Acasti Pharma Becomes Royalty Free
Acasti Pharma Announces Prepayment of All Future Royalties to Neptune
Technologies & Bioressources Inc. Through the Issuance of Class "A" Shares
LAVAL, Quebec, Dec. 4, 2012 (GLOBE NEWSWIRE) -- Acasti Pharma Inc. ("Acasti")
(TSX.V:APO) announces it has entered into a prepayment agreement (the
"Prepayment Agreement") with Neptune Technologies & Bioressources Inc.
("Neptune"), Acasti's controlling shareholder, pursuant to which Acasti has
exercised the option embedded in its exclusive technology license agreement
dated August 7, 2008 entered into between Acasti and Neptune (the "License
Agreement") to pay in advance all of the future royalties payable under the
License Agreement (the "Prepayment").
The value of the Prepayment, confirmed by an independent valuation expert
using the pre-established Prepayment formula set forth in the License
Agreement, amounts to approximately $15.5 million, which will be paid through
the issuance of 6,750,000 Class "A" shares in the share capital of Acasti (the
"Shares"), issuable at a price of $2.30 per Share, upon the exercise of a
warrant delivered to Neptune at the signature of the Prepayment Agreement.
The Prepayment and the issuance of the Shares to Neptune are subject to the
approval of the TSX Venture Exchange and of the disinterested shareholders of
Acasti (excluding Neptune and non-arm's length parties to Neptune) at the next
annual meeting of shareholders of Acasti. If approved by disinterested
shareholders, Acasti will no longer be required to pay any royalties to
Neptune under the License Agreement during its term for the use of Neptune's
intellectual property under license.
Acasti's Board of Directors and Management have carefully considered the
exercise of its prepayment right over the past several months and have reached
the conclusion that it is in Acasti's best interest to exercise its prepayment
right at this time, with the primary objective to remove the payment of future
royalties as a variable consideration for the valuation of its business going
forward. Acasti would also have the option under the License Agreement to
proceed with an immediate prepayment in cash, but deems that its preferred
scenario, considering its development stage, is for the prepayment to be
settled through the issuance of Class A Shares, following the exercise of the
warrant, to Neptune, upon the approval of disinterested shareholders.
Acasti's management and board of directors have elected to exercise the
Prepayment option for the following reasons, among others:
*Impact on valuation: Acasti believes its valuation incorporates actual and
future royalties payable under the License Agreement. According to
management's and Board's assessment, the Prepayment is desirable to
address this valuation cost.
*Business development:Being a royalty free corporation, Acasti expects to
have a better profile to negotiate with potential business partners, even
if no specific business development transaction is contemplated at the
*Cash Flow: The Prepayment will allow Acasti to preserve cash as it will no
longer have to pay the minimum royalties payable under the License
Agreement, which amounted to $700,000 on a yearly basis, since August 7,
"The burden of the royalties' payment had become too substantial for a lean
operation like Acasti. The timing for the prepayment was optimal, since
minimum royalties' requirements became fully loaded since August, 2012,"
stated Xavier Harland, CFO.
"Ultimately, being a royalty free corporation brings more flexibility and
value in deals negotiation with potential business partners," stated Harlan
Waksal, Executive Vice-President, Business and Scientific Affairs.
"Ultimately, it may make Acasti more attractive for a future potential
partnership," he added.
About the Prepayment Agreement
Under the terms of the Prepayment Agreement, Acasti will issue to Neptune a
warrant entitling Neptune to acquire 6,750,000 Shares at a price of $2.30 per
Share (the "Warrant").
The aggregate fair market value of the Shares issuable upon the exercise of
the Warrant is approximately $15.5 million and represents the payment in
advance of all of the royalties which are payable under the License Agreement.
The fair market value of each Share to be issued pursuant to the Prepayment
Agreement upon the exercise of the Warrant and the number of Shares to be
issued have been calculated in accordance with the pre-established formula set
forth in the License Agreement.
Effective immediately upon the exercise in full of the Warrant in accordance
with the Prepayment Agreement, Acasti will no longer be required to pay any
royalties to Neptune under the License Agreement during its term for the use
of the intellectual property under license.
The issuance of the Shares upon the exercise of the Warrant is subject to the
receipt of applicable regulatory approvals, including the approval of the TSX
Venture Exchange pursuant to Policy 5.3, and is subject to the approval of the
disinterested shareholders of Acasti (excluding Neptune and non-arm's length
parties to Neptune) at the next annual meeting of shareholders of Acasti.
In the event that the approvals required are not obtained by the next annual
meeting of shareholders of Acasti, the Prepayment Agreement and the Warrant
will automatically terminate, and Acasti will be required to pay any and all
royalties owing to Neptune as if the Prepayment Agreement had not been entered
About the License Agreement
The License Agreement provides Acasti with the right to use certain
intellectual property rights of Neptune in order to develop novel active
pharmaceutical ingredients, or APIs, into commercial products for specific
medical food and prescription drug markets (the "Licensed Intellectual
Property"). Pursuant to the License Agreement, Acasti has been granted a
license to use Neptune's intellectual property rights solely for the
development, distribution and sale of products for use in the human
cardiovascular field. Acasti is responsible for carrying out the research and
development of the APIs, as well as required regulatory submissions and
approvals and intellectual property filings.
Acasti is currently obligated under the License Agreement to pay to Neptune,
until the expiration of Neptune's patents on the Licensed Intellectual
Property, a royalty equal to the sum of (a) in relation to sales of products
in the licensed field, if any, the greater of: (i) 7.5% of net sales, and (ii)
15% of Acasti's gross margin; and (b) 20% of revenues from sub licenses
granted by Acasti to third parties, if any. The license will expire on the
date of expiration of the last-to-expire of the licensed patent claims and/or
continuation in part and/or divisional of the licensed patent claims. After
the last-to expire of the licensed patents on Licensed Intellectual Property,
theLicense Agreement will automatically renew for an additional period of 15
years, during which period royalties would equal half of those calculated
according to the above formula. In addition, the license provides for minimum
royalty payments notwithstanding the above of: year 1 ‐ nil; year 2 ‐ $50,000;
year 3 ‐ $200,000; year 4 ‐ $225,000 (initially $300,000, but reduced to
$225,000 following Acasti's abandonment of its rights to develop products for
the OTC market pursuant to the License Agreement); year 5 ‐ $700,000; and year
6 and thereafter - $750,000. Minimum royalties are based on contract years
based on the effective date of the license, August 7, 2008.
Under the License Agreement, Acasti has the option to pay future royalties in
advance, in cash or through the issuance of Shares, in whole or in part, based
on the economic model contained in the license agreement.
About Acasti Pharma Inc.
Acasti Pharma is developing a product portfolio of proprietary novel
long-chain omega-3 phospholipids. Phospholipids are the major component of
cell membranes and are essential for all vital cell processes. They are one of
the principal constituents of High Density Lipoprotein (good cholesterol) and,
as such, play an important role in modulating cholesterol efflux. Acasti
Pharma's proprietary novel phospholipids carry and functionalize the
polyunsaturated omega-3 fatty acids EPA and DHA, which have been shown to have
substantial health benefits and which are stabilized by potent antioxidants.
Acasti Pharma is focusing initially on treatments for chronic cardiovascular
and cardiometabolic conditions within the over-the-counter, medical food and
prescription drug markets.
"Neither Nasdaq nor the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release."
Statements in this press release that are not statements of historical or
current fact constitute "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities
laws. Such forward-looking statements involve known and unknown risks,
uncertainties, and other unknown factors that could cause the actual results
of the Company to be materially different from historical results or from any
future results expressed or implied by such forward-looking statements. In
addition to statements which explicitly describe such risks and uncertainties,
readers are urged to consider statements labeled with the terms "believes,"
"belief," "expects," "intends," "anticipates," "will," or "plans" to be
uncertain and forward-looking. The forward-looking statements contained herein
are also subject generally to other risks and uncertainties that are described
from time to time in the Company's reports filed with the Securities and
Exchange Commission and the Canadian securities commissions.
CONTACT: Acasti Contact:
Chief Financial Officer
Howard Group Contact:
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