Prominent Perth fundie the main backer in PharmAust’s $3.5m cap raise

PharmAust raises ~$3.5m through an oversubscribed placement to institutional and sophisticated investors
Perth-based Merchant Biotech Fund and associated parties subscribed for $2.1m of the offer
Further $1.4m was placed to other institutional and sophisticated investors along with company director

Special Report: Perth-based fundie Merchant Funds Management will become a strategic investor in PharmAust which has received binding commitments to raise ~$3.46 million through an oversubscribed placement.

Clinical-stage biotech PharmAust (PAA) will kick off 2024 with ~$6 million in cash to accelerate preparations for its Phase 2 clinical study in motor neurone disease (MND/ALS) following the capital raise.

PAA says the raise was priced at a 4.8% premium to the 15-day VWAP and a 10.8% premium to the 30-day VWAP, reflecting new institutional shareholders’ growing confidence in its achievements over recent quarters, as well as a positive outlook.

The placement will see PAA issue ~34.6 million new shares at an issue price of 10 cents/share, each with a 2:3 free attaching option exercisable at 15 cents with an expiry of December 31, 2025.

The strategic placement was granted primarily to a prominent Perth fund manager Merchant Funds Management, within its Merchant Biotech Fund.

Merchant Biotech Fund and associated parties subscribed for $2.1 million of the offer.

The remaining $1.4 million of the placement went to sophisticated Australian, Hong Kong, and Singaporean investors, including existing eligible shareholders, along with PAA finance director Sam Wright.

Wright has subscribed for an additional 450,000 shares to increase his holding to 5 million shares, subject to shareholder approval at a general meeting to be announced.

Blue Ocean Equities acted as lead manager for the placement.

Merchant Funds approaches PAA

PAA says the decision to undertake this funding at this time directly resulted from an approach by Merchant Funds Management, which showed material interest in becoming a strategic investor.

The biotech says without the direct solicitation, additional funding would not have been undertaken.

“We are incredibly pleased with this strategic placement at a premium and welcome aboard institutional fund Merchant Funds Management,” PAA CEO Dr Michael Thurn says.

Funds for Phase 2 study

Funds raised will enable the PAA to start the New Year with ~$6 million in cash and accelerate preparations for its Phase 2 Clinical Study in MND.

The company recently announced it had wrapped up the Phase 1 MEND study of the drug monepantel (MPL) in patients with MND/ALS.

PAA is due to release top line results from the study in Q1 2024 and has applied for an Orphan Drug Designation (ODD) with the US FDA, which incentivises development of drugs or biological products to treat rare diseases by offering market exclusivity for several years and tax credits.

The Phase 1 MEND study is an open-label, multicentre study involving 12 patients with MND/ALS – a nervous system disease that weakens muscles and impacts physical function.

MND/ALS affects more than 350,000 people globally and is invariably fatal with the average life expectancy around 27 months.

Patients from the Phase 1 MEND trial who are continuing to receive MPL under a compassionate use program, remain able to swallow and breathe unassisted.

All patients have also been invited to move to a 12-month open-label trial.

In a positive sign, patients who were diagnosed 24 months before the trial have now survived for 34 months.

PAA says this is longer than the average survival and nearly matches the current survival-leading drug, which extends life by nine months to 36 months average survival.

This article was developed in collaboration with PharmAust, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.