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Midatech Pharma - £5m fund-raise to provide headroom to end-FY23

Midatech announced on 9 February a private placement to certain US institutional investors to raise US$6m (£5m) in gross proceeds. The issue will comprise 10.3m ADS units (or ADS-equivalent pre-funded warrants, or a combination thereof) at US$0.58/unit along with attached A and B warrants and is expected to close on 15 February 2023. We note that the placement is subject to price adjustments, with the floor price set at US$0.3/unit (or if approved by shareholders, at US$0.1/unit), which would increase the number of pre-funded warrants issued. The placement is likely to be highly dilutive to existing shareholders (70.5% at the base issue price on exercise of pre-funded warrants), although it is crucial to support Midatech’s operations as a going concern, in our opinion. As a reminder, Midatech’s proposed acquisition of Bioasis was recently turned down by shareholders, leaving the company with cash to last only until mid-March 2023. With austerity measures in place and the proposed £5m funding, management expects the cash runway to extend to December 2023, past key data readouts for MTX110 in DIPG (Q223) and GBM (Q323).