Cash concern for Angel as two important deals falter
Biotech firm warns failure will make it impossible to continue
ANGEL Biotechnology Holdings has signalled it will run out of cash by the end of March unless it signs two alliances with industry partners.
In a stark statement at a general meeting in Northumberland, chairman Nicholas Smith warned the future of the business was in the balance.
He told shareholders failure to pull off either deal would make it “impossible” for the company to continue trading.
That admission worried investors and the biomaterial manufacturer’s share price plunged more than 35% to 0.05p in early trading.
Angel operates from the Pentlands Science Park near Edinburgh, a collagen manufacturing site in Glasgow and a recently commissioned facility at Cramlington, Northumberland.
The first orders for Cramlington have taken longer than anticipated to arrive and Angel’s board admitted raising funds through the markets would be “extremely difficult” in the current environment.
The first joint venture key to its future is a tie up with Russian firm Materia Medica Holdings (MMH).
The deal was first announced in autumn 2011 but is expected to be sealed early next month subject to MMH representatives receiving confirmation of visas.
Further information on the structure of the venture, which was initially to make active antibody products for MMH, is due to be announced upon signing of the agreement.
UNDER SCRUTINY: Edinburgh-based Angel Biotechnology Holdings operates a collagen manufacturing site in Glasgow and has a new facility at Cramlington, Northumberland.
The second venture involves setting up a “strategic relationship” with a third party to develop Angel’s contract manufacturing (CMO) business.
Angel said it has been in discussions with a consortium of overseas organisations and has “reasonable grounds” to believe a deal can be concluded before the end of March.
It is likely an operating subsidiary of Angel will be created to run the contract manufacturing with the partner investing up to £1 million to help get the operation up and running.
Mr Smith said: “The benefits of this arrangement will include bringing Cramlington into a state of readiness to conduct the general CMO business.
“It is also proposed to channel significant new orders through the CMO business relating to products in development by the strategic p a r t n e r ’s consortium.”
Angel has pared back nonessential spending and cut staff numbers from 37 to around 20 in recent months.
Mr Smith said: “It is the directors’ view that both transactions are necessary to effectively address the trading difficulties experienced by the company to date, and that without both, the cash resources of the company are at risk of exhaustion by the end of March 2013.
“In order to protect the interests of creditors from a further deterioration of the company’s financial position, the board is in negotiation with MMH for an arrangement to allow ongoing payment of direct and indirect costs relating to the MMH contracts and, in the case of the CMO business, for the strategic partner consortium to provide funding in advance to cover the costs associated with delivering the transaction and the net costs of the CMO business until delivery of the transaction.
“The board anticipates it is likely to be in a position shortly to announce the terms of such arrangements, but the board will monitor their progress to ensure that it continues to act in the interest of creditors.”
While Mr Smith said the proposed partners were enthusiastic about the ventures he could not guarantee the deals will be signed before the end of March.
Angel reported a £1.3m loss in the 12 months to March 31, 2012, and had £580,255 of cash and cash equivalents at that point.
In unaudited interim results for the six months to September 30, 2012, the loss was £2.8m, although more than £2m was due to the costs associated with setting up the MMH joint venture.
Cash and cash equivalents at that point had dropped to £496,000.
Angel was set up in 2000 by former Synpac and Glaxo executive Stuart Duncan and the business was floated on AIM in November 2005.
Mr Duncan then l eft in November 2007, while longserving executive chairman Paul Harper also stepped down at the end of last year.
Shares in Angel ended the day down 22.5%, or 0.02p, at 0.06p.