Proactive Investors - Run By Investors For Investors

Chinese billionaire invests £8mln in AIM drug developer Midatech

Assuming shareholders approve Lam Kong’s £8mln equity investment, the billionaire’s China Medical System company will sign a licence deal that will see it develop and commercialise Midatech’s products in South East Asia
scientist in lab
Lam Kong set up China Medical System in 1995, having graduated from med school a year earlier

A Chinese billionaire is set to take a 77.3% stake in AIM-quoted drug developer Midatech Pharma PLC (LON:MTPH).

Lam Kong, through his China Medical System and A&B Company businesses, has agreed to buy 207.8mln new shares for 3.85p each, bringing in £8mln for Midatech.

READ: Big name pharma starting to take note of Midatech’s drug delivery technology

The company, which has a market cap of £2.5mln, plans to use the proceeds to “pursue further development” of its lead product, MTD201 – a potential treatment for a hormonal disorder called acromegaly and carcinoid cancer.

A pivotal trial – which will cost between £5-7mln – is pencilled in for the second half of this year, and Kong’s cash injection will allow for that to get started, although Midatech has warned it would need more money to complete the study and prepare MTD201 for commercialisation.

To help top up its coffers a bit more, the junior pharma has also said it will carry out a placing and open offer with existing retail shareholders on the same terms as Kong.

The investment needs shareholder approval, as does a resolution which would allow Kong not to launch a formal bid for the company, as is normal when a shareholder’s stake surpasses 30%.

Should investors give their blessing, China Medical System – the drug distributor founded by Kong in 1995 – will sign a licence agreement giving it the exclusive right to develop and commercialise Midatech’s assets, including MTD201 and MTX110, in China, Hong Kong, Macau and Taiwan.

Hefty milestone payments

Midatech will manufacture and supply the licensed products, earning a manufacturing margin “in the low double-digit percentage range”, although the margin will be a bit less for MTX110 – a treatment for a rare type of brain tumour found in children – as Novartis will take a slice for the use of its panbinostat.

On top of that, the AIM firm is also entitled to receive various regulatory and sales-based milestone payments for each product which could run into the tens of millions, although these are not expected for a couple of years yet.

“The board believes that this partnership with the licensees has the potential to accelerate the development of the company's assets in the CMS Territory with a high quality, expert partner with demonstrable development and significant sales expertise, whilst permitting the company to retain its focus on its main target markets in the US and the EU and potentially to service the rest of the world.”

Having settled following an initial spike, Midatech shares were up 0.6% to 4.12p in late-morning trading on Tuesday.

View full MTPH profile View Profile

Midatech Pharma PLC Timeline

Related Articles

Scientist at work
May 28 2019
CaPre, a potent form of Omega-3, has been shown to reduce triglycerides, but also lower 'bad cholesterol' levels, and raise 'good' ones
Oncoprex
October 17 2018
The biotech was founded by an investment group led by scientists and driven by a no-nonsense CEO whose stake is more than just business as usual
patch
May 20 2019
The New Jersey company's lead product is Twirla, a low-dose prescription contraceptive applied once weekly for three weeks, followed by a week without the patch

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use