Proposed Cancellation of Admission to Trading
Monday July 15, 2024
Monday July 15, 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 AS IT FORMS PART OF DOMESTIC LAW IN THE UNITED KINGDOM BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.
Destiny Pharma plc
(“Destiny Pharma” or the “Company”)
Proposed Cancellation of Admission of Ordinary Shares to Trading on AIM
Re‐Registration as a Private Limited Company
and
Notice of General Meeting
Brighton, United Kingdom, 15 July 2024 Destiny Pharma (AIM: DEST), a clinical stage biotechnology company focused on the development and commercialisation of novel medicines to prevent and cure life threatening infections, today announces:
· subject to Shareholder approval, the proposed cancellation of the admission of its ordinary shares of 1 pence each (“Ordinary Shares”) from trading on AIM (the “Cancellation”), the re‐registration of the Company as a private limited company (the “Re‐registration”) following the Cancellation and the adoption of new articles of association (the “New Articles”) to be effective on the Re‐registration (the Cancellation, Re‐registration and New Articles collectively being the “Proposals”); and
· the posting of a circular to Shareholders (the “Circular”) which contains further information on the Cancellation and the Re‐registration, a copy of the proposed New Articles, and notice of a general meeting to be held on 31 July 2024 at 10.00 a.m. at the offices of Covington & Burling LLP, 22 Bishopsgate, London EC2N 4BQ (the “General Meeting”) at which shareholder approval will be sought for the Proposals.
Sir Nigel Rudd, Chair of the Board of Directors, Destiny Pharma, commented: “As previously disclosed, the Company has been seeking a licencing partner for the development of XF‐73 Nasal through Phase 3 clinical trials. However, to date a deal has not been forthcoming and given our cash runway, the Board and our advisors have been evaluating a range of strategic options to access the significant quanta of funding required to progress the drug through these Phase 3 clinical trials and realise the creation of meaningful shareholder value.
“This review, and our discussions with possible funding partners, has identified that a larger pool of capital may be available to Destiny Pharma as a private company and therefore, the Board has concluded that delisting from AIM and re‐registering as a private company is a necessary step to provide Destiny Pharma with a realistic chance of securing the capital required to progress XF‐73 Nasal through clinical trials and bring this important product to patients and health systems.
“In summary, while there can be no guarantee, the Board believes that the only viable option now available to Destiny Pharma to create future shareholder value is the pursuit of capital as a private company. Without taking this route, we believe that liquidation of the Company is the most likely alternative.”
Chris Tovey, Chief Executive Officer, Destiny Pharma, commented: “I continue to believe that XF‐73 Nasal could be a highly differentiated drug for patients to prevent post‐surgical site infections. XF‐73 Nasal has substantial market potential and represents an attractive commercial proposition that, if progressed through late‐stage clinical development, could create considerable shareholder value. “Since I joined the Company, not only have we been vigorously pursuing a potential licensing deal, we have also taken important steps to improve the attractiveness of XF‐73 Nasal to potential partners. This includes optimising the clinical trial design, reducing the overall cost to less than half of the previously planned Phase 3 trial, and further strengthening the market research supporting the blockbuster potential for XF‐73 Nasal in the United States. Although we continue to speak to partners about this renewed proposition, we are extremely disappointed that a deal has not been forthcoming and, given our shortening cash runway, have been forced to amend our strategy as we seek to continue to progress this important product.”
Background to and reasons for the proposed Cancellation and Re‐registration
The Board continues to believe that XF‐73 Nasal, the Company’s lead drug candidate, is highly differentiated with substantial market potential. It targets a significant medical, patient and health system need in preventing post‐surgical site infections, even when MRSA is present. Having successfully completed Phase 2 development, which, in the Board’s opinion, has significantly de‐risked XF‐73 Nasal, the Company has worked diligently to design an efficient Phase 3 clinical development programme. The Board also continues to believe that market research supports the proposition that the emerging clinical profile of XF‐73 Nasal suggests this product could be an “excellent fit” for its target indication, a
positioning implicitly endorsed by the FDA QIDP and MHRA IPD designations XF‐73 Nasal has received.
Therefore, the Board believes that XF‐73 Nasal represents a commercially significant and attractive proposition and, furthermore, that progressing XF‐73 Nasal through the remainder of its late‐stage clinical development should create considerable shareholder value while bringing an important therapy to patients.
However, as detailed below, the Board has considered the likelihood of the Company reaching agreement on an appropriate licensing deal in the near term and its ability to raise the significant quantum of capital necessary to advance the XF‐73 Nasal programme meaningfully whilst it remains on the public markets. It has concluded that it is very unlikely that an appropriate licensing deal will be forthcoming in the near term, nor that it is realistic to raise sufficient equity capital from the public markets in order to fund and progress the required Phase 3 trial. Feedback from a broad number of potential other sources of equity capital suggests that a possible funding proposal could only be forthcoming if Destiny was a private company.
Given the Company’s limited cash resources (£2.9 million as at 30 June 2024), absent a near‐term partnership deal or securing sufficient funding to advance the development of XF‐73 Nasal in the short‐term, the Board has concluded that it would have to review and consider what limited remaining options are available to it, and there is a high likelihood that this would involve liquidating the Company.
As previously communicated, in recent months, the Company has taken important steps to improve the attractiveness of XF‐73 Nasal in the context of securing a meaningful licensing deal on XF‐73 Nasal that could fund future activities such as completing the Phase 3 studies ‐ these steps include developing a new clinical trial design that is expected to cost approximately £25 million, less than half of the previously planned Phase 3 trial, whilst still delivering the same indication and commercial returns, and conducting an ongoing exercise to broaden understanding of the market potential for XF‐73 Nasal in the United States and the commercial go to market model.
However, the Company recognises the challenges presented by the antibiotics markets more broadly, with a growing incidence of bacterial resistance arising to existing agents on their continued use and overuse to treat infections. In order to reduce the likelihood of resistance arising to newer agents, health systems promote antimicrobial stewardship which ultimately limits the use and rate of uptake of new antibiotics and thus their commercial potential. This has led to a paucity of funding for new antibiotics, even for anti‐infectives such as XF‐73 Nasal which has a differentiated proposition including use as a very short‐course prophylactic, rather than a treatment over an extended period of time and, if approved, would be a first‐in‐class antimicrobial, where no resistance has been observed to date.
For some time, the Company has been seeking a licencing partner to progress and fund the development of XF‐73 Nasal. More recently, as announced on 25 April 2024, and in light of a cash runway that only extends to Q1 2025, alongside licencing activities the Board has also been evaluating a range of other strategic options with its Financial Adviser, Rothchild & Co, to secure funding required to conduct the Phase 3 clinical studies.
Ongoing conversations with potential partners have not yet resulted in a licensing deal, and the Board has considered the possibility that a near‐term licencing agreement may not be secured. The Board has explored the possibility of securing the quantum of funding (c. £25 million) it needs to execute on the Phase 3 clinical trial programme from a very wide range of sources, including existing Shareholders and public market investors, venture capital firms, specialist healthcare funds as well as from non‐dilutive sources, as it believes that by successfully completing the Phase 3 programme itself, it will significantly increase the likelihood of securing a meaningful licencing deal in the future.
Discussions with a limited number of potential funding partners continue but feedback received from those, and other, possible sources of capital has indicated that a possible funding proposal could only be forthcoming if Destiny was a private company.
The Board has considered its ability to raise the quantum of capital necessary to advance the XF‐73 Nasal programme from the public markets and has concluded that it is very unlikely to be able to raise sufficient equity capital to fund the required Phase 3 trial, taking into account its current investor base, which is primarily made up of VCT, EIS and private investors, many of whom are unable to invest further in the Company (or make investments of the quantum required), as well as current public market sentiment towards pre‐revenue biotechnology companies. In reaching this conclusion, the Board has also considered the Company’s current market capitalisation of c. £8.1 million coupled with the limited liquidity and high price volatility in the Company’s Ordinary Shares. The Board considers that a fundraise of a smaller quantum on AIM would not realistically allow the Company to significantly advance XF‐73 Nasal, or its other pipeline assets, through to value inflection points.
The Board’s continued focus is on maximising shareholder value over the long‐term and it has extensively reviewed and evaluated the benefits and drawbacks for the Company and its Shareholders in retaining the admission to trading of the Ordinary Shares on AIM. The Board has taken into consideration numerous factors, both positive and negative, and considered the interests of all Shareholders in reaching its decision. These considerations have led the Board to conclude that the Cancellation is the Company’s only viable option in order to provide it with a realistic chance of securing an appropriate quantum of funding in a timely manner. The Board considers this objective essential in promoting the medium and long‐term success and development of the business.
Whilst there can be no guarantee that additional funding will be secured as a private company, nor as to the terms of any such funding, the Board is of the view that a larger pool of available and appropriate capital is accessible to the Company as a private company at this time. With the Company’s limited cash runway in mind, the Board also believes that the cost, management time and the legal and regulatory burden associated with maintaining the Company’s admission to trading on AIM are disproportionate to its benefits in the context of a lack of access to sufficient capital to advance XF‐73 Nasal through final clinical trials.
General Meeting
The General Meeting will be held at the offices of Covington & Burling LLP, 22 Bishopsgate, London EC2N 4BQ at 10.00 a.m. on 31 July 2024.
Resolution 1 to be proposed at the General Meeting is a special resolution to approve the Cancellation. Resolution 2 to be proposed at the General Meeting is a special resolution to re‐register the Company as a private limited company. Resolution 3 to be proposed at the General Meeting is a special resolution to approve the adoption by the Company of the New Articles, upon Re‐registration. Resolution 2 is conditional on the passing of Resolution 1, and Resolution 3 is conditional on the passing of Resolutions 1 and 2.
The Directors consider that the Resolutions are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that you vote in favour of the Resolutions as they intend to do in respect of their own shareholdings of 9,475,605 Ordinary Shares (representing approximately 9.89 per cent. of the Existing Ordinary Shares).
Irrevocable undertakings and letters of intent to vote in favour of the Resolutions
As at today’s date, the Company has received irrevocable undertakings from certain Shareholders representing approximately 18.77 per cent. of the Company’s issued share capital to vote in favour of the Resolutions, including 9.89 per cent. of the Company’s issued share capital held by directors and their connected parties. The Company has received letters of intent from certain Shareholders representing a further approximately 7.20 per cent. of the Company’s issued share capital to vote in favour of the Resolutions.
Therefore, the Company has received irrevocable undertakings and letters of intent totalling in aggregate 25.97 per cent. of the Company’s issued share capital to vote in favour of the Resolutions.
Matched Bargain Facility
The Company is making arrangements for a Matched Bargain Facility to assist Shareholders to trade in the Ordinary Shares following Cancellation, if the Resolutions are passed. The Matched Bargain Facility will be provided by J P Jenkins. J P Jenkins is an appointed representative of Prosper Capital LLP, which is authorised and regulated by the FCA.
The Circular and, where applicable, a notice of availability will be sent to shareholders later today. A copy of this announcement and the Circular will also be made available on the Company’s website later today at destinypharma.com.
Capitalised terms used but not defined in this announcement shall have the same meaning given to such term in the Circular.
The person responsible for the release of this announcement on behalf of the Company is Shaun Claydon, Company Secretary.
For further information, please contact:
Destiny Pharma plc
Chris Tovey, CEO
Shaun Claydon, CFO
+44 (0)1273 704 440
pressoffice@destinypharma.com
FTI Consulting
Ben Atwell / Simon Conway
+44 (0) 203 727 1000
destinypharma@fticonsulting.com
Shore Capital (Nominated Adviser and Broker)
Daniel Bush / James Thomas / Lucy Bowden
+44 (0) 207 408 4090
About Destiny Pharma
Destiny Pharma is an innovative, clinical‐stage biotechnology company focused on the development and commercialisation of novel medicines that can prevent life‐threatening infections. The Company’s drug development pipeline includes two late‐stage assets XF‐73 Nasal gel, a proprietary drug targeting the prevention of post‐surgical staphylococcal hospital infections including MRSA, a microbiome‐based biotherapeutic for the prevention of C. difficile infection (CDI) recurrence which is the leading cause of hospital acquired infection in the US.
For further information on the company, please visit destinypharma.com.
To read the press release in full, click here.