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Shares of pharmaceutical services company Open Orphan (LON: ORPH) are trading lower on Tuesday after the company revealed it is at an advanced stage in planning for a possible spin-out of certain non-core development IP assets.
The development IP assets are a portfolio of intellectual property and development assets, including HVO-001, which has potential application in treating respiratory disease.
Open Orphan’s share price is down over 8% at 41.4p.
The company said it feels that to maximise shareholder value, the development IP assets are best developed separately from the core services business.
A spin-out transaction could also secure extra financial resources for Open Orphan.
“A spin-out transaction would also allow Shareholders to benefit from both the value of the development assets and the standalone value of the core services business, as they progress through their own key milestones,” said Open Orphan.
The company will now send out a circular to shareholders on Tuesday, providing background to, details of and reasons for a proposed reduction of capital to facilitate the possible spin-out and admission to AIM of the company's non-core development IP assets.
Open Orphan has taken preliminary steps for the potential spin-out, including incorporating a subsidiary. They will now seek the approvals necessary.
“We now have an opportunity to deliver significant further shareholder value by the Demerger of these non-core assets. Their development and commercialisation can be accelerated through the Demerger, which offers the opportunity to access financing as a separate public company listed on AIM and a separate business focussed on the successful commercialisation of pharmaceutical products,” said Cathal Friel, Executive Chairman of Open Orphan.
Open Orphan shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Open Orphan shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies
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