REG - Destiny Pharma PLC - Proposed Cancellation of Admission to Trading

Destiny PharmaAnnouncement

15/07/2024 07:00

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RNS Number : 3138W  Destiny Pharma PLC  15 July 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7
OF EU REGULATION 596/2014 AS IT FORMS PART OF DOMESTIC LAW IN THE UNITED
KINGDOM BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

 

Destiny Pharma plc

("Destiny Pharma" or the "Company")

 

Proposed Cancellation of Admission of Ordinary Shares to Trading on AIM

Re-Registration as a Private Limited Company

and

Notice of General Meeting

 

Brighton, United Kingdom, 15 July 2024 Destiny Pharma (AIM: DEST), a clinical
stage biotechnology company focused on the development and commercialisation
of novel medicines to prevent and cure life threatening infections, today
announces:

 

·    subject to Shareholder approval, the proposed cancellation of the
admission of its ordinary shares of 1 pence each ("Ordinary Shares") from
trading on AIM (the "Cancellation"), the re-registration of the Company as a
private limited company (the "Re-registration") following the Cancellation and
the adoption of new articles of association (the "New Articles") to be
effective on the Re-registration (the Cancellation, Re-registration and New
Articles collectively being the "Proposals"); and

·    the posting of a circular to Shareholders (the "Circular") which
contains further information on the Cancellation and the Re-registration, a
copy of the proposed New Articles, and notice of a general meeting to be held
on 31 July 2024 at 10.00 a.m. at the offices of Covington & Burling LLP,
22 Bishopsgate, London EC2N 4BQ (the "General Meeting") at which shareholder
approval will be sought for the Proposals.

 

Sir Nigel Rudd, Chair of the Board of Directors, Destiny Pharma, commented:
"As previously disclosed, the Company has been seeking a licencing partner for
the development of XF-73 Nasal through Phase 3 clinical trials. However, to
date a deal has not been forthcoming and given our cash runway, the Board and
our advisors have been evaluating a range of strategic options to access the
significant quanta of funding required to progress the drug through these
Phase 3 clinical trials and realise the creation of meaningful shareholder
value.

 

"This review, and our discussions with possible funding partners, has
identified that a larger pool of capital may be available to Destiny Pharma as
a private company and therefore, the Board has concluded that delisting from
AIM and re-registering as a private company is a necessary step to provide
Destiny Pharma with a realistic chance of securing the capital required to
progress XF-73 Nasal through clinical trials and bring this important product
to patients and health systems.

 

"In summary, while there can be no guarantee, the Board believes that the only
viable option now available to Destiny Pharma to create future shareholder
value is the pursuit of capital as a private company. Without taking this
route, we believe that liquidation of the Company is the most likely
alternative."

 

Chris Tovey, Chief Executive Officer, Destiny Pharma, commented: "I continue
to believe that XF-73 Nasal could be a highly differentiated drug for patients
to prevent post-surgical site infections. XF-73 Nasal has substantial market
potential and represents an attractive commercial proposition that, if
progressed through late-stage clinical development, could create considerable
shareholder value.

 

"Since I joined the Company, not only have we been vigorously pursuing a
potential licensing deal, we have also taken important steps to improve the
attractiveness of XF-73 Nasal to potential partners. This includes optimising
the clinical trial design, reducing the overall cost to less than half of the
previously planned Phase 3 trial, and further strengthening the market
research supporting the blockbuster potential for XF-73 Nasal in the United
States. Although we continue to speak to partners about this renewed
proposition, we are extremely disappointed that a deal has not been
forthcoming and, given our shortening cash runway, have been forced to amend
our strategy as we seek to continue to progress this important product."

 

Background to and reasons for the proposed Cancellation and Re-registration

The Board continues to believe that XF-73 Nasal, the Company's lead drug
candidate, is highly differentiated with substantial market potential. It
targets a significant medical, patient and health system need in preventing
post-surgical site infections, even when MRSA is present. Having successfully
completed Phase 2 development, which, in the Board's opinion, has
significantly de-risked XF-73 Nasal, the Company has worked diligently to
design an efficient Phase 3 clinical development programme. The Board also
continues to believe that market research supports the proposition that the
emerging clinical profile of XF-73 Nasal suggests this product could be an
"excellent fit" for its target indication, a positioning implicitly endorsed
by the FDA QIDP and MHRA IPD designations XF-73 Nasal has received.

 

Therefore, the Board believes that XF-73 Nasal represents a commercially
significant and attractive proposition and, furthermore, that progressing
XF-73 Nasal through the remainder of its late-stage clinical development
should create considerable shareholder value while bringing an important
therapy to patients.

 

However, as detailed below, the Board has considered the likelihood of the
Company reaching agreement on an appropriate licensing deal in the near term
and its ability to raise the significant quantum of capital necessary to
advance the XF-73 Nasal programme meaningfully whilst it remains on the public
markets. It has concluded that it is very unlikely that an appropriate
licensing deal will be forthcoming in the near term, nor that it is realistic
to raise sufficient equity capital from the public markets in order to fund
and progress the required Phase 3 trial. Feedback from a broad number of
potential other sources of equity capital suggests that a possible funding
proposal could only be forthcoming if Destiny was a private company.

 

Given the Company's limited cash resources (£2.9 million as at 30 June 2024),
absent a near-term partnership deal or securing sufficient funding to advance
the development of XF-73 Nasal in the short-term, the Board has concluded that
it would have to review and consider what limited remaining options are
available to it, and there is a high likelihood that this would involve
liquidating the Company.

 

As previously communicated, in recent months, the Company has taken important
steps to improve the attractiveness of XF-73 Nasal in the context of securing
a meaningful licensing deal on XF-73 Nasal that could fund future activities
such as completing the Phase 3 studies - these steps include developing a new
clinical trial design that is expected to cost approximately £25 million,
less than half of the previously planned Phase 3 trial, whilst still
delivering the same indication and commercial returns, and conducting an
ongoing exercise to broaden understanding of the market potential for XF-73
Nasal in the United States and the commercial go to market model.

 

However, the Company recognises the challenges presented by the antibiotics
markets more broadly, with a growing incidence of bacterial resistance arising
to existing agents on their continued use and overuse to treat infections. In
order to reduce the likelihood of resistance arising to newer agents, health
systems promote antimicrobial stewardship which ultimately limits the use and
rate of uptake of new antibiotics and thus their commercial potential. This
has led to a paucity of funding for new antibiotics, even for anti-infectives
such as XF-73 Nasal which has a differentiated proposition including use as a
very short-course prophylactic, rather than a treatment over an extended
period of time and, if approved, would be a first-in-class antimicrobial,
where no resistance has been observed to date.

 

For some time, the Company has been seeking a licencing partner to progress
and fund the development of XF-73 Nasal. More recently, as announced on 25
April 2024, and in light of a cash runway that only extends to Q1 2025,
alongside licencing activities the Board has also been evaluating a range of
other strategic options with its Financial Adviser, Rothchild & Co, to
secure funding required to conduct the Phase 3 clinical studies.

 

While milestone payments are due in future from the collaboration and
co-development agreement with Sebela Pharmaceuticals in respect of NTCD-M3,
the Company's lead asset for the prevention of Clostridioides difficile
infection (CDI) recurrence, the anticipated timing of the next milestone
payment falls well beyond the Company's current cash runway and beyond the
timing of the funding requirement for the development of the Phase 3 programme
for XF-73 Nasal.

 

Ongoing conversations with potential partners have not yet resulted in a
licensing deal, and the Board has considered the possibility that a near-term
licencing agreement may not be secured. The Board has explored the possibility
of securing the quantum of funding (c. £25 million) it needs to execute on
the Phase 3 clinical trial programme from a very wide range of sources,
including existing Shareholders and public market investors, venture capital
firms, specialist healthcare funds as well as from non-dilutive sources, as it
believes that by successfully completing the Phase 3 programme itself, it will
significantly increase the likelihood of securing a meaningful licencing deal
in the future.

 

Discussions with a limited number of potential funding partners continue but
feedback received from those, and other, possible sources of capital has
indicated that a possible funding proposal could only be forthcoming if
Destiny was a private company.

 

The Board has considered its ability to raise the quantum of capital necessary
to advance the XF-73 Nasal programme from the public markets and has concluded
that it is very unlikely to be able to raise sufficient equity capital to fund
the required Phase 3 trial, taking into account its current investor base,
which is primarily made up of VCT, EIS and private investors, many of whom are
unable to invest further in the Company (or make investments of the quantum
required), as well as current public market sentiment towards pre-revenue
biotechnology companies. In reaching this conclusion, the Board has also
considered the Company's current market capitalisation of c. £8.1 million
coupled with the limited liquidity and high price volatility in the Company's
Ordinary Shares. The Board considers that a fundraise of a smaller quantum on
AIM would not realistically allow the Company to significantly advance XF-73
Nasal, or its other pipeline assets, through to value inflection points.

 

The Board's continued focus is on maximising shareholder value over the
long-term and it has extensively reviewed and evaluated the benefits and
drawbacks for the Company and its Shareholders in retaining the admission to
trading of the Ordinary Shares on AIM. The Board has taken into consideration
numerous factors, both positive and negative, and considered the interests of
all Shareholders in reaching its decision. These considerations have led the
Board to conclude that the Cancellation is the Company's only viable option in
order to provide it with a realistic chance of securing an appropriate quantum
of funding in a timely manner. The Board considers this objective essential in
promoting the medium and long-term success and development of the business.

 

Whilst there can be no guarantee that additional funding will be secured as a
private company, nor as to the terms of any such funding, the Board is of the
view that a larger pool of available and appropriate capital is accessible to
the Company as a private company at this time. With the Company's limited cash
runway in mind, the Board also believes that the cost, management time and the
legal and regulatory burden associated with maintaining the Company's
admission to trading on AIM are disproportionate to its benefits in the
context of a lack of access to sufficient capital to advance XF-73 Nasal
through final clinical trials.

 

General Meeting

The General Meeting will be held at the offices of Covington & Burling
LLP, 22 Bishopsgate, London EC2N 4BQ at 10.00 a.m. on 31 July 2024.

 

Resolution 1 to be proposed at the General Meeting is a special resolution to
approve the Cancellation. Resolution 2 to be proposed at the General Meeting
is a special resolution to re-register the Company as a private limited
company. Resolution 3 to be proposed at the General Meeting is a special
resolution to approve the adoption by the Company of the New Articles, upon
Re-registration. Resolution 2 is conditional on the passing of Resolution 1,
and Resolution 3 is conditional on the passing of Resolutions 1 and 2.

 

The Directors consider that the Resolutions are in the best interests of the
Company and its Shareholders as a whole. Accordingly, the Directors
unanimously recommend that you vote in favour of the Resolutions as they
intend to do in respect of their own shareholdings of 9,475,605 Ordinary
Shares (representing approximately 9.89 per cent. of the Existing Ordinary
Shares).

 

Irrevocable undertakings and letters of intent to vote in favour of the
Resolutions

As at today's date, the Company has received irrevocable undertakings from
certain Shareholders representing approximately 18.77 per cent. of the
Company's issued share capital to vote in favour of the Resolutions, including
9.89 per cent. of the Company's issued share capital held by directors and
their connected parties. The Company has received letters of intent from
certain Shareholders representing a further approximately 7.20 per cent. of
the Company's issued share capital to vote in favour of the Resolutions.

 

Therefore, the Company has received irrevocable undertakings and letters of
intent totalling in aggregate 25.97 per cent. of the Company's issued share
capital to vote in favour of the Resolutions.

 

Matched Bargain Facility

The Company is making arrangements for a Matched Bargain Facility to assist
Shareholders to trade in the Ordinary Shares following Cancellation, if the
Resolutions are passed. The Matched Bargain Facility will be provided by J P
Jenkins. J P Jenkins is an appointed representative of Prosper Capital LLP,
which is authorised and regulated by the FCA.

 

The Circular and, where applicable, a notice of availability will be sent to
shareholders later today. A copy of this announcement and the Circular will
also be made available on the Company's website later today at
www.destinypharma.com
(https://url.avanan.click/v2/___http:/www.destinypharma.com/___.YXAxZTpzaG9yZWNhcDphOm86OWRhMGVhNmY0MzdhY2U3MzhiMDNiNDRmYjlhOWNlYzU6NjozNTIyOjQ5ZjRjNTU2MTEwODZiOTY2ZTk3OGU2YzI2YTExNWNmM2Q4ODE1ODI5NzA5ZDVjNDg0NGMyZjI4ZmNhMmZkYzg6cDpUOk4)
.

 

Capitalised terms used but not defined in this announcement shall have the
same meaning given to such term in the Circular.

 

The person responsible for the release of this announcement on behalf of the
Company is Shaun Claydon, Company Secretary.

 

 

For further information, please contact:

 

Destiny Pharma plc
Chris Tovey, CEO

Shaun Claydon, CFO

+44 (0)1273 704 440
pressoffice@destinypharma.com

 

FTI Consulting

Ben Atwell / Simon Conway

+44 (0) 203 727 1000

destinypharma@fticonsulting.com

 

Shore Capital (Nominated Adviser and Broker)

Daniel Bush / James Thomas / Lucy Bowden

+44 (0) 207 408 4090

 

 

About Destiny Pharma

Destiny Pharma is an innovative, clinical-stage biotechnology company focused
on the development and commercialisation of novel medicines that can prevent
life-threatening infections. The Company's drug development pipeline includes
two late-stage assets XF-73 Nasal gel, a proprietary drug targeting the
prevention of post-surgical staphylococcal hospital infections including MRSA
and NTCD-M3, a microbiome-based biotherapeutic for the prevention of C.
difficile infection (CDI) recurrence which is the leading cause of hospital
acquired infection in the US.

 

For further information on the company, please visit www.destinypharma.com
(https://url.avanan.click/v2/___http:/www.destinypharma.com___.YXAxZTpzaG9yZWNhcDphOm86YTgzNTY4M2FkNmQyNzcyNmJlNWViN2U1MzU0ZjJmN2U6NjoxYWQ4OmYzMjJhZGVkMjlkZTUxYjRlYTI3M2QxNTNjYzkyYmEzZGU0ZGNlMWEzN2E2NjE3YzA5NGFkOTRkZmRjZGUyYjc6cDpG)
.

 

 

 

APPENDIX I

Expected Timetable of Principal Events

 Event                                                                           Date
 Announcement of the Proposals                                                   15 July 2024
 Posting of Circular                                                             15 July 2024
 Notice of the proposed Cancellation provided in accordance with AIM Rule 41     15 July 2024
 Latest time and date for receipt of completed Form of Proxy to be valid at the  10.00 a.m. on 29 July 2024
 General Meeting
 General Meeting                                                                 10.00 a.m. on 31 July 2024
 Results of General Meeting announced through RIS                                31 July 2024
 Expected last day of dealings on AIM in the Ordinary Shares                     12 August 2024
 Expected cancellation of the admission to trading on AIM of the Ordinary        7.00 a.m. on 13 August 2024
 Shares
 Matched Bargain Facility for Ordinary Shares commences                          7.00 a.m. on 13 August 2024
 Expected date of re-registration as a private limited company                   on or around 30 August 2024
 Notes:

 1.     Each of the times and dates set out in the above timetable and
 mentioned in the Circular is subject to change by the Company, in which event
 details of the new times and dates will be notified to London Stock Exchange
 plc and the Company will make an appropriate announcement to a Regulatory
 Information Service.

 2.     References to times are to London time unless otherwise stated.

 3.     If you want to request a hard copy Form of Proxy, please contact
 Link Group via email at shareholderenquiries@linkgroup.co.uk
 (mailto:shareholderenquiries@linkgroup.co.uk) or on 0371 664 0300. Lines are
 open from 9.00 a.m. to 5.30 p.m. Monday to Friday (excluding public holidays
 in England and Wales).

 

 

APPENDIX II

Extracts from the Circular

AIM Delisting

It is a requirement under Rule 41 of the AIM Rules that the AIM Delisting is
approved by Shareholders holding not less than 75 per cent. of votes cast by
Shareholders at the General Meeting. The Delisting Resolution is set out at
resolution 1 in the Notice of General Meeting.

 

If the Delisting Resolution is passed, the Board will resolve to cancel the
admission of the Ordinary Shares to trading on AIM.

 

Pursuant to Rule 41 of the AIM Rules, the Company, through its nominated
adviser, Shore Capital, has notified the London Stock Exchange of the proposed
Cancellation. Under the AIM Rules, the Company is required to give at least 20
clear Business Days' notice of the Cancellation.

 

Additionally, Cancellation will not take effect until at least five clear
Business Days have passed following the passing of the Delisting Resolution.
If the Delisting Resolution is passed at the General Meeting, it is proposed
that the last day of trading in the Ordinary Shares on AIM will be 12 August
2024 and that the Cancellation will become effective following the issue of a
Dealing Notice, at 7.00 a.m. on 13 August 2024.

 

The Directors are aware that certain Shareholders may be unable or unwilling
to hold Ordinary Shares in the event that the Cancellation is approved and
becomes effective. Such Shareholders should consider selling their interests
in the market prior to the Cancellation becoming effective.

 

The principal effects of the AIM Delisting are as follows:

·    there will be no formal market mechanism enabling Shareholders to
trade their Ordinary Shares on AIM (or any other recognised market or trading
exchange) and no price will be publicly quoted for the Ordinary Shares;

·    it is possible that, following the publication of the Circular, the
liquidity and marketability of the Ordinary Shares may be significantly
reduced and their value adversely affected;

·    the Ordinary Shares may be more difficult to sell compared to shares
of companies traded on AIM (or any other recognised market or trading
exchange);

·    it may be difficult for Shareholders to determine the market value of
their investment in the Company at any given time;

·    the regulatory and financial reporting regime applicable to companies
whose shares are admitted to trading on AIM will no longer apply;

·    the Company will no longer be required to comply with the AIM Rules
and Shareholders will no longer be afforded the protections given by the AIM
Rules, such as the requirement to be notified of price sensitive information
or certain events and the requirement that the Company seek shareholder
approval for certain corporate actions, where applicable, including
substantial transactions, reverse takeovers, related party transactions and
fundamental changes in the Company's business, including certain acquisitions
and disposals;

·    the levels of disclosure and corporate governance within the Company
may not be as stringent as for a company quoted on AIM;

·    the Company will no longer be subject to UK MAR regulating inside
information and other matters;

·    the Company will no longer be required to publicly disclose any
change in major shareholdings in the Company under the Disclosure Guidance and
Transparency Rules;

·    Shore Capital will cease to be nominated adviser to the Company; and

·    whilst the Company's CREST facility will remain in place immediately
post the Cancellation, the Company's CREST facility may be cancelled in the
future and, although the Ordinary Shares will remain transferable, they may
cease to be transferable through CREST (in which case, Shareholders who hold
Ordinary Shares in CREST will receive share certificates).

Additional tax consequences are set out in paragraph 8 of Part I (Letter from
the Chairman of Destiny Pharma plc) of the Circular.

 

Details of the application of the Takeover Code, which will continue to apply
to the Company following the Cancellation, are set out in paragraph 7 of Part
I (Letter from the Chairman of Destiny Pharma plc) of this Circular.

 

For the avoidance of doubt, the Company will remain registered with the
Registrar of Companies in England and Wales, and as such the Company will
continue to be subject to the requirements of the Companies Act 2006.

 

The above considerations are not exhaustive, and Shareholders should seek
their own independent advice when assessing the likely impact of the
Cancellation on them and their shareholding in the Company.

 

 

Transactions in the Ordinary Shares prior to and post the proposed
Cancellation

Prior to the Cancellation

Shareholders should note that they are able to continue trading in the
Ordinary Shares on AIM prior to the date of Cancellation. If the requisite
majority of Shareholders approve the Delisting Resolution at the General
Meeting, it is anticipated that the last day of dealings in the Ordinary
Shares on AIM will be 12 August 2024. The Board is not making any
recommendation as to whether or not Shareholders should buy or sell their
Ordinary Shares.

Dealing and settlement arrangements post the Cancellation

The Directors are aware that Shareholders may wish to acquire or dispose of
Ordinary Shares in the Company following the Cancellation. Should the
Delisting Resolution be approved by Shareholders at the General Meeting, the
Company is seeking to implement a Matched Bargain Facility and to be provided
by J P Jenkins. J P Jenkins is an appointed representative of Prosper Capital
LLP, which is authorised and regulated by the FCA.

 

Under the Matched Bargain Facility, Shareholders or persons wishing to acquire
or dispose of Ordinary Shares will be able to leave an indication with J P
Jenkins, through their stockbroker (J P Jenkins is unable to deal directly
with members of the public), of the number of Ordinary Shares that they are
prepared to buy or sell at an agreed price. In the event that J P Jenkins is
able to match that order with an opposite sell or buy instruction, it would
contact both parties and then effect the bargain (trade). Shareholdings remain
in CREST and can be traded during normal business hours via a UK regulated
stockbroker. Should the Cancellation become effective and the Company puts in
place the Matched Bargain Facility, details will be made available to
Shareholders on the Company's website at www.destinypharma.com
(https://url.avanan.click/v2/___http:/www.destinypharma.com___.YXAxZTpzaG9yZWNhcDphOm86OTNmNzIyYzQ2MjRjZGFjMjUxNmM3NTUwNTQ2Yjg2M2E6NjoyNjQ3Ojk4M2VlYWZhOTY2MGMxZGVhMDUxY2E3NTk3MGU5NDljZmE5YzU1ZDk4YTgwODU3OWJlZWRlOGY4YmEzZTRmNDM6cDpUOk4)
.

 

The Matched Bargain Facility will operate for a minimum of 12 months after the
Cancellation. The Directors' current intention is that it will continue beyond
that time but Shareholders should note that it could be withdrawn and there
can be no guarantee that the Matched Bargain Facility will be kept in place
indefinitely, and this could therefore inhibit the ability to trade the
Ordinary Shares. Further details will be communicated to the Shareholders at
the relevant time.

 

If Shareholders wish to buy or sell Ordinary Shares on AIM they must do so
prior to the Cancellation becoming effective. As noted above, in the event
that Shareholders approve the Cancellation, it is anticipated that the last
day of dealings in the Ordinary Shares on AIM will be 12 August 2024 and that
the effective date of the Cancellation will be 13 August 2024.

 

 

Re-registration

Following the Cancellation, the Directors believe that the requirements and
associated costs of the Company maintaining its public company status will be
difficult to justify and that the Company will benefit from the more flexible
requirements and lower costs associated with private limited company status.
It is therefore proposed to re-register the Company as a private limited
company. In connection with the Re-registration, it is proposed that the New
Articles be adopted to reflect the change in the Company's status to a private
limited company. The principal effects of the Re-registration and the adoption
of the New Articles on the rights and obligations of Shareholders and the
Company are summarised in Appendix B to the Circular. A copy of the New
Articles can be found at Appendix C to the Circular.

 

Under the Companies Act 2006, the Re-registration and the adoption of the New
Articles must be approved by Shareholders holding not less than 75 per cent.
of votes cast by Shareholders at the General Meeting. Accordingly, the Notice
of General Meeting set out in Part II (Notice of General Meeting) of the
Circular contains a special resolution to approve the Re-registration and
adopt the New Articles.

 

If the Delisting Resolution and the Re-registration Resolution are approved at
the General Meeting, an application will be made to the Registrar of Companies
for the Company to be re-registered as a private limited company.
Re-registration will take effect when the Registrar of Companies issues a
certificate of incorporation on re-registration. The Registrar of Companies
will issue the certificate of incorporation on re-registration when it is
satisfied that no valid application can be made to cancel the re-registration
Resolution or that any such application to cancel the Re-registration
Resolution has been determined and confirmed by the Court.

 

If the Resolutions are passed at the General Meeting, it is anticipated that
the Re-registration will become effective on or around 30 August 2024.

 

 

Board composition and provision of information following the Cancellation

Although any Board changes have not yet been determined, the composition of
the Board is expected to change shortly after Cancellation and the
Re-registration so that it is appropriate for a private company of its size.

The Company currently intends to continue to provide certain information,
services and facilities to Shareholders following the Cancellation.

 

The Company will continue to communicate information about the Company
(including annual accounts) to its Shareholders, as required by the Companies
Act. It also currently intends to maintain its website,
(www.destinypharma.com) and to post periodic updates for investors on the
business and key developments, although Shareholders should be aware that
there will be no obligation on the Company to include all of the information
required under the Disclosure Guidance and Transparency Rules or the AIM
Rules, nor to update the website as currently required by the AIM Rules.

 

As set out above, the Company intends to make available to Shareholders,
through J P Jenkins, the Matched Bargain Facility which will allow
Shareholders to buy and sell Ordinary Shares on a matched bargain basis
following the Cancellation.

 

 

Application of the Takeover Code following the AIM Delisting and the
Re-registration

The Takeover Code applies to all offers for companies which have their
registered office in the United Kingdom, the Channel Islands or the Isle of
Man if any of their equity share capital or other transferable securities
carrying voting rights are admitted to trading on a UK regulated market or a
UK multilateral trading facility or on any stock exchange in the Channel
Islands or the Isle of Man.

 

The Takeover Code also applies to all offers for companies (both public and
private) which have their registered offices in the United Kingdom, the
Channel Islands or the Isle of Man which are considered by the Takeover Panel
to have their place of central management and control in the United Kingdom,
the Channel Islands or the Isle of Man, but in relation to private companies
only if one of a number of conditions is met, including that any of the
company's equity share capital or other transferable securities carrying
voting rights have been admitted to trading on a UK regulated market or a UK
multilateral trading facility or on any stock exchange in the Channel Islands
or the Isle of Man at any time in the preceding ten years.

 

Following the AIM Delisting and the Re-registration, the Takeover Code will
continue to apply for a period of ten years from the AIM Delisting provided
that the Company is considered by the Takeover Panel to have its place of
central management and control in the United Kingdom (or the Channel Islands
or the Isle of Man). This is known as the "residency test". The way in which
the test for central management and control is applied for the purposes of the
Takeover Code may be different from the way in which it is applied by the
United Kingdom tax authority, HMRC. Under the Takeover Code, the Takeover
Panel looks to where the majority of the Directors are resident, amongst other
factors, for the purposes of determining where the Company has its place of
central management and control.

 

Based on the current composition of the Board, the residency test will be
satisfied and the Takeover Code will continue to apply to the Company
following the AIM Delisting and the Re-registration. However, the Takeover
Code could cease to apply to the Company in the future if any changes to the
Board composition result in the majority of the Directors not being resident
in the United Kingdom, Channel Islands and Isle of Man.

 

If amendments to the Takeover Code proposed in consultation paper PCP 23.4.1
(published by the Takeover Panel on 24 April 2024) are adopted, then the
Takeover Code would cease to apply to the Company after a period of 3 years
following the implementation of these amendments, irrespective of the
composition of the Board.

 

When the Takeover Code ceases to apply to the Company in the future,
Shareholders will not receive the protections afforded by the Takeover Code in
the event that there is a subsequent offer to acquire their Ordinary Shares.
This includes the requirement for a mandatory cash offer to be made if either:

i.      a person acquires an interest in shares which, when taken
together with the shares in which persons acting in concert with it are
interested, increases the percentage of shares carrying voting rights in which
it is interested to 30 per cent. or more; or

ii.     a person, together with persons acting in concert with it, is
interested in shares which in the aggregate carry not less than 30 per cent.
of the voting rights of a company but does not hold shares carrying more than
50 per cent. of such voting rights and such person, or any person acting in
concert with it, acquires an interest in any other shares which increases the
percentage of shares carrying voting rights in which it is interested.

Brief details of the Takeover Panel, the Takeover Code and the protections
given by the Takeover Code are described below.

Before giving your approval to the AIM Delisting and the Re-registration, you
may want to take independent professional advice from an appropriate
independent financial adviser.

The Takeover Code

The Takeover Code is issued and administered by the Takeover Panel. Destiny
Pharma is a company to which the Takeover Code applies and its shareholders
are accordingly entitled to the protections afforded by the Takeover Code.

 

The Takeover Code and the Takeover Panel operate principally to ensure that
shareholders are treated fairly and are not denied an opportunity to decide on
the merits of a takeover and that shareholders of the same class are afforded
equivalent treatment by an offeror. The Takeover Code also provides an orderly
framework within which takeovers are conducted. In addition, it is designed to
promote, in conjunction with other regulatory regimes, the integrity of the
financial markets.

 

The General Principles and Rules of the Takeover Code

The Takeover Code is based upon a number of General Principles which are
essentially statements of standards of commercial behaviour. For your
information, these General Principles are set out in Part 1 of Appendix A to
the Circular. The General Principles apply to all transactions with which the
Takeover Code is concerned. They are expressed in broad general terms and the
Takeover Code does not define the precise extent of, or the limitations on,
their application. They are applied by the Takeover Panel in accordance with
their spirit to achieve their underlying purpose.

 

In addition to the General Principles, the Takeover Code contains a series of
Rules, of which some are effectively expansions of the General Principles and
examples of their application and others are provisions governing specific
aspects of takeover procedure. Although most of the Rules are expressed in
more detailed language than the General Principles, they are not framed in
technical language and, like the General Principles, are to be interpreted to
achieve their underlying purpose. Therefore, their spirit must be observed as
well as their letter. The Takeover Panel may derogate or grant a waiver to a
person from the application of a Rule in certain circumstances.

 

Giving up the protection of the Takeover Code

A summary of key points regarding the application of the Takeover Code to
takeovers generally is set out in Part 2 of Appendix A to the Circular. You
are encouraged to read this information carefully as it outlines certain
important protections which you will be giving up if you agree to the AIM
Delisting and the Re-registration, if/when the Company subsequently ceases to
be subject to the Takeover Code in the future.

 

 

Irrevocable Undertakings and Letters of Intent

As at the Last Practicable Date, the Company has received voting irrevocable
undertakings from the following Shareholders to vote in favour of the
Resolutions:

a)    The Wade Family in respect of 6,420,971 Ordinary Shares (representing
approximately 6.70 per cent. of the Existing Ordinary Shares); and

b)    Joe Eagle in respect of 2,081,560 Ordinary Shares (representing
approximately 2.17 per cent. of the Existing Ordinary Shares).

In addition, those Directors who are Shareholders, who in aggregate hold
9,475,605 Ordinary Shares, representing approximately 9.89 per cent. of the
Existing Ordinary Shares, have irrevocably undertaken to vote in favour of the
Resolutions at the General Meeting.

The irrevocable undertakings cease to be binding and shall lapse if the
General Meeting is not held before 30 September 2024.

As at the Last Practicable Date, the Company has also received voting letters
of intent from the following Shareholders indicating their intention to vote
in favour of the Resolutions:

a)    A&B (HK) Company Limited in respect of 3,449,289 Ordinary Shares
(representing approximately 3.60 per cent. of the Existing Ordinary Shares);
and

b)    CMS Medical Venture Investment in respect of 3,449,289 Ordinary
Shares (representing approximately 3.60 per cent. of the Existing Ordinary
Shares).

The letters of intent are not legally binding and there is no guarantee that
these Shareholders will vote in favour of the Resolutions.

 

The Company has therefore obtained irrevocable undertakings to vote in favour
of the Resolutions in respect of, in aggregate, 17,978,136 Ordinary Shares
(representing approximately 18.77 per cent. of the Existing Ordinary Shares)
and letters of intent to vote in favour of the Resolutions in respect of, in
aggregate, 6,898,578 Ordinary Shares (representing approximately 7.20 per
cent. of the Existing Ordinary Shares).

 

Recommendation

The Directors consider that the Resolutions are in the best interests of the
Company and its Shareholders as a whole. Accordingly, the Directors
unanimously recommend that you vote in favour of the Resolutions as they
intend to do in respect of their own shareholdings of 9,475,605 Ordinary
Shares, (representing approximately 9.89 per cent. of the Existing Ordinary
Shares).

 

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