EMV Capital (AIM:EMVC) has picked up key assets of Destiny Pharma, the collapsed antibiotic developer, in a deal that Panmure Liberum says highlights how its platform can capture assets on the cheap while preserving upside for investors.
Through its Moirai Acquisitions arm, EMV is paying £475,000 up front for Destiny’s XF drug platform, including intellectual property, stock, contracts and the trading name itself.
According to Panmure, the XF compounds offer “a novel, ultra-rapid mechanism that reduces the chance of bacteria becoming resistant”, a potential edge over conventional antibiotics.
Further payments of up to £2 million are linked to milestones: £600,000 on the launch of a phase III trial in the US, £900,000 on regulatory approval, and a further £500,000 tied to a one-off fee under a regional licensing deal with a Hong Kong-based pharmaceutical group.
The initial payment has been funded through a three-year loan arranged by EMV’s venture capital arm, with warrants attached, keeping the parent’s cash outlay to a minimum.
Panmure notes that EMV has also led an equity raise of up to £725,000 to provide working capital for Moirai. If fully subscribed, this would add about £1.86 million to the group’s assets under management, including EMV’s 44 per cent stake in Moirai, which would dilute to 30 per cent if all warrants are exercised.
For the broker's analysts, the significance is less about this individual drug platform than the structure.
“Adding new assets through third-party capital fundraising, leveraging the group network, whilst retaining potentially lucrative equity stakes offers the potential for significant value-accretion with little to no direct cash inputs,” they argue. EMV’s initial investment in Moirai was just £100.
The market remains cautious. Panmure highlights that the shares, at 45p, value EMV at £12 million and trade at a near 70% discount to its estimate of fair value.
But it also sees “the asymmetric return profile from potential further upside” as attractive, and says continued deal flow should showcase the strength of EMV’s model.