US group pumps £4.2m into Collagen Solutions

Collagen Solutions is to raise £6 million from investors, including more than £4m through a strategic partnership with a major US food group, as it aims to boost its manufacturing and commercialisation capabilities.

The Glasgow firm will supply tissue to RDIs subsidiary Scientific Life Solutions as part of the strategic investment.

The Glasgow-based life sciences company announced that multi-billion dollar group Rosen’s Diversified Inc (RDI) is investing £4.2m as part of a share offer.

Collagen has entered into an agreement to supply tissue to RDI’s subsidiary Scientific Life Solutions, a supplier of critical components in the bio research and biomedical products, as part of the deal.

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Family-owned RDI also operates American Foods Group, the fifth largest beef processing company in the US.

Collagen, which develops and manufactures collagen-based products and biomaterials used by the medical device industry, announced the US investment as part of a funding round aiming to raise up to £6m in total.

The life sciences firm will look to generate £1.8m through a proposed equity placing and open offer at 5p per share, a premium of 23.5 per cent to Collagen’s closing price on 17 May, subject to shareholder approval.

Funds raised will be used to expand manufacturing contracts, drive product development, reduce debt and commercialise ChrondroMimetic – a collagen-based implant for the treatment of small cartilage and underlying bone defects which could be used to treat arthritis.

The group is currently awaiting feedback regarding the status of the CE mark for the implant, which it views as a “near-term opportunity” with the potential to add significant revenue.

In preparation for the approval, and as previously announced, Collagen has put in place several distribution partners in “select countries” in Europe and Asia.

This comes one month after Collagen released a market update stating that revenues for the full-year are expected to come in ahead of market expectations at £4.2m, representing an increase of 18 per cent from 2018.

Jamal Rushdy, chief executive of Collagen Solutions, said: “We are pleased to welcome Rosen’s Diversified Inc as our strategic partner and anchor investor in this round.

“This funding round will support continued growth of our core business, including our supply of collagen and tissue biomaterials as well as new product development contracts activity, providing the company a solid foundation over the next several years.

“In addition, the funding will support our launch of ChondroMimetic following review and approval of the data we previously submitted to our notified body.”

Market analysts at Cenkos upgraded full-year forecasts for the group on the back of the trading update, adding: “We believe this investment supports the growth we see developing in the company and significantly de-risks the near-term cash position. The momentum we see in the company supports our forecasts and ‘buy’ recommendation.”