco Ordinary Shares they receive for a period to be determined by
the Board and expected to be up to nine months following Admission.
During the period of such nominee arrangements, and except as
follows, such nominee will exercise the voting rights attaching to
the Newco Ordinary Shares held by it in accordance with the wishes,
if any, of the underlying beneficial owners of such shares.
However, prior to Admission it will be necessary for Newco to
re-register as a public limited company and, in order to facilitate
the passing of the necessary resolution(s), it is intended that, on
the basis that the Resolutions would already have been passed, the
Board will instruct such nominee to vote all of the Newco Ordinary
Shares held by it in favour of such resolution(s).
As mentioned above, Shareholders should note that the Board does
not intend to declare the Distribution in Specie until the
Fundraising for Newco process is near conclusion. The Fundraising
process is in its early stages and so the Fundraising and Admission
of Newco may or may not occur. The Distribution in Specie therefore
may or may not occur. In the event that the Distribution in Specie
does not occur ORPH Pharma IP will remain within the Open Orphan
Group and continue to be operated as a subsidiary of the Company.
The reserves created by the Reduction of Capital which were
intended to be used in the implementation of the Distribution in
Specie will be used, as with the balance of the reserves, to
facilitate the future consideration of payment of dividends to
Shareholders and the possible redemption or buy back of the
Company's shares where desirable. However, no assurance can be
given that any such dividend would be declared or redemption or
buy-back implemented.
Reduction of Capital
The Act only permits a company to make distributions to its
shareholders out of its profits available for that purpose. In
addition, a public company may only fund a purchase of its own
shares out of distributable profits. Such profits are, broadly, a
company's accumulated realised profits so far as not previously
utilised by distribution or capitalisation, less its accumulated
realised losses. The Company does not currently have distributable
profits and is therefore unable to make any distributions to its
Shareholders or fund a purchase of its own Open Orphan Ordinary
Shares out of distributable profits.
As at 31 December 2019, the Company had an accumulated retained
earnings deficit on its statement of financial position of
EUR3,513,000. At the same date, there was EUR19,041,000 standing to
the credit of the Company's share premium account. In addition, the
nominal value of the Deferred Shares (which are non-voting), which
the Directors consider to be effectively worthless due to the
extremely restricted rights which the shares confer on their
holders, was GBP62,833.34.
Since 31 December 2019, the Company's share premium account has
increased following the issue by the Company of Open Orphan
Ordinary Shares at the following prices: (i) 207,040,800 Open
Orphan Ordinary Shares at a price of GBP0.05775 per Open Orphan
Ordinary Share; (ii) 86,885,253 Open Orphan Ordinary Shares at a
price of GBP0.061 per Open Orphan Ordinary Share; (iii) 1,383,741
Open Orphan Ordinary Shares at a price of GBP0.001 per Open Orphan
Ordinary Share; (iv) 2,524,860 Open Orphan Ordinary Shares at a
price of GBP0.022 per Open Orphan Ordinary Share; (v) 114,821,824
Open Orphan Ordinary Shares at a price of GBP0.11 per Open Orphan
Ordinary Share; and (vi) 2,172,565 Open Orphan Ordinary Shares at a
price of GBP0.02 per Open Orphan Ordinary Share.
As at 31 December 2020, there was GBP44,494,997 standing to the
credit of the Company's share premium account and the accumulated
retained earnings deficit on the Company's statement of financial
position had also increased.
The Directors therefore feel it is appropriate to seek
shareholder approval to effect the Reduction of Capital and,
subject to the approval of the Shareholders and of the Court,
to:
2.1 cancel the Company's share premium account; and
2.2 cancel all of the Deferred Shares.
The Directors then propose to apply the reserve arising on the
Reduction of Capital to eliminate the Company's accumulated
retained earnings deficit on its statement of financial position
and, as to the balance, to create distributable profits on the
balance sheet of the Company of approximately GBP39,388,000.
As mentioned above, the Directors are planning to effect the
Demerger by way of the Distribution in Specie. However, in order to
do this the Company first needs to create realised profits of the
requisite amount which is the purpose of the Reduction of
Capital.
In addition, the Board believes that, subject to the future
performance of the Company, the creation of realised profits will
give the Company the ability to not only effect the Distribution in
Specie but also to make distributions to Shareholders and/or buy
back its own Open Orphan Ordinary Shares in the future if and when
the Directors may consider that it is appropriate to do so.
However, the Directors cannot give any guarantee either that the
Company will make the Distribution in Specie or make any
distributions or purchases of its own Open Orphan Ordinary Shares
or as to the size of any distributions or purchases of its own Open
Orphan Ordinary Shares which may be made.
The rights attaching to the Deferred Shares as set out in the
articles of association of the Company ("Articles") mean that the
proposed cancellation of such shares does not involve a variation
of such rights for any purpose and therefore the Company is
authorised at any time to reduce its share capital (subject to the
provisions of the Act) by cancelling the Deferred Shares without
obtaining the consent of the holders of such Deferred Shares. Once
the Reduction of Capital has been confirmed by the Court no further
communication will be received by the holders of the Deferred
Shares from the Company and all share certificates (if any) held in
respect of such Deferred Shares can be destroyed.
Cancellation of the share premium account and the Deferred
Shares
The cancellation of the Company's share premium account and the
Deferred Shares will only become effective if (in the following
order): (i) Resolution 1 as set out in the Notice of General
Meeting is approved by Shareholders at the General Meeting; (ii)
confirmation is given by the Court; and (iii) the Court order and a
statement of capital are delivered to and registered by Companies
House.
As noted above, the cancellation of the Company's share premium
account and the Deferred Shares should enable the Directors to
eliminate the current retained earnings deficit on the Company's
statement of financial position and create distributable
profits.
Notice of General Meeting
The Reduction of Capital and Distribution in Specie are
conditional upon, inter alia, the Shareholders approving the
Resolutions at the General Meeting.
In accordance with the UK Government's response to the COVID-19
outbreak, and to minimize public health risks, it is strongly
recommended that shareholders do not physically attend the General
Meeting, and instead appoint the Chairman of the meeting as a proxy
to exercise their right to vote.
The Circular contains a notice convening the General Meeting to
be held at 11 a.m. on 29 April 2021 at which the Resolutions will
be proposed.
Shareholders should note that, unless the Resolutions are
approved at the General Meeting, the spin-out of the Development IP
Assets cannot take place.
Recommendation
The Directors consider that the Resolutions are in the best
interests of the Company and would promote the success of the
Company for the benefit of its Shareholders as a whole.
Accordingly, the Directors unanimously recommend that Shareholders
vote in favour of the Resolutions to be proposed at the General
Meeting as they and their immediate families and connected persons
(within the meaning of section 252 of the Act) intend to do in
respect of their aggregate holdings of 53,810,871 Open Orphan
Ordinary Shares representing approximately 8.04 per cent. of the
existing issued share capital of the Company.
ENDS
Notes to Editors
Open Orphan plc (London and Euronext: ORPH) is a rapidly growing
pharmaceutical service/contract research company that is a world
leader in testing vaccines and antivirals using human challenge
clinical trials. The company provides services to Big Pharma,
biotech and government/public health organisations.
Open Orphan runs challenge studies in London from both its
19-bedroom Whitechapel quarantine clinic, opened in February 2021,
and its 24-bedroom QMB clinic which also has a highly specialised
virology and immunology laboratory on-site. Open Orphan has a
leading portfolio of eight human challenge study models for
conditions such as RSV, flu, asthma and COPD. In addition, Open
Orphan is also developing the world's first COVID-19 human
challenge study model as part of the Human Challenge Programme and
has signed a reservation contract with the UK Government for the
first three COVID-19 vaccine challenge studies.
Building upon its many years of challenge studies and virology
research, the Company is developing an in-depth database of
infectious disease progression data. Based on the Company's Disease
in Motion(R) platform, this unique dataset includes clinical,
immunological, virological and digital (wearable) biomarkers. The
Disease in Motion platform has many potential applications across a
wide variety of end users including big technology, wearables,
pharma and biotech companies. Following COVID-19 there is now a
renewed interest and investment in infectious diseases.
Open Orphan's Paris office has been providing biometry, data
management and statistics to its many European pharmaceutical
clients for over 20 years. For over 15 years, the Company's
Netherlands office has been providing drug development consultancy
and services, including CMC (chemistry, manufacturing and
controls), PK and medical writing, to a broad range of European
clients. Both offices are now also fully integrated with the London
office and working on challenge study contracts as well as
supporting third party trial contracts.
Interested in becoming a volunteer?
hVIVO recruits many of its volunteers for its challenge study
clinical trials through its dedicated volunteer recruitment
website, www.flucamp.com . By volunteering to take part in one of
our studies in a safe, controlled, clinical environment under
expertly supervised conditions you are playing your part to further
medical research and help increase the understanding of respiratory
illnesses.
Individuals interested in taking part in COVID-19 human
challenge study research can learn more at www.UKCovidChallenge.com
.
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END
MSCIJMATMTJBMPB
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