Under the terms of the royalty financing agreement, Aradigm received a loan of $8.5 million, less fees, transaction and legal expenses (estimated to be approximately $400,000) and an additional $250,000 set aside for an Interest Reserve Account. The lenders will be entitled to receive 100% of all royalties payable to Aradigm under the APA until the principal and accrued interest of the Term Loan are fully repaid, after which time the benefit of any further royalties made under the APA will accrue to Aradigm. The Term Loan will accrue interest at the rate equal to the greater of a) LIBOR or b) one-and-a-half percent (1.50%), plus a margin of fourteen-and-a-half percent (14.5%). To the extent royalty payments are insufficient to pay accrued and unpaid interest under the financing, the shortfall will be funded from the Interest Reserve Account or, if the account is insufficient to pay all of the interest due, the shortfall will be capitalized and added to the principal balance of the Term Loan. The lenders were granted a security interest in the assets of an Aradigm subsidiary that holds Aradigm’s rights to receive royalty payments under the APA. The lenders have no recourse to other assets of Aradigm for repayment of the loan. In connection with the Transaction, Aradigm issued to the lenders warrants to purchase a total of 2,840,909 shares of Aradigm common stock at a strike price of $0.22, representing a 20% premium above the average closing price of Aradigm common stock for the ten trading days immediately preceding the closing of the Transaction. The warrants expire on December 31, 2016.
Nancy E. Pecota, Aradigm’s Vice President, Finance and Chief Financial Officer commented, “We are very pleased to enter into this royalty financing with PBS Capital and the lenders. As we have previously stated, our focus has been on the sale and out-licensing of our non-core assets to raise funds to advance our development of inhaled drugs for the treatment and prevention of severe respiratory diseases. This transaction generates a significant amount of capital by leveraging a non-core asset.”
SUMAVEL is marketed in the U.S. by Zogenix and Astellas Pharma US, Inc. for the treatment of acute migraine and cluster headache. Pursuant to a license agreement, Desitin Pharmaceuticals, GmbH (“Desitin”), was granted exclusive rights to develop and commercialize SUMAVEL DosePro in the European Union. In December 2010, Zogenix and Desitin were granted approval of the Marketing Authorization Application (“MAA”) for SUMAVEL DosePro (sumatriptan injection) needle-free delivery system by the Danish Medicines Agency of Denmark. Denmark is the first country in Europe to grant marketing authorization for SUMAVEL DosePro. Five weeks later, the Federal Institute for Drugs and Medical Devices of Germany (BrArM) and the Medicines and Healthcare products Regulatory Agency of the United Kingdom (MHRA ) granted approval of the MAA for SUMAVEL DosePro (sumatriptan injection) needle-free delivery system for the acute treatment of migraine attacks, with or without aura, and the acute treatment of cluster headache. Germany and the United Kingdom are two of the largest pharmaceutical markets in Europe.
About Aradigm
Aradigm is an emerging specialty pharmaceutical company focused on the development and commercialization of a portfolio of drugs delivered by inhalation for the treatment of severe respiratory diseases by pulmonologists. The Company has product candidates addressing the treatment of bronchiectasis, cystic fibrosis, inhalation anthrax and tularemia infections, and smoking cessation.
More information about Aradigm can be found at www.aradigm.com.
About PBS Capital
PBS Capital Management LLC (PBS Capital) is a Dallas-based investment firm designed to leverage the principals' expertise in special situations in the healthcare sector. PBS Capital’s primary focus is on originating and investing in structured, asset-based transactions in the biotech, pharmaceutical and medical device space, including traditional royalties, synthetic royalties, IP-based cash flow streams, and corporate debt.
Forward-Looking Statements
Except for the historical information contained herein, this news release contains forward-looking statements, including, but not limited to, statements regarding the commercial launch of SUMAVEL DosePro in Europe and continued receipt of royalties from Zogenix, Inc. These forward-looking statements involve risk and uncertainties, as well as the other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 25, 2011, and the Company’s Quarterly Reports on Form 10-Q.
Aradigm and the Aradigm Logo are registered trademarks of Aradigm Corporation.
Other names and brands may be claimed as the property of others.
Contact:
Aradigm CorporationNancy Pecota, 510-265-8800Chief Financial Officer
