Drug developer ImmuPharma (IMM:AIM) dives 12% to 25.5p on Friday morning after outlining plans to raise at least £7.5 million in a heavily discounted placing.

The company, which specialises in finding treatments for serious medical conditions, such as autoimmune diseases, intends to sell a minimum of 11.8 million shares through a placing at 26p each.

These shares will be sold for 10.3% lower than the shares could be bought for on the open market when trading ended on Thursday night.

ImmuPharma also plans to collect £4.4 million by selling around 17 million shares to Lanstead Capital, which will give the institutional investor an almost 20% stake in the business.

Web - Immupharma - 05 Feb 2016

The proceeds will fund the completion of Phase III trials for Lupuzor, which treats life threatening auto immune disease Lupus.

Lupuzor has been given fast track status by US regulator the Food & Drug Administration (FDA), which will hopefully speed up the decision on whether the treatment will be allowed to be sold in the US. The Fast Track scheme has been designed to accelerate getting treatments to market where there is no effective treatment available.

The discounted cash call does illustrate the dilution threat that is par for the close for shareholders in this type of pre-revenue biotech. Nor should it come as a surprise. Interim results to 30 June showed the company burning through £1.81 million of cash in the period, leaving £3.29 million on the books, but the accelerated trial process may have also increased cash consumption in the second half.

Shareholders will vote on whether to approve the funding plan on 22 February.

Results from Lupuzor’s final clinical trial are due at the end of 2017. ImmuPharma has four other drugs in the pipeline, two technology platforms and around 70 patents.

Issue Date: 05 Feb 2016