Cytopia to raise $13m in rights issue

Cytopia (ASX:CYT) will raise AUD$13.2 million in a fully underwritten non-renounceable rights issue.

The prospectus for the offer was lodged with ASIC today, with a closing date of November 11, 2004. Under the offer shareholders in Australia and New Zealand will be able to acquire one share for every two owned, at a price of $0.55 and two options for every three new shares subscribed for. The options, priced at $1.00, will expire in November 2007, and have the capacity to raise up to another $16 million for the company.

As part of the capital raising, there will be a change in board leadership after the AGM in November, with director Robert Watson taking over as executive chairman from current non-executive chairman John Hasker. Watson is the former CEO of Mayne Nickless Computer Services, Lend Lease Employer Systems and Icon Recruitment, among others, and holds a number of board seats in unlisted companies. He joined the Medica board in June 2003.

Managing director Kevin Healey said the shift to Watson as executive chairman would allow the company to take advantage of his experience in corporate growth. Watson plans to spend two working days a week with the company.

"We want to grow a bit more aggressively and in that respect, Bob will be excellent," Healey said.

According to Healey, the funds will be used to support the pre-clinical and early clinical development of its anti-cancer drug, as well as expand the collaboration with US-based Myomatrix Therapeutics. He said the cash would last for at least 18 months to two years, longer if the company was successful in obtaining additional income through government grants or deals with pharmaceutical companies. The company is currently looking to partner its core JAK program.

"With this cash backing, we now can really steam ahead with our anti-cancer drug trials, and that's what we plan to do," Healey said. "There won't be a need to go back to the market for a while."

The anti-cancer drug, CYT997, is in the last stages of formal pre-clinical development, and Healey said there had been no hiccups in the testing to date. The company is planning to commence human clinical trials in Melbourne early next year, subject to ethics approval. If approval is not forthcoming in Australia, he said, the trials would be held in the UK.

"The only thing that would stop the trials in Australia would be the relative inexperience here in conducting first-in-man trials," he said. "This would be one of the first trials in Australia where a company had discovered and developed a new chemical entity in house."

Cytopia is also poised to take its JAK2 inhibitors into animal trials focusing on pulmonary hypertension and heart failure, in collaboration with Myomatrix. Healey said the studies would be performed in the US and at the Baker Institute in Melbourne.

"We'll be applying for orphan drug status for pulmonary hypertension once we have the animal data," Healey said. "For the cardiovascular program, we are hoping to have approval to go into the clinic by the end of next year, probably for pulmonary hypertension first."