October 14, 2019 (ACCESSWIRE via COMTEX) -- Transaction increases annual revenue to $44M and is expected to accelerate time to breakeven, following recently announced acquisition of Innovus Pharmaceuticals
Total upfront consideration equals 1.4x LTM revenue plus assumption of debt
Triples size of Rx product portfolio to nine commercial products
Investor webcast and conference call – today at 4:30 p.m. ET
ENGLEWOOD, CO / ACCESSWIRE / October 14, 2019 / Aytu BioScience, Inc. /zigman2/quotes/203513178/composite AYTU -8.19% , a specialty pharmaceutical company focused on commercializing novel products that address significant patient needs, announced the signing of an asset purchase agreement to acquire a portfolio of prescription products from Cerecor, Inc. (the "Commercial Portfolio"). The Commercial Portfolio and accompanying commercial infrastructure generated $12.4 million in net revenue and was profitable on a standalone basis for the twelve months ending June 30, 2019.
The company will host a live conference call and webcast today at 4:30 p.m. ET to discuss the details of the transaction. Conference call details are provided at the end of this press release.
Josh Disbrow, Chief Executive Officer of Aytu BioScience, commented, "This asset purchase is a transformational transaction for Aytu BioScience. Through the combination of this acquisition and the previously announced acquisition of Innovus Pharmaceuticals, we increase Aytu's top line more than six-fold, growing from $7.3 million annually in fiscal 2019 to a combined annual revenue run rate of $44 million. These two transactions accelerate the company's growth and provide for an increased revenue base from which to expand. Further, through the acquisition of this novel portfolio of six prescription products and the accompanying commercial team, which is profitable on a standalone basis, we achieve much higher commercial scale."
Mr. Disbrow continued, "Additionally, with today's separate announcement of our $10 million financing with two high-quality, healthcare-focused institutional investors, we have a strong balance sheet with estimated cash of approximately $17.3M as of September 30th. We are well positioned to integrate and grow this newly expanded product portfolio."
Mr. Disbrow concluded, "Following closing, we plan to quickly start the integration process with the commercial team to increase revenue and realize cost savings through the removal of redundancies. The cost savings we expect to realize by year-end, along with an immediate step-up in revenue, should enable us to quickly cut our burn, significantly extend our cash runway and shorten our time to breakeven. Through these two strategic transactions and newly expanded scale, Aytu is on a much higher trajectory and is positioned to deliver more value to our shareholders. This is an exciting day for the Aytu team, and we are excited to begin driving more growth at the new Aytu BioScience."
Following the closing of this asset purchase agreement and upon the closing of the previously announced merger agreement with Innovus Pharmaceuticals, Aytu BioScience's annual revenue will exceed $44 million - based on combined trailing twelve-month revenue as of June 30, 2019. The transaction is expected to further increase revenue scale and accelerate the company's time to achieve breakeven.
The purchased Commercial Portfolio includes prescription products competing in markets exceeding $8 billion in annual U.S. sales. The portfolio consists of six established, commercialized pediatric primary care products including: AcipHex® Sprinkle™, Cefaclor for Oral Suspension, Karbinal® ER, Flexichamber™, Poly-Vi-Flor® and Tri-Vi-Flor™. The Commercial Portfolio complements current Aytu products Natesto®, ZolpiMist™, and Tuzistra® XR. The combined total addressable U.S. market across both product portfolios exceeds $13 billion.
Asset Purchase Agreement Components
Acquisition of the Commercial Portfolio generating $12.4 million in net revenue for the four quarters ending June 30, 2019. This portfolio includes the following product lines: AcipHex® Sprinkle, Cefaclor for Oral Suspension, Karbinal® ER, Flexichamber™, Poly-Vi-Flor® and Tri-Vi-Flor™Retention of the commercial infrastructure and nationwide sales force that commercializes the Commercial PortfolioHiring of Matthew Phillips, current Chief Commercial Officer of Cerecor, as Aytu's Executive Vice President of Commercial Operations, reporting to the Chief Executive OfficerAssumption of contracts associated with the Commercial Portfolio inclusive of licensing and supply agreements, along with wholesaler, third-party logistics, distributor, and direct purchase agreementsPayment of $4.5 million in cash and $12.5 million in Aytu preferred stock, which converts into common stock upon receipt of Aytu shareholder approval; The shares are locked up through July 1, 2020 per a lock-up agreement with Cerecor.Assumption of Cerecor's outstanding payment obligations to Deerfield CSF, LLC ("Deerfield Note") totaling approximately $16.575 million in principal and interest, which is payable in January 2021Company expects to refinance and extend the term of the Deerfield Note following the closeDeerfield Note guaranteed by Armistice Capital via an escrow agreementTotal upfront consideration in cash and preferred stock for this $12.4M commercial portfolio is $17 million, or approximately 1.4x LTM revenue, plus the assumption of the Deerfield Note.
The purchase of the Commercial Portfolio, in conjunction with the planned acquisition of Innovus Pharmaceuticals, increases Aytu's annual revenue to over $44 million based on combined company sales over the four quarters ending June 30, 2019.
Both Innovus Pharmaceuticals and the Cerecor commercial business have operated near or above breakeven on a cash basis over the last twelve months.
The company expects to integrate the Cerecor commercial team, currently led by Matthew Phillips, into Aytu's current commercial infrastructure and realize cross-selling and cost savings across multiple product lines.
Mr. Phillips will transition from Cerecor to Aytu to serve as the company's Executive Vice President of Commercial Operations, reporting to the Chief Executive Officer. Jarrett Disbrow, the company's current Chief Operating Officer, will assume the role of Executive Vice President of Marketing and Market Access, continuing to report to the Chief Executive Officer. The company expects to further leverage operational efficiencies and achieve subsequent cost savings across the organization.
The asset purchase agreement is expected to close following the receipt of all required consents to the transaction and upon the satisfaction of certain obligations of Cerecor relating to the delivery of audited financial statements.