Commonwealth Biotechnologies, Inc. (CBTE) is struggling to prevent its delisting as it works toward completing an acquisition of peptide maker GL Biochem of Shanghai, a deal the company calls “transformative.”
In early June, CBI announced it would issue 6.6 million shares of its common stock to acquire GL Biochem. That is enough to give GL Biochem’s owners a 51% stake in CBI. Originally, CBI predicted GL Biochem would produce net income of $2 million on $12 million of revenue. Now, CBI expects $3 million of net income from $18 million of sales as GL Biochem’s business model expands.
CBI called GL Peptide the “clear global leader in the research-grade peptide market” and pointed toward a growing role for peptides in drug development because of peptides’ versatility, high specificity and low rates of toxicity. One of CBI’s many divisions, Mimotopes Pty Ltd. of Australia, is also involved peptide drug discovery, and it established a relationship with GL Peptides prior to the CBI acquisition. GBI says Mimotypes and GL Peptide will share technology and facilities to increase each company’s revenues.
CBI is facing some formidable regulatory problems. NASDAQ is seeking to delist CBI because it has not maintained minimum shareholders’ equity of $2.5 million. In addition, CBI’s recent deal with Biosignal Ltd. did not comply with NASDAQ rules, as CBI issued more than 20% of new shares without consulting shareholders. CBI and Biosignal quickly restructured their deal to comply with the rules.
To raise cash, CBI has reached a deal to sell off two US-based divisions, CBI Services and Fairfax Identity Laboratories divisions, to Bostwick Laboratories for $1.1 million. CBI would continue to own the buildings that house these companies.
On July 23, 2009, CBI agreed with Australian biotech company Biosignal Limited to exchange 1.6 million shares of CBI common stock for a $1.6 million 12-month convertible note and biofilm technology owned by Biosignal. CBI may decide to develop the technology or sell it to another company.
In spite of CBI’s initiatives to bolster its balance sheet, NASDAQ still wants to delist CBI. However, CBI appealed NASDAQ’s decision, and the company’s shares will continue to trade while NASDAQ’s decision is under review.
CBI is also active in China through Venturepharm (Asia), a China JV offering CRO/CMO services.
Disclosure: none.
