Canadian drugmaker Aralez Pharmaceuticals Inc. is winding down its operations following a strategic review of the business and selling its main assets in transactions valued at $250 million.
As part of the process, Aralez is also filing for bankruptcy protection in Canada and the U.S. to continue operating as usual as it searches for buyers for its other assets. Without the protection, the company's cash position — which stood at $43.9 million at the end of the first quarter according to S&P Global Market Intelligence — would continue to deteriorate, Aralez said in a statement.
The Ontario-based company will sell its Canadian operations, as well as the rights to receive royalties on the sale of arthritis medicine Vimovo, to fellow drugmaker Nuvo Pharmaceuticals Inc. for $110 million. Both parties have entered a so-called letter of intent, and plan to finalize the terms of the sale by Aug. 19.
Horizon Pharma PLC has the rights to market Vimovo in the U.S. where the drug generated $57.7 million in sales during 2017. Horizon is required to pay Aralez a 10% royalty based on net sales of the drug, subject to a minimum annual royalty obligation of $7.5 million and adjustments under certain conditions.
In a separate agreement, Aralez will sell its Toprol-XL franchise to healthcare-focused private equity firm Deerfield Management Co. LP, also a lender to the company, for $140 million. The heart disease drug generated approximately $690 million in total U.S. sales for the 12 months ended September 2017, according to IQVIA.
Both transactions will need to be signed off by bankruptcy courts, and will require customary regulatory approvals.
Aralez's Canadian operations, formerly under the Tribute Pharmaceuticals Canada Inc. name, includes more than 20 revenue-generating medicines such as the non-steroidal anti-inflammatory drug Cambia which is indicated for migraine attacks in adults in Canada. The company had previously shuttered its U.S.-based operations to focus on the Canadian market.
Nuvo Pharmaceuticals' current CEO, Jesse Ledger, and chief scientific officer, Bernard Chiasson, were former executives of Tribute Pharmaceuticals and will provide Nuvo with insight on the new products and key personnel involved in operating the business.
To fund the deal, Deerfield has offered to lend $112.5 million to Nuvo Pharmaceuticals. The senior secured debt facility will have a six-year term, and accrue annual interest at the rate of 3.5%.
Nuvo will also issue warrants to that can be used to buy up to 43.6 million shares of the company at C$3.53 per share. The exercise of warrants will automatically reduce the amount owed to Deerfield in connection with the credit facility.
Meanwhile, Deerfield has also agreed to lend $15 million to Aralez to help support its day-to-day activities following the bankruptcy protection. Additionally, Aralez said that as part of the restructuring process, its board size had been reduced to four members with Seth Rudnick, Neal Fowler and Rob Harris stepping down.
Aralez is being advised by Moelis & Co. LLC and Alvarez & Marsal as its financial advisers and Willkie Farr & Gallagher LLP and Stikeman Elliott LLP as U.S. and Canadian legal counsel, respectively.