By Doug Macron
Roughly five months after the US Patent and Trademark Office ended a years-long review of Benitec's core patent, the Australian company announced that it is aiming to raise A$8 million ($8.4 million) though a public offering in order to support development of its three drug-development programs.
“This is effectively a relaunch of Benitec following the favorable decision from the US Patent and Trademark Office,” CEO Peter French said in a statement.
The decision “has provided new impetus to Benitec's development as a major player in the RNA interference field worldwide, and as such has stimulated significant and renewed interest in the company from investors and other industry stakeholders," Benitec Chairman Peter Francis added in a letter to shareholders. "As a consequence, the board was approached by several interested investment groups to invest in Benitec's future.”
Should Benitec successfully raise the A$8 million, it said it would have sufficient resources to move all three of its pipeline programs into the clinic, including an effort in lung cancer being conducted in collaboration with the University of New South Wales. Benitec is aiming to use its expressed RNAi technology to inhibit the beta III isoform of tubulin, which is over-expressed in some cancers, in order to increase the sensitivity of tumors to chemotherapy.
The firm is also collaborating with China's Biomics Biotechnologies to develop a hepatitis B therapy. The two began their partnership in mid-2009, and recently announced that it had advanced to the proof-of-concept stage (GSN 2/24/2011).
Lastly, Benitec is advancing a program in cancer- and chronic disease-associated pain. Benitec said late last year that it is working with the University of Queensland to evaluate a number of RNAi constructs in pain models to "determine which specific target sequences have the strongest effect on reducing neuropathic pain from a single injection."
French told Gene Silencing News last November that Benitec could advance at least one drug candidate to human testing within two years, noting that the pain initiative could become its “flagship program to demonstrate efficacy” because the regulatory requirements to look at long-term effects of a drug in a terminal patient population would be lower than with non-life-threatening conditions, which would enable the company to fast-track the work.
Benitec will also use the money from the financing to explore the utility of technology in other cancer and infectious disease areas, “which will ideally be conducted in collaboration with other biotechnology groups,” Francis wrote. “In addition, we will continue to pursue other opportunities to realize value through commercialization of Benitec's extensive patent estate.”
In pursuing the financing, Benitec has set its sights on what had proven to be an elusive goal as it struggled under the pressure of its lengthy patent re-examination.
The company's troubles began in 2004, very shortly after it began to extend its reach from its native Australia into the US, when its previous CEO filed lawsuits against three companies — Nucleonics, Ambion, and GenScript — for infringing its primary US patent: No. 6,573,099, which essentially claims the knockdown of gene expression using DNA that transcribes double-stranded RNA (GSN 4/2/2004).
While Ambion and GenScript promptly licensed the patent as Benitec asked, Nucleonics chose to fight back, and asked the court hearing the case to rule Benitec's patent invalid and unenforceable. It later expanded its defense to include requests for re-examination of Benitec's IP in the US and abroad.
The litigation was protracted and its cost to Benitec was high, both in financial and business terms. The company underwent a change in management, and under new leadership sought to have its suit against Nucleonics dismissed.
Although Nucleonics tried to keep the case active, it was eventually dismissed at Benitec's request. Still, the damage was done. In mid-2006, Benitec buckled under the weight of legal costs and shuttered its US operations in order to regroup in Australia as a much smaller firm (GSN 4/20/2006 & 6/29/2006).
All the while, the re-examination of the '099 patent proceeded, and the USPTO repeatedly rejected all of its claims (GSN 4/28/2008). Although these rulings were never final, the process raised enough questions about Benitec's intellectual property that the company was unable to secure any significant partnerships, while a number of fund-raising efforts failed to garner any real investor interest.
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For instance, Benitec had proposed a share-purchase plan in 2006 that was designed to raise at least A$500,000, but the bid was scuttled after it failed to meet the required minimum investment level (GSN 9/14/2006). Less than a year later, a stock rights issue plan that would have raised as much as A$6.5 million pulled in less than half of what was expected (GSN 4/5/2007).
Benitec did, however, find ways to stay afloat, and by 2010 its fortunes had begun to change. It raised $6 million by signing a convertible note with California-based investment group La Jolla Cove Investors (GSN 4/15/2010). More importantly, late last year the USPTO said it had decided to re-instate the '099 patent in full and end all re-examination proceedings (GSN 11/11/2010).
With the US patent in hand, Benitec now sees itself in a good position to once again approach the public market to raise the cash that could allow it to get back to the business of drug development.
Under the public offering, Benitec will offer shareholders four new fully paid ordinary shares for every five shares they hold at a price of A$0.02 per share. Also included is one free-attaching option, exercisable at A$0.04, for every four new shares accepted.
Shareholders will also be entitled to apply for additional shares and options that are not subscribed for under the rights issue, Benitec said.
The maximum number of shares offered is 400,643,929, and the maximum number of free-attaching options is 100,160,982, Benitec said.
In addition to supporting is business initiatives, the company said it will use some of the proceeds of the financing to repay La Jolla Cove, thereby terminating the convertible note facility.
Benitec said that it is “grateful to La Jolla Cove Investors … who supported the company when few others would.” By ending its arrangement with the firm, however, Benitec will be free to “utilize more conventional forms of capital-raising to grow the company.”
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