OncoSec $30m fundraise threatened by spat

OncoSec Medical (NSDQ:ONCS) is embroiled in a lawsuit and proxy war over a $30 million money-raise as it seeks to continue development of its cancer treatment technology.

The company — headquartered in San Diego and Pennington, N.J. — sent a letter to shareholders today in which it countered what it described as false and misleading statements by South Korea–based investor Alpha Holdings, which is seeking to stop a $30 million cash infusion from China Grand Pharmaceutical and Healthcare Holdings and its U.S. affiliate Sirtex Medical Holdings.

Alpha Holdings also has a lawsuit underway in the Eighth Judicial District Court in Las Vegas to halt a scheduled Jan. 17, 2020 shareholder vote on the deal.

OncoSec’s lead technology Tavo uses electroporation, in which an electrical field increases cell membrane permeability. Tavo is meant to deliver DNA-based interleukin-12 (IL-12) directly into tumors in order to produce an immune response.

The company’s stock lost more than half its value in November 2018 after the release of preliminary results of a study evaluating the use of Tavo with Merck‘s (NYSE:MRK) intravenous immunotherapy drug, Keytruda, on people with advanced skin cancer. Despite the negative response on Wall Street, researchers described the 10% response rate in the preliminary results as meaningful.

OncoSec’s stock is presently trading around $2 per share.

Alpha Holdings officials say they want a thorough sale process to maximize value for all stockholders and ensure that the company can realize future upside. But OncoSec CEO Daniel O’Connor said today in the shareholders letter that the company only had $25 million in cash at the end of July and is burning through $2.5 million a month.

“Due to limitations under the federal securities laws and current market conditions, even if we sold nearly every share available to us today (approximately 12 million) we would only be able to raise approximately $8 million at most, not considering discount pricing and significant warrant coverage, both of which would likely be included in such a deal — compared to the $30 million we would receive from the transaction by selling the same number of shares,” O’Connor said.

Over the last 18 months, OncoSec, according to O’Connor, spent 18 months working with Destum Partners, PierCap Partners, Sage Group and Torreya Partners to explore potential licensing opportunities, financings and strategic transactions. None of the resulting discussions panned out.

OncoSec plans to vigorously defend itself against Alpha Holdings’ litigation in Nevada. “Unfortunately, this is forcing the company to spend millions of dollars on these multiple actions, diverting those funds away from our clinical trials and other critical aspects of our business,” O’Connor said.