Two life sciences investment firms have agreed to acquire Paratek Pharmaceuticals in a take-private deal, betting that they can accelerate the sales of an antibiotic the biotechnology company has struggled to profitably market.
Per deal terms announced Tuesday, Gurnet Point Capital and Novo Holdings, the investment arm of the Novo Nordisk Foundation, will pay $2.15 per Paratek share, or roughly $123 million upfront, and assume all of Paratek’s debt. Paratek shareholders could also get another $0.85 for each share they own if net U.S. sales of the company’s antibiotic, Nuzyra, tops $320 million by the end of 2026.
Including that additional payment and the debt held by Paratek at the end of last quarter, the deal could be worth a total of $462 million.
The upfront price per share represents a 41% premium to Paratek’s closing price May 31, the last full trading day before speculation emerged that private equity firms were eyeing a takeover. The premium to Monday’s closing price is just under 10%, by comparison.
The need for new medicines to combat antibiotic resistance has grown in recent years, as drug-resistant infections have emerged as a top threat to public health. Yet small biotech companies specializing in the field have had a tough time filling that gap, as antibiotics are given in a short course, and new ones are administered sparingly.
Drugmakers contend that the current government incentives and “subscription-style” purchasing models aren’t enough to overcome their marketing challenges. Several biotechs trying to launch new antibiotics in recent years have either been acquired at steep discounts or gone bankrupt.
Paratek is the latest example. The company was formed in 1996 and spent years developing Nuzyra as a treatment for bacterial skin and pneumonia infections, finally winning its first U.S. approval in 2018.
Yet its share price and financial health has steadily eroded since then. It ended last quarter with just $45 million in cash and cash equivalents, enough to survive through the first quarter of next year. Shares have hovered around $2 apiece for several months. Paratek recorded a $20 million net loss in the first three months of 2023, too, and faces the looming maturity next year of about $164 million in convertible notes.
Even as Nuzyra sales grow and further testing continues, “the elephant in the room is the company’s financing overhang,” wrote Jefferies analyst Kambiz Yazdi in a note to clients last month.
Gurnet Point and Novo Holdings view Paratek’s challenges as a chance to step in. “We see an attractive opportunity to invest in and accelerate the commercialization of Nuzyra,” said Gurnet Point partner Stacey Seltzer, in a statement.
Seltzer added that the investor group, aided by debt provided by Oaktree Capital Management, will have the “capital and resources required” to speed up the launch. Jefferies analyst Yazdi has estimated yearly Nuzyra sales could reach $300 million at their peak without further label expansions.
"This transaction will deliver immediate value to our shareholders at a substantial premium while allowing them to also benefit from the future value created by Nuzyra," said CEO Evan Loh, calling the deal “a testament to all we've accomplished at Paratek over the past several years.
Paratek is the second biotech company Gurnet Point has agreed to take private since last June, when the firm reached a deal to buy bone drug maker Radius Health.