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Avadel Pharmaceuticals Reports Third Quarter 2018 Financial Results

Avadel Pharmaceuticals Reports Third Quarter 2018 Financial Results

DUBLIN, Ireland, Nov. 05, 2018 (GLOBE NEWSWIRE) -- Avadel Pharmaceuticals plc (AVDL), a company focused on providing innovative medicines for chronic urological, central nervous system, and sleep disorders, today announced its financial results for the third quarter of 2018.

Mike Anderson, Avadel’s Chief Executive Officer, said, “We executed a number of important initiatives during the third quarter related to our REST-ON Phase 3 FT 218 clinical study in narcolepsy and our recently launched product, NOCTIVA™. For REST-ON, we completed 10 new clinical site initiations, hosted two successful patient events with well over 100 attendees, and recently launched a patient referral program in tandem with a new ad campaign, all of which have opened us up to new pools of potential patients."

"While prescription uptake for NOCTIVA is a bit slower than we anticipated, a number of important metrics have continued to improve over the last 3 months. We have substantially grown our prescriber base and have seen triple the number of prescriptions since the start of August, resulting in almost 8,000 dispensed prescriptions to date from over 1,800 unique prescribers. Our unaided brand awareness increased to approximately 80 percent, up from just under 60 percent in August, and recent intent-to-treat data indicates that 85 percent of targeted physicians expect to increase use of NOCTIVA in the next 6 months. Although the level of financial assistance to ensure patient access continues to impact revenue, we improved coverage through commercial insurance plans during the quarter and now have almost 140 million lives with access to NOCTIVA. In addition, we secured our first Part D contract with a top 5 provider and believe as we further expand access and drive demand we will improve our top line results."

Overview of third quarter 2018 financial results:

Revenues by product:        
    Three Months Ended September 30,
($ in 000s)   2018   2017
         
Bloxiverz   $ 3,656     $ 9,920  
Vazculep   8,759     9,573  
Akovaz   5,991     18,561  
Noctiva   1,047      
Other   373     1,093  
Product sales   19,826     39,147  
License revenue       528  
Total revenues   $ 19,826     $ 39,675  
                 

Revenues for the third quarter 2018 were $19.8 million, compared to $39.7 million in the third quarter 2017. The decline on a year-over-year basis was attributed to lower net selling prices across all of our hospital products and lower unit volumes for Akovaz® and Bloxiverz® as a result of increased market competition.  Net sales for NOCTIVA, which was launched in May 2018, were $1.0 million in the third quarter 2018, up from $0.3 million in the second quarter 2018.

Operating expenses:        
    Three Months Ended
September 30,
($ in 000s)   2018   2017
         
Cost of products   $ 3,120     $ 3,790  
Research and development expenses (R&D)   11,402     8,095  
Selling, general and administrative expenses (SG&A)   24,829     11,563  
             

R&D expense was up $3.3 million in the third quarter 2018 compared to the prior year period, primarily due to increased spend on the Phase 3 REST-ON trial. The $13.3 million increase in SG&A in the third quarter 2018 compared to the third quarter 2017 was due to sales and marketing expenses associated with the May 2018 launch of NOCTIVA.

         
GAAP earnings (loss):        
    Three Months Ended
September 30,
($ in 000s except for per share)   2018   2017
         
Net (loss) income   $ (15,771 )   $ 21,679  
Net (loss) income per share - diluted   (0.43 )   0.52  
             

Included in GAAP net loss for the third quarter 2018 were gains of $7.1 million related to changes in the fair value of related party contingent consideration, compared to gains of $9.9 million in the same period last year. These non-cash gains were recorded as a result of reducing the fair value of related party contingent consideration due to changing market conditions across the Company's three hospital products. Additionally, included in GAAP net loss for the third quarter 2018 was $3.0 in interest expense related to the Company's convertible notes issued in February 2018.

         
Adjusted earnings (loss) (1):        
    Three Months Ended September 30,
($ in 000s except for per share)   2018   2017
         
Adjusted net (loss) income   $ (23,969 )   $ 3,747  
Adjusted net (loss) income per share - diluted   (0.65 )   0.09  
             

The decrease in adjusted net income is largely attributable to lower revenues from the Company’s hospital products, higher SG&A due to the 2018 launch of NOCTIVA and increased R&D spend on the Phase 3 REST-ON trial.  Please see the Supplemental Information section within this document for a reconciliation of adjusted net income and adjusted diluted EPS to the respective GAAP amounts.

__

(1)  Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.

2018 Guidance:

The Company is maintaining its full-year 2018 revenue guidance of $90 to $105 million, and its full-year R&D spend guidance of $40 to $50 million.  SG&A is now expected to range between $85 to $95 million for the full year compared to $80 to $90 million in our previous guidance. Within the 2018 revenue guidance, the Company does not anticipate reaching the low end of its previous guidance for NOCTIVA of $5 million, due to a higher mix of Medicare Part D scripts, high levels of copay assistance, and lower overall script growth compared to the assumptions used for such previous guidance. Cash interest expense paid and accrued on the Company's convertible notes issued in February 2018 is expected to be approximately $6 million, and a non-GAAP tax benefit of 0% to 10% of loss before tax is anticipated for the full year 2018.

Conference Call:

A conference call to discuss these results has been scheduled for Monday, November 5, 2018 at 10:00 a.m. EST. A question and answer period will follow management's prepared remarks. To access the conference call, investors are invited to dial (844) 388-0559 (U.S. and Canada) or (216) 562-0393 (International). The conference ID number is 6799356. A live audio webcast can be accessed by visiting the investor relations section of the Company’s website, www.avadel.com. A replay of the webcast will be archived on Avadel’s website for 90 days following the event.

About Avadel Pharmaceuticals plc:

Avadel Pharmaceuticals plc (AVDL) is a specialty pharmaceutical company that seeks to develop differentiated pharmaceutical products that are safe, effective and easy to take through formulation development, by utilizing its proprietary drug delivery technology and through in-licensing / acquiring new products; ultimately, helping patients adhere to their prescribed medical treatment and see better results. Avadel’s current portfolio of products and product candidates focuses on the urology, central nervous system (CNS) / sleep, and hospital markets. The Company is headquartered in Dublin, Ireland with operations in St. Louis, Missouri and Lyon, France. For more information, please visit www.avadel.com.

Safe Harbor: This press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “project,” "guidance" and similar expressions, and (as applicable) the negatives thereof, identify forward-looking statements, each of which speaks only as of the date the statement is made. Although we believe that our forward-looking statements are based on estimates and assumptions made within the bounds of our knowledge of our business and operations, our business and operations are subject to significant risks and as a result there can be no assurance that actual results of our research, development and commercialization activities and the results of our business and operations will not differ materially from the results contemplated in such forward-looking statements. These risks include: (i) risks relating to our exchangeable senior notes including use of the net proceeds from the offering of the notes and other future events related to the notes; (ii) risks relating to the divestiture of our former pediatric business including whether such divestiture will be accretive to our operating income and cash flow; (iii) risks relating to our license agreement with Serenity Pharmaceuticals, LLC including that a potential competitive product, and patent litigation with the manufacturer of that product, could have a material adverse impact on our ability to successfully exploit any market opportunity for the drug desmopressin acetate (the “Drug”) which we are marketing under the brand name NOCTIVAtm, our internal analyses may overstate the market opportunity in the United States for the Drug or we may not effectively exploit such market opportunity, that significant safety or drug interaction problems could arise with respect to the Drug, that we may not successfully increase awareness of nocturia and the potential benefits of the Drug, and that the need for management to focus attention on the development and commercialization of the Drug could cause our ongoing business operations to suffer; and (iv) the other risks, uncertainties and contingencies described in the Company's filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2017, in particular disclosures therein that may be set forth under the captions “Forward-Looking Statements” and “Risk Factors,” including without limitation: our dependence on a small number of products and customers for the majority of our revenues; the possibility that our Bloxiverz®,Vazculep® and Akovaz® products, which are not patent protected, could continue to face substantial and increased competition resulting in a loss of market share and/or forcing us to further reduce the prices we charge for those products; the possibility that we could fail to successfully complete the research and development for pipeline products we are evaluating for potential application to the FDA pursuant to our "unapproved-to-approved" strategy, or that competitors could complete the development of such products and apply for FDA approval of such products before us; the possibility that we could experience failure or delay in completing the Phase 3 clinical trial for our “FT 218” sodium oxybate product known as REST-ON); the possibility that our products may not reach the commercial market or gain market acceptance; our need to invest substantial sums in research and development in order to remain competitive; our dependence on certain single providers for development of several of our drug delivery platforms and products; our dependence on a limited number of suppliers to manufacture our products and to deliver certain raw materials used in our products; the possibility that our competitors may develop and market technologies or products that are more effective or safer than ours, or obtain regulatory approval and market such technologies or products before we do; the challenges in protecting the intellectual property underlying our drug delivery platforms and other products; and our dependence on key personnel to execute our business plan.  Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.

Non-GAAP Disclosures and Adjustments

In addition to reporting its financial results in accordance with generally accepted accounting principles in the U.S.("GAAP"), Avadel discloses certain non-GAAP financial measures, including adjusted net income and loss and adjusted net income and loss per diluted share, as management believes that such non-GAAP financial measures can enhance an overall understanding of the Company’s financial performance when considered together with financial measures prepared in accordance with GAAP.  The non-GAAP results disclosed herein (a) exclude, in each case to the extent applicable, fair value remeasurements of its contingent consideration, amortization of debt discount and debt issuance costs attributable to our  exchangeable notes, impairment of intangible assets, amortization of intangible assets, restructuring costs, foreign exchange gains and losses on assets and liabilities denominated in foreign currencies, unrealized gains/losses on marketable equity securities,  but (b) include the cash payments plus any unpaid accrued cash payments associated with the contingent consideration and cash interest payments or related accruals on the exchangeable notes. Our management uses these non-GAAP measures internally for forecasting, budgeting and measuring the Company's operating performance. Investors and other readers should review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most closely comparable GAAP measure set forth below and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. The table provided within the following “Supplemental Information” section reconciles GAAP net income and loss and diluted earnings or loss per share to the corresponding adjusted (i.e., "non-GAAP") amounts.


Contacts: Michael F. Kanan
  Chief Financial Officer
  Phone: (636) 449-1844
  Email: mkanan@avadel.com
   
  Lauren Stival
  Sr. Director, Investor Relations & Corporate Communications
  Phone: (636) 449-5866
  Email: lstival@avadel.com
   


AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)

    Three Months Ended September
30,
  Nine Months Ended September
30,
    2018   2017   2018   2017
                 
Revenues:                
Product sales   $ 19,826     $ 39,147     $ 82,103     $ 138,009  
License revenue       528     246     484  
Total revenues   19,826     39,675     82,349     138,493  
Operating expenses:                
Cost of products   3,120     3,790     13,224     12,253  
Research and development expenses   11,402     8,095     33,243     22,093  
Selling, general and administrative expenses   24,829     11,563     77,159     35,804  
Intangible asset amortization   1,620     564     4,996     1,692  
Gain - changes in fair value of related party contingent consideration   (7,115 )   (9,906 )   (17,036 )   (30,107 )
Restructuring costs   65     (549 )   268     3,173  
Total operating expenses   33,921     13,557     111,854     44,908  
Operating (loss) income   (14,095 )   26,118     (29,505 )   93,585  
Investment and other income, net   208     977     845     2,562  
Interest expense   (3,000 )   (263 )   (7,577 )   (789 )
Other income - changes in fair value of related party payable   425     768     1,432     2,988  
(Loss) income before income taxes   (16,462 )   27,600     (34,805 )   98,346  
Income tax (benefit) provision   (691 )   5,921     (3,360 )   21,830  
Net (loss) income   $ (15,771 )   $ 21,679     $ (31,445 )   $ 76,516  
                 
Net (loss) income per share - basic   $ (0.43 )   $ 0.54     $ (0.84 )   $ 1.87  
Net (loss) income per share - diluted   (0.43 )   0.52     (0.84 )   1.81  
                 
Weighted average number of shares outstanding - basic   36,904     40,061     37,410     40,839  
Weighted average number of shares outstanding - diluted   36,904     41,339     37,410     42,194  
                         



AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

    September 30, 2018   December 31, 2017
         
ASSETS        
Current assets:        
Cash and cash equivalents   $ 17,837     $ 16,564  
Marketable securities   107,425     77,511  
Accounts receivable   9,725     14,785  
Inventories   6,030     6,157  
Prepaid expenses and other current assets   6,859     8,958  
Total current assets   147,876     123,975  
Property and equipment, net   2,288     3,001  
Goodwill   18,491     18,491  
Intangible assets, net   69,339     92,289  
Research and development tax credit receivable   6,168     5,272  
Other non-current assets   24,844     10,249  
Total assets   $ 269,006     $ 253,277  
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current liabilities:        
Current portion of long-term debt   $ 107     $ 111  
Current portion of long-term related party payable   10,979     25,007  
Accounts payable   11,399     7,477  
Deferred revenue   1,720     2,007  
Accrued expenses   20,698     50,926  
  Other current liabilities   2,116     1,011  
Total current liabilities   47,019     86,539  
Long-term debt, less current portion   114,382     156  
Long-term related party payable, less current portion   27,713     73,918  
Other non-current liabilities   14,150     7,084  
Total liabilities   203,264     167,697  
         
Shareholders’ equity:        
Preferred shares, $0.01 nominal value; 50,000 shares authorized at September 30, 2018 and December 31, 2017, respectively; none issued or outstanding at September 30, 2018 and December 31, 2017, respectively        
Ordinary shares, nominal value of $0.01; 500,000 shares authorized; 42,420 issued and 37,012 outstanding at September 30, 2018 and 41,463 issued and 39,346 outstanding at December 31, 2017   424     414  
Treasury shares, at cost, 5,408 and 2,117 shares held at September 30, 2018 and December 31, 2017, respectively   (49,998 )   (22,361 )
Additional paid-in capital   433,097     393,478  
Accumulated deficit   (294,130 )   (262,685 )
Accumulated other comprehensive loss   (23,651 )   (23,266 )
Total shareholders’ equity   65,742     85,580  
Total liabilities and shareholders’ equity   $ 269,006     $ 253,277  
                 



AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

    Nine months ended September 30,
    2018   2017
         
Cash flows from operating activities:        
Net (loss) income   $ (31,445 )   $ 76,516  
Adjustments to reconcile net (loss) income to net cash provided by operating activities:        
Depreciation and amortization   5,625     2,664  
Amortization of premiums on marketable securities   2,889     653  
Remeasurement of related party acquisition-related contingent consideration   (17,036 )   (30,107 )
Remeasurement of related party financing-related contingent consideration   (1,432 )   (2,988 )
Amortization of debt discount and debt issuance costs   3,402      
Change in deferred tax and income tax deferred charge   (4,675 )   322  
Stock-based compensation expense   7,190     6,019  
Other adjustments   117     (1,076 )
Net changes in assets and liabilities        
Accounts receivable   5,059     (6,240 )
Inventories   (548 )   (2,612 )
Prepaid expenses and other current assets   2,194     1,924  
Research and development tax credit receivable   (1,350 )   (1,576 )
Accounts payable & other current liabilities   4,312     804  
Accrued expenses   (11,660 )   9,324  
Accrued income taxes   (228 )   5,826  
Earn-out payments for related party contingent consideration in excess of acquisition-date fair value   (16,254 )   (24,729 )
Royalty payments for related party payable in excess of original fair value   (2,362 )   (3,446 )
Other assets and liabilities   (1,988 )   (800 )
Net cash (used in) provided by operating activities   (58,190 )   30,478  
         
Cash flows from investing activities:        
Purchases of property and equipment   (167 )   (533 )
Purchase of intangible asset   (20,000 )   (52,139 )
Proceeds from sales of marketable securities   308,015     153,398  
Purchases of marketable securities   (341,036 )   (115,893 )
Net cash used in investing activities   (53,188 )   (15,167 )
         
Cash flows from financing activities:        
Earn-out payments for related party contingent consideration   (645 )   (961 )
Proceeds from debt issuance   143,750      
Payments for debt issuance costs   (6,190 )    
Share repurchases   (27,637 )   (16,707 )
Proceeds from the issuance of ordinary shares and warrants   3,488     376  
Other financing activities, net   (31 )    
Net cash provided by (used in) financing activities   112,735     (17,292 )
         
Effect of foreign currency exchange rate changes on cash and cash equivalents   (84 )   215  
         
Net change in cash and cash equivalents   1,273     (1,766 )
Cash and cash equivalents at January 1,   16,564     39,215  
Cash and cash equivalents at September 30,   $ 17,837     $ 37,449  
                 


AVADEL PHARMACEUTICALS PLC
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per share data)

    Three Months Ended September 30,   Nine Months Ended September 30,
Revenues by Product:   2018   2017   2018   2017
                 
Bloxiverz   $ 3,656     $ 9,920     $ 16,691     $ 37,541  
Vazculep   8,759     9,573     33,097     29,906  
Akovaz   5,991     18,561     28,083     65,110  
Noctiva   1,047         2,002      
Other   373     1,093     2,230     5,452  
Total product sales   19,826     39,147     82,103     138,009  
License revenue       528     246     484  
Total revenues   $ 19,826     $ 39,675     $ 82,349     $ 138,493  
                                 


null
                 
        GAAP to Non-GAAP adjustments for the three-months ended September 30, 2018        
        Exclude   Include        
    GAAP   Intangible asset amortization   Foreign exchange (gain)/loss   Restructuring impacts   Equity securities unrealized (gain)/loss impact   Amortization of debt discount and debt issuance costs   Contingent related party payable fair value remeasurements   Contingent related party payable paid/accrued   Total adjustments   Adjusted GAAP
                                         
Revenues:                                        
Product sales   $ 19,826     $     $     $     $     $     $     $     $     $ 19,826  
License revenue                                        
Total revenues   19,826                                     19,826  
Operating expenses:                                        
Cost of products   3,120                                     3,120  
Research and development expenses   11,402                                     11,402  
Selling, general and administrative expenses   24,829                                     24,829  
Intangible asset amortization   1,620     (1,620 )                           (1,620 )    
Gain - changes in fair value of related party contingent consideration   (7,115 )                       7,115     3,182     10,297     3,182  
Restructuring costs   65             (65 )                   (65 )    
Total operating expenses   33,921     (1,620 )       (65 )           7,115     3,182     8,612     42,533  
Operating (loss) income   (14,095 )   1,620         65             (7,115 )   (3,182 )   (8,612 )   (22,707 )
Investment and other income, net   208         7         (53 )               (46 )   162  
Interest expense   (3,000 )                   1,383             1,383     (1,617 )
Other income - changes in fair value of related party payable   425                         (425 )   (484 )   (909 )   (484 )
(Loss) income before income taxes   (16,462 )   1,620     7     65     (53 )   1,383     (7,540 )   (3,666 )   (8,184 )   (24,646 )
Income tax (benefit) provision   (691 )   341             4         (186 )   (145 )   14     (677 )
Net (loss) income   $ (15,771 )   $ 1,279     $ 7     $ 65     $ (57 )   $ 1,383     $ (7,354 )   $ (3,521 )   $ (8,198 )   $ (23,969 )
                                         
Net income (loss) per share - diluted(1)   $ (0.43 )   $ 0.03     $     $     $     $ 0.04     $ (0.20 )   $ (0.10 )   $ (0.22 )   $ (0.65 )
Weighted average number of shares outstanding - diluted