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Shares of Open Orphan PLC (LON: ORPH) have fallen 19.4% from their April all-time highs after announcing plans to divest some of its non-core assets into a separate company that will list on the AIM.
Investors turned bearish on the company expecting the demerger to hurt the company’s overall valuation, and many are wondering when the selloff will end.
The short answer is that the expected spinoff of the company’s assets may not be as significant as most investors expect, given that Open Orphan generates most of its revenues from its core services division, which has been growing exponentially.
Some of the assets likely to be spun off include its HVO-001 small molecule immunomodulatory drug that could become a treatment for severe flu. However, the drug is still in the early stages of developments.
Other non-core assets include Imutex and PrEP Biopharma, with Open Orphan owning a 49% stake in the Imutex joint venture with SEEK Group.
The joint venture partners are developing flu and mosquito-borne diseases vaccines with the FLU-v003 vaccine having completed a phase II trial.
Open Orphan owns 62.6% of PrEP Biopharm, which owns the PrEP-001 asset, a pan-viral prophylactic.
These assets could be worth a lot in the future, but since they are still in the development stages, they are not worth as much as possible if they were in the commercial stages.
Open Orphan wants to focus on testing vaccines and antiviral drugs using human challenge studies using the momentum generated in 2020 from its work on COVID-19 vaccines and treatments.
Divesting its non-core businesses is an excellent way for the company to boost its long-term prospects by focusing on what they are very good at, human challenge studies, and being the best globally.
Open Orphan became profitable in Q4 2020, and its shares are likely to keep rising once the spinoff of its non-core assets is complete.
Open Orphan share price.
Open Orphan shares have fallen 19.37% from their April all-time high of 47.23p to their current price of 38.15p.
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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