Clarus Therapeutics Is Going Public by Merging With Blue Water SPAC

Pharmaceutical company Clarus Therapeutics, which has developed an oral drug called Jatenzo to treat testosterone deficiency, has agreed to go public by merging with special purpose acquisition company (SPAC) Blue Water Acquisition Corp. (NASDAQ: BLUW).

The deal values Clarus at $379 million, and the proceeds should help accelerate the commercialization of Jatenzo.

Here’s what you need to know about Clarus Therapeutics.

An oral alternative to existing testosterone treatments

Jatenzo is the only oral drug designed for testosterone replacement therapy (TRT) that’s been approved by the FDA, according to Clarus. TRT is used to treat a condition known as hypogonadism, which is when the body produces very few to no sex hormones. Hypogonadism can occur in men or women and can be congenital or acquired later in life. Clarus is looking to treat hypogonadism in men.

The company estimates that about 20 million men in the U.S. are affected by hypogonadism, of which only 6 million are diagnosed and roughly 2.2 million are being treated. That suggests that there is a large opportunity to provide treatment to an underserved market.

About 8 million prescriptions a year are written for the condition in the U.S., and each point of market share that Clarus gains represents $33 million in annual sales, according to the company’s estimates. By offering an oral drug, Clarus hopes to address challenges that current non-oral treatments present, such as pain from injectable products or skin irritation from topical products. 

Those issues can cause patients to change treatment options. Clarus estimates that more than 75% of men who are currently taking non-oral TRT options are unhappy with the solution and more than 80% are interested in an oral alternative.

Jatenzo launched in February 2020, shortly before the COVID-19 outbreak was declared a pandemic. Clarus notes that demand has steadily increased since the launch. Additional growth opportunities include expanding to Europe, Asia, or the Middle East and leveraging Jatenzo to treat hypogonadism in kidney disease or for transgender men (female-to-male). 

How the merger is structured

Blue Water has around $58.7 million in its trust account, and existing investors led by H.I.G. Capital will invest an additional $25 million in the company. The transaction values Clarus at $379 million on a fully diluted basis, assuming no redemptions by the SPAC’s shareholders. There is no traditional PIPE (private investment in public equity) financing component in the transaction. Before factoring in potential dilution, Clarus is fetching a post-money equity value of about $248.9 million.

Clarus intends to use the cash to expand its sales force, creating a direct-to-consumer (DTC) sales channel, and invest in other growth initiatives. The merger is expected to close in the third quarter.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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