An asset purchase is an agreement between a buyer and a seller that finalizes terms...
An asset purchase is an agreement between a buyer and a seller that finalizes terms and conditions related to the purchase and sale of a company's assets.
Assets purchased tend to take one of four forms in the biopharma sector.
Business assets are the most common asset exchanging hands. Business assets are in the form of a business unit or subsidiary of a parent company. Common assets include territorial businesses or non-core businesses such as an OTC or diagnostics business, separate from the core business operations.
Another type of business asset commonly acquired is a manufacturing or research facility, where the seller no longer requires the asset, whilst the buyer is seeking to obtain additional facilities and perhaps a workforce at a price lower than starting from scratch.
Business asset sales are often accompanied by related agreements to enable a smooth transition of activities. An example is a transition services agreement.
Another type of asset acquired is a product in the form of marketed product, clinical phase development compound, or drug delivery-compound combination. These assets are commonly available as a result of a merger or change in direction of the selling company. The buyer acquires the asset for global or territorial exploitation. It is often the case that the acquiring company is normally a competitor to the seller, but in this situation the trade is of mutual benefit.
Drug delivery-compound combination products are often developed by specialty drug delivery companies utilizing a successful drug in combination with a proprietary drug delivery system. The resultant product is then offered for license or out-right sale by the drug delivery company, with the acquiring company often being the originator of the drug.
Product asset purchase agreements are sometimes accompanied with a manufacturing and supply agreement to ensure continuity of product availability during transition from seller to buyer.
The following figure provides a simple definition for each asset purchase term.
- Business assets - A business unit, subsidiary, spin-out company or production facility to be acquired from the disposing party. The asset buyer may require the seller to provide additional support during the transfer of the asset including product supply, interim service support.
- Product assets - A marketing product or clinical stage compound. A product asset purchase may include global rights or limited territorial rights, for example USA only. The product asset seller may limit the asset sale to the marketing of the asset in a specific market, whilst retaining rights to the assets in their core territories.
- Royalty assets - A sale of rights to royalties for sale of the product which would have otherwise been due to the licensor, in return for a lump sum investment. The buyer of the royalty asset would assume right and title to receive the royalties due from the sales of the product under a pre-existing licensing agreement.
- Technology assets - A discovery or other technology platform. This may include an entire research program, associated patents and other intellectual property rights.
In September 2012, QLT announced the sale of its Visudyne business to Valeant Pharmaceuticals International.
The recitals summarized the agreement as follows:
Sellers, directly or indirectly through their Affiliates (such term, and each other capitalized term used but not defined in these Recitals, having the meaning set forth in Article I of this Agreement), are engaged in the Business and hold the Purchased Assets;
Parties desire that, at the Closing, Sellers shall sell, or cause to be sold, to Purchaser, and Purchaser shall purchase from Sellers, all of the Purchased Assets and assume the Assumed Liabilities upon the terms and conditions set forth herein; in connection with the sale of the Purchased Assets and assumption of the Assumed Liabilities, the Parties desire to enter into the Ancillary Agreements at the Closing; and
the Parties acknowledge that this Agreement contemplates that Purchaser will only be acquiring the Purchased Assets, assuming the Assumed Liabilities and entering into the Ancillary Agreements and not acquiring Sellers’ business operation as a going concern and that, accordingly, Purchaser will not be employing or retaining any of Sellers’ employees, assuming any obligations under Sellers’ compensation or benefits plans, purchasing or leasing any of Sellers’ facilities or assuming any of the Retained Liabilities.
The complete contract document can be viewed at: Asset purchase agreement for Visudyne