COS.L Regulatory News (COS)

This announcement contains inside information.

Collagen Solutions Plc

(the "Company" or the "Group")

Conditional Placing and Open Offer to raise up to £8.0 million

Conditional issue of up to £4.0 million in senior secured private bonds with warrants

and Notice of General Meeting

Collagen Solutions plc (AIM: COS), the developer and manufacturer of medical grade collagen components for use in regenerative medicine, announces a conditional Placing (the "Placing") and Open Offer to raise up to approximately £8.0 million with new and existing investors. Furthermore, the Company has received a conditional commitment from Norgine Ventures to subscribe up to £4.0 million in secured private bonds with Warrants.

Highlights

· Placing and Open Offer, which is subject to Shareholder approval, will raise gross proceeds of up to £8.0 million

· Conditional commitment from Norgine Ventures to subscribe up to £4.0 million in senior secured private bonds with Warrants

· Placing of 123,799,999 Ordinary Shares at the Offer Price of 5p per share

· Open Offer for an aggregate of 35,924,258 Offer Shares on the basis of 1 new Ordinary Share for every 5 Existing Ordinary Shares at 5p each

The net proceeds of the Placing and Open Offer will go towards investment in the development and commericalisation of high value device products, accelerate the launch of ChondroMimetic and aid expansion of the existing medical collagen supply business. The Placing demonstrates continued strong support by existing and new investors.

Commenting on the Transaction, Jamal Rushdy, CEO of Collagen Solutions said: "This strategically important funding round strengthens our balance sheet and provides the resources to accelerate our core biomaterials and tissue business. Furthermore, the capital will provide the Company with the opportunity to fund the development of a range of exciting new products for use in the rapidly emerging field of regenerative medicine. We are appreciative of the support from both existing and new shareholders, and to our stakeholders and global staff in the UK, US, South Korea, and New Zealand. We look forward to updating the market about our progress as we embark on this exciting phase of the Company's development"

An explanatory circular (the "Circular") is today being posted to Shareholders in relation to the Placing and Open Offer and is also available to view on the Company's website at www.collagensolutions .com 

Enquiries: 

1. Introduction

Collagen Solutions plc (AIM: COS), the developer and manufacturer of medical grade collagen components for use in regenerative medicine, announces a conditional Placing to raise approximately £6.2 million (before expenses) by the issue of 123,799,999 new Ordinary Shares at the Offer Price of 5 pence per Ordinary Share.

In addition, in order to provide Shareholders who have not taken part in the Placing with an opportunity to participate in the proposed issue of New Ordinary Shares, the Company is providing all Qualifying Shareholders with the opportunity to subscribe at the Offer Price for an aggregate of 35,924,258 Offer Shares, to raise up to approximately £1.8 million, on the basis of 1 New Ordinary Share for every 5 Existing Ordinary Shares held on the Record Date, at the Offer Price of 5 pence each, payable in full on acceptance.

Furthermore, the Company has received a conditional commitment from Norgine Ventures to subscribe for up to £4.0 million in senior secured private bonds with Warrants. The notes are issuable in three tranches:

(i) Tranche A (£2.0 million) with a term of 42 months;

(ii) Tranche B (£1.0 million) with a term of 42 months; and

(iii) Tranche C (£1.0 million) with a term of 36 months.

The interest rate on Tranche A is 10%; and the interest rate on Tranches B and C is the higher of:

(i) 10%; and

(ii) the three year GBP Swap Rate plus 935 basis points.

On completion of the bond transaction, Norgine Ventures shall be issued with Warrants to purchase up to 6,767,044 Ordinary Shares at a price of 5.911p per ordinary share.

The Transaction is conditional, inter alia, upon:

(i) Shareholders approving the Resolutions at the General Meeting that will grant to the Directors the authority to allot the New Ordinary Shares, as well as Ordinary Shares in satisfaction of the Warrants and certain additional shares as described therein and the power to disapply pre-emption rights in respect of such shares, and

(ii) Admission 

The Resolutions are contained in the Notice of General Meeting at the end of the Circular. Admission is expected to occur no later than 8.00 a.m. on 7 March 2017 (or such later time and/or date as Cenkos Securities plc ("Cenkos") and the Company may agree, being no later than 8.00 a.m. on 21 March 2017). The Transaction is not underwritten.

The Open Offer provides Qualifying Shareholders with an opportunity to participate in the proposed issue of the New Ordinary Shares on a pre-emptive basis whilst providing the Company with additional capital to invest in the business of the Group. The Offer Price is at a discount of 11.1 per cent. to the closing market price of 5.625 pence per Existing Ordinary Share on 13 February 2017 (being the last practicable date before publication of this announcement).

2. Background to Collagen Solutions and reasons for the Transaction

Background to Collagen Solutions

Collagen Solutions is a global supplier, manufacturer and developer of biomaterials and medical device components based on natural biomaterials. Its principal raw materials are bovine collagen and tissues sourced from negligible BSE risk countries. These materials are used in a wide variety of currently marketed and in-development advanced medical products in multiple specialties including orthopaedic soft tissue, bone and cartilage repair; cardiovascular heart valves and haemostats; dental bone void fillers and membranes; wound management products and healing scaffolds; and in other applications including regenerative medicine.

Regenerative medicine has gained a high profile in recent years based on the promise of curative treatments for unmet medical needs, with approximately 700 companies receiving $2.9 billion in funding according to the Alliance for Regenerative Medicine. Collagen scaffolds, such as those made from Collagen Solutions' materials, are a critical component of regenerative medicine products in that they provide both physical support and a conducive environment for cellular migration and growth.

Collagen Solutions' current products range from simple formulations of medical grade biopolymers to complex medical devices, which combine different collagen materials in the form of gels, foams and films to either coat synthetic products, or to fabricate a device which will ultimately be absorbed by the body during the healing and/or regenerative process.

In addition to products manufactured from purified forms of collagen, the Company also derives revenues from the sale of pericardium, a delicate yet tough membrane which forms a protective sac in which the heart sits and which can be used to make synthetic replacement heart valves. The Company also supplies tendons to various medical device companies who utilise this material in the manufacture of collagen-based medical devices.

The Company is also developing its own line of products based on its core biomaterials know-how as well as acquired intellectual property, including devices to repair cartilage defects of the knee, encourage wound healing and regenerate bone. The Directors believe these ''finished devices'' will enable the Company to move up the value chain and capture incremental business from customers that have demonstrated demand for these devices in their product portfolio and will value an immediately available and differentiated product.

The Company's scientific and management team has expertise in collagen biomaterials as well as finished medical devices. The Group's core collagen expertise includes manufacturing (including collagen chemistry, sterile processing, medical device manufacture and collagen characterisation) as well as the development of new collagen-based biomaterials, enabling the Company to offer research and development services to external contract manufacturers which take a product from concept to the clinic including technology transfer. The Company's management team also has experience directly in its customers' markets, with over 85% of the Company's executive, commercial and research and development teams having experience in the medical device and/or research industries.

The Company sells its biomaterial products and services primarily to medical device manufacturers. Collagen Solutions works with established, as well as emerging, medical device companies to support the development of biomaterials with specified properties which are used in new or improved products for market. Customers range in size from academic groups and start-up firms to larger blue-chip companies. The Company's manufactured collagen materials are intrinsically linked to products under development by their customers; once a product has begun clinical development overseen by regulatory authorities, it is costly and time consuming for the customer to change suppliers. The Company believes that if it continues to provide its customers with superior service and quality, combined with high customer switching costs, it will maintain a sustainable revenue stream from its core business. Establishing relations early in a customer's product development programme is therefore key to securing repeating revenue streams.

History of the Group

Healthcare Investment Opportunities plc, a vehicle established to make acquisitions in the sector was formed in March 2013 and changed its name to Collagen Solutions plc in December 2013. The Company has grown significantly by acquisition. These acquisitions have brought access to safe and certified raw materials; the scientific knowledge to convert these raw materials into functional formulations; and the expertise and equipment to undertake the clean room manufacturing to make medical grade materials required by regulatory agencies. These businesses, now integrated, have a good strategic fit and the ability to furnish medical device manufacturers with a specialist end-to-end development solution. The acquisitions have comprised:

(i) In December 2013, the Company acquired Collbio Limited ("Collbio"), a Glasgow-based contract manufacturer of medical-grade collagen components and soluble collagen, for use in regenerative medicine, medical devices and in-vitro diagnostics. The acquisition also provided the Company with a 6,500 sq ft leased manufacturing facility and clean rooms, together with additional laboratory and office space.

(ii) In parallel to this transaction, Collbio established a US subsidiary which entered into an agreement to acquire certain assets and liabilities of Collagen Solutions LLC, a San Jose, California-based business which provided medical grade bovine collagen, corium and tendon. Collagen Solutions LLC also provided contract research and laboratory-scale product development services relating to collagen-based devices, working with customers from concept to clinical trial stage and subsequently transferring the technology and know-how to outside contract manufacturing facilities.

(iii) In December 2014, the Company acquired Southern Lights Ventures 2002 Limited (now renamed CSNZL). Based at an ISO 13485 certified production and engineering facility at Marton on the North Island of New Zealand, it provides an international client base of medical device manufacturers with processed and semi processed bovine biomaterials and also produces preserved pericardium, which is widely used to form the leaves in prosthetic heart valves. In addition, CSNZL provides consultancy services focussing on collagen, collagen related services and regulatory support to its customers. CSNZL also benefits from having access to a ready and consistent source of bovine tissue from New Zealand, which is ranked by the World Health Organisation as presenting a "negligible BSE risk."

(iv) In September 2015, the Company acquired all of the assets relating to ChondroMimetic from Orthomimetics Limited ("Orthomimetic") together with an exclusive worldwide licence to the intellectual property ("IP") from Cambridge Enterprise Limited. These assets have transformed the commercial opportunity for the Company: Orthomimetic's intellectual property details the integration of collagen scaffolds with regenerative techniques. The acquisition also gives Collagen Solutions access to a portfolio of patents and patent applications covering a range of additional collagen-based orthopaedic product technologies. These technologies may potentially promote the structural repair of bones and joints as well as the delivery of biological agents such as stem cells and other therapeutic agents. The first manifestation of this IP is ChondroMimetic, an off-the-shelf collagen based implant for the treatment of small osteochondral (cartilage and underlying bone) defects.

Market

The global biomaterials market at end-user prices is estimated to be in excess of US$50 billion. The biomaterials market serves many clinical segments such as cardiovascular, orthopaedics, neurology, dental, tissue engineering, plastic surgery, urogenital, wound healing and others. The Company has identified two broad end markets in which it will focus: medical devices, inclusive of regenerative medicine technologies, and research/diagnostics supply. Within medical devices, the Company's emphasis is on the orthopaedic, dental, cardiovascular, and wound care segments.

The Company's addressable market is difficult to ascertain and is a sub-set of this global biomaterials market as it sells its products and services to intermediary customers who in turn sell to end-users, focusing on tissue and collagen rather than all biomaterials. The Directors believe the end-user market value of devices that utilise its products is at least US$15 billion growing in excess of 10% annually, and that it could potentially capture at least 10% of this value as a supplier, developer, and contract manufacturer, implying an addressable market of at least US$1.5 billion. The Directors believe that by seeking to move up the value chain, from supply of raw materials to development of higher added-value collagen formulations and customers' medical devices, to contract manufacturing services and ultimately to the development of proprietary products, a larger addressable market can be targeted.

Future Growth Driver

The Company's growth strategy is based on (i) accelerating its core supply, development and manufacturing business by implementing a global sales and marketing organisation along with improved processes for scalable growth, and (ii) developing and commercialising a programme of finished devices for partnering/distribution through medical device companies starting with its ChondroMimetic technology for cartilage regeneration.

The Company has set out a plan which, the Directors believe, will see it exceed the market's growth rate. The Directors have identified multiple drivers of growth which they believe could be capable of delivering 5x YE 2016 revenue within the next five years (although many factors, some of which are outside of the Company's control, will determine whether such growth is achieved and there can be no assurance that the Company will achieve such growth). Such drivers include:

Organic Growth of Core Business

Today all of the Company's revenues are derived from the sale of bovine collagen and tissue materials, customised collagen-based formulations and components, and related services. As described earlier, once established into the customers' supply chain for its end-products, this can lead to sustainable long-term revenue streams, although the sales cycles can be long and complex. The Company has established key core customers already in North America, Europe, and Asia through management's historical network and acquired businesses, and recently established a regionally-focused sales team and global marketing and sales support group. The recent above market growth has been driven by these investments as well as maturation of its historical core business and therefore the Directors believe that further investment in the resourcing and geographic scope of marketing within the sales channel will enable it to access new customers and to continue to expand its core business at above market rate.

Higher Value Finished Device products

The Company's expertise, experience, and infrastructure in collagen and tissue engineering can be leveraged to move up the value chain to produce its own finished devices, which can address current customer needs to improve their own product portfolios with immediately available and differentiated products. The Company expects to invest in developing those higher value finished device products as part of a longer term collaborative relationship with its customers. The Directors believe that further investment in development and commercialisation of these products via partners will realise greater value from its core biomaterials manufacturing and development platform. The Company has established a multi-year development programme to develop multiple finished devices, starting with the following:

a) Launch of ChondroMimetic

ChondroMimetic represents a near-term opportunity to establish and realise revenue from the Company's first wholly-owned medical device. ChondroMimetic is a collagen based implant for the treatment of small osteochondral (cartilage and underlying bone) defects and having previously received CE-mark approval for the treatment of small chondral and subchondral lesions, with approximately 1,000 units previously supplied into European markets, and had what the Directors consider to be successful clinical results as documented in an early-use six month clinical study of 17 patients. ChondroMimetic benefits from being a single surgery costing less than 10% of current two-surgery cell therapy devices. It also addresses the cause of the lesion in both the chondral and the underlying osseous (bony) tissue. The cost to the healthcare system of an ageing, but more active population means that the ability to effectively repair joints, rather than replacing them, could deliver substantial savings and represents a clear commercial opportunity for Collagen Solutions. The addressable market is estimated to be in excess of US$500m. The Company is already seeking to collect follow-up data from some of the original clinical trial participants which should give it up to six years of data evidencing the effectiveness of ChondroMimetic. Such retrospective data should provide a valuable marketing tool upon reissue of the CE mark and market launch with a strategic partner, which is expected in 2017.

b) Launch of bone graft

The treatment of post-traumatic or post-surgical orthopaedic conditions where there has been a loss of bone is challenging. Surgeons must pack those areas where there has been bone loss with materials which provide a scaffold for the regrowth of bone into the void. Various forms of bonegraft substitutes are available including allografts (bone removed from the patient); demineralized bone matrices (prepared from real bone) and synthetic graft materials. The Company is developing a synthetic bone graft substitute comprising a natural osteoconductive collagen matrix which has the potential to compete in this US$1.3 billion market. The product is expected to benefit from superior handling and a price point which will position it between basic synthetic materials and the more expensive biological materials and is currently expected to receive market clearance in 2018.

c) Launch of wound treatment

There are several types of wounds, including chronic non-healing wounds such as diabetic foot ulcers and venous stasis ulcers and burns, for which there are few effective therapeutic options. These wounds are often associated with injury or underlying conditions, such as diabetes or circulatory insufficiency, which undermine the migration of cells to the wound-site and the rebuilding of those tissue structures required to close the wound. The Company's fibrillar Type 1 collagen gel has good handling characteristics and the promise of providing a scaffold material which may accelerate wound closure in the treatment of partial and full thickness wounds. The product, which also has potential in combination with cell therapies and other therapeutics, is currently expected to receive market clearance in 2018.

Private Bond Issue

Conditional on Admission and subject to the satisfaction of certain conditions to drawdown, the Group will issue up to £4.0 million in private bonds in three tranches as follows:

(a) Tranche A: comprises £2.0 million in senior secured bonds repayable over the 42 months following drawdown and will be issued upon the closing of a successful equity fundraise of over £3.5 million (inclusive of the proceeds from the Placing and Open Offer); and

(b) Tranche B: comprises £1.0 million in senior secured bonds repayable over the 42 months following drawdown and will be issued at the Company's option between May 1, 2017 and July 31, 2017, provided that the Group has achieved certain revenue targets in the 12 months prior to drawdown; and

(c) Tranche C: comprises £1.0 million in senior secured bonds repayable over 36 months, and will be issued at the Company's option between November 1, 2017 and December 31, 2017, provided that either: the Group has achieved certain revenue targets in the 12 months prior to the drawdown and the Group has raised a further £1.0 million in equity finance in the 12 months prior to the drawdown or alternatively £2.0 million in equity finance in that period against a lower level of revenue achievement. Those proceeds in excess of £3.5 million from the Placing and Open Offer will contribute to the fundraising requirements stipulated for Tranche C.

The interest rate on the Tranche A Bonds will be 10%. The interest rate on Tranches B and C will be the higher of 10% or 935 basis points above the three year GBP Swap Rate, and will be fixed upon issuance. The Bonds are secured against the assets of the Group, but contain no other financial covenants in relation to the operation of the business during the term of the Bonds.

Warrants

As a condition of the issue of the Bonds, the Company has agreed to issue to Norgine Ventures 10 year Warrants to purchase Ordinary Shares, comprising Warrants for 5,075,283 Ordinary Shares and an additional 1,691,761 Ordinary Shares if the Company draws down Tranche C (as described above), in all cases exercisable at 5.911p per Ordinary Share over the 10 years from drawdown or, if earlier, on sale of the whole share capital of the Company, after which they shall lapse. The terms of the Warrants are subject to adjustment in certain circumstances including a share capital reorganisation of the Company.

Call Option

In addition, a Call Option has been granted to Norgine Ventures by the Company's Chairman, David Evans, in tandem with the Warrants, exercisable at an aggregate cost of £1, over a maximum of 20,000,000 of his Ordinary Shares. The Call Option is only exercisable following any further fundraising having raised over £2,000,000 during the term of the Bonds at a price per share lower than 5.911p, with the number of Options capable of exercise increasing the greater the difference between the price per Ordinary Share at which the further funding is conducted and 5.911p. An exercise of Warrants following a fundraising at or above the Warrant Price would not trigger a right under the Call Option for David Evans to deliver any shares while his maximum liability would only arise as a result of a fundraising round as described above and subsequent exercise of the option when the fundraising price was below 1.5785p.

3. Use of Proceeds

The net proceeds of the Transaction together with the proceeds of the Bond Facility will, in the opinion of the Directors, provide the Company with sufficient working capital to fund the Group until it achieves cash flow positive operations expected after 2019, including the milestones set out below (subject to final protocol designs and regulatory approvals not already received. There can be no assurance that such milestones or positive cashflow will be achieved in that timeline (or at all) and Shareholders attention is drawn to Part 2 (Risk factors) of the Circular.

ChondroMimetic completion, R&D expansion and product pipeline development

ChondroMimetic had previously been sold by Orthomimetics under a CE Mark. The Company is in the process of compiling existing and new supplementary data in order to regain the CE Mark under its current ISO 14385 manufacturing operations. Furthermore, the Company is initiating a 6+ year retrospective study of up to 17 patients from an original study to provide long term evidence of ChondroMimetic's incorporation and remodeling ability. The Company believes that this follow up study will, if successfully completed, provide it with a compelling additional data-set which will make it attractive to a commercial partner for full launch in European markets and support for clinical trials required for entry into the United States. The elements of this plan can be achieved for relatively modest investment with a relatively large potential return. In addition to ChondroMimetic, the Company acquired a suite of IP relating to additional collagen-based orthopaedic products for tendon, ligament, meniscus, and bone that the Company may also potentially finish and commercialise via a commercial partner.

In addition to ChondroMimetic, the Company has a pipeline of potential new products which it wishes to progress to commercialisation. The first of these additional products include a flowable collagen matrix for wound healing and a collagen-ceramic bone graft substitute for use in multiple orthopaedic indications. The Company plans to invest a portion of the Transaction proceeds for these projects as well as additional next-stage collagen-based products in its pipeline to create additional value.

Expansion of its core business activities

The Company's core business activities focus on providing standard and custom-developed collagen and tissue biomaterials and components for an array of medical device developers, regenerative medicine companies, and researchers. In addition, the Company provides development services to these customers for products based on its collagen and tissue biomaterials in advance of supply agreements for such materials, once the products are commercialised by the customers. This business forms all of the existing Group revenues and it is believed that there are significant opportunities to further develop these activities, especially in Asia, Europe and the US. In particular, the Company aims to expand its commercial channels both in terms of breadth of customer relationships and geographic scope. The Company intends to utilise a portion of the Placing to Open Offer proceeds to expand its recently established sales and marketing operation.

Payment of deferred consideration for CSNZL and working capital

Some of the Transaction proceeds will be used to pay deferred consideration primarily to the vendors of CSNZL. The acquisition of CSNZL included a provision for deferred consideration of NZ$4 million (circa £2.3 million)* to be satisfied in cash depending on the achievement of certain future performance criteria. If CSNZL's sales reach NZ$6.5 million (equivalent to circa £3.7 million)* in any of the years to the year ended 31 March 2017, and they are sustained in any of the following years during the period ended 31 March 2018, a maximum of NZ$4 million (equivalent to circa £2.3 million)* is payable. If the target sales are not met in that period a pro rata amount is payable subject to sales exceeding the base level of NZ$2.5 million (equivalent to circa £1.4 million)*.

*NZ$:£ FX rate of 1:0.57

The Transaction proceeds will also provide additional working capital and general corporate facilities for the Group.

4. Current Trading and Outlook

The Company separately announced on 19 December 2016 the interim unaudited financial statements for the period ended 30 September 2016 and provided in such announcement an update regarding its therapeutic programmes and other activities. A copy of this announcement is available from the Company's website. Since this date, the Company has continued to trade in line with market expectations.

5. The Placing and Open Offer

The Board believes that raising the bulk of the majority finance using the flexibility provided by a non-pre-emptive placing is the most appropriate and optimal structure for the Company at this time. This combined with the Open Offer (which is on a pre-emptive basis) allows both existing Shareholders and new institutional and other investors the opportunity to participate in the equity financing. The Placing Shares and Offer Shares when issued will rank pari passu with the Ordinary Shares and will rank in full for any dividends and distributions paid or made in respect of the Ordinary Shares.

Details of the Placing

The Company proposes to raise gross proceeds of up to approximately £6.2 million (£5.8 million net of expenses) through the issue of the Placing Shares at the Offer Price by way of the Placing to certain institutional and other investors. The Offer Price represents a discount of 11.1 per cent. to the closing market price of 5.625 pence on 13 February 2017, being the last practicable date prior to this announcement. The Placing Shares will represent 36.5 per cent. of the Company's Enlarged Share Capital (assuming the Open Offer is fully subscribed).

As part of the Placing, the Company proposes to issue 99,999,999 VCT/EIS Shares to certain investors seeking EIS relief and for the purposes of investment by VCTs pursuant to the Placing. It is not anticipated that EIS/VCT relief will be available in respect of the Offer Shares.

Application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that dealings in the Placing Shares will commence on AIM on 7 March 2017.

It is anticipated that the EIS/VCT Placing Shares will be issued unconditionally to investors on the day prior to Admission.

Placing Agreement

Under the Placing Agreement, Cenkos has conditionally agreed to act as placing agent to the Company and to use reasonable endeavours to procure placees to acquire the Placing Shares at the Offer Price. The Placing has not been underwritten.

The Placing Agreement is conditional upon, inter alia, the satisfaction of the following conditions:

(a) the passing of the Resolutions to be proposed at the General Meeting;

(b) Admission taking place no later than 8.00 a.m. on 7 March 2017 (or such later time and date as the Company and Cenkos may agree, being no later than 8.00 a.m. 21 March 2017);

(c) there being no breach of warranty in the Placing Agreement prior to Admission which is material in the context of the Placing;

(d) the performance by the Company of its obligations under the Placing Agreement and/or other terms of or conditions to the Placing prior to Admission; and

(e) drawdown of Tranche A (as described above) under the Bond Facility having become unconditional in all respects (save for any condition relating to Admission).

The Placing Agreement contains certain warranties from the Company in favour of Cenkos in relation to, inter alia, the accuracy of the information contained in the announcement and certain other matters relating to the Group and its business. In addition, the Company has given certain undertakings to Cenkos and has agreed to indemnify Cenkos in relation to certain liabilities they may incur in respect of the Placing. Cenkos has the right to terminate the Placing Agreement in certain circumstances prior to Admission including inter alia (i) for certain force majeure events or other events involving certain material adverse changes or prospective material adverse changes relating to the Group or (ii) in the event of a breach of the warranties or other obligations of the Company set out in the Placing Agreement.

Under the Placing Agreement, the Company has agreed to pay certain commissions to Cenkos and certain other fees and expenses in connection with the Placing and Open Offer.

Details of the Open Offer

The Company is proposing to raise up to approximately £1.8 million before expenses under the Open Offer. A total of 35,924,258 new Ordinary Shares are available to Qualifying Shareholders pursuant to the Open Offer at the Offer Price, payable in full on acceptance. Any Offer Shares not subscribed for by Qualifying Shareholders will be available to Qualifying Shareholders under the Excess Application Facility.

Qualifying Shareholders may apply for Offer Shares under the Open Offer at the Offer Price on the following basis:

1 Offer Share for every 5 existing Ordinary Shares

and so in proportion for any number of Existing Ordinary Shares held on the Record Date. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Offer Shares. Fractional entitlements which would otherwise arise will not be issued to the Qualifying Shareholders but will be made available under the Excess Application Facility. The Excess Application Facility enables Qualifying Shareholders to apply for Excess Shares in excess of their Open Offer Entitlement. Not all Shareholders will be Qualifying Shareholders. Shareholders who are located in, or are citizens of, or have a registered office in certain overseas jurisdictions will not qualify to participate in the Open Offer.

Application has been made for the Open Offer Entitlements to be admitted to CREST. It is expected that such Open Offer Entitlements will be credited to CREST on 15 February 2017. The Open Offer Entitlements will be enabled for settlement in CREST until 11.00 a.m. on 2 March 2017. Applications through the CREST system may only be made by the Qualifying CREST Shareholder originally entitled or by a person entitled by virtue of bona fide market claims. The Offer Shares must be paid in full on application. The latest time and date for receipt of completed Application Forms or CREST applications and payment in respect of the Open Offer is 11.00 a.m. on 2 March 2017.

The Open Offer is conditional on the Placing becoming or being declared unconditional in all respects and not being terminated before Admission (as the case may be). Accordingly, if the Placing Agreement conditions are not satisfied or waived (where capable of waiver), the Open Offer will not proceed and the Offer Shares will not be issued and all monies received by Capita will be returned to the applicants (at the applicants' risk and without interest) as soon as possible thereafter. Any Open Offer Entitlements admitted to CREST will thereafter be disabled.

Application will be made for the Offer Shares to be admitted to trading on AIM. It is expected that dealings in the Offer Shares will commence on AIM on 7 March 2017.

Directors'/PDMR dealings

The following Directors have agreed to subscribe for Placing Shares in the following amounts.

*Jamal Rushdy is subscribing for such shares pursuant to a separate subscription letter with the Company.

6. Related Party Transaction

David Evans has agreed to subscribe for 16,500,000 Placing Shares in the Placing. This transaction is considered to be a related party transaction pursuant to AIM Rule 13 of the AIM Rules for Companies. The independent Directors (being those Directors other than Mr Evans) consider, having consulted with Cenkos, that the terms of the transaction are fair and reasonable insofar as shareholders of the Company are concerned.

7. Concert Party

The existing Concert Party, as is detailed in the Company's Admission Document dated 10 December 2013, is currently interested in less than 30 per cent. of the Existing Ordinary Shares. Following Admission, the Concert Party's aggregate interest in the Enlarged Share Capital will be approximately 16.78 per cent. Assuming that the Open Offer has a zero take-up, the Concert Party's aggregate interest in the issued share capital immediately following Admission is expected to be approximately 18.77 per cent. Whilst the Concert Party holds less than 30 per cent. of the issued share capital, if any of the members were to purchase or subscribe for any shares in the Company which takes their or the Concert Party's aggregate interest above 30 per cent., under Rule 9 of the Code that person (and potentially the Concert Party in its entirety) will normally be required to make an offer to all Shareholders for those shares it does not own (in cash at the highest price paid in the last 12 months).

8. General Meeting

A notice convening the General Meeting is set out at the end of the Circular. A summary and explanation of the Resolutions to be proposed at the General Meeting is set out below. Please note that the summary and explanation is not the full text of the Resolutions and Shareholders should review the full text of the Resolutions before deciding whether or not to approve them.

The first Resolution proposes to grant to the Directors a general authority pursuant to section 551 of the Act to allot shares in the Company or to grant rights to subscribe for or convert any security into shares in the Company.

The second Resolution proposes to confer upon the Directors a general power to allot equity securities for cash on a non pre-emptive basis pursuant to the authority granted to the Directors by the first Resolution. The second resolution is a special resolution. Accordingly, for the second resolution to be passed, not less than 75 per cent. of votes cast must be in favour.

If passed, the Resolutions will confer upon the Directors the authority to issue the New Ordinary Shares as well as certain additional shares as described therein. The Placing and the Open Offer are conditional upon the passing of the Resolutions and, accordingly, if the Resolutions are not passed, the Placing and Open Offer will not complete. If the Resolutions are passed, the authority and power conferred will, to the extent not used, expire at the end of the next annual general meeting of the Company to be held on in 2017.

9. Recommendation

The Directors consider that the Placing and Open Offer and the Bond Facility are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions, as they intend to do in respect of their entire beneficial holdings of Ordinary Shares totalling in aggregate 32,228,217 Ordinary Shares and representing approximately 17.94 per cent. of the current issued share capital of the Company.

 Timetable of Principal Events

Note:

Each of the times and dates in the above table is a reference to the time in London and is subject to change.

If any of the above times and/or dates change, the revised times and/or dates will be notified by amendment by the Company on a regulatory information service.

Definitions

Important notice:

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any New Ordinary Shares, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract or commitment whatsoever with respect to the proposed Placing and Open Offer or otherwise. This announcement is not a prospectus and investors should not subscribe for or purchase any New Ordinary Shares on the basis of this announcement. Any offer to acquire New Ordinary Shares referred to in this announcement will be made, and any investor should make his investment, solely on the basis of information in the Circular expected to be published and made generally available in the United Kingdom today. When made generally available, copies of the Circular may be obtained at no cost through the Company's corporate website (www.collagensolutions.com).

The distribution of this announcement and/or the transfer of the New Ordinary Shares in or into jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, this announcement should not be distributed, forwarded to, or transmitted in or into the United States, Canada, Japan, the Republic of South Africa, the Republic of Ireland or Australia.

The New Ordinary Shares referred to in this announcement will not be offered in or into any jurisdiction unless such an offer can be made without contravention of any unfulfilled registration or other legal or regulatory requirements. The New Ordinary Shares, the Open Offer Entitlements and the Excess Open Offer Entitlements have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "US Securities Act") and may not be offered, sold or delivered in, into or from the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. 

Cenkos Securities plc, which, in the United Kingdom, is authorised and regulated by the Financial Conduct Authority, is acting as nominated adviser and broker to the Company for the purposes of the AIM Rules in connection with the proposed Placing and Admission and will not be acting for any other person (including a recipient of the Circular) or otherwise be responsible to any person for providing the protections afforded to clients of Cenkos Securities plc or for advising any other person in respect of the proposed Placing and Admission. Cenkos Securities plc's responsibilities as the Company's nominated adviser and broker are owed solely to London Stock Exchange and are not owed to the Company or to any Director or to any other person in respect of his decision to acquire shares in the Company in reliance on any part of the Circular.

Cautionary note regarding forward looking statements:

This announcement includes certain ''forward-looking statements'' with respect to the business, strategy and plans of the Company and its current goals and expectations relating to its future financial condition and performance. Statements that are not historical facts, including statements about the Company's or the Directors' and/or management's beliefs and expectations are forward looking statements. Words such as ''believes'', ''anticipates'', ''estimates'', ''expects'', ''intends'', ''aims'', ''potential'', ''will'', ''would'', ''could'', ''considered'', ''likely'', ''estimate'' and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to, those discussed in the Circular. Neither the Company nor any member of its group undertake any obligation publicly to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, save in respect of any requirement under applicable laws, the AIM Rules, the Prospectus Rules, the Disclosure and Transparency Rules and other applicable regulations.

About Collagen Solutions:

Collagen Solutions Plc is a global provider of medical grade collagen formulations and components for use in regenerative medicine, medical devices and in-vitro diagnostics and research. The capabilities of the Company include the provision of native, soluble and powdered collagen formulations, processed and semi-processed tissues such as pericardium, bone, and blood vessels, and expertise in the development and contract manufacture of collagen components for use as engineered tissue scaffolds and other medical devices. These products are used in a wide variety of applications including orthopaedics, cardiovascular, dental, plastic surgery, wound healing, neurology and urology. Collagen Solutions' unique offering extends beyond material supply and contract services through the highly skilled staff who support customers through the various stages of development and regulatory approval. For additional information, please visit www.collagensolutions.com.