Evocutis PLC - Circ re. Disposal and Notice of GM
RNS Number : 9294A
Evocutis PLC
26 February 2014



Evocutis Plc

("Evocutis" or the "Company")


Proposed Disposal of LabSkinand SYN1113 and Related Assets

New Investing Policy

Notice of General Meeting


Evocutis Plc announces that it has posted a circular to Shareholders containing a notice convening a general meeting of the Company ("General Meeting") to be held at 11:30 a.m. on 13 March 2014, at the offices of Walker Morris at Kings Court, 12 King Street, Leeds, LS1 2HL.


The Circular contains proposals (the "Proposals") for:


·     the approval of the proposed sale of intellectual property rights in LabSkin and SYN1113 and related equipment (the "Disposal") ; and

·     the adoption of an Investing Policy under AIM Rule 15.



Following a review of the performance of the business, the Board has concluded that the performance of the Company is not strong enough to secure an independent future.

The Directors are therefore proposing to dispose of the Company's intellectual property rights in LabSkin and SYN1113, and related assets. Completion will divest the Company of substantially all of its assets and the Company will be treated as an Investing Company, as a consequence under Rule 15 of the AIM Rules.  The following announcement has been extracted from the Circular (without material adjustment) which is available on the Company's website, and outlines the key details including the proposed Investing Policy. 

Tom Bannatyne, Chairman of the Company commented; "The Board of Evocutis recognised the difficult position the Company was in late in 2012.  Since then we have spent considerable effort to identify, review and evaluate all strategic options available. The Directors consider the Proposals to be in the best interests of the Company and the Shareholders as a whole. Going forward, the Company will be open to a variety of potential investments which the Directors believe will provide exciting prospects and real opportunity to create shareholder value".


For further information, please contact:

Evocutis plc


Tom Bannatyne, Chairman

+44 (0)844 209 8440

Dr Gwyn Humphreys, Interim Chief Executive Officer



Cairn Financial Advisers LLP


James Caithie/Carolyn Sansom

Tel: +44(0) 20 7148 7900





1.   Introduction

The Company announces that it has entered into the Disposal Agreement for the sale of certain of its assets to the Purchaser. The consideration will be settled by the issue of the Consideration Shares and a right to potential future revenue payments.  Further details on the terms of the Disposal are contained in paragraph 3 below.

Under Rule 15 of the AIM Rules, the Disposal represents a fundamental change to the business of the Company and Completion is therefore conditional upon approval of the Shareholders.

The Disposal will result in the Company becoming an Investing Company.  As a consequence, Rule 15 of the AIM Rules further requires the Company to obtain the approval of the Shareholders for its proposed Investing Policy going forward. Further details of the proposed Investing Policy are set out in paragraph 6 below.

Shareholders representing 76,964,038 Ordinary Shares, approximately 44.06 per cent. of the Share Capital, have provided irrevocable undertakings to vote in favour of the Resolutions. Further details of the irrevocable undertakings are contained in paragraph 7 below.

A General Meeting of the Company has been convened to seek the approval of Shareholders for the Disposal and the proposed Investing Policy. The General Meeting will be held at 11:30 a.m. on 13 March 2014. Notice of GM is set out in the Circular which is available on the company's website www.evocutis.com.



Background to the Disposal

Since its admission to AIM in March 2006 and the subsequent equity fundraisings in August 2008, March 2010, and May 2011, the Company (previously named Syntopix Group plc ("Syntopix")) has sought to develop its business focussed on specialist contract services to the pharmaceutical, consumer health and cosmetics industries. The three main areas of the Company's activity over the past 2 years were as follows:

2.1          The development of LabSkin™

LabSkin™ is a living skin equivalent model system which seeks to emulate normal human skin. LabSkin™ is a full thickness 3D cell culture model which offers a platform for non-animal cosmetic testing, clinical microbiological experimentation and in vitro skin research. It was developed at the University of Leeds, and became the Group's property when it acquired the entire issued share capital of Leeds Skin on 24 May 2011. The businesses previously undertaken by each of Syntopix and Leeds Skin were brought together and Syntopix changed its name to Evocutis plc in October 2011. The purpose of amalgamating the Leeds Skin business and the Syntopix business was to develop the joint offering under a new brand, with a view to generating further commercial interest in the additional capability of the Company as a result of the Leeds Skin acquisition.

An internal review of the business was undertaken by the interim CEO, Dr Gwyn Humphreys. The findings of this review were that, whilst revenues derived from commercial ventures (in the case of the Company these being predominately collaborative contracts), had increased over the 12 months preceding the review, the opportunities for those collaborative arrangements to generate future revenues were unpredictable. Given these findings, the Company decided to broaden its commercial offering by developing and selling LabSkin™ as a stand-alone, consumable product which would be made available to companies and academic laboratories directly for use as an in-house tool for research and development purposes. This product was developed and launched by the Company on 11 September 2012 with the intention of complementing the continuing contract research services element of the Company's business.

2.2          Specialist skin microbiology research and SYN1113

SYN1113 is a compound which was developed by Syntopix for cosmetic use in controlling acne and other skin blemishes. SYN1113 is the most advanced of the Company's compounds. It completed several clinical and consumer use tests in the period 2010 to 2012 and the Company sought to licence the product.  Although several companies expressed interest in the product, none of these have led to a commercial licence arrangement.

The Directors consider that the reasons for the Company being unable to secure a licencing arrangement with a suitable commercial partner are not related to a lack of activity of SYN1113 or the Company's other compounds but, instead, to a reluctance on the part of companies active in the relevant areas to licence and launch new products, with there not having been any significant anti-acne product carrying a new active compound in the last 10 years.

2.3          Skin microbiology lab services to support Clinical Research Organisations

The Company has, in the prior 18 months, sought to build relationships with clinical research organisations ("CRO's") to supply micro-biology studies to support the patient focused activities of the CRO's. This has not lead to any significant collaborative relationships, and it seems there have been few clinical studies with a microbiology element carried out in the UK in recent times.

On 3 December 2012, the Company announced that it had appointed consultants Growth Innovators Group and advisers Zeus Capital Limited to assist the Company in reviewing and evaluating a number of strategic options to maximise value for shareholders. The Company then entered into a "formal sale process" as defined in the Takeover Code, with a view to executing a corporate transaction (whether it be a sale, merger or strategic partnership) with a third party in order to meet the objective of maximising value for shareholders given the Directors did not consider the Company had the financial resources itself to effectively commercialise the LabSkin™ product. The growth in sales of the LabSkin™ product had been slow and the Directors therefore considered that any future sales levels were unpredictable. Coupled with the unpredictability of timing and volume of contract research project revenues, the Directors determined that, whilst they considered the LabSkin™ technology remained competitive with other similar products in the market, the activity needed to be part of a larger corporate entity with adequate financial resources to secure a sustainable commercialisation of the product.

In October 2013, the Company announced that, having held discussions with a large number of third parties, it had been unable to conclude a corporate transaction and, as a result, was terminating the formal sales process but would continue to review its strategic options.  Since that time the Directors, in conjunction with Zeus Capital Limited, have continued to assess options for the Company and this has led to them agreeing the terms of the Disposal. The Directors believe that the Disposal offers a future for the SYN1113 and the LabSkin™ technology and a continuing interest for the Company's shareholders in its market development, whilst also opening the door to a different strategic direction for the Company itself.

Current trading   

The Company published its Annual Report and Financial Statements for the year ended 31 July 2013 on 31 January 2014. The Company has incurred further losses subsequent to the Company's financial year end and, given the Company's reduced revenues, the Directors have taken steps during the current financial year to significantly reduce the Company's operating costs.  This has included making all operational staff redundant and the Board is also negotiating an early exit from the Company's property lease.  The Company currently has a level of cash reserves that the Directors consider to be sufficient to conduct an orderly wind down of the Company if the Resolutions are not passed at the General Meeting and if the Directors cannot secure new funding for the Company.

Reasons for Disposal

·           the Company has insufficient financial and operational resources to grow the sales of the LabSkin™ product quickly enough to such a level as would be required in order to make the Company self-sustaining in its present form;

·           the reliance on contract research revenues, which are always unpredictable in terms of regularity and volume, also puts the viability of Company at risk;

·           the Directors believe that the proposed Investing Policy has the potential to deliver future returns for Shareholders; and

·           the Company has received support from over 44.06 per cent of the Company's Shareholders for the Disposal (in the form of irrevocable undertakings to vote in favour of the Disposal).

Consequently, the Directors consider the Disposal to be in the best interests of Shareholders as a whole and that it represents an opportunity for the Company to realise limited value today through the issue to it of the Consideration Shares and the potential of future revenue, whilst retaining the ability to use its remaining cash reserves to make an investment (by way of reverse takeover and in line with the proposed Investment Policy) with the potential to deliver future returns for Shareholders.

3.    summary of the proposed disposal

Under the terms of the Disposal Agreement, the Purchaser has agreed to purchase and the Company has agreed to sell the following assets, conditional on, amongst other things, the Shareholders approving the Disposal in General Meeting:

·           intellectual property rights in SYN1113;

·           intellectual property rights in LabSkin™; and

·           certain equipment associated with the operation of SYN1113 and/or LabSkin™.

The initial consideration for these assets will be the allotment and issue of Consideration Shares on Completion.  The Consideration Shares are subject to a six month lock-in period from Completion, during which time the Company may not dispose of any interest in the Consideration Shares except in certain contractually agreed circumstances.

In addition, the Company will be entitled to the following additional consideration:

·           a cash payment of 25 per cent. of any proceeds received by the Purchaser from the future sale or license of SYN1113; and

·           a cash payment of 7.5 per cent. of future net sales made by the Purchaser in respect of LabSkin™ in the 36 months following Completion.

The Company's entitlement to additional consideration is protected in customary circumstances including a right for the Company to audit the relevant sales of the Purchaser.

In addition to obtaining approval of the Shareholders, the Completion is conditional on:

·           the admission of the Consideration Shares; and

·           the Purchaser obtaining a valuation report in accordance with section 593 of the Act.

The Company will make customary warranties to the Purchaser, primarily in respect of the assets being sold.  The warranties are subject to customary limitations including a longstop for claims of 12 months from Completion.  The Company will indemnify the Purchaser in respect of historic liabilities arising from the Company's historic business.

The Company will be subject to customary restrictive covenants for a period of 12 months from Completion, during which time the Company will be restricted from competing with the Purchaser and from enticing any customer or supplier from the Purchaser.

4.    fundamental change of business

By virtue of its size, Completion of the Disposal will result in a fundamental change of business for the Company.  As such, the Disposal requires the prior approval of Shareholders to be sought at the General Meeting in accordance with the AIM Rules.


If the Disposal is approved by Shareholders, the Company will not hold any material tangible operating assets going forward. 

The proposed Disposal will also result in the Company becoming an Investing Company, as a consequence of which Rule 15 of the AIM Rules further requires the Company to obtain the approval of the Shareholders for its proposed Investing Policy going forward. Further details of the proposed Investing Policy are set out in paragraph 6 below.


As referred to above, on Completion, the Company will have disposed of all of its trading businesses and therefore (under Rule 15 of the AIM Rules) it will be re-classified as an Investing Company and will be required to adopt an Investing Policy, which must also be approved by Shareholders.

It is proposed that the Company will have the ability to invest in all sectors, however the focus will be on businesses focused on commercialising intellectual property and exhibiting the factors and management necessary for significant growth over the short to medium term. The Directors intend to focus primarily on the UK where the Directors believe that there are suitable opportunities, although other countries may also be considered in due course.

It may be considered appropriate to take an equity interest in any proposed business, which may range from a minority position to 100 per cent. ownership. Any investment is likely to be made into an unquoted company and structured as a direct acquisition.

As the Company's financial resources are likely to be invested in just one investment, this acquisition is also likely to be deemed to be a reverse takeover pursuant to Rule 14 of the AIM Rules. The Company does not currently intend to fund any investment with debt or other borrowings, but may do so if appropriate.

The Company's primary objective is that of achieving for Shareholders, over time, both capital growth and income through increasing profitability coupled with dividend payments on a sustainable basis.

The Directors believe that the collective business experience in the areas of acquisitions and corporate and financial management of both the Directors and of the Company's advisers and institutional Shareholders will assist the Company in the identification and evaluation of suitable opportunities.

The Directors consider that current market conditions and the general difficulty of securing both equity and debt financing for businesses, means there exists considerable opportunity to implement the proposed Investing Policy.  The Directors also expect to have available to them such additional independent technical and commercial advice as they judge may be required.  

Acquisition timeframe

Subject to the approval of the Investing Policy by the Shareholders at the General Meeting, the Company will be required to make an acquisition or acquisitions which constitute a reverse takeover under the AIM Rules or otherwise implement its Investing Policy within 12 months of the General Meeting, failing which the Ordinary Shares would then be suspended from trading on AIM. If the Ordinary Shares are suspended, the Directors believe that they would then propose to convene a general meeting of the Shareholders to consider whether to continue seeking investment opportunities or to wind up the Company and distribute any surplus cash back to Shareholders.

7.    Irrevocable Undertakings

Irrevocable undertakings to vote, or (where applicable) to procure that the registered holder votes, in favour of the Resolutions have been given to the Company by the Directors in respect of their entire beneficial holdings of 18,123,468 Ordinary Shares representing, in aggregate, approximately 10.37 per cent. of the Share Capital.

In addition to the Directors, Shareholders who in aggregate have a beneficial interest in 58,840,570 Ordinary Shares representing 33.69 per cent. of the Share Capital have irrevocably undertaken to vote in favour of the Resolutions.

In total, irrevocable undertakings to vote, or (where applicable) to procure that the registered holder votes, in favour of the Resolutions have been given to the Company in respect of 76,964,038 Ordinary Shares, representing 44.06 per cent. of the Share Capital.

8.    General Meeting

At the General Meeting, the Resolutions will be proposed to approve (a) the Disposal and (b) the proposed Investing Policy. The Notice of GM, which is to take place at 11:30 a.m. on 13 March 2014, is set out at the end of this Circular.

·     Resolution 1 seeks Shareholder approval for the Disposal.

·     Resolution 2 seeks Shareholder approval for the Investing Policy.  

Resolutions 1 and 2 are to be proposed as ordinary resolutions and will be passed if more than 50 per cent. of the votes cast are in favour.




The following definitions shall apply throughout this Circular unless the context otherwise requires:



the Companies Act 2006 (as amended from time to time);


the AIM market operated by the ;

"AIM Rules"


means the AIM Rules for Companies issued by the from time to time;

"Business Day"

means any day, other than a Saturday or Sunday or public holiday in England, on which banks are open for normal business in the City of London;


this document;


Evocutis plc, a company incorporated and registered in England and Wales with registered number 05656604;


completion of the Disposal;

"Consideration Shares"

such number of ordinary shares in the share capital of the Purchaser as having an aggregate value nearest to but not less than £210,000, to be allotted and issued to the Company pursuant to the Disposal Agreement;


the relevant system (as defined in the Uncertificated Securities Regulations 2001 (the "Regulations")) in respect of which Euroclear UK & Ireland Limited is the Operator (as defined in the Regulations) and in accordance with which securities may be held and transferred in uncertificated form;

"Directors" or "Board"

the directors of the Company, whose names appear on page 6 of this Circular;


the proposed sale by the Company to the Purchaser of intellectual property rights in LabSkin and SYN1113 and related equipment;

"Disposal Agreement"

the conditional asset purchase agreement dated 25 February 2014 made between the Company and the Purchaser relating to the Disposal;



the Financial Conduct Authority;

"Form of Proxy"

the form of proxy for use by Shareholders enclosed with this Circular, to enable Shareholders to appoint one or more proxies to attend the GM and, on a poll, to vote instead of that Shareholder;                                             

"GM" or "General Meeting"

the general meeting of the Company convened for 13 March 2014 at 11:30 a.m., or any adjournment thereof, notice of which is set out at the end of this Circular;


the Company and its Subsidiaries;

"Investing Company"


an AIM company which has as its primary business or objective, the investing of its funds in securities, businesses or assets of any description;

"Investing Policy"

the proposed investing policy to be adopted by the Company in accordance with the AIM Rules following the Disposal;


means the Company's living skin equivalent model system which seeks to emulate normal human skin operating under the unregistered trade mark LabSkin (as detailed further in paragraph 2.1 of Part I of this Circular);

"Leeds Skin"


Leeds Skin Centre for Applied Research Limited, a company incorporated and registered in England and Wales with registered number 06455439;

" "



Cairn Financial Advisers LLP;

"Notice of GM"

the notice of the General Meeting as set out at pages 12 and 13 of this Circular;

"Ordinary Shares"

the 174,675,828 ordinary shares of 1p each in issue at the date of this Circular;


Venn Life Sciences Holdings plc;


the resolutions to be proposed at the General Meeting, details of which are set out in the Notice of GM;


Regulatory Information Service;

"Share Capital"

the entire issued share capital of the Company as at the date of this Circular;


the persons who are registered as holders of Ordinary Shares as at the date of this Circular;


has the meaning ascribed by the Act;


means compound SYN1113, comprising of a number of patents of various stages, pending and granted (as detailed further in paragraph 2.2 of Part I of this Circular);

"Takeover Code"

means the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers; and

"United Kingdom" or "UK"

United Kingdom of Great Britain and Northern Ireland.


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