Yourgene Health plc
(“Yourgene” or the “Group” or the “Company”)
Proposed Acquisition and Placing to raise a minimum of £13 million
Manchester, UK – 4 August 2020: Yourgene Health plc (AIM: YGEN), the international molecular diagnostics group, today announces a proposed placing (the "Placing") of new ordinary shares of 0.1 pence each ("Ordinary Shares") in the capital of the Company (the "Placing Shares") at a price of 17 pence per share (the "Placing Price") to raise a minimum of £13 million. The Company also announces that it has conditionally agreed to acquire the entire issued share capital of Coastal Genomics, Inc. (“Coastal Genomics”), a sample preparation technology company based in Vancouver, Canada (the "Acquisition").
• Coastal Genomics is a sample preparation technology company which will enable the Company to extend its offering and IP portfolio in the DNA sample preparation sector.
• Acquisition consideration of up to US$13.5 million, comprising initial consideration of US$3 million in cash and US$2.5 million in equity and contingent consideration of up to US$8.0 million payable in cash and equity.
• Proposed Placing to fund the initial cash consideration for the Acquisition and for general corporate and working capital purposes. Additional funds may also be used to accelerate the Company’s commercial activities, including new products and services such as the IONA® Nx NIPT workflow and our COVID-19 testing capacity. Any excess funds will be used to support further M&A activity.
• Placing to be conducted by way of an accelerated bookbuild process (the "Bookbuild") by Nplus1 Singer Capital Markets Limited ("N+1 Singer"), sole bookrunner in connection with the Placing, which will be launched in accordance with the Terms and Conditions set out in this Announcement and its Appendix, immediately following the release of this Announcement.
• The Placing is being conducted pursuant to the Company’s existing share authorities and is therefore not conditional upon the approval of the Company's shareholders.
• The Placing Price represents a discount of approximately 2.9 per cent. to the closing middle market price of 17.5 pence of an Ordinary Share on 3 August 2020, being the latest practicable trading day prior to the publication of this Announcement.
Rationale for the Placing and the Acquisition
Additional funds will enable the Company to progress organic and inorganic growth plans including:
• further acceleration of its commercial global footprint, specifically planned recruitment for the US and enlarged European market
• greater financial resources to manage the exciting launch of the IONA® Nx NIPT Workflow across existing and new regions
• more opportunity to expand Yourgene’s COVID-19 testing capacity, in line with future demand profiles
• accelerate its internal R&D pipeline to support our planned and growing product portfolio
• accelerate its M&A pipeline without needing further recourse from the capital markets
The Company has conditionally agreed to acquire the entire issued share capital of Coastal Genomics for a total consideration of up to US$13.5 million, comprising initial consideration of US$3 million in cash and US$2.5 million in equity, and contingent consideration of up to US$8.0 million payable in cash and equity.
Key investment highlights of the Acquisition include:
• offering complementary DNA sample preparation technology which enables customers to choose and use Yourgene for a wider range of diagnostic and genomics solutions;
• adding core IP-based technology which is key for the future genomic diagnostic industry, especially NIPT and Oncology, and expanding Yourgene’s technology portfolio with a further 5 patents in 13 jurisdictions;
• opportunities to grow the Company’s blue-chip customer base and industry partners, in particular in the US;
• the ability to offer cost-effective, automated solutions for repeatability and laboratory efficiency;
• increasing its geographical penetration in the US and Canada, supplementing existing coverage in the UK, Europe, MEA and Asia;
• the ability to accelerate the Company’s diversification into the oncology market and provide access to the DNA sample preparation market. Yourgene was an early adopter of this technology which is now core to both Thermo and Illumina NIPT platforms, offering a valuable differentiator to our customer base;
• opportunity for reagent pull and margin improvement from utilising the Company's reagent manufacture capability;
• Yourgene is the only NIPT company of its direct competitors to utilise the technology during the NGS workflow;
• leverage the Company's technical and regulatory expertise and partnerships to extend the Company's genetic testing offering; and
• fragmented market with minimal medium-sized entities, presents opportunity for consolidation.
The Board believes that Coastal Genomics’ business is at an inflexion point following technology validation phases with its strategic blue-chip commercial partners. The Company was an early adopter of the technology used by Coastal Genomics, has spent over two years evaluating this technology (and has a non-exclusive supply agreement to provide Lightbench), has already embedded it into its own products, IONA® Nx NIPT Workflow and Sage™ 32plex, and has trained the Company’s technology team on frontline Lightbench Platform support.
The net proceeds of the Placing will be used to fund the initial cash consideration for the Acquisition and provide additional general working capital to the acquired business and the enlarged group.
The Acquisition is conditional on the admission of the Placing Shares to trading on AIM, a market operated by the LSE ("AIM") becoming effective ("Admission"), and also on procedural completion steps. The Placing is not conditional on the Acquisition completing. The Placing may therefore complete while the Acquisition does not, or the Acquisition completion is delayed. In the unlikely event that Admission becomes effective but the Acquisition does not complete or is delayed, the Company's current intention is to redeploy the portion of proceeds to be used for the Acquisition into the organic and inorganic growth opportunities described above.
Background to Coastal Genomics and the Acquisition
Coastal Genomics is an ISO 9001 accredited, Vancouver-based sample preparation technology company with proprietary ownership of Ranger® Technology, facilitating cfDNA (circulating free DNA) with primary applications in NIPT (non-invasive prenatal testing) and in oncology.
For its financial year ended 31 December 2019, Coastal Genomics delivered unaudited revenues (under Canadian ASPE standards) of US$0.6m, an increase of 25% on the previous year. As an early stage company it generated an EBITDA loss of US$0.6m (reflecting early stage pre-inflexion). Coastal Genomics had net assets of US$0.8m as at 31 December 2019 before non-continuing loans. The acquisition is being undertaken on a zero net working capital basis and the consideration will be adjusted accordingly.
The Directors believe there are opportunities for commercial synergies, including:
• leveraging Yourgene’s commercial engine for sales of Coastal products, and cross-selling Group products through Coastal;
• applying Coastal Genomics’ technical support in North America to support wider Group activities;
• Yourgene scalability support, for example, in ERP and operations;
• Group margin improvement through vertical integration.
Completion of the Acquisition ("Completion") is expected to occur on Admission.
The consideration will include both upfront and deferred payments to the shareholders of Coastal Genomics. Additional consideration will be payable in tranches of shares and cash based on the achievement of accelerated growth objectives. The contingent share consideration can be paid in cash at the Company’s discretion in certain circumstances.
The total consideration payable by the Company will be up to US$13.5m and will comprise the following:
• cash consideration on Completion of US$3.0m;
• consideration of US$2.5m payable by the issuance on Completion of Initial Consideration Shares at a price of 18.3 pence per share (as described below);
• two further elements of consideration of US$1.0m each for early strategic customer wins, payable in ExchangeCo Shares and Ordinary Shares at a price of up to 18.3 pence per share, and subject to lock-up periods of 12 months;
• contingent cash consideration of US$2.0m should Coastal Genomics generate revenues of at least US$4.0m for the year ended 31 March (“FY”) 2022; and
• contingent cash consideration of US$4.0m should Coastal Genomics generate revenues of at least US$8.5m in FY23.
The cash earn-outs achievable in respect of FY22 and FY23 are expected to be funded by the enlarged group’s future cash flows.
The Acquisition will involve the issuance on Completion of:
(i) new Ordinary Shares in the Company to one of the sellers at a price of 18.3 pence per Ordinary Share (the "Company Consideration Shares"); and
(ii) new shares in Yourgene Health Canada Investments Ltd, a subsidiary of Yourgene Health plc, incorporated under the laws of British Columbia, Canada (the "ExchangeCo Shares" and, together with the Company Consideration Shares, the "Initial Consideration Shares"). The ExchangeCo Shares will not carry voting rights, but will participate in any Group dividends on an equivalent basis and will be capable of being exchanged for Ordinary Shares in the Company at a price of 18.3 pence per Ordinary Share at any time after Completion.
Key members of the Management team and staff of Coastal Genomics will be incentivised to remain with the business via the contingent consideration referred to above. All share based consideration will be subject to an initial lock-up period (in the case of the shares issued on Completion, for three years from Completion and, in the case of shares issues in respect of strategic customer wins, for 12 months after issuance) and subsequent orderly market arrangements.
Details of the Placing
The Placing is subject to the terms and conditions set out in the appendix (the "Appendix") to this announcement (which forms part of this announcement, such announcement and the Appendix together being, this "Announcement").
N+1 Singer is acting as sole bookrunner in connection with the Placing. The book will open with immediate effect following the release of this Announcement. The timing of the closing of the book, pricing and allocations are at the absolute discretion of N+1 Singer and the Company. The results of the Placing will be announced as soon as practicable after the close of the Bookbuild.
Certain of the Directors of the Company have indicated their intention to subscribe for Ordinary Shares in the Placing or in the open market shortly after Completion. Further details of the Placing and any participation by the Directors will be set out in the announcement to be made on the closing of the Placing.
Pursuant to the placing agreement between the Company, N+1 Singer and Cairn Financial Advisers LLP (the "Placing Agreement"), N+1 Singer has agreed, subject to the terms and conditions set out therein, to use its reasonable endeavours to procure placees for the Placing Shares at the Placing Price. Pursuant to the Placing Agreement, N+1 Singer has agreed, subject to the parties entering into the term sheet and the Placing Agreement not having been terminated in accordance with its terms, to pay an amount equal to the Initial Cash Consideration to the Company on the date of Admission in order to enable the Company to satisfy the Initial Cash Consideration payable under the Acquisition Agreement upon completion of the Acquisition. Any further net proceeds of the Placing will, to the extent actually received by N+1 Singer from Placees, be paid to the Company as soon as reasonably practicable thereafter.
Placing Shares and initial consideration Ordinary Shares
Pursuant to the Placing, the Company is seeking to raise a minimum of £13 million; the aggregate of the Placing Shares and the Company Consideration Shares, represent approximately 12.4 per cent. of the existing issued ordinary share capital of the Company. The Placing Shares and the Company Consideration Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.
Any Ordinary Shares which may be issued following the subsequent exchange of the ExchangeCo Shares, in aggregate, represent approximately 1.7 per cent. of the existing issued ordinary share capital of the Company and, when issued, will be fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue. Should all future potential earn-out be achieved, it is expected that a further 8,342,719 shares (assuming an exchange rate of US$1.31) will be issued.
Admission, Settlement and Dealings
Application will be made to London Stock Exchange plc (the "LSE") for the Placing Shares to be admitted to trading on AIM. It is expected that settlement of the Placing Shares and Admission will take place at 8.00 a.m. on 7 August 2020. The Placing is conditional upon, among other things, Admission becoming effective on or before 8.00 a.m. on 7 August 2020 or such later date (being no later than 10 August 2020 as N+1 Singer and the Company may agree. The Placing is also conditional upon the Placing Agreement not being terminated in accordance with its terms.
Application will also be made to the LSE for the admission to AIM of the Company Consideration Shares. Admission of such shares is expected to become effective on or around 7 August 2020.
This Announcement should be read in its entirety. In particular, your attention is drawn to the detailed terms and conditions of the Placing and further information relating to the Placing and any participation in the Placing that is described in the Appendix to this Announcement (which forms part of this Announcement). Your attention is also drawn to the Principal Risks and Uncertainties section also included in this Announcement below, updated as at the date of this Announcement and for the Acquisition.
By choosing to participate in the Placing and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety (including the Appendix), and to be making such offer on the terms and subject to the conditions of the Placing contained herein, and to be providing the representations, warranties and acknowledgements contained in the Appendix.
For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this Announcement is being made on behalf of the Company by Lyn Rees, CEO.
Yourgene Health plc
Lyn Rees, Chief Executive Officer
Tel: +44 (0)161 669 8122
Cairn Financial Advisers LLP (Nominated Adviser)
Tel: +44 (0)20 7213 0880
N+1 Singer (Joint Corporate Broker and Sole bookrunner)
Tel: +44 (0)207 496 3000
Stifel Nicolaus Europe Limited (Joint Corporate Broker)
Nicholas Moore / Matthew Blawat / Ben Maddison
Tel: +44 (0)20 7710 7600
Walbrook PR Ltd (Media and Investor Relations)
Paul McManus / Lianne Cawthorne
Mob: 07980 541 893 Mob: 07584 391 303
About Yourgene Health
Yourgene Health is an international molecular diagnostics group which develops and commercialises genetic products and services. The group works in partnership with global leaders in DNA technology to advance diagnostic science.
Yourgene develops and commercialises simple and accurate molecular diagnostic solutions, primarily for reproductive health. The Group's products include non-invasive prenatal tests (NIPT) for Down's Syndrome and other genetic disorders, Cystic Fibrosis screening tests, invasive rapid aneuploidy tests, male infertility tests and genetic disease tests. Yourgene's commercial footprint is already established in the UK, Europe, the Middle East, Africa and Asia.
Our product development, research service and commercial capabilities extend across the lifecycle of genetic test development including regulatory submissions. Through our technical expertise and partnerships, Yourgene Health is also extending its genetic testing offering into oncology.
Yourgene Health is headquartered in Manchester, UK with offices in Taipei and Singapore, and is listed on the London Stock Exchange's AIM market under the ticker "YGEN". For more information, visit www.yourgene-health.com and follow us on twitter @Yourgene_Health.