Epitan reveals milestones for $10m VC funding

Melbourne-based Epitan (ASX:EPT, ADR:EPTNY, XETRA:UR9) has entered into a funding agreement with international specialist fund Absolute Capital Management (ACM) to raise AUD$10 million over the next 18 months.

The $10 million capital injection was previously announced when Philippe Wolgen replaced Iain Kirkwood as Epitan's CEO at the end of last year.

Wolgen's appointment, as well as Hank Agersborg's appointment as chief scientific officer, is linked to one of the five milestones in the agreement and is worth $1 million.

"The biotech industry in Australia is fairly small," said Wolgen. "This company has held promise over a number of years. The mandate I got from the board is to take the company to the final leg.

"It would be much easier to attract these institutional investors if you were on the west cost of the US -- being Down Under, I'm just amazed and delighted that a small biotech in phase IIb is able to attract this funding -- it indicates that people do look at Australia."

ACM, which has operations in Switzerland, Spain, Germany and the Americas, will be issued Epitan shares at 0.91 of the volume weighted average share price for the 30 days up to, and including the fifth day after, the achievement of each relevant milestone.

"ACM represents one of the European investors with substantial interest worldwide in this drug. A small Australian biotech is getting global attention," said Wolgen.

Epitan will receive a $3 million milestone payment upon successfully filing a US IND, enabling the company to conduct pivotal clinical trials of its lead drug EPT1647 (formerly known as Melanotan) in the United States.

A further $2 million payment will be payable if one of the regulatory authorities in Australia (TGA), the United States (FDA) or Europe (MHRA) approve a phase III trial of EPT1647. "We will enrol in phase III trials either by the end of 2006 or early 2007," said Wolgen.

Another milestone payment of $3 million is linked to Epitan executing an agreement worth no less than $15 million with a corporate partner in the United States or Europe. This type of agreement is "very broad", said Wolgen, and could include a licensing agreement or the full purchase of the company. "We believe that we are able to sign an agreement with a major player in the pharmaceutical arena," he said.

"We're fully aware that if you want to roll out this product on a global scale, a small Australian company is hardly in a position to do it," he said.

Epitan will also receive $1 million if the company is admitted on London's Alternative Investments Market. Wolgen said that the timing of such a listing is "crucial", given the company's failed attempt last year.

"When we're ready and we meet all the requirements, that's when I'll embark on an AIM listing. It will be within 24 months," he said. "I'm not in a particular hurry, but there will not be a second failure."

Based on the company's previous experience, Wolgen said a successful listing will require substantial European interest in biotech -- something which was lacking last time Epitan tried to list. It will also require that Epitan involve the right NOMAD and that the company be less pressured by time.

The funding agreement is subject to shareholder approval, which will be sought at an upcoming EGM which has yet to be set.

US VC sells Epitan stock

Meanwhile, US venture capital fund Columbine announced last week that it had sold all of its Epitan stock (more than 4 million shares) to European institutional investor Kaupthing.

Columbine Venture Fund-II was liquidated on December 31, 2005, "which is not uncommon for these smaller funds," said Wolgen. "Again, this indicates European interest which I'm very happy about."

Epitan's shares were trading at $0.345 at the time of writing, down $0.005 since trade opened this morning.