Alchemia launches $21m IPO

Brisbane-based carbohydrates company Alchemia is the latest company to seek listing on the ASX, announcing a AUD$21 million IPO to take place before Christmas.

The company is offering 30 million shares at a price of $0.70, bringing the total shares issued to 100 million and a market capitalisation at listing of $70 million.

According to CEO Dr Tracie Ramsdale, the funds raised will primarily be put towards process development for the synthetic heparin project, the company's first commercial opportunity. In addition the company plans to continue developing two other lead compounds, an anticancer therapeutic targeting somatostatin receptors, and an antibiotic effective against multi-drug resistant bacteria.

"We expect that the funds raised plus other income from our partners to be sufficient for the next three years," said Ramsdale.

Ramsdale said the company did not expect any of the company's investors, which include listed biotechnology investment companies Medica Holdings and BioTech Capital, to sell off their shares in the float.

Medica CEO Kevin Healey said he was pleased at the news of the listing.

"The market is getting a bit of a bargain, but in the current market that's OK," he said. "It's our first liquidity event, and says the initial strategy we established five years ago was the right one. It's the proof of the pudding."

Healey said Medica's holding would drop to around 15 per cent as a result of the offering.

Alchemia's synthetic heparin project is based on a process that the company has developed to manufacture a generic synthetic heparin, which is used to prevent formation of blood clots. The only synthetic heparin on the market currently is Arixtra, manufactured by Organon Sanofi-Synthelabo, which is due to lose its patent protection in December 2006. Alchemia's version is expected to be on the market by mid-2008, said Ramsdale, allowing for a 19-month FDA approval process.

Alchemia has also announced a significant strategic alliance with American Pharmaceutical Partners (APP), a major player in generic injectable pharmaceuticals in the US and Canada, with a strong FDA track record. APP recently made a $1.8 million equity investment into Alchemia.

APP will be Alchemia's marketing partner for the generic version of synthetic heparin in the US and Canada, Ramsdale said, providing support and assistance gaining regulatory approval for synthetic heparin.

The deal is a lucrative one, and along with the Dow Chemical alliance for large scale process development and manufacturing, will see the company net a 50 per cent profit share on the manufacture and sales of synthetic heparin, estimated by APP to be a billion dollar market opportunity.

Ramsdale said there were several reasons for the high value of the deal, with the value of Alchemia's carbohydrate synthesis technology foremost.

"There are very high barriers for entry by other competitors," she said. "We've also removed a lot of the risk, we only have to prove chemical identity with the existing product Arixtra."

Alchemia also announced today that the federal government had approved an R&D Start grant of $4.5 million for the company's synthetic heparin project. The grant is the third of $7 million in Start grants received by the company.

Alchemia's IPO is being fully underwritten by Credit Suisse First Boston Australia and ABM AMRO Morgans Corporate. The offer is expected to open on November 17, and close on December 12, with quotation on the ASX on December 18.