Virionyx sells stake to gain US foothold

The Auckland-based biotech company plans a US listing before trials of its HIV drug HRG214 are completed. Picture / Martin Sykes

Auckland biotech company Virionyx has sold a stake to US-based investors with an eye on an American listing.

It is part of a plan to raise US$7.5 million ($11 million) to fund operations for the next two years, pay back debt of about $1.5 million and cover the cost of phase II trials of Aids drug HRG214.

Chief executive Simon Wilkinson said Virionyx planned to list in the US before the trials were completed - expected within two years.

The US-based investors have bought 16.8 per cent of the company for US$6 million. The remaining US$1.5 million dollars will be raised from New Zealand shareholders, who have expressed an interest in investing more money.

The New Zealand-raised funds were not needed, Wilkinson said, but the board had responded to the request from shareholders who had rescued the company a year ago. They would be offered shares at $1.50 each on a "first come, first served" basis. If the offer was over-subscribed, the share allotments would be scaled.

A prospectus will be sent out within two weeks, with the offer expected to open in late February and close in late March.

At December's annual meeting shareholders in the as-yet unlisted company approved the investigation of two US-based investment options.

The discarded option would have seen the company re-incorporated in the US sooner, in preparation for a possible reverse takeover and listing - a so-called back-door approach.

"Taking a New Zealand company into the US market is a complex transaction," Wilkinson said. "By accepting the private placement funds the company has bought the time to research the best way of obtaining a listing."

The US Securities and Exchange Commission and US investment market were more relaxed about the front-door approach, he said, although this could cost more and take longer to achieve.

A front-door listing would generally take 12-18 months and cost about US$2 million, he said, while a back-door approach would cost about US$1 million and take six to nine months.

Phase II trials of HRG214 - a treatment for Aids patients for whom existing therapies are failing - are planned to start in June. They will involve 50 patients in Dallas, Houston and Mexico.

Late last year Virionyx also entered into a joint venture called Buckler Biodefense with New York company Zeptometrix.

In January samples of antibodies for an anti-anthrax treatment being developed by Buckler were sent to the US Centers for Disease Control and Prevention for independent testing.