Item 1.01.Entry into a Material Definitive Agreement.
On October 10, 2019 (the “Closing Date”), Aclaris Therapeutics, Inc. (the “Company”) entered into an Asset Purchase Agreement (the “APA”) with EPI Health, LLC (“EPI Health”), pursuant to which the Company sold the worldwide rights to RHOFADE (oxymetazoline hydrochloride) cream, 1% (“RHOFADE”), which includes the assignment of certain licenses for related intellectual property assets (the “Disposition”).
Pursuant to the APA, EPI Health has agreed to pay the Company total cash consideration of up to $55.0 million, consisting of (i) an upfront payment of $35.0 million ($1.75 million of which was placed in escrow) and (ii) potential sales milestone payments of up to $20.0 million in the aggregate upon the achievement of specified levels of net sales (as defined in the APA) of products covered by the APA. In addition, EPI Health has agreed to pay the Company (i) a specified high single-digit royalty calculated as a percentage of net sales, on a product-by-product and country-by-country basis, until the date that the patent rights related to a particular product, such as RHOFADE, have expired, provided, that with respect to sales of RHOFADE in any territory outside of the United States, such royalty shall be paid on a country-by-country basis until the date that the RHOFADE patent rights in the particular country have expired or, if later, 10 years from the date of the first commercial sale of RHOFADE in such country, (ii) 25% of any upfront, license, milestone, maintenance or fixed payment received by EPI Health in connection with any license or sublicense of the assets transferred in the Disposition in any territory outside of the United States, subject to specified exceptions and (iii) approximately $0.2 million for certain inventory, subject to a specified post-closing inventory-related adjustment. In addition, EPI Health has agreed to assume the obligation to pay specified royalties and milestone payments under the Company’s existing agreements with Allergan Sales, LLC, Aspect Pharmaceuticals, LLC and Vicept Therapeutics, Inc.
The APA contains customary representations and warranties, covenants and indemnities. The Company has agreed that for a period of seven years following the Closing Date, it will not research, develop, manufacture, commercialize or sell any topical product to treat facial redness due to rosacea, provided that for the final 24 months of such period, a competing product is limited to any topical product to treat facial redness due to rosacea that contains oxymetazoline hydrochloride as one of its active ingredients.
The foregoing summary of the Disposition and the APA is not complete and is qualified in its entirety by reference to the APA, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference. The representations, warranties and covenants contained in the APA were made only for the purposes of the APA, were made as of specific dates, and were made solely for the benefit of the parties to the APA and may not have been intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among the parties to the APA. The assertions embodied in those representations and warranties may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating their respective terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to the Company’s stockholders. For the foregoing reasons, none of the Company’s stockholders or any other person should rely on such representations and warranties, or any characterizations thereof, as statements of factual information at the time they were made or otherwise.
The APA and the transactions contemplated in the APA have been unanimously approved by a special committee of the Company’s board of directors.
Item 1.02. Termination of a Material Definitive Agreement.
On October 10, 2019, the Company repaid in full the $30 million borrowed under the Loan and Security Agreement, dated as of October 15, 2018, with Oxford Finance LLC. In addition, in accordance with the terms of the Loan and Security Agreement, the Company paid (i) accrued and unpaid interest of approximately $70,000, (ii) a final payment fee of $1,725,000 and (iii) a prepayment fee of $600,000. Following this repayment, all of the Company’s obligations under the Loan and Security Agreement are deemed to be terminated, except as set forth in the agreement.