Carmell Announces Successful Closing of Axolotl Biologix Sale Transaction
- Successful sale of subsidiary Axolotl Biologix to initial sellers for shares of common stock, preferred stock, and debt cancellation.
- Improved financial position with a $4 million drop in annualized cash burn, $15.6 million reduction in debt, $7 million increase in tangible equity, and 29% reduction in EPS dilution.
- Focus on launching skincare products in March 2024 and continuing over Summer 2024 after exiting tissue graft space.
- Chairman & CEO Rajiv Shukla emphasizes organizational focus on skincare products post-sale of AxoBio.
- None.
Insights
The divestiture of Axolotl Biologix by Carmell Corporation represents a strategic refocusing of the company's resources towards its core competency in skin and hair health products. This move can be seen as a restructuring effort to streamline operations and concentrate on areas with higher growth potential. The significant reduction in debt, coupled with the decrease in annualized cash burn, suggests an improved financial health post-transaction. This is particularly notable for a company in the bio-aesthetics sector where cash flow management is critical due to high research and development costs.
From a shareholder's perspective, the reduction in earnings per share (EPS) dilution is a positive signal. It indicates a potential increase in the value of remaining shares since there are fewer shares outstanding, which could lead to higher EPS in future financial reports. However, investors should monitor the company's ability to generate revenue from its new skincare product line to ensure long-term sustainability and growth.
Exiting the tissue graft space allows Carmell to allocate more resources towards the burgeoning skincare market. The timing of this strategic pivot coincides with the launch of their skincare products, suggesting a calculated move to capitalize on market trends favoring personalized and advanced skin health solutions. By shedding a subsidiary that was contributing to a negative tangible equity, Carmell may enhance its attractiveness to investors seeking companies with a solid balance sheet.
However, the success of this strategy heavily relies on the market acceptance and competitive performance of Carmell's upcoming skincare line. The company's ability to differentiate its products and capture market share in a highly competitive industry will be critical. Investors should evaluate the company's marketing strategy, product innovation and consumer adoption rates post-launch to assess the potential impact on Carmell's market position and financial performance.
By analyzing the debt structure post-sale, we observe a substantial deleveraging effect on Carmell's balance sheet. The $15.6 million reduction in debt is a significant relief, as it not only improves the debt-to-equity ratio but also potentially lowers the cost of capital. The cancellation of the $8 million note payable is an immediate reduction in liabilities, which could improve the company's creditworthiness and provide more flexibility for future financing.
However, it is essential to scrutinize the terms of the preferred stock issued, as it may carry different rights and privileges compared to common stock. These terms could affect future cash flows, particularly if the preferred stock includes dividend rights or other financial obligations. Stakeholders should examine the preferred stock's impact on future financial obligations and how it might influence the company's financial strategy.
PITTSBURGH, March 27, 2024 (GLOBE NEWSWIRE) -- Carmell Corporation (Nasdaq: CTCX), a bio-aesthetics company focused on skin and hair health (“Carmell”, the “Company”, “we”, “our”, or “us”), today announced the successful closing of the previously announced sale of its wholly owned subsidiary, Axolotl Biologix (“AxoBio”) to the initial sellers of AxoBio for 3,845,337 shares of Carmell common stock, 4,243 shares of Carmell preferred stock and cancellation of
“The sale of AxoBio enables our exit from the tissue graft space thereby facilitating a sharper organizational focus on the launch of our skincare products beginning in March 2024 and continuing over Summer 2024,” said Rajiv Shukla, Chairman & Chief Executive Officer of Carmell.
Following the sale of AxoBio, Carmell’s financial position is expected to improve as follows:
$4 million drop in annualized cash burn (net of revenue) based on AxoBio’s actual January 2024 financials.$15.6 million reduction in debt:$7.6 million of AxoBio subsidiary level debt plus$8 million note payable related to the AxoBio acquisition.$7 million increase in tangible equity due to elimination of AxoBio’s negative tangible equity.29% reduction in EPS dilution due to the cancellation of 8.09 million CTCX common shares on a fully diluted basis. Post-Closing, Carmell has 19.25 million common shares outstanding.
About Carmell
Carmell is a bio-aesthetics company that utilizes the Carmell SecretomeTM to support skin and hair health. The Carmell SecretomeTM consists of a potent cocktail of growth factors and proteins extracted from allogeneic human platelets sourced from U.S. Food and Drug Administration-approved tissue banks. The technology underpinning the Carmell SecretomeTM has been extensively tested for safety and efficacy, significantly surpassing standards set by the aesthetics industry, including robust results from a prospective, randomized, multi-center Phase 2 human trial. Besides the Carmell SecretomeTM, the Company has developed a novel micellar nanoparticle formulation that enables delivery of lipophilic and hydrophilic ingredients without relying on the Foul FourteenTM, 14 potentially harmful excipients that are commonly used by other companies to impart texture, stability, and other desirable physicochemical attributes to cosmetic products. Additionally, Carmell’s micellar formulations do not utilize mineral or vegetable oils across their entire product line and are designed to be non-comedogenic. The Company is also developing a line of men’s products and a line of topical haircare products. All products are tailored to meet the demanding technical requirements of professional care providers and discerning retail consumers. For more information, visit www.carmellcosmetics.com.
Forward-Looking Statements
This press release contains forward-looking statements that are based on beliefs, assumptions and information currently available. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology. However, not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this press release, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this press release include, but are not limited to, statements about the impact of the AxoBio sale on our financial condition, our business strategy, the commercial launch of our G.L.E.E product and other products in our pipeline, and the attributes and benefits of Carmell’s products including products under development as well as commercial strategy, goals, plans and timelines. We cannot assure you that the forward-looking statements in this press release will prove to be accurate. These forward-looking statements are subject to a number of significant risks and uncertainties that could cause actual results to differ materially from expected results, including, among others, the ability to recognize anticipated benefits from our commercial products, R&D pipeline, distribution agreements, changes in applicable laws or regulations, the possibility that Carmell may be adversely affected by other economic, business, and/or competitive factors, and other risks and uncertainties, including those described under the header “Risk Factors” in the Quarterly Report on Form 10-Q filed by Carmell with the Securities and Exchange Commission (the “SEC”) on November 15, 2023, and in our other reports filed with the SEC. Most of these factors are outside of Carmell’s control and are difficult to predict. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. Except as required by law, we undertake no obligation to publicly update any forward-looking statement contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.
Contact:
Bryan Cassaday
Chief Financial Officer
bc@carmellcorp.com
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