Tue 09/06/2022 13:26 PM
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Relevant Documents:
Voluntary Petition
Press Release
First Day Declaration
Cash Collateral Motion
Bid Procedures Motion

Clarus is a pharmaceutical company that has developed and commercialized oral testosterone replacement Jatenzo (testosterone undecanoate)
Seeks to run sale process for Jatenzo, its sole commercial asset, with a “number” of prospective bidders interested in submitting stalking horse bid
Senior secured noteholders have consented to the use of cash collateral as a means to fund the case

Clarus Therapeutics Holdings Inc., a Northbrook, Ill.-based pharmaceutical company focused on the commercialization of Jatenzo (testosterone undecanoate), the “first oral testosterone replacement, or testosterone replacement therapy, of its kind approved by the U.S. Food and Drug Administration,” filed for chapter 11 protection on Monday, Sept. 5, in the Bankruptcy Court for the District of Delaware, along with affiliate Clarus Therapeutics Inc. The company seeks to run a sale process for its sole commercial asset, Jatenzo, noting parties’ “serious interest” in the product. The debtors have not designated a stalking horse but say that a “number” of prospective bidders are interested in submitting a bid.

According to the first day declaration of the company’s Chief Restructuring Officer Lawrence Perkins of SierraConstellation Partners, the debtors seek to “maximize going concern value” and “ensure that JATENZO remains available to patients who rely on it without interruption.” Robert Dudley, M.D., founder and CEO of Clarus, said in a press release: “We strongly believe that JATENZO has the potential to be a valuable product for the treatment of men with testosterone deficiency and, with continued commercialization efforts, to capture increasing market share over time. Unfortunately, Clarus is no longer in a tenable financial position to provide such efforts nor remain a viable entity.”

With $8.9 million of cash on hand, the case would be funded by the senior secured notes indenture trustee’s cash collateral with their consent to “provide the funding runway necessary for the Debtors to complete a sale or other restructuring transaction.” Current noteholders are: FFI Fund Ltd.; FYI Ltd.; Olifant Fund Ltd.; Nineteen77 Capital Solutions A LP; Bermudez Mutuari Ltd.; Bracebridge Capital LLC; and UBS O’Connor LLC.

The first day hearing has yet to be scheduled.

The company reports $48.9 million in assets and $62 million in liabilities. The company’s prepetition capital structure includes:

  • Secured debt:

    • 12.5% senior secured notes due 2015 (U.S. Bank as trustee): $43.1 million (excluding fees and expenses).

  • Unsecured debt:

    • Trade debt: $11 million.

  • Equity: Clarus Holdings owns Clarus Therapeutics. Prior to its delisting on Wednesday, Aug. 31, Clarus Holdings’ common stock traded on the Nasdaq under the ticker symbols CRXT and CRXTW, respectively. The common stock and warrants are trading on the OTC Markets’ OTC Pink Market tier. Holders of 5% or more of the company’s equity consist of H.I.G. Capital LLC and CBC SPVI Ltd.

The company also has rent-related obligations under Clarus’ leases for the corporate headquarters in Northbrook, Ill., and an ancillary office space in Murfreesboro, Tenn., and certain unpaid obligations to former and current employees.

The debtors’ only funded debt are the senior secured notes issued in the original amount of $50 million, which were issued to fund the launch of Jatenzo, and are secured by a first-priority lien on substantially all of Clarus’ assets; Clarus Holdings is not a guarantor of the obligations. The noteholders and the indenture trustee entered into a forbearance agreement with Clarus in March 2021, and also agreed to provide additional funding of $8.6 million in the aggregate for additional liquidity before a strategic merger.

In connection with the merger, the noteholders converted $10 million of principal of the notes, certain royalty rights that Clarus sold to the noteholders, plus the additional notes of $8.6 million, to common shares of Clarus Holdings. Clarus failed to make $8.7 million in required debt service payments due on the notes for Sept. 1.

The company has $8.9 million of cash. Clarus has seven U.S. patents related to Jatenzo and also has several pending domestic and international patent applications that would cover pharmaceutical compositions, methods of treatment and other features of Jatenzo, with the potential to extend patent coverage past 2030.

The debtors are represented by Goodwin Procter as counsel, Potter Anderson & Corroon as Delaware and conflicts counsel, Raymond James & Associates as investment banker and SierraConstellation Partners to provide additional personnel to support the CRO. Stretto is the claims agent. The case has been assigned to Judge Mary F. Walrath (case No. is 22-10845).

Events Leading to the Bankruptcy Filing

Clarus began commercializing Jatenzo in February 2020, generating net revenue of $6.4 million in 2020, which increased to $14 million in 2021 despite the Covid-19 pandemic’s impact on in-person marketing. Notwithstanding the increase in revenue, the company suffered a net loss of $25.6 million for the six-month period ended June 30 and a net loss of $40.6 million for fiscal year 2021. The company has an accumulated deficit of $347.2 million as of June 30 and has struggled to raise funding to continue commercializing Jatenzo. In early 2022, the company began to explore strategic alternatives, resulting in a nonbinding proposal in March to acquire all of Clarus Holdings’ outstanding common stock.

Clarus appointed a special committee of independent and disinterested directors to consider any potential strategic transaction, and in April retained Raymond James as investment banker to run a marketing process. Around the same time, the debtors obtained an upsized $30 million underwritten public offering of (i) units consisting of 26,680,720 shares of Clarus Holdings’ common stock and accompanying Class A warrants to purchase up to 26,680,720 shares of its common stock and (ii) units consisting of pre-funded warrants to purchase up to 590,000 shares of Clarus Holdings’ common stock and accompanying Class A warrants to purchase up to 590,000 shares of common stock.

Without any letters of intent by an Aug. 11 deadline for an out-of-court transaction, the debtors determined to file for chapter 11 protection and run an in-court sale process.


Clarus developed Jatenzo, which it says is the first oral testosterone replacement therapy of its kind to receive final Food and Drug Administration approval. The company’s president, CEO and founder Robert Dudley led the discovery, development, regulatory approval and launch of AndroGel, the first topical T-gel product and “most successful TRT product developed and commercialized to date, worldwide.” Perkins explains that “[m]illions of patients are treated yearly for male hypogonadism - testosterone deficiency accompanied by an associated medical condition,” but that prior to Jatenzo, there were no safe oral options available.

Most of the debtors’ prescriptions are open access, and the company has negotiated agreements with “several” pharmacy benefits managers, including Express Scripts. The product was also available under health plans representing approximately 71% of all insured in the U.S., of which approximately 74% with commercial insurance had access to Jatenzo. Clarus also offers a co-pay assistance program and participates in certain rebate programs and provides discounts to veterans under federal programs.

The debtors had planned for several life-cycle management projects for Jatenzo including a label expansion to treat hypogonadal men with chronic kidney disease, development of a once-daily oral TU and a label expansion to provide testosterone therapy for female-to-male transgender individuals. The initiatives were then put on hold because of liquidity issues.

In September 2021, Clarus and Blue Water Acquisition Corp., a special purpose acquisition company, and Blue Water Merger Sub Corp., a Delaware corporation and wholly owned subsidiary of Blue Water, consummated a merger. Blue Water Merger Sub merged with and into Clarus, with Clarus surviving as a wholly owned subsidiary of Blue Water, which changed its name to Clarus Therapeutics Holdings. Pursuant to the merger, certain of Clarus’ equityholders and convertible debt and noteholders, and certain other obligations, converted into shares of Clarus Holdings’ common stock. The company also received net proceeds of approximately $17 million.

The debtors' largest unsecured creditors are listed below:

10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
inVentiv Commercial Services LLC Somerst, N.J. Trade $   5,547,373
Intouch Group LLC Overland Park, Kan. Trade 1,766,646
Ascent Health Services LLC Switzerland Trade 532,780
Donnelley Financial Solutions Chicago Trade 460,369
Relay Health Moon Township, Pa. Trade 431,036
Zinc Health Services LLC Northbrook, Ill. Trade 353,162
Caremark PCS Northbrook, Ill. Trade 322,107
Source Healthcare Analytics LLC Raleigh, N.C. Trade 275,018
Axtria Inc. Berkely Heights, N.J. Trade 150,534
PSKW LLC Whippany, N.J. Trade 138,385

The case representatives are as follows:

Role Name Firm Location
Debtors' Co-Counsel Michael
H. Goldstein
New York
Barry Z.
Kizzy L.
Debtors' Co-Counsel L. Katherine
Anderson &
Wilmington, Del.
Aaron H.
Debtors' Financial Advisor Geoffrey
James &
New York
Simon Wein
Los Angeles
Debtors' Claims
NA Stretto New York
Co-Counsel to the
Indenture Trustee
Joshua D. Morse Pillsbury
Shaw Pittman
San Francisco
Co-Counsel to the
Indenture Trustee
Mayer Brown New York
Co-Counsel to the
Indenture Trustee
M. Blake
Stargatt & Taylor
Wilmington, Del.
U.S. Trustee Benjamin A. Hackman Office of the U.S.
Wilmington, Del.

Bid Procedures Motion

The debtors say that though they received “several promising opportunities” and multiple nonbinding indications of interest, they were unable to reach agreement with any of the prospective purchasers on the terms of an out-of-court transaction. After the petition date, the debtors say, they “reengaged” with all parties that had conducted “substantial diligence” prepetition to discuss their interest in serving as a stalking horse bidder. The debtors say that although they have yet to select a stalking horse bidder, they and their advisors are “in regular dialogue” with a number of prospective bidders interested in submitting a stalking horse bid.

In support of the proposed bid procedures, the debtors filed the declaration of Simon Wein of Raymond James & Associates, the debtors’ investment banker, who states that prepetition the debtors identified and contacted 138 potential bidders to purchase substantially all or portion of their assets.
With respect to any stalking horse bidder, the debtors propose a breakup fee in an amount not to exceed 3% of the purchase price and an expense reimbursement up to $400,000.

If a stalking horse bidder is designated in advance of the auction, the first overbid must have a “value,” as determined by the debtors in consultation with the consultation parties, that is greater than or equal to the sum of the stalking horse bid plus (a) the amount of the bid protections and (b) $250,000.

The consultation parties consist of indenture trustee U.S. Bank and any official committee appointed in the chapter 11 cases. Additionally, the indenture’s trustee’s written consent would be required prior to the debtors’ entry into any stalking horse agreement. The bid procedures also preserve the indenture trustee’s right to credit bid the prepetition senior note obligations.

The proposed sale timeline is below:

The debtors seek to have the motion heard on shortened notice on Sept. 23, with an objection deadline of Sept. 19 at 4 p.m. ET.

Cash Collateral Motion

The debtors are seeking authority to use the cash collateral of the indenture trustee U.S. Bank on a consensual basis. The cash collateral may be used for working capital and other general corporate purposes, payroll obligations and case administration, pursuant to the budget. The authority to use cash collateral terminates on the earliest of Oct. 28 and other customary termination events.

In general, the company proposes granting replacement liens, allowed superpriority administrative expense claims, liens on avoidance actions, financial reporting requirements and payment of the professionals’ fees and expenses.

The company proposes the following adequate protection liens: (i) first priority replacement lien on unencumbered property; (ii) replacement liens junior to certain senior existing liens; (iii) replacement liens senior to certain existing liens of secured parties and (iv) first priority replacement lien on Clarus Holdings’ unencumbered property. Upon entry of a final order, the replacement liens would attach to avoidance actions.

Additionally, the company proposes the following adequate protection to its prepetition lenders:

  • Subject to the entry of the interim cash collateral order, payment of approximately $2.7 million in accrued and unpaid prepetition interest for the period from March 1 to Aug. 1;

  • Subject to entry of the final cash collateral order, payment of all accrued and unpaid postpetition interest, including (1) approximately $521,000 for the period from Sept. 1 to 3 at a 2% interest rate and (ii) approximately $486,000 for the period from Oct. 1 to 28 at a 2% interest rate;

  • Subject to entry of the final order, payment of $25,000 on account of the secured parties’ prepetition reasonable fees and expenses;

  • Payment of the secured parties’ postpetition reasonable fees and expenses; and

  • Within three business days of any “Net Cash Sale Proceeds,” satisfaction of the accrued but unpaid adequate protection payments, any adequate protection superpriority claim and the prepetition obligations.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge their collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b), both subject to entry of a final order.

The carve-out for professional fees is $500,000.

The proposed budget is HERE.

The lien challenge deadline is the later of 75 days following entry of the interim order and any other date set by the court. The UCC lien investigation budget is $150,000.

Other Motions

The debtors also filed various standard first day motions, including the following:

  • Motion for joint administration

    • The cases will be jointly administered under case No. 22-10845.

  • Motion to establish trading procedures

    • Clarus Therapeutics Holdings Inc. seeks to establish trading procedures for its common stock in order to be able to object to and prevent transfers if necessary to preserve net operating losses. The debtors have about $360.9 million in NOLs and excess interest expenses.

  • Motion to pay employee wages and benefits

    • In the motion, the company reports have satisfied most of their prepetition obligations after the debtors initiated a “special company-wide payroll” from the period of Sept. 1 to 15. The company seeks to pay the following employee obligations:

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