MISSISSAUGA, ON, July 29, 2024 /CNW/ - Cipher Pharmaceuticals Inc. (TSX: CPH) (OTCQX: CPHRF) (“Cipher” or the “Company”) announces the signing of a definitive asset purchase agreement with ParaPRO LLC (“ParaPRO”) and the closing of the acquisition of the global product rights for Natroba™ (Spinosad), as well as the commercial sales team in the United States for total consideration of US$89.5 million.
Acquisition Details
Cipher has acquired the profitable and growing U.S. based Natroba™ operations and global product rights to ParaPRO’s Natroba™ and its authorized generic Spinosad, a topical treatment for both head lice and scabies. There are currently no generic alternatives for these products. The indication for scabies, which represents a larger market than head lice, currently carries FDA exclusivity and patent protection until 2033.
Cipher paid US$80 million in cash (satisfied from US$40 million cash on hand and US$40 million from a new credit facility) and issued US$9.5 million in common shares of Cipher to ParaPRO (1,474,097 shares at a deemed issue price of CAD$8.91).
Cipher announces entering into a new credit agreement and partnership with the National Bank of Canada, with a US$65 million revolving credit facility which was partially drawn to fund the Natroba™ transaction, and will be available to provide financing to fuel Cipher’s continued future growth plans.
Natroba™ (Spinosad) is widely recognized as one of the most effective treatments for two parasitic indications in the United States. It is superior to permethrin 1% for treating head lice and is the only treatment that meets the FDA’s criteria for a “complete cure” (elimination of all signs and symptoms) in eradicating scabies infestations with a single application.
In addition, Cipher has acquired ParaPRO’s highly experienced and successful sales and marketing team, comprised of 50 employees. They have a well-established network of physician relationships and are highly experienced in state reimbursement, product marketing and direct sales to healthcare practitioners in the areas of dermatology, family practice, infectious disease, and pediatrics.
Cipher plans to submit Natroba™ for Health Canada approval later in 2024 and to commercialize this unique product in Canada directly through its existing Canadian dermatology infrastructure.
Cipher additionally plans to out-license Natroba™ in countries outside North America. Cipher believes that the North American and global market potential for the product is significant. Existing head lice products in North America and globally have become ineffective from resistance developed by lice due to a gene mutation, coupled with resistance by scabies mites to the most often prescribed global products.
- Cipher plans to use the ParaPRO commercial footprint north of Indianapolis in Carmel, Indiana as its U.S. headquarters and a platform to launch unique complementary dermatology and infectious disease products to Natroba™ across the United States.
Craig Mull, Interim CEO commented: “Our acquisition of the Natroba™ products and the ParaPro commercial infrastructure is a pivotal step in our strategy to establish a leading dermatology platform featuring unique, innovative products. ParaPRO has a demonstrated strong sales, gross margin and earnings profile, making it a natural fit with our existing business. With this acquisition we have not only doubled the current sales and earnings of Cipher’s business today but we have greatly enhanced the capabilities of our dermatology focused strategy.
The founder of ParaPRO will continue be actively involved with Cipher as a business partner, become our second largest shareholder, and fully supports Cipher’s strategy. As we continue to execute our plan to acquire and in-license unique dermatology products, such as our near-term pipeline product MOB-015 for the treatment of nail fungus for the Canadian market, we believe Cipher’s growth potential is significant and will return significant value to our shareholders.
In the U.S., permethrin 5% has approximately 71.4% market share of the anti-parasitic market while Natroba™ (Spinosad) has 22.1%1. We believe there is tremendous market growth opportunity in the U.S. market and globally given lice and scabies have developed resistance to permethrin products (1%,5%), whereby parents and patients are looking to a single treatment proven option we believe is the unmet need that Natroba™ fulfills.”
Bill Culpepper III, President of ParaPRO commented: “We believe Cipher is an exemplary partner to support and further expand the Natroba™ product line in the U.S. and globally and will provide growth opportunities to the U.S. based sales and marketing teams.
Credit Facility with National Bank of Canada
In conjunction with the above acquisition, Cipher is pleased to welcome National Bank Financial Markets (“National Bank”) as a new financial partner as Lead Arranger and sole Bookrunner of a syndicated credit facility (the “Facility”).
Under the terms of the Facility, National Bank will provide Cipher access to US$65 million through a revolving credit facility plus an optional US$25 million accordion feature. The Facility matures three years from closing and has an optional annual extension clause.
Bryan Jacobs, CFO commented: “We would like to welcome National Bank as a business partner providing financial support to drive the growth objectives of Cipher’s business. This expanded Facility provides Cipher with ample liquidity to not only fund the acquisition of Natroba™ and ParaPRO’s commercial assets but was designed to provide further financial support to fund future accretive acquisitions as we look to further build out our Canadian and U.S. dermatology platforms.”
Other Financial Matters:
As a result of entering into the new Facility, Cipher terminated its previous undrawn credit facility with the Royal Bank of Canada.
About Cipher Pharmaceuticals Inc.
Cipher Pharmaceuticals (TSX: CPH) (OTCQX: CPHRF) is a specialty pharmaceutical company with a robust and diversified portfolio of commercial and early to late-stage products, mainly in dermatology. Cipher acquires products that fulfill unmet medical needs, manages the required clinical development and regulatory approval process, and currently markets those products in Canada, the U.S., and South America. Fogler Rubinoff LLP and Troutman Pepper Hamilton Sanders LLP acted as advisors to Cipher. For more information, visit www.cipherpharma.com.
About ParaPRO LLC
ParaPRO LLC, is a specialty pharmaceutical company focused on innovating antiparasitic formulations that minimize the disruption and economic burden on patients and families and providing support for the broader professional community with the most current insights, tools and resources that educate and inform. In 2021, the company introduced the first product indication for scabies to be approved by the U.S. Food and Drug Administration (FDA) in more than 30 years and the only targeted topical therapy that meets the FDA’s new criteria for a “complete cure” of scabies. In 2023 ParaPRO invested in Aperta Biosciences to pursue development of advanced therapeutic solutions for blepharitis and other demodex-implicated diseases. Stifel, Dinsmore & Shohl LLP and Osler, Hoskin & Harcourt LLP acted as advisors to ParaPRO. For more information, visit www.ParaPRO.com.
Forward-Looking Statements and Non-IFRS Measures
This document includes forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to the ParaPRO transaction, our plans and intentions with respect to commercializing, out-licensing and marketing Natroba™ in Canada and elsewhere, our plans and intentions with respect to the introduction of additional dermatological products in Canada, the United States and elsewhere, the potential for future acquisitions, our objectives and goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, expectations, anticipations, estimates and intentions. The words “may”, “will”, “could”, “should”, “would”, “suspect”, “outlook”, “believe”, “plan”, “anticipate”, “estimate”, “expect”, “intend”, “forecast”, “objective”, “hope” and “continue” (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements. By nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. We caution readers not to place undue reliance on these statements as a number of important factors, many of which are beyond our control, could cause our actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, publication of negative results of clinical trials; our ability to enter into development, manufacturing and marketing and distribution agreements with other pharmaceutical companies and keep such agreements in effect; our dependency on a limited number of products; our dependency on protection from patents that will expire; integration difficulties and other risks if we acquire or in-license technologies or product candidates; reliance on third parties for the marketing of certain products; product approval process by regulators which can be highly unpredictable; the timing of completion of clinical trials, regulatory submissions and regulatory approvals; reliance on third parties to manufacture our products and events outside of our control that could adversely impact the ability of our manufacturing partners to supply products to meet our demands; we may be subject to future product liability claims; unexpected product safety or efficacy concerns may arise; we generate license revenue from a limited number of distribution and supply agreements; the pharmaceutical industry is highly competitive with new competing product entrants; requirements for additional capital to fund future operations; products may be subject to pricing regulation; dependence on key managerial personnel and external collaborators; certain of our products are subject to regulation as controlled substances; limitations on reimbursement in the healthcare industry; extent and impact of health pandemic outbreaks on our business; unpredictable development goals and projected time frames; rising insurance costs; ability to enforce covenants not to compete; we may be unsuccessful in evaluating material risks involved in completed and future acquisitions; we may be unable to identify, acquire or integrate acquisition targets successfully; compliance with privacy and security regulation; our policies regarding product returns, allowances and chargebacks may reduce revenues; additional regulatory burden and controls over financial reporting; general commercial litigation, class actions, other litigation claims and regulatory actions; the difficulty for shareholders to realize in the United States upon judgments of U.S. courts predicated upon civil liability of the Company and its directors and officers who are not residents of the United States; the potential violation of intellectual property rights of third parties; our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our products; changes in U.S., Canadian or foreign patent laws; inability to protect our trademarks from infringement; shareholders may be further diluted if we issue securities to raise capital; volatility of our share price; the fact that we have a significant shareholder; our operating results may fluctuate significantly; and our debt obligations will have priority over the common shares of the Company in the event of a liquidation, dissolution or winding up. We caution that the foregoing list of important factors that may affect future results is not exhaustive. When reviewing our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found in the “Risk Factors” section of our MD&A for the year ended December 31, 2023 and the Company’s Annual Information Form, and elsewhere in our filings with Canadian securities regulators. Except as required by Canadian securities law, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
SOURCE Cipher Pharmaceuticals Inc.
