On January 28, 2022 Oxford Biomedica plc (LSE:OXB) ("Oxford Biomedica" or the "Company"), a leading cell and gene therapy group, reported that it has entered into an agreement with Homology Medicines Inc. (Nasdaq:FIXX) ("Homology") pursuant to which Oxford Biomedica (US) Inc. ("Oxford Biomedica US") will acquire an 80 per cent (Press release, Oxford BioMedica, JAN 28, 2022, View Source [SID1234607470]). ownership interest in a newly formed AAV focused manufacturing and innovation business, Oxford Biomedica Solutions LLC ("Oxford Biomedica Solutions" or "Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business"), at an implied pre-money Enterprise Value of approximately US$175 million (£131 million) (the "Transaction").
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In addition, Oxford Biomedica announces that it proposes to raise total gross proceeds of approximately £80 million (gross) pursuant to a non-pre-emptive placing of new Ordinary Shares (the "Placing Shares") with certain existing shareholders and other institutional investors, of which (i) up to 4,858,410 new Ordinary Shares (the "Firm Placing Shares") (equating to 5.6 per cent. of the Company’s existing issued share capital as at the last practicable date prior to this Announcement), will be issued utilising the unused authorities granted at the 2021 AGM to issue Ordinary Shares for cash on a non-pre-emptive basis (the "Firm Placing") and (ii) a further number of new Ordinary Shares (the "Conditional Placing Shares") will, subject to shareholder approval, be issued under the new authorities to be sought at the General Meeting to issue Ordinary Shares for cash on a non-pre-emptive basis (the "Conditional Placing") such that the total gross proceeds from the Firm Placing and the Conditional Placing together reach an amount of approximately £80 million (the "Placing"). The joint bookrunners of the Placing reserve the right to issue additional Placing Shares.
In connection with the Transaction, Oxford Biomedica has also entered into a commitment letter for a secured short term loan facility of US$85 million (£64 million) which, if drawn down, is repayable in twelve months after completion of the Transaction.
Highlights
Creation of a Global Viral Vector Champion
· Oxford Biomedica and Homology to form a new US-based AAV manufacturing and innovation business, Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business1
· The Board of Oxford Biomedica believes the Transaction presents a compelling opportunity to accelerate the Group’s stated strategy of becoming a global fully integrated development and manufacturing platform across key viral vector types, with the following key benefits:
o Broadens Oxford Biomedica’s viral vector capabilities into the largest and fast growing AAV segment;
o Expands Oxford Biomedica’s geographic presence with the addition of technical operational expertise in the US biopharma market;
o Enables Oxford Biomedica to leverage proprietary technologies and IP in AAV to further enhance Oxford Biomedica’s platform; and
o The Transaction is immediately accretive to revenue growth with contribution from Homology and potential new customers.
· Under the terms of the Transaction:
o Homology will bring its established AAV process development and manufacturing platform, strong IP, experienced team and US-based GMP facility to Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business;
§ Experienced team and high-quality GMP vector production capabilities that has been in operating since 2019 without a single failed batch;
§ Over 40 analytical assays developed and an established breadth of vector characterisation that has met CMC requirements for three cleared Investigational New Drug applications ("INDs") from Homology’s pipeline;
o Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business will offer a scalable, high quality manufacturing platform to global customers, including Homology through a multi-year supply agreement as a preferred customer with minimum contracted revenue of approximately US$25 million (£19 million) from Homology for the first twelve months;
o Oxford Biomedica US will acquire an 80 per cent. ownership interest in newly-formed Oxford Biomedica Solutions for a US$130 million (£97 million) cash consideration payable to Homology and a US$50 million (£37 million) capital injection into Oxford Biomedica Solutions to fund growth;
o Homology will retain a 20 per cent. ownership interest upon closing of the Transaction;
o Oxford Biomedica will have control of Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business through a majority board position, under the LLC Agreement to be entered into between Oxford Biomedica and Homology; and
o At any time following the three-year anniversary of closing, Oxford Biomedica will have a call option to purchase, and Homology will have a put option to require Oxford Biomedica to purchase, Homology’s ownership interest2.
· Tim Kelly, Chief Operating Officer of Homology, will join Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business as Chief Executive Officer and Chair of its Board of Directors and will also become a member of Oxford Biomedica’s Senior Executive Team
· The Transaction constitutes a Class 2 transaction for the purposes of the Listing Rules and is expected to close in Q1 2022, subject to the satisfaction of requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR"). The Transaction is not conditional on the approval of the Company’s shareholders or on financing
Placing and Short Term Loan Facility
· Firm Placing with certain existing shareholders and other institutional investors of up to 4,858,410 Firm Placing Shares (equating to 5.6 per cent. of the Company’s existing issued share capital as at the last practicable date prior to this Announcement), utilising the unused authorities granted at the 2021 AGM to issue Ordinary Shares for cash on a non-pre-emptive basis
o Firm Placing is not conditional on completion of the Transaction and does not require shareholder approval
o Admission and settlement of the Firm Placing Shares is expected to take place at 8.00 a.m. on or around 4 February 2022
· Subject to shareholder approval, Conditional Placing with certain existing shareholders and other institutional investors of a further number of new Ordinary Shares to be issued, at the same issue price as the Firm Placing Shares, under the new authorities to be sought at the General Meeting to issue Ordinary Shares for cash on a non-pre-emptive basis such that the total gross proceeds from the Firm Placing and the Conditional Placing together reach an amount of approximately £80 million
o Conditional Placing is conditional on (i) completion of the Transaction, such that if the Transaction does not complete, the Conditional Placing will not complete and (ii) shareholder approval of the issue of the Conditional Placing Shares at the General Meeting, such that if shareholder approval is not obtained, the Conditional Placing will not complete
o Admission and settlement of the Conditional Placing Shares is expected to take place at 8.00 a.m. on or around 11 March 2022 subject to the time it takes for the HSR requirements to be satisfied and the date that the Company posts a circular to its shareholders to convene the General Meeting
o The number of Conditional Placing Shares will be such that no publication of a prospectus by Oxford Biomedica under the UK Prospectus Regulation or the EU Prospectus Regulation is required
· Details of the price at which the Placing Shares are to be placed and the number of Placing Shares will be announced as soon as soon as reasonably practicable after the close of the book build process later today
· An indicative timetable for the Transaction and the Placing is set out further below
· In connection with the Transaction, Oxford Biomedica also entered into a commitment letter for a secured short term loan facility of US$85 million (£64 million) from funds managed by Oaktree Capital Management, L.P. ("Oaktree") (the "Short Term Loan Facility" or the "Facility")
o The interest rate under the Facility will be 8.5 per cent. per annum, payable quarterly in cash or in kind as additional loan principal, at the option of the Company and will be repayable in twelve months after completion of the Transaction
Oxford Biomedica updates and recent developments
· Upon announcement of the Transaction, John Dawson will step down as CEO and current Chairman Dr. Roch Doliveux will become interim CEO
o John Dawson will remain a Board Director and Advisor to the Company
o A process to appoint a new CEO is underway, as previously announced
· Continued strong momentum across CDMO activities since H1 2021 with FY21 Group revenues expected to be in line with equity research analyst consensus3 (unaudited)
· The Group’s closing net cash position as at 31 December 2021 was approximately £109 million (unaudited)
Dr. Roch Doliveux, Chair and Interim CEO, commented: "Accessing Homology’s unique AAV capabilities is a major advancement in Oxford Biomedica’s goal to become an innovative global viral vector leader that provides solutions to Cell and Gene Therapy (C>) Biotech and Biopharma companies for their process development and manufacturing needs across key viral vectors. Process Development/CMC being one of the most important critical success factors to ensure efficacy, safety and affordability of C>, Oxford Biomedica is in a strong position to enable our customers to bring their new medicines to many more patients and change their lives. We look forward to working with Homology’s impressive team and uniquely robust processes to achieve world-leadership as a provider of AAV solutions in addition to enhancing our leadership in lentiviral vectors. Having a US base brings us closer to customers, talent, innovation in academia and pools of capital all of which will allow growth and building a market leadership position."
Arthur Tzianabos, Ph.D., President and Chief Executive Officer of Homology, said: "We chose Oxford Biomedica for its leadership in viral-based manufacturing and prestigious global client base, and we believe that Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business will build upon the strengths of both companies. Our leadership in AAV process development and CMC, which resulted from establishing internal capabilities early on, has enabled us to advance three programmes from discovery into the clinic within five years. We believe the opportunity in Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business further leverages the value we created in this broad capability, including the demonstrated expertise of our team, to provide much-needed high-quality viral vector to other companies and, importantly, more patients around the world. . Additionally, the $130 million cash infusion, coupled with the reduction in operating expenses, significantly extends our runway and supports the continued advancement of our programs and genetic medicines platform. We believe our ownership stake in Oxford Biomedica Solutions, continued access to our AAV ‘plug and play’ manufacturing platform as a preferred customer, and our ability to benefit from any further manufacturing innovations, will be key value drivers for Homology."
Dr. Roch Doliveux commenting on John’s departure added: "I would like to express my sincere appreciation for John Dawson’s leadership and achievements as CEO. He and the world-class management team he has built have worked relentlessly in selecting the best AAV partner and creating this potentially transformative deal for the Group. This makes it easier to support John’s decision to step down at this time. I am delighted that he will remain a Board member and Advisor."
John Dawson, CBE, added: "I am excited that this will be my final deal as CEO of the Group. This transaction not only brings proven, scalable, high-quality AAV manufacturing capabilities to Oxford Biomedica, which was in line with our strategy, but also expands Oxford Biomedica’s presence into the US and brings us a dedicated team in close geographic proximity to other leading gene therapy companies in Boston and more widely across the US."
Overview of Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business
Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business comprises Homology’s end-to-end high performing AAV process development and manufacturing platform with a proprietary ‘plug and play’ model protected by IP, and an experienced team of approximately 125 Boston based technical operations employees with deep AAV development and manufacturing know-how.
The state of the art AAV manufacturing facility based near Boston includes approximately 25,000 sq. ft of GMP space for drug substance, drug product, QC testing, quality and warehousing, with three 500L single-use bioreactors. The facility has been operating for GMP production since 2019 and has the potential to expand laboratories and the GMP footprint on-site.
Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business has manufacturing capabilities for both process and analytical development and early stage clinical manufacturing at 500L with proven scalability to 2,000L for commercial supply. The GMP facility has an estimated steady state annual maximum capacity of 10 – 15 500L batches and 10 – 15 1,000L batches. Oxford Biomedica Solutions’ process development expertise covers all AAV related gene therapy and gene editing development functions which has already supported three successful Phase I trial initiations in the United States. Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business will be Oxford Biomedica’s global manufacturing and innovation business for AAV and the focus of Oxford Biomedica’s US operations.
Oxford Biomedica Solutions will at completion of the Transaction have approximately US$35 million (£26 million) worth of AAV CDMO gross assets transferred to it by Homology and is expected to generate a minimum first twelve months contracted revenues of approximately US$25 million (£19 million) from Homology under the three-year Manufacturing and Supply Agreement.
Oxford Biomedica Solutions has not traded as an independent entity to date. Oxford Biomedica expects Oxford Biomedica Solutions to break-even on an EBITDA basis by year 3 after closing with gold standard long term target margins.
Oxford Biomedica Solutions will bring together complementary cultures focused on science-led solutions and excellence in customer service under the leadership of Tim Kelly, Chief Operating Officer of Homology, who will join Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business as Chief Executive Officer and Chair of the Board of Directors and also become a member of Oxford Biomedica’s Senior Executive Team.
Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business employees are integral to the success of the Transaction and will be provided with an attractive incentivisation package upon completion of the Transaction.
Strategic Rationale for the Transaction
The Board of Oxford Biomedica believes that the Transaction has compelling strategic and financial rationale, with the potential to deliver substantial benefits to patients, customers, shareholders and other stakeholders. In particular, the Transaction will:
· Broaden Oxford Biomedica’s viral vector capabilities into the largest and fast growing AAV segment via a single transaction
o Bring fully established manufacturing AAV technologies, IP, capabilities and capacity into Oxford Biomedica
o Offer the opportunity to leverage commercial capabilities in Oxbox in the UK through increased credibility in AAV with Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business
· Expand Oxford Biomedica’s geographic presence with the addition of technical operational expertise near Boston, US presenting ideal access to the key US biopharma hub
o Increase Oxford Biomedica’s total addressable market
o Unlock strong synergy opportunities from the combination of technical capabilities and the ability to cross-sell to existing Oxford Biomedica customers
· Enable Oxford Biomedica to leverage proprietary technologies protected by IP in AAV to further enhance Oxford Biomedica’s existing platform
o Promote a collaborative and complementary AAV and lentiviral vector-based approach across transfection, upstream and downstream, analytical testing and cell technology
o Enhance Oxford Biomedica’s ability to offer solutions that meet the CMC challenges that gene and cell therapy companies face
· Be immediately accretive to revenue growth with contribution from Homology and potential new customers
o The three-year strategic partnership with Homology for AAV manufacturing provides Oxford Biomedica Solutions its first major customer with availability of capacity for potential new customers
In summary, the Transaction accelerates Oxford Biomedica’s strategy to create a leading partner of choice with advanced capabilities across key viral vector types in gene and cell therapy (lentivirus, adenovirus and AAV) that will be able to address the increasing market requirements for efficacy, safety and affordability in cell and gene therapeutics. The enlarged Oxford Biomedica will leverage its strong track record, skills and expertise in a significantly larger total addressable market and provide solutions for gene and cell therapy developers underpinned by technologies, know-how and IP with continued focus on innovation to further enhance the combined platform and its customer offering.
The Transaction will also provide expanded manufacturing capacity to Oxford Biomedica. Oxford Biomedica currently has five manufacturing and R&D facilities (>150,000 sq. ft) in the UK, with the potential for at least four additional GMP suites to be added to existing capacity within its current facilities. Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business will add one process R&D and manufacturing facility (approximately 25,000 sq. ft) in Boston, US with the potential to expand laboratories and the GMP footprint on-site.
Transaction Agreements
On 28 January 2022, Oxford Biomedica US and the Company (solely for the purposes of guaranteeing the obligations of Oxford Biomedica US) entered into an equity securities purchase agreement with Homology and Oxford Biomedica Solutions LLC1 (the "Equity Securities Purchase Agreement"), pursuant to which Oxford Biomedica US has agreed to acquire an 80 per cent. ownership interest in Oxford Biomedica Solutions.
The Transaction will be implemented through Oxford Biomedica Solutions, a newly formed US LLC entity, which is initially wholly owned by Homology. Prior to completion of the Transaction and pursuant to the terms of a contribution agreement to be entered into by Homology and Oxford Biomedica Solutions (the "Contribution Agreement"), Homology will, prior to completion of the Transaction, assign and transfer to Oxford Biomedica Solutions certain assets comprising the AAV CDMO Business, and Oxford Biomedica Solutions will assume from Homology, and agree to pay, perform and discharge when due, certain liabilities related to the AAV CDMO Business (the "Contribution"). Following the Contribution, Oxford Biomedica Solutions will hold the AAV CDMO Business.
Pursuant to the terms of the Equity Securities Purchase Agreement, upon completion of the Transaction (i) Oxford Biomedica US will pay Homology a total initial consideration of US$130 million (£97 million) in cash in exchange for the transfer to Oxford Biomedica US of limited liability company units in Oxford Biomedica Solutions (representing approximately 74 per cent. of the total membership interests of Oxford Biomedica Solutions) and (ii) Oxford Biomedica US will make a cash injection of US$50 million (£37 million) into Oxford Biomedica Solutions in exchange for the issue to Oxford Biomedica US of additional limited liability company units in Oxford Biomedica Solutions (representing approximately 6 per cent. of the total membership interests of Oxford Biomedica Solutions). Following completion of the Transaction, Oxford Biomedica US will own limited liability company units in the Oxford Biomedica Solutions, representing 80 per cent. of the total membership interests of Oxford Biomedica Solutions and Homology will own limited liability company units in Oxford Biomedica Solutions representing 20 per cent. Of the total membership interests of Oxford Biomedica Solutions.
Completion of the Transaction under the Equity Securities Purchase Agreement is subject to the satisfaction, or (to the extent permitted by law) waiver, of a number of outstanding conditions, including, inter alia, (i) the Contribution having been completed in accordance with the terms of the Contribution Agreement and (ii) any waiting period (and any extension thereof) applicable to the consummation of the transactions contemplated by the Equity Securities Purchase Agreement under the US Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated. The Transaction is not conditional on the approval of the Company’s shareholders or on financing.
The Equity Securities Purchase Agreement contains (i) an indemnity from Homology for the benefit of Oxford Biomedica US against any losses that Oxford Biomedica US or its indemnified persons may suffer or incur in certain circumstances and (ii) an indemnity from Oxford Biomedica US for the benefit of Homology against any losses that Homology or its indemnified persons may suffer or incur in certain circumstances. Under the Equity Securities Purchase Agreement, Homology and Oxford Biomedica Solutions have given customary representations and warranties to Oxford Biomedica US, and Oxford Biomedica US has given customary representations and warranties to Homology.
On completion of the Transaction, Homology, Oxford Biomedica US and Oxford Biomedica Solutions will enter into an LLC agreement in relation to Oxford Biomedica Solutions, which, among other things, will set out the ongoing rights and obligations of Homology and Oxford Biomedica US with respect to the governance of Oxford Biomedica Solutions (the "LLC Agreement").
Pursuant to the terms of the LLC Agreement, at any time following the third anniversary of completion of the Transaction, Oxford Biomedica US will have the option to purchase from Homology all of Homology’s membership interests in Oxford Biomedica Solutions (the "Call Option") and Homology will have the option to require Oxford Biomedica US or Oxford Biomedica Solutions to purchase all of Homology’s membership interests in Oxford Biomedica Solutions (the "Put Option"). The purchase price payable by Oxford Biomedica US or Oxford Biomedica Solutions on exercise of the Call Option or the Put Option will be equal to the amount Homology would be entitled to receive upon a liquidation of Oxford Biomedica Solutions assuming all of the assets of Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business are sold for a purchase price based on a valuation equivalent to a multiple of 5.5 times the revenue of Oxford Biomedica Solutions over the twelve months prior to the date of exercise. In addition, the maximum purchase price payable by Oxford Biomedica US or Oxford Biomedica Solutions on exercise of the Call Option or the Put Option will be capped at US$74.1 million (£55.4 million). Additionally, upon a change of control of Homology, Oxford Biomedica US has the right to purchase all (but not less than all) of Homology’s interests in Oxford Biomedica Solutions for the same purchase price payable on exercise of the Call Option or the Put Option, except that, on a change of control of Homology occurring within one year of completion of the Transaction, only Oxford Biomedica Solutions’ revenue from the date of completion of the Transaction to the closing date of the change of control transaction will be included in the calculation of the purchase price. The purchase price payable for Homology’s interests in Oxford Biomedica Solutions is subject to the same maximum price as described above.
In connection with the Transaction, Homology, Oxford Biomedica Solutions and Oxford Biomedica US will enter into certain other ancillary agreements upon completion of the Transaction, which in addition to the Contribution Agreement and the LLC Agreement referred to above, also include a Licence and Patent Management Agreement, a Manufacturing and Supply Agreement, a Transitional Services Agreement, a Lease Assignment, a Sublease Agreement, an Employee Matters Agreement, a Patent Assignment Agreement and a Quality Agreement.
Proposed Placing
Oxford Biomedica is undertaking (i) a Firm Placing with certain existing shareholders and other institutional investors of up to 4,858,410 Firm Placing Shares (equating to 5.6 per cent. of the Company’s existing issued share capital as at the last practicable date prior to this Announcement), utilising the unused authorities granted at the 2021 AGM to issue Ordinary Shares for cash on a non-pre-emptive basis and (ii) subject to shareholder approval, a Conditional Placing with certain existing shareholders and other institutional investors of a further number of new Ordinary Shares to be issued under the new authorities to be sought at the General Meeting to issue Ordinary Shares for cash on a non-pre-emptive basis, such that the total gross proceeds from the Firm Placing and the Conditional Placing together reach an amount of approximately £80 million.
Peel Hunt LLP ("Peel Hunt") and WG Partners LLP ("WG Partners") (together the "Joint Bookrunners") are acting as joint bookrunners in connection with the Placing.
The Joint Bookrunners of the Placing reserve the right to issue additional Placing Shares..
The Firm Placing is not conditional on completion of the Transaction and does not require shareholder approval. The Conditional Placing is conditional on completion of the Transaction and on shareholder approval of the issue of the Conditional Placing Shares at the General Meeting. Both the Firm Placing and the Conditional Placing are conditional on Admission becoming effective and the placing agreement between the Company and the Joint Bookrunners (the "Placing Agreement") not being terminated in accordance with its terms.
The Placing will be conducted through a bookbuilding process (the "Bookbuild"), which will be launched immediately following this announcement (such announcement and its appendices together being the "Announcement") and is subject to the terms and conditions set out in Appendix 1 to this announcement. The Joint Bookrunners will commence the Bookbuild and the book will open immediately following the release of this Announcement. The price per Ordinary Share at which the Placing Shares are to be placed (the "Placing Price") and the number of Placing Shares will be determined at the close of the Bookbuild and announced as soon as reasonably practicable after such time. The timing of the closing of the book, the number of Placing Shares to be issued and allocations are at the absolute discretion of the Joint Bookrunners and the Company. The results of the Placing and the Placing Price will be announced as soon as practicable after the close of the Bookbuild. The Placing is not being underwritten. The Placing Shares, if issued, will be fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares of the Company, including, without limitation, the right to receive all dividends and other distributions declared, made or paid in respect of the Ordinary Shares after Admission.
As part of the Placing, there will be an offer made by the Company on the PrimaryBid platform of new Ordinary Shares (the "Retail Offer Shares") at the Placing Price (the "Retail Offer"), to provide retail investors with an opportunity to participate in the equity fundraise. A separate announcement will be made regarding the Retail Offer and its terms. The total number of new Ordinary Shares to be issued pursuant to the Placing and the Retail Offer will be such that no publication of a prospectus by Oxford Biomedica under the UK Prospectus Regulation or the EU Prospectus Regulation is required.
Oxford Biomedica acknowledges that it is seeking to issue new Ordinary Shares on a non-pre-emptive basis and therefore members of its Board of Directors and senior management have consulted with the Company’s major institutional shareholders ahead of the release of this Announcement. Given the benefits of the Transaction, the Company believes the structure, including the issue of new Ordinary Shares on a non-pre-emptive basis, is very much aligned with shareholder and other stakeholder interests. The Placing structure has been chosen as it reduces both the complexity, cost and time of a pre-emptive offering such as an open offer. The consultation has confirmed the Board’s view that the Placing is in the best interests of shareholders, as well as wider stakeholders in the Company and will promote the success of the Company.
This Announcement should be read in its entirety. In particular, you should read and understand the information provided in the "Important Notices" section of this Announcement. The Appendix to this Announcement sets out further information relating to the terms and conditions of the Placing. Unless otherwise stated, capitalised terms in this Announcement have the meanings ascribed to them in the Appendix (which forms part of this Announcement).
Investors who have chosen to participate in the Placing, by making an oral or written offer to acquire Placing Shares, will be deemed to have read and understood this Announcement in its entirety (including the Appendices) and to be making such offer on the terms and subject to the conditions herein, and to be providing the representations, warranties, agreements, acknowledgements and undertakings contained in Appendix 1.
Applications will be made for the Firm Placing Shares and the Conditional Placing Shares to be admitted to the premium listing segment of the Official List (the "Official List") of the Financial Conduct Authority (the "FCA") and to be admitted to trading on the main market for listed securities of London Stock Exchange plc (the "London Stock Exchange") (together, "Admission").
Settlement for the Firm Placing Shares and Admission is expected to take place on or around 8.00 a.m. (London time) on or around 4 February 2022 (or such later time and/or date as the Joint Bookrunners may agree with the Company), and dealings in the Firm Placing Shares will commence at that time. The Firm Placing is conditional upon Admission becoming effective and the placing agreement between the Company and the Joint Bookrunners (the "Placing Agreement") not being terminated in accordance with its terms in respect of the Firm Placing Shares. The Firm Placing is not conditional on completion of the Transaction.
Settlement for the Conditional Placing Shares and Admission is expected to take place on or around 8.00 a.m. (London time) on or around 11 March 2022 (or such later time and/or date as the Joint Bookrunners may agree with the Company), and dealings in the Conditional Placing Shares will commence at that time. The date for Admission of the Conditional Placing Shares is subject to the time it takes for the HSR requirements to be satisfied and the date that the Company posts a circular to its shareholders to convene the General Meeting. When the Company posts the circular to shareholders it will confirm any changes to the timetable for Admission of the Conditional Placing Shares.
Short Term Loan Facility
On 28 January 2022, the Company entered into a commitment letter and a fee letter with funds managed by Oaktree, for a senior secured term loan facility in an aggregate principal amount of US$85 million (£64 million).
The Company and Oaktree intend to enter into definitive agreements for the Facility on or prior to completion of the Transaction and it is expected that the definitive agreements will include: (i) usual and customary mandatory prepayments, covenants and representations and warranties, (ii) a financial covenant requiring the Company and its subsidiaries to maintain a minimum level of liquidity (iii) usual and customary events of default and (iv) customary expense reimbursement and an indemnity from the Company for the benefit of Oaktree against any losses that Oaktree or its indemnified persons may suffer or incur in certain circumstances.
The proceeds of the Facility can be used by the Company, together with the Company’s existing cash, to finance a portion of the purchase price of the Transaction, pay transaction costs and for working capital and general corporate purposes. The availability of the Facility will be subject to the satisfaction by the Company of certain conditions precedent, including the Transaction having been, or being concurrently with the initial borrowing under the Facility, completed in all material respects in accordance with the Equity Securities Purchase Agreement. The Company intends to draw down the Facility to fund a portion of the purchase price of the Transaction.
The Facility will mature twelve months after the date of completion of the Transaction and will not amortise, with the full aggregate principal amount of the Facility being repayable on the final maturity date. The Company intends to repay some or all of the drawn funds out of the proceeds of the Placing.
The Facility will be secured by substantially all of the present and subsequently acquired assets of the Company and its wholly owned subsidiaries and be guaranteed by the Company’s wholly owned subsidiaries, with customary exceptions. The interest rate under the Facility will be 8.50 per cent. per annum, payable quarterly in cash or in kind as additional loan principal, at the option of the Company. Voluntary prepayment and mandatory prepayment of the Facility (including upon acceleration thereof) will be subject to scaling exit fees on the principal amount of loans repaid, ranging from 0% to 0.75% depending on the date of repayment.
Use of Proceeds
As at 31 December 2021 the Company had unaudited cash balances of approximately £109 million, as detailed above the Company has also entered into a commitment letter for short term debt financing of US$85 million (£64 million) with Oaktree which it expects to receive (net of transaction fees and expenses) concurrently with completion of the Transaction. Subject to Admission of the Firm Placing Shares, the net proceeds of the Firm Placing will also be available to the Company prior to completion of the Transaction.
At completion, the net proceeds of the Firm Placing, the Short Term Facility and the Company’s current cash balances will allow the Company to acquire the 80 per cent. ownership interest in newly-formed Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business for a US$130 million (£97 million) cash consideration payable to Homology and a US$50 million (£37 million) capital injection into Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business to fund growth. Should the Firm Placing not complete, then the Company would propose to utilise the Facility and its existing cash resources to fund the Transaction.
The net proceeds of the Firm Placing, the Conditional Placing, the Facility and any other surplus funds after completion of the Transaction will fund the Company’s existing capital requirements in respect of Oxbox and Windrush Innovation Centre (estimated at £65 million), cover the expenses of the Transaction, the Placing and the Facility and provide additional working capital for the Group.
In the event that the Firm Placing completes but the Transaction does not the Company will retain the net proceeds for working capital and general corporate purposes.
The Company estimates that upon completion of the Transaction and the Placing it will hold cash balances of approximately £100 million assuming full draw down of the US$85 million (£64 million) Facility. The Facility is expected to mature within 12 months from the date of completion of the Transaction. This estimated cash balance of £100 million excludes the cash balance associated with the US$50 million (£37 million) working capital injection into Oxford Biomedica Solutions’ AAV Manufacturing and Innovation Business at Completion.
Company Business Update and Recent Developments
Simultaneous to this announcement of the Transaction, John Dawson will step down as CEO and current Chairman Roch Doliveux will become interim CEO.
Roch Doliveux has been integrally involved with Oxford Biomedica’s strong senior management team and has significant experience of running international companies (including post-transaction integration), having previously been CEO at UCB for ten years. John Dawson will remain a Board Director and Advisor to the Company and the process to appoint a new CEO is underway.
The group continued its strong momentum across CDMO activities since H1 2021, as set out below, and FY21 Group revenues are expected to be in line with equity research analyst consensus4 (unaudited). The Group’s closing cash position at 31 December 2021 stood at approximately £109 million (unaudited).
· On 5 January 2022, Oxford Biomedica announced that it had signed a new License and Supply Agreement with Cabaletta Bio, Inc. ("Cabaletta Bio") granting Cabaletta Bio a non-exclusive license to Oxford Biomedica’s LentiVector platform for its application in Cabaletta Bio’s leading Chimeric AutoAntibody Receptor (CAAR) T programme, DSG3-CAART (targeting DSG3), and put in place a multi-year Supply Agreement;
· On 13 December 2021, Oxford Biomedica announced that it had signed a Licence and Supply Agreement with Arcellx, Inc. ("Arcellx") a biotechnology company, developing novel, adaptive and controllable cell therapies for the treatment of patients with cancer and autoimmune diseases. The agreement grants Arcellx a non-exclusive licence to Oxford Biomedica’s LentiVector platform for its application in select Arcellx CAR-T programmes and puts in place a three-year Clinical Supply Agreement. Under the terms of the agreement, Oxford Biomedica will receive payments related to the development and manufacturing of lentiviral vectors for use in clinical trials. Additionally, the agreement allows for payments to the Group for the manufacture and supply of lentiviral vectors for commercial use;
· On 13 December 2021, Oxford Biomedica announced that Novartis extended the terms of its initial commercial supply agreement to the end of 2028 and Oxford Biomedica regained the rights to its LentiVector platform relating to three CAR-T targets, including CD19 targeted therapies. As result of the agreement Oxford Biomedica has the right to work with potential pharmaceutical and biotech partners other than Novartis across all CAR-T targets. In addition, under the terms of the new agreement Novartis has been granted additional flexibility in ordering of GMP batches across Oxford Biomedica’s multiple GMP facilities but will no longer have a minimum order commitment; and
· On 19 October 2021, Oxford Biomedica announced that Boehringer Ingelheim had exercised its option to license Oxford Biomedica’s lentiviral vector technology to manufacture, register and commercialise BI 3720931, a lentiviral vector-based gene therapy for the treatment of cystic fibrosis (CF). Under the terms of the option and license agreement with Boehringer Ingelheim, originally announced in August 2018, Oxford Biomedica received an option exercise fee of £3.5 million. Oxford Biomedica is further entitled to development, regulatory and sales milestones of up to a further £27.5 million, in addition to a tiered low single digit royalty on net sales of a CF gene therapy product.
Furthermore, Oxford Biomedica is having ongoing discussions with other potential partners including one at an advanced stage as well as ongoing discussions with AstraZeneca on the potential extension of the current 18-month manufacturing agreement for the Oxford AstraZeneca COVID-19 Vaccine.
Related Party Transactions
Novo Holdings A/S, a strategic investor in the Company ("Novo Holdings") has indicated its intention to subscribe for approximately £10 million in aggregate across the Firm Placing and the Conditional Placing. Due to Novo Holdings having held more than 10 per cent. of the Company’s issued share capital in the last twelve months, Novo Holdings is deemed to be a related party of the Company under Listing Rule 11.1.4A. As the Placing is not being conducted on a pre-emptive basis and due to the proposed size of Novo Holdings’ participation, the issue of Placing Shares to Novo Holdings would be classified as a related party transaction under the Listing Rules and, as such, the Company may be required to obtain Shareholder approval for the participation of Novo Holdings in the Placing and/or comply with the additional provisions of Listing Rule 11.1.10. If Shareholder approval is required pursuant to Listing Rule 11.1.7, relevant details will be set out in the circular to be sent to Shareholders in connection with the Conditional Placing. The Company will ensure that in the event that Novo Holdings is allocated Firm Placing Shares that the value of any such shares does not trigger the requirement for a Shareholder vote under Listing Rule 11.1.7. If Shareholder approval is required for part of Novo Holdings’ participation and if the relevant resolution is not passed in respect of the participation in the Placing by Novo Holdings, Peel Hunt and WG Partners will use reasonable endeavours to reallocate the Placing Shares originally allocated to Novo Holdings on closing of the bookbuilding process, in accordance with the terms of the Placing Agreement and the terms and conditions set out in Appendix 1.
Dr. Roch Doliveux, the Company’s Chairman and interim CEO, has indicated his intention to invest not less than £1 million in the Placing. Due to his position as director of the Company, Dr. Roch Doliveux is also deemed to be a related party of the Company under Listing Rule 11.1.4A. Therefore, depending on the final number of Placing Shares that Dr. Roch Doliveux may conditionally subscribe for in the Placing, the Company may be required to comply with additional provisions of Listing Rule 11.1.10.
Irrevocable Undertakings
Novo Holdings has irrevocably undertaken to vote, or procure the voting of, the 8,253,000 Ordinary Shares in which it is interested (representing approximately 9.6 per cent. of the issued share capital of the Company as at the last practicable date prior to this Announcement) in favour of the resolutions to be proposed at the General Meeting (except in relation to any resolution that may be proposed to approve its participation in the Conditional Placing where such participation is classified as a related party transaction under the Listing Rules).
Vulpes has irrevocably undertaken to vote, or procure the voting of, the 9,270,809 Ordinary Shares in which it is interested (representing approximately 10.8 per cent. of the issued share capital of the Company as at the last practicable date prior to this Announcement) in favour of the resolutions to be proposed at the General Meeting.
Serum Life Sciences Ltd has irrevocably undertaken to vote, or procure the voting of, the 3,382,950 Ordinary Shares in which it is interested (representing approximately 3.9 per cent. of the issued share capital of the Company as at the last practicable date prior to this Announcement) in favour of the resolutions to be proposed at the General Meeting.
Lansdowne Partners (UK) LLP has irrevocably undertaken to vote, or procure the voting of, the 1,293,037 Ordinary Shares in which it is interested (representing approximately 1.5 per cent. of the issued share capital of the Company as at the last practicable date prior to this Announcement) in favour of the resolutions to be proposed at the General Meeting.
Dr. Roch Doliveux, John Dawson, Stuart Paynter, Stuart Henderson, Dr. Michael Hayden, Dr. Heather Preston and Dr. Siyamak Rasty (being those Directors who hold Ordinary Shares) have irrevocably undertaken to vote in favour of the resolutions to be proposed at the General Meeting in respect of their holdings of Ordinary Shares, amounting to 241,327 Ordinary Shares in aggregate (representing approximately 0.3 per cent. of the issued share capital of the Company as at the last practicable date prior to this Announcement).
Notice of General Meeting
In connection with the Conditional Placing, the Company will publish and send a circular to its shareholders (the "Circular") containing a notice convening a general meeting of the Company (the "General Meeting"). At the General Meeting, Shareholder approval will be sought for authority to allot the Conditional Placing Shares and to disapply pre-emption rights in connection with such issue. If Shareholder approval is also required for Novo Holdings’ participation in the Conditional Placing that will also be sought at the General Meeting. The Company expects to publish the circular within 3 weeks following the date of this Announcement.
Indicative timetable
The following time and dates are indicative and subject to change.
Announcement of the Transaction, the Firm Placing and the Conditional Placing
7.00 a.m. 28 January 2022
Announcement of the results of the Firm Placing and the Conditional Placing
By 06:30 p.m. 28 January 2022
Completion of the Firm Placing and Admission of the Firm Placing Shares
4 February 2022
Publication and dispatch of the Circular (including notice of General Meeting)
mid-February 2022
General Meeting
early-March 2022
Completion of the Transaction
Week commencing 7 March 2022
Completion of the Conditional Placing and Admission of the Conditional Placing Shares (see note below)
On or around 11 March 2022
Note: The estimated date for completion of the Conditional Placing and Admission will be dependent on the time it takes for the HSR requirements to be satisfied and the date that the Company posts a circular to its shareholders convening the General Meeting. Further announcements will be made through a Regulatory Information Service as required.
The exchange rate used for the conversion of USD into GBP is US$1:£0.7478, derived from Bloomberg FX Fixings Spot Exchange Rate as at 6.00 p.m. on the last practicable date.
This announcement is made in accordance with the Group’s disclosure obligations pursuant to Chapter 10 of the Listing Rules.