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Xenova Group PLC (XEN)

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Wednesday 11 September, 2002

Xenova Group PLC

Rights Issue

Xenova Group PLC
11 September 2002


   Not for release, distribution or publication in or into the United States,
              Canada, Australia, the Republic of Ireland or Japan


                                Xenova Group plc

Announces a fully underwritten 8 for 33 rights issue to raise approximately £11
                                    million


Slough, UK, 11 September, 2002 - Xenova Group plc (Nasdaq NM: XNVA; London Stock
Exchange: XEN), the UK-based bio-pharmaceuticals group, which focuses on the
therapeutic areas of cancer and immune system disorders, today announces that it
proposes to raise approximately £9.9 million (net of expenses) by means of a
rights issue.



The Rights Issue of approximately 33.7 million New Ordinary Shares at a price of
32.5 pence per New Ordinary Share is being made to Qualifying Shareholders by
way of an 8 for 33 rights issue.  This represents a discount of 24.9 per cent.
to the closing middle market price of 43.25 pence per Ordinary Share on 10
September 2002, the last business day before this announcement.  The Rights
Issue has been fully underwritten by Nomura (save to the extent of the
Directors' Undertakings).



A prospectus produced by the Company and containing details of the Rights Issue
is expected to be posted to Qualifying Shareholders today.  It is expected that
Provisional Allotment Letters will be sent to Qualifying non-CREST Shareholders
following the Extraordinary General Meeting to be held on 4 October 2002 and
that Qualifying CREST Shareholders (who will not receive a Provisional Allotment
Letter) will receive a credit to their appropriate stock accounts in CREST in
respect of their Nil Paid Rights on 4 October 2002.



David Oxlade, Chief Executive Officer of Xenova, commented:

'We are pleased to be able to announce this fully underwritten rights issue at a
time of such volatile and difficult market conditions.  The funds raised will
help Xenova to continue to develop and further strengthen its portfolio of
innovative new drugs and to progress a number of new drug candidates towards or
into clinical trials.'



Enquiries:

Xenova Group PLC                                             Tel.: 01753 706 600

David Oxlade, Chief Executive Officer

Daniel Abrams, Chief Financial Officer

Hilary Reid Evans, Head of Corporate Communications

Nomura International PLC                                     Tel.: 020 7521 2000

Charles Spicer

David Rasouly

Media Enquiries: Financial Dynamics                          Tel.: 020 7831 3113

Fiona Noblet

Jonathan Birt



Nomura, which is regulated in the United Kingdom by the Financial Services
Authority, is acting for Xenova and no one else in connection with the Rights
Issue and will not be responsible to anyone other than Xenova for providing the
protections afforded to clients of Nomura, nor for providing advice in relation
to the Rights Issue or the New Ordinary Shares.



The Directors of Xenova are the persons responsible for the information
contained in this announcement.  To the best of the knowledge and belief of the
Directors (who have taken all reasonable care to ensure that such is the case)
the information contained in this announcement is in accordance with the facts
and does not omit anything likely to affect the import of such information.



This announcement does not constitute an offer to sell, or the solicitation of
an offer to subscribe for, the Nil Paid Rights, the Fully Paid Rights, or the
New Ordinary Shares in the United States or in any other jurisdiction in which
such offer or solicitation is unlawful. The Nil Paid Rights, the Fully Paid
Rights, the New Ordinary Shares and the Provisional Allotment Letters have not
been, and will not be, registered under the US Securities Act of 1933 (as
amended) or under the applicable securities laws of Canada, Australia, the
Republic of Ireland, or Japan.  Accordingly, unless an exemption under any
applicable laws is available, the New Ordinary Shares or Provisional Allotment
Letters may not be offered, sold, transferred, taken up or delivered, directly
or indirectly, in the US, Canada, Australia, the Republic of Ireland or Japan or
any other country outside the United Kingdom where such distribution may
otherwise lead to a breach of any law or regulatory requirement.



                                XENOVA GROUP PLC


            PROPOSED RIGHTS ISSUE TO RAISE APPROXIMATELY £11 MILLION


1.  Introduction

Xenova announces today that it proposes to raise approximately £11.0 million
(approximately £9.9 million net of expenses) by way of an 8 for 33 Rights Issue
to Qualifying Shareholders of 33,710,703 New Ordinary Shares at a price of 32.5
pence per New Ordinary Share, representing a discount of 10.75 pence (24.9 per
cent.) to the closing middle market price of 43.25 pence for Ordinary Shares
trading on the London Stock Exchange on 10 September 2002 (the last practicable
date prior to the date of this announcement).



A prospectus produced by the Company and containing details of the Rights Issue
is expected to be posted to Qualifying Shareholders today.  It is expected that
Provisional Allotment Letters will be sent to Qualifying non-CREST Shareholders
following the Extraordinary General Meeting to be held on 4 October 2002 and
Qualifying CREST Shareholders (who will not receive a Provisional Allotment
Letter) will receive a credit to their appropriate stock accounts in CREST in
respect of their Nil Paid Rights on 4 October 2002.



2.  Background on Xenova

Xenova is an emerging bio-pharmaceutical company focusing on the therapeutic
areas of cancer and immune system disorders. The Group has a strong track record
in the discovery and development of novel drug candidates, in which it creates
and retains ownership of intellectual property. The Company merged with Cantab
in April 2001, and now employs approximately 140 people at its facilities in
Slough and Cambridge, in the United Kingdom.



The last eighteen months have been a significant period in the history of the
Company, during which the business was expanded through the successful
completion of the merger with Cantab, a number of clinical trials were
successfully completed and important and valuable commercial licensing
agreements were entered into, validating both the strategy and the research and
development activities of the Group. These significant events included:



•         the merger with Cantab, which brought together complementary
competencies in the development of new cancer treatments and created a group
with one of the largest clinical development pipelines among listed European
bio-pharmaceuticals companies. Following the merger the Directors carried out a
strategic review of the enlarged group, which resulted in focusing the Group's
activities and resources on key programmes and led to a substantial reduction in
the combined operating expenses of the Group. Integration of the two businesses
has now been successfully completed;

•         the entry into Phase III clinical trials of the Group's lead drug
candidate, tariquidar (XR9576), a P-glycoprotein inhibitor being developed for
the treatment of MDR in cancer patients;

•         the entry into Phase I clinical trials of XR11576, one of the Group's
novel DNA targeting agents for potential cancer therapy;

•         a significant licensing agreement with QLT for the conduct and funding
by QLT of North American and European registration studies, and North American
marketing, of tariquidar (XR9576). Xenova retains substantially all marketing
rights to commercialise the product outside North America;

•         a significant licensing agreement with Millennium for the development
and North American marketing of three of the Company's early stage novel DNA
targeting agents (XR11576, XR5944 and XR11612) for potential cancer therapy.
Xenova retains substantially all marketing rights to commercialise any products
arising from this programme outside North America;

•         a further important licensing agreement with Genentech for the
research, development, and worldwide marketing of products primarily targeting
disorders of the immune system based on the OX40 receptor protein and anti-OX40
Ligand antibody programmes. Xenova has retained the global rights to the
applications of the anti-OX40 antibodies and OX40 Ligand programmes relating to
cancer and infectious diseases; and

•         two licensing agreements entered into by Phogen, a joint venture
between Xenova and Marie Curie Cancer Care, in respect of the application of
Phogen's VP22 technology. The first of these collaborations, with Genencor,
relates to the application of VP22 technology to the development of therapeutic
vaccines for certain infectious viral diseases. The second, with Cell Genesys,
relates to the application of VP22 technology to the enhanced delivery of
certain proprietary Cell Genesys genes for the development of products for
cancer and cardiovascular disease.



As a result of these and other developments, the Directors believe that Xenova
now has a strong and well balanced portfolio of product candidates in
development, with 8 products in clinical trials and a further 8 in preclinical
development, and an experienced research and development team supported by a
range of technologies to drive the progress of its product portfolio. The Group
has established a number of commercial collaborations with major pharmaceutical
companies and, in addition to QLT, Millennium, Genentech, Genencor and Cell
Genesys referred to above, also has collaborations with Celltech, Lilly and
Pfizer.



3.  Current Trading and Prospects

The Company published its interim results on 14 August 2002. As at 30 June 2002,
Xenova had £15.1 million in cash and liquid resources.



Since the date of the Company's last published annual accounts, the Group has
continued to make progress, in line with Directors' expectations, with the
development of its drug candidates and early stage programmes.



The Directors continue to expect that the output of its research and development
activities will generate drug candidates that are capable of being partnered
with pharmaceutical or biotechnology companies for their further development and
eventual commercialisation in line with the Group's commercial strategy. The
Group will continue to seek opportunities to license out compounds at an
appropriate stage of their development.



The Directors expect that losses and cash outflows will continue for a number of
years. However, the Directors believe that this fundraising will place the
Company in a stronger position to continue the development of the business.  If
the Rights Issue does not proceed the Company would need to out-license further
products or rights to other territories at an earlier stage than otherwise
intended.  The timing of further fundraising will depend on the timing and
magnitude of revenues, in particular milestones and other payments from
programmes licensed out.



4.  Reasons for the Rights Issue and Use of Proceeds

Xenova will use the proceeds of the Rights Issue to continue to develop and
exploit its clinical products and to progress its promising early pipeline
towards or into clinical development. The Group is also seeking to expand this
pipeline through a focus on in-house drug discovery and on in-licensing of
products as and when the right opportunities arise. The Directors believe that
the additional financial strength resulting from the Rights Issue will put the
Group in a better position to negotiate favourable terms for its licensing
agreements or any other corporate transactions.



The specific areas to which the funds from the Rights Issue, as well as existing
funds, will be applied include the following:



•         progressing tariquidar through Phase III clinical trials. While the
North American rights to this product candidate have been licensed to QLT,
Xenova intends to progress the development of tariquidar in Europe and the Rest
of the World, licensing it out in these other territories at the most
appropriate time;

•         progressing one or more product candidates from the novel DNA
targeting agent programme (XR11576, XR11612 and XR5944) to late stage clinical
trials. While the North American rights of certain of these compounds have been
licensed to Millennium, Xenova is responsible for any additional development
costs in Europe and the Rest of the World;

•         progressing the addiction vaccines, TA-NIC and TA-CD, through clinical
trials;

•         progressing the DISC-PRO prophylactic vaccine and DISC-GMCSF
gene-therapy product through clinical trials to a stage when they can be
licensed out to a partner;

•         in respect of the Group's early stage research projects, seeking to
establish proof of concept of, amongst others, MRP, OX40L, MEN.B, PAI-1
inhibitors (for cancer) and M3, and to progress a product candidate from each of
these programmes towards or into clinical development; and

•         in-licensing of new early stage programmes from other companies or
through collaborations with academic research centres and institutions as and
when the right opportunities arise.



The net proceeds of the Rights Issue are expected to be £9.9 million. The
Directors currently estimate that £6.6 million will be invested in the further
development of programmes currently in clinical development and £3.3 million
will be invested in the development of current research and early stage
pre-clinical programmes.



5.  Details of the Rights Issue

The Company is proposing to raise approximately £9.9 million, net of expenses,
by way of the Rights Issue.  Subject to the terms and conditions set out below,
it is proposed that 33,710,703 New Ordinary Shares will be provisionally
allotted by way of rights to Qualifying Shareholders at a price of 32.5 pence
per New Ordinary Share, payable in full on acceptance, on the following basis:


               8 New Ordinary Shares for every 33 Ordinary Shares


held on the Record Date and so in proportion for any other number of Ordinary
Shares then held. Holdings of shares in certificated and uncertificated form
will be treated as separate holdings for the purposes of calculating
entitlements under the Rights Issue.  Entitlements of Qualifying Shareholders
under the Rights Issue will be rounded down to the nearest whole number of New
Ordinary Shares. Fractions of New Ordinary Shares will not be allotted to
Qualifying Shareholders but will be aggregated and sold in the market, nil paid,
for the benefit of the Company. The allotment and issue of the New Ordinary
Shares will be made upon and subject to the terms and conditions set out in the
Prospectus, the Provisional Allotment Letters to Qualifying non-CREST
Shareholders and the Company's memorandum and articles of association.  The
offer of New Ordinary Shares to Qualifying CREST Shareholders will be made, on
the terms and conditions set out in the Prospectus and the memorandum and
articles of association, at the time when (such Qualifying CREST Shareholders'
stock accounts having been credited as described in sub-paragraph (a) below) Nil
Paid Rights are enabled for settlement as described in sub-paragraph (b) below.



The issue of the New Ordinary Shares has been underwritten in full by Nomura
(except to the extent of the Directors' Undertakings) pursuant to the
Underwriting Agreement.



Application has been made to the UKLA for the New Ordinary Shares to be admitted
to the Official List and application has been made for the New Ordinary Shares
to be admitted to trading on the market for listed securities of the London
Stock Exchange. It is expected that Admission will become effective and that
dealings in the New Ordinary Shares, nil paid, will commence at 8.00 a.m. on 7
October 2002.  The New Ordinary Shares will, when issued and fully paid, rank
pari passu in all respects with the existing Ordinary Shares, including the
right to receive in full all dividends and other distributions hereafter paid,
made or declared on the Ordinary Shares.



The existing Ordinary Shares are already admitted to Crest.  Applications will
be made for the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares
to be admitted to CREST. CRESTCo requires, amongst other things, the Company to
confirm to it that the New Ordinary Shares have been admitted to the Official
List before CRESTCo will admit any security to CREST. As soon as practicable
after Admission, the Company will confirm this to CRESTCo.



Subject to the passing of a special resolution, Resolution1, Provisional
Allotment Letters in respect of Nil Paid Rights will be despatched to Qualifying
non-CREST Shareholders at their own risk on 4 October 2002.



Subject, inter alia, to the conditions referred to below being satisfied, it is
intended that:



(a)     Computershare Investor Services PLC will instruct CRESTCo to credit the
appropriate stock accounts of Qualifying CREST Shareholders with such
shareholders' entitlements to Nil Paid Rights on 4 October 2002; and

(b)     the Nil Paid Rights and the Fully Paid Rights will be enabled for
settlement by CRESTCo by 8.00 a.m. on 7 October 2002, or, if later, as soon as
practicable after the Company has confirmed to CRESTCo that all the conditions
for admission of such rights to CREST have been satisfied.



The Rights Issue is conditional upon:



i.   the passing of a special resolution, Resolution 1, to be proposed at the
Extraordinary General Meeting;

ii.  the Underwriting Agreement not having terminated prior to the satisfaction
of the condition referred to in sub-paragraph iii. below; and

iii.  Admission becoming effective by no later than 8.00 a.m. on 7 October 2002
(or such later time and/or date as Nomura may decide, being not later than 8.00
a.m. on 15 October 2002).



If, for any reason, the Provisional Allotment Letters are posted otherwise than
on the day of the Extraordinary General Meeting or the Extraordinary General
Meeting does not take place on 4 October 2002, or share accounts of Qualifying
CREST Shareholders cannot be credited, or the Nil Paid Rights cannot be enabled,
by 8.00 a.m. on 7 October 2002, the times and dates referred to in this
announcement may be revised and the times and dates so revised will be contained
in the Provisional Allotment Letters and will be notified by the Company to the
UKLA, a Regulatory Information Service and, where appropriate, to Qualifying
Shareholders.



The latest time and date for acceptance and payment in full in respect of the
Rights Issue is expected to be 9.30 a.m. on 28 October 2002.



The full terms and conditions of the Rights Issue, including the procedure for
acceptance and payment and the procedure in respect of rights not taken up, will
be included in the Prospectus and, in case of Qualifying non-CREST Shareholders,
the Provisional Allotment Letter.



6. Extraordinary General Meeting

An Extraordinary General Meeting is to be held at 10.00 a.m. on 4 October 2002
at Nomura House, 1 St. Martin's-le-Grand, London EC1A 4NP at which a special
resolution, Resolution 1, necessary to implement the Rights Issue will be
proposed.



A further ordinary resolution, Resolution 2, will also be proposed to amend some
of the Share Option Schemes in order to delete the prescriptive flow rates and
dilution limits that are hindering the operation of the Share Option Schemes.
The overriding 10% in ten years' dilution limit will remain.



7.  Further Information



Enquiries:

Xenova Group PLC                                            Tel.: 01753 706 600

David Oxlade, Chief Executive Officer

Daniel Abrams, Chief Financial Officer

Hilary Reid Evans, Head of Corporate Communications

Nomura International PLC                                    Tel.: 020 7521 2000

Charles Spicer

David Rasouly

Media enquiries: Financial Dynamics                         Tel.: 020 7831 3113

Fiona Noblet

Jonathan Birt



Nomura, which is regulated in the United Kingdom by the Financial Services
Authority, is acting for Xenova and no one else in connection with the Rights
Issue and will not be responsible to anyone other than Xenova for providing the
protections afforded to clients of Nomura, nor for providing advice in relation
to the Rights Issue or the New Ordinary Shares.



This announcement does not constitute an offer to sell, or the solicitation of
an offer to subscribe for, the Nil Paid Rights, the Fully Paid Rights the New
Ordinary Shares in any jurisdiction in which such offer or solicitation is
unlawful. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares
and the Provisional Allotment Letters have not been, and will not be, registered
under the US Securities Act of 1933 (as amended) or under the applicable
securities laws of Canada, Australia, the Republic of Ireland, or Japan.
Accordingly, unless an exemption under any applicable laws is available, the New
Ordinary Shares or Provisional Allotment Letters may not be offered, sold,
transferred, taken up or delivered, directly or indirectly, in the US, Canada,
Australia, the Republic of Ireland or Japan or any other country outside the
United Kingdom where such distribution may otherwise lead to a breach of any law
or regulatory requirement.



This press release is not an offer of securities for sale in the United States.
The Nil Paid Rights, the Fully Paid Rights and the New Ordinary Shares may not
be offered or sold in the United States.



Appendix 1 - Expected timetable of Principal Events

It is currently anticipated that the Rights Issue will proceed in accordance
with the following timetable:


Record date for the Rights Issue                                                 close of business on 2 October
                                                                                                           2002

Latest time and date for receipt of Forms of Proxy                                 10.00 a.m. on 2 October 2002

Extraordinary General Meeting                                                      10.00 a.m. on 4 October 2002

Provisional Allotment Letters despatched to Qualifying non-CREST Shareholders                    4 October 2002

Admission, dealings in New Ordinary Shares to commence, nil paid                    8.00 a.m. on 7 October 2002

Nil Paid Rights and Fully Paid Rights enabled in CREST                              8.00 a.m. on 7 October 2002

Recommended latest time for requesting withdrawal of Nil Paid Rights from          9.30 a.m. on 22 October 2002
CREST

Latest time for depositing renounced Provisional Allotment Letters (nil paid       3.00 p.m. on 23 October 2002
or fully paid) into CREST or for dematerialising Nil Paid Rights into a CREST
stock account

Latest time and date for splitting Provisional Allotment Letters, nil paid or      3.00 p.m. on 24 October 2002
fully paid

Latest time and date for acceptance and payment in full and for registration       9.30 a.m. on 28 October 2002
of renunciation

Dealings in New Ordinary Shares to commence, fully paid                            8.00 a.m. on 29 October 2002

CREST Stock Accounts credited for New Ordinary Shares in uncertificated form                    29 October 2002

Definitive share certificates for New Ordinary Shares despatched                             by 4 November 2002



Appendix 2 - Definitions


'Admission'                              admission of the New Ordinary Shares (nil paid) to the Official List
                                         and to trading on the market for listed securities of the London Stock
                                         Exchange

'Cantab'                                 Cantab Pharmaceuticals plc

'Celltech'                               Celltech Group plc

'Cell Genesys'                           Cell Genesys, Inc.

'certificated form'                      a share or other security which is not in uncertificated form

'CREST'                                  The relevant system (as defined in the Regulations) in respect of
                                         which CRESTCo Limited is the Operator (as defined in the Regulations)

'CREST stock account'                    a CREST stock account

'Directors'                              The directors of Xenova

'Directors' Undertakings'                the irrevocable undertaking of certain Directors to take up all or
                                         part of their entitlement as Qualifying Shareholders pursuant to the
                                         Rights Issue

'Extraordinary General Meeting' or 'EGM' The extraordinary general meeting of the Company to be held at 10.00
                                         a.m. on 4 October 2002, notice of which will be set out in the
                                         Prospectus

'Form of Proxy'                          means the form of proxy for use at the EGM, which will accompany the
                                         Prospectus

'Fully Paid Rights'                      The rights to acquire New Ordinary Shares, fully paid

'Genencor'                               Genencor International, Inc.

'Genentech'                              Genentech, Inc.

'GSK'                                    GlaxoSmithKline PLC

'Lilly'                                  Eli Lilly & Company of Indianapolis, USA

'London Stock Exchange'                  London Stock Exchange PLC

'Millennium'                             Millennium Pharmaceuticals, Inc.

'New Ordinary Shares'                    Ordinary Shares to be issued pursuant to the Rights Issue

'Nil Paid Rights'                        The New Ordinary Shares, in nil paid form, provisionally allotted to
                                         Qualifying Shareholders pursuant to the Rights Issue

'Nomura'                                 Nomura International plc

'Official List'                          the Official List of the UKLA

'Ordinary Shares'                        ordinary shares of 10 pence each in the share capital of the Company

'Overseas Shareholders'                  Shareholders with registered addresses outside the United Kingdom or
                                         who are citizens or residents of countries outside the United Kingdom

'Pfizer'                                 Pfizer Animal Health, Inc.

'Phogen'                                 Phogen Ltd

'Prospectus'                             the prospectus relating to the proposed rights issue

'Provisional Allotment Letter' or 'PAL'  the renounceable provisional allotment letter to be sent to Qualifying
                                         non-CREST Shareholders in respect of the New Ordinary Shares to be
                                         provisionally allotted to them pursuant to the Rights Issue

'QLT'                                    QLT, Inc.

'Qualifying CREST Shareholders'          Qualifying Shareholders who hold Ordinary Shares on the relevant
                                         register of members of the Company at the close of business on the
                                         Record Date in uncertificated form

'Qualifying non-CREST Shareholders'      Qualifying Shareholders who hold Ordinary Shares on the relevant
                                         register of members of the Company at the close of business on the
                                         Record Date in certificated form

'Qualifying Shareholders'                holders of Ordinary Shares on the register of members of the Company
                                         as at the close of business on the Record Date, except as described in
                                         Part 3 of the Prospectus in respect of certain Overseas Shareholders

'Record Date'                            2 October 2002

'Regulations'                            the Uncertificated Securities Regulations 2001 (SI/3755)

'Resolutions'                            the special resolution (''Resolution 1'') and the ordinary resolution
                                         (''Resolution 2'') to be proposed at the EGM

'Rights Issue'                           the offer of 33,710,703 New Ordinary Shares by way of rights to
                                         Qualifying Shareholders on the basis set out in the Prospectus and,
                                         for Qualifying non-CREST Holders only, the Provisional Allotment
                                         Letter

'Shareholder'                            a holder of Ordinary Shares

'Share Option Schemes'                   the Xenova Limited 1988 Share Option Scheme, the Xenova Group 1992
                                         Share Option Scheme, the Xenova Group 1996 Share Option Scheme, the
                                         Xenova Group 1996 Savings-Related Share Option Plan and the Xenova
                                         Deferred Share Bonus Plan

'stock account'                          an account within a member account in CREST to which a holding of a
                                         particular share or other security in CREST is credited

'UKLA' or 'UK Listing Authority'         the UK Listing Authority, being the Financial Services Authority
                                         acting as the competent authority for the purposes of Part VI of the
                                         Financial Services and Markets Act 2000

'uncertificated form'                    a share or security which is for the time being recorded on the
                                         relevant register of members as being held in uncertificated form in
                                         CREST, and title to which, by virtue of the Regulations, may be
                                         transferred by means of CREST

'Underwriting Agreement'                 the conditional underwriting agreement dated 11 September 2002 between
                                         the Company and Nomura in relation to the Rights Issue

'US', 'USA' or 'United States'           the United States of America, its territories and possessions and any
                                         state of the United States of America and the District of Columbia
'Xenova Group' or the 'Group'            Xenova and its subsidiary undertakings from time to time

'Xenova' or the 'Company'                Xenova Group plc and/or where applicable any of its subsidiaries


                      This information is provided by RNS
            The company news service from the London Stock Exchange