Egalet files bankruptcy, agrees to buy four Iroko marketed products

By Caroline Salls

Pittsburgh, Nov. 1 – Egalet Corp. made a pre-packaged Chapter 11 bankruptcy filing Tuesday in the U.S. Bankruptcy Court for the District of Delaware to facilitate its acquisition of four marketed products from Iroko Pharmaceuticals, Inc., according to an Egalet news release.

Egalet said the proposed transaction will enable it to focus on marketing predominantly non-narcotic pain products.

“Through this transaction, we will expand our commercial portfolio with four additional marketed, non-narcotic pain products while improving our capital structure,” Egalet president and chief executive officer Bob Radie said in the release. “We believe that the acquisition of the Iroko assets will enable us to leverage our existing commercial infrastructure while driving efficiencies.”

Acquisition agreement

Under the agreement, Egalet will acquire three FDA-approved low-dose SoluMatrix non-steroidal anti-inflammatory products, Vivlodex (meloxicam), Tivorbex (indomethacin) and Zorovolex (diclofenac), as well as Indocin (indomethacin) oral suspension and suppositories or capsules and SoluMatrix naproxen, a phase 2 product candidate, from Iroko.

As consideration for the acquisition, Egalet will issue to Iroko $45 million in new senior secured notes, 49% of the new Egalet common stock, a portion of which may be issued in the form of warrants, and a royalty payment based on annual Indocin net sales over $20 million.

Upon the closing of the acquisition, Egalet management will continue to lead the company with the Iroko products integrated into the Egalet sales representatives’ product offerings.

Egalet said it projects annual net revenue for all products, including the products to be acquired from Iroko, to be between $80 million and $90 million.

Plan terms

As part of its restructuring, Egalet filed a plan of reorganization that is supported by a majority in dollar amount of all classes of its debtholders.

The company said the plan calls for payment in full of all of its vendors and suppliers.

Egalet said its business will continue uninterrupted, and its operations will be supported by existing cash on hand.

The company is seeking court approval to use the cash collateral of its pre-bankruptcy secured creditors to fund its operations while in bankruptcy.

The cash collateral use will expire in six months, unless a final order has not been entered within 45 days of the bankruptcy filing date.

In advance of the Chapter 11 filing, the company said more than two-thirds in dollar amount of its debtholders signed a restructuring support agreement, which it believes will facilitate an expeditious emergence from Chapter 11. Egalet said it expects to close the acquisition and complete its bankruptcy proceedings in the first quarter of 2019.

As part of that agreement, Egalet will equitize its existing 5.5% and 6.5% convertible notes and a portion of its existing 13% senior secured notes.

Through a combination of equity and cash, Egalet will, if the plan is approved, reduce its senior debt by $34 million to a total of $95 million in senior secured debt, comprised of the $45 million to be issued to Iroko and $50 million to be issued to existing 13% senior secured noteholders.

In addition, the plan provides for the elimination of all of Egalet’s outstanding equity securities and the issuance of new Egalet common stock to Iroko and Egalet’s existing debtholders.

Debt details

According to court documents, Egalet had $99.98 million in total assets and $143.34 million in total debt as of Aug. 9.

The company’s largest unsecured creditors are its 5.5% noteholders, with a claim for $24.65 million, plus accrued interest; the 6.5% noteholders, with a claim for $23.89 million, plus accrued interest; Cardinal Health Inc. of Dublin, Ohio, with a $10.46 million trade vendor claim; Jubilant Hollisterstier LLC of Spokane, Wash., with a $1.92 million trade vendor claim; and Cumberland Consulting Group LLC of Franklin, Tenn., with a $1.44 million trade vendor claim.

The company said it will look to relist on the Nasdaq market as soon as it meets the applicable initial listing requirements. Egalet stock is expected to trade over-the-counter on the Pink Sheets through the close of the transaction.

Leerink Partners is acting as financial adviser to Egalet in the acquisition of the Iroko assets. Piper Jaffray has acted as investment banking financial adviser to Egalet in the restructuring. Dechert LLP is acting as legal counsel for Egalet in both the Iroko acquisition and planned reorganization.

Wayne, Pa.-based Egalet is a specialty pharmaceutical company focused on developing pain treatments. The Chapter 11 case number is 18-12439.

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