Yourgene Health plc
(“Yourgene” or the “Company”)
Proposed acquisition of Delta Diagnostics (UK) Limited (“Elucigene”)
and
Proposed placing of a minimum of 92,682,928new Ordinary Shares
and
Proposed subscription for 4,878,048new Ordinary Shares
Highlights
● Proposed acquisition of Elucigene, a leading molecular diagnostics manufacturer and developer, complementary to Yourgene’s current and planned product offering
● Acquisition consideration of £9.2 million (comprising £6.3 million cash and £2.9 million equity), includes £0.4 million of net cash, representing an enterprise value of £8.8 million
● £6.3 million cash consideration for the Acquisition to be funded by a non-pre-emptive fundraise (“Fundraise”) comprising a placing of Ordinary Shares to institutional investors and the subscription for Ordinary Shares by certain Directors of Yourgene, in each case at an issue price of 10.25 pence per new Ordinary Share
● Yourgene intends to raise a minimum of £10.0million (before expenses) pursuant to the Fundraise, but has the flexibility to increase the size of the Fundraise to up to approximately £11.8 million (before expenses)
Any proceeds from the Fundraise (net of expenses) in excess of the Cash Consideration will be used to provide additional working capital for the Enlarged Group
● £2.9 million equity consideration for the Acquisition is to be satisfied through the issue of 24,581,111 new Ordinary Shares to Elucigene shareholders at an issue price of 11.7 pence per new Ordinary Share
● Acquisition immediately accretive to earnings, with identified potential cost and revenue synergies, offering an opportunity to accelerate Yourgene’s overall pathway to profitability and free cash flow generation
● Elucigene revenue was £3.6 million for the year ended 31 December 2018, with an associated Adjusted EBITDA of £1.0 million
● Acquisition of Elucigene offers a complementary suite of CE-IVD marked products focused on reproductive health, strengthening the Enlarged Group’s position in the prenatal testing pathway, with pipeline of reproductive health and oncology products
● Increases sales resource materially, including six additional full time employees focused on the European region and an additional 150 new customers (laboratories) added to the Enlarged Group
● Immediate increase in the Enlarged Group’s global footprint, with territories covered increasing from 30 to 57 (through direct or indirect sales)
Elucigene’s PCR (DNA amplifying) technology platform broadens the Enlarged Group’s technology portfolio within molecular diagnostics
● Integration plans prepared to combine Yourgene’s and Elucigene’s Manchester-based head offices
Manchester, UK – 17April 2019: Yourgene Health plc (AIM: YGEN), the international molecular diagnostics group which commercialises genetic products and services, announces that it has conditionally agreed to acquire the entire issued share capital of Elucigene, a leading molecular diagnostics manufacturer and developer, for a total consideration of £9.2 million, on a £0.4 million net cash positive basis, representing an £8.8 million total enterprise value. The consideration will be satisfied by the payment of £6.3 million in cash (the “Cash Consideration”) and the issue of 24,581,111 new Ordinary Shares in the Company at an issue price of 11.7 pence each (representing 5.4 per cent. of the Existing Share Capital) (the “Consideration Shares”). Completion of the Acquisition is conditional, amongst other things, on admission of the Fundraise Shares to trading on AIM becoming effective.
In order to fund the Acquisition and to provide additional working capital for the Enlarged Group, the Company is seeking to raise, through the Fundraise, a minimum of £10.0 million (before expenses), through the issue of 97,560,976 new Ordinary Shares at an issue price of 10.25 pence per new Ordinary Share. The Directors have the flexibility to increase the size of the Fundraise to up to approximately £11.8 million. Further details of the Fundraise are set out below in the section headed “Details of the Fundraise”.
Stifel Nicolaus Europe Limited (“Stifel”) is acting for the Company as Sole Bookrunner in relation to the Placing, and Cairn Financial Advisers LLP (“Cairn”) is acting as the Company’s Nominated Adviser.
Elucigene’s executive management team have agreed to roll approximately 60 per cent. of their shareholdings in Elucigene (representing approximately 20 per cent. of Elucigene’s total issued share capital) into new Ordinary Shares in Yourgene. The Consideration Shares to be issued to such members of the Elucigene’s executive management team will be subject to lock-up restrictions for a period of 12 months.
In connection with the Fundraise, each of the Directors has agreed to 12 month lock-up restrictions in respect of all Ordinary Shares held by him/her as at the date of this Announcement (and including, in the case of Bill Chang and Lyn Rees, their respective Subscription Shares).
Background to Elucigene and the Acquisition
Elucigene is a Manchester-based molecular diagnostics manufacturer and developer with a suite of in vitrodiagnostic CE (“CE-IVD”) marked products focused on reproductive health and oncology, including leading products for cystic fibrosis testing and invasive prenatal aneuploidy screening and a pipeline of new diagnostic solutions in development.
Elucigene’s current product portfolio is complementary to Yourgene’s existing non-invasive prenatal testing (“NIPT”) solutions, broadening the Group’s offering as a leading provider of molecular diagnostic solutions for reproductive health. Elucigene has launched 36 commercial products and has a pipeline of new diagnostic solutions in development. Elucigene’s current commercial offering includes leading products for:
● Cystic Fibrosis screening, which is routinely performed on newborn babies as part of the newborn blood spot test (more commonly known as the “heel prick test”);
● invasive rapid aneuploidy testing;
● male infertility testing; and
● genetic disease testing.
The Enlarged Group will have an increased depth of products across reproductive health and will leverage its combined skillset to develop and launch additional next generation sequencing (“NGS”) and other molecular diagnostic products for commercialisation.
Elucigene’s geographic reach is complementary to Yourgene’s existing footprint, creating significant cross-selling opportunities within existing and new territories. The Acquisition will add 150 new laboratory customers worldwide and expand Yourgene’s commercial footprint, with direct or indirect sales increasing from 30 to 57 territories. The Acquisition will also materially increase the Enlarged Group’s sales resources, especially in Europe, with six additional sales persons focused on the region.
The integration of the two businesses will create an Enlarged Group of increased scale and the Directors believe that it will accelerate Yourgene’s road to profitability and free cash flow generation. Elucigene’s premises are located within one kilometre of Yourgene’s current head office. Given this geographical proximity, Yourgene has identified potential cost synergies, including with the opportunity to combine the operations of Yourgene and Elucigene onto a single site.
For the year ended 31 December 2018, Elucigene generated revenues of £3.6 million and Adjusted EBITDA of £1.0 million.
Elucigene’s surplus cash at completion of the Acquisition will be paid to the sellers of Elucigene, but that payment will be funded by Elucigene’s balance sheet, not the Company or the Fundraising.
Details of the Fundraise
Pursuant to the Fundraise, the Company is seeking to raise a minimum of £10.0 million (before expenses), by way of:
● the Placing of a minimum of 92,682,928 new Ordinary Shares to institutional investors; and
● the Subscription for 4,878,048 new Ordinary Shares (in aggregate) by Directors, Bill Chang and Lyn Rees.
The Directors have the ability to increase the size of the Placing to up to approximately £11.8 million.
In connection with the Fundraise, each of the Directors has agreed to 12 month lock-up restrictions in respect of all Ordinary Shares held by him/her as at the date of this Announcement (and including, in the case of Bill Chang and Lyn Rees, their respective Subscription Shares).
The new Ordinary Shares to be issued pursuant to the Fundraise represent approximately 21.3 per cent. of the Existing Share Capital and will, when issued, rank pari passuin all respects with the Company’s existing Ordinary Shares.
The Placing
The Placing is being conducted, subject to the satisfaction of certain conditions, through an accelerated bookbuilding process which will be launched immediately following this Announcement and will be subject to the Terms and Conditions set out in Appendix II. The exact number of Placing Shares to be placed with investors will be determined by the Company and Stifel at the close of the bookbuilding process and will be announced by the Company shortly thereafter. The timing of the closing of the bookbuilding process and of the allocations are at the discretion of the Company and Stifel.
The Placing is conditional, inter alia, upon:
● the Placing Agreement becoming or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Admission;
● the Company raising gross proceeds of not less than £10.0 million pursuant to the Fundraise; and
● Admission becoming effective by no later than 8.00 a.m. on 25 April 2019 or such later time and/or date (being no later than 8.00 a.m. on 9 May 2019) as Stifel and the Company may agree.
If any of the Conditions are not satisfied, the Placing Shares will not be issued and all monies received from Placees and Subscribers will be returned to them. The Placing Agreement contains warranties from the Company in favour of Stifel and Cairn in relation to (amongst other things) the Group and its business. In addition, the Company has agreed to indemnify Stifel and Cairn and each of their respective Associates (as defined in the Placing Agreement) in relation to certain liabilities they may incur in undertaking the Placing. Stifel has the right to terminate the Placing Agreement in certain limited circumstances prior to Admission, in particular, Stifel may terminate in the event that there has been a material breach of any of the warranties or a Material Adverse Change (as defined in the Placing Agreement).The Placing is not conditional on completion of the Acquisition. The Placing may therefore complete while the Acquisition does not. In the event that admission of the Fundraise Shares becomes effective to trading on AIM but completion of the Acquisition does not occur, the Directors’ current intention is that the net proceeds of the Placing will be applied to fund the Acquisition and the Company’s additional organic and inorganic growth opportunities.
Pursuant to a share lock-in deed between the Company and Life Technologies Limited (“Thermo Fisher”) dated 17 March 2019, the Company has granted Thermo Fisher certain rights to participate in future issuances of Ordinary Shares and other securities by the Company on a pro rata basis for so long as Thermo Fisher is a holder of Ordinary Shares (the “Pre-emptive Rights”). The Pre-emptive Rights allow Thermo Fisher to participate in any such share and securities issuances on the same terms as other participating investors, subject to certain limited exceptions which do not apply in the context of the Fundraise or the issue of the Consideration Shares or the grant of the New Options. Thermo Fisher will therefore have an opportunity to participate in the Fundraise and the grant of New Options pursuant to the operation of its Pre-emptive Rights. Should Thermo Fisher elect to exercise its Pre-emptive Rights in connection with the Fundraise and the New Options after the closing of the bookbuilding process being undertaken by Stifel in connection with the Placing, it is envisaged that (subject to sufficient shareholder authorities being put in place in order to issue new Ordinary Shares and New Options to Thermo Fisher) the Company will issue up to 10,500,000 further new Ordinary Shares and grant New Options over up to 1,050,000 further new Ordinary Shares to Thermo Fisher following completion of the Fundraise, which would have an immediate dilutive impact on other shareholders (including those who participate in the Fundraise).
By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement (including the Appendices) in this entirety and to be making such offer on the terms and subject to the conditions in Announcement, and to be providing the representations, warranties and acknowledgements contained in Appendix II.
Your attention is drawn to the detailed Terms and Conditions of the Placing set out in Appendix II to this Announcement.
The Subscription
Each of Bill Chang and Lyn Rees have entered into conditional Subscription Letters pursuant to which they have agreed to subscribe for 4,634,146 and 243,902 new Ordinary Shares, respectively. The Subscription is conditional upon completion of the Placing.
In connection with the Fundraise, each of the Directors has agreed to 12 month lock-up restrictions in respect of all Ordinary Shares held by him/her as at the date of this Announcement (and including, in the case of Bill Chang and Lyn Rees, their respective Subscription Shares).
Application will be made to London Stock Exchange for the admission of the Fundraise Shares to trading on AIM. It is expected that admission will occur and that dealings in the Fundraise Shares will commence at 8.00 a.m. on or around 25 April 2019, at which time it is also expected that the Fundraise Shares will be enabled for settlement in CREST.
Lyn Rees, CEO of Yourgene, commented: “The acquisition of Elucigene will strengthen Yourgene’s product portfolio within reproductive health and produce cross-selling opportunities across our client bases. The combination of the businesses will immediately increase our commercial footprint to 57 territories, adding an additional 150 customers to the Enlarged Group into which we will aim to cross-sell our respective complementary products. We have a unique opportunity to bring our skill sets together under one roof, expand our combined sales force and leverage our respective technical and regulatory expertise and partnerships to extend our genetic testing offering. We are excited to be consolidating our position within molecular diagnostics and accelerating our road to profitability.”
Mark Street-Docherty, CEO of Elucigene, commented:“We believe strongly in the rationale for bringing Elucigene’s business together with Yourgene’s and this is reflected in the executive management team of Elucigene rolling the majority of its equity into Yourgene. We look forward together to continuing to deliver innovative products that improve patient outcomes.”
For more information, please contact:
Yourgene Health plc
Lyn Rees, Chief Executive Officer
Barry Hextall, Chief Financial Officer
Joanne Cross, Head of Marketing
investors@yourgene-health.com
Tel: +44 (0)161 667 1053
Cairn Financial Advisers LLP (Nomad)
Liam Murray / James Caithie / Ludovico Lazzaretti
Tel: +44 (0)20 7213 0880
Stifel Nicolaus Europe Limited (Sole Bookrunner)
Nicholas Moore / Matthew Blawat / Ben Maddison
Tel: +44 (0)20 7710 7600
Vigo Communications (PR)
Ben Simons / Fiona Henson / Antonia Pollock
yourgene@vigocomms.com
