Last close As at 05/08/2026
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Market capitalisation
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Research: Healthcare
Midatech announced on 9 February a private placement to certain US institutional investors to raise US$6m (£5m) in gross proceeds. The issue will comprise 10.3m ADS units (or ADS-equivalent pre-funded warrants, or a combination thereof) at US$0.58/unit along with attached A and B warrants and is expected to close on 15 February 2023. We note that the placement is subject to price adjustments, with the floor price set at US$0.3/unit (or if approved by shareholders, at US$0.1/unit), which would increase the number of pre-funded warrants issued. The placement is likely to be highly dilutive to existing shareholders (70.5% at the base issue price on exercise of pre-funded warrants), although it is crucial to support Midatech’s operations as a going concern, in our opinion. As a reminder, Midatech’s proposed acquisition of Bioasis was recently turned down by shareholders, leaving the company with cash to last only until mid-March 2023. With austerity measures in place and the proposed £5m funding, management expects the cash runway to extend to December 2023, past key data readouts for MTX110 in DIPG (Q223) and GBM (Q323).
Written by
Midatech Pharma |
£5m fund-raise to provide headroom to end-FY23 |
Funding update |
Pharma and biotech |
13 February 2023 |
Share price performance
Business description
Analysts
Midatech Pharma is a research client of Edison Investment Research Limited |
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Midatech announced on 9 February a private placement to certain US institutional investors to raise US$6m (£5m) in gross proceeds. The issue will comprise 10.3m ADS units (or ADS-equivalent pre-funded warrants, or a combination thereof) at US$0.58/unit along with attached A and B warrants and is expected to close on 15 February 2023. We note that the placement is subject to price adjustments, with the floor price set at US$0.3/unit (or if approved by shareholders, at US$0.1/unit), which would increase the number of pre-funded warrants issued. The placement is likely to be highly dilutive to existing shareholders (70.5% at the base issue price on exercise of pre-funded warrants), although it is crucial to support Midatech’s operations as a going concern, in our opinion. As a reminder, Midatech’s proposed acquisition of Bioasis was recently turned down by shareholders, leaving the company with cash to last only until mid-March 2023. With austerity measures in place and the proposed £5m funding, management expects the cash runway to extend to December 2023, past key data readouts for MTX110 in DIPG (Q223) and GBM (Q323).
Year end |
Revenue |
PBT* (£m) |
EPS* |
DPS |
P/E |
Yield |
12/18 |
1.94 |
(11.8) |
(339.0) |
0.0 |
N/A |
N/A |
12/19 |
0.67 |
(10.9) |
(50.0) |
0.0 |
N/A |
N/A |
12/20 |
0.34 |
(11.1) |
(22.9) |
0.0 |
N/A |
N/A |
12/21 |
0.58 |
(6.1) |
(6.8) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised.
We note that the private placement is being structured as a ‘cashbox’ placing, which means that instead of directly receiving cash proceeds from the funding, Midatech will receive redeemable preference shares in a newly incorporated shell company, which will hold the placement proceeds as cash on its books. This will allow Midatech to bypass the requirement to seek shareholder approval or convene a general meeting for the fund-raise. We acknowledge the rationale behind this decision given the large size of the issue and ensuing dilution.
The initial issue price has been set at US$0.58/unit (a c 25% discount to the 8 February trading price) and will comprise 2.6m American depositary shares (ADSs; one ADS is equal to 25 ordinary shares) and 7.74m pre-funded warrants (exercise price of US$0.0001 each) if the issue price stays at US$0.58. The pre-funded warrants to be issued will increase to 17.4m if the issue is finalised at the floor price US$0.3/unit. Each unit will also include A and B warrants (1 and 1.5 warrants respectively/unit available for exercise over five- and three-year periods). The placement has been structured to ensure that each institutional investor’s stake is limited to under 10% at all times (excluding the pre-funded warrants).
We reiterate that this placement, while highly dilutive to existing shareholders (87.8% assuming all issued warrants are exercised at their initial exercise prices), is crucial to support Midatech’s ability to fund ongoing working capital requirements (given the short cash runway). More importantly, if successful, the funds raised from the placement should allow the company to advance its clinical development activities past crucial readouts from the Phase I study in diffuse intrinsic pontine glioma (DIPG) in Q223 and progression-free survival data from its Phase I study in recurrent glioblastoma (GBM) in Q323, both of which could be potential infection points, provided the data are favourable.
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Research: Financials
Helios Underwriting reported a 27% increase in Lloyd’s of London (Lloyd’s) underwriting capacity for the start of 2023 to £296.6m, with historically high pre-emptions offered by its syndicates and additional tenancy capacity purchased in the Lloyd’s auctions as the main drivers. Retained capacity grew by 39% to £238.3m on the back of a lower level of reinsurance. Capacity growth was supported by a successful capital raise of £12.5m gross in November 2022. The company also announced the acquisition of three limited liability vehicles (LLVs) in December 2022, which resulted in a modest £5.7m addition to capacity. The strong increase in capacity has prompted us to lift our underwriting premium forecast, with a resultant increase in our earnings forecast for FY24. We increase our valuation by 5% to 252p/share.