BIOTECHNOLOGY company Alchemia plans to use proceeds from a global institutional placement towards its proposed de-merger from subsidiary Alchemia Oncology.

Alchemia CEO Pete Smith (pictured) says the de-merged Alchemia Oncology, formerly known as Meditec, will become a separate entity listed on Australian, US or both stock exchanges.

“The stand-alone company will contain all of the HyACT oncology assets including HAIrinotecan,” says Smith.

“We are keeping an open eye on M&A opportunities and will take advice on potentially listing on the (US stock exchange) NASDAQ.”

The $15 million placement involved issuing 62.5 million shares for $0.24 per unit, representing a 20 per cent discount to the 20-day volume-weighted average price of Alchemia shares traded on ASX to November 3.

Smith says the institutional placement was oversubscribed.

“(There was) strong demand from international, existing and new investors – and included a number of leading specialist life sciences funds joining the Alchemia register,” he says.

Alchemia will offer investors a chance to subscribe for up to $15,000 in stocks under a new share purchase plan (SPP), with a 7.5 per cent discount on the five-day average closing price on the ASX.

The placement also gives the company’s largest shareholder group, Orbis Investment Management an opportunity to maintain its stake.

“This may involve the issue of additional shares to Orbis to enable Orbis to maintain its shareholding at 19.1 per cent, following completion of the SPP and settlement of the second tranche of the placement,” says Smith.

Proceeds from the capital raising will be used towards clinical development, research and working capital purposes including the spin out and listing of Alchemia Oncology, business development of HA-Irinotecan and costs relating to the raising.

RBS Morgans acted as lead manager, Corrs Chambers Westgarth partners Stephanie Daveson and Jeremy Horwood served as the legal counsels and Blueprint Life Science Group was the corporate adviser.

Alchemia will continue to be listed on the ASX after the demerger, with fondaparinux being the primary asset of the company.

“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,” says Smith.

“We anticipate initiating patient recruitment to our Phase III trial and commencement of preparations to demerge as soon as possible after the fundraising.”

The company may opt to rationalise its cost structure, while managing ongoing relationship with manufacturing and marketing partner Dr Reddy’s Laboratories.

Alchemia reported fiscal 2011 tax losses of $72 million, while Alchemia Oncology suffered losses of $52 million with the burden to be carried by the subsidiary after the spin-out is complete.

The deal is expected to close by the end of 2011.

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