iX Biopharma to sell Chemical Analysis unit for A$12.5m

IX Biopharma has entered into an agreement with independent third party Eurofins Australia New Zealand Holding for the proposed disposal of its entire stake in its wholly-owned subsidiary, Chemical Analysis, for A$12.5 million (S$12 million) in cash.

The company expects to receive from the sale net proceeds of about S$11.75 million, after deducting estimated expenses of about S$250,000. The proceeds will be used to repay bank borrowings, for marketing the company's pharmaceutical and nutraceutical products, and scaling up its manufacturing capacity.

The consideration represents an excess of around S$10.60 million and S$10.84 million over the book value and the net tangible asset value (NTA) of the sale shares respectively, assuming there would be no adjustments. The net gain on disposal is about S$10.4 million.

The consideration was reached based on the book value and the NTA of the sale shares of about S$1.40 million and S$1.16 million respectively, based on the group's financial results for the period ended Dec 31, 2018.

With the disposal, loss per share (LPS) for iX Biopharma will narrow to 0.76 Singapore cent from 2.35 Singapore cents. Net loss will also narrow from S$15.10 million to S$4.89 million. Meanwhile, the effect of the disposal on NTA will increase to S$31.72 million from S$20.66 million. This brings NTA per share to 4.94 Singapore cents, up from 3.22 cents previously.

The move comes one week after iX Biopharma released its unaudited financial statements for the second quarter and half year ended Dec 31, 2018. It said at the time it was "assessing its corporate strategy" for Chemical Analysis given anticipated trends affecting the laboratory testing business.

"The board is of the view that (iX Biopharma) should focus its attention and financial resources to manage its core business, which is the development and commercialisation of innovative therapies to address areas of unmet health needs, and not the laboratory testing business, which is a non-core, ancillary business it had acquired when the company acquired a group of companies for the primary purpose of adding manufacturing capabilities to the group in 2014," said the company in its filing on Monday.

The company added that the the business model of the laboratory testing business is "very labour intensive" as it derives fees for services rendered. Therefore, the disposal would allow the group to "better use or rationalise its resources" with the goal of achieving better returns for shareholders.

The sale will also provide the group with the funds to grow more strongly in its core business areas. It requires funding for the continuous development and the anticipation of commercialisation for its third quarter this year for its pharmaceutical and nutraceutical products. This includes sales and marketing expenditure in Australia and in the region, as well as funds to scale up the group's manufacturing capacity, among other things.

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