MethylGene Announces Cdn.$26.1 Million Private Placement
MethylGene Inc. (TSX:MYG) announced today its intention to complete a private placement in the United States of Cdn.$26.1 million (the "Offering"). The lead investor of the Offering is Tavistock Life Sciences ("Tavistock"), an insider of the Company, and other insiders participating in the Offering include funds managed by Baker Bros. Advisors, LLC (collectively, "Baker Brothers"), a fund managed by OrbiMed Advisors LLC ("OrbiMed") and Tang Capital Partners, LP ("Tang Capital" and, together with Tavistock, Baker Brothers and OrbiMed, collectively, the "Insiders").
The Company intends to use the proceeds from the Offering to support ongoing clinical programs for the Company's two lead programs, MGCD265 and MGCD290. For MGCD290, our novel antifungal Hos2 inhibitor, we intend to use the proceeds of the Offering to complete the ongoing randomized, double-blind, placebo-controlled Phase II study in patients with moderate-to-severe vulvovaginal candidiasis (VVC). Topline results from this trial are expected in Q1 2013. The Company also expects to use the proceeds of the Offering to advance MGCD265, our Met/VEGF receptor kinase inhibitor for oncology, into multiple Phase I/II expansion cohorts upon reaching MTD, in patients with renal cell, gastric and hepatocellular cancers who are c-Met positive. The Company also plans to use the proceeds of the Offering to initiate a study in NSCLC patients who express Axl. With the proceeds from the Offering, and based on its current clinical development and operating plans, the Company's cash runway is expected to extend into the second half of 2014.
Details of the Offering
Under terms of the Offering, MethylGene intends to issue 179,690,970 units at a subscription price per unit of Cdn.$0.145 (the "Subscription Price") (being the 5-day volume weighted average price of MethylGene's common shares at the close of markets on November 2, 2012 (the "Market Price"), less 19.4%), each unit consisting of one common share and thirty one-hundredths (0.30) of a common share purchase warrant, exercisable for a period of five years from the date of issuance at an exercise price of Cdn.$0.174 (being 97% of the Market Price and 120% of the Subscription Price). The common shares and warrant shares issuable pursuant to the Offering represent, in the aggregate, a total of up to 233,598,261 common shares (up to 73.41% of the issued and outstanding common shares as at close of business on November 9, 2012). The warrants include standard adjustment provisions for stock splits, stock dividends, mergers, recapitalizations and the like as well as a cashless exercise feature. The common shares and the common share purchase warrants (along with any shares issuable upon exercise of the warrants) will be subject to a four month hold period in respect of any resales in Canada.
All investors who subscribed for Cdn.$4,000,000 or more of units have been granted a pre-emptive right to acquire, in proportion to their respective holdings in MethylGene, any equity or voting securities subsequently issued by MethylGene for a term of up to 48 months following the closing of the Offering.
The securities offered will not be registered under the U.S. Securities Act of 1933, as amended (the "1933 Act"), and may not be offered or sold in the United States absent registration under or an applicable exemption from the registration requirements of the 1933 Act.
Out of the Offering, 129,303,078 units (representing approximately 40.64% of MethylGene's issued and outstanding common shares as of November 9, 2012) will be allocated to the Insiders. Prior to the Offering, Baker Brothers holds approximately 16.43% of the issued and outstanding common shares; Tavistock holds approximately 17.08% of the issued and outstanding common shares; and each of OrbiMed and Tang Capital holds approximately 12.64% of the issued and outstanding common shares.
Upon the issuance of the additional common shares at the closing of the offering, (i) Baker Brothers will hold 99,003,760 common shares (approximately 19.88% of the then issued and outstanding common shares) and warrants entitling it to purchase 29,701,217 common shares (for aggregate holdings representing approximately 20.28% on a fully diluted basis); (ii) Tavistock will hold 99,003,760 common shares (approximately 19.88% of the then issued and outstanding common shares) and warrants entitling it to purchase 29,086,188 common shares (for aggregate holdings representing approximately 20.19% on a fully diluted basis); (iii) Tang Capital will hold 60,914,917 common shares (approximately 12.26% of the then issued and outstanding common shares) and warrants entitling it to purchase 18,274,474 common shares (for aggregate holdings representing approximately 12.48% on a fully diluted basis); and (iv) OrbiMed will hold 57,466,641 common shares (approximately 11.54% of the then issued and outstanding common shares) and warrants entitling it to purchase 17,239,992 common shares (for aggregate holdings representing approximately 11.77% on a fully diluted basis). Notwithstanding the foregoing, each of Baker Brothers and Tavistock has agreed that it shall not have the right to exercise any portion of its warrants to the extent that after giving effect to such exercise, it would beneficially own in excess of 19.99% of the common shares of the Company, except in certain limited circumstances. Save for the units issued to the Insiders, all units issued pursuant to the Offering will be issued to arm's length third parties.
The control of MethylGene will not be materially affected by the Offering.
The Toronto Stock Exchange requires MethylGene to obtain the approval of a majority of its disinterested shareholders with respect to the issuance of the additional common shares and potential issuance of the common shares underlying the warrants (i) since the TSX Company Manual deems the price per share underlying each warrant to be less than "market price" (as that term is defined in the TSX Company Manual), and (ii) given that the shares issuable pursuant to the Offering amount to more than 25% of the number of the issued and outstanding common shares, on a non-diluted basis, prior to the date of closing of the Offering, and (iii) given that the shares issuable pursuant to the Offering to the Insiders amount to more than 10% of the number of the issued and outstanding common shares, on a non-diluted basis, prior to the date of closing of the Offering. MethylGene intends to provide the Toronto Stock Exchange with written evidence that holders of more than 50% of its voting securities, on a disinterested basis, are familiar with the terms of the Offering, and are in favour of it, in order to benefit from the exemption set forth in the rules of the Toronto Stock Exchange from the requirement to hold a special shareholders' meeting to obtain this approval.
The closing of the private placement is expected not before November 19, 2012, subject to shareholder and regulatory approvals as well as customary closing conditions.
MethylGene Inc. (TSX:MYG) is a drug development company that is advancing novel therapeutics for cancer and infectious disease in human clinical trials. The Company's lead product candidates are: MGCD290, an oral antifungal agent targeting the fungal Hos2 enzyme that is in Phase II trials for vulvovaginal candidiasis, and MGCD265, an oral Met/VEGF receptor kinase inhibitor that is in Phase I/II clinical trials for patients with solid tumors. MethylGene owns all rights to its lead product candidates, and has partnerships with Otsuka Pharmaceutical Co. Ltd., Taiho Pharmaceutical Co. Ltd., and EnVivo Pharmaceuticals, Inc. for its other pipeline programs.
Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward-looking statements including the expected closing date of the private placement. Such statements, based as they are on the current expectations of management of MethylGene, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond MethylGene's control. These risks and uncertainties could cause future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Such results, performance or achievements include, but are not limited to, the timing and effects of regulatory action; the continuation of collaborations; the results of clinical trials; the timing of enrollment or completion of clinical trials; the success, efficacy or safety of MGCD265, MGCD290 or our other programs; the ability to scale up, formulate and manufacture sufficient GMP, clinical or commercialization quantities of MGCD265, MGCD290 or our other products, and the relative success or the lack of success in developing and gaining regulatory approval and/or market acceptance for any compound or new product including MGCD265 or MGCD290. Such risks include, but are not limited to, the impact of general economic conditions, economic conditions in the pharmaceutical industry, changes in the regulatory environment in the jurisdictions in which MethylGene does business, stock market volatility, fluctuations in costs, expectations with respect to our intellectual property position and our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others, changes in the competitive landscape including changes in the standard of care for the various indications in which MethylGene is involved, and changes to the competitive environment due to consolidation, as well as other risks, as described in MethylGene's Annual Information Form under the heading "Risk Factors" which you are urged to read, and all other documents filed by the Company that can be found at www.sedar.com. Consequently, actual future results may differ materially from the anticipated results expressed in the forward-looking statements. The reader should not place undue reliance on the forward-looking statements included in this news release. These statements speak only as of the date they are made and MethylGene expressly disclaims any duty, obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in MethylGene's expectations with regard thereto of any change in events, conditions or circumstances on which any such statements are based except in accordance with law.
Joseph Walewicz, CFA
Vice President, Business & Corporate Development
514-337-3333 ext. 373
The Trout Group LLC