Nuvo Pharmaceuticals (OTCQX:NRIFF)(TSX:NRI) has agreed to pay more than quadruple its $23.6 million market capitalization for the specialty pharmaceutical business of bankrupt Aralez Pharmaceuticals (OTCPK:ARLZQ), a unit now called Aralez Pharmaceuticals Canada and formerly named Tribute Pharmaceuticals Canada.
The acquisition includes over 20 commercialized products, as well as associated personnel and infrastructure to continue growing sales channels. The deal was first announced in August and has now progressed into a binding agreement.
Last month, Mississauga, Ontario-based Aralez entered into a stalking-horse agreement to sell its assets to Nuvo and Deerfield Management Companies, a healthcare-specialized investor and the senior secured lender to Aralez.
Shares of Aralez have been destroyed since voluntarily filing for bankruptcy under the Companies’ Creditors Arrangement Act in Canada and Chapter 11 protection in the United States. Moving forward with the transactions must still be approved by the courts, although it is expected that the sale process will be completed in the next 60-90 days.
The Aralez product lineup being acquired by Nuvo includes:
Cambia;
Blexten;
Suvexx (marketed as Treximet in the U.S.);
Canadian distribution rights to Resultz;
Worldwide rights and royalties from licensees for Vimovo and Yosprala;
Global, ex-U.S. product rights to MT400 (currently sold in the U.S. under the brand Treximet; Nuvo plans to register and sell in Canada under the Suvexx moniker);
Nuvo stated that the acquisition further allows for the creation of a platform to launch other unnamed commercial products in Canada.
Currently, Nuvo has four products being sold in various countries worldwide, as well as drug manufacturing capabilities from its facilities in Varennes, Quebec.
Nuvo, also based in Mississauga, is paying $110 million in cash for the assets, which will be satisfied through capital provided by funds held by Deerfield. The company trumpets the acquisition as immediately accretive to revenue and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and accretive to net income in 2019.
Hypothesizing if the deal would have been done at the start of 2017, Nuvo says its pro forma revenue would have been four times higher and pro forma adjusted EBITDA would have been 10 times higher.
For the full year 2017, Nuvo reported revenue of $17.5 million and adjusted EBITDA of $2.2 million. Aralez reported 2017 revenue of $105.9 million and (in what is a bit confusing related to Nuvo's estimates) adjusted EBITDA of a loss of ($4.5 million).
Deerfield is acquiring acquiring Aralez's Toprol-XL, a blood pressure medication, for $140 million. The remaining Aralez assets are reportedly being shopped still.
U.S.-listed shares of Nuvo closed flat on Tuesday at $2.04. Toronto-listed shares gained 1.5% to $2.75.
