avdl-20250331

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: March 31, 2025

☐ 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						N/A
(Address of Principal Executive Office and Zip Code)						(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)

———————

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, nominal value $0.01 per share	AVDL	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	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
		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 May 5, 2025, 96,738,935 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	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	32

NOTE REGARDING TRADEMARKS

We own various trademark registrations and applications, and unregistered trademarks, including, but not limited to, AVADELTM, LUMRYZTM, RYZUPTM, REST-ONTM, RESTORETM and REVITALYZTM. 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 X 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 X 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 commercialize LUMRYZ (sodium oxybate) in the United States (“U.S.”) for the treatment of cataplexy or excessive daytime sleepiness (“EDS”) in patients seven years of age and older 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 expectations regarding timing of and our ability to execute the pivotal REVITALYZ trial of LUMRYZ in idiopathic hypersomnia (“IH”);

•Our ability to seek, maintain and receive additional U.S. regulatory approvals as well as commercialize LUMRYZ for indications beyond narcolepsy;

•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 produce LUMRYZ or deliver sufficient quantities of such 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 including the incurrence of convertible or other indebtedness, issuance of equity or royalty-based financings, or through strategic financing or commercialization partnerships;

•Our expectations regarding the pricing and reimbursement and the extent to which patient financial 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 commercialization of LUMRYZ in the U.S.;

•The potential impacts of tariffs, 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;

•The potential impacts due to global political instability and conflicts, such as terrorism, civil unrest, war and natural disasters in foreign countries on our business, financial condition and results of operations; 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 3, 2025 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 March 31,
	2025		2024

Net product revenue	$	52,511	$	27,178
Cost of products sold	5,577		1,522
Gross profit	46,934		25,656
Operating expenses:
Research and development expenses	4,354		3,068
Selling, general and administrative expenses	45,581		48,623

Total operating expense	49,935		51,691
Operating loss	(3,001)		(26,035)
Investment and other income, net	397		1,378
Interest expense	(2,238)		(2,592)


Loss before income taxes	(4,842)		(27,249)
Income tax provision	78		93
Net loss	$	(4,920)	$	(27,342)

Net loss per share - basic	$	(0.05)	$	(0.30)
Net loss per share - diluted	$	(0.05)	$	(0.30)

Weighted average number of shares outstanding - basic	96,601		91,693
Weighted average number of shares outstanding - diluted	96,601		91,693

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 March 31,
	2025		2024

Net loss	$	(4,920)	$	(27,342)
Other comprehensive income (loss), net of tax:
Foreign currency translation income (loss)	415		(236)
Net other comprehensive loss, net of income tax expense of $0 and $0, respectively	(147)		(353)
Total other comprehensive income (loss), net of tax	268		(589)
Total comprehensive loss	$	(4,652)	$	(27,931)

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)


	March 31, 2025		December 31, 2024
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	56,370	$	51,371
Marketable securities	10,114		22,406
Accounts receivable, net	41,581		34,097
Inventories	20,406		20,298

Prepaid expenses and other current assets	10,787		6,036
Total current assets	139,258		134,208
Property and equipment, net	307		453
Operating lease right-of-use assets	2,896		1,702
Goodwill	16,836		16,836


Other non-current assets	8,652		11,037
Total assets	$	167,949	$	164,236

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:

Current portion of operating lease liability	$	706	$	582
Accounts payable	9,116		7,328
Accrued expenses	40,917		40,651

Other current liabilities	194		273
Total current liabilities	50,933		48,834


Long-term operating lease liability	2,189		1,122
Royalty financing obligation	35,518		35,249
Other non-current liabilities	5,239		5,183
Total liabilities	93,879		90,388

Shareholders’ equity:
Preferred shares, nominal value of $0.01 per share; 50,000 shares authorized; zero issued and outstanding at March 31, 2025 and December 31, 2024	—		—
Ordinary shares, nominal value of $0.01 per share; 500,000 shares authorized; 96,632 issued and outstanding at March 31, 2025 and 96,518 issued and outstanding at December 31, 2024	966		965
Additional paid-in capital	896,663		891,791
Accumulated deficit	(799,247)		(794,328)
Accumulated other comprehensive loss	(24,312)		(24,580)
Total shareholders’ equity	74,070		73,848
Total liabilities and shareholders’ equity	$	167,949	$	164,236

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Ordinary shares			Preferred shares			Additional		Accumulated		Accumulated other comprehensive		Total shareholders’
	Shares	Amount		Shares	Amount		paid-in capital		deficit		loss		equity
Balance, December 31, 2024	96,518	$	965	—	$	—	$	891,791	$	(794,328)	$	(24,580)	$	73,848
Net loss	—	—		—	—		—		(4,920)		—		(4,920)
Other comprehensive income	—	—		—	—		—		—		268		268



Exercise of stock options	60	1		—	—		281		—		—		282
Vesting of restricted shares	8	—		—	—		—		—		—		—
Employee share purchase plan share issuance	46	—		—	—		408		1		—		409
Share-based compensation expense	—	—		—	—		4,183		—		—		4,183
Balance, March 31, 2025	96,632	$	966	—	$	—	$	896,663	$	(799,247)	$	(24,312)	$	74,070

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Ordinary shares			Preferred shares			Additional paid-in		Accumulated		Accumulated other comprehensive		Total shareholders’
	Shares	Amount		Shares	Amount		capital		deficit		loss		equity
Balance, December 31, 2023	89,825	$	898	5,194	$	52	$	855,452	$	(745,496)	$	(23,167)	$	87,739
Net loss	—	—		—	—		—		(27,342)		—		(27,342)
Other comprehensive loss	—	—		—	—		—		—		(589)		(589)
Issuance of common stock under at-the-market offering program, net of issuance costs	640	6		—	—		9,244		—		—		9,250
Amortization of deferred issuance costs	—	—		—	—		(3)		—		—		(3)
Conversion of preferred stock into ordinary shares	5,194	52		(5,194)	(52)		—		—		—		—
Exercise of stock options	390	3		—	—		3,353		—		—		3,356

Employee share purchase plan share issuance	48	1		—	—		583		—		—		584
Share-based compensation expense	—	—		—	—		5,389		—		—		5,389
Balance, March 31, 2024	96,097	$	960	—	$	—	$	874,018	$	(772,838)	$	(23,756)	$	78,384

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AVADEL PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2025		2024

Cash flows from operating activities:
Net loss	$	(4,920)	$	(27,342)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	825		541


Share-based compensation expense	4,183		5,389

Other adjustments	70		(719)
Net changes in assets and liabilities
Accounts receivable	(7,484)		(10,589)
Inventories	(66)		(1,260)
Prepaid expenses and other current assets	(3,016)		(6,082)

Accounts payable & other current liabilities	1,779		7,528
Accrued expenses	218		3,415
Other assets and liabilities	179		(585)
Net cash used in operating activities	(8,232)		(29,704)

Cash flows from investing activities:


Proceeds from sales of marketable securities	17,808		119,066
Purchases of marketable securities	(5,491)		(97,679)
Net cash provided by investing activities	12,317		21,387

Cash flows from financing activities:




Proceeds from issuance of shares off the at-the-market offering program	—		9,250
Proceeds from stock option exercises and employee share purchase plan	690		3,940
Net cash provided by financing activities	690		13,190

Effect of foreign currency exchange rate changes on cash and cash equivalents	224		(246)

Net change in cash and cash equivalents	4,999		4,627
Cash and cash equivalents at January 1,	51,371		31,167
Cash and cash equivalents at March 31,	$	56,370	$	35,794

Supplemental disclosures of cash flow information:
Interest paid	$	1,890	$	730

See accompanying notes to unaudited condensed consolidated financial statements.

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AVADEL PHARMACEUTICALS PLC

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data)

NOTE 1: Summary of Significant Accounting Policies

Nature of Operations. Avadel Pharmaceuticals plc (Nasdaq: AVDL) (“Avadel,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company. The Company is registered as an Irish public limited company. The Company’s headquarters are in Dublin, Ireland with operations in Dublin, Ireland and St. Louis, Missouri, United States (“U.S.”).

LUMRYZ is an extended-release formulation of sodium oxybate indicated to be taken once at bedtime for the treatment of cataplexy or excessive daytime sleepiness (“EDS”) in patients seven years of age and older with narcolepsy.

LUMRYZ was approved by the U.S. Food and Drug Administration (“FDA”) on May 1, 2023 for the treatment of cataplexy or EDS in adults with narcolepsy. The FDA also granted Orphan Drug Exclusivity (“ODE”) to LUMRYZ for treatment of cataplexy or EDS in adults with narcolepsy for a period of seven years until May 1, 2030. In June 2023, the Company commercially launched LUMRYZ in the U.S for the treatment of cataplexy or EDS in adults living with narcolepsy. LUMRYZ was approved by the FDA for use in the treatment of cataplexy or EDS in the pediatric narcolepsy population seven years of age and older on October 16, 2024, and was granted ODE for this patient population through October 16, 2031.

The FDA required implementation of a Risk Evaluation and Mitigation Strategy (“REMS”) to help ensure the benefits of the drug outweigh the risks of serious adverse outcomes resulting from inappropriate prescribing, misuse, abuse, and diversion of the same. Under the LUMRYZ REMS, healthcare providers who prescribe the drug must be specially certified, pharmacies that dispense the drug must be specially certified, and the drug must be dispensed only to patients who have enrolled in the LUMRYZ REMS and completed all REMS requirements, including documentation of safe use conditions.

As of the date of this Quarterly Report, the Company’s only commercialized product is LUMRYZ. The Company continues to evaluate opportunities to expand its product portfolio.

Liquidity. The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The adequacy of the Company’s cash resources depends on the outcome of certain business conditions including the Company’s ongoing LUMRYZ commercialization activities, the Company’s cost structure, and other factors set forth in “Risk Factors” within Part I, Item 1A of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3, 2025 (the “Annual Report on Form 10-K”).

Ordinary Shares

Effective April 15, 2024, the Company’s ordinary shares, nominal value $0.01 per share (“ordinary shares”), became directly listed on the Nasdaq Stock Market. The Company caused a mandatory exchange of its American Depositary Shares (“ADSs”) for the underlying ordinary shares on a one-for-one basis. Accordingly, the Bank of New York Mellon (“BNY Mellon”), as Depositary for the ADSs, issued a notice of termination of its American Depository Receipt program (“ADR Program”) of ADSs to the registered holders of ADSs according to the requirements under the deposit agreement dated January 3, 2017 (the “Deposit Agreement”) among the Company, BNY Mellon and holders of ADSs. The Deposit Agreement terminated on July 15, 2024.

At-the-Market Offering Program

On May 8, 2024, the Company entered into an Open Market Sale AgreementSM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company may offer and sell its ordinary shares, from time to time, with respect to an at-the-market offering program (“ATM Program”) under which Jefferies will act as sales agent. The Sales Agreement provides that Jefferies will be entitled to aggregate compensation for its services of an amount up to 3.0% of the gross proceeds of any ordinary shares sold through Jefferies under the Sales Agreement.

The ordinary shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-267198), filed with the SEC on August 31, 2022, as amended, and declared effective by the SEC on September 12, 2022,

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as supplemented by the prospectus supplement dated May 8, 2024 (the “Prospectus Supplement”). The Company may offer and sell ordinary shares having an aggregate offering price of up to $100,000 under the Prospectus Supplement.

The Company did not issue or sell ordinary shares under at-the-market offering program during the three months ended March 31, 2025.

Basis of Presentation. The unaudited condensed consolidated balance sheet as of March 31, 2025 and the interim unaudited condensed consolidated financial statements presented herein, have been prepared in accordance with U.S. GAAP, the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by U.S. GAAP for complete financial statements or all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Annual Report on Form 10-K.

Certain prior year amounts have been reclassified within the notes to the unaudited condensed consolidated financial statements to condense line items of the same nature to conform with the current year presentation.

The unaudited condensed consolidated financial statements include the accounts of the Company and subsidiaries and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented. All intercompany accounts and transactions have been eliminated. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.

Share-based Compensation. The Company accounts for share-based compensation based on the estimated grant-date fair value. The fair value and requisite service period of market-based performance non-qualified stock options ("market-based NQSOs") is determined using the Monte Carlo valuation methodology on the date of grant. For market-based NQSOs, the Company uses a straight-line method to recognize compensation expense over the award’s requisite service period, net of estimated forfeiture rates.

Recent Accounting Guidance Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The ASU is effective for annual periods beginning after December 15, 2024. Adoption of ASU 2023-09 will not have a material effect on the Company’s financial position or results of operations.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), to require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact adopting ASU 2024-03 will have on its financial statement disclosures.

NOTE 2: Revenue Recognition

The Company’s source of net product revenue during the three months ended March 31, 2025 and 2024 consists solely of sales of LUMRYZ in the U.S.

For the three months ended March 31, 2025 and 2024, three customers accounted for 100% of sales. The following table presents a summary of the percentage of total gross sales to customers:


	Three Months Ended March 31,
Sales by Customer:	2025		2024

Caremark	45	%	44	%
Accredo	44	%	39	%
Optum	11	%	17	%

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NOTE 3: Fair Value Measurement

The Company is required to measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, the Company uses fair value extensively when accounting for and reporting certain financial instruments, when measuring certain contingent consideration liabilities and in the initial recognition of net assets acquired in a business combination. Fair value is estimated by applying the hierarchy described below, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement.

ASC 820, Fair Value Measurements and Disclosures, defines fair value as a market-based measurement that should be determined based on the assumptions that marketplace participants would use in pricing an asset or liability. When estimating fair value, depending on the nature and complexity of the asset or liability, the Company may generally use one or each of the following techniques:

•Income approach, which is based on the present value of a future stream of net cash flows.

•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.

As a basis for considering the assumptions used in these techniques, the standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

•Level 1 - Quoted prices for identical assets or liabilities in active markets.

•Level 2 - Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.

•Level 3 - Unobservable inputs that reflect estimates and assumptions.

The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying unaudited condensed consolidated balance sheets:


	As of March 31, 2025						As of December 31, 2024
Fair Value Measurements:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Marketable securities (see Note 4)


Government securities - U.S.	$	10,114	$	—	$	—	$	22,406	$	—	$	—

Total assets	$	10,114	$	—	$	—	$	22,406	$	—	$	—

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. During the periods ended March 31, 2025 and December 31, 2024, there were no transfers in and out of Level 3. During the three months ended March 31, 2025 and 2024, the Company did not recognize any allowances for credit losses.

Some of the Company’s financial instruments, such as cash and cash equivalents, accounts receivable and accounts payable, are reflected in the unaudited condensed consolidated balance sheets at carrying value, which approximates fair value due to their short-term nature.

Royalty Financing Obligation

As of March 31, 2025 and December 31, 2024, the carrying value of the royalty financing obligation under the Royalty Purchase Agreement (“RPA”) approximated its fair value and was measured using estimates of forecasted net product revenue based on current contractual and statutory requirements, specific known market events and trends, industry data, historical trends, current and expected patient demand and forecasted customer buying and payment patterns (Level 3 inputs). See Note 6: Royalty Financing Obligation for additional information regarding the Company’s royalty financing obligation.

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NOTE 4: Marketable Securities

The Company has investments in available-for-sale debt securities which are recorded at fair market value. The change in the fair value of available-for-sale debt investments is recorded as accumulated other comprehensive loss in shareholders’ equity, net of income tax effects. As of March 31, 2025 and December 31, 2024, the Company considered any decreases in fair value on its marketable securities to be driven by factors other than credit risk, including market risk.

The following tables show the Company’s available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of March 31, 2025 and December 31, 2024:


	March 31, 2025
Marketable Securities:	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value



Government securities - U.S.	$	10,097	$	17	$	—	$	10,114

Total	$	10,097	$	17	$	—	$	10,114


	December 31, 2024
Marketable Securities:	Adjusted Cost		Unrealized Gains		Unrealized Losses		Fair Value



Government securities - U.S.	$	22,242	$	164	$	—	$	22,406

Total	$	22,242	$	164	$	—	$	22,406

The Company determines realized gains or losses on the sale of marketable securities on a specific identification method. The Company reflects these gains and losses as a component of investment and other income, net in the accompanying unaudited condensed consolidated statements of loss.

The Company recognized gross realized gains of $206 and no gross realized losses for three months ended March 31, 2025. The Company recognized gross realized gains of $398 and no gross realized losses for the three months ended March 31, 2024.

The following table summarizes the estimated fair value of the Company’s investments in marketable debt securities, accounted for as available-for-sale debt securities and classified by the contractual maturity date of the securities as of March 31, 2025:


	Maturities
Marketable Debt Securities:	Less than 1 Year		1-5 Years		5-10 Years		Greater than 10 Years		Total


Government securities - U.S.	$	10,114	$	—	$	—	$	—	$	10,114


Total	$	10,114	$	—	$	—	$	—	$	10,114

The Company has classified its investment in available-for-sale marketable debt securities as current assets in the unaudited condensed consolidated balance sheets as the securities need to be available for use, if required, to fund current operations. There are no restrictions on the sale of any securities in the Company’s investment portfolio.

NOTE 5: Inventories

The principal categories of inventories were comprised of the following:


Inventory:	March 31, 2025		December 31, 2024

Raw materials and supplies	$	4,491	$	5,199
Work in process	3,035		4,963
Finished goods	12,880		10,136
Total	$	20,406	$	20,298

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NOTE 6: Royalty Financing Obligation

On March 29, 2023, the Company and Avadel CNS Pharmaceuticals, LLC entered into the RPA with RTW Investments, L.P. (“RTW”) for up to $75,000 of royalty financing in two tranches. The first tranche of $30,000 became available upon satisfaction of certain conditions which included the Company’s first shipment of LUMRYZ. The second tranche became available to use, at the Company’s election, when the Company achieved quarterly net revenue of $25,000 prior to the quarter ending June 30, 2024. The Company allowed the second tranche to expire on August 31, 2024 and paid a one-time commitment fee of $2,000 to RTW in accordance with the terms of the RPA.

On August 1, 2023, the Company received the first tranche of $30,000. The Company is required to make quarterly royalty payments calculated as 3.75% of worldwide net product revenue of LUMRYZ, up to a total payback of $75,000.

The RPA is recorded as a royalty financing obligation on the unaudited condensed consolidated balance sheets based on the Company’s evaluation of the terms of the RPA. The accounts receivable and inventory balances of LUMRYZ are pledged as collateral for the RPA. There are no subjective acceleration clauses or provisions, and there are no covenants in violation or other clauses that would cause the full amount of the royalty financing obligation to be callable. As such, the RPA is recorded as a long-term obligation on the unaudited condensed consolidated balance sheets.

The Company imputes interest using the effective interest method and records interest expense based on the unamortized royalty financing obligation. The Company’s estimate of the interest rate under the RPA is based primarily on forecasted net revenue and the calculated amounts and timing of net royalty payments to reach the total payback of $75,000. As of March 31, 2025 and December 31, 2024 the effective interest rate is estimated as 25.2%. The Company accounts for changes in the imputed interest rate resulting from changes in forecasted net product revenue using the prospective method.

The following table shows the activity within the royalty financing obligation account:


Royalty Financing Obligation:	March 31, 2025		December 31, 2024
Royalty financing obligation – beginning balance	$	37,139	$	33,490

Accretion of imputed interest expense on royalty financing obligation	2,238		10,830
Less: royalty payments made to RTW	(1,890)		(5,181)
Less: one-time payment for expiration of second tranche	—		(2,000)
Royalty financing obligation – ending balance	37,487		37,139
Less: royalty payable to RTW classified within accrued expenses	(1,969)		(1,890)
Royalty financing obligation, non-current	$	35,518	$	35,249

The accretion of imputed interest expense is reflected as interest expense in the unaudited condensed consolidated statements of loss. For the three months ended March 31, 2025 and 2024, the total interest expense related to the royalty financing obligation was $2,238 and $2,592, respectively.

NOTE 7: Income Taxes

The income tax provision was $78 for the three months ended March 31, 2025 resulting in an effective tax rate of (1.6)%. The income tax provision was $93 for the three months ended March 31, 2024 resulting in an effective tax rate of (0.3)%.

The Company's cumulative loss position was significant negative evidence in assessing the need for a valuation allowance on its deferred tax assets. Given the weight of objectively verifiable historical losses from operations, the Company has recorded a full valuation allowance on its deferred tax assets. The Company will be able to reverse the valuation allowance when it has shown its ability to generate taxable income on a consistent basis in future periods. The valuation allowance does not have an impact on the Company's ability to utilize any net operating losses or other tax attributes to offset cash taxes payable as these items are still eligible to be used.

NOTE 8: Other Assets and Liabilities

Various other assets and liabilities are summarized as follows:

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Prepaid Expenses and Other Current Assets:	March 31, 2025		December 31, 2024

Prepaid and other expenses	$	9,962	$	5,154
Other	825		882

Total	$	10,787	$	6,036


Other Non-Current Assets:	March 31, 2025		December 31, 2024

Right of use assets at contract manufacturing organizations	$	8,462	$	10,700

Other	190		337

Total	$	8,652	$	11,037


Accrued Expenses:	March 31, 2025		December 31, 2024

Accrued professional fees	$	18,845	$	18,028
Reserves for variable consideration	14,974		14,218
Accrued compensation	5,129		6,515
Royalty payable to RTW	1,969		1,890


Total	$	40,917	$	40,651


Other Non-Current Liabilities:	March 31, 2025		December 31, 2024

Tax liabilities	$	5,239	$	5,151
Other	—		32
Total	$	5,239	$	5,183

NOTE 9: Share-Based Compensation

Market-based Performance NQSOs

On March 5, 2025, the Company granted options to purchase a total of 466 ordinary shares with market conditions to executive members. The options shall vest, if at all, in four equal increments if the volume-weighted average price of the Company’s ordinary shares during any 30-calendar day period over the five years after the grant date exceeds $11.00, $14.00, $17.00 and $19.09, respectively. The weighted average grant-date fair value per share of the market-based NQSOs was $6.15. As of March 31, 2025, all market-based NQSOs were still outstanding.

Share-based compensation expense related to market-based NQSOs was approximately $300 for the three months ended March 31, 2025.

NOTE 10: Net Loss Per Share

Basic net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during each period. Diluted net loss per share is calculated by dividing net loss by the diluted number of shares outstanding during each period. Except where the result would be anti-dilutive to net loss, diluted net loss per share would be calculated assuming the conversion of the Company’s preferred shares, the exercise of outstanding equity compensation awards, and ordinary shares expected to be issued under the Company’s Employee Share Purchase Plan (“ESPP”).

The dilutive effect of the stock options, restricted share awards, preferred shares and ordinary shares expected to be issued under the Company’s ESPP has been calculated using the treasury stock method.

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A reconciliation of basic and diluted net loss per share, together with the related shares outstanding in thousands is as follows:


	Three Months Ended March 31,
Net Loss Per Share:	2025		2024

Net loss	$	(4,920)	$	(27,342)



Weighted average shares:
Basic shares	96,601		91,693
Effect of dilutive securities—employee and director equity awards outstanding and preferred shares	—