Proteome to raise $10 million

Sydney proteomics R&D company Proteome Systems (ASX:PXL) will raise about $10 million through the issue of over 33 million fully paid ordinary shares to institutional and professional investors in the UK, US and Australia at a price of $0.30 per share.

The placement is conditional upon shareholder approval and the company is seeking to convene an extraordinary general meeting in October 2005.

"It has all gone to new investors and about 70 per cent of the placement went offshore," said Proteome System's CEO Stephen Porges. "There are about five significant investment funds on the register now."

After broking and selling fees, the net proceeds of the placement will be about $9.75 million.

Proteome Systems will use the money raised as general working capital, said Porges. "We've reduced the burn of the company in the last six months, from about $1.4 million to a budgeted burn going forward of about $800,000 a month. That's our basic costs of being in business," he said.

Porges said that when Proteome was burning $1.4 million a month, the company only had about three months' cash left. "We were doing so many different projects, it was just ridiculous," he said. "We had to focus. So when I had a partner in a project that was a global leader in it, then I'd keep that project going. If I didn't, I'd wipe it out."

Proteome Systems now has about 18 months of working capital, Porges said.

He said the capital raising was done in a couple of days and while the market overseas for raising capital was "easy", the Australian market was "bad".

"When I present offshore a huge portion of those people have interest in the company. They want to invest," he said. "When I present domestically, people say 'you're too small', and they're not willing to back a small company."

Porges also said that historical problems created by the previous management had 'clouded' people's perception of the company. "Domestic investors really need to look at the company afresh," he said.

He said Proteome had dealt with some major issues" the company's technology products had been licensed, the US government was paying for its therapeutics development, and it had a partner for its diagnostics program. "The last problem that people had was a problem of capital and this really takes that off the table as an issue," he said.

Proteome is working to accelerate the development of its rapid diagnostic test for active tuberculosis, with a commercial partnership with the Geneva-based Foundation for Innovative New Diagnostics (FIND). The company will also begin clinical development of one of its lead 'scavenger' drug compounds as a topical treatment for a range of dermatological diseases for which the company was recently awarded a US$20 million grant from the US government.

Proteome's shares were trading at $0.33 at the time of writing.