Cyclopharm (ASX:CYC) raises $30M to support US expansion


by Melissa Darmawan

Cyclopharm (ASX:CYC) CEO & Managing Director, James McBrayer talks about its recent cap raising to support rapid USA commercialisation for Technegas following USFDA approval targeted in Q2 2021.

Melissa Darmawan:
Hello, Melissa Darmawan for the Finance News Network. Joining me from Cyclopharm, is CEO and Managing Director, James McBrayer. James, welcome back and happy New Year.

James McBrayer: Thank as, Melissa, and to you as well.

Melissa Darmawan: Thank you. To your capital raising, how much did you raise and where will the funds go?

James McBrayer: Well Mel, we raised Australian $30 million, before cost. That represented 11 and a half million new fully paid ordinary shares at $2.60 a share. That represented about 4.1% discount to our 30-day VWAP. The offer was oversubscribed, with strong support from our existing institutional investors, Australian Ethical and Karst Peak. Our register is further strengthened by the inclusion of other instos to include Perennial Regal and IML. There was also a portion that was allocated to high net worth retail investors. The funds will be used to commercialize our Technegas technology in the United States and continue our R and D efforts towards expanding the use of Technegas beyond its traditional use in diagnosing pulmonary embolism.

Melissa Darmawan: And James, you mentioned there was a share purchase plan as part of the capital raising. Can you tell us a bit more about that?

James McBrayer: Mel, the board felt very strongly about ensuring that our existing shareholders had an opportunity to expand their holding at this pivotal time in the company's history. So, we're putting out a SPP, a share purchase plan, expecting a raise about 1.5 million Australian dollars at the same price that we placed the capital raising shares at $2.60.

Melissa Darmawan: You mentioned that the use of funds will be directed toward funding the commercialization in the U.S.A. What is your timeline for this commercialization?

James McBrayer: Well Mel, we expect approval with the USFDA in the first half of this year. We've gained further confidence in meeting that milestone, with the fact that the FDA have given us a time for a preapproval audit. So they're actually going to travel to Australia to conduct the audit here in Australia, and that's going to be the week of March 29th.

Melissa Darmawan: And what's the mark of potential for Technegas in the U.S.A?

James McBrayer: Well, we see the market potential for Technegas at 180 million, just in the pulmonary embolism market, and we see that coming about in two stages over that five to eight year period. The first stage is specifically directed towards the displacement of current technology that we use, or that is competing with Technegas in nuclear medicine. The next 90 million we see is, once they have the superior technology that Technegas represents, it will start to impact on another portion of the market, like competing technology used in diagnosing from an embolism, through imaging through CP. However, now we see the largest potential for Technegas in broader respiratory chronic conditions, like COPD and asthma. And I think it's probably worthwhile noting a couple of things, is that from day one Technegas will be reimbursed, and we expect as soon as we get FDA approval, within the month of that, we'll start making sales.

Melissa Darmawan: And is the model of funding one you've used in other markets, or is this unique to the U.S?

James McBrayer: I think that's probably one of the strengths of the company. We're in 60 different countries around the world. We have different models that work in different markets, but the one that we're proposing in the U.S. is very different. We make our money off of the consumables, typically we historically sell the capital piece of equipment, Technegas generator, into the hospital department, and then they purchased the consumables off of us. With the U.S. we're actually going to place the generator, we're going to maintain ownership of that, and charge a annual service maintenance and education fee of $5,000 per annum and we believe that the payback will be quite rapid. But it does two things for us, it takes the capital expenditure question or debate off the table, so we believe that that in turn will promote rapid penetration. But the other element too, from this particular strategy, is USFDA compliance. This model will ensure that our technology is maintained to its specifications, and it provides regular contact and education support to the hospitals and clinics.

Melissa Darmawan: There was an announcement last Friday, sighting a letter from the Society of Nuclear Medicine and Molecular Imaging. Can you tell us more?

James McBrayer: Well, I'm very grateful and humbled by that support. The SNMMI is based in the U.S, it's the peak body for nuclear medicine. Clinicians, frontline technologists, physicists, scientists, and researchers are all involved in nuclear medicine, it has a membership of 16,000. The letter was driven by COVID-19 actually, in the letter, it not only supports the clinical outcomes that Technegas can provide, but it also underscores our safety profile in comparison to the other products. That gives us tremendous amount of confidence going into the U.S. market, particularly with this COVID-19 tailwind.

Melissa Darmawan: Last question, James, is there anything else you would like to add?

James McBrayer: Well Melissa, with the recent capital raising underscored by our upcoming SPP, we're now fully funded to commercialize Technegas in the U.S, and fund our R and D initiatives beyond pulmonary embolism. We're also making an impact globally in the fight against COVID-19. The letter from the SNMMI underscores both the need, and commercial tailwind we have for Technegas in the U.S. But lastly, as always, I want to thank our existing, and now our new shareholders for their commitment and their confidence in the company,

Melissa Darmawan: James McBrayer, congratulations on the capital raising. I look forward to hearing from you as the rollout progresses.

James McBrayer: Thank you, Melissa.