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UPDATE: e-Therapeutics rises after investors back fund raising

Drug discovery and development company e-Therapeutics (LON:ETX) is to raise £40 million through a placing of shares with existing and new institutional shareholders. Broker Panmure Gordon described the placing as a “significant recapitalisation”.

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-- Adds broker and management comment, plus share price reaction --

Drug discovery and development company e-Therapeutics (LON:ETX) is to raise £40 million through a placing of shares with existing and new institutional shareholders.

The new shares are being placed at 32p each; the closing mid-market price of e-Therapeutics shares on the last trading day before the placing announcement was 30.75p, so the shares are being placed at a premium.

Following the proposed issue, which needs to be ratified by shareholders, the company will have pro-forma net cash and liquid resources of about £48 million.

Throw in research & development credits and interest, and the company believes it now has enough money to carry out all its planned discovery and development activities into 2017, at which point the company believes it should have a licensing deal in the bag for its lead cancer drug, ETS2101.

“We appreciate the continuing support of existing investors and are also pleased to have attracted significant new investors to the company. With our financial position secure we are well placed to build further shareholder value based on our innovative platform and product portfolio,” said Professor Malcolm Young, chief executive officer of e-Therapeutics.

Chief financial officer Dr Daniel Elger told Proactive Investors that Aviva is among the new investment institutions becoming a significant investor as a result of this transaction.

With Invesco Asset Management, already a major shareholder in the company, increasing its stake from 45.92% 49.90% as a result of the issue, the company has some powerful backers in its corner.

More importantly, it has the money to carry it through to what Elger called “a value inflexion point”.

“This fundraising provides us with the resources needed for significant investment in new drug discovery and to take our lead cancer drug ETS2101 through efficacy-focused trials that could lead to a lucrative licensing deal,” Dr Elger said.

By the time that happens, the company expects to be working on a number of other candidate drugs.

“The aim here is that by the time we get to the phase II data on the cancer drug, we’ll have made good use of our platform to come up with further promising new candidates, so we’ll not only be well placed to partner the cancer drug if we have positive data, but will also have greater diversification of risk in a broader and more mature pipeline of drugs,” Dr Elger said. 

Broker Panmure Gordon described the placing as a “significant recapitalisation”.

“Essentially the company’s raise will be investment capital, particularly to fund phase II development of oncology asset ETS2101. The company’s cash position stands at £48m which should fund operations into 2017 further mitigating risk,” said Panmure’s Savvas Neophytou.

“The company will use around £25m to fund efficacy trials for ETS2101, namely a randomised phase II trial in some 100 patients with brain cancer as well as phase Ib/II extension trial in some 100-150 patients in 4-6 other cancers,” Neophytou added.

The broker currently has its stance on e-Therapeutics under review.

Shares in e-Therapeutics rose 4.9% to 32.25p in the first hour of trading following the announcement.

Quick facts: e-Therapeutics plc

Price: 3.34 GBX

AIM:ETX
Market: AIM
Market Cap: £8.98 m
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