Alchemia pulls plug on Audeo Oncology demerger

Alchemia (ASX:ACL) shares have plunged by over 27% following news that it has pulled the plug on its plans to spin off its anti-cancer business into a new company, Audeo Oncology.

The company went into a trading halt on December 13 to seek IPO funding for Audeo Oncology, with the halt being delayed multiple times until it was lifted today.

According to the company, there was insufficient interest from investors in the new oncology business, with US investors in particular citing concerns around market conditions, timing and the US domestic economy.

However, the company attempted to put a positive spin on the news, announcing there was substantial interest in the oncology programme. Only insufficient interest to reach the board’s benchmark of investment to make the spin-off worthwhile.

In the wake of the setback, Alchemia will pursue alternate avenues for spinning off its oncology business, including making Audeo financially independent or listing Audeo in early 2013.

The company stressed that with recent revenues from its generic fondaparinux along with R&D Tax Incentive payouts, it is “adequately financed” in the short to medium term.

“While we are disappointed we could not secure sufficient investment at acceptable financial terms for Audeo and Alchemia this year, we are encouraged by investor feedback on Audeo’s oncology platform and have great confidence in the value of Audeo, especially given the execution of its Phase III trial is on track,” said Alchemia chairman, Mel Bridges.

“We will continue to evaluate financial options for Audeo, while also ensuring the Phase III trial of HA-Irinotecan in metastatic colorectal cancer is delivered on time and on budget.

“The group continues to be well placed in that it has a launched, FDA approved product generating cashflows, a pivotal Phase III trial underway and a platform technology which could be used to develop numerous additional late stage drug candidates. We will continue to keep the market updated on developments.”

Alchemia shares took a beating following the announcement, dropping from 55c to 36c, and clawing their way back to 40c - a 27% drop - as of around 11am.