This private pediatric therapeutics-focused specialty pharmaceutical company was close to commercializing its first product, Twinject™, a novel auto-injector device containing two doses of epinephrine to treat severe allergic reactions. The company concluded that it would need significant capital to launch Twinject and to finalize development deals for additional pipeline products. However, Verus did not want the dilutive impact of an all-equity financing, and wanted more operating and financial flexibility than traditional debt would have allowed.
To meet Verus' financial objectives, Paul Capital Healthcare combined two forms of financing into a single deal structure. Using this approach, the company raised $98 million through a two-component "Series A" / Revenue Interest round of financing. The first component, funded by a syndicate of several blue-chip investment funds including Paul Capital Healthcare, comprised $78 million in equity. The second component, consisting of the remaining $20 million, was structured as a revenue interest financing based upon future Twinject revenues. Paul Capital Healthcare provided the largest commitment of capital of any investor in this deal totaling $30 million.
This deal structure was less dilutive to shareholders than a pure equity investment would have been. It increased the total amount of capital raised while keeping the Series A post-money valuation reasonable and aligned the interests of the equity and revenue-interest investors.The revenue interest portion of the transaction also allowed the equity investors to retain more upside than they would have in a full equity deal.
