Cipher Pharmaceuticals, a Canada-based specialty pharmaceutical dermatology company, has acquired Innocutis Holdings, a Charleston, S.C.-based, privately held specialty dermatology company, for $45.5 million in cash.
"This acquisition marks our commercial entry to the U.S. market," said Shawn O'Brien, president and CEO of Cipher. "Innocutis provides us with commercial infrastructure, revenue-generating branded prescription products and a talented team, including a 31-person sales force that shares our customer-focused philosophy. We see excellent opportunity to drive increased sales and profitability by growing their current branded prescription products, led by Sitavig, and adding new products to the portfolio, including our recently acquired Pruridexin and Dermadexin."
Joe Pecora, president and CEO of Innocutis, said, "We are combining with a partner that is ideally suited to realize the full potential inherent in Sitavig, a treatment breakthrough for herpes labialis. The product recently was launched in the U.S. and will be filed in Canada in 2016.”
For the 12 months ended Dec. 31, 2014, Innocutis recorded approximately $10.1 million in net product revenue. Cipher expects the acquisition to be accretive to earnings per share within two years, consistent with management's stated objective.
Consideration for the acquisition is $45.5 million in cash to be paid on closing. The agreement also includes additional Innocutis management incentive payments of up to $3 million in cash over a three-year period based on the achievement of certain financial performance targets.
Cipher has closed on a private offering of $100 million in aggregate principal amount of Senior Secured Notes due 2020, provided by investment funds managed by Athyrium Capital Management. The company received an initial drawdown of $40 million, which was used to fund the majority of the upfront purchase price for Innocutis. The remaining balance of the Notes will be made available, subject to certain conditions, to finance future acquisitions.
In connection with the offering, Cipher has issued Athyrium 600,000 common share purchase warrants. The warrants are exercisable at $9.22 (equal to the five-day volume-weighted average price on the Toronto Stock Exchange prior to closing converted to U.S. dollars) and expire seven years following issuance.
Since the beginning of 2015, Cipher has completed five transactions and made substantial progress on its three-pronged growth strategy.