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Dermavant Announces $200 Million of Financing

June 07, 2021, 07:00 AM
Filed Under: Private Equity

Dermavant Sciences entered into a $160 million revenue interest purchase and sale agreement for its investigational product tapinarof with three participants that include Marathon Asset Management (Marathon), NovaQuest Capital Management (NovaQuest) and a third institutional investor located in Boston. The company concurrently entered into a $40 million senior secured credit facility with the Boston-based firm. Tapinarof is a novel, therapeutic aryl hydrocarbon receptor modulating agent, in development as a once-daily, steroid-free and cosmetically elegant topical cream being investigated for the treatment of plaque psoriasis and atopic dermatitis.

Under the terms of the revenue purchase and sale agreement, the participants purchased a capped single-digit percentage revenue interest in net sales of tapinarof for all dermatological indications in the United States in exchange for $160 million in committed funding to be paid to Dermavant, subject to approval of tapinarof by the U.S. Food and Drug Administration (FDA). The company has previously reported positive Phase 3 results for tapinarof cream in adult patients with plaque psoriasis, and recently submitted a New Drug Application (NDA) for tapinarof to the FDA. The company intends to use the funding proceeds for the payment of certain one-time milestone obligations that become payable upon the approval and commercialization of tapinarof for the treatment of psoriasis in the United States, as well as for other general corporate purposes.

Concurrent with entering into the revenue sale transaction, Dermavant entered into a $40 million senior secured credit facility with the Boston-based investor. The loan proceeds were used to pay off the company’s previously existing secured credit facility, with the remainder of net proceeds to be used for working capital and general corporate purposes.

"These transactions will allow Dermavant to fully fund all milestone payments associated with the approval of tapinarof for the treatment of psoriasis in the U.S. and increase our investment in its commercial launch," said Todd Zavodnick, Chief Executive Officer of Dermavant. "Following the recent NDA submission for tapinarof in plaque psoriasis, we plan to initiate a Phase 3 trial for the drug in atopic dermatitis in the second half of the year. Each of these milestones brings us closer to delivering this potential new therapy to patients who are suffering from these chronic skin diseases."

"Our participation in the revenue sale transaction reflects our confidence in tapinarof, underlined by the drug’s five key attributes that were observed during the Phase 3 clinical trials for the treatment of psoriasis, including treatment effect, durability on-therapy, remittive effect off-therapy, safety, and tolerability," said Steve DeNelsky, Managing Director at Marathon. "We believe that tapinarof, if approved by the FDA, could provide a meaningful new topical treatment option for healthcare providers and patients who otherwise have limited choices in therapies."

"We are delighted to continue to play our part in Dermavant’s development as the company prepares for the commercial launch of tapinarof, potentially Dermavant’s first FDA-approved product," said Brian Axe, Managing Director of NovaQuest. "We are confident that the company has the right team and strategy in place to commercialize this innovative therapy which, if approved, we believe could improve the standard of care for patients suffering from psoriasis and atopic dermatitis."

Morgan Stanley & Co. LLC acted as Dermavant’s sole structuring agent on the revenue sale transaction and as sole placement agent on the senior debt financing. Cooley LLP acted as counsel to Dermavant, Pillsbury Winthrop Shaw Pittman LLP acted as counsel to the Boston-based institutional investor, Wyrick Robbins Yates & Ponton LLP acted as counsel to NovaQuest, and Latham & Watkins LLP acted as counsel to Marathon.

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