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Desperate for Cash, Benitec Pitches Share-Purchase Plan to Investors; Firm Needs $380K to Stay Afloat

Moribund RNAi therapeutics firm Benitec last week proposed to its investors a share-purchase plan designed to raise at least Aus$500,000 ($380,845), the minimum the company would need to remain solvent.
But even if it is able to secure the funds necessary to stay afloat, the company said that it has no plans to restart its internal research and development activities, nor does it intend to retry its hand at becoming a US-based firm.
Rather, it “will move to a model of co-investment and/or licensing, and combining [its intellectual property] estate with third-party capital and technology” within Australia, Benitec said in a letter to shareholders.
”Whatever the justification and rationale for the establishment of a US presence may have been originally, its continuation is beyond the capital reach of this company,” the directors said in their letter. “Its re-establishment forms no part of this board’s strategy. Our focus now is the preservation of the company’s granted and pending intellectual property estate and maintaining the valuable relationships that have been established over the years.”
Benitec’s proposal to its shareholders comes about a month after the company shut down its US operations and suspended all in-house R&D operations amid a severe cash shortage caused in part by a streak of costly litigation (see RNAi News, 6/29/2006). 
Benitec started off with a promising expressed RNAi technology and an IP portfolio that included one of the earliest issued RNAi-related US patents — US patent No. 6,573,099. But the company eventually ran aground under the weight of several patent-infringement suits filed at the order of one-time Chairman and CEO — and former IP lawyer — John McKinley.
The company had some success with the suits, signing licensing deals with defendants Ambion and GenScript, but the litigation was costly and damaging to the company’s reputation.
Additionally, one of the companies targeted by Benitec, Nucleonics, opted to fight back, raising the stakes and the potential legal tab. As part of its defense, Nucleonics has opposed or requested re-examinations of certain Benitec patents in several nations, including the US, where an initial review by the US Patent and Trademark Office found Benitec’s ‘099 patent to be invalid (see RNAi News, 9/9/2005).
Nucleonics President and CEO Robert Towarnicki recently told RNAi News in an e-mail that his company plans to continue its efforts to have the ‘099 patent invalidated and that a final ruling by the USPTO is pending. He added that Nucelonics will try to reinstate the Benitec lawsuit, which was dismissed at Benitec’s request last year (see RNAi News, 10/7/2005), “in the event the [US] patent office allows any meaningful claims to stand in the” re-examination of the ‘099 patent.

Benitec “will move to a model of co-investment and/or licensing, and combining [its intellectual property] estate with third-party capital and technology” within Australia.

With its cash supplies dwindling and its fight with Nucleonics dragging on, Benitec eventually shuttered its California headquarters and cut almost its entire staff, including CEO Sara Cunningham and CFO Mike Catelani. A few Australian-based directors remain onboard to handle the company’s day-to-day operations.
In an attempt to re-group and realize some value from Benitec’s remaining assets, including an HIV/AIDS therapy program being funded and run by strategic partner City of Hope (see RNAi News, 9/3/2004), Benitec has asked its stockholders to take part in a share-purchase program to address the company’s “urgent need for capital, without which the directors will have no choice but to consider … options which may include … selling off the company’s remaining assets.”
According to Benitec’s letter to its shareholders, “capital is required both in the short and medium term to ensure the continuing ability of the company to pursue its objectives.” As of June 30, Benitec had Aus$895,000 in cash, down from Aus$2.3 million just three months earlier.
Unlike their earlier plan to become a publicly traded, US-based drug developer, however, Benitec’s directors “envisage a new, significantly lower cost model of value creation that moves away from maintaining R&D infrastructure and in-house programs.”
This model will allow Benitec “to avoid the substantial costs of funding extensive in-house programs and seek to spread the company’s risks and expand its opportunities beyond the company’s … portfolio of R&D collaborators and licensees,” the letter states. “Further, as an Australian company participating in Australian funded and located R&D projects, the directors consider that they will be better placed to pursue the grants and other benefits available in Australia.
According to Benitec, its share-purchase plan permits all company stockholders within Australia and New Zealand to purchase up to Aus$5,000 worth of ordinary company shares. Applications for stock must be for a minimum of Aus$1,000 worth of shares.
The offer closes on Aug. 25.
Officials from Benitec did not return a request for additional comment.

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