Phoqus cites 'unfavourable market' in £10 million funding

Phoqus Group Plc, a British drug-delivery company, blamed "unfavourable market" conditions for it meeting only its minimum fund-raising target of £10 million for an initial public offering on London’s Alternative Investment Market (AIM).

The company said it placed 7.1 million new shares. The company in September had announced a fund-raising target of £10 million to £12 million. Hitting the lower target gives the company a market valuation of £45 million, as against its September forecast of a post-flotation value of about £55 million. Phoqus shares begin trading on AIM Thursday.

"Since we put the initial announcement out the overall market, particularly the small cap market, has dropped down significantly and I think our reduction reflects that," said Phoqus Group’s Chief Executive Officer Andy Jones in an interview. "Unfortunately that is something we have to accept."

Last week, Celoxica, an Oxford University spin-out that makes chip design software, said it had to cut its IPO size to £6.1 million from £10 million because of "depressive market" conditions.

Still, Phoqus’s Jones said he is not worried that the reduction would affect investor confidence in the company, as he foresees the market conditions will "turn around".

"I think that everybody could see what was happening, and it just so happened in the period when we are out in the marketplace the overall small cap market fell by 12 to 15 percent," said Jones. "In those conditions, all of the funds are nervous about taking on new investments but they all know that will grow again."

Meanwhile the company said on Monday that the £10 million raised from selling new shares will be used to repay a trade loan from Cardinal Health, and to expand the company’s collaborations and conduct further in-house development programmes. It will also be used for general working capital, Phoqus said in a statement to the AIM.

Phoqus develops oral drug coatings that allow controlled release into the body and enable drug companies to put images on tablets to boost their image and protect against counterfeiters. The company owns more than 120 patents and counts GlaxoSmithKline among its clients. It uses electrostatic powder coating, similar to that used in laser copiers, to develop pills that slowly dissolve in the body.

Based in Kent, in the southeast of England, Phoqus was established in 1998 as a spin-out from Colorcon, a division of Berwind Pharmaceutical Services, and employs 30 people.