avdl-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number: 001-37977

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AVADEL PHARMACEUTICALS PLC

(Exact name of registrant as specified in its charter)

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Ireland						98-1341933
(State or Other Jurisdiction of Incorporation)						(I.R.S. Employer Identification No.)

10 Earlsfort Terrace

Dublin 2 D02 T380

Ireland

(Address of Principal Executive Office and Zip Code)

+353-1-901-5201

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American Depositary Shares*	AVDL	The Nasdaq Global Market
Ordinary Shares, nominal value $0.01 per share**	N/A

*American Depositary Shares may be evidenced by American Depositary Receipts. Each American Depositary Share represents one (1) Ordinary Share.

** Not for trading, but only in connection with the listing of American Depositary Shares on The Nasdaq Global Market.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ	Smaller reporting company	þ
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

At August 4, 2023, 89,367,975 ordinary shares, nominal value $0.01 each, of the Company were outstanding.

TABLE OF CONTENTS


		Page #
Cautionary Note Regarding Forward Looking Statements		3

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34

NOTE REGARDING TRADEMARKS

We own various trademark registrations and applications, and unregistered trademarks, including AVADELTM, LUMRYZTM, MICROPUMPTM, LIQUITIMETM, and MEDUSATM. All other trade names, trademarks and service marks of other companies appearing in this Quarterly Report are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Quarterly Report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

From time to time, we may use our website, LinkedIn or our Twitter account (@AvadelPharma) to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.avadel.com. Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website, our LinkedIn posts or our Twitter posts are not incorporated into, and does not form a part of, this Quarterly Report.

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Cautionary Disclosure Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but are not always, made through the use of words or phrases such as “may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue,” and similar expressions, or the negative of these terms, or similar expressions. Accordingly, these statements involve estimates, assumptions, risks and uncertainties which could cause actual results to differ materially from those expressed in them.

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

•Our ability to successfully launch and commercialize LUMRYZ (sodium oxybate) in the United States (“U.S.”) for the treatment of cataplexy or excessive daytime sleepiness (“EDS”) in adults with narcolepsy;

•Our plans with respect to our commercial infrastructure and marketing, market access and commercial activities;

•Our ability to maintain and receive additional regulatory approvals for LUMRYZ in any other jurisdictions outside the U.S., and any related restrictions, limitations, and/or warnings in the label of LUMRYZ;

•Our expectations regarding the rate and degree of market acceptance for LUMRYZ;

•Our ability to enter into strategic partnerships for the commercialization, manufacturing and distribution of LUMRYZ in the U.S.;

•Our reliance on a single product, LUMRYZ;

•Our dependence on a limited number of suppliers for the manufacturing of LUMRYZ and certain raw materials used in LUMRYZ and any failure of such suppliers to deliver sufficient quantities of these raw materials, which could have a material adverse effect on our business, including commercialization of LUMRYZ in the U.S.;

•Our ability to finance our operations on acceptable terms, either through the raising of capital, the incurrence of convertible or other indebtedness, issuance of equity, royalty-based financings, or through strategic financing or commercialization partnerships;

•Our expectations regarding the pricing and reimbursement of, and the extent to which patient assistance programs are utilized for, LUMRYZ;

•Our expectations about the potential market size and market participation for LUMRYZ;

•Our expectations regarding litigation related to LUMRYZ;

•Our expectations regarding our cash runway to support the commercial launch of LUMRYZ in the U.S.;

•Our ability to continue to service our remaining Exchangeable Senior Notes due October 2023 (the “October 2023 Notes”), including making the ongoing interest payments on the October 2023 Notes, settling exchanges of the October 2023 Notes in cash or completing any required repurchases of the October 2023 Notes;

•The potential impacts of COVID-19, inflation and rising interest rates on our business and future operating results;

•Our ability to hire and retain key members of our leadership team and other personnel; and

•Competition existing today or that may arise in the future.

These forward-looking statements are neither promises nor guarantees of future performance due to a variety of risks and uncertainties and other factors more fully discussed in the “Risk Factors” section in Part I, Item 1A of the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 29, 2023 and the risk factors and cautionary statements described in our subsequent filings with the SEC. Given these uncertainties, readers should not place undue reliance on our forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and are not guarantees of future performance. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to revise any forward-looking statements to reflect events or developments occurring after the date of this Quarterly Report, even if new information becomes available in the future.

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net product revenue	$	1,496	$	—	$	1,496	$	—
Cost of products sold	36		—		36		—
Gross profit	1,460		—		1,460		—
Operating expenses:
Research and development expenses	4,223		4,541		8,053		11,532
Selling, general and administrative expenses	46,778		21,804		71,246		43,439
Restructuring expense	—		3,592		—		3,592
Total operating expense	51,001		29,937		79,299		58,563
Operating loss	(49,541)		(29,937)		(77,839)		(58,563)
Investment and other income, net	623		192		816		88
Interest expense	(2,295)		(3,506)		(5,554)		(5,523)
Loss on extinguishment of debt	(13,129)		—		(13,129)		—

Loss before income taxes	(64,342)		(33,251)		(95,706)		(63,998)
Income tax provision (benefit)	90		30,193		(490)		25,870
Net loss	$	(64,432)	$	(63,444)	$	(95,216)	$	(89,868)

Net loss per share – basic	$	(0.83)	$	(1.07)	$	(1.35)	$	(1.52)
Net loss per share – diluted	(0.83)		(1.07)		(1.35)		(1.52)

Weighted average number of shares outstanding - basic	77,246		59,037		70,603		58,931
Weighted average number of shares outstanding - diluted	77,246		59,037		70,603		58,931

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net loss	$	(64,432)	$	(63,444)	$	(95,216)	$	(89,868)
Other comprehensive income (loss), net of tax:
Foreign currency translation income (loss)	8		(657)		183		(842)
Net other comprehensive income (loss), net of income tax expense of $0, $330, $0 and $0, respectively	75		(629)		216		(1,546)
Total other comprehensive income (loss), net of tax	83		(1,286)		399		(2,388)
Total comprehensive loss	$	(64,349)	$	(64,730)	$	(94,817)	$	(92,256)

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)


	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	49,985	$	73,981
Marketable securities	110,525		22,518
Accounts receivable, net	1,775		—
Inventories	1,439		—
Research and development tax credit receivable	974		2,248
Prepaid expenses and other current assets	6,532		2,096
Total current assets	171,230		100,843
Property and equipment, net	715		839
Operating lease right-of-use assets	1,235		1,713
Goodwill	16,836		16,836

Research and development tax credit receivable	420		1,232
Other non-current assets	10,540		11,322
Total assets	$	200,976	$	132,785

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt	$	20,851	$	37,668
Current portion of operating lease liability	783		960
Accounts payable	11,786		7,890
Accrued expenses	17,582		7,334

Other current liabilities	500		1,941
Total current liabilities	51,502		55,793
Long-term debt	—		91,614

Long-term operating lease liability	490		780
Other non-current liabilities	5,792		5,743
Total liabilities	57,784		153,930

Shareholders’ equity (deficit):
Preferred shares, nominal value of $0.01 per share; 50,000 shares authorized; 5,194 issued and outstanding at June 30, 2023 and 488 issued and outstanding at December 31, 2022	52		5
Ordinary shares, nominal value of $0.01 per share; 500,000 shares authorized; 89,321 issued and outstanding at June 30, 2023 and 62,878 issued and outstanding at December 31, 2022	893		628
Additional paid-in capital	848,626		589,783
Accumulated deficit	(680,436)		(585,220)
Accumulated other comprehensive loss	(25,943)		(26,341)
Total shareholders’ equity (deficit)	143,192		(21,145)
Total liabilities and shareholders’ equity (deficit)	$	200,976	$	132,785

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)


	Ordinary shares			Preferred shares			Additional		Accumulated		Accumulated other comprehensive		Total shareholders’
	Shares	Amount		Shares	Amount		paid-in capital		deficit		loss		equity (deficit)
Balance, December 31, 2022	62,878	$	628	488	$	5	$	589,783	$	(585,220)	$	(26,341)	$	(21,145)
Net loss	—	—		—	—		—		(30,784)		—		(30,784)
Other comprehensive income	—	—		—	—		—		—		315		315
Issuance of common stock under at-the-market offering program, net of issuance costs	1,564	16		—	—		11,897		—		—		11,913
Amortization of deferred issuance costs	—	—		—	—		(16)		—		—		(16)

Vesting of restricted shares	22	—		—	—		—		—		—		—
Employee share purchase plan share issuance	14	—		—	—		29		—		—		29
Share-based compensation expense	—	—		—	—		1,522		—		—		1,522
Balance, March 31, 2023	64,478	$	644	488	$	5	$	603,215	$	(616,004)	$	(26,026)	$	(38,166)
Net loss	—	—		—	—		—		(64,432)		—		(64,432)
Other comprehensive income	—	—		—	—		—		—		83		83
April 2023 public offering, net of issuance costs	12,205	122		4,706	47		133,982		—		—		134,151
Mandatory Exchange of April 2027 Notes, net of issuance costs	12,347	123		—	—		102,039		—		—		102,162
Exercise of stock options	291	4		—	—		1,746		—		—		1,750


Share-based compensation expense	—	—		—	—		7,644		—		—		7,644
Balance, June 30, 2023	89,321	$	893	5,194	$	52	$	848,626	$	(680,436)	$	(25,943)	$	143,192

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AVADEL PHARMACEUTICALS PLC