NightHawk Biosciences is making a strategic shift into a pure play biomanufacturing contract development and manufacturing organization (CDMO), divesting certain non-core assets to focus on growing sales within its Scorpius BioManufacturing subsidiary.

Scorpius’ first full year of operation is expected to generate more than $20 million in revenue, a substantial portion of which will be recognized in 2024. To facilitate this strategic shift, the company has divested its Elusys subsidiary and related assets and has eliminated most of its R&D and associated expenses to focus resources on growing and expanding Scorpius.

The assets will be acquired by a private company established by Jeff Wolf, CEO of NightHawk, which will assume Elusys’ contracted financial commitments, currently estimated at over $40 million. Under the terms of the transaction, the private company will also provide an upfront payment of $500,000, a note for $2.25 million that is convertible into shares of NightHawk’s common stock, and royalties of 3% on all of Elusys’ gross sales until June 30, 2031.

In a statement, the company said that the divestiture of Elusys and R&D cuts are expected to reduce the company’s annual operating expenses by over $13 million and fully eliminate the need for NightHawk to raise capital to support Elusys’ programs.

Wolf said, “Given the strength of our CDMO operations at Scorpius, we have made the strategic decision to refocus our efforts around those activities that hold the potential to generate meaningful cash flow while substantially reducing non-core costs and associated overhead. Scorpius booked $3 million in contracted sales in 2022, which has grown to over $20 million in contracted sales thus far in 2023. As contracted sales are generally recognized as revenue as work is performed, we expect to recognize substantial revenue on these booked contracts in 2024.”