Montreal, Quebec, March 24, 2011 – MethylGene Inc. (TSX:MYG) announced today its intention to complete a private placement of $34.5 million. Institutional investors participating in the Offering include a fund managed by Baker Bros. Advisors, LLC (“Baker Brothers”), Tavistock Life Sciences, a fund managed by OrbiMed Advisors LLC, funds managed by QVT Financial LP and Tang Capital Partners, LP. Current shareholders ProQuest Investments III, L.P. and Fonds de solidarité FTQ will also be participating in the Offering.
“I’m very pleased to announce this financing and am particularly gratified by the high caliber life science investors we attracted. I also want to thank our current investors for their continuing support,” said Charles Grubsztajn, President and Chief Executive Officer. “The proceeds of this financing will provide us with sufficient capital to advance our two primary product candidates into Phase 2 clinical trials in specific indications which we believe will offer the most benefit to patients and value to shareholders. With the appropriate resources now in place, we look forward to implementing our strategic plan.”
The proceeds from the Offering will be used to advance MGCD265 into Phase 2 clinical trials in non-small cell lung and other cancer indications. In addition, the Company will also be advancing MGCD290 into Phase 2 clinical trials in vulvovaginal candidiasis (VVC). With the proceeds from this Offering and based on the current clinical development and operating plans, the Company’s cash runway is expected to extend into 2014.
Details of the Offering
Under terms of the Offering, MethylGene intends to issue 271,338,696 units at a subscription price per unit of $0.1243 (being the 5-day volume weighted average price of MethylGene’s common shares at the close of markets on March 23, 2011 (the “Market Price”), each unit consisting of one common share and thirty one-hundredths (0.30) of a common share purchase warrant, exercisable for a period of five years from the date of issuance at an exercise price of $0.1492 (being 120% of the Market Price). The common shares and warrant shares issuable pursuant to the Offering represent, in the aggregate, a total of up to 352,740,300 common shares (up to 873% of the issued and outstanding common shares as at close of business on March 23, 2011). The warrants include standard adjustment provisions for stock splits, stock dividends, mergers, recapitalizations and the like as well as a cashless exercise feature.
Baker Brothers and Tavistock Life Sciences have concurrently each purchased $382,599.00 of senior unsecured debentures issued by MethylGene, which debentures are convertible into 3,078,030 of the above-described units at a conversion price of $0.1243 per unit. The debentures will be automatically converted at the closing of the Offering.
All investors who subscribed for $3,000,000 or more of units have been granted a pre-emptive right to acquire, in proportion to their respective holdings in MethylGene, any equity or voting securities subsequently issued by MethylGene for a term of up to 48 months following the closing of the offering.
The securities offered will not be registered under the U.S. Securities Act of 1933, as amended (the “1933 Act”), and may not be offered or sold in the United States absent registration under or an applicable exemption from registration requirements of the 1933 Act.
Out of the Offering, 3,078,030 units (representing 9.9% of MethylGene’s issued and outstanding common shares as of March 23, 2011) will be allocated to Fonds de solidarité FTQ, an insider of MethylGene prior to the Offering because it holds 11.8% of the issued and outstanding common shares. Upon the issuance of the additional common shares at the closing of the offering, the Fonds de solidarité FTQ will hold 7,863,489 common shares (2.47% of the then issued and outstanding common shares) and warrants entitling it to purchase 923,409 common shares (for aggregate holdings representing 2.18% on a fully diluted basis). Save for the units issued to the Fonds de solidarité FTQ, all units issued pursuant to the Offering will be issued to arm’s length third parties.
Assuming full conversion of all of the debentures and full exercise of all of the common share purchase warrants comprised in the units, an aggregate of up to 360,743,178 common shares (approximately 893% of the issued and outstanding common shares at the close of business on March 23, 2011) may be issued pursuant to this private placement.
Upon the closing of the Offering, Baker Brothers and Tavistock Life Sciences will each hold 52,292,839 common shares (16.45% of the then issued and outstanding common shares) and 15,687,851 warrants (representing 16.88% ownership on a fully diluted basis) and each of a fund managed by OrbiMed Advisors LLC, the QVT Financial LP managed funds (in the aggregate), and Tang Capital Partners, LP, will hold 40,225,261 common shares and 12,067,578 warrants (resulting in each holding 12.99% ownership on a fully diluted basis).
The control of MethylGene will not be materially affected by the Offering.
The Toronto Stock Exchange requires MethylGene to obtain the approval of a majority of its shareholders with respect to the issuance of the additional common shares and potential issuance of the common shares underlying the warrants since the TSX Company Manual deems the price per share underlying each warrant to be less than “market price” (as that term is defined in the TSX Company Manual) and given that the shares issuable pursuant to the Offering amount to more than 25% of the number of the issued and outstanding common shares, on a non-diluted basis, prior to the date of closing of the Offering. MethylGene intends to provide the Toronto Stock Exchange with written evidence that holders of more than 50% of its voting securities are familiar with the terms of the Offering, and are in favor of it, in order to benefit from the exemption set forth in the rules of the Toronto Stock Exchange from the requirement to hold a special shareholders’ meeting to obtain this approval.
The closing of the private placement is expected on or about April 1, 2011, subject to shareholder and regulatory approvals as well as customary closing conditions.
MethylGene Inc. (TSX: MYG) is a clinical-stage biopharmaceutical company that develops novel therapeutics for cancer and infectious disease. The Company’s lead product candidates include: MGCD265, an oral Met/VEGF receptor kinase inhibitor that is in Phase 1/2 clinical trials for solid tumor cancers and MGCD290, a fungal Hos2 inhibitor, for use in combination with fluconazole for fungal infections, which has completed Phase 1 clinical studies. The Company’s partners include Otsuka Pharmaceutical Co. Ltd., Taiho Pharmaceutical Co. Ltd., and EnVivo Pharmaceuticals, Inc.