Avadel Pharmaceuticals plc(AVDL) - 2019 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial information and management's analysis for the period ended June 30, 2019 Financial Statements This section presents the unaudited condensed consolidated financial statements and related notes for the period ended June 30, 2019, detailing financial performance and position Unaudited Condensed Consolidated Statements of Loss The company reported a significant decline in total revenues and an increased net loss for both the three and six months ended June 30, 2019 Condensed Consolidated Statements of Loss (in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $17,554 | $29,230 | $33,991 | $62,523 | | Operating Loss | ($4,451) | ($2,785) | ($12,618) | ($15,410) | | Net Loss | ($8,605) | ($3,438) | ($21,623) | ($15,674) | | Net Loss Per Share - Diluted | ($0.23) | ($0.09) | ($0.58) | ($0.42) | Unaudited Condensed Consolidated Balance Sheets Total assets decreased to $165.7 million, leading to a shareholders' deficit of $17.8 million as of June 30, 2019 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $97,200 | $124,851 | | Cash and cash equivalents | $17,111 | $9,325 | | Marketable securities | $62,151 | $90,590 | | Total Assets | $165,709 | $190,300 | | Total Current Liabilities | $33,580 | $38,383 | | Total Liabilities | $183,486 | $187,520 | | Total Shareholders' (Deficit) Equity | ($17,777) | $2,780 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $22.7 million, while investing activities provided $30.3 million for the six months ended June 30, 2019 Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($22,653) | ($37,942) | | Net cash provided by (used in) investing activities | $30,336 | ($79,212) | | Net cash provided by financing activities | $55 | $113,160 | | Net change in cash and cash equivalents | $7,786 | ($4,087) | | Cash and cash equivalents at end of period | $17,111 | $12,477 | Notes to the Unaudited Condensed Consolidated Financial Statements These notes detail the company's strategic focus on FT218, the deconsolidation of a subsidiary due to bankruptcy, and significant restructuring efforts - The company's primary focus is the development and potential FDA approval of FT218, a Phase 3 clinical trial product for narcolepsy, alongside marketing three sterile injectable drugs[23][24][25] - On February 6, 2019, the subsidiary Avadel Specialty Pharmaceuticals, LLC filed for Chapter 11 bankruptcy, leading to its deconsolidation and a $2.84 million non-cash charge[33][42][43] - In 2019, the company initiated significant restructuring plans, including a 50% reduction in corporate workforce and substantial reductions at its France site[110][112] Revenue by Product (in thousands) | Product | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Bloxiverz | $4,926 | $13,035 | | Vazculep | $18,883 | $24,338 | | Akovaz | $9,738 | $22,092 | | Total Product Sales | $33,991 | $62,277 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, strategic focus on FT218 development, and changes in revenues, expenses, and liquidity Overview and Business Strategy The company's core strategy centers on developing FT218 for narcolepsy, alongside marketing existing hospital injectable drugs and seeking approval for AV001 - The company's primary business strategy focuses on the development and potential FDA approval of FT218 for narcolepsy[138] - Patient enrollment for the FT218 Phase 3 REST-ON trial is expected to be completed in the second half of 2020[142] - The FDA accepted the NDA for AV001, with a PDUFA target action date extended to December 15, 2019[147] Results of Operations Total revenues significantly declined in Q2 2019 due to competition, partially offset by reduced SG&A expenses from the Noctiva business exit Revenue Comparison by Product - Q2 2019 vs Q2 2018 (in thousands) | Product | Q2 2019 Revenue | Q2 2018 Revenue | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Bloxiverz | $2,358 | $5,544 | ($3,186) | (57.5)% | | Vazculep | $9,410 | $11,377 | ($1,967) | (17.3)% | | Akovaz | $5,946 | $11,875 | ($5,929) | (49.9)% | | Total Revenues | $17,554 | $29,230 | ($11,676) | (39.9)% | - Selling, general and administrative (SG&A) expenses decreased by $21.1 million (75.7%) in Q2 2019, primarily due to an $18.1 million reduction from the Noctiva business exit[176] - Research and development (R&D) expenses decreased by $1.6 million (13.4%) in Q2 2019, driven by lower Noctiva spending and cost reductions[174] - Restructuring costs increased to $1.5 million in Q2 2019, primarily due to the 2019 French and Corporate restructuring plans[188] Liquidity and Capital Resources The company held $79.3 million in cash and marketable securities as of June 30, 2019, with liquidity dependent on hospital product revenue and FT218 development costs - Cash and marketable securities totaled $79.3 million at June 30, 2019, a $20.7 million decrease from December 31, 2018, primarily due to $22.7 million cash used in operations[159][208] - Cash resource adequacy depends on FT218 clinical development costs and hospital product revenue, potentially requiring additional dilutive funding[212] - In February 2018, the company issued $143.75 million of 4.50% exchangeable senior notes due 2023, yielding approximately $137.6 million in net proceeds[213] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on marketable securities, managed through a policy prioritizing safety and diversification - The company is subject to interest rate risk from its portfolio of marketable securities[223] - The investment policy aims to mitigate risk through diversification, prioritizing safety and principal preservation[223] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2019, following restructuring that consolidated accounting and outsourced IT - The CEO and CFO concluded the company's disclosure controls and procedures were effective as of June 30, 2019[224] - During Q2 2019, the company consolidated Irish and French accounting operations to St. Louis and outsourced most IT resources as part of restructuring[225] PART II - OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, and other disclosures Legal Proceedings This section incorporates legal proceedings by reference, primarily detailing litigation related to the subsidiary Specialty Pharma's Chapter 11 bankruptcy - Information on legal proceedings is incorporated by reference from Note 19: Commitments and Contingencies[226] - Litigation relates to the Noctiva business, now part of the Chapter 11 bankruptcy of subsidiary Specialty Pharma, including patent and contract disputes[126][127][128] Risk Factors No material changes in risk factors have occurred since the 2018 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the 2018 Annual Report[227] Unregistered Sales of Equity Securities and Use of Proceeds The authorized share buyback program was completed during the year ended December 31, 2018 - The authorized share buyback program was completed in the year ended December 31, 2018[227] Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None[228] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[228] Other Information The company reports no information for this item - None[228]