Council calls in administrators at drug developer over loan dispute

Dr Neil Murray of Redx

Liverpool City Council has pulled the rug from under pharma research company Redx and called in administrators, following an ongoing dispute over a £2m loan that matured at the end of March.

In 2012, the council provided a three year £2m investment loan, with accrued interest at 12% a year, to Redx to support its business expansion plans in the city, which was later extended by a further two years.

This afternoon, the council appointed administrators and said in a statement that the company – which relocated from Liverpool to Alderley Park in Cheshire towards the end of last year – had “shown no willingness to make any repayment of any size”.

The council says this is despite it agreeing to extend the repayment deadline by two years to the end of March 2017 and despite the fact Redx has raised “substantial funds from shareholders” over the past few years.

Redx, meanwhile, says it has offered to make an immediate payment of £1m and the remaining £1m within seven days and that it can’t fathom the council’s sudden, aggressive change in stance.

Iain Ross, recently appointed chairman of Redx Pharma, said: “The timing of this action by LCC and its advisers FRP is extremely unfortunate and quite baffling considering our efforts to have face to face discussions, including earlier today, the immediate offer of a payment plan and our latest proposal to make an immediate £1m payment in return for a short grace period.

“The board and its advisers felt consistently confident that we could have found the appropriate solution within a short period and can’t quite fathom why a creditor with whom we have had a good relationship for over five years is taking such an aggressive stance when they know, and have been provided with the evidence, that the company is making excellent progress on all fronts.”

Redx is working on new treatments for patients suffering with cancer and fibrotic diseases and has two oncology programs which are due to soon start clinical development.

It listed on AIM in March 2015, raising £15m. Since then it has raised a further £22m through share placings, the most recent being in March.

But the drug development company has also seen its half year losses widen to £10.7m and earlier this month said a strategic refocus of the business is expected to deliver annual cost savings of almost half that amount in the future.

Ross added: “The company, which now comprises 84 employees, has two incredibly important state of the art cancer programs, which will shortly commence clinical development in seriously ill patients and both these assets are attracting significant partnering interest from a number of large pharmaceutical companies.

“Despite this and our assurances to resolve the matter in seven days, LCC has refused to meet with me or to have any direct discussion and therefore it is with regret that we need to take this step. I remain confident that given the time requested we could reach a speedy and amicable resolution.”

Liverpool City Council asserts that no contact was made by the company in the run up to the maturity of the loan at the end of March this year.

“The council was forced to make formal demand of the debt on the company. This demand was not satisfied leaving the council with no option than to appoint administrators today,” it said in a statement circulated to media.

A spokesman for FRP Advisory confirmed it had been appointed as administrators to both Redx Pharma plc and subsidiary RedX Oncology and said administrators were considering options int he interest of creditors.

It added: “The group’s business and assets include a number of specialist oncology drugs at various stages of development, together with related intellectual property, and the administrators will be seeking to realise the assets in the interests of creditors.”

Liverpool City Council has itself been in turmoil in recent days – Joe Anderson has just taken over temporary powers after chief executive Ged Fitzgerald was one of four men arrested the start of this week.

He was detained on suspicion of conspiracy to pervert the course of justice and witness intimidation in connection with an investigation into Lancashire County Council’s One Connect contract with BT.

City Mayor Anderson said: “This is a highly regrettable situation but Redx have been given more than two years to put their house in order and establish a way to repay this investment loan. Even at the 11th hour the city council was willing to work on a repayment schedule but it is now clear Redx has no intention to work with us in any meaningful way.

“This investment loan was given in good faith and we have a duty to the public to ensure their money, especially during such financial difficulties, is protected.”

Redx chief executive Neil Murray said he was “shocked and saddened” by the actions of Liverpool City Council and also said there were inaccuracies in its statement to the press.

He added: “We believed we were very close to a resolution by offering a full repayment of the loan within a week and yet this offer was rejected. Requests for a face to face meeting with the mayor and finance director of LCC were also rejected.”

Redx announced in March that it was cutting staff numbers by 60%, following its change in strategy to focus more on pipeline development than discovery. It said it remains committed to discovery research, but at a reduced investment level. The changes meant that around 86 jobs were cut, from a total of around 140 staff based at Alderley Park.

Redx suspended trading on AIM this afternoon, following the appointment of administrators.

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