10th May 2019 10:06
LONDON (Alliance News) - Venn Life Sciences Holdings PLC on Friday said it is acquiring Open Orphan DAC in an all-share acquisition and planning an equity fundraise.
In addition, Venn announced it has reshuffled its board, making non-executive chair Cathal Friel its new chief executive. Furthermore, the company said its loss more than doubled in 2018 after a sizeable impairment.
Venn - which provides clinical design and management to pharmaceutical, biotechnology, and medical device companies - has agreed to acquire Open Orphan for GBP5.7 million in Venn shares.
The consideration shares will be issued to Open Orphan's shareholders with reference to a relative value of Venn of around GBP4.0 million, meaning the value of Open Orphan is more than of Venn itself. What's more, Venn's actual market capitalisation is just GBP1.9 million. Venn shareholder approval is required.
The deal is considered a reverse takeover under AIM rules and so Venn's shares have been temporarily suspended. The acquisition could result in an obligation for Open Orphan shareholders to make an offer for Venn. As such, the offer is also conditional on a waiver of this obligation.
Open Orphan is a rare and orphan drug consulting services platform incorporated in the Republic of Ireland in July 2017. It has raised more than EUR3 million from investors in order to build its platform, which helps companies obtain approval for their drugs from the European Medicines Agency and on a local basis.
"The combination of Venn and Open Orphan gives us a strong platform, and we have the pipeline and management team to go out and build a leading full-service consultancy offering services to the fast growing orphan drug market right across Europe," said new CEO Friel.
In 2019 so far, Venn said, low utilisation has resulted in both revenue and earnings before interest, taxation, depreciation, and amortisation falling behind management forecasts.
While revenue and profitability are expected to increase "in the coming months", careful management of cash will be needed and further financial resources are necessary for Venn's growth strategy.
The company is therefore planning an equity fundraise, which will support its enlarged business with Open Orphan as well as adding to working capital and helping with future acquisitions. The exact amount of the fundraise has not been disclosed, although Venn has said it will announce further details "in due course".
In terms of Venn's new board composition Friel, previously non-executive chair of Venn, has moved over to CEO with immediate effect. Former CEO Tony Richardson remains on Venn's board as corporate development director. Brendan Buckley, a non-executive director at Venn, has been made non-executive chair.
Venn's pretax loss for 2018 was EUR4.6 million, more than twice its EUR1.7 million loss in 2017. This was due to a EUR2.2 million impairment of intangible assets with no such impairment recorded in 2017.
Other factor's in Venn's widened loss included its reduction in revenue for the year to EUR14.2 million from EUR17.4 million.
Outgoing CEO Richardson said: "While the confidential nature of our business prevents us from fully disclosing client and technology details, I am pleased to communicate that we have played a pivotal role in the development of a successful drug for the treatment of a rare medical condition. This is the culmination of three years work and provides a critical proof point regarding Venn's drug development capabilities. We have significantly advanced our credentials as a drug development partner and begin this year with greater credibility in the eyes of current and prospective clients. We are committed to further service and geographical expansion of our business in 2019 and further to our collaboration announcement in December 2018 have made significant strides in developing our platform offering for rare and orphan drug developers."