Novan Inc to Sell All Assets and File for Chapter 11 Protection

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Novan Inc announced today that itself and its wholly owned subsidiary, EPI Health, have entered into a stalking horse asset purchase agreement (APA), an initial bid on the assets of a bankrupt company, with Ligand Pharmaceuticals prior to filing voluntary petitions for relief under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.¹ Novan continues to operate as a debtor-in-possession (DIP) under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Novan also entered into a secured DIP credit facility with Ligand in the principal amount of $15 million.

Most notably, Novan has been eagerly waiting for the FDA-assigned PDUFA date of January 5, 2024, for the approval of its berdazimer gel, 10.3%, for the treatment of molluscum contagiosum. According to its announcement today, Novan plans to continue to work with the FDA toward the potential approval of berdazimer gel. In the second quarter of 2023, Novan received its mid-cycle review communication from the FDA, in addition to the manufacturing facility’s pre-approval inspection and establishment inspection report.

The APA governs the sale of substantially all the assets of Novan for $15 million to be paid in cash at closing. The cash payable at closing will be reduced dollar-for-dollar by the outstanding balance of the DIP credit facility which will be repaid at closing. The transaction will be subject to approval by the Bankruptcy Court and compliance with agreed-upon and Bankruptcy Court-approved bidding procedures allowing for the submission of higher or otherwise better offers, and other agreed-upon conditions.

On July 14, 2023, Novan entered into a bridge loan with Ligand for the principal amount of $3 million. This pre-petition loan provided needed working capital to Novan for general corporate purposes and is secured by the assets of Novan. The pre-petition bridge loan will be rolled into the DIP credit facility after Bankruptcy Court approval of the DIP credit facility.

According to Novan’s announcement, its board of directors made the decision to commence the Chapter 11 Case, with Ligand as a stalking horse bidder, after a careful review of alternatives, after considering factors such as Novan’s challenging financial circumstances and the challenging market climate for similarly situated companies and upon consultation with Novan’s professional advisors.

Reference

1. Novan enters into agreement to sell substantially all of its assets, including berdazimer gel, 10.3% (SB206), and files for chapter 11 protection. Novan Inc. July 17, 2023. Accessed July 17, 2023. https://novan.com/novan-enters-into-agreement-to-sell-substantially-all-of-its-assets-including-berdazimer-gel-10-3-sb206-and-files-for-chapter-11-protection/