No holiday for Regenera shareholders as firm re-jigs merger

Shareholders in Regenera (ASX:RGA) have been asked to attend a meeting in Perth between Christmas and New Year, as the company seeks to revise terms of its planned merger with US firm Advanced Ocular Systems (AOS).

Regenera has revised the terms of the merger to ensure that the minimum level of ownership will not fall below 52.2 per cent, following the continuing decline of the company's share price.

"Our intent was not to dilute our shareholders out of existence, so to set a limit was considered reasonable to ensure that they maintain at least 52.2 per cent of the company," said chief operating officer Mark Gummer.

The finalised terms for the proposed merger, which will be voted on at the December 30 meeting, includes a floor valuation of Regenera shares at $0.40 per share. The value was determined by setting a maximum of number of shares at 100,791,404 and values the deal at up to US$31 million (AUD$40 million) for 100 per cent ownership of AOS.

At the meeting, shareholders will also vote on a change of name to Advanced Ocular Systems and the election of AOS' current CEO Dr Ken Taylor as a director. Under the new corporate structure he will also become president, managing director and CEO of the merged company.

Difficult date

Gummer told Australian Biotechnology News that the decision to hold the meeting on December 30 was "a matter of making the deal happen as fast as we could push it -- whatever date we picked in late December was going to be difficult, but shareholders will have the papers in their hands for 28 days and will be able to vote by proxy."

Regenera listed on the ASX in June 2004 at an issue price of $0.50. Regenera shares were trading at a high of $0.86 in April following news of a licensing deal with US firm Alcon for a steroid technology, which led to an initial AUD$1.3 million milestone payment in August.

In November, Regenera unveiled its plan to acquire AOS for AUD$40 million. Delaware-based AOS has a pipeline of products and IP in refractive products, including the patent family that forms the basis of Tetraflex, a lens for the treatment of presbyopia in patients with cataracts. Tetraflex currently has European CE Mark approval and began clinical trials in the second half of 2005.

Dr William Ardrey resigned as Regenera's CEO following the announcement to make way for Taylor, who told Australian Biotechnology News he plans to visit Australia four times a year once he begins the role. It is believed that he will be unlikely to attend the December 30 Perth meeting.

Expanded portfolio

Regenera listed on the ASX in 2004, aiming to commercialise patents from Sydney University, covering the use of synthetic steroid triamcinolone acetonide (TA) for the treatment of age-related macular degeneration (AMD). It acquired the additional technology for the use of TA to 'illuminate' the vitreous during eye surgery from US-based MINU in August last year. In October, Regenera appointed former federal health minister Dr Michael Wooldridge to its board.

The company touted the AOS acquisition as a way to expand its portfolio of ophthalmic technologies. But shareholders were unconvinced, and the company's price has since been on a downward path.

On November 8, Regenera executive director Tony Fitzgerald sought to reassure shareholders about the merger, issuing a 26-point Q&A in which he dismissed the notion that the merger was actually a reverse takeover, describing it as "possibly the closest to a true merger that you can get".

He told shareholders that it was not a sign that the company planned to move from Australia to the US. Following the merger, he said, Regenera would be able to develop therapeutic products in cost-efficient Australia, and collaborate with Australian and Singapore institutes on R&D.

Fitzgerald praised Ardrey's leadership in the Australian marketplace, but said AOS' Taylor would be able to provide high-level introductions to potential partnering firms in the US, and was well placed to source new technologies as well as keeping abreast of current trends.

Conflict of interest

Fitzgerald, who is a board member of both Regenera and AOS, said he his licensing experience led to an invitation to join AOS in June 2005, when he was granted 180,000 AOS shares. He has declared his conflict of interest and abstained from voting on the issue. In the merged company Fitzgerald will be issued 910,959 shares, while directors Finian MacCana and Stephen Newman will also be issued 106,000 and 143,000 respectively.

Fitzgerald was unable to comment this week, as he is on a week-long cruise in Singapore. He returns to Perth on December 30, the day of the shareholder meeting, following engagements in New York and London.

As part of its attempt to inform shareholders of the merger, Regenera also hosted briefings in Perth, Melbourne and Sydney in mid-November, where the company introduced Taylor. At the relatively quiet Sydney briefing, shareholders expressed concern about the company's declining share price.

At time of writing Regenera shares were trading at $0.37.