Merrion Pharma was spun out of pharmaceutical company Elan two years ago. The Dublin-based company, which conducts its research from a base in Trinity College, is understood to be considering a stock-market flotation on secondary markets on both Dublin's IEX market and London's AIM within the next year.

Merrion will require up to 40m in funds to bring to market four separate treatments that use its delivery technology. The 5m fundraising, which the company is due to announce at next week's Summit technology conference organised by Goodbody Stockbrokers, is expected to take care of the company's ongoing capital requirements ahead of a much larger fund-raising or an IPO next year.

Merrion Pharma's chief operating officer John Lynch said Merrion Pharam will require up to 10m for each treatment.

Merrion's core products are drug delivery systems which can increase the effectiveness of oral treatments and control the release of their active ingredients into the bloodstream. The company is in discussions with a number of potential partners in the pharmaceutical industry to develop drugs using technology but will requires substantial funding of its own to help bring the treatments to market.

Lynch said the company, which has hired Goodbody Corporate Finance as its advisor, hasnot yet made a final decision on the best way to raise the necessary money.

"Our ambition would be to take our projects as far as possible down the line to give our investors the best bang for their money, " he said.

Lynch declined to reveal the identity of the company's latest investors. Its previous backers include Enterprise Ireland and the European Bioscience Fund.