Aralez Sells Off Assets as it Initiates Bankruptcy Proceedings
Mississauga, Ontario-based Aralez Pharmaceuticals, Inc. has entered into a stalking horse agreement to sell its assets to two separate companies, Nuvo Pharmaceuticals and Deerfield Management Companies. The beleaguered company will secure about $250 million for its assets from the sale as it files for bankruptcy.
Shares of the penny stock plunged more than 63 percent in premarket trading after the company announced its agreements this morning. That was after a significant 13 percent gain on Thursday’s trading. Shares are as low as 19 cents this morning. In a statement, Aralez said it has commenced voluntary bankruptcy proceedings under the Companies’ Creditors Arrangement Act in Canada and has filed Chapter 11 in the United States.
The move comes after an extensive financial and strategic review was conducted by the company. Aralez said during the course of the review, it became apparent that the company’s cash position would continue to deteriorate without the protection of the courts during the bankruptcy proceedings. That review led to the asset sale, which was overwhelmingly supported by the company’s board of directors, Aralez revealed.
"Following a thorough financial and strategic review, we believe that these sales, together with an auction process under court supervision are in the best interests of the company and its stakeholders," Adrian Adams, chief executive officer of Aralez said in a statement.
As part of the deal, Nuvo Pharmaceuticals will acquire the main operating business of Aralez, as well as its non-steroidal pain drug Vimovo pipeline and Canadian operations. That portion of the sale is valued at $110 million, Aralez said in this morning’s announcement. Other assets in that business include Cambia, Blexten, Suvexx (sold as Treximet in the U.S.) as well as the Canadian distribution rights to Resultz.
Deerfield Management Company will secure Aralez’s Toprol-XL franchise for $140 million. Toprol-XL is a blood pressure medication.
Aralez said it is looking to sell additional assets that were not part of the deals with Nuvo and Deerfield.
As Aralez moves through the bankruptcy proceedings, the company said it intends to obtain permission from the courts to operate the business without interruption during the sale process. Aralez also noted that it has obtained approximately $15 million for “debtor-in-possession” (DIP) financing from its secured lender. With approval from the bankruptcy courts, Aralez said it intends to use the $15 million, as well as other available cash, to “pay for all goods and services from vendors provided after the CCAA and Chapter 11 filing date in accordance with their current terms.” Aralez said it intends to also pay certain pre-petition obligations and support existing business operations through the bankruptcy period.
As the company moves through the legal proceedings, Aralez said its board of directors has been reduced to four members. The current members are Chairman Arthur Kirsch, Kenneth Lee, Martin Thrasher and Adrian Adams. Board members Seth Rudnick, Neal Fowler and Rob Harris resigned.
Aralez is being advised by Moelis & Company LLC and Alvarez & Marsal as its financial advisors, and Willkie Farr & Gallagher LLP and Stikeman Elliott LLP as U.S. and Canadian legal counsel, respectively.