METABOLIC TAKES 60% OF POLYNOVO FOR $3.5m
December 21st 2008 04:20
Thursday December 18, 2008
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METABOLIC, XCEED
Metabolic has invested $3.5 million for 60 percent ownership of Polynovo Biomaterials.
In November an agreed acquisition of Polynovo by Metabolic collapsed at the Metabolic annual general meeting when major shareholders unexpectedly voted against merger resolutions (see Biotech Daily; November 27, 2008).
Metabolic said in a media release today that it had reached agreement with Polynovo's shareholders, Xceed Capital and the Commonwealth Scientific and Industrial Research Organisation to exchange $3.5 million for 20,750,000 Polynovo Series A shares.
The company said the Series A shares had similar rights to ordinary shares except for priority in the event of the winding up of Polynovo.
The conversion of Metabolic’s existing loan to Polynovo of $1.25 million (with accrued interest) is included within the $3.5 million.
Following the Metabolic investment, Xceed and CSIRO, will own 25.5 per cent and 14.5 percent of Polynovo, respectively.
Metabolic has also been granted five options enabling it to invest up to a further $5 million for more Polynovo Series A shares at the same price as the initial investment.
Each option entitles Metabolic to subscribe for 5,928,571 Series A shares on payment of an exercise price of $1 million at any time on or before the expiry date of June 30, 2013.
Metabolic chairman Rob Stewart said his company’s board “remains of the view that Polynovo represents an exciting technology with great potential”.
“It also considers that this restructured investment reduces the risk for Metabolic shareholders and enables Metabolic to make further investments in Polynovo as and when the technology is further validated,” Mr Stewart said.
The Metabolic nominated directors are Rob Stewart, Franklyn Brazil and Paul Lappin. The other directors are expected to be CSIRO’s Bruce Rathie and Xceed’s Dr Stewart Washer.
Dr Ian Griffiths will continue in his role as Polynovo’s chief executive officer.
Metabolic said Polynovo had several “high potential projects”, including licencing arrangements with Medtronic, Biomet and Smith & Nephew plc.
Polynovo develops the Novosorb family of biodegradable polymers for use in medical devices, with potential applications in orthopaedics, orthodontics, drug delivery, wound care, tissue engineering, nerve regeneration and cartilage repair.
Options will be issued to Polynovo employees in Metabolic pursuant to the terms of the Metabolic employee option plan.
Following its $3.5 million investment, Metabolic said it would have about $12 million in cash and cash equivalents and said it would “continue exploring opportunities in the current market which present the greatest potential to create significant value for shareholders”.
In its media release to the ASX, Xceed set out Polynovo’s recent financial history and said it had invested a total of $10.1 million into Polynovo since 2004 which had an impaired value of $7.2 million at June 30, 2008 in the books of Xceed.
Xceed said it was “likely that further impairment of its carrying value of the investment in Polynovo would be brought to account by Xceed as a result of the Metabolic investment”.
The company said Peter Francis and Dr Ian Griffiths resigned as directors of Xceed and Polynovo on execution of the revised investment agreement.
Xceed will continue to look to optimize its investment in wholly owned subsidiary Boron Molecular, which is unaffected by the Polynovo deal.
The company said it would “actively consider alternative investment opportunities to seek to recover value for Xceed shareholders”.
Metabolic was up half a cent or 20 percent to three cents.
Xceed was untraded at 5.5 cents.
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