Alchemia to spin off oncology business

Alchemia (ASX:ACL) today announced it intends to spin off its oncology business into a new wholly-owned stand-alone company, Alchemia Oncology.

The new company will focus on the development of Alchemia’s HyACT technology, which enhances the delivery of chemotherapy drugs to site of tumours, including HA-irinotecan, which combines with Pfizer’s Camptosar for the treatment of colon cancer.

The split would leave Alchemia with its existing business manufacturing and distributing generic fondaparinux, which is an FDA approved generic version of Arixtra, marketed by GlaxoSmithKline.

The new company will take on all of Alchemia’s oncology assets and associated tax losses, and will be separately listed on the public exchange in Australia, the U.S., or both. Alchemia Oncology should also be eligible for tax credits through the new R&D Tax Incentive legislation.

If the spin-off takes place, the company expects to issue a pro-rata distribution of shares in the new company to existing shareholders.

According to Alchemia CEO, Pete Smith, the split allows the company to better manage the respective risks of each of its arms.

“We believe that these changes will provide a clear choice for investors as we recognise that the risk/return profile of each of these businesses is markedly different,” he said.

“By separating the oncology business from Alchemia, we aim to allow the majority of profits arising from fondaparinux to fall to Alchemia’s bottom line. Equally, it will allow investors who want to participate in the upside potential of HA-Irinotecan and the HyACT platform to do so in a separate company with a clear identity and mission.”

Alchemia today also announced a capital raising of $15 million through a placement of 62.5 million shares to Australian and international institutional investors at a price of 24c per share, which is a 20 per cent discount to the twenty day volume-weighted average price.

It also announced a $5 million share purchase plan, with shares offered at 24c to eligible shareholders.

The additional funds will go towards a pivotal phase III trial of HAIrinotecan and a phase II trial in small cell lung cancer, as well as finalising the HA-Irinotecan manufacturing process.

Alchemia (ASX:ACL) was trading at 29.5c as of 12.30pm Monday.