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Aclaris Divests Rhofade to EPI Health for $55M, Shares Up

Zacks Equity Research

Aclaris Therapeutics, Inc. ACRS announced that it has sold worldwide rights to its rosacea drug, Rhofade Cream, and certain licenses to related intellectual property assets to privately-held wholesale distributor of prescription drugs, EPI Health for $55 million. The divestiture is part of Aclaris’ ongoing restructuring program to focus on its immuno-inflammatory pipeline.

Shares of Aclaris rallied 19.3% on Oct 11, following the announcement. However, the company’s shares have declined 80.8% so far this year compared with the industry’s decrease of 0.4%.

Per the terms of the deal, Aclaris is eligible to receive $35 million in upfront payment and up to $20 million in potential sales-based milestone payments t. In addition, Aclaris is also eligible to receive tiered royalties on net sales of the products. EPI Health will also pay 25% of any potential upfront, license, milestone, maintenance or fixed payment to Aclaris, paid by a licensee or sublicensee in ex-U.S. markets, subject to specified exceptions.

In September, Aclaris completed a strategic review of its business and announced a restructuring plan to reform itself from a dermatology company to development stage biotech focusing on developing treatment options targeting immunology and inflammation indications. Moreover, the company announced workforce reduction by 86 employees to streamline operations and reduce costs.

The Rhofade divestment deal helped Aclaris to clear its $30 million debt with Oxford Finance. Following the deal, given its restructuring initiatives, the company anticipates its cash resources to be sufficient to fund its operations into the third quarter of 2021.

Please note that Rhofade was a major revenue generator for Aclaris so far in 2019. The company acquired rights to Rhofade from Allergan AGN in 2018. Aclaris has another drug in its portfolio, Eskata, which was approved by the FDA in 2017 for treating seborrheic keratosis, a common non-malignant skin tumor. The company voluntarily discontinued commercialization of the drug in August 2019 due to lower-than-expected sales. It is seeking a strategic partner to commercialize the drug.

The company is currently developing its lead pipeline candidate, A-101 45% topical solution for treatment of common warts in two late-stage studies. The candidate achieved clinically and statistically significant clearance of common warts in phase III THWART-2 study, per data announced last month.

Apart from A-101 45% topical solution, Aclaris has two JAK inhibitors – ATI-501 and ATI-502 – in mid-stage development targeting atopic dermatitis and alopecia, respectively. The company had in-licensed these two candidates from Rigel Pharmaceuticals, Inc, RIGL in 2015. The company also has an early-stage candidate, ATI-450, which is being developed for treating rheumatoid arthritis and psoriasis along with other pre-clinical candidates.

Aclaris Therapeutics, Inc. Price

 

Aclaris Therapeutics, Inc. Price

Aclaris Therapeutics, Inc. price | Aclaris Therapeutics, Inc. Quote

Zacks Rank & Key Pick

Aclaris currently carries a Zacks Rank #2 (Buy). Dermira, Inc. DERM is another top-ranked stock from the same sector, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for Dermira’s loss have narrowed 2% for 2019 and 1.9% for 2020 in the past 30 days.

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