Benitec ($OTCPK:BNIKF) is about to raise up to AUD $31.5M in a share placement to institutional investors in the US and Australia. The placement price represents a 5.3% discount on the 15 day Volume Weighted Average as at February 21 2014. These 29.4M, AUD $1.07 shares will also attract options at an exercise price of AUD $1.26. If all the options are exercised, a further, additional 13.3 million ordinary shares will be added to the registry.
This capital raising process seems to be following a similar pattern to Arrowhead Research ($ARWR) and if that is the case then investors can expect to see big returns. On April 30 2013 Arrowhead announced that it was raising USD $36M. On that day the share price closed at USD $2.06. On February 21 2014 the shares closed at USD $22.45, more than ten times the price at the time of the announcement. Arrowhead has a RNAi treatment for Hepatitis B (HBV) in a clinical trial and Benitec is to dose its first patient in a Hepatitis C (HCV) trial in the coming weeks. To this extent the companies are very similar and so it would not be unreasonable to assume that investor interest in Benitec may follow a similar pattern.
Benitec also has a few other things going for it. Its licensee, Calimmune is already eight months into its clinical trial for HIV and positive results for this potential cure for HIV could have a dramatic effect on the value of Benitec. Two other licensees, Regen and Genable Technologies, have also announced that they expect to be in clinical trials in 2014. Benitec's ddRNAi technology is therefore advancing on a number of fronts.
The new capital will be used to progress not only the HCV trial but also the development of treatments for Non-Small Cell Lung Cancer (NSCLC), Age-related Macular Degeneration (NYSE:AMD) and HBV. This is a particularly pleasing development as the current cash limit has meant that these programs have been on the backburner. NSCLC research has produced some very good pre-clinical results and should be in clinical trial before the end of the year. AMD is interesting because it represents the next generation of ddRNAi with the incorporation of miRNA. HBV will piggyback on the success of the HCV trial (liver is the same target) as much of the safety data will be the same and this should substantially decrease the time to market for the HBV treatment.
I think this announcement is a very positive one. It demonstrates that US institutional investors are now starting to share the confidence that retail investors have demonstrated over recent months. The future of the company seems bright and we shareholders seem set to benefit.
Disclosure: I am long BNIKF.
Additional disclosure: These are the opinions of the author and do not represent investment advice.