Alchemia Turns Down The Volume, Cancels Audeo Oncology IPO and Spin Amid Lack Of Interest

Faced with one marketed generic drug and insufficient capital to further development of its late stage cancer drug, Australian biotech Alchemia(AEMAF) concocted a strategy for funding.  Alchemia split its cancer division into a new company, Audeo Oncology, which it planned to IPO in the United States, raising $50 million. The remaining shares were to be spun off to Alchemia shareholders (or demerged, as Australians would have it).

Unfortunately, the company announced on December 21, that they were unable to complete the IPO due to lack of interest, and the firm will be looking at alternative sources of financing, including taking another shot at IPO.  The company committed to staying on schedule with its pivotal phase III trial for its colorectal cancer drug.

Investors clearly decided that this was too speculative an investment to pursue and the stock of Alchemia fell 28% when it reopened for trading after the announcement.  A reminder of an unappreciated risk in spinoff situations – sometimes the deal doesn’t happen, and when it fails, look out below.

Disclosure: The author holds no position in any stock mentioned