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 such as 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.

On the Bankruptcy Auction Block: Novum Pharma

Novum Pharma has filed for chapter 11 protection. The case is pending in the Delaware bankruptcy court under Case #19-10209.

Novum is a Chicago-based pharmaceutical company specializing in topical dermatology products. It has rights to 3 branded prescription dermatology products: Alcortin A (a fast acting fungicide), Quinja (a fungicide), and Novacort (a first-line treatment for pruritic dermatoses… caused by external hemorrhoids). If you are a regular follower, you know I like to add graphics to my posts. But I’m going pass on the illustrations and just note that I would go with the fast-acting options.

Novum reports approximately $20 million in assets, $35 million in current liabilities, and $18 million in long-term liabilities. Its goal? Preserving assets and conducting a bankruptcy sale. It intends to seek approval of bidding and sale procedures “in the early weeks” of its Chapter 11 Case.

The company attributes the bankruptcy to “(i) manufacturing hurdles leading to production delays and product ‘stock-outs’; (ii) a dispute with Cardinal and CVS regarding the price at which the Dermatology Products can be returned to the Debtor; (iii) managed care actions leading to increased prescription rejection rates for the Dermatology Products; and (iv) market dilution and decreased total prescriptions due to unauthorized generic alternatives being introduced into the market.”

For more background, you can download Novum’s bankruptcy petition, its global declaration, or the agenda for its first hearing scheduled for February 5th at 2:30 p.m. Additional information about the case is available free of charge from their claims agent, KCC, here.

Mette K.

Alcor Energy, LLC Seeks Chapter 11 Bankruptcy Protection

Alcor Energy, LLC commenced a Chapter 11 bankruptcy case in the District of Delaware on December 19, 2018.

Alcor Energy operates a portable turbine generator business.  Its core customers are oil and gas operators who rent generators to obtain power in remote places with limited access to conventional power grids.

Ultimately, many factors led to the deterioration of Alcor’s business performance. These include litigation claims, quality control issues, excessive operational and manufacturing costs, unprofitable customer contracts, deferred maintenance costs, and customer dissatisfaction. In the midst of these challenges, investor relationships also became strained.

To obtain an independent perspective, Alcor engaged Neil Gilmour III as an independent manager. Mr. Gilmour has extensive experience counseling companies through financial and operational turnarounds.  Together with other members of Alcor’s management, Mr. Gilmour determined that a Chapter 11 process would be Alcor’s best path forward.

Alcor has announced that it intends to file a small business plan of reorganization through which is funded debt to its lender, Ocho Ventura, LLC, will be cancelled, and the reorganized company will emerge as a significantly delevered enterprise. Ocho will receive 100% of the membership interests in the reorganized company, as well as deferred payment on a portion of the amounts owed to it, through a debt-for-equity swap.

The Debtor has asked that no official committee of unsecured creditors be appointed in this case.

The Case No. is 18-12839. Additional information about the bankruptcy filing can be found here.

Do you have questions or are you looking for additional information? Feel free to  contact me!

Mette K.

USA Gymnastics Seeks Bankruptcy Protection in #MeToo Fallout

Facing 100 lawsuits from more than 350 sexual-assault victims of team physician Larry Nassar, Indianapolis-based USA Gymnastics filed for chapter 11 protection today. The case is pending in the Bankruptcy Court for the Southern District of Indiana.

“We owe it to the survivors to resolve, fully and finally, claims based on the horrific acts of the past and, through this process, seek to expedite resolution and help them move forward,” said Kathryn Carson, the newly-elected chair of USA Gymnastics’ Board of Directors.  In addition, the Chapter 11 filing will put on hold the U.S. Olympic Committee’s effort to dismantle the sport’s governing body, according to Carson, providing “breathing room” for the organization to continue running the sport at a grassroots and national level.  The full press release is available here.

But as reported by NBC News, lawyer John Manly, who represents 180 alleged victims of Nassar, has this to say: “The leadership of USA Gymnastics has proven itself to be both morally and financially bankrupt” and the bankruptcy filing will block the victims’ “ongoing efforts to discover the truth about who at USA Gymnastics and the U.S. Olympic Committee knew about Nassar’s criminal conduct and failed to stop it.”

The case number is 18-09108.  The bankruptcy petition is available for download.

Mette K.

 

 

Argos Therapeutics Files Bankruptcy to Pursue a Sale

 Argos Therapeutics filed for chapter 11 protection in Delaware on Nov. 30th with a proposed buyer in hand. The bankruptcy follows the termination of an unsuccessful phase 3 clinical trial of its most advanced cancer-treatment product. Now, Argos seeks to run a going-concern sale process with Cellscript, LLC as a “stalking horse” buyer.  Argos values Cellscript’s opening bid at $3.8 million.

Who Is Argos Therapeutics?

Argos is an immunotherapy company based in North Carolina. It is publicly traded, with shares trading on the NASDAQ until April 23. After its common stock was de-listed as of April 25, Argos transferred its common stock to the OTCQB Venture Market.

Argos focuses on developing individualized immunotherapies to treat cancer and infectious diseases. The company derives its primary revenue from third-party license agreements and government grants. But the company has been far from profitable, with a net loss of $40.6 million for 2017.

The company built its immunotherapies on its Arcelis® technology platform.

Arcelis is a precision immunotherapy technology that captures the spectrum of mutated and variant antigens that are specific to each patient’s individual disease . . . to overcome immunosuppression by enabling specifically targeted, durable memory T-cells without adjuvants that may be associated with toxicity.

Confused?  Here’s a helpful diagram.

Argos-Arcelis-Platform_AGS-003_Activate-Neo-Immunity.png

Ummm…. Still confused? If you have 15 minutes, Jeff Abbey provides a thorough explanation here.

Practically speaking, a buyer might use the Arcelis platform to treat a range of different cancers and infectious diseases. And according to Argos (notwithstanding its bankruptcy), the platform is valuable because it may circumvent manufacturing and commercialization challenges that have impeded other personalized immunotherapies.

The Proposed Sale to Cellscript

Argos has engaged in an extensive marketing effort to capitalize on its intellectual property, its manufacturing capabilities, and its position as a publicly traded entity.  Ultimately, Cellscript – one of Argos’ largest unsecured creditors – presented a purchase offer. The bid includes $1.675 million in cash, cure costs and assumed liabilities valued at no less than $1.4 million, and the “release” of Cellscript’s $2 million unsecured claim against Argus, valued at a minimum of $700,000.

Argos has proposed a $75,000 breakup fee and a $75,000 expense reimbursement. Initial overbids must total at least $4,095,330, with subsequent overbid increments of at least $100,000.  And it proposes the following sale timeline:

  • Bid deadline: Jan. 16, 2019
  • Auction: Jan. 22, 2019

The court has scheduled the bid procedures motion for hearing on Dec. 20, 2018.

Case Information

Argos is represented by Landis Rath & Cobb as bankruptcy counsel, Wilmer Cutler Pickering Hale and Dorr as special corporate counsel, and SSG Advisors as investment banker. Judge Kevin Carey is presiding over the case (#18-12714).

Mette K.