As filed
with the Securities and Exchange Commission on July 17, 2008
Registration
No. 333-
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
F-7
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES
ACT OF 1933
VIREXX
MEDICAL CORP.
(Exact
name of Registrant as specified in its charter)
Alberta,
Canada _________ Not
Applicable
(Province
or other
jurisdiction Primary Standard
Industrial
(I.R.S.
Employer
of
incorporation or
organization)
Classification Code
Number)
Identification Number)
8223
Roper Road NW
Edmonton,
Alberta T6E 6S4 (780) 433-4411
(Address
and telephone number of Registrant's principal executive offices)
Corsair
Advisors, Inc.
497
Delaware Avenue
Buffalo,
New York 14202
(716)
882-2157
Attention:
Joseph P. Galda
(Name,
address and telephone number of agent for service in the United
States)
Copies
to:
Bruce
D. Hirsche, Q.C.
Parlee
McLaws LLP
1500
Manulife Place, 10180-101 Street
Edmonton,
Alberta T5J 4K1
Approximate
date of commencement of proposed sale of the securities to the
public: As soon as possible as practicable after this registration
statement becomes effective.
This
registration statement and any amendment thereto shall become effective upon
filing with the Commission in accordance with Rule 467(a).
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to the home jurisdiction's shelf prospectus offering
procedures, check the following box: ______
CALCULATION
OF REGISTRATION FEE (1)
|
Title
of Each Class of
Securities
to be
Registered
|
Amount
to
Be
Registered
|
Proposed
Maximum
Offering
Price
per Unit
|
Proposed
Maximum
Aggregate
Offering
Price(2)
|
Amount
of
Registration
Fee
|
|
Common
Shares
|
72,760,717
|
US$0.045
|
US$3,269,328
|
US$128.48
|
(1) Calculation
of Fee is in accordance with General Instruction II.F of Form F- 7.
(2) Based
on the exchange rate ofUS$1.00 to CDN $1.0015, the noon buying rate as reported
by the
Federal
Reserve Bank of New York on July 15, 2008 for all transfers in foreign
currencies as certified
for
customs purposes.
If,
as a result of stock splits, stock dividends or similar transactions, the number
of securities purported to be registered on this registration statement changes,
the provisions of Rule 416 shall apply to this registration
statement.
PART
I
INFORMATION
REQUIRED TO BE SENT TO SHAREHOLDERS
ITEM
1. HOME JURISDICTION DOCUMENT
Rights
Offering Prospectus.
ITEM
2. INFORMATION LEGENDS
See
the outside front cover page of the Rights Offering Prospectus.
ITEM
3. INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE
Not
applicable.
ITEM
4. LIST OF DOCUMENTS FILED WITH THE COMMISSION
The
documents filed with the U.S. Securities and Exchange Commission as part of the
Registration Statement are listed in the Rights Offering
Prospectus under the caption "Documents Incorporated by Reference."
I-1
This
short form prospectus constitutes a public offering of these securities only in
those jurisdictions where they may be lawfully offered for sale and therein only
by persons permitted to sell such securities. No securities
regulatory authority has expressed an opinion about these securities and it is
an offence to claim otherwise. Information has been incorporated by
reference in this short form prospectus from documents filed with securities
commissions or similar authorities in Canada. Copies of the documents
incorporated herein by reference may be obtained on request without charge from
the Chief Financial Officer, ViRexx Medical Corp., 8223 Roper Road, Edmonton,
AB, T6E 6S4, Telephone (780) 433-4411, and are also available electronically at
www.sedar.com.
SHORT
FORM PROSPECTUS
|
Rights
Offering
|
July
17, 2008
|
VIREXX
MEDICAL CORP.
Rights
to Subscribe for Common Shares
Subscription
Price: One Right and CA$0.045 per Common Share
Maximum
Offering: CA$3,274,232 million
ViRexx
Medical Corp. (the “Corporation” or “ViRexx”) is distributing to
the holders of its outstanding common shares of record (the “Shareholders”) at the close of
business (Toronto time) on July 25, 2008 (the “Record Date”) transferable
rights (the “Rights”) to
subscribe for an aggregate of approximately 72,760,717 common shares (the “Shares”) of the Corporation
(the “Offering”). This
short form prospectus qualifies for distribution the Rights and the Shares
issuable upon exercise of the Rights.
The
Rights are evidenced by certificates in registered form (the “Rights Certificates”), which
are fully transferable by non-U.S. persons (as such term is defined in
Regulation S (“Regulation
S”) under the U.S. Securities Act of 1933, as amended (the “US Securities Act”) outside of
the United States, and outside of the United States by U.S. persons provided
that such persons comply with the requirements of Regulation S. Each
Shareholder is entitled to one Right for every common share of the Corporation
held on the Record Date. Each of the Rights shall entitle the holder
thereof to purchase one Share (the “Basic Subscription Right”) at
a price of CA$0.045 (the “Subscription Price”) prior to
5:00 p.m. (Toronto time) on August 22, 2008 (the “Expiry
Time”). Rights not exercised before the Expiry Time will be
void and of no value. Shareholders who exercise their Rights in full
are entitled to subscribe for additional Shares, if available, pursuant to an
additional subscription privilege (the “Additional Subscription
Privilege”). See “Details of Rights Offering - Basic
Subscription Right” and “Details of the Offering - Additional Subscription
Privilege”.
|
Subscription Price
|
Dealer Manager Fee
(1)(2)
|
Net
Proceeds to the Corporation
(2)
|
|
|
Per
Share ………………………
|
$0.045
|
$0.001
|
$0.044
|
|
Maximum
Offering …………...
|
$3,274,232
|
$76,454
|
$3,197,778
|
Notes:
|
(1)
|
The
Corporation has retained Desjardins Securities Inc. (the “Dealer Manager”) to
solicit the exercise of the Rights and act as financial adviser in
connection with the Offering. See “Details of Rights Offering – Dealer
Manager”.
|
|
(2)
|
The
Dealer Manager has agreed to receive 6% of the proceeds realized from the
purchase of shares excluding any proceeds received from the Standby
Purchaser (defined hereafter) estimated to be $2,000,000. The
other expenses of the Offering, estimated to be approximately $200,000
(estimate includes the costs of printing and preparing this prospectus and
the Dealer Manager’s expenses but excludes legal expenses), will be paid
from the proceeds of the Offering. See "Details of Rights
Offering - Dealer Manager" and "Details of Rights Offering - Use of
Proceeds".
|
The
outstanding common shares are listed and posted for trading on the Toronto Stock
Exchange (the “TSX”)
under the symbol “VIR” and on the American Stock Exchange (the “AMEX”) under the symbol
“REX”. On July 14, 2008, the closing price for the common shares of
the Corporation was CA$0.060 on the TSX and US$0.070 on the AMEX. The
Subscription Price of CA$0.045 is equal to the weighted average of the closing
price of the Corporation’s common shares on the TSX for each of the trading days
on which there was a closing price during the three trading days immediately
preceding July 14, 2008, less a discount of 25%. The TSX has
conditionally approved the listing of these securities. The
Corporation has applied to list the Shares issuable upon the exercise of the
Rights (but not the Rights themselves) on the AMEX. Approval of such listings
will be subject to the Corporation fulfilling all of the listing requirements of
the AMEX.
For
common shares held through a securities broker or dealer, bank or trust company
or other participant (a “Participant”) in the
book-based system administered by CDS Clearing and Depository Services Inc.
(“CDS”) or the
Depository Trust & Clearing Corporation (“DTC”), a subscriber may
subscribe for Shares by instructing the Participant holding the subscriber’s
Rights to exercise all or a specified number of such Rights and forwarding the
Subscription Price for each Share subscribed for to such Participant in
accordance with the terms of the Offering. A subscriber wishing to
subscribe for additional Shares pursuant to the Additional Subscription
Privilege must forward its request to the Participant that holds the
subscriber’s Rights prior to the Expiry Time, along with payment for the number
of additional Shares requested. Any excess funds will be returned by
mail or credited to the subscriber’s account with its Participant without
interest or deduction. Subscriptions for Shares made through a
Participant will be irrevocable and subscribers will be unable to withdraw their
subscriptions for Shares once submitted. Participants may have an
earlier deadline for receipt of instructions and payment than the Expiry
Time. See “Details of Rights Offering – Rights Certificate – Common
Shares Held Through CDS or DTC”.
For
common shares held in registered form, a Rights Certificate evidencing the
number of Rights to which a Shareholder is entitled will be mailed with a copy
of the final prospectus in respect of this Offering to each registered
Shareholder as of the Record Date. In order to exercise the Rights
represented by the Rights Certificate, a holder of Rights must complete and
deliver the Rights Certificate to Computershare Investor Services Inc. (the
“Subscription Agent”) in
the manner and upon the terms set out in this prospectus. See
“Details of Rights Offering – Rights Certificate – Common Shares Held in
Registered Form”.
Rights
Certificates will not be distributed to Shareholders whose addresses of record
are outside Canada and the United States (collectively, the “Non-Participating
Jurisdictions”). See “Details of Rights Offering -
Shareholders in Non-Participating Jurisdictions”.
Under the
standby purchase agreement dated May 22, 2008 (the “Standby Purchase Agreement”),
LM Funds Corp. (the “Standby
Purchaser”) has agreed, subject to certain terms and conditions, to
exercise all of its Basic Subscription Rights and to purchase, at the
Subscription Price, that number of common shares of the Corporation resulting in
aggregate subscription proceeds to the Corporation equal to the difference
between (i) the proceeds received by the Corporation in connection with the
exercise of all Basic Subscription Rights and all Additional Subscription
Privileges; and (ii) CA$3,000,000. See “Standby Commitment” and
“Details of Rights Offering – Intention of Standby Purchaser to Exercise
Rights”.
The
Standby Purchaser is not engaged as an underwriter in connection with the
Offering and has not been involved in the preparation of, or performed any
review of, this prospectus in the capacity of an underwriter.
This
Offering is made by a Canadian issuer that is permitted, under a
multijurisdictional disclosure system adopted by the United States, to prepare
this prospectus in accordance with the disclosure requirements of
Canada. Prospective investors should be aware that such requirements
are different from those of the United States. Financial statements
included or incorporated herein, if any, have been prepared in accordance with
Canadian generally accepted accounting principles, and are subject to Canadian
auditing and auditor independence standards, and thus may not be comparable to
financial statements of United States companies.
THE
RIGHTS AND THE SHARES FOR WHICH THEY MAY BE EXERCISED HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”)
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENCE.
Prospective investors should be aware
that the acquisition or disposition of the securities described in this
prospectus and the expiry of an unexercised Right may have tax consequences in
Canada, the United States or elsewhere, depending on each particular existing or
prospective investor’s specific circumstances. Such consequences for
investors who are resident in, or citizens of, the United States are not
described fully herein. Prospective investors should consult their
own tax advisors with respect to such tax
considerations. See “Canadian Federal Income Tax
Considerations”.
The
enforcement by investors of civil liabilities under United States federal
securities laws may be affected adversely by the fact that the Corporation is
incorporated or organized under the laws of Canada, that some or all of its
officers and directors may be residents of a country other than the United
States, that the Dealer Manager, some or all of the experts named in the
registration statement may be residents of Canada, and that all or a substantial
portion of the assets of the Corporation and said persons may be located outside
the United States.
See
“Risk Factors” for certain considerations relevant to an investment in the
Shares.
Certain
legal matters relating to the Offering, the Rights and the Shares offered hereby
will be passed upon on behalf of the Corporation by Parlee McLaws LLP as to
matters of Canadian law, and on behalf of the Dealer Manager, by Osler, Hoskin
& Harcourt LLP as to matters of Canadian law and U.S. law.
Mr.
Michael Marcus and Mr. Yves Cohen, directors of the Corporation reside outside
of Canada. Although Messrs. Marcus and Cohen have each appointed the
Corporation as their agent for service of process in each of the provinces in
Canada, it may not be possible for investors to enforce judgements obtained in
Canada against them.
The head
office of the Corporation is located at 8223 Roper Road, Edmonton, AB T6E 6S4
and its registered office is located at 1500 Manulife Place, 10180-101 Street,
Edmonton, AB T5J 4K1.
GIVAREX®,
OVAREX®, PROSTAREX®, VIREXX®, ViREXX POWER TO CURE®, AIT™, CHIMIGEN™, OCCLUSIN™
and T-ACT™ are the Corporation’s trademarks. The trademarks GIVAREX®,
OVAREX®, PROSTAREX®, VIREXX® and ViREXX POWER TO CURE® are registered in both
the United States and Canada. The trade-marks OCCLUSIN™ and T-ACT™
are registered only in Canada, while the trade-marks AIT™ and CHIMIGEN™ are
registered in Canada and are the subject of pending applications in the United
States. The symbol ® in this prospectus indicates those trademarks of
the Corporation that have been registered in the United States. All
other trademarks or trade names appearing in this prospectus are the trademarks
or tradenames of other entities.
The
business of the Corporation should be considered speculative due to the nature
of the Corporation’s involvement in the development of therapeutic product
candidates for the treatment of certain cancers and chronic viral
infections. Investing in the Rights involves a high degree of risk
and should only be considered by those persons who can afford a total loss of
their investment. Before buying any Rights you should carefully read
the discussion of material risks of investing in the Rights under the heading
“Risk Factors”.
TABLE
OF CONTENTS
DOCUMENTS
INCORPORATED BY REFERENCE
Information has been incorporated by
reference in this prospectus from documents filed with securities commissions or
similar authorities in Canada. Copies of the documents
incorporated herein by reference and the permanent information record may be
obtained on request without charge from the Chief Financial Officer of the
Corporation at 8223 Roper Road, Edmonton, Alberta T6E 6S4 (telephone: (780)
433-4411) or by accessing the disclosure documents available electronically at
www.sedar.com.
The
following documents of the Corporation, filed with the securities commissions or
similar authorities in certain of the provinces of Canada, are specifically
incorporated by reference into and form an integral part of this
prospectus:
|
(a)
|
Form
20-F of the Corporation dated March 31, 2008 for the year ended
December 31, 2007 as amended by the Amended Form 20-F dated July 10,
2008 (the “Form
20-F”);
|
|
(b)
|
audited
comparative consolidated financial statements of the Corporation and the
notes thereto for the year ended December 31, 2007 and 2006, together
with the report of the auditor thereon dated January 31, 2008 and June 26,
2008 as to the effects of the restatement as described in Note
24;
|
|
(c)
|
management’s
discussion and analysis of the financial condition and results of
operations of the Corporation for the year ended December 31,
2007;
|
|
(d)
|
Management
Information Circular dated April 9, 2007 with respect to the Annual
General Meeting of the Shareholders of the Corporation, which was held on
May 3, 2007;
|
|
(e)
|
material
change report dated April 8, 2008 relating to the resignation of Peter P.
Smetek from the Corporation’s board of
directors;
|
|
(f)
|
material
change report dated June 12, 2008 relating to a standby guarantor and a
debt financing of $1,000,000;
|
|
(g)
|
unaudited
consolidated financial statements of the Corporation for the three months
ended March 31, 2008; and
|
|
(h)
|
management’s
discussion and analysis of the financial condition and results of
operations of the Corporation for the three months ended March 31,
2008.
|
Any
annual information form, comparative annual financial statements, comparative
interim financial statements, management’s discussion and analysis of financial
condition and results of operations, material change report (except a
confidential material change report), business acquisition report and
information circular, subsequently filed by the Corporation with the securities
commissions or similar authorities in the provinces of Alberta, British
Columbia, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, Newfoundland and
Labrador, New Brunswick and Prince Edward Island after the date of this
prospectus and prior to the completion or withdrawal of the Offering, shall be
deemed to be incorporated by reference in this prospectus.
Any
statement contained in this prospectus or in a document incorporated or deemed
to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is, or is deemed to be, incorporated by reference into this prospectus
modifies or supersedes that statement. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or
include any other information set forth in the document that it modifies or
supersedes. The making of a modifying or superseding statement shall
not be deemed an admission for any purposes that the modified or superseded
statement when made, constituted a misrepresentation, an untrue statement of a
material fact or an omission to state a material fact that is required to be
stated or that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute part of this prospectus.
Potential
U.S. purchasers of Shares are encouraged to review the Form 20-F and other
information filed with the U.S. Securities and Exchange Commission and available
through the Internet on EDGAR at www.sec.gov and on SEDAR at www.sedar.com under
the name, “ViRexx Medical Corp.”
FORWARD-LOOKING
STATEMENTS
Certain
statements contained in this prospectus, and in certain documents incorporated
by reference into this prospectus, are “forward-looking information” (as defined
under Canadian securities laws) and “forward-looking statements” (as defined in
the U.S. Securities Exchange
Act of 1934, as amended). These statements relate to future events or the
Corporation’s future performance. All statements other than statements of
historical fact may be forward-looking information or statements.
Forward-looking information and statements are often, but not always, identified
by the use of words such as “seek”, “anticipate”, “plan”, “continue”,
“estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”,
“targeting”, “intend”, “could”, “might”, “should”, “believe” and similar
expressions. These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to vary materially from
those anticipated in such forward-looking information or statements. Management
of the Corporation believes that the expectations reflected in such
forward-looking information and statements are reasonable due to their intimate
knowledge of the business of the Corporation and are based on past experience
with businesses similar to the Corporation, but no assurance can be given that
these expectations will prove to be correct and such forward-looking information
and statements included in, or incorporated by reference into, this prospectus
should not be unduly relied upon. These statements are made as of the date of
this prospectus or as of the date specified in the documents incorporated by
reference into this prospectus, as the case may be, and should not be relied
upon as representing the Corporation’s views on any subsequent
date.
In
particular, this prospectus and the documents incorporated by reference herein
contain forward-looking information and statements pertaining to the
following:
|
(a)
|
anticipated
development milestones and regulatory drug approval
expectations;
|
|
(b)
|
expectations
regarding expenditures;
|
|
(c)
|
beliefs
and assumptions relating to the Corporation’s liquidity
position;
|
|
(d)
|
expectations
regarding the Corporation’s ability to maintain its competitive position;
and
|
|
(e)
|
projected
commercialization of product candidates, including OvaRex® MAb and
OcclusinTM
500 Artificial Embolization Device (“OcclusinTM 500
AED”).
|
Management
cautions prospective investors that the forward-looking information and
statements represent expectations, anticipated results and beliefs
only. Actual results may vary materially from the results or
projections set out in the forward-looking information and
statements. Factors that could cause such a variance include the
failure to licence the ChimigenTM Vaccine
Platform, the OcclusinTM 500 AED
or OcclusinTM 50
Injection, the failure of clinical trials and the failure to complete the
Offering in the manner expected. There may be other factors that
cause actions, events or results not to be as anticipated, estimated or
intended. These factors are not intended to represent a complete list
of the material risk factors and could affect the
Corporation. Examples of additional risk factors that could cause the
Corporation’s actual results to differ materially from those anticipated in the
forward-looking information and statements are set out in the “Risk Factors”
section of this prospectus. A
prospective investor should carefully consider such risk factors. Readers are
also cautioned that such risk factors are not exhaustive.
Forward-looking
information and statements are based on a number of assumptions, which may prove
to be incorrect, including, but not limited to, assumptions regarding the
Corporation’s ability to continue as a going concern, ability to locate
strategic partners or collaborative partners to advance certain technology and
ability to continue positive progress on its research and development
programs. Forward-looking information and statements are based upon
the assumption that none of the identified risk factors that could cause actual
results to vary materially from the results or projections set out in the
forward-looking information and statements will occur.
The
forward-looking information and statements contained in this prospectus and the
documents incorporated by reference herein are expressly qualified by these
cautionary statements. While the Corporation anticipates that
subsequent events may cause its views to change, the Corporation and the Dealer
Manager specifically disclaim any intention or obligation to update or revise
any forward-looking information and statements, whether as a result of new
information, future events or otherwise, except to the extent required by
applicable securities laws.
PROSPECTUS
SUMMARY
The
following is a summary of the principal features of the Offering and should be
read together with, and is qualified in its entirety by, the more detailed
information and financial statements contained elsewhere or incorporated by
reference in this short form prospectus.
|
Issuer:
|
ViRexx
Medical Corp.
|
|
The
Offering:
|
Rights
to subscribe for up to approximately 72,760,717 Shares. Each
Shareholder on the Record Date will receive one Right for each common
share held.
|
|
Record
Date:
|
July
25, 2008, at 5:00 p.m. (Toronto time).
|
|
Expiry
Time:
|
5:00
p.m. (Toronto time) on August 22, 2008. Rights not exercised at
or before the Expiry Time will be void and have no
value.
|
|
Subscription
Price:
|
CA$0.045
per Share. The Subscription Price of CA$0.045 is equal to the
volume weighted average of the closing price of the Corporation’s common
shares on the TSX for each of the trading days on which there was a
closing price during the three trading days immediately preceding July 14,
2008, less a discount of 25%.
|
|
Net
Proceeds:
|
Approximately
CA$2,997,778, assuming exercise of all the Rights, after deduction of the
Dealer Manager fees described below and estimated expenses of
approximately CA$200,000 (estimate includes the costs of printing and
preparing this prospectus and the Dealer Manager’s expenses but excludes
legal expenses).
|
|
Basic
Subscription Right:
|
Each
Right entitles the holder thereof to subscribe for one Share upon payment
of the Subscription Price. See “Details of Rights Offering –
Basic Subscription Right”.
|
|
Additional
Subscription Privilege:
|
Holders
of Rights who exercise in full the Basic Subscription Right for their
Rights are also entitled to subscribe for Shares, if any, not otherwise
purchased pursuant to the Basic Subscription Right. See
“Details of Rights Offering – Additional Subscription
Privilege”.
|
|
Exercise
of Rights:
|
For
common shares held through a Participant in the book-based system
administered by CDS or DTC, a subscriber may subscribe for Shares by
instructing the Participant holding the subscriber’s Rights to exercise
all or a specified number of such Rights and forwarding the Subscription
Price for each Share subscribed for to such Participant in accordance with
the terms of the Offering. A subscriber wishing to subscribe
for additional Shares pursuant to the Additional Subscription Privilege
must forward its request to the Participant that holds the subscriber’s
Rights prior to the Expiry Time, along with payment for the number of
additional Shares requested. Any excess funds will be returned
by mail or credited to the subscriber’s account with its Participant
without interest or deduction. Subscriptions for Shares made
through a Participant will be irrevocable and subscribers will be unable
to withdraw their subscriptions for Shares once
submitted. Participants may have an earlier deadline for
receipt of instructions and payment than the Expiry Time. See
“Details of Rights Offering – Rights Certificate – Common Shares Held
Through CDS or DTC”.
For
Shareholders whose common shares are held in registered form, a Rights
Certificate representing the total number of Rights to which such
Shareholder is entitled as at the Record Date will be mailed with a copy
of the final prospectus in respect of this Offering. In order
to exercise the Rights represented by the Rights Certificate, such holder
of Rights must complete and deliver the Rights Certificate in accordance
with the instructions set out under “How to Complete the Rights
Certificate – Registered Shareholders”.
|
|
Shareholders
in Non-Participating Jurisdictions:
|
This
Offering is made in all of the provinces of Canada and in the United
States. No Rights Certificates will be mailed to Shareholders in
Non-Participating Jurisdictions. No subscription under the
Basic Subscription Right nor under the Additional Subscription Privilege
will be accepted from any person, or his or her agent, who appears to be,
or who the Corporation has reason to believe is, resident in a
Non-Participating Jurisdiction, except that the Corporation may accept
subscriptions in certain circumstances from persons in Non-Participating
Jurisdictions if the Corporation determines that such offering to and
subscription by such person or agent is lawful and in compliance with all
securities and other laws applicable in the jurisdiction where such person
or agent is resident. Rights of Shareholders in
Non-Participating Jurisdictions will be held by the Subscription Agent
until 5:00 p.m. (Toronto time) on August 14, 2008 in order to provide the
beneficial holders an opportunity to claim the Rights Certificate by
satisfying the Subscription Agent that the exercise of their Rights will
not violate the laws of the applicable jurisdiction. After such
time, the Subscription Agent will attempt to sell the Rights of
Shareholders in Non-Participating Jurisdictions on such date or dates and
at such price or prices as the Subscription Agent shall determine in its
sole discretion. See “Details of Rights Offering – Shareholders
in Non-Participating Jurisdictions”.
|
|
Dealer
Manager
|
The
Corporation has engaged the Dealer Manager to act as financial adviser to
the Corporation and to solicit the exercise of the Rights. The Dealer
Manager has agreed to receive 6% of the proceeds realized from the
purchase of shares excluding any proceeds received from the Standby
Purchaser estimated to be $2,000,000. The Dealer Manager’s
expenses, including legal expenses and disbursements as a fee, will be
paid from the proceeds of the Offering. See “Details of
Rights Offering - Dealer Manager”.
|
|
Standby
Commitment:
|
Under
the Standby Purchase Agreement the Standby Purchaser has agreed, subject
to certain terms and conditions, to exercise all of its Basic Subscription
Rights and to purchase, at the Subscription Price, that number of common
shares of the Corporation resulting in aggregate subscription proceeds to
the Corporation equal to the difference between (i) the proceeds received
by the Corporation in connection with the exercise of all Basic
Subscription Rights and all Additional Subscription Privileges; and (ii)
CA$3,000,000 (the “Standby
Commitment”).
The
Standby Purchaser has loaned to the Corporation, pursuant to a secured,
convertible debenture (the “Debenture”), the amount
of CA$1 million. Repayment of the Debenture has been secured
under a General Security Agreement charging all present and after-acquired
property of ViRexx, with specific charges on the siRNA patent (provisional
and formal patent application), Chimigen platform patents, Occlusin
platform patents and AIT platform patents (all to the extent possible)
which are registered subject to any third party interests in those patents
which may be found to exist. The Debenture will be convertible,
at the option of the holder, into units of the Corporation (“Debenture Units”) until May 22,
2010, at a conversion price of CA$0.10 per Debenture Unit (the “Conversion
Price”). Each Debenture Unit shall consist of one common
share and one-half of a share purchase warrant (“Debenture Warrant”),
each such whole Debenture Warrant entitling the holder to purchase one
additional common share at a price of CA$0.15 for a period of twelve
months from the date of issue. The Debenture shall bear
interest at a rate of 6% per annum, which interest may be converted into
common shares at the Conversion Price at the option of the
holder. See “Standby Commitment” and “Details of Rights
Offering – Intention of Standby Purchaser to Exercise
Rights”.
|
|
Use
of Proceeds:
|
The
Corporation intends to use the net proceeds of the Offering for general
working capital and to advance its clinical development
programs. See “Use of Proceeds”.
|
|
Listing
and Trading:
|
The
outstanding common shares of the Corporation are currently listed and
posted for trading on the TSX and AMEX under the symbol “VIR” and “REX”
respectively. The TSX has conditionally accepted the listing of
the Rights and the Shares issuable upon the exercise of the
Rights. The Corporation expects that on July 23, 2008, the
Rights will commence trading on the TSX under the trading symbol “VIR.RT”
and the common shares of the Corporation will commence trading on an “ex
rights” basis, meaning that persons purchasing common shares on or
following that date will not be entitled to receive the related
Rights. The Corporation also expects that the Rights will
remain listed and posted for trading until noon (Toronto time) on August
22, 2008. The Corporation has applied to list the Shares
issuable upon the exercise of the Rights (but not the Rights themselves)
on the AMEX. The Rights may not be transferred to any person in
the United States or to any U.S. person within the meaning of Regulation
S. Shareholders in the United States who receive Rights may resell them
only outside the United States in accordance with Regulation
S.
|
|
Risk
Factors:
|
An
investment in the Shares is subject to a number of risk
factors.
Risk
factors related to the Corporation:
· Our
success depends on the management of growth.
· We
may incur losses, higher development costs and/or lower revenues
associated with currency fluctuations and may not be able to effectively
hedge our exposure.
· Acquisitions
of companies or technologies may result in disruption to our
business.
· The
biotechnology industry has a history of patent and other intellectual
property litigation, and we may be involved in costly intellectual
property lawsuits.
· Our
clinical trials could take longer to complete than we project or may not
be completed at all.
· We
deal with hazardous materials and must comply with environmental laws and
regulations, which can be expensive and restrict how we do
business.
· All
of ViRexx’s potential products are in the research and development stage
and will require further development and testing before they can be
marketed commercially.
· There
are inherent risks in pharmaceutical research and
development.
· Pharmaceutical
products are subject to intense regulatory approval
processes.
· ViRexx’s
operations and products may be subject to other government manufacturing
and testing regulations.
· The
biotechnology industry is extremely competitive and the Corporation must
successfully compete with larger companies with substantially greater
resources.
· ViRexx
relies on patents and proprietary rights to protect its
technology.
· ViRexx’s
products may fail or cause harm, subjecting the Corporation to product
liability claims, which are uninsured.
· New
products may not be accepted by the medical community or
consumers.
|
|
Risk
Factors (continued):
|
· ViRexx’s
technologies may become obsolete.
· ViRexx
is dependent on the success of its strategic relationships with third
parties.
· ViRexx
has no operating revenues and a history of losses.
· ViRexx
will need to succeed in this Rights Offering and additional financing in
the future to fund the research and development of its products and to
meet its ongoing capital requirements.
· ViRexx
is dependent on its key employees and collaborators.
· ViRexx
earns interest income on its excess cash reserves and is exposed to
changes in interest rates.
· Lawsuits
against ViRexx.
Risks
Related to this Offering:
· Dilution.
· Trading
Market for Rights.
· ViRexx’s
share price has been, and is likely to continue to be, highly volatile and
your investment could decline in value.
· You
will experience immediate dilution in the book value per share of the
Shares you purchase.
· ViRexx
has discretion in the use of the net proceeds from this
Offering.
· Sales
of substantial amounts of ViRexx’s securities may have an adverse effect
on the market price of ViRexx’s securities.
· ViRexx’s
Articles and certain Canadian laws could delay or deter a change of
control.
Additional
Risks for U.S. Investors:
· As
a foreign private issuer, ViRexx is subject to different U.S. securities
laws and rules than a domestic U.S. issuer, which means that the
information publicly available to ViRexx’s shareholders may not be
comparable to information provided by U.S. domestic issuers and their
affiliates.
· You
may be unable to enforce actions against ViRexx, certain of its directors
and officers, under U.S. federal securities laws.
See
“Risk Factors” pages 30 to 38
|
VIREXX
MEDICAL CORP.
The
corporate headquarters of ViRexx are located at 8223 Roper Road, Edmonton,
Alberta T6E 6S4. The registered office of the Corporation is located at
Suite 1500, Manulife Place, 10180-101 Street, Edmonton, Alberta,
T5J 4K1.
The
Corporation has two wholly owned subsidiaries and AltaRex Medical Corp. has one
wholly owned subsidiary, AltaRex US Corp, which is inactive. The
organizational chart of the Corporation is set forth below:
In this
prospectus, and in any prospectus supplement, unless the context otherwise
requires, reference to “we”, “us”, "our” or
similar terms, as well as references to “ViRexx” or the “Corporation”, refer to ViRexx
Medical Corp., either alone or together with our subsidiaries.
Business
ViRexx is
a Canadian development-stage biotechnology company focused on targeted
therapeutic products for people suffering from chronic viral infections or
certain cancers.
ViRexx’s
proprietary ChimigenTM Vaccine
Platform is being used to develop immunotherapeutic agents for the treatment of
patients with chronic hepatitis B and C virus infections. The platform is
also used to develop biodefense vaccines, pandemic influenza vaccines and
targeted bionanoparticles. The Corporation is developing OcclusinTM 50
Injection embolization therapy for the treatment of liver cancer and
OcclusinTM 500 AED
for the treatment of uterine fibroids. OvaRex® MAb, an ovarian cancer
treatment, is currently being considered for front-line therapy in combination
with chemotherapy, following its failure to meet its clinical endpoints in
recent Phase III trials as a stand alone treatment in terminally ill
patients.
Corporate
Update
ViRexx
has experienced significant changes during the past year. See
Management Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 2007, incorporated hereto by
reference. See “Documents Incorporated by
Reference”. Subsequent to the filing of the Management Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 2007, Gary Woerz, the Corporation’s former Chief Financial Officer,
made a wrongful dismissal claim against the Corporation in the amount of
$250,000 plus additional damages. The Corporation has taken the
position that the claim is without merit and intends to defend the
claim.
The
Corporation’s management has concentrated on prudent fiscal management and
refocusing ViRexx employees with renewed direction in development and
commercialization of ViRexx’s ChimigenTM
Platform Technology and its targeted autothrombogenic cancer therapy
(“T-ACT”). In addition a new short interfering Ribo Nuclecic Acid
(“siRNA”) technology has been developed and is in the process of being
patented. The failure of the Phase III clinical trial using OvaRex®
MAb as a stand-alone treatment was a disappointment to management and
shareholders alike and resulted in a significant drop in share
value. Senior management has succeeded in engendering renewed
enthusiasm for the ChimigenTM
Platform, the OcclusinTM 50
Injection and OcclusinTM 500 AED
development programs, as well as the possibility using OvaRex® MAb as a
front-line therapy. Collaboration opportunities have been revitalized
and discussions have been initiated with other potential joint research venture
partners or potential licensees for certain ChimigenTM
Platform product development projects, siRNA projects and for OcclusinTM
products. In addition, the Corporation is in discussion with parties
interested in continuing development of OvaRex® MAb in combination with
front-line chemotherapy for ovarian cancer.
This
rights offering is intended to provide the funds necessary to achieve the
development and commercialization milestones that are being established for each
of the technology platforms. The Corporation intends to focus its internal
resources on moving product candidates generated from its Chimigen™ Platform
through preclinical development and into clinical trials and development of
siRNA technology. Product candidates from the T-ACT™ and AIT™
Platforms will be progressed in collaboration with and using the resources of an
appropriate development and commercialization partner.
Corporate
Cease Trade Orders
Other
than as disclosed herein, during the past ten years, no director or executive
officer, to the knowledge of management of ViRexx, has acted in the capacity as
director, chief executive officer or chief financial officer, of any company
that: (i) was subject to a cease trade order or similar order, or an order that
denied the relevant company access to any exemption under securities
legislation, that was in effect for a period of more than 30 consecutive days,
that was issued while the director or executive officer was acting in the
capacity as director, chief executive officer or chief financial officer; or
(ii) was subject to a cease trade or similar order, or an order that denied the
relevant company access to any exemption under securities legislation, that was
in effect for a period of more than 30 consecutive days, that was issued after
the director or officer ceased to be a director, chief executive officer or
chief financial officer and which resulted from an event that occurred while
that person was acting in the capacity as director, chief executive officer or
chief financial officer:
|
1.
|
Darrell
Elliott is a director/officer of Chromos Molecular Systems Inc.
(“Chromos”), a Canadian public company. Chromos filed a Notice
of Intention to File a Proposal under the Bankruptcy and Insolvency Act
because of last minute withdrawal of financing. The proposal
was duly filed and accepted by the creditors, Chromos proceeded to sell
assets and both secured and unsecured creditors were paid out under court
approved settlements. During this period Chromos’ shares were
placed under a cease trade by the Securities Commission of Manitoba,
British Columbia, Alberta, Ontario and Quebec. Chromos plans
shortly to request revocation of this
order.
|
|
2.
|
Darrell
Elliott served as a director of SMC Ventures Inc. that was the subject of
cease trade orders issues by the Securities Commission of Manitoba,
British Columbia, Alberta, Ontario and Quebec in June 2004 for failure to
file comparative financial statements for the financial year ended
December 31, 2003 and interim financial statements for the financial
period ended March 31, 2004. The company’s inability to have
financial statements filed when due was a result of significant
administrative and financial issues that arose following the sale of all
the company’s assets to Isotis, in October 2003 and January 2004,
whereafter the company was unable to access from Isotis the financial
records necessary to complete the year end audit in a timely
manner. The annual and interim financial statements were
subsequently filed and the cease trade orders revoked by revocation orders
in May 2006.
|
Penalties
or Sanctions
To the
knowledge of ViRexx, no director or executive officer of ViRexx has been subject
to any penalties or sanctions imposed by a court relating to securities
legislation or by a securities regulatory authority or has entered into a
settlement agreement with a securities regulatory authority or has been subject
to any other penalties or sanctions imposed by a court or regulatory body,
including a self-regulatory body, that would be likely to be considered
important to a reasonable investor in making an investment
decision.
|
|
Bankruptcies
|
Other
than as disclosed herein, to the knowledge of ViRexx, no director or executive
officer or a shareholder holding a sufficient number of securities of ViRexx to
affect materially the control of ViRexx: (i) is, at the date hereof, or has been
within the ten years before the date hereof, a director or executive officer of
any company that, while that person was acting in that capacity, or within a
year of that person ceasing to act in that capacity, became bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency or was
subject to or instituted any proceedings, arrangement or compromise with
creditors or had a receiver, receiver manager or trustee appointed to hold its
assets; or (ii) has, within the ten years before the date hereof, become
bankrupt, made a proposal under any legislation relating to bankruptcy or
insolvency, or became subject to or instituted any proceedings, arrangement or
compromise with creditors or had a receiver, receiver manager or trustee
appointed to hold such persons assets:
|
1.
|
Darrell
Elliott served as a director of Phytogen Life Sciences Inc., a Canadian
private company, as a nominee of MDS Capital Corporation. Prior
to MDS Capital Corporation becoming an investor, Phytogen Life Sciences
Inc. had signed a licence agreement with a customer, Mylan Pharmacuticals
Inc., to which it supplied bulk API (pharmaceutical raw
materials). As part of the contract, Phytogen Life Sciences
Inc. agreed to indemnify Mylan Pharmacuticals Inc. for any costs
associated with defending itself in patent disputes. In due
course this occurred and, in the fullness of time, Mylan Pharmacuticals
Inc. lost the litigation. Phytogen Life Sciences Inc. was
unable to meet the resulting costs, also unable to refinance itself and
was petitioned in to insolvency in July or August
2005.
|
|
2.
|
Darrell
Elliott served as a director of A.R.C. Resins International Corp.
(formerly a public company traded on the TSX) as a nominee of the venture
investor, when it declared bankruptcy under Quebec law in April 1997 for
its Quebec operating subsidiary, as a result of litigation between it and
a certain Mr. Krishan Sudan who was a former employee, director,
shareholder and officer of both the parent and the Quebec operating
subsidiary. The protection was fully discharged, the creditor
claims settled, and the companies emerged from protection in May 1999.
During this period, the listing of A.R.C. Resins International Corp. on
the TSX was suspended and ultimately lost. After emerging from
protection, the company was sold to Tembec Industries, a major Canadian
forest products company.
|
|
3.
|
Darrell
Elliott served as a director of SMC Ventures Inc. (formerly GenSci
Regeneration Sciences Inc.), a Canadian public company. As a
result of losing a legal dispute involving intellectual property, GenSci
Regeneration Sciences Inc. sought protection in the United States under
‘Chapter 11’, for its operating subsidiary, and similarly in
Canada. GenSci Regenerations Sciences Inc. subsequently sold
its assets, emerged from bankruptcy protection, and changed its name to
SMC Ventures Inc.
|
|
4.
|
See
also Darrell Elliott’s involvement with Chromos Molecular Systems Inc. and
SMC Ventures Inc. under the heading, “Corporate Cease Trade
Orders”.
|
|
5.
|
Darrell
Elliott served as a director of lnex Pharmaceuticals Corp. from 1995 until
April 2007 (and continues as a director in its successor company, Tekmira
Pharmaceuticals Corp. (a Canadian public
company). There was a period in which Inex Pharmaceuticals
Corp. was a portfolio company for MDS Capital Corp. In 2001,
Inex Pharmaceuticals Corp. ‘spun-out’ certain technology into a new
company, Protiva Biotherapeutics Inc. This
company was financed by MDS Capital Corp. and by other venture capital
firms and the Inex Pharmaceuticals Corp. holding reduced from 100%, to 35%
post financing and today to about 5%. As part of the spinout
Inex Pharmaceuticals Corp. licensed certain technology to Protiva
Biotherapeutics Inc. for the liposomal delivery of “gene therapy”
products. The licenses contained certain rights for Inex Pharmaceuticals
Corp. regarding new inventions and improvements of Inex Pharmaceuticals
Corp.’s technology. The companies became involved in mutual
litigation over the interpretation of these licenses, specifically as
regards small interfering RNA (note that this reference is NOT to the
Corporation’s siRNA product referred to elsewhere in the prospectus) and
an allegation brought by Protiva Biotherapeutics Inc. against Mr. Elliott
(who sat as a director representing MDS CC) and two others of its
directors who were also directors of Inex Pharmaceuticals Corp. for breach
of fiduciary duty and conflict of interest. The companies
merged on May 30, 2008 and all legal issues have been set
aside. Mr. Elliott tendered his resignation from Inex on May
30, 2008 and is no longer involved with the
company.
|
Products
The
Corporation’s product candidates referred to above can be categorized using
ViRexx’s three technology platforms.
|
1.
|
The
Chimigen™ Platform is a proprietary platform developed at ViRexx to
generate therapeutic and prophylactic vaccines for major infectious
diseases that have high unmet needs. These vaccines are
designed to stimulate broad immune responses towards specifically targeted
viral and foreign antigens. Using this novel platform, the
Corporation is developing product candidates for the treatment of chronic
Hepatitis B and Hepatitis C virus infections, which afflict hundreds of
millions of people worldwide, as well as vaccines targeting pandemic
influenza, and weaponized biological
agents.
|
|
2.
|
The
T-ACT™ Platform includes embolotherapeutic product candidates designed to
cut off the blood supply to tumours by targeted transcatheter
delivery. ViRexx is developing OcclusinTM 50
Injection for the treatment of primary liver cancer and OcclusinTM
500 AED for the treatment of uterine fibroids. Both agents
utilize biocompatible / biodegradable materials to induce targeted
embolization of the arterial blood
supply.
|
|
3.
|
The
AIT™ Platform has resulted in the development of unique murine
monoclonal antibody treatments specifically designed for certain cancers,
including Ovarian (OvaRex® MAb), Breast (BrevaRex® MAb), Prostate
(ProstaRex™ MAb) and Gastrointestinal (GivaRex™ MAb)
malignancies.
|
|
4.
|
The
siRNA technology involves methodology for gene manipulation but is at a
very early stage of development.
|
ChimigenTM Platform
Technology
The
ChimigenTM
Platform is a versatile platform technology that has been used to produce
several immunotherapeutic products and prophylactic vaccines candidates. The
Corporation is focused on developing product candidates as therapeutic agents
for the treatment of chronic Hepatitis B and C virus infections. In 2006, ViRexx
completed a Phase I clinical trial of its initial ChimigenTM
Hepatitis B Therapeutic Vaccine candidate, CHB111 (formerly called HepaVaxx B
Vaccine) in 15 normal, healthy volunteers. There was no significant
adverse event associated with the treatment. The evaluation of the
immune responses in these volunteers to the treatment with a single dose of
CHB111 revealed no significant humoral or cellular responses elicited by the
vaccination.
The
Corporation has identified a promising new ChimigenTM
Hepatitis B Therapeutic Vaccine, which includes multiple antigens shown to be
involved in a therapeutic immune response in patients who cleared hepatitis B
virus infection. ViRexx hopes to initiate a clinical trial for its
ChimigenTM
Hepatitis B Therapeutic Vaccine with a partner in the second half of
2009. ViRexx’s ChimigenTM
Hepatitis C Therapeutic Vaccine is being developed for the treatment of chronic
Hepatitis C infection. The Corporation currently has two ex vivo tested vaccine
candidates in this program. Continued efforts in 2008 will be
directed to the final selection of a ChimigenTM
Hepatitis C Therapeutic Vaccine candidate for clinical testing.
Partnering
discussions have been initiated for Chimigen™ Hepatitis B Therapeutic Vaccine.
Specifically, ViRexx is targeting potential partners with a strong presence in
Asia, especially India and China where almost three quarters of the world’s
chronic Hepatitis B sufferers live. ViRexx will also seek a global
partner for development and commercialization of its Chimigen™ Hepatitis C
Therapeutic Vaccine.
The other
product candidates include ChimigenTM Avian
Influenza vaccines against pandemic influenza, ChimigenTM
biodefense vaccines against biological threat agents and development of
immune-targeted bionanoparticles. Several potential ChimigenTM Avian
Influenza Vaccine candidates have been produced and are being evaluated for
their efficacy.
In
collaboration with the Defense Research and Development Canada-Suffield
(“DRDC-Suffield”), ViRexx is evaluating ChimigenTM
Vaccines for use in biodefense. In this program, the Corporation is
focusing on two candidate vaccines for Western Equine Encephalitis
Virus. Based on the results from these studies, the Corporation was
encouraged to apply for a biodefense development contract, which was submitted
to the National Institute of Health (“NIH”) in the United States in
January 2008. The application is under review and the result is
awaited.
Looking
toward its next generation ChimigenTM
Platform products, the Corporation has established a research collaboration with
the National Institute of Nanotechnology for developing targeted
bionanoparticles using the ChimigenTM
Platform. If successful, ChimigenTM
Bionanoparticle technology could be used for targeting immune cells to modulate
specific pathways of immune responses and also for use in siRNA immunomodulator
vaccine development.
T-ACT™ Platform
Technology
The
T-ACT™ Platform is designed to interrupt blood supply to tumours, leading to
tumour tissue starvation and death. The lead product candidate of the T-ACT™
Platform, OcclusinTM 50
Injection, is a treatment for primary cancer of the liver. The
Corporation has completed a Phase I clinical trial treating 12 hepatocellular
carcinoma patients with OcclusinTM 50
Injection as part of a transcatheter arterial chemoembolization (“TACE”)
procedure. The adverse events profile of the product was similar to
that of commercially available embolization devices. Significant
tumour stability was achieved in 11 patients and progression occurred in 1
patient following treatment. This TACE procedure translates to a
clinical benefit of over 90%, with three patients stabilized sufficiently to
qualify for a liver transplant. TACE is the treatment of choice to
control tumour progression in patients who are being considered for liver
transplantation. Liver transplantation is the optimal treatment for
primary cancer of the liver in selected patients because it essentially “cures”
the liver cancer and any underlying liver disease that might lead to the
reappearance of the cancer. OcclusinTM 50
Injection partnering discussions have been initiated with companies interested
in OcclusinTM 50
Injection. Specifically, ViRexx is evaluating potential partners
interested in licensing OcclusinTM 50
Injection for Asia, as the prevalence of liver cancer is much higher in Asia
than anywhere else in the world.
The
second product candidate of the T-ACT™ Platform is the OcclusinTM 500
AED, an embolic agent designed to treat hypervascular tumours including uterine
fibroids. This device is delivered by catheter to the blood vessels
feeding the tissue to be treated. Unlike other embolic agents,
OcclusinTM 500 AED
undergoes natural breakdown in the body and ultimately
disappears. ViRexx is continuing preclinical testing of this product
candidate and has also completed the production of two Good Manufacturing
Practice (“GMP”) batches of the product. Exploration of new
manufacturing methods of OcclusinTM 500 AED
to increase efficiency of production is in progress. Partnering discussions are
currently underway with parties interested in developing and commercializing
Occlusin™ 500 AED. Clinical studies could be started in the second half of 2009
and marketing clearance in United States in early 2011, or earlier.
AIT™ Platform
Technology
The lead
product candidates from the AIT™ Platform include OvaRex® MAb for
ovarian cancer, and BrevaRex® MAb for
breast cancer. OvaRex® MAb was
the subject of one Phase II study examining combination chemo-immunotherapy in
front-line treatment, and two randomized, double-blind and placebo controlled
Phase III clinical trials examining immunotherapy during remission.
The Phase
III trials were designed to compare OvaRex® MAb to
placebo by evaluating the time to disease relapse in patients in remission who
had undergone successful surgery and front-line chemotherapy. The
results of these Phase III trials released in December of 2007 indicated that
while the use of OvaRex® MAb was
safe, the outcomes for the patients who were treated were not statistically
significant. Consequently Unither Pharmaceuticals, Inc. (“Unither”) a
subsidiary of United Therapeutics Corporation (“United”), to whom ViRexx,
through its wholly owned subsidiary AltaRex Medical Corp. (“AltaRex”), had
granted exclusive rights for development and commercialization of OvaRex® MAb,
announced they were abandoning development and commercialization of OvaRex® MAb and
related potential products. The License and Development Agreement has
been terminated and ViRexx has repatriated the development and commercialization
rights for all AIT™ Platform products. Unither/United has returned to
ViRexx all data and other material associated with the development and
commercialization of OvaRex®
MAb. The scientists at ViRexx in conjunction with outside independent
parties are currently evaluating the data and the assumptions underlying the
program prior to determining the next steps in the development of this product
and the effect of this on related technologies.
The Phase
II study referred to above showed promising results for the use of OvaRex® MAb in
conjunction with front-line chemotherapy. Not only was OvaRex® MAb safe
to use in this new setting, but cellular immune responses to the tumour antigen
were seen. The use of non-selective chemotherapy combined with targeted
immunotherapy is being recognized as a new cancer treatment paradigm by the
medical community. This new treatment mode represents an exciting
partnering opportunity and ViRexx is pursuing discussions with several
interested parties.
The
combination chemo-immunotherapy model is also being discussed in the context of
a Phase II clinical trial which may be initiated jointly by ViRexx and the
Gynaecologic Oncology Group (GOG) in 2008. The trial, if and when it
proceeds, will explore the use of OvaRex® MAb in
conjunction with cyclophosphamide, a chemotherapeutic drug known to have immune
modulating effects. To enrol, patients must have relapsed and
undergone a second round of chemotherapy. This trial will seek to
broaden our experience in using combination chemo-immunotherapy in treating
ovarian cancer.
BrevaRex® MAb is a
high affinity antibody specific to the tumour associated antigen, MUC-1 which is
present in cancers of the breast and pancreas as well as in multiple
myelomas. BrevaRex® MAb was
shown to be safe in a Phase I clinical trial in patients with MUC-1 expressing
tumours. ViRexx has worldwide rights for licensing BrevaRex® MAb,
with established license agreements for some European
territories. The remaining antibodies in the AIT™ Platform include
ProstaRex™ MAb and GivaRex™ MAb, both in the pre-clinical stage targeting
prostate and pancreatic cancer respectively.
Discussions
are ongoing between ViRexx and interested parties to determine the best strategy
for proceeding with development and commercialization of the AIT™ Platform
product pipeline.
Business
Strategy
ViRexx's
business strategy is to develop and commercialize therapeutic product candidates
originating from its Chimigen™, T-ACT™ and AIT™ platform technologies
in a timely and effective manner. The Corporation plans to build value by
advancing its Chimigen™ Therapeutic Vaccines through pre-clinical and Phase
I/II clinical trials. As well, ViRexx will pursue strategic partnering and
licensing opportunities for its non-core programs, specifically Occlusin™ 50 and
Occlusin™ 500 AED, OvaRex® MAb and Chimigen™ Hepatitis B Therapeutic
Vaccine.
The
Corporation’s strategic plan includes the following:
|
·
|
New
leadership with significant relevant industry experience to drive
performance and provide networks for collaborations and
partnering;
|
|
·
|
Focus
research expenditures on near term product
opportunities;
|
|
·
|
Control
and focus expenditures on longer term opportunities to build strong
development and commercialization
opportunities;
|
|
·
|
Aggressive
partnering plan for late stage clinical candidate, medical device &
oncology products;
|
|
·
|
Focus
overall expenditures to minimize the level of additional capital required;
and
|
|
·
|
Direct
efforts to clear value creating milestones in 2008 and
2009.
|
Key
Milestones
The
Corporation’s strategic plan calls for the achievement of a number of
significant milestones over the next 12 months:
|
·
|
Completion
of data review and assessment of the AITTM
Platform development strategy;
|
|
·
|
Initiation
of a Phase II clinical trial in collaboration with the Gynecologic
Oncology Group (GOG) examining OvaRex®
MAb in conjunction with cyclophosphamide in ovarian cancer patients who
have relapsed and undergone a second round of
chemotherapy;
|
|
·
|
Establish
a partnership for the development and commercialization of Occlusin™
products in Europe and / or Asia;
|
|
·
|
Establish
partnership for development and commercialization of OvaRex® MAb in
Europe;
|
|
·
|
Demonstrate
in vivo efficacy
of Chimigen™ WEEV Vaccine in preclinical
models;
|
|
·
|
Demonstrate
in vivo immune
response to multiantigen Chimigen™ Hepatitis B Therapeutic Vaccine in
preclinical models;
|
|
·
|
Demonstrate
ex vivo
immunological efficacy of Chimigen™ Influenza Vaccine in laboratory
assays; and
|
|
·
|
Implement
Chimigen™ WEEV Vaccine development plan, should NIH funding be
received.
|
The
Corporation’s focus in 2008-2009 is to concentrate its internal resources on
moving the Chimigen™ Hepatitis B Therapeutic Vaccine and Hepatitis C Therapeutic
Vaccine into development. In order to leverage external resources,
ViRexx will also seek to establish partnerships for development and
commercialization of its Occlusinä 500 AED and
Occlusinä 50
Injection.
ViRexx
will also seek partnerships to move the AITTM
Platform strategy forward, both in the clinical and pre-clinical
areas. Analysis of the past trials will lay the foundation for any
future trials of OvaRex® MAb in
conjunction with front-line chemotherapy. A number of companies have
expressed interest in partnering with ViRexx to work on several of the other
MAbs in the AITTM
Platform pipeline.
Summary/Outlook
The past
year was a challenge for ViRexx, but the Corporation is optimistic about the
future of its existing products as well as new relationships being put in
place. The potential exists for medium term re-partnering of antibody
candidates from the AIT™ Platform, on terms that may be superior to those
obtained in the past. In addition, several of the Corporation’s existing product
candidates from its other two platforms are currently under active consideration
by new potential partners. The year has resulted in a strong
sharpening of the Corporation’s focus and a keener understanding of its
strengths.
The
Corporation’s Chimigen™ Platform has promise for the future. ViRexx
is continuing to develop these novel immunotherapies for high value infectious
disease markets. Over the next two years, the Corporation will
increasingly focus its research and development efforts on advancing its current
candidate Chimigen™ Platform based therapies into clinical development and in
seeking corporate partners at the appropriate time.
The
Chimigen™ Platform has already produced one, Chimigen™ Hepatitis B Vaccine
candidate, CHB111 (formerly HepaVaxx B), which demonstrated safety in a clinical
trial on August 9, 2006. The Corporation does not intend
further to develop this particular candidate, independently, and is currently
responding to a partnering enquiry. However, new candidates from the
Chimigen™ Hepatitis B Vaccine program are showing great promise.
The
support of the Corporation’s shareholders will be key as new management seeks to
build upon the great inherent value within the Corporation and to maximize
opportunities from its product candidates within the Corporation’s Chimigen™
Platform technology. ViRexx was awarded the Alberta Science and
Technology Leadership Foundation award in 2004 for technology innovation for
this platform.
The
Corporation is of the view that strong opportunities exist in Asian markets,
where there is a high incidence of liver cancer, for the further development and
commercialization of Occlusin™ 50 Injection. The Corporation plans to license
this therapeutic to a regional partner who will take it into a pivotal trial in
the Asian market.
The
Corporation is actively investigating partnering interest in both Europe and
China for its embolotherapeutic agent Occlusin™ 500 AED. These
prospects are expected to be brought to a conclusion in the first half of
2008.
The
rights to the AIT™ Platform and its several antibodies, including OvaRex® MAb,
which had been licensed to United Therapeutics Corporation, have been
repatriated to ViRexx. ViRexx is completing an in depth evaluation of the data
available from the clinical trial results and is also evaluating the possibility
of commencing another trial, with an appropriate partner, for OvaRex® MAb in
combination therapy, for which there appears to be supporting
evidence.
DESCRIPTION
OF SHARE CAPITAL
The
authorized share capital of the Corporation consists of an unlimited number of
common shares of which 72,760,717 common shares are issued and outstanding as at
the date hereof. All the issued and outstanding common shares are fully paid and
non-assessable.
The
holders of the common shares are entitled to dividends if, as and when declared
by the board of directors, to one vote per common share at meetings of the
shareholders, and upon liquidation, dissolution or winding up of ViRexx and to
receive such assets of ViRexx as are distributable to the holders of common
shares.
DETAILS
OF RIGHTS OFFERING
Rights
The
Corporation is distributing to each Shareholder of record on July 25, 2008, one
transferable Right for each common share held. Subject to certain
exceptions, Rights Certificates may not be held directly by, and subscriptions
for Shares will not be accepted from, Shareholders whose addresses of record are
in Non-Participating Jurisdictions. See “Details of Rights Offering
Shareholders in Non-Participating Jurisdictions”.
Dealer
Manager
The
Corporation has retained the Dealer Manager to solicit the exercise of Rights in
Canada and in such other jurisdictions where such solicitation is permitted
under applicable law. In the United States, the Dealer Manager will act through
its affiliate, Desjardins Securities International. In consideration
for such services, the Corporation has agreed to pay to the Dealer Manager a fee
of 6% of the proceeds realized from the purchase of shares excluding any
proceeds received from the Standby Purchaser, which are estimated to be
$2,000,000. The Dealer Manager’s expenses, including legal expenses
and disbursements as a fee, will be paid from the proceeds of the
Offering.
The
obligations of the Dealer Manager under the Dealer Manager Agreement may be
terminated at the Dealer Manager’s discretion in certain limited circumstances.
The Corporation may complete the Offering notwithstanding the termination of the
Dealer Manager Agreement. The Corporation has agreed to
indemnify the Dealer Manager against any and all claims by the Standby Purchaser
against the Dealer Manager in connection with the Offering.
The
Dealer Manager has agreed to comply with applicable securities legislation,
regulations, policy statements, rulings, orders and published notices of the
securities regulatory authorities in each of the provinces of Canada, of the
TSX, and the applicable securities laws of such other jurisdictions in which
solicitations to exercise Rights are made, in performing its duties under the
Dealer Manager Agreement.
Rights
Certificates — Common Shares Held Through CDS or DTC
For all
Shareholders who hold their common shares through a securities broker or dealer,
bank or trust company or other Participant in the book-based systems
administered by CDS or DTC, a global certificate representing the total number
of Rights to which all such Shareholders as at the Record Date are entitled will
be issued in registered form to, and deposited with, CDS or DTC, as the case may
be. The Corporation expects that each beneficial Shareholder will
receive a confirmation of the number of Rights issued to it from its Participant
in accordance with the practices and procedures of that
Participant. CDS and DTC will be responsible for establishing and
maintaining book-entry accounts for Participants holding Rights.
Neither
the Corporation nor the Subscription Agent will have any liability for: (i) the
records maintained by CDS, DTC or Participants relating to the Rights or the
book-entry accounts maintained by them; (ii) maintaining, supervising or
reviewing any records relating to the Rights; or (iii) any advice or
representations made or given by CDS, DTC or Participants with respect to the
rules and regulations of CDS or DTC or any action to be taken by CDS, DTC or
their Participants.
The
ability of a person having an interest in Rights held through a Participant to
pledge such interest or otherwise take action with respect to such interest
(other than through a Participant) may be limited due to the lack of a physical
certificate.
Shareholders
who hold their common shares through a Participant must arrange purchases or
transfers of Rights through their Participant. For common
shares held through a Participant, a subscriber may subscribe for Shares by
instructing the Participant holding the subscriber’s Rights to exercise all or a
specified number of such Rights and forwarding the Subscription Price for each
Share subscribed for to such Participant in accordance with the terms of the
Offering. A subscriber wishing to subscribe for additional Shares
pursuant to the Additional Subscription Privilege must forward its request to
the Participant that holds the subscriber’s Rights prior to the Expiry Time,
along with payment for the number of additional Shares requested. Any
excess funds will be returned by mail or credited to the subscriber’s account
with its Participant without interest or deduction. Subscriptions for
Shares made through a Participant will be irrevocable and subscribers will be
unable to withdraw their subscriptions for Shares once
submitted. Participants may have an earlier deadline for receipt of
instructions and payment than the Expiry Time.
It is
anticipated by the Corporation that each such purchaser of Shares or Rights will
receive a customer confirmation of issuance or purchase, as applicable, from the
Participant through which such Rights are issued or such Shares or Rights are
purchased in accordance with the practices and policies of such
Participant.
Rights
Certificate — Common Shares Held in Registered Form
For all
Shareholders whose common shares are held in registered form, a Rights
Certificate representing the total number of Rights to which such Shareholder is
entitled as at the Record Date will be mailed with a copy of the final
prospectus in respect of the Offering. In order to exercise the
Rights represented by the Rights Certificate, such holder of Rights must
complete and deliver the Rights Certificate in accordance with the instructions
set out under “How to Complete the Rights Certificate Registered
Shareholders”. Only registered Shareholders of the Corporation will
receive Rights Certificates.
Expiry
Time
The
Rights may be exercised commencing on July 26, 2008 (the day after the
Record Date) and will expire at 5:00 p.m. (Toronto time) on August 22, 2008 (the
“Expiry
Time”). To subscribe for Shares, a completed Rights
Certificate must be received by the Subscription Agent by the Expiry
Time. The Corporation reserves the right to extend the period of the
Offering, subject to obtaining any required regulatory approvals, if the
Corporation determines that the timely exercise of the Rights may have been
prejudiced due to a disruption in postal service. Rights not exercised prior to the
Expiry Time will be void and of no value.
Basic
Subscription Right
Under the
Basic Subscription Right, each Right entitles the holder thereof to acquire one
Share at a price of CA$0.045. The Subscription Price of CA$0.045 is
equal to the weighted average of the closing price of the Corporation’s common
shares on the TSX for each of the trading days on which there was a closing
price during the three trading days immediately preceding July 14, 2008, less a
discount of 25%.
A
Participant which holds common shares of the Corporation as of the Record Date
on behalf of more than one beneficial owner may, upon providing evidence
satisfactory to the Subscription Agent, exercise the Rights evidenced by its
Rights Certificate or exchange its Rights Certificate on the same basis as
though each of the beneficial owners were a Shareholder of record as of the
Record Date.
Any
Shareholder or any holder of a Rights Certificate who has any questions
concerning the terms of this Offering should contact the Subscription Agent at
the Subscription Office by telephone or e-mail as specified under
“Inquiries”.
Partial
Exercise of Rights
A
Shareholder who exercises some, but not all, of the Rights evidenced by a Rights
Certificate will be deemed to have elected to waive the unexercised balance of
such Rights and such unexercised balance of Rights will be void and of no
value.
Additional
Subscription Privilege
Any
holder of Rights who exercises the Basic Subscription Right to subscribe for all
the Shares that can be subscribed for with the Rights held, or evidenced by a
Rights Certificate, has the privilege of subscribing for additional Shares, if
available, at the Subscription Price (the “Additional Subscription
Privilege”). The Shares available for such purpose (the “Remaining Shares”) will be
those that have not been otherwise subscribed and paid for at the Expiry
Time.
To
exercise the Additional Subscription Privilege, a holder of a Rights Certificate
who completes Form 1 on the Rights Certificate for the maximum number of Shares
that can be subscribed for, given the number of Rights evidenced by such
certificate, must also complete Form 2 on the Rights Certificate and specify the
number of additional Shares for which the holder would like to
subscribe. The completion of Form 2 constitutes a binding commitment
to subscribe for the number of additional Shares specified. Payment
for additional Shares, in the same manner as required upon exercise of the Basic
Subscription Right, must accompany Form 2 when it is delivered to the
Subscription Agent or a Participant, as applicable. Any excess funds
will be returned by mail by the Subscription Agent or credited to the
subscriber’s account with its Participant, as applicable, without interest or
deduction. Payment for such additional Shares must be received by the
Subscription Agent prior to the Expiry Time, failing which the subscriber’s
entitlement to such additional Shares shall terminate. Accordingly, a
subscriber subscribing through a Participant must deliver its payment and
instructions to a Participant sufficiently in advance of the Expiry Time to
allow the Participant to properly exercise the Additional Subscription Privilege
on its behalf. See “How to Complete the Rights Certificate Payment
of Subscription Price”.
If there
are sufficient Remaining Shares to satisfy all additional subscriptions by
participants in the Additional Subscription Privilege, each such participant
will be allotted the number of additional Shares for which it has
indicated it would like to subscribe.
If the
aggregate number of Shares subscribed for under the Additional Subscription
Privilege exceeds the number of Remaining Shares, those Remaining Shares will be
allotted to each participant in the Additional Subscription Privilege on a
proportionate basis in accordance with the following formula: the number of the
Remaining Shares allotted to each participant in the Additional Subscription
Privilege will be the lesser of: (a) the number of Shares which that participant
has subscribed for under the Additional Subscription Privilege; and (b) the
product (disregarding fractions) of the multiplication of the number of
Remaining Shares by a fraction of which the numerator is the number of Shares
subscribed for by that participant under the Basic Subscription Right and the
denominator is the aggregate number of Shares subscribed for under the Basic
Subscription Right by all participants in the Additional Subscription
Privilege. If any participant has subscribed for fewer Shares than
the number resulting from the application of the formula in (b) above, the
excess Shares will be allotted in a similar manner among the participants who
were allotted fewer Shares than they subscribed for.
Shareholders
in Non-Participating Jurisdictions
This
Offering is being made only in Canada and the United States. This
Offering is not being made in Non-Participating Jurisdictions and is not, and
under no circumstances is to be construed as, an offering of any securities for
sale in or to a resident of the Non-Participating Jurisdictions or a
solicitation therein of an offer to buy any securities. Accordingly,
subject to the exception as provided for hereinafter, Rights Certificates may
not be held directly by, and subscriptions for Shares will not be accepted from,
or on behalf of, Shareholders whose addresses of record are in Non-Participating
Jurisdictions or other persons whom the Corporation or the Subscription Agent
has reason to believe are residents of the Non-Participating Jurisdictions
(collectively, “Shareholders in Non-Participating Jurisdictions”).
Notwithstanding
the foregoing, if a Shareholder whose address of record is in or who is a
resident of a Non-Participating Jurisdiction on the Record Date can demonstrate
to the satisfaction of the Corporation and its counsel not less than ten days
before the Expiry Time that the delivery of the Rights and the issue of Shares
under this Offering to such a Shareholder would not, in any way, contravene any
securities law of such Non-Participating Jurisdiction and would not require the
Corporation to file any documentation, make any application or make any payment
of any nature whatsoever in such Non-Participating Jurisdiction, then the
Corporation may, if it so chooses, deliver the Rights to and accept
subscriptions for Shares from, or on behalf of, such Shareholder in such
Non-Participating Jurisdiction.
Shareholders
in Non-Participating Jurisdictions will not receive Rights
Certificates. The Corporation will notify Shareholders in
Non-Participating Jurisdictions that the Rights Certificates to which they are
entitled will be delivered to and held by the Subscription Agent, which will
hold the same and the Rights evidenced thereby as agent for the benefit of all
Shareholders in Non-Participating Jurisdictions. Commencing August
14, 2008, the Subscription Agent will attempt to sell on a best-efforts basis
such Rights in Canada prior to the Expiry Time at such prices and otherwise in
such a manner as the Subscription Agent may determine in its sole
discretion. The Subscription Agent’s ability to sell such Rights and
the price obtained therefor are dependent on market conditions. The
Subscription Agent will not be subject to any liability for failure to sell any
Rights of Shareholders in Non-Participating Jurisdictions or to sell any such
Rights at a particular price. There is a risk that the proceeds
received from the sale of the Rights will not exceed the brokerage commissions
and costs of or incurred by the Subscription Agent in respect of the sale of
such Rights. In such event, the Shareholders in Non-Participating
Jurisdictions will not be liable for any shortfall and no proceeds will be
forwarded. The net proceeds received by the Subscription Agent from
the sale of such Rights will be divided among the Shareholders in
Non-Participating Jurisdictions in proportion to the number of common shares of
the Corporation held by them respectively on the Record Date. The
Subscription Agent will mail cheques therefor to the Shareholders in
Non-Participating Jurisdictions at their addresses appearing in the records of
the Corporation.
Intention
of Standby Purchaser to Exercise Rights
Under the
Standby Purchase Agreement the Standby Purchaser has agreed, subject to certain
terms and conditions, to exercise all of its Basic Subscription Rights and to
purchase, at the Subscription Price, that number of common shares of the
Corporation resulting in aggregate subscription proceeds to the Corporation
equal to the difference between (i) the proceeds received by the Corporation in
connection with the exercise of all Basic Subscription Rights and all Additional
Subscription Privileges; and (ii) CA$3,000,000.
Stock
Exchange Listing
The
outstanding common shares of the Corporation are currently listed and posted for
trading on the TSX and the AMEX under the symbols “VIR” and “REX”,
respectively. The Corporation has applied to list the Rights and the
Shares issuable upon the exercise of Rights, on the TSX. The TSX has
conditionally approved the listing of these securities. The
Corporation expects that on July 23, 2008, the Rights will commence trading on
the TSX under the trading symbol “VIR.RT” and the common shares of the
Corporation will commence trading on an “ex rights” basis, meaning that persons
purchasing common shares on or following that date will not be entitled to
receive the related Rights. The Corporation also expects that the
Rights will remain listed and posted for trading until noon (Toronto time) on
August 22, 2008. The Corporation has applied to list the Shares
issuable upon the exercise of the Rights (but not the Rights themselves) on the
AMEX. The Rights may not be transferred to any person in the United
States or to any U.S. person within the meaning of Regulation S. Shareholders in
the United States who receive Rights may resell them only outside the United
States in accordance with Regulation S.
Dilution
to Shareholders
If a
Shareholder wishes to retain its current percentage ownership in the
Corporation, and assuming that all Rights are exercised, the Shareholder should
exercise all of its Rights to purchase Shares for which it may subscribe
pursuant to the Basic Subscription Right. If a Shareholder does not
do so and other holders of Rights exercise any of their Rights, the
Shareholder’s current percentage ownership in the Corporation may be diluted by
the issue of Shares under this Offering. Shareholders should be aware
that the Standby Purchaser has agreed, subject to certain terms and conditions,
to exercise all of its Basic Subscription Rights and to purchase, at the
Subscription Price, that number of common shares of the Corporation resulting in
aggregate subscription proceeds to the Corporation equal to the difference
between (i) the proceeds received by the Corporation in connection with the
exercise of all Basic Subscription Rights and all Additional Subscription
Privileges; and (ii) CA$3,000,000. See “Details of Rights Offering –
Intention of Standby Purchaser to Exercise Rights” and “Standby
Commitment”.
Subscription
Agent
Pursuant
to a Rights Agency and Custodial Agreement, the Subscription Agent
(Computershare Investor Services Inc.) will be appointed by the Corporation to
perform various services relating to the exercise of Rights, including receiving
subscriptions for Shares and payment of the Subscription Price from
Shareholders, issuing certificates for the Shares to be issued upon the exercise
of the Rights, acting as transfer agent for the Rights and acting as agent for
Shareholders in Non-Participating Jurisdictions as described above under
“Shareholders in Non-Participating Jurisdictions”. The Corporation
will pay the fees and expenses of the Subscription Agent, which are estimated to
be CA$15,000.
The
Subscription Agent will accept subscriptions for Shares and payment of the
Subscription Price from holders of Rights Certificate only at its office at the
following addresses (the “Subscription
Office”):
|
Registered
Mail, Courier or Hand Delivery:
|
Mail:
|
|
Computershare
Investor Services Inc.
100
University Avenue, 9th
Floor
Toronto,
ON M5J 2Y1
Attention: Corporate
Actions
|
Computershare
Investor Services Inc.
P.O.
Box 7021
31
Adelaide Street E.
Toronto,
ON M5C 3H2
Attention: Corporate
Actions
|
HOW
TO COMPLETE THE RIGHTS CERTIFICATE – REGISTERED SHAREHOLDERS
General
By
completing the appropriate form on the Rights Certificate in accordance with the
instructions outlined below and on the back of the Rights Certificate, a
registered Shareholder may:
(i) exercise
the Basic Subscription Right to subscribe for Shares (Form 1);
(ii) exercise
the Additional Subscription Privilege (Form 2);
(iii) sell
or transfer Rights (Form 3); or
(iv) divide
or combine the Rights Certificate (Form 4).
Basic
Subscription Right - Form 1
Each
Right entitles the holder thereof to acquire one Share at a price of
CA$0.045. The maximum number of Rights, which may be exercised by
completing and signing Form 1, is shown immediately above Form 1 on the Rights
Certificate. Form 1 must be completed and signed in order for a
holder to exercise some or all of the Rights represented by the Rights
Certificate pursuant to the Basic Subscription Right. A Shareholder
who chooses not to exercise all the Rights evidenced by the Rights Certificate
will be deemed to have elected to waive the unexercised balance of such Rights
and such unexercised balance of Rights will be void and of no
value.
Completion
of Form 1 constitutes a representation by the Shareholder that he is not a
resident of any Non-Participating Jurisdiction, or the agent of any such
person. Subject to the exception set out under “Details of Rights
Offering Shareholders in Non-Participating Jurisdictions”, subscriptions will
not be accepted from, or on behalf of, Shareholders whose addresses of record
are in Non-Participating Jurisdictions.
Only
registered Shareholders of the Corporation will receive Rights
Certificates. Beneficial Shareholders of the Corporation will not
receive Rights Certificates. However, beneficial Shareholders will be
able to exercise their Rights and acquire Shares. Should a beneficial Shareholder wish
to exercise Rights and purchase Shares, the beneficial Shareholder should
contact his or her securities dealer for details on how to do so. See
“Rights Certificate — Common Shares Held Through CDS or
DTC”.
Additional
Subscription Privilege - Form 2
Any
holder of a Rights Certificate who exercises the Basic Subscription Right to
subscribe for all the Shares that can be subscribed for with the Rights
evidenced by such certificate and who wishes to participate in the Additional
Subscription Privilege must complete and sign Form 2 on the Rights
Certificate.
The
completed Rights Certificate and payment for all Shares subscribed for under the
Basic Subscription Right and Additional Subscription Privilege should be
delivered or mailed so that they are received by the Subscription Agent at the
Subscription Office, before 5:00 p.m. (Toronto time) on August 22,
2008. If mailing, Shareholders should allow for sufficient time to
avoid late delivery.
Sale
and Transfer of Rights - Form 3
The
Corporation will apply to list the Rights distributed under this prospectus and
the Shares issuable upon the exercise of Rights on the TSX. Listing
will be subject to the Corporation fulfilling all the listing requirements of
the TSX. The Rights will not be listed on the AMEX.
Holders
of Rights in registered form in Canada may, instead of exercising their Rights
to subscribe for Shares, sell or transfer their Rights to any person in Canada
by completing Form 3 on the Rights Certificate and delivering the Rights
Certificate to the transferee.
To
transfer the Rights, a registered Shareholder must complete Form 3 on the Rights
Certificate and have the signature guaranteed by a Canadian Schedule I
bank, a major trust company in Canada, a member of an applicable Medallion
Signature Guarantee Program, including STAMP, SEMP and MSP. Members
of these programs are usually members of a recognized stock exchange in Canada
or members of the Investment Dealers Association of Canada. It is not
necessary for a transferee to obtain a new Rights Certificate to exercise the
Rights, but the signature of the transferee on Forms 1 and 2 must correspond in
every particular with the name of the transferee (or the bearer if no transferee
is specified) as the absolute owner of the Rights Certificate for all
purposes. If Form 3 is completed, the Corporation and Subscription
Agent will treat the transferee (or the bearer if no transferee is specified) as
the absolute owner of the Rights Certificate for all purposes and will not be
affected by notice to the contrary.
Rights
may be transferred only in transactions outside of the United States in
accordance with Regulation S. Regulation S does permit the
resale of the Rights by persons through the facilities of the TSX, provided that
the offer is not made to a person in the United States, neither the seller nor
any person acting on its behalf knows that the transaction has been prearranged
with a buyer in the United States, and no “directed selling efforts”, as that
term is defined in Regulation S, are conducted in the United States in
connection with the resale. Certain additional conditions are
applicable to the Corporation’s “affiliates”, as that term is defined under the
U.S. Securities Act.
Dividing
or Combining Rights Certificates -Form 4
A Rights
Certificate may be divided or combined by completing Form 4 on the Rights
Certificate and surrendering it to the Subscription Agent at the Subscription
Office, in which case no endorsement is necessary. The Subscription
Agent will then issue a new Rights Certificate in such denominations (totaling
the same number of Rights as evidenced by the Rights Certificate being divided
or combined) as are requested by the Rights Certificate
holder. Rights Certificates must be surrendered for division or
combination in sufficient time prior to the Expiry Time to permit the new Rights
Certificates to be issued to and used by the Rights Certificate
holder.
Payment
of Subscription Price
The
Subscription Price is CA$0.045 per Share. The Subscription Price,
including the Subscription Price for any additional Shares elected to be
purchased pursuant to the Additional Subscription Privilege, is payable in
Canadian funds by certified cheque, bank draft or money order payable at par
(without deduction for bank service charges or otherwise) to or to the order of
“Computershare Investor Services Inc.” (the Subscription Agent). Any
excess funds paid in respect of the exercise of an Additional Subscription
Privilege will be returned by mail by the Subscription Agent or credited to a
subscriber’s account with its Participant, as applicable, without interest or
deduction.
Unexercised
Rights
Subject
to the ability of a holder of a Rights Certificate to divide or combine a Rights
Certificate as discussed above, a holder of a Rights Certificate who in Form 1
of the Rights Certificate exercises some but not all of the Rights evidenced by
the Rights Certificate will be deemed to have elected to waive the unexercised
balance of such Rights and such unexercised balance of Rights will be void and
of no value. Similarly, if a holder of a Rights Certificate
surrenders his Rights Certificate but fails to complete Form 1 or Form 2 on the
Rights Certificate, or fails to make payment of the Subscription Price as
described above in respect of any Shares for which he elects to subscribe, such
holder will be deemed to have elected to waive the Rights represented by such
Rights Certificate (or such portion thereof in respect of which he has failed to
make payment) and such Rights will be void and of no value.
Signatures
The
signature of the holder of a Rights Certificate must correspond in every
particular with the name that appears on the face of the Rights
Certificate. Signatures by a trustee, executor, administrator,
guardian, attorney or officer of a corporation or any person acting in a
fiduciary or representative capacity should be accompanied by evidence of
authority satisfactory to the Subscription Agent.
Share
Certificates
The
Shares purchased through the exercise of Rights will be registered in the name
of the person to whom the Rights were issued or such person’s transferee, if
any, indicated on the appropriate form on the Rights
Certificate. Certificates for Shares will be delivered as soon as
practicable by mail to the address appearing in the records of the Corporation
with respect to the person to whom the Rights Certificate was issued or to the
address of the transferee, if any, indicated on the appropriate form on the
Rights Certificate.
Validity
and Rejection of Subscriptions
All
questions as to the validity, form, eligibility (including time of receipt) and
acceptance of any subscription will be determined by the Corporation in its sole
discretion, which determination shall be final and binding. All
subscriptions are irrevocable. The Corporation reserves the absolute
right to reject any subscription if such subscription is not in proper form or
if the acceptance thereof or the issuance of Shares pursuant thereto could be
deemed unlawful. The Corporation also reserves the right to waive any
defect with regard to any particular subscription. The Corporation
and the Subscription Agent will not be under any duty to give notification of
any defect or irregularity in such subscriptions and neither the Corporation nor
the Subscription Agent will incur any liability for failure to give such
notification.
INQUIRIES
Inquiries
relating to this Offering should be directed to the Subscription Agent at the
Subscription Office, by telephone at 1-800-564-6253 or via e-mail at
corporateactions@computershare.com, or to the Dealer Manager by telephone at
416-867-3589 (Beth Shaw) or via e-mail at beth.shaw@vmd.desjardins.com , or to
Virexx by telephone at (780) 433-4411 or via e-mail at
investor@virexx.com.
CHANGES
TO SHARE AND LOAN CAPITAL
Aside
from the issuance of the Debenture, there have been no material changes in the
Corporation’s consolidated share capital and loan capital since December 31,
2007, the date of the Corporation’s most recently filed consolidated financial
statements.
CONSOLIDATED
CAPITALIZATION
The
following table sets forth the consolidated capitalization of the Corporation as
at the dates indicated, and adjusted to give effect to the
Offering. The table should be read in conjunction with the unaudited
consolidated financial statements of the Corporation for the three months ended
March 31, 2008 and management’s discussion and analysis thereon for the three
months ended March 31, 2008, incorporated by reference in this
prospectus.
|
Designation
|
Outstanding
as
at
March 31, 2008
|
Outstanding
as at March 31, 2008 assuming all Rights are exercised
|
||
|
Common
shares
|
$54,064,680
|
$61,340,752
|
(1)
|
|
|
(72,760,717
shares)
|
(145,521,434
shares)
|
(1)(2)
|
||
|
Contributed
surplus
|
$12,516,406
|
$12,516,406
|
||
|
Current
liabilities
|
$2,341,306
|
$2,341,306
|
||
|
Long
term liabilities
|
$0
|
$1,000,000
|
(3)
|
|
|
Deficit
|
($67,105,318)
|
($67,105,318)
|
||
|
Total
capitalization
|
$1,817,074
|
$10,093,146
|
Notes:
|
|
1.
|
Assumes
exercise of maximum number (72,760,717) of Rights at a price of $0.10 per
Share and does not include amounts loaned under the Debenture
($1,000,000). See “Standby
Commitment”.
|
|
|
2.
|
Does
not include 10,000,000 common shares issuable upon full conversion of the
Debenture or the 5,000,000 common shares issuable upon exercise of all of
the Debenture Warrants. See “Standby
Commitment”.
|
|
|
3.
|
Represents
amounts loaned under the Debenture. See “Standby
Commitment”.
|
USE
OF PROCEEDS
The
aggregate net proceeds to be derived by the Corporation from the Offering is
estimated to be approximately $2,997,778 assuming the exercise of all of the
Rights, after deducting the estimated expenses of this Offering of approximately
$200,000 (estimate includes the costs of printing and preparing this prospectus
and the Dealer Manager’s expenses but excludes legal
expenses). ViRexx intends to use the net proceeds from the Offering
to fund capital, operating and product development expenditures as
follows:
(i) 55%
shall be allocated to ChimigenTM
Platform development;
|
(ii)
|
15%
shall be allocated to OcclusinTM
50 Injection and OcclusinTM
500 AED development;
|
(iii) 15%
to further development of the AIT™ Platform; and
(iv) the
remainder for general working capital.
The
percentage amounts listed in (i) to (iii) above include administration and
working capital amounts allocated to the specific programs mentioned, however,
any amounts remaining will be allocated to general working capital. The actual
use of the net proceeds of the Offering may vary depending on operating and
capital needs and the progress of all research and development programs from
time to time. Accordingly, management of the Corporation will have
the broad discretion in the application of the proceeds of the
Offering. Pending the use of proceeds outlined, the Corporation
intends to invest the net proceeds of the Offering in investment grade,
short-term, interest bearing securities.
Currently
the Corporation’s programs are in the early stages and pre-clinical phase of
development. Certain indications have reached the Phase I stage of
development and one has reached Phase II clinical trials. The funding
received from this Offering will be used to solidify proof-of-concept for a
number of our indications and platforms as well as progress a number of
pre-clinical programs to file as Investigational New Drug in order to progress
to human clinical trials. The research will be completed by the
Corporation’s research teams as well as subcontractors with required specialist
knowledge or facilities. Commercialization and production can only be
achieved once all regulatory steps have been completed. This usually
includes three phases of clinical trials which depending on the drug, device or
product being tested will vary in length and requirements to
complete. These steps can extend a number of years and can be costly
to complete. As we are an early stage research and development
Corporation, we do not expect to be at the commercialization stage prior to 2010
for any of our potential products, although this could vary depending on
regulatory approval. Given the uncertainty around the design,
requirements and timing of future clinical trials, an estimate of these future
costs is not reasonable at this time.
Further
breakdown of the expected use of proceeds as allocated above is as
follows:
|
Key
Milestone
|
Expected
Use of Proceeds*
|
Expected
Date of Completion **
|
|
Completion
of data review and assessment of the AITTM
development strategy;
|
$300,000
|
August
2008
|
|
Initiation
of a Phase II clinical trial in collaboration with the Gynecologic
Oncology Group (GOG) examining OvaRex®
MAb in conjunction with cyclophosphamide in ovarian cancer patients who
have relapsed and undergone a second round of
chemotherapy;
|
$200,000
|
March
2009
|
|
Establish
a partnership for the development and commercialization of Occlusin™
products in Europe and / or Asia;
|
$600,000
|
November
2008
|
|
Establish
partnership for development and commercialization of OvaRex® MAb in
Europe;
|
$100,000
|
January
2009
|
|
Demonstrate
in vivo efficacy
of Chimigen™ WEEV Vaccine in preclinical models;
|
$300,000
|
September
2008
|
|
Demonstrate
in vivo immune
response to multiantigen Chimigen™ Hepatitis B Therapeutic Vaccine in
preclinical models.
|
$1,320,000
|
November
2008
|
|
Demonstrate
ex vivo
immunological efficacy of Chimigen™ Influenza Vaccine in laboratory
assays;
|
$280,000
|
November
2008
|
|
Implement
Chimigen™ WEEV Vaccine development plan, should BARDA, NIAID-NIH funding
be received;
|
$300,000
|
September
2008
|
|
General
and administration costs
|
$597,778
|
|
|
Total
|
$3,997,778
|
*
Includes net proceeds from the Offering in the amount of CA$2,997,778 and
CA$1,000,000 received from the Standby Purchaser under the
Debenture
**
Management’s current expectation although actual results could differ and be
significantly affected by “Risk Factors”
For
additional information regarding the significant events that must occur please
review the “Business Strategy and Key Milestones” sections of this
prospectus.
PRINCIPAL
SHAREHOLDERS
To the
knowledge of the management of the Corporation, as of the date hereof, no person
or company owns, directly or indirectly, is the beneficial owner of, or
exercises control or direction over more than 10 percent of any class or series
of voting securities of the Corporation other than the following:
|
Name
of Shareholder
|
Position
with the Corporation
|
Number
and Class of Securities
|
Percentage
of Class of Securities
|
|||
|
Estate
of Dr. Antoine A. Noujaim
|
Shareholder
|
7,446,449
Common Shares
|
10.23%
|
STANDBY
COMMITMENT
The
Corporation has entered into a Standby Purchase Agreement with the Standby
Purchaser. Pursuant to the Standby Purchase Agreement, the Standby
Purchaser has agreed, subject to certain terms and conditions, to exercise all
of its Basic Subscription Rights and to purchase, at the Subscription Price,
that number of common shares of the Corporation resulting in aggregate
subscription proceeds to the Corporation equal to the difference between (i) the
proceeds received by the Corporation in connection with the exercise of all
Basic Subscription Rights and all Additional Subscription Privileges; and (ii)
CA$3,000,000.
The
Standby Purchaser has also loaned to the Corporation, pursuant to the Debenture,
the amount of CA$1 million. Repayment of the Debenture will be
secured under a General Security Agreement charging all present and
after-acquired property of ViRexx, with specific charges on the siRNA patents
(provisional and formal patent application), Chimigen platform patents, Occlusin
platform patents and AIT platform patents (to the extent possible) will be
registered as third party interests in those patents are
resolved. The Debenture will be convertible, at the option of the
holder, into Debenture Units of the Corporation until May 22, 2010, at the
Conversion Price of CA$0.10 per Debenture Unit. Each Debenture Unit
shall consist of one common share and one-half of a Debenture Warrant, each such
whole Debenture Warrant entitling the holder to purchase one additional common
share at a price of CA$0.15 for a period of twelve months from the date of
issue. The Debenture shall bear interest at a rate of 6% per annum,
which interest may be converted into common shares at the Conversion Price at
the option of the holder.
The
Standby Purchaser has provided usual representations, warranties and covenants
under the Standby Purchase Agreement. The obligation of the Standby
Purchaser to complete the closing of the transactions set out in the Standby
Purchase Agreement is subject to the satisfaction in full of the following
conditions, among others: (i) the completion of the Offering in accordance with
this prospectus; (ii) there shall be no order to cease or suspend trading in any
securities of the Corporation; (iii) no any inquiry, action, suit, investigation
(formal or informal) or other proceeding is commenced, threatened or announced;
(iv) the Corporation shall not be in breach of, default under or non-compliance
with any material representation, warranty, covenant, term or condition of the
Standby Purchase Agreement; and (v) the Dealer Manager shall not have determined
that it is not proceeding with the Rights Offering.
The
Standby Purchaser is not engaged as an underwriter in connection with the
Offering and has not been involved in the preparation of or performed any review
of this prospectus in the capacity of an underwriter. The Standby
Purchaser and the Dealer Manager have entered into a waiver agreement pursuant
to which the Standby Purchaser acknowledged that it has not relied on the
Prospectus in making an investment in the Rights and the Shares.
CANADIAN
FEDERAL INCOME TAX CONSIDERATIONS
In the
opinion of Parlee McLaws LLP, Canadian counsel to the Corporation, the following
is a summary of the principal Canadian federal income tax considerations
generally applicable to Shareholders of the Corporation who, for the purposes of
the Income Tax Act
(Canada) (the “Act”),
are resident in Canada, deal at arm’s length with the Corporation and hold, or
will hold, Rights and any Shares acquired on exercise of the Rights as capital
property. The Rights and Shares generally will constitute capital
property to a Shareholder unless the Shareholder holds such securities in the
course of carrying on a business of trading or dealing in securities or
otherwise as part of a business of buying and selling securities or has acquired
such securities in a transaction or transactions considered to be an adventure
in the nature of trade. Certain Shareholders who might not otherwise
be considered to hold their securities as capital property may be entitled, in
certain circumstances, to treat their securities as capital property by making
an election under subsection 39(4) of the Act.
This
summary is based upon the current provisions of the Act, the regulations
thereunder, all proposed amendments thereto publicly released by the Department
of Finance prior to the date hereof and counsel’s understanding of the current
administrative and assessing practices of the Canada Revenue
Agency. The income tax consequences under the Taxation Act (Québec) are
identical to those under the Act. Except for the proposed amendments
referred to above, this summary does not take into account or anticipate any
change in law or administrative or assessing practices whether by legislative,
governmental or judicial action. No guarantee can be given that the
Act will not be amended in the future such that comments in this section no
longer will be valid. This summary does not take into
account the tax consequences resulting from the purchase of Rights in the open
market.
The Act
contains certain provisions relating to securities held by persons that are
“financial institutions” for purposes of the Act (the “Mark-to-Market
Rules”). This summary does not take into account these
Mark-to-Market Rules or any proposed amendments thereto. Taxpayers
who are “financial institutions” for purposes of the Act should consult their
own tax advisors.
This
summary is of a general nature and does not take into account the laws of any
province or territory or of any jurisdiction outside Canada. It is
not intended to be, nor should it be construed to be, legal or tax advice to any
particular Shareholder. Shareholders are encouraged to
consult their own tax advisors regarding the income tax considerations
applicable to them.
This
summary does not address any Canadian federal income tax considerations
applicable to non-residents of Canada, and non-residents should consult their
own tax advisors regarding the tax consequences of acquiring and holding Rights
or Shares.
Receipt
of Rights
No amount
will be required to be included in computing the income of a Shareholder as a
consequence of acquiring Rights under the Offering. The adjusted cost
base or cost of Rights received by a Shareholder under the Offering will be
nil. If a Shareholder holds Rights received pursuant to this Offering
and purchases Rights otherwise than pursuant to the Offering, the cost of each
Right held by a Shareholder will be the aggregate cost of the Rights divided by
the total number of Rights held at that time.
Exercise
of Rights
The
exercise of Rights will not constitute a disposition of property for purposes of
the Act. Consequently, no gain or loss will be realized upon the
exercise of Rights. A Share acquired by a Shareholder upon the
exercise of Rights will have a cost to the Shareholder equal to the aggregate of
the Subscription Price for such Share and the cost to the Shareholder of the
Rights exercised to acquire the Shares. The cost of a Share acquired
by a Shareholder upon the exercise of Rights will be averaged with the adjusted
cost base to the Shareholder of all other common shares held at that time as
capital property to determine the adjusted cost base of each such common share
to the Shareholder.
Disposition
of Rights
Upon the
disposition of a Right by a Shareholder, other than pursuant to the exercise
thereof, the Shareholder will realize a capital gain (or capital loss) to the
extent that the proceeds of disposition, net of reasonable costs of the
disposition, exceed (or are less than) the adjusted cost base of the Right to
the Shareholder. One-half of a capital gain (a “taxable capital
gain”) will be included in the Shareholder’s income, and one-half of a capital
loss may be deducted against taxable capital gains in accordance with the
detailed rules in the Act in that regard.
Expiry
of Rights
Upon the
expiry of an unexercised Right, a Shareholder will realize a capital loss equal
to the adjusted cost base of the Right to the Shareholder.
PURCHASERS’
STATUTORY RIGHTS
Securities
legislation in certain of the provinces of Canada provides purchasers with the
right to withdraw from an agreement to purchase securities. This
right may be exercised within two business days after receipt or deemed receipt
of a prospectus and any amendment. In several of the provinces,
securities legislation further provides a purchaser with remedies for rescission
or, in some jurisdictions, revision of the price or damages, if the prospectus
and any amendment contains a misrepresentation or is not delivered to the
purchaser, provided that such remedies for rescission, revision of the price or
damages are exercised by the purchaser within the time limit prescribed by the
securities legislation of the purchaser’s province. The purchaser
should refer to any applicable provisions of the securities legislation of the
purchaser’s province for the particulars of these rights or consult with a legal
adviser.
RISK
FACTORS
An
investment in the Shares is subject to a number of risks. A
prospective purchaser of the Shares should carefully consider the information
and risks faced by the Corporation described in other sections of this
prospectus, the documents incorporated herein by reference, including, without
limitation, the consolidated financial statements and the related notes, the
risk factors set out in under the heading, “Risk Factors” in the Form 20-F, and
the following risk factors:
Risks
Related to the Corporation
Our
success depends on the management of growth.
Our
future growth, if any, may cause a significant strain on management,
operational, financial and other resources. Our ability to
effectively manage growth will require us to implement and improve our
scientific, operational, financial and management information systems and to
expand the number of, and to train, manage and motivate, our
employees. These demands may require the addition of new management
personnel and the development of additional expertise by
management. Any increase in resources devoted to research, product
and business development without a corresponding increase in our scientific,
operational, financial and management information systems could have a material
adverse effect on our performance. The failure of our management team
to effectively manage growth could have a material adverse effect on our
business, financial condition and results of operations.
We
may incur losses, higher development costs and/or lower revenues associated with
currency fluctuations and may not be able to effectively hedge our
exposure.
Our
operations are in many instances conducted in currencies other than the Canadian
dollar and fluctuations in the value of currencies relative to the Canadian
dollar could cause us to incur currency exchange losses, higher development
costs and/or lower revenues.
We expect
that our U.S. dollar denominated expenditures will increase as we undertake
clinical trials in the United States, scale up manufacturing of our product
candidates, are required to pay milestones under our license agreements and
should we decide to further expand our U.S. operations. To the extent
that our U.S. dollar denominated revenues from development and commercialization
agreements and our existing U.S. dollar cash, cash equivalents and short term
investments do not cover our U.S. denominated expenditures we will need to
purchase U.S. dollars at the then prevailing exchange rates.
We
currently do not implement any currency hedging techniques to mitigate the
impact of currency fluctuations on our financial results. These
techniques, if implemented in the future, do not eliminate the effects of
currency fluctuations with respect to anticipated revenues or cash flows, and,
as they are short term in nature, would not protect us from prolonged periods of
currency fluctuations.
Acquisitions
of companies or technologies may result in disruption to our
business.
As part
of our business strategy, we may acquire additional assets or businesses
principally related to, or complementary to, our current
operations. Any such acquisitions will be accompanied by certain
risks including exposure to unknown liabilities or acquired companies, higher
than anticipated acquisition costs and expenses, the difficulty and expense of
integrating operations and personnel of acquired companies, disruption of our
ongoing business, diversion of management’s time and attention, and possible
dilution to shareholders.
We may
not be able to successfully overcome these risks and other problems associated
with acquisitions and this may adversely affect our business.
The
biotechnology industry has a history of patent and other intellectual property
litigation, and we may be involved in costly intellectual property
lawsuits.
The
biotechnology industry has a history of patent and other intellectual property
litigation, and these lawsuits likely will continue. In order to
protect or enforce our intellectual property rights, we may have to initiate
legal proceedings against third parties. We may also have to defend claims
brought against us or any purchaser or user of our potential products asserting
that such product or process infringes intellectual property rights of third
parties. Legal
proceedings relating to intellectual property typically are expensive, take
significant time and divert management’s attention from other business
matters. The cost of this litigation could adversely affect our
business. Further, if we do not prevail in an infringement lawsuit
brought against us, we might have to pay substantial damages, and we could be
required to stop the infringing activity or obtain a license to use the patented
technology. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to us, if at all. In the event a claim is
successful against us and we cannot obtain a license to the relevant technology
on acceptable terms, license a substitute technology or redesign our potential
products to avoid infringement, our business, financial condition and operating
results would be materially adversely affected.
Our
clinical trials could take longer to complete than we project or may not be
completed at all.
The
clinical trials of our products under development may not be completed on
schedule and the regulatory authorities may not ultimately approve any of our
product candidates for commercial sale. If we fail to adequately
demonstrate the safety and efficacy of a product under development, this would
delay or prevent regulatory approval of the product candidate, which could
prevent us from achieving profitability.
Clinical
trials vary in design by factors including dosage, end points, length, controls,
and numbers and types of patients enrolled. Although for planning
purposes we project the commencement, continuation and completion of clinical
trials for products currently being developed and new products to be developed
in future, the actual timing of these events may be subject to significant
delays relating to various causes, including lack of adequate funding,
scheduling conflicts with participating clinical institutions, difficulties in
identifying and enrolling patients who meet trial eligibility criteria, and
shortages of available drug supply. We may not commence, continue or
complete clinical trials involving our products as projected.
We rely
on third parties to conduct, supervise or monitor some or all aspects of
clinical trials for our products. We will have less control over the
timing and other aspects of these clinical trials than if we conducted them
entirely on our own.
In
addition, we may suffer a delay in the completion of any one of our clinical
trials because of requests from government regulators to conduct additional
trials. Failure to commence or complete or delays in, any of our
planned clinical trials would delay, and possibly prevent us from
commercialization of our product candidates, and thus seriously harm our
business.
We
deal with hazardous materials and must comply with environmental laws and
regulations, which can be expensive and restrict how we do
business.
Our
research and development processes involve the controlled use of hazardous and
radioactive materials. We are subject to federal, provincial and
local laws and regulations governing the use, manufacture, storage, handling and
disposal of such materials and waste products. The risk of accidental
contamination or injury from handling and disposing of such materials cannot be
completely eliminated. In the event of an accident involving
hazardous or radioactive materials, we could be held liable for resulting
damages. We are not insured with respect to this
liability. Any such liability for this type of risk could exceed our
resources. In the future we could incur significant costs to comply
with environmental laws and regulations.
All
of ViRexx’s potential products are in the research and development stage and
will require further development and testing before they can be marketed
commercially.
We have
not completed the development of any commercial products, and accordingly we
have not begun to market or generate revenues from sales of the products we are
developing.
Prospects
for companies in the biotechnology industry generally may be regarded as
uncertain given the nature of the industry and, accordingly, investments in
biotechnology companies should be regarded as speculative. There can be no
assurance that the research and development programs conducted by the
Corporation or its partners will result in any products becoming commercially
viable products, and in the event that any product or products result from the
research and development program, it is unlikely they will be commercially
available for a number of years.
To
achieve profitable operations the Corporation, alone or with others, must
successfully develop, introduce and market its products. To obtain regulatory
approvals for products being developed for human use, and to achieve commercial
success, human clinical trials must demonstrate that the product is safe for
human use and that the product shows efficacy. Unsatisfactory results obtained
from a particular study relating to a program may cause the Corporation to
abandon its commitment to that program or the product being tested. No
assurances can be provided that any current or future animal or human test, if
undertaken, will yield favourable results.
There
are inherent risks in pharmaceutical research and development.
Pharmaceutical
research and development is highly speculative and involves a high and
significant degree of risk. The marketability of any product developed by the
Corporation will be affected by numerous factors beyond the Corporation’s
control, including:
|
·
|
the
discovery of unexpected toxicities or lack of sufficient efficacy of
products which make them unattractive or unsuitable for human
use;
|
|
·
|
preliminary
results as seen in animal and/or limited human testing may not be
substantiated in larger controlled clinical
trials;
|
|
·
|
manufacturing
costs or other factors may make manufacturing of products impractical and
non- competitive;
|
|
·
|
proprietary
rights of third parties or competing products or technologies may preclude
commercialization;
|
|
·
|
requisite
regulatory approvals for the commercial distribution of products may not
be obtained; and
|
|
·
|
other
factors may become apparent during the course of research, up-scaling or
manufacturing which may result in the discontinuation of research and
other critical projects.
|
The
Corporation’s products under development have never been manufactured on a
commercial scale, and there can be no assurance that such products can be
manufactured at a cost or in a quantity to render such products commercially
viable. Production and utilization of the Corporation’s products may require the
development of new manufacturing technologies and expertise. The impact on the
Corporation’s business in the event that new manufacturing technologies and
expertise are required to be developed is uncertain. There can be no assurance
that the Corporation will successfully meet any of these technological
challenges, or others that may arise in the course of development.
Pharmaceutical
products are subject to intense regulatory approval processes.
The
regulatory process for pharmaceuticals, which includes preclinical studies and
clinical trials of each compound to establish its safety and efficacy, takes
many years and requires the expenditure of substantial resources. Moreover, if
regulatory approval of a drug is granted, such approval may entail limitations
on the indicated uses for which it may be marketed. Failure to comply with
applicable regulatory requirements can, among other things result in suspension
of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution. Further, government policy may change,
and additional government regulations may be established that could prevent or
delay regulatory approvals for the Corporation’s products. In addition, a
marketed drug and its manufacturer are subject to continual review. Later
discovery of previously unknown problems with the product or manufacturer may
result in restrictions on such product or manufacturer, including withdrawal of
the product from the market.
Regulatory
authorities may deny approval of a marketing application if required regulatory
criteria are not satisfied, or may require additional testing. Product approvals
may be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. Regulatory
authorities in other countries may require further testing and surveillance
programs to monitor the pharmaceutical product that has been commercialized.
Non-compliance with applicable requirements can result in fines and other
judicially imposed sanctions, including product withdrawals, product seizures,
injunction actions and criminal prosecutions.
Governmental
regulators have increased requirements for drug purity and have increased
environmental burdens upon the pharmaceutical industry. Because pharmaceutical
drug manufacturing is a highly regulated industry, requiring significant
documentation and validation of manufacturing processes and quality control
assurance prior to approval of the facility to manufacture a specific drug,
there can be considerable transition time between the initiation of a contract
to manufacture a product and the actual initiation of manufacture of that
product. Any lag time in the initiation of a contract to manufacture product and
the actual initiation of manufacture could cause the Corporation to lose profits
or incur liabilities.
ViRexx’s
operations and products may be subject to other government manufacturing and
testing regulations.
Securing
regulatory approval for the marketing of therapeutics by regulatory agencies is
a long and expensive process, which can delay or prevent product development and
marketing. Approval to market products may be for limited applications or may
not be received at all.
The
products anticipated to be manufactured by the Corporation will have to comply
with GMP regulations and other regulatory guidelines promulgated by regulatory
authorities of the countries in which ViRexx wishes to market its products.
Additionally, certain of the Corporation’s customers may require the
manufacturing facilities contracted by the Corporation to adhere to additional
manufacturing standards. Compliance with GMP regulations requires manufacturers
to expend time, money and effort in production, and to maintain precise records
and quality control to ensure that the product meets applicable specifications
and other requirements. Regulatory bodies periodically inspect
drug-manufacturing facilities to ensure compliance with applicable GMP
requirements. If the manufacturing facilities contracted by the Corporation fail
to comply with the GMP requirements, the facilities may become subject to
possible regulatory action and manufacturing at the facility could consequently
be suspended. The Corporation may not be able to contract suitable alternative
or back-up manufacturing facilities on terms acceptable to the Corporation or at
all.
Regulatory
agencies may also require the submission of any lot of a particular product for
inspection. If the lot product fails to meet the authority’s requirements, then
the authority could take any of the following actions: (i) restrict the release
of the product; (ii) suspend manufacturing of the specific lot of the product;
(iii) order a recall of the lot of the product; or (iv) order a seizure of the
lot of the product. The Corporation is subject to regulation by governments in
many jurisdictions and, if the Corporation does not comply with healthcare,
drug, manufacturing and environmental regulations, among others, the
Corporation’s existing and future operations may be curtailed, and the
Corporation could be subject to liability.
In
addition to the regulatory approval process, the Corporation may be subject to
regulations under local, provincial, state, federal and foreign law, including
requirements regarding occupational health, safety, laboratory practices,
environmental protection and hazardous substance control, and may be subject to
other present and future local, provincial, state, federal and foreign
regulations.
The
biotechnology industry is extremely competitive and the Corporation must
successfully compete with larger companies with substantially greater
resources.
Technological
competition in the pharmaceutical industry is intense and the Corporation
expects competition to increase. Other companies are conducting research on
therapeutics involving immunotherapy and embolotherapy as well as other novel
treatments or therapeutics for the treatment of cancer, infectious diseases and
solid tumours, which may compete with the Corporation’s product. Many of these
competitors are more established, benefit from greater name recognition and have
substantially greater financial, technical and marketing resources than the
Corporation. In addition, many of these competitors have significantly greater
experience in undertaking research, preclinical studies and human clinical
trials of new pharmaceutical products, obtaining regulatory approvals and
manufacturing and marketing such products. In addition, there are several other
companies and products with which the Corporation may compete from time to time,
and which may have significantly better and larger resources than the
Corporation. Accordingly, the Corporation’s competitors may succeed in
manufacturing and/or commercializing products more rapidly or effectively, which
could have a material adverse effect on the Corporation’s business, financial
condition or results of operations.
The
Corporation anticipates that it will face increased competition in the future as
new products enter the market and advanced technologies become available. There
can be no assurance that existing products or new products developed by the
Corporation’s competitors will not be more effective, or be more effectively
manufactured, marketed and sold, than any that may be developed or sold by the
Corporation. Competitive products may render the Corporation’s products obsolete
and uncompetitive prior to recovering research, development or commercialization
expenses incurred with respect to any such products.
ViRexx
relies on patents and proprietary rights to protect its technology.
The
Corporation’s success will depend, in part, on its ability to obtain patents,
maintain trade secret protection and operate without infringing the rights of
third parties. The Corporation has patents in the United States and Europe and
has filed applications for patents in the United States and under the Patent
Cooperation Treaty, allowing it to file in other jurisdictions. The
Corporation’s success will depend, in part, on its ability to obtain, enforce
and maintain patent protection for its technology in Canada, the United States
and other countries. The Corporation cannot be assured that patents will issue
from any pending applications or that claims now or in the future, if allowed
under issued patents, will be sufficiently broad to protect its technology. In
addition, no assurance can be given that any patents issued to or licensed by
the Corporation will not be challenged, invalidated, infringed or circumvented,
or that the rights granted thereunder will provide continuing competitive
advantages to the Corporation.
From time
to time management may make a determination that superior economic gain made be
attained by perpetually protecting an invention as a trade secret rather than
disclosing it in a patent application. Inventions held as trade
secrets can be independently discovered by others. In addition, the contractual
agreements by which we protect our unpatented technology and trade secrets may
be breached. If technology similar to ours is independently developed
or our contractual agreements are breached, our technology will lose value and
our business will be irreparably harmed.
The
patent positions of pharmaceutical and biotechnology firms, including the
Corporation, are generally uncertain and involve complex legal and factual
questions. In addition, it is not known whether any of the Corporation’s current
research endeavours will result in the issuance of patents in Canada, the United
States, or elsewhere, or if any patents already issued will provide significant
proprietary protection or will be circumvented or invalidated. Since patent
applications in the United States and Canada are maintained in secrecy until at
least 18 months after filing of the original priority application, and since
publication of discoveries in the scientific or patent literature tends to lag
behind actual discoveries by several months, the Corporation cannot be certain
that it or any licensor was the first to create inventions claimed by pending
patent applications or that it was the first to file patent applications for
such inventions. Loss of patent protection could lead to generic competition for
these products, and others in the future, which would materially and adversely
affect the financial prospects for these products and the Corporation.
Similarly, since patent applications filed before October 2000 in the United
States are maintained in secrecy until the patents issue or foreign
counterparts, if any, publish, the Corporation cannot be certain that it or any
licensor was the first creator of inventions covered by pending patent
applications or that it or such licensor was the first to file patent
applications for such inventions. There is no assurance that the Corporation’s
patents, if issued, would be held valid or enforceable by a court or that a
competitor’s technology or product would be found to infringe such
patents.
Accordingly,
the Corporation may not be able to obtain and enforce effective patents to
protect its proprietary rights from use by competitors, and the patents of other
parties could require the Corporation to stop using or pay to use certain
intellectual property, and as such, the Corporation’s competitive position and
profitability could suffer as a result.
In
addition, the Corporation relies on, and intends in the future to continue to
rely on licenses under patents or other proprietary rights of third parties. No
assurance can be given that any licenses required under such patents or
proprietary rights will be available on terms acceptable to the Corporation, or
that our existing licenses or new licenses, if obtained, will not terminate, or
that they will be renewed. We cannot assure that these licenses will
remain in good standing or that the technology we have licensed under these
agreements has been adequately protected or is free from claims of infringement
of the intellectual property rights of third parties. Pursuant to the
terms of the licenses and any agreements we may enter into in the future, we are
and could be obligated to exercise diligence in bringing potential products to
market and to make license payments and certain potential milestone payments
that, in some instances, could be substantial. We are obligated and may in the
future be obligated, to make royalty payments on the sales, if any, of product
candidates resulting from licensed technology and, in some instances, may be
responsible for the costs of filing and prosecuting patent applications. Because
we require additional funding, we may not be able to make payments under current
or future license agreements, which may result in our breaching the terms of any
such license agreements. Any breach or termination of any license could have a
material adverse effect on our business, financial condition, and results of
operations.
If the
Corporation does not obtain new licenses, or if any of the existing licenses are
terminated or not renewed, it could encounter delays in introducing one or more
of its products to the market while it attempts to design around such patents,
or could find that the development, manufacture or sale of products requiring
such licenses could be foreclosed. In addition, the Corporation could incur
substantial costs in defending itself in suits brought against the Corporation
on such patents or in suits in which the Corporation attempts to enforce its own
patents against other parties.
ViRexx’s
products may fail or cause harm, subjecting the Corporation to product liability
claims, which are uninsured.
The sale
and use of products of the Corporation entail risk of product liability. The
Corporation currently does not have any product liability insurance. There can
be no assurance that it will be able to obtain appropriate levels of product
liability insurance prior to any sale of its pharmaceutical products. An
inability to obtain insurance on economically feasible terms or to otherwise
protect against potential product liability claims could inhibit or prevent the
commercialization of products developed by the Corporation. The obligation to
pay any product liability claim or a recall of a product could have a material
adverse effect on the business, financial condition and future prospects of the
Corporation.
New
products may not be accepted by the medical community or consumers.
The
Corporation’s primary activity to date has been research and development and the
Corporation has no experience in marketing or commercializing products. The
Corporation will likely rely on third parties to market its products, assuming
that they receive regulatory approvals. If the Corporation relies on third
parties to market its products, the commercial success of such product may be
outside of its control. Moreover, there can be no assurance that physicians,
patients or the medical community will accept the Corporation’s product, even if
the Corporation’s product proves to be safe and effective and is approved for
marketing by Health Canada, the Food and Drug Administration of the United
States (FDA) and other regulatory authorities. A failure to successfully market
its products would have a material adverse affect on the Corporation’s
revenue.
ViRexx’s
technologies may become obsolete.
Rapidly
changing markets, technology, emerging industry standards and frequent
introduction of new products characterize the pharmaceutical industry. The
introduction of new products embodying new technologies, including new
manufacturing processes, and the emergence of new industry standards may render
the Corporation’s products obsolete, less competitive or less marketable. The
process of developing the Corporation’s products is extremely complex and
requires significant continuing development efforts and third party commitments.
The Corporation’s failure to develop new technologies and products and the
obsolescence of existing technologies could adversely affect its business. The
Corporation may be unable to anticipate changes in its potential customer
requirements that could make the Corporation’s existing technology obsolete. The
Corporation’s success will depend, in part, on its ability to continue to
enhance its existing technologies, develop new technology that addresses the
increasing sophistication and varied needs of the market, and respond to
technological advances and emerging industry standards and practices on a timely
and cost-effective basis. The development of the Corporation’s proprietary
technology entails significant technical and business risks. The Corporation may
not be successful in using its new technologies or exploiting its niche markets
effectively or adapting its businesses to evolving customer or medical
requirements or preferences or emerging industry standards.
ViRexx
is dependent on the success of its strategic relationships with third
parties.
The
Corporation is a party to collaborative agreements with third parties relating
to OvaRex® MAb and four other products from the AIT™ Platform. The Corporation
intends to seek to enter into additional strategic relationships with
collaborators to develop and commercialize its products. The
Corporation will be dependent on its collaborators to fund, conduct clinical
trials for, obtain regulatory approvals for, manufacture, market and sell
products using the Corporation’s technology. The Corporation’s collaborators may
not devote the resources necessary or may otherwise be unable to complete
development and commercialization of these potential products. The Corporation’s
future success is dependent on the development and maintenance of strategic
relationships. If the Corporation cannot maintain its existing collaborations or
establish new collaborations, it would be required to terminate the development
and commercialization of products or undertake product development and
commercialization activities at its own expense.
If the
Corporation fails to enter into strategic relationships for development of
products on terms favourable to the Corporation or if these collaborators fail
to effectively complete the clinical trials, the regulatory approval of the
Corporation’s products may be delayed, and any such delay may have a materially
adverse effect on the Corporation’s results of operations and business. The
Corporation may also rely on collaborators to market its products. If the
Corporation fails to enter collaborations or if its collaborators fail to
effectively market the Corporation’s products, the Corporation may lose the
opportunity to successfully commercialize the products. The Corporation can make
no assurance that it will be able to enter additional collaborations on terms
that are acceptable to the Corporation. The Corporation and its collaborators
may not manufacture antibodies or fill vials, and will seek to enter into
agreements with third parties to manufacture its antibodies (or alternatively,
to consider direct manufacturing) and to fill vials.
The
Corporation also relies on a number of alliances and collaborative partnerships
for the development of its products. The Corporation cannot guarantee that these
relationships will continue or result in any successful
developments.
ViRexx
has no operating revenues and a history of losses.
To date,
the Corporation has not generated sufficient revenues to offset its research and
development costs and accordingly has not generated positive cash flow or made
an operating profit. We have experienced significant operating losses in each
year since our inception. The Corporation anticipates that it will continue to
incur significant losses during 2008 and in the foreseeable future. The
Corporation will not reach profitability until after successful
commercialization of one or more of its products.
ViRexx
will need to succeed in this Rights Offering and additional financing in the
future to fund the research and development of its products and to meet its
ongoing capital requirements.
As of
March 31, 2008, the Corporation had cash and cash equivalents, including
short-term investments, of CA$1.1 million and a working capital deficit of
approximately CA$1 million (current assets less current liabilities). The
Corporation presently anticipates that its average cash usage for 2008 will be
approximately $550,000 per month. Its existing capital resources are not
adequate to fund its current plans for research and development activities into
2009. This Offering is key to ViRexx’s capacity to currently fund its
plans. In addition another financing will be necessary within a few
months if this Offering yields less than the maximum
possible. Factors that will affect the Corporation’s anticipated
monthly cash usage include, but are not limited to, the number of manufacturing
runs required to supply its clinical trial program and the cost of each run, the
number of clinical trials ultimately approved, the timing of patient enrolment
in the approved clinical trials, the actual costs incurred to support each
clinical trial, the number of treatments each patient will receive, the timing
of research and development activity, and the level of pre-clinical activity
required by a regulatory authority. The Corporation anticipates that it may need
additional financing in the future to fund research and development and to meet
its on going capital requirements. The amount of future capital requirements
will depend on many factors, including continued scientific progress in its drug
discovery and development programs, progress in its pre-clinical and clinical
evaluation of drug candidates, time and expense associated with filing,
prosecuting and enforcing its patent claims and costs associated with obtaining
regulatory approvals. In order to meet such capital requirements, the
Corporation will consider contract fees, collaborative research and development
arrangements, and additional public or private financings (including the
incurrence of debt and the issuance of additional equity securities) to fund all
or a part of particular programs as well as potential partnering or licensing
opportunities. There can be no assurance that additional funding will be
available or, if available, that it will be available on acceptable terms. If
adequate funds are not available on terms favourable to the Corporation, the
Corporation may have to reduce substantially or eliminate expenditures for
research and development, testing, production and marketing of its proposed
products, or obtain funds through arrangements with corporate partners that
require the Corporation to relinquish rights to certain of its technologies or
products. There can be no assurance that the Corporation will be able to raise
additional capital if its current capital resources are exhausted.
ViRexx
is dependent on its key employees and collaborators.
The
Corporation’s ability to develop the product will depend, to a great extent, on
its ability to attract and retain highly qualified scientific personnel and to
develop and maintain relationships with leading research institutions.
Competition for such personnel and relationships is intense. There can be no
assurance that we will be able to retain and attract qualified individuals
currently or in the future on acceptable terms, or at all. The Corporation is
highly dependent on the principal members of its management staff as well as its
advisors and collaborators, the loss of whose services might impede the
achievement of development objectives. The persons working with the Corporation
are affected by a number of influences outside of the control of the
Corporation. The loss of key employees and/or key collaborators may affect the
speed and success of product development. In addition, we do not maintain “key
person” life insurance on any officer, employee or collaborator.
ViRexx
earns interest income on its excess cash reserves and is exposed to changes in
interest rates.
The
Corporation invests its excess cash reserves in investment vehicles that provide
a rate of return with little risk to principal. As interest rates change the
amount of interest income the Corporation earns will be directly
impacted.
Lawsuits against
ViRexx
ViRexx is
defending several lawsuits commenced by former members of ViRexx management and
Clarus Securities Ltd. If they are not settled or otherwise resolved
for less than the claimed amounts, ViRexx may, if it loses the actions, be faced
with significant payments exceeding $2 million. This would greatly
interfere with ViRexx’s ability to achieve its research and development
objectives.
In
addition, prospective purchasers of the Shares should carefully consider the
following risks specifically related to this Offering.
Risks
Related to this Offering
Dilution
If a
Shareholder does not subscribe for Shares issuable upon exercise of Rights
pursuant to this Offering, the Shareholder’s current percentage ownership in the
Corporation will be diluted by the issue of Shares upon the exercise of Rights
by other holders of Rights.
Trading
Market for Rights
Although
the Corporation expects that the Rights will be listed on the TSX, the
Corporation cannot provide any assurance that an active or any trading market in
the Rights will develop or that Rights can be sold on the TSX at any
time.
ViRexx’s
share price has been, and is likely to continue to be, highly volatile and your
investment could decline in value.
The
market price of shares for biopharmaceutical companies is often very
volatile. ViRexx’s stock price on the TSX fluctuated from $0.08 in
December 2007 (low) to $1.34 in March 2007 (high) during the fiscal year ended
December 31, 2007. In the period beginning January 1, 2008 to
July 8, 2008 ViRexx’s stock price on the TSX has fluctuated from $0.120 in
February 2008 to $0.045 in May 2008. Factors such as announcements by
ViRexx or competitors of clinical trial results, technological innovations, new
corporate partnerships or changes in existing partnerships, new commercial
products or patents, the development of proprietary rights by ViRexx or others,
regulatory actions, publications and other factors could have significant effect
on the market price of the common shares of the Corporation. When the market
price of a company’s shares drops significantly, shareholders may initiate
securities class action lawsuits against that company. A lawsuit of this nature
against ViRexx could cause ViRexx to incur substantial costs, expose ViRexx to
significant liability for damages, and could divert the time and attention of
ViRexx’s management and other personnel.
You
will experience immediate dilution in the book value per share of the Shares you
purchase.
Because
the exercise price per Right may be higher than the book value per share of the
common shares of the Corporation, you will suffer substantial dilution in the
net tangible book value of the Shares that you purchase in this
Offering. Assuming all of the Rights are exercised and a net tangible
book value per share of the common shares of the Corporation of approximately
$0.02 as of December 31, 2007, if you exercise Rights under this Offering, you
will suffer immediate and substantial dilution of approximately $0.01 per common
share in the net tangible book value of the common shares of the
Corporation.
ViRexx
has discretion in the use of the net proceeds from this Offering.
ViRexx
currently intends to allocate the net proceeds received from this Offering as
described under “Use of Proceeds”. However, management will have discretion in
the actual application of the net proceeds, and may elect to allocate net
proceeds differently from that described under “Use of Proceeds” if they believe
it would be in ViRexx’s best interests to do so. ViRexx’s shareholders may not
agree with the manner in which management chooses to allocate and spend the net
proceeds. The failure by management to apply these funds effectively could have
a material adverse effect on ViRexx’s business.
Sales
of substantial amounts of ViRexx’s securities may have an adverse effect on the
market price of ViRexx’s securities.
Sales of
substantial amounts of ViRexx’s securities, or the availability of such
securities for sale, could adversely affect the prevailing market prices for
those securities. A decline in the market prices of ViRexx’s securities could
impair ViRexx’s ability to raise additional capital through the sale of
securities should it desire to do so.
ViRexx’s
Articles and certain Canadian laws could delay or deter a change of
control.
The
Corporation’s articles grant the board of directors the authority, subject to
the corporate law of Alberta, to determine or alter the special rights and
restrictions granted to or imposed on the common shares of the Corporation under
a Shareholders’ Rights Plan which ViRexx may adopt.
Any of
the foregoing could prevent or delay a change of control and may deprive or
limit strategic opportunities for ViRexx’s shareholders to sell their common
shares of the Corporation.
Additional
Risks for U.S. Investors
As
a foreign private issuer, ViRexx is subject to different U.S. securities laws
and rules than a domestic U.S. issuer, which may limit the information publicly
available to ViRexx’s shareholders.
As a
foreign private issuer, ViRexx is not required to comply with all the periodic
disclosure requirements of the Securities Exchange Act of 1934 and therefore
there may be less publicly available information about ViRexx than if ViRexx was
a U.S. domestic issuer. In addition, ViRexx’s officers, directors and principal
shareholders are exempt from the reporting and “short-swing” profit recovery
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
thereunder. Therefore, ViRexx’s shareholders may not know on a timely basis when
its officer, directors and principal shareholders purchase or sell ViRexx’s
common shares.
You
may be unable to enforce actions against ViRexx, certain of its directors and
officers, under U.S. federal securities laws.
ViRexx is
a corporation organized under the laws of the Alberta, Canada. All but one of
its directors and all of its officers, reside outside the United States. Because
all or a substantial portion of ViRexx’s assets and the assets of these persons
are located outside the United States, it may not be possible for you to effect
service of process within the United States upon ViRexx or those
persons.
Furthermore,
it may not be possible for you to enforce against ViRexx or its officers or
directors in the United States, judgments obtained in the U.S. courts based upon
the civil liability provisions of the U.S. federal securities laws or other laws
of the United States. There is doubt as to the enforceability, in original
actions in Canadian courts, of liabilities based upon the U.S. federal
securities laws and as to the enforceability in Canadian courts of judgments of
U.S. courts obtained in actions based upon the civil liability provisions of the
U.S. federal securities laws.
Therefore
it may not be possible to enforce those actions action ViRexx, certain of its
directors and officers.
The
business of the Corporation should be considered speculative due to the nature
of the Corporation’s involvement in the development of therapeutic product
candidates. Investment in the Corporation involves a high degree of risk and
should only be considered by those persons who can afford a total loss of their
investment. Purchasers of Shares are cautioned that such risk factors are not
exhaustive.
AUDITORS,
REGISTRAR AND TRANSFER AGENT
The
auditors of the Corporation are Deloitte & Touche LLP, Chartered
Accountants, 2000 Manulife Place, 10180-101 Street, Edmonton, AB T5J 4E4, and
the registrar and transfer agent for the common shares of the Corporation is
Computershare Trust Company of Canada, 600, 530-8th Avenue
SW, Calgary, AB T2P 3S8.
INTEREST
OF EXPERTS
Certain
legal matters relating to the Offering, the Rights and the Shares offered hereby
will be passed upon on behalf of the Corporation by Parlee McLaws LLP as to
matters of Canadian law, and on behalf of the Dealer Manager, by Osler, Hoskin
& Harcourt LLP as to matters of Canadian and U.S. law. To the
knowledge of the management of the Corporation, as at the date hereof, the
partners and associates of Parlee McLaws LLP, as a group, and the partners and
associates of Osler, Hoskin & Harcourt LLP, as a group, beneficially owned,
directly or indirectly, less than 1% of the outstanding common shares of the
Corporation. To the knowledge of management of the Corporation, as of the date
hereof the partners and associates of Parlee McLaws LLP and Osler, Hoskin &
Harcourt LLP, beneficially own, directly and indirectly, less than 1% of the
common shares of the Corporation.
Both
Deloitte & Touche LLP and PricewaterhouseCoopers LLP have advised the
Corporation that they are independent within the meaning of the Rules of
Professional Conduct of the Institute of Chartered Accountants of
Alberta.
STATUTORY
RIGHTS OF WITHDRAWAL AND RESCISSION
Securities
legislation in certain of the provinces of Canada provides purchasers with the
right to withdraw from an agreement to purchase securities. This right may be
exercised within two business days after receipt or deemed receipt of a
prospectus and any amendment. In several of the provinces, securities
legislation further provides a purchaser with remedies for rescission or, in
some jurisdictions, damages if the prospectus and any amendment contains a
misrepresentation or is not delivered to the purchaser, provided that the
remedies for rescission or damages are exercised by the purchaser within the
time limit prescribed by the securities legislation of the purchaser’s province.
The purchaser should refer to any applicable provisions of the securities
legislation of the purchaser’s province for the particulars of these rights or
consult with a legal adviser.
AUDITORS’
CONSENT
We have
read the short form prospectus of ViRexx Medical Corp. (the “Corporation”) dated
July 17, 2008 qualifying the distribution of rights to subscribe for common
shares of the Corporation. We have complied with Canadian generally accepted
standards for an auditor’s involvement with offering documents.
We
consent to the incorporation by reference in the above-mentioned short form
prospectus of our report to the Board of Directors and Shareholders of the
Corporation on the consolidated balance sheet of the Corporation as at December
31, 2007 and the consolidated statements of loss and comprehensive loss,
shareholders’ equity and cash flows for the year ended December 31, 2007 and for
the period from October 30, 2000 (date of incorporation) to December 31,
2007. Our report is dated January 31, 2008 (June 26, 2008 as to the
effects of the restatement as described in Note 24).
/s/
Deloitte & Touche LLP
Chartered
Accountants
Edmonton,
Alberta, Canada
July 17,
2008
AUDITORS’
CONSENT
We have
read the short form prospectus of ViRexx Medical Corp. (the Corporation) dated
July 17, 2008 relating to the issue and sale of Rights to Subscribe for Common
Shares of the Corporation. We have complied with Canadian generally accepted
standards for an auditor's involvement with offering documents.
We
consent to the incorporation by reference in the above-mentioned short form
prospectus of our report to the shareholders of the Corporation on the
consolidated balance sheet of the Corporation as at December 31, 2006 and the
consolidated statements of loss, shareholders’ equity and cash flows for each of
the years in the two-year period ended December 31, 2006. Our report is dated
March 9, 2007.
/s/
PricewaterhouseCoopers LLP
Chartered
Accountants
Edmonton,
Alberta
July 17,
2008
CERTIFICATE
OF THE CORPORATION
Dated: July
17, 2008
This
short form prospectus, together with the documents incorporated herein by
reference, constitutes full, true and plain disclosure of all material facts
relating to the securities offered by this short form prospectus as required by
the securities legislation of each of the provinces of Canada.
|
/s/
Darrell Elliott
Chief
Executive Officer
|
/s/
Brent Johnston
Chief
Financial Officer
|
|
On
behalf of the Board of Directors
|
|
|
/s/
Douglas Gilpin
Director
|
/s/
Jacques LaPointe
Director
|
CERTIFICATE
OF THE DEALER MANAGER
Dated: July
17, 2008
To the
best of our knowledge, information and belief, this short form prospectus,
together with the documents incorporated herein by reference, constitutes full,
true and plain disclosure of all material facts relating to the securities
offered by this prospectus as required by the securities legislation of each of
the provinces of Canada.
DESJARDINS
SECURITIES INC.
By: /s/
Nitin Kaushal
PART
II
INFORMATION
NOT REQUIRED TO BE SENT TO SHAREHOLDERS
EXHIBITS
|
1.1
|
Standby
Purchase Agreement dated May 22, 2008 by and between the Registrant and LM
Funds Corp.
|
|
2.1
|
Form
20-F of the Corporation dated March 31, 2008 for the year ended December
31, 2007 as amended (1)
|
|
2.2
|
Audited
comparative consolidated financial statements of the Corporation and the
notes thereto for the year ended December 31, 2007 and 2006, together
with the report of the auditor thereon, as amended (2)
|
|
2.3
|
Management’s
discussion and analysis of the financial condition and results of
operations of the Corporation for the year ended December 31,
2007(3)
|
|
2.4
|
Management
Information Circular dated April 9, 2007 with respect to the Annual
General Meeting of the Shareholders of the Corporation, which was held on
May 3, 2007(4)
|
|
2.5
|
Material
change report dated April 8, 2008 relating to the resignation of Peter P.
Smetek from the Corporation’s board of directors (5)
|
|
2.6
|
Material
change report dated June 12, 2008 relating to a standby guarantor and a
debt financing of $1,000,000 (6)
|
|
2.7
|
Unaudited
consolidated financial statements of the Corporation for the three months
ended March 31, 2008 (7)
|
|
2.8
|
Management’s
discussion and analysis of the financial condition and results of
operations of the Corporation for the three months ended March 31, 2008
(8)
|
|
3.1
|
Consent
of Deloitte & Touche LLP
|
|
3.2
|
Consent
of Parlee McLaws LLP
|
|
4.1
|
Powers
of Attorney (contained on the signature page of this Registration
Statement)
|
(1)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on July 11, 2008
(2)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on July 11, 2008
(3)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on February 12, 2008
(4)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on April 16, 2008
(5)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on April 8, 2008
(6)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on June 13, 2008
(7)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on May 14, 2008
(8)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on May 14, 2008
POWER
OF ATTORNEY
Each
person whose signature appears below constitutes and appoints Darrell Elliot and
Brent Johnston and each of them as attorneys-in-fact with full power of
substitution, severally, to execute in the name and on behalf of the issuer and
each such person, individually, and in each capacity stated below, one or more
amendments (including post-effective amendments) to the registration statement
as the attorney-in- fact acting in the premises deems appropriate and to file
any such amendment to the registration statement with the Securities and
Exchange Commission.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Date Title
/s/ Darrell
Elliott______
July 17,
2008 Chief
Executive Officer
Darrell
Elliott and Chairman of the
Board of Directors
/s/ Brent
Johnston_____ July
17,
2008
Chief Financial Officer
Brent
Johnston and Principal
Accounting Officer
/s/ Douglas
Gilpin____
July 17,
2008
Director
Douglas
Gilpin
/s/ Jacques
LaPointe___
July 17,
2008
Director
Jacques
LaPointe
Pursuant
to the requirements of Section 6(a) of the Securities Act of 1933, the
Authorized Representative has duly caused this Registration Statement to be
signed on its behalf by the undersigned, solely in its capacity as the duly
authorized representative of ViRexx Medical Corp. in Edmonton, Province of
Alberta on the 17th day of
July, 2008.
VIREXX
MEDICAL CORP.
By: /s/ Brent
Johnston
Name:
Brent Johnston
Title:
Chief Financial Officer
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form F- 7 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Edmonton, Province of Alberta on the 17th day of
July, 2008.
VIREXX
MEDICAL CORP.
By: /s/ Brent
Johnston
Name:
Brent Johnston
Title:
Chief Financial Officer
INDEX
TO EXHIBITS
|
1.1
|
Standby
Purchase Agreement dated May 22, 2008 by and between the
Registrant and LM Funds Corp.
|
|
2.1
|
Form
20-F of the Corporation dated March 31, 2008 for the year ended December
31, 2007 as amended; (1)
|
|
2.2
|
Audited
comparative consolidated financial statements of the Corporation and the
notes thereto for the year ended December 31, 2007 and 2006, together
with the report of the auditor thereon, as amended;
(2)
|
|
2.3
|
Management’s
discussion and analysis of the financial condition and results of
operations of the Corporation for the year ended December 31, 2007
(3)
|
|
2.4
|
Management
Information Circular dated April 9, 2007 with respect to the Annual
General Meeting of the Shareholders of the Corporation, which was held on
May 3, 2007(4)
|
|
2.5
|
Material
change report dated April 8, 2008 relating to the resignation of Peter P.
Smetek from the Corporation’s board of directors (5)
|
|
2.6
|
Material
change report dated June 12, 2008 relating to a standby guarantor and a
debt financing of $1,000,000 (6)
|
|
2.7
|
Unaudited
consolidated financial statements of the Corporation for the three months
ended March 31, 2008 (7)
|
|
2.8
|
Management’s
discussion and analysis of the financial condition and results of
operations of the Corporation for the three months ended March 31, 2008
(8)
|
|
3.1
|
Consent
of Deloitte & Touche LLP
|
|
3.2
|
Consent
of Parlee McLaws LLP
|
|
4.1
|
Powers
of Attorney (contained on the signature page of this Registration
Statement)
|
(1)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on July 11, 2008
(2)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on July 11, 2008
(3)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on February 12, 2008
(4)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on April 16, 2008
(5)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on April 8, 2008
(6)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on June 13, 2008
(7)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on May 14, 2008
(8)
Incorporated by reference to the Registrant’s Form 6-K filed with the Commission
on May 14, 2008
EXHIBIT
3.1
CONSENT
OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS
We
consent to the incorporation by reference in this Registration Statement on Form
F-7 of our report dated January 31, 2008 (June 26, 2008 as to the effects of the
restatement as described in Note 24) relating to the consolidated financial
statements of ViRexx Medical Corp., as at and for the year ended December 31,
2007 and for the period from October 30, 2000 (date of incorporation) to
December 31, 2007 and our report dated January 31, 2008 (June 26, 2008 as to the
effects of the restatement as described in Note 24) relating to Comments by
Independent Registered Chartered Accountants on Canada – United States of
America Reporting Differences, which are incorporated by reference in the Short
Form Prospectus, which is part of this Registration Statement.
/s/
Deloitte & Touche LLP
Independent
Registered Chartered Accountants
Edmonton,
Canada
July 17,
2008
EXHIBIT
3.2
Parlee
McLaws LLP
Barristers
& Solicitors/Patent & Trade-Mark Agents
July 17,
2008
Board of
Directors
ViRexx
Medical Group Inc.
We hereby
consent to all references to this firm in the Registration Statement on Form F-7
(the “Registration
Statement”) filed by ViRexx Medical Group Inc. (the “Company”) under the Securities
Act of 1933, as amended, and in the Short Form Prospectus made a part of the
Registration Statement relating to the issuance of common shares of the
Company.
Yours
very truly,
/s/ Parlee McLaws
LLP