I have 10 questions re the proposed acquisition by Virax of Pathway Oncology Pty Ltd.
The deal was announced to the ASX on Monday.
As I revealed then, Pathway Oncology was registered less than three months ago - on December 20, 2013.
It was formed with an issued capital of $1000 and four shareholders - Paul Hopper, partner Deborah Coleman and two Hopper companies, Kilinwata Investments Ptd and Moreglade Pty Ltd.
Sole director is Alexandra Hopper, 28, of Woollahra.
Pathway Oncology has acquired control of exclusive world wide license to develop Yale University's breast cancer/multiple myeloma drug platform GGTI-2418.
Virax proposes to acquire Pathway by issuing 60m shares up front and then issuing a further 180m shares in two equal tranches, subject to performance criteria - criteria that I find less than onerous.
The Hopper interests may emerge with 30pc of capital, giving them an influential/controlling interest.
Questions:
1. Who/what has Pathway Oncology acquired the license from?
2. What are the consideration terms?
3. Why did former license holder - Florida-based Tigris Pharmaceuticals, now Kirax Corporation - terminate the Stage 1 trial of the drug in 2009 - some three years after license rights were first acquired.
The trial was conducted by Dr Peter O'Dwyer, a professor at the University of Pennsylvania's School of Medicine.
One scientific researcher told me yesterday that he believed the drug to be "dead and buried".
While I don't necessarily accept this conclusion, I would suggest that the performance background and outlook for the aging GGTI-2418 technology is problematic.
On the other hand, further trials of the drug are to be conducted by Moffitt Cancer Center, Florida and Monterfiore Einstein Center for Cancer Care, New York.
More questions:
4. How will Virax fund further trialling of GGTI-2418?
5. In the event of a capital raising - I'm led to believe about $3m initially - will the company conduct a placement or a rights issue?
6. If the company decides on a rights issue, will director-elect, Paul Hopper, participate?
While Virax would be currently researching funding options, it seems that the company will need shareholder approval before it formally acquires Pathway and assumes full responsibility for developing GGTI-2418.
Which raises more questions:
7. When will the meeting be held?
8. Will current chief shareholder, Westoz Investment Co (ASX:WIC), support the Pathway deal.
9. How will Virax address any concerns shareholders might have for an imminent, material - and perhaps continuing - dilution of their equities in the company.
And here's one final question:
10. How confident can Virax be in assembling shareholding support from RA Capital and other US institutional investors renowned for their rigorous due diligence?
Until/unless these questions are answered, the VHL share price may struggle to regain the levels attained when the Pathway deal was first announced.
VHL Price at posting:
1.5¢ Sentiment: Hold Disclosure: Held
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