Disposition of the Hospital Products

12 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

On June 30, 2020 (the “Closing Date”), the Company announced the sale of its Hospital Products, which included its three FDA-approved commercial products, Akovaz, Bloxiverz and Vazculep, as well as Nouress, to the Exela Buyer pursuant to an Asset Purchase Agreement (the “Transaction”).

Pursuant to the Transaction, 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 was paid in ten equal monthly installments following the Closing Date. During the year ended December 31, 2020, the Company collected four installment payments, totaling $11,000. The Company collected the remaining six installment payments, totaling $16,500 during 2021. 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.

The Company was party to a Membership Interest Purchase Agreement, dated March 13, 2012, by and among the Company, 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 the Company, 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.

The Company was also party to a Royalty Agreement, dated December 3, 2013, by and between the Company, 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.

The Company 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 statements of (loss) income. 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 the Company due to the sale of the Hospital Products, which are listed below.


	June 30, 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.

The Company 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 statements of (loss) income for the years ended December 31, 2020 and 2019 included below is being provided for information purposes only and are not necessarily indicative of the results of operations 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 Statement of (Loss) Income
	Year Ended December 31, 2020
	As Reported		Pro Forma Adjustments		Notes	Pro Forma


Product sales	$	22,334	$	(22,175)	(a)	$	159
Total operating expense	16,519		(8,392)		(b)	8,127
Operating income (loss)	5,815		(13,783)			(7,968)
Loss before income taxes	$	(5,082)	$	(13,348)	(c)	$	(18,430)


	Unaudited Pro Forma Condensed Combined Statement of (Loss) Income
	Year Ended December 31, 2019
	As Reported		Pro Forma Adjustments		Notes	Pro Forma


Product sales	$	59,215	$	(59,273)	(a)	$	(58)
Total operating expense	83,327		(16,092)		(d)	67,235
Operating loss	(24,112)		(43,181)			(67,293)
Loss before income taxes	$	(38,582)	$	(42,803)	(e)	$	(81,385)

Adjustments to the pro forma unaudited condensed combined statements of (loss) income

(a) This adjustment reflects Product sales attributable to the Hospital Products.

(b) 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.

(c) This amount reflects the adjustments noted in (a) and (b) 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.

(d) 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.

(e) This amount reflects the adjustments noted in (a) and (d) 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.