– Would result in significant expansion of
revenue and adjusted EBITDA –
– Would provide platform for future growth –
– Acquisition financing commitment from
Deerfield, a leading, global, healthcare-specialized investor –
MISSISSAUGA, ON, Sept. 19, 2018 /CNW/ - Nuvo Pharmaceuticals Inc.
(Nuvo or the Company) (TSX:NRI; OTCQX:NRIFF), a globally focused,
healthcare company with a portfolio of commercial products and
pharmaceutical manufacturing capabilities, today announced the
signing of definitive, binding purchase agreements with Aralez
Pharmaceuticals Inc. (Aralez) to acquire a portfolio of more than
20 revenue-generating products, as well as the associated personnel
and infrastructure to continue the products' management and growth
(the Proposed Transaction or the Transaction). Upon closing of the
Proposed Transaction, Nuvo would pay Aralez US$110 million in cash, which Nuvo would satisfy
through funding provided by certain funds managed by Deerfield
Management Company, L.P. (Deerfield), a leading, global,
healthcare-specialized investor. Deerfield is also the senior secured lender to
Aralez. Assuming completion of the Transaction at the beginning of
2017, Nuvo's pro forma 2017 revenues would have been
approximately 4x higher than reported for fiscal 2017 and 2017
pro forma adjusted EBITDA would have been greater than 10x
higher than that reported for fiscal 2017. All references to
dollars are in Canadian dollars, unless otherwise specified.
Completion of the Transaction is subject to a number of conditions
set out in the definitive purchase agreements and binding
commitment letter, copies of which will be filed under Nuvo's
profile at www.sedar.com.
Assuming completion of the Transaction, Nuvo would acquire
Aralez's Canadian specialty-pharmaceutical business, which was
formerly known as Tribute Pharmaceuticals Canada Inc. (Tribute).
This is a growing business that includes Cambia®,
BlextenTM, SuvexxTM (sold as
Treximet® in the U.S.), as well as the Canadian
distribution rights to Resultz,® and would create a
platform for Nuvo to acquire and launch additional commercial
products in Canada. The
Transaction would also include the worldwide rights and royalties
from licensees for Vimovo®, Yosprala® and
global, ex-U.S. product rights to MT400 (to be sold as Suvexx in
Canada once registered and
currently commercialized in the U.S. as Treximet).
Jesse Ledger, Nuvo's President
& CEO commented, "This transaction contains all of the elements
we have been looking for: immediate commercial scale from a diverse
product portfolio, generating positive cash flow; a highly
effective commercial organization with a track record of success,
providing a platform to add new business development opportunities;
support from a premier healthcare-focused financial sponsor through
the participation of Deerfield;
and most importantly, the Transaction will accelerate our growth
trajectory by substantially enhancing our top and bottom-line." Mr.
Ledger continued, "Nuvo will be preserving the jobs of over 40
Canadian-based employees and we will ensure that patients and
healthcare practitioners across Canada continue to receive access to and
support in relation to important medicines like Blexten and
Cambia."
Rationale for the Proposed Transaction:
- Immediately and significantly accretive to revenue and adjusted
EBITDA
- Projected to be accretive to net income in 2019
- Establishes critical mass for Nuvo in the capital markets and
as an operating company
- Revenue diversification across products and revenue types
(direct revenues and royalties)
- Provides Canadian platform with national sales infrastructure
and an ability to integrate more products
- Significant cash flow from royalties of global Vimovo
sales
- Low-cost financing and sponsorship from Deerfield
- Existing commercial and related support infrastructure remains
in place to ensure smooth transition
Financing:
Deerfield
has provided a binding commitment letter to Nuvo to be the sole
financier and to fund the Proposed Transaction in its entirety (the
Financing). The commitment letter from Deerfield provides Nuvo with the
following:
- US$52.5 million of 6-year term,
3.5% p.a. interest, senior secured convertible debentures with a
conversion price of US$2.70 to fund
the acquisition of the Canadian operations and working capital
purposes;
- US$60 million of 6-year term,
3.5% p.a. interest, senior secured loan for an issue price of
US$47.5 million to Nuvo
Pharmaceuticals (Ireland) Limited
to fund the acquisition of the royalty and product interests in
Vimovo, Yosprala and MT400. Nuvo will make mandatory quarterly loan
payments equal to the greater of US$2.5
million and 50% of excess cash flow;
- Nuvo will issue to Deerfield,
for an aggregate purchase price of US$12.5
million, warrants to purchase approximately 25.6 million
common shares at an exercise price of C$3.53 and with a 6-year life (the Warrants). The
proceeds from the exercise of Warrants will initially be used to
reduce the amount owing on the senior secured loans;
- US$3.0 million of 18-month term,
12.5% p.a. interest, senior secured loan to Nuvo for working
capital purposes;
- Deerfield (and any permitted
transferee) will be prohibited from converting debentures or
exercising warrants if it would result in Deerfield (and its affiliates) holding more
than 4.985% of the total issued securities of Nuvo; and
- There will be no changes to the Nuvo senior management team or
board of directors.
The Financing is subject to certain terms and conditions. Nuvo
has agreed to certain customary restrictions on the conduct of its
business between now and the closing of the Transaction.
Next Steps
To facilitate the Transaction, Aralez,
along with its Canadian subsidiary, Aralez Pharmaceuticals Canada
Inc., has commenced voluntary proceedings under Canada's Companies' Creditors Arrangement
Act (the CCAA) in the Ontario Superior Court of Justice. In
connection with these proceedings, certain other subsidiaries of
Aralez have voluntarily filed petitions under Chapter 11 of the
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York.
The definitive agreements in respect of the Transaction will be
filed with the relevant bankruptcy courts as part of Aralez's
restructuring process and are subject to court approval. As part of
the restructuring process, Aralez and its subsidiaries will conduct
a sale process in accordance with bidding procedures to be approved
by the courts and to pursue a superior acquisition proposal for any
of the assets subject to the Proposed Transaction in accordance
with the bidding procedures. The definitive agreements in respect
of the Transaction will serve as the "stalking horse" bids in the
sale process and entitle Nuvo to a customary termination fee and
expense reimbursement if it is not ultimately the successful bidder
in the process. It is anticipated that the sale process will be
completed within the next 60 to 90 days.
If Nuvo is the successful bidder in the sale process, closing of
the Transaction will be subject to certain conditions, including
approval of the Transaction by the Canadian and U.S. bankruptcy
courts, as well as approval by the Toronto Stock Exchange. It is
not anticipated that the approval of Nuvo's shareholders will be a
condition to closing the Transaction or the Financing, but Nuvo
intends to seek the approval of its shareholders following closing
for certain terms of the warrants and convertible debentures to be
issued to Deerfield. If such
shareholder approval is not obtained, the convertible debentures
and the warrants would be settled solely through cash payments in
accordance with their terms.
The description of the Transaction and the Financing contained
in this news release are qualified in their entirety by the
reference to the definitive purchase agreements and binding
commitment letter, copies of which will be filed under Nuvo's
profile at www.sedar.com.
Nuvo will provide further updates regarding the Transaction if
and as required, but there can be no assurance that Nuvo will
ultimately be the successful bidder in the process or that the
Transaction as described, or otherwise, will be successfully
concluded.
About Nuvo Pharmaceuticals Inc.
Nuvo (TSX: NRI; OTCQX:
NRIFF) is a globally focused, healthcare company with a portfolio
of commercial products and pharmaceutical manufacturing
capabilities. Nuvo has four commercial products that are available
in a number of countries: Pennsaid® 2%, Pennsaid,
Resultz and the heated lidocaine/tetracaine patch. Nuvo
manufactures Pennsaid 2% for the U.S market, Pennsaid for the
global market and the bulk drug product for the HLT Patch at its
U.S. Food and Drug Administration (FDA), Health Canada and E.U.
approved manufacturing facility in Varennes, Québec. The Company's focus is to
maximize the value of Pennsaid 2% and Resultz through out-licensing
to commercial partners in international markets and identifying new
opportunities to acquire additional, revenue generating or
late-stage products or businesses to further diversify the
Company's existing product portfolio. For additional
information, please visit www.nuvopharmaceuticals.com.
About Deerfield Management Company, L.P.
Deerfield is an investment management firm,
committed to advancing healthcare through investment, information
and philanthropy. For more information about Deerfield, please visit www.deerfield.com.
About Aralez Pharmaceuticals Inc.
Aralez
Pharmaceuticals Inc. is a specialty pharmaceutical company focused
on delivering meaningful products to improve patients' lives by
acquiring, developing and commercializing products in various
specialty areas. Aralez's global headquarters is in Mississauga, Ontario, Canada and the Irish
headquarters is in Dublin,
Ireland. More information about Aralez can be found at
www.aralez.com.
About Cambia
Cambia (diclofenac potassium for oral
solution) is a non-steroidal anti-inflammatory drug (NSAID) and
currently the only prescription NSAID approved in Canada for the acute treatment of migraine
attacks with or without aura in adults 18 years of age or older.
Cambia was licensed from Nautilus Neurosciences, Inc. (Nautilus) in
November 2010, which was acquired by
Depomed, Inc. (Depomed has since been renamed Assertio
Therapeutics, Inc.) in December 2013.
Cambia was approved by Health Canada in March 2012 and was commercially launched in
Canada in October 2012.
About Blexten
Blexten (bilastine tablets) is a second
generation antihistamine drug for the symptomatic relief of
allergic rhinitis and chronic spontaneous urticaria. Bilastine
exerts its effect as a selective histamine H1 receptor antagonist,
and has an effectiveness similar to other second generation
antihistamines such as cetirizine, fexofenadine and desloratadine.
It was developed in Spain by FAES
Farma, S.A. In April 2016, Health
Canada approved bilastine with the brand name Blexten (bilastine
20mg oral tablet) for the treatment of the symptoms of Seasonal
Allergic Rhinitis (SAR) and Chronic Spontaneous Urticaria (CSU)
(such as itchiness and hives). Blexten was commercially launched in
Canada in December 2016.
About Suvexx
Suvexx (sumatriptan/naproxen sodium) is a
migraine medicine that was developed by Aralez's wholly owned
subsidiary Pozen, Inc. in collaboration with Glaxo Group Limited,
d/b/a GlaxoSmithKline (GSK). The product is formulated with Pozen's
patented technology of combining a triptan, sumatriptan 85mg, with
an NSAID, naproxen sodium 500mg, and GSK's RT Technology™ in a
single tablet. In 2008, the FDA approved Treximet for the acute
treatment of migraine attacks, with or without aura, in adults.
Treximet is currently available in the
United States only. Aralez plans to file a New Drug
Submission for Suvexx with Health Canada towards the end of
2018.
About Vimovo
Vimovo (naproxen/esomeprazole magnesium)
is the brand name for a proprietary fixed-dose combination of
enteric-coated naproxen, a pain-relieving NSAID, and
immediate-release esomeprazole magnesium, a proton pump inhibitor
(PPI), in a single delayed-release tablet. Pozen, Inc. developed
Vimovo in collaboration with AstraZeneca. On April 30, 2010, the FDA approved Vimovo for the
relief of the signs and symptoms of osteoarthritis, rheumatoid
arthritis, and ankylosing spondylitis, and to decrease the risk of
developing gastric ulcers in patients at risk of developing
NSAID-associated gastric ulcers. Vimovo is currently commercialized
in the U.S. by Horizon Pharma USA,
Inc. and by AstraZeneca in various rest of world territories
including Canada, Europe and select additional countries.
About Yosprala
Yosprala is a prescription fixed-dose
combination of aspirin (acetylsalicylic acid), an antiplatelet
agent, and omeprazole, a proton pump inhibitor (PPI) originally
developed by Pozen, Inc. and commercialized in the U.S. by Genus
Lifesciences, Inc. It is indicated for patients who require aspirin
for secondary prevention of cardiovascular and cerebrovascular
events and who are at risk of developing aspirin associated gastric
ulcers. Yosprala is designed to support both cardio- and
gastro-protection for at-risk patients through the proprietary
Intelli-COAT™ system, which is formulated to sequentially deliver
immediate-release omeprazole (40mg) followed by a delayed-release,
enteric-coated aspirin core in either 81 mg or 325 mg dose
strengths.
Forward-Looking Statements
This press release contains "forward-looking statements"
within the meaning of applicable securities laws. Forward-looking
statements can be identified by words such as: "anticipate,"
"intend," "plan," "goal," "seek," "believe," "project," "estimate,"
"expect," "strategy," "future," "likely," "may," "should," "will"
and similar references to future periods. Forward looking
information in this press release includes, but is not limited to,
statements with respect to the ability of the parties to complete
the Proposed Transaction and the Financing (including the
satisfaction of the conditions to completion of the Proposed
Transaction and the Financing), and the anticipated benefits of the
Proposed Transaction and the Financing (including the results of
operation of the acquired products and related assets following
completion of the Proposed Transaction). The forward-looking
information contained in this press release is based on certain
expectations and assumptions made by Nuvo, including the receipt of
required approvals and the satisfaction of other conditions to the
Proposed Transaction and the Financing; and that the definitive
agreements in respect of the Proposed Transaction and the
commitment letter in respect of the Financing will not be amended
or terminated.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
the Company's current beliefs, expectations and assumptions
regarding the future of its business, future plans and strategies,
projections, anticipated events and trends, the economy and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of the Company's control. Nuvo's actual results
and financial condition may differ materially from those indicated
in the forward-looking statements due to a number of factors and
risks. Material factors and assumptions used to develop the
forward-looking information contained in this news release, and
material risk factors that could cause actual results to differ
materially from the forward-looking information, include but are
not limited to, the failure to satisfy the conditions relating to
the Proposed Transaction and the Financing (including failure to
obtain any required approvals, including the approval of the U.S.
and Canadian bankruptcy courts); the occurrence of any event,
change or other circumstance that could give rise to the
termination of the definitive agreements in respect of the Proposed
Transaction or the commitment letter in respect of the Financing;
material adverse changes in the business or affairs of the acquired
businesses or Nuvo; either party's failure to consummate the
Proposed Transaction or the Financing when required; competitive
factors in the industries in which the acquired businesses and Nuvo
operate; interest rates, prevailing economic conditions; and other
factors, many of which are beyond the control of Nuvo.
Addition factors that could cause Nuvo's actual results and
financial condition to differ materially from those indicated in
the forward-looking statements include, among others, the risk
factors included in Nuvo's most recent Annual Information Form
dated March 22, 2018 under the
heading "Risks Factors", and as described from time to time in the
reports and disclosure documents filed by Nuvo with Canadian
securities regulatory agencies and commissions. These and other
factors should be considered carefully and readers should not place
undue reliance on Nuvo's forward-looking statements. As a result of
the foregoing and other factors, no assurance can be given as to
any such future results, levels of activity or achievements and
none of Nuvo or any other person assumes responsibility for the
accuracy and completeness of these forward-looking
statements.
Any forward-looking statement made by the Company in this
press release is based only on information currently available to
it and speaks only as of the date on which it is made. Except as
required by applicable securities laws, Nuvo undertakes no
obligation to publicly update any forward-looking statement,
whether written or oral, that may be made from time to time,
whether as a result of new information, future developments or
otherwise.
Non-IFRS Financial Measures
Adjusted EBITDA is a non-IFRS financial measure. The term
"adjusted EBITDA" does not have any standardized meaning under IFRS
and therefore may not be comparable to similar measures presented
by other companies. The Company defines adjusted EBITDA as net
income before net interest income, plus income tax expense
(recovery), depreciation and amortization and stock-based
compensation. Management believes adjusted EBITDA is a useful
supplemental measure from which to determine the Company's ability
to generate cash available for working capital, capital
expenditures and income taxes. For additional information on
non-IFRS Financial measures, please refer to the reports and
disclosure documents filed by Nuvo with Canadian securities
regulatory agencies and commissions.
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SOURCE Nuvo Pharmaceuticals Inc.