Adelaide biotech company Sementis has been given the all-clear to raise up to $10 million to develop its next-generation COVID-19 vaccine amid concerns the rights issue could hand majority ownership to a local building magnate. 

The Sementis vaccine is intended to provide an Australian-owned and developed vaccine technology that is longer lasting and more effective against variants of the virus. 

The company has been working in partnership with the University of South Australia for several years and moved its headquarters from Melbourne to Adelaide about a year ago to be closer to the research team. 

In May this year, University of South Australia Professor John Hayball, who is also Sementis Chief Scientific Officer, was awarded $2.9 million via the Federal Government’s Medical Research Future Fund to fast-track human clinical trials of the COVID-19 vaccine within the next 18 months. 

The grant announcement followed Sementis launching a prospectus for a $10 million rights issue with existing shareholders in January. 

However, former Sementis director Dr Glen Burgess lodged an application with the Federal Government’s Takeovers Panel in May raising concerns the entitlement offer could increase the voting power of major shareholder Michael Hickinbotham to 59.3 per cent, handing him effective control of the company. 

Hickinbotham currently owns 47.55 per cent of the Sementis shares as the sole director and shareholder of Fortitude Nominees. 

Burgess, who owns 4.89 per cent of Sementis, sought a declaration of unacceptable circumstances from the Takeovers Panel. 

In a separate action, Burgess last year unsuccessfully wrote to Sementis shareholders asking them to have company chairman Martyn Evans removed from the board and replaced by a global biotech expert. 

According to the Takeovers Panel’s ‘Reasons for Decision’ report into the entitlement offer published last week, the company’s next two largest shareholders Maurice O’Shannassy (24.81 per cent), who is also a board member, and Andrew Hays (4.86 per cent) also raised concerns. 

In a preliminary submission to the panel, O’Shannassy wrote that the entitlement offer “has been structured with the effect of providing Mr Hickinbotham with absolute control of the Company.” 

Hays’ submission said the offer was “just the latest instance in a long-standing campaign” to deliver control to Hickinbotham. 

“Sementis (under its Chair, Mr Martyn Evans) has undertaken a consistent and purposeful course of action to attempt to secure control of Sementis for its major shareholder, Mr Michael Hickinbotham,” Hays wrote. 

In a June 23 media release, the panel declined to make a declaration of unacceptable circumstances following the acceptance of undertakings from Sementis and Fortitude Nominees. 

Sementis has issued a replacement prospectus to its 86 shareholders, which closes on August 13. 

There is no shortfall facility that allows shareholders to buy additional shares not taken up in the rights issue. 

Fortitude Nominees’ shareholding will increase above 50.1 per cent if 87 per cent or less of entitlements are taken up by Sementis shareholders. 

Hickinbotham Homes is one of the state’s biggest builders. 

The Hickinbotham Group of Companies was last year ranked No.51 in InDaily’s South Australian Business Index of the state’s largest 100 companies. 

Evans, a former state and federal Labor politician, said Fortitude had indicated to the Takeovers Panel it intended to take up its full entitlement. 

“If everyone took up their percentage then nothing will change and that’s the point of a rights issue: it’s the fairest way to allocate new capital because if everyone takes it up then everyone stays where they are,” he told InDaily. 

“It’s very hard to know what the outcome would be until you have an outcome, which is what the company said to the Takeovers Panel. 

“Given that Fortitude is very close to 50 per cent anyway, then it is possible that it will go over 50 under a variety of scenarios but it depends on the outcome and given that they are already at 48 per cent the practical effect is very small and that is effectively what the Takeovers Panel seems to have concluded themselves.” 

The capital raise of up to $10 million will be used to fund the business for the next 18 months in areas including manufacturing process development; development of a COVID-19 vaccine; finalising its Sementis Copenhagen Vector platform; employee costs; office and corporate expenses; and increasing the number of consulting scientists. 

Evans said moving ahead with the capital raise would provide the company “clear air and a pathway forward”. 

“It is a great relief that we can set the company back on the right track – we were in a holding pattern while that went on because we were unable to seek shareholder funding while the matter was under discussion so we had no extra funding to proceed,” he said. 

“The Takeovers Panel proceedings, and the differences between past and current board members that precipitated them, have been an enormous drain on Sementis’ time and financial resources.” 

The key to the company’s vaccines is its Sementis Copenhagen Vector platform, which can quickly develop new vaccines for a range of viruses. 

The team has already used the vaccine platform to create a dual protective vaccine for the mosquito-borne Zika and Chikungunya viruses. But that vaccine is yet to progress through to the approval stage. 

“While we were moving on that, COVID hit so we’ve moved the Zika/Chikungunya vaccine to second place and, like a number of other people, we have moved COVID into first place,” Evans said. 

“Because we have a standard platform, we can interchange what goes in it. 

“It’s very much easier to make and manufacture because we are doing the same thing every time – all we change are the passengers on the bus.” 

Evans said it was hoped the company would make “very substantial progress” on the COVID-19 vaccine over the next 12 to 18 months. 

“Our COVID vaccine candidate targets multiple sites on the virus, not just the spike protein, which will make it much more effective against variants of the COVID virus,” he said. 

“We will need vaccines which are much longer acting and can target multiple sites on the COVID virus so it is much harder for the molecule to evolve and adapt against single point vaccines. 

“If you only target the spike, the virus can much more easily evolve and partially defeat the vaccine but if you target multiple points on the molecule – the spike, envelope and other proteins – then it is much harder for the virus to evolve all three points at the same time and that’s our approach.”