Avadel Specialty Pharmaceuticals, LLC– U.S. Subsidiary of Ireland’s Avadel Pharmaceuticals plc Files Chapter 11 as Part of Broader Restructuring, Looks to Sell Underperforming NOCTIVA-related Assets

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February 6, 2019 – Avadel Specialty Pharmaceuticals (“ASP” or the “Company” ) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 19-10248. The Company, a pharmaceutical company focused on providing innovative medicines for chronic urological conditions, is a direct and indirect subsidiary of non-debtors Avadel U.S. Holdings, Inc. (“AUSH”) and Avadel Pharmaceuticals plc, respectively, the latter formed under the laws of Ireland and publicly traded on the NASDAQ Global Market under the symbol AVDL. ASP is represented by Dennis A. Meloro of Greenberg Traurig and further board-authorized engagements include MCA Financial Group as investment banker. 
 
The Company’s petition notes between 200 and 1,000 creditors; estimated assets between $10mn and $50mn; and estimated liabilities between $100mn and $500mn [NB: Also filed with the Petition was a 2018 balance sheet that listed assets of $79.7mn and liabilities of $167.4mn]. Documents filed with the Court list the Company's three largest unsecured creditors as (i) Digital Science Press, Inc. ($481k trade debt), (ii) GEN LLC ($48k trade debt) and (iii) Jones Public Affairs, Inc. ($45k trade debt).
 
In documents filed with the Court, ASP noted, “ASP’s objectives in this Chapter 11 Case are to (a) sell its assets pursuant to section 363 of the Bankruptcy Code in a flexible manner allowing for proposals for a sale of all or any combination of its assets, including but not limited to a sale of all or substantially all assets, or a sale of specific assets in one or more lots, or for only its NOCTIVA™ inventory, (b) liquidate any remaining assets, and (c) wind down its operations in an orderly manner. The Avadel Group, including Avadel Pharmaceuticals plc, is currently undergoing an out-of-court restructuring to right-size its headcount, reduce operational expenses, and increase the economic viability and sustainably of its underlying business model. As part of the ongoing restructuring, the Avadel Group is conducting a reduction in its collective workforce. The Debtor’s Chapter 11 Case is a part of the Avadel Group’s broader restructuring efforts.”
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Divis Declaration”), ASP President Gregory J. Divis detailed events leading to the Company’s Chapter 11 filing.

The Divis Declaration states, “ASP’s success is predicated upon its ability to effectively and successfully commercialize NOCTIVA™. Regrettably, NOCTIVA™ has underperformed since its launch.

Despite significant time and investment, NOCTIVA™ has not flourished on the market for several reasons. 

  • First, health care professionals have been unwilling to try (or adopt) NOCTIVA™. Physicians almost exclusively treat their patients with other agents that target conditions such as overactive bladder and prostate due to the high prevalence of co-morbidity between these conditions and nocturia due to nocturnal polyuria. 
  • Second, underlying concerns with regard to the potential risks of a serious side effect associated with the active ingredient in NOCTIVA™ (desmopressin acetate), based on prior experience with older formulations of the same active ingredient, have resulted in a hesitancy overall by health care professionals to adopt and/or try NOCTIVA™ for their patients. 
  • Third, serum sodium monitoring requirements, which are not necessarily in the ordinary course for physicians treating patients suffering from nocturia due to nocturnal polyuria, have inhibited healthcare professionals’ overall willingness to broadly adopt NOCTIVA™. 
  • Lastly, given the evolution of patient benefit designs and the restrictions managed care companies have placed on NOCTIVA™, despite significant efforts, during the first approximately nine months of commercialization, over 55% of all prescriptions were dispensed for free resulting in no corresponding positive gross margin. Furthermore, when combined with the additional qualified and eligible financial assistance provided for insured beneficiaries with a covered benefit for NOCTIVA™, the resulting gross margin has been substantially lower than originally assumed. For these and other reasons, approximately $80 million in additional investments since September 2017 (exclusive of the Initial Payment and Launch Payment) has yielded less than $3 million in net sales.
 
In this challenging environment, ASP’s innovative commercialization and development efforts have been key. Such efforts, however, have required significant investment and put immense pressure on ASP’s finances. As a result of the significant investments made with the objective of driving growth, ASP incurred significant losses and requires additional capital to provide a bridge to profitability….In light of the Avadel Group’s broader restructuring, and as a result of its own ongoing financial and capital constraints, AUSH determined that it could no longer continue to fund ASP.”

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