Avadel Pharma on the Bankruptcy Auction Block

Avadel Specialty Pharmaceuticals is one of three pharmaceutical companies to file for bankruptcy this week. The trio of healthcare companies included two pharmaceuticals companies – Novum Pharma and Avadel, both of which filed in pursuit of a sale process – and San Juan-based healthcare consulting firm, Navegar Network Alliance. Avadel’s filing comes as part of a broader restructuring of its publicly-traded, Dublin-based parent, which is currently undergoing an out-of-court restructuring to “right-size” its own headcount, reduce expenses, and improve profitability.

Avadel provides innovative medicines for chronic urological disorders. It has one commercial product, Noctiva™ , a prescription nasal spray used to prevent the kidneys from overproducing urine at night. Avadel claims this it is the first FDA-approved treatment proven to help adults with nocturia due to nocturnal polyuria. Here’s to a good night’s sleep!

A Quick Sale Process!

On Monday, Avadel filed a motion to approve procedures to sell its assets, allowing bids for any combination of assets (including just for its new drug application for Noctiva and its inventory or for only its Noctiva inventory).

Avadel hasn’t yet found a “stalking horse” buyer to make a first bid. But if it finds one, it may request approval of a breakup fee and bid protections. Bids, it proposes, will require a 10% deposit while overbids at auction must be at least $50,000. The sale process is likely to move forward at a rapid clip, with the following proposed deadlines:

  • Bid Procedures Hearing: March 13
  • Bid deadline: March 15
  • Selection of Qualified Bidders: March 18
  • Auction: March 19
  • Sale hearing: March 21

The company is working with Cassel Salpeter & Co. as investment banker.

How Did Avadel Get Here?

The company entered into an exclusive license and assignment agreement with Serenity Pharmaceuticals in September 2017. The agreement gave Avadel exclusive rights to develop, market and sell Noctiva in the U.S. and Canada. In exchange, Serenity walked away with two one-time payments totaling $70 million and royalties from product sales.

Despite significant time and investment, Avadel says that Noctiva has
underperformed since its launch due to resistance from healthcare professionals and concerns regarding potential risks for serious side effects. Due to these complications, among others, $80 million in additional investments since September 2017 have yielded less than $3 million in sales. Revised sales projections, it says, are “substantially below” the projections made in connection with its entry into the license and assignment agreement with Serenity.

Beginning in November of 2018, the company tried (and failed) to find a co-promotor for Noctiva, contacting 20 pharmaceutical companies and strategic buyers. It then tried to find a sublicensee, “discreetly” contacting potential parties. But none had completed diligence or discussed deal terms before the bankruptcy filing.

What Comes Next?

Avadel manages Noctiva’s production and distribution through third-party manufacturing, distribution, and supply agreements with such as its agreement with Renaissance Lakewood (f/k/a DPT Lakewood). Under Lakewood agreement, the company must purchase a minimum of 400,000 units of product each year regardless of need. If it falls short, Avadel has to make up the difference to Renaissance. Not expecting buyers to be interested in the contract, Avadel has filed a motion to reject it.

After the sale, Avadel intends to liquidate any remaining assets and wind down its remaining operations.

Mette K.

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