Shares in RedX Pharma (REDX) have been uspended after Liverpool City Council (LCC) called in administrators when the Aim-traded biotech group failed to repay a loan, which matured on 31 March 2017.
Redx, which specialises in developing early-stage drugs for a range of illnesses, borrowed £2m from its former home council in June 2012. LCC is said to have agreed to the three year loan on the condition that Redx would employ a certain number of people in Liverpool. In 2015, the council agreed to extend the repayment deadline by two years. But in 2016 Redx moved to Cheshire and recently closed down its last remaining office in Liverpool.
Meanwhile, that second deadline has come and gone and, according to the council, Redx showed “no willingness to make any repayment of any size during this period”. But the biotech group’s chairman Iain Ross rejects these claims. In a statement following the share suspension he said the timing of the action is “quite baffling considering our efforts to have face to face discussions [with the council]”. The group said it offered to make a £1m payment immediately in return for a short grace period.
Redx, which reported a pre-tax loss of £11m for the half year to March 2017, returned to shareholders in February to raise £12m. At the half-year point it reported net cash of £5.1m, not including the £2m loan and the £1.2m interest it had accrued over the five-year period. In addition the group was due to pay out £300,000 in redundancy payments in April, after the closure of its Liverpool office. The capital intensive nature of its drug development operations also means it burns through £1.3m of cash a month.
Yet Redx is owed money. Investment company Lanstead Partners, is due to pay £3.66m of the £4.3m it contributed to February’s fundraising via monthly instalments over an 18-month period. The instalments are based on Redx’s share price, meaning the group could received higher monthly payments if the shares perform well. The group is also owed £623,000 by agro-chemicals producer Redag Crop Protection, a former subsidiary of Redx Pharma, in which the group’s chief executive Neil Murray and non-executive director Norman Molyneux are both shareholders.
