XML 170 R12.htm IDEA: XBRL DOCUMENT
v3.20.4

Disposition of the Hospital Products | 12 Months Ended
--- | ---
Dec. 31, 2020
Discontinued Operations and Disposal Groups [Abstract] |
Disposition of the Hospital Products | Disposition of the Hospital Products On June 30, 2020 (the “Closing date”), we announced the sale of our Hospital Products to the Exela Buyer pursuant to the Purchase Agreement (the “Transaction”). Pursuant to the Purchase Agreement, the Exela Buyer agreed to pay a total aggregate consideration amount of $42,000, of which $14,500 was paid on the Closing Date and an additional $27,500 is to be paid in ten equal monthly installments. During the year ended December 31, 2020, we collected four installment payments, totaling $11,000. Subsequent to the year ended December 31, 2020 but prior to the filing of this Annual Report, we collected an additional $5,500 in installment payments. In connection with the sale of the Hospital Products, the parties also agreed to cause the dismissal of the pending civil litigation related to Nouress in the District Court for the District of Delaware. We were party to a Membership Interest Purchase Agreement, dated March 13, 2012, by and among us, Avadel Legacy, Breaking Stick Holdings, LLC, Deerfield Private Design International II, L.P. (“Deerfield International”), Deerfield Private Design Fund II, L.P. (“Deerfield Fund”) and Horizon Santé FLML, Sarl (“Horizon”) (the “Deerfield MIPA”) and a Royalty Agreement, dated February 4, 2013, by and among us, Avadel Legacy, the Deerfield Fund and Horizon (the “Deerfield Royalty Agreement”). In connection with the closing of the sale of the Hospital Products, the Deerfield MIPA (with respect to certain sections thereof) and the Royalty Agreement were assigned to the Exela Buyer. Pursuant to the Purchase Agreement, the Exela Buyer assumed and will pay, perform, satisfy and discharge the liabilities and obligations of Avadel Legacy under the Deerfield Royalty Agreement for obligations that arise after the Closing date. We were also party to a Royalty Agreement, dated December 3, 2013, by and between us, Avadel Legacy and Broadfin Healthcare Master Fund, Ltd. (the “Broadfin Royalty Agreement”). In connection with the closing of the sale of the Hospital Products, the Broadfin Royalty Agreement was assigned to the Exela Buyer and the Exela Buyer assumed and shall pay, perform, satisfy and discharge the liabilities and obligations of Avadel Legacy under the Broadfin Royalty Agreement for obligations that arise after the Closing Date. We recorded a net gain on the sale of the Hospital Products of $45,760 during the year ended December 31, 2020 which has been recorded on the consolidated statement of income (loss). The $45,760 gain represents the aggregate consideration of $42,000, less transaction fees of $2,928, plus the assets and liabilities either transferred to the Exela Buyer or eliminated by us due to the sale of the Hospital Products, which are listed below.
|  | December 31, 2020
Prepaid expenses and other current assets |  | $ | (134) |
Inventories |  | (4,922) |
Goodwill |  | (1,654) |
Intangible assets, net |  | (407) |
Other non-current assets |  | (1,095) |
Total long-term contingent consideration payable |  | 14,900 |
Net liabilities disposed of |  | 6,688 |
Aggregate consideration |  | 42,000 |
Less transaction fees |  | (2,928) |
Net gain on the sale of the Hospital Products |  | $ | 45,760 |
Subsequent to the disposition of the Hospital Products, the Company entered into a separate and distinct agreement with the Exela Buyer, whereby the Exela Buyer assumed all future returns of the Hospital Products in exchange for cash consideration paid by the Company. The Company recorded a $518 gain from this transaction, which is recorded in “Selling, general and administrative expenses” for the year ended December 31, 2020. We evaluated various qualitative and quantitative factors related to the disposition of the Hospital Products and determined that it did not meet the criteria for presentation as a discontinued operation. The unaudited pro forma condensed combined financial statements included below are being provided for information purposes only and are not necessarily indicative of the results of operations or financial position that would have resulted if the Transaction had actually occurred on the date indicated. The pro forma adjustments are based on available information and assumptions that the Company believes are attributable to the sale.
|  | Unaudited Pro Forma Condensed Combined Balance Sheet
|  | As of December 31, 2019
|  | As Reported |  | Pro Forma Adjustments |  | Notes |  | Pro Forma
ASSETS |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 9,774 |  |  | $ | 12,935 |  |  | (a) |  | $ | 22,709 |
Inventories |  | 3,570 |  |  | (3,570) |  |  | (b) |  | — |
Prepaid expenses and other current assets |  | 4,264 |  |  | 27,500 |  |  | (c) |  | 31,764 |
Goodwill |  | 18,491 |  |  | (1,654) |  |  | (d) |  | 16,837 |
Intangible assets, net |  | 813 |  |  | (813) |  |  | (e) |  | — |
Other non-current assets |  | 39,274 |  |  | (9,702) |  |  | (f) |  | 29,572 |
Total assets |  | $ | 151,436 |  |  | $ | 24,696 |  |  |  |  | $ | 176,132 |
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) |  |  |  |  |  |  |  |
Current portion of long-term contingent consideration payable |  | $ | 5,554 |  |  | $ | (5,054) |  |  | (g) |  | $ | 500 |
Accrued expenses |  | 19,810 |  |  | 2,800 |  |  | (h) |  | 22,610 |
Long-term contingent consideration payable, less current portion |  | 11,773 |  |  | (11,773) |  |  | (g) |  | — |
Total liabilities |  | 180,635 |  |  | (14,027) |  |  |  |  | 166,608 |
Shareholders’ equity (deficit): |  |  |  |  |  |  |  |
Accumulated deficit |  | (391,215) |  |  | 38,723 |  |  | (i) |  | (352,492) |
Total shareholders’ (deficit) equity |  | (29,199) |  |  | 38,723 |  |  |  |  | 9,524 |
Total liabilities and shareholders’ equity (deficit) |  | $ | 151,436 |  |  | $ | 24,696 |  |  |  |  | $ | 176,132 |
Adjustments to the pro forma unaudited condensed combined balance sheet (a) This adjustment represents the receipt of $14,500 cash consideration from the Exela Buyer at the closing of the Transaction less $1,565 placed into escrow for the estimated earn outs and royalties payable to Breaking Stick Holdings L.L.C., Horizon Santé FLML, Sarl, Deerfield Private Design Fund II, L.P., all affiliates of Deerfield Capital L.P. ("Deerfield") and Broadfin Healthcare Master Fund ("Broadfin") for the current year ended. (b) This adjustment reflects the elimination of Inventories that were purchased as part of the Transaction. (c) This adjustment reflects the Transaction consideration in the form of ten monthly installment payments of $2,750 (totaling $27,500) beginning 90 days from the Closing date. (d) This adjustment reflects the elimination of $1,654 of Goodwill based on the relative fair value of the Hospital Products as a portion of the overall value of the Company. (e) This adjustment reflects the elimination of the unamortized balance of the Intangible asset on acquired developed technology for Vazculep. (f) This adjustment reflects the elimination of $1,228 of other long-term assets and $8,474 of deferred tax assets at December 31, 2019. The eliminated deferred tax assets are tax attributes of the Hospital Products. (g) This adjustment reflects the elimination of short and long term related party payables, less the expected amounts due to Deerfield and Broadfin after taking into consideration the escrow discussed in Note (a). As part of the Transaction, the buyer agreed to assume the quarterly earn-out and royalty payments for periods after the close of the Transaction. The Company will no longer be responsible for these payments. (h) This adjustment reflects the estimated transaction fees payable related to the Transaction. (i) This adjustment reflects the estimated gain of $38,723 arising from the Transaction for the year ended December 31, 2019. This estimated gain has not been reflected in the pro forma unaudited condensed combined statements of loss as it is considered to be nonrecurring in nature. No adjustment has been made to the sale proceeds to give effect to any potential post-closing adjustments under the terms of the Purchase Agreement.
|  | Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
|  | Year Ended December 31, 2020
|  | As Reported |  | Pro Forma Adjustments |  | Notes |  | Pro Forma
Product sales |  | $ | 22,334 |  |  | $ | (22,175) |  |  | (j) |  | $ | 159 |
Total operating expense |  | 16,519 |  |  | (8,392) |  |  | (k) |  | 8,127 |
Operating income (loss) |  | 5,815 |  |  | (13,783) |  |  |  |  | (7,968) |
Loss before income taxes |  | $ | (5,082) |  |  | $ | (13,348) |  |  | (l) |  | $ | (18,430) |
|  | Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
|  | Year Ended December 31, 2019
|  | As Reported |  | Pro Forma Adjustments |  | Notes |  | Pro Forma
Product sales |  | $ | 59,215 |  |  | $ | (59,273) |  |  | (j) |  | $ | (58) |
Total operating expense |  | 83,327 |  |  | (16,092) |  |  | (m) |  | 67,235 |
Operating income (loss) |  | (24,112) |  |  | (43,181) |  |  |  |  | (67,293) |
Loss before income taxes |  | $ | (38,582) |  |  | $ | (42,803) |  |  | (n) |  | $ | (81,385) |
Adjustments to the pro forma unaudited condensed combined statements of income (loss) (j) This adjustment reflects Product sales attributable to the Hospital Products. (k) This adjustment reflects the following estimated expenses attributable to the Hospital Products: •Cost of products of $3,540. •R&D expenses of $322. •Selling, general and administrative expenses of $797. •Intangible asset amortization on acquired development technology for Vazculep of $406. •Changes in fair value of related party contingent consideration of $3,327. The Company will no longer be responsible for these payments. (l) This amount reflects the adjustments noted in (j) and (k) above, as well as estimated Changes in fair value of related party payable of $435 attributable to the Hospital Products. The Company will no longer be responsible for these payments. (m) This adjustment reflects the following estimated expenses attributable to the Hospital Products: •Cost of products of $11,368. •R&D expenses of $1,960. •Selling, general and administrative expenses of $1,102. •Intangible asset amortization on acquired development technology for Vazculep of $816. •Changes in fair value of related party contingent consideration of $845. The Company will no longer be responsible for these payments. (n) This amount reflects the adjustments noted in (j) and (m) above, as well as the reversal of estimated Changes in fair value of related party payable of $378 attributable to the Hospital Products. The Company will no longer be responsible for these payments. Divestiture of the Pediatric Assets On February 12, 2018, the Company, together with its subsidiaries Avadel Pharmaceuticals (USA), Inc., Avadel Pediatrics, Inc., FSC Therapeutics, LLC (“FSC Therapeutics”), and Avadel US Holdings, Inc. (“Holdings”), as the “Sellers,” entered into an asset purchase agreement (the “Purchase Agreement”) with Cerecor, Inc. (“Cerecor”). The transaction closed on February 16, 2018 wherein Cerecor purchased from the Sellers four pediatric commercial stage assets – Karbinal™ ER, Cefaclor, Flexichamber™ and AcipHex® Sprinkle™, together with certain associated business assets – which were held by FSC. The Company acquired FSC in February 2016 from Deerfield and certain of its affiliates. Pursuant to the Purchase Agreement, Cerecor assumed the Company’s remaining payment obligations to Deerfield under the Membership Interest Purchase Agreement, dated as of February 5, 2016, between Holdings, Flamel Technologies SA (the predecessor of the Company) and Deerfield and certain of its affiliates, which payment obligations consisted of the following (collectively, the “Assumed Obligations”): (i) a quarterly payment of $263 beginning in July 2018 and ending in October 2020, amounting to an aggregate payment obligation of $2,625; (ii) a payment in January 2021 of $15,263; and (iii) a quarterly royalty payment of 15% on net sales of the FSC products through February 5, 2026 (“FSC Product Royalties”), in an aggregate amount of up to approximately $10,300. Cerecor also assumed certain contracts and other obligations related to the acquired assets, and in that connection Holdings agreed to pay Cerecor certain make-whole payments associated with obligations Cerecor is assuming related to a certain supply contract related to Karbinal™ ER. In conjunction with the divestiture, the Company also entered into the following arrangements: License and Development Agreement Flamel Ireland Limited, an Irish private limited company operating under the trade name of Avadel Ireland and a wholly-owned subsidiary of the Company, and Cerecor entered into a license and development agreement (the “License and Development Agreement”) pursuant to which, among other things: •Avadel Ireland will provide Cerecor with four product formulations utilizing Avadel Ireland’s LiquiTime™ technology, and will complete pilot bioequivalence studies for such product formulations within 18 months; •Cerecor will reimburse Avadel Ireland for development costs of the four LiquiTime™ products in excess of $1,000 in the aggregate; •Upon transfer of the four product formulations, Cerecor will assume all remaining development costs and responsibilities for the product development, clinical studies, NDA applications and associated filing fees; and •Upon regulatory approval and commercial launch of any LiquiTime™ products, Cerecor will pay Avadel Ireland quarterly royalties based on a percentage of net sales of any such products in the mid-single digit range. Effective October 25, 2019, Cerecor and Avadel Ireland agreed to terminate the License and Development Agreement. Deerfield Guarantee The Company and Holdings provided their guarantee (the “Deerfield Guarantee”) in favor of Deerfield. Under the Deerfield Guarantee, the Company and Holdings guaranteed to Deerfield the payment by Cerecor of the Assumed Obligations under the Membership Interest Purchase Agreement between the Company and Deerfield dated February 5, 2016. The Assumed Obligations include (i) a quarterly payment of $263 beginning in July 2018 and ending in October 2020, amounting to an aggregate payment obligation of $2,625; (ii) a payment in January 2021 of $15,263; and (iii) a quarterly royalty payment of 15% on net sales of the FSC products through February 6, 2026 (“FSC Product Royalties”), in an aggregate amount of up to approximately $10,300. In addition, under the Deerfield Guarantee, the Company and Holdings guaranteed that Deerfield would receive certain minimum annual FSC Product Royalties through February 6, 2026 (the “Minimum Royalties”). Given the Company’s explicit guarantee to Deerfield, the Company recorded the guarantee in accordance with ASC 460. A valuation was performed, which was based largely on an analysis of the potential timing of each possible cash outflow described above and the likelihood of Cerecor’s default on such payments assuming an S&P credit rating of CCC+. The result of this valuation identified a guarantee liability of $6,643. This liability is being amortized proportionately based on undiscounted cash outflows through the remainder of the contract with Deerfield. On October 10, 2019, Cerecor entered into a purchase and sale agreement with Aytu BioScience, Inc (“Buyer”) pursuant to which the Buyer will purchase certain assets from Cerecor and assume certain of Cerecor’s liabilities, including all of Cerecor’s liabilities assumed as part of the Purchase Agreement noted above. As part of this transaction, on November 1, 2019, Armistice has agreed to deposit $15,000 in an escrow account governed by an escrow agreement between Armistice and Deerfield having the purpose of securing the $15,000 balloon payment due January 2021 as part of the Membership Interest Purchase Agreement. As part of the Cerecor transaction with the buyer, Deerfield contractually acknowledges and agrees that it will seek payment from the escrow funds before requesting payment from the Company pursuant to the Deerfield Guarantee discussed above. Due to the change in circumstances, a new valuation was performed based on an analysis of the possible timing of the updated possible cash flow which excludes the $15,000 that Armistice has deposited in an escrow account. The updated valuation identified an updated guarantee liability of $1,827 at December 31, 2019, which is being amortized proportionately based on undiscounted cash outflows through the remainder of the contract with Deerfield. The balance of this guarantee liability was $1,372 at December 31, 2020. Armistice Guarantee Armistice Capital Master Fund, Ltd., the majority shareholder of Cerecor, guaranteed to Holdings the payment by Cerecor of the Assumed Obligations, including the Minimum Royalties. A valuation of the guarantee asset was performed in accordance with ASC 460 “Guarantees” and a guarantee asset of $6,620 was recorded. This asset is being amortized proportionately based on undiscounted cash outflows through the remainder of the contract with Deerfield noted above. As discussed above, based on the purchase and asset sale between Cerecor and the Buyer, an updated valuation was performed and identified an updated guarantee asset of $1,821 at December 31, 2019. The balance of this guarantee asset was $1,368 at December 31, 2020. The fair values of the Avadel guarantee to Deerfield and the guarantee received by Avadel from Armistice largely offset and when combined are not material. Based on management’s review of ASU 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, the disposition of our pediatric assets and related liabilities did not qualify for discontinued operations reporting. Our results of operations for the year ended December 31, 2018 includes the results of FSC, prior to its February 16, 2018 disposition date. The net impact of this transaction was not material to the consolidated statements of income (loss).

X
- References No definition available. + Details
Name: | us-gaap_DiscontinuedOperationsAndDisposalGroupsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
Name: | us-gaap_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration