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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM 10-Q
———————
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-37977

———————
AVADEL PHARMACEUTICALS PLC
(Exact name of registrant as specified in its charter)
———————

Ireland |  | 98-1341933
(State or Other Jurisdiction of Incorporation) |  | (I.R.S. Employer Identification No.)
10 Earlsfort Terrace Dublin 2 D02 T380 Ireland |  | N/A
(Address of Principal Executive Office and Zip Code) |  | (Zip Code)

+353-1-901-5201
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
———————
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Ordinary Shares, nominal value $0.01 per share | AVDL | The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | þ | Accelerated filer | ¨
Non-accelerated filer | ¨ | Smaller reporting company | ¨
|  | Emerging growth company | ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
At October 31, 2025, 97,656,664 ordinary shares, nominal value $0.01 each, of the Company were outstanding.

TABLE OF CONTENTS

|  | Page #
Cautionary Disclosure Regarding Forward Looking Statements | 3
PART I - FINANCIAL INFORMATION |
Item 1. | Financial Statements | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 37
Item 4. | Controls and Procedures | 38
PART II - OTHER INFORMATION |
Item 1. | Legal Proceedings | 38
Item 1A. | Risk Factors | 38
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 42
Item 3. | Defaults Upon Senior Securities | 42
Item 4. | Mine Safety Disclosures | 42
Item 5. | Other Information | 42
Item 6. | Exhibits | 43

NOTE REGARDING TRADEMARKS
We own various trademark registrations and applications, and unregistered trademarks, including, but not limited to, AVADEL TM, LUMRYZ TM, RYZUP TM, REST-ON TM, RESTORE TM and REVITALYZ TM. Trade names, trademarks and service marks of other companies appearing in this Quarterly Report are the property of their respective holders. Solely for convenience, the trademarks and trade names in this Quarterly Report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
From time to time, we may use our website, LinkedIn or our X account (@AvadelPharma) to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.avadel.com. Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website, our LinkedIn posts or our X posts are not incorporated into, and does not form a part of, this Quarterly Report.
- 2 -

Cautionary Disclosure Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but are not always, made through the use of words or phrases such as “may,” “will,” “could,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “potential,” “continue,” and similar expressions, or the negative of these terms, or similar expressions. Accordingly, these statements involve estimates, assumptions, risks and uncertainties which could cause actual results to differ materially from those expressed in them.
This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
•Our and Alkermes plc’s (“Alkermes”) ability to consummate our pending transaction with Alkermes in a timely manner, or at all, and the satisfaction (or waiver) of conditions to the consummation of our pending transaction with Alkermes, including with respect to the approval of the Company’s shareholders and required regulatory clearances;
•The occurrence of any event, change or other circumstance or condition that could give rise to the termination of our transaction agreement with Alkermes;
•The effect of the pendency of our transaction with Alkermes on our business relationships, operating results and business generally;
•Our ability to successfully commercialize LUMRYZ (sodium oxybate) in the United States (“U.S.”) for the treatment of cataplexy or excessive daytime sleepiness (“EDS”) in patients seven years of age and older with narcolepsy;
•Our plans with respect to our commercial infrastructure and marketing, market access and commercial activities;
•Our ability to maintain and receive additional regulatory approvals for LUMRYZ in any other jurisdictions outside the U.S., and any related restrictions, limitations, and/or warnings in the label of LUMRYZ;
•Our expectations regarding the rate and degree of market acceptance for LUMRYZ;
•Our ability to enter into strategic partnerships for the commercialization, manufacturing and distribution of LUMRYZ in the U.S.;
•Our reliance on a single product, LUMRYZ;
•Our expectations regarding timing of and our ability to execute the pivotal REVITALYZ trial of LUMRYZ in Idiopathic Hypersomnia (“IH”);
•Our ability to seek, maintain and receive additional U.S. regulatory approvals as well as commercialize LUMRYZ for indications beyond narcolepsy;
•Our dependence on a limited number of suppliers for the manufacturing of LUMRYZ and certain raw materials used in LUMRYZ and any failure of such suppliers to produce LUMRYZ or deliver sufficient quantities of such raw materials, which could have a material adverse effect on our business, including commercialization of LUMRYZ in the U.S.;
•Our ability to finance our operations on acceptable terms, either through the raising of capital including the incurrence of convertible or other indebtedness, issuance of equity or royalty-based financings, or through strategic financing or commercialization partnerships;
•Our expectations regarding the pricing and reimbursement and the extent to which patient financial assistance programs are utilized for LUMRYZ;
•Our expectations about the potential market size and market participation for LUMRYZ;
•Our expectations regarding the continued profitability of LUMRYZ;
•Our expectations regarding our cash runway to support the commercialization of LUMRYZ in the U.S.;
•The potential impacts of tariffs, inflation and rising interest rates on our business and future operating results;
•Our ability to hire and retain key members of our leadership team and other personnel;
•The potential impacts due to global political instability and conflicts, such as terrorism, civil unrest, war and natural disasters in foreign countries on our business, financial condition and results of operations; and
•Competition existing today or that may arise in the future.
These forward-looking statements are neither promises nor guarantees of future performance due to a variety of risks and uncertainties and other factors more fully discussed in the “Risk Factors” sections in Part I, Item 1A of the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on M arch 3, 2025, Part II, Item 1A in this
- 3 -

Quarterly Report on Form 10-Q, a nd the risk factors and cautionary statements described in our subsequent filings with the SEC. Given these uncertainties, readers should not place undue reliance on our forward-looking statements. These forward-looking statements speak only as of the date on which the statements were made and are not guarantees of future performance. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to revise any forward-looking statements to reflect events or developments occurring after the date of this Quarterly Report, even if new information becomes available in the future.
Introductory Note
On October 22, 2025, we announced that we entered into a transaction agreement (the “Transaction Agreement”) by and between us and Alkermes plc (“Alkermes”). Under the terms of the Transaction Agreement, Alkermes will acquire us (the “Transaction”) pursuant to a court-sanctioned scheme of arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of Ireland (the “Scheme”), or under certain circumstances, subject to the terms of the Transaction Agreement, a takeover offer (as such term is defined in the Irish Takeover Panel Act, 1997, Takeover Rules, 2022) rather than the Scheme. As a result of the Scheme, we will become a wholly owned subsidiary of Alkermes. The Transaction is subject to customary closing conditions, including, among other things (a) the approval by our shareholders of the Scheme, (b) the sanction by the Irish High Court of the Scheme and delivery of the court order to the Irish Registrar of Companies, and (c) the receipt of required antitrust clearances in the United States. We expect the Transaction to close in the first quarter of 2026.
- 4 -

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AVADEL PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Net product revenue |  | $ | 77,467 |  |  | $ | 50,025 |  |  | $ | 198,107 |  |  | $ | 118,707 |
Cost of products sold |  | (4,116) |  |  | 6,155 |  |  | 7,827 |  |  | 10,465 |
Gross profit |  | 81,583 |  |  | 43,870 |  |  | 190,280 |  |  | 108,242 |
Operating expenses: |  |  |  |  |  |  |  |
Research and development expenses |  | 27,010 |  |  | 3,803 |  |  | 35,619 |  |  | 10,922 |
Selling, general and administrative expenses |  | 52,636 |  |  | 40,394 |  |  | 146,841 |  |  | 136,422 |
Total operating expense |  | 79,646 |  |  | 44,197 |  |  | 182,460 |  |  | 147,344 |
Operating income (loss) |  | 1,937 |  |  | (327) |  |  | 7,820 |  |  | (39,102) |
Investment and other income, net |  | 532 |  |  | 610 |  |  | 895 |  |  | 3,114 |
Interest expense |  | (2,415) |  |  | (2,820) |  |  | (7,008) |  |  | (8,128) |
Income (loss) before income taxes |  | 54 |  |  | (2,537) |  |  | 1,707 |  |  | (44,116) |
Income tax provision (benefit) |  | 34 |  |  | 88 |  |  | (3,058) |  |  | (327) |
Net income (loss) |  | $ | 20 |  |  | $ | (2,625) |  |  | $ | 4,765 |  |  | $ | (43,789) |
Net income (loss) per share - basic |  | $ | 0.00 |  |  | $ | (0.03) |  |  | $ | 0.05 |  |  | $ | (0.46) |
Net income (loss) per share - diluted |  | $ | 0.00 |  |  | $ | (0.03) |  |  | $ | 0.05 |  |  | $ | (0.46) |
Weighted average number of shares outstanding - basic |  | 97,104 |  |  | 96,300 |  |  | 96,812 |  |  | 94,720 |
Weighted average number of shares outstanding - diluted |  | 101,276 |  |  | 96,300 |  |  | 99,830 |  |  | 94,720 |

See accompanying notes to unaudited condensed consolidated financial statements.
- 5 -

AVADEL PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Net income (loss) |  | $ | 20 |  |  | $ | (2,625) |  |  | $ | 4,765 |  |  | $ | (43,789) |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |
Foreign currency translation income |  | — |  |  | 429 |  |  | 1,088 |  |  | 119 |
Net other comprehensive income (loss), net of income tax expense of $0, $0, $0, and $0 respectively |  | 70 |  |  | (16) |  |  | (84) |  |  | (754) |
Total other comprehensive income (loss), net of tax |  | 70 |  |  | 413 |  |  | 1,004 |  |  | (635) |
Total comprehensive income (loss) |  | $ | 90 |  |  | $ | (2,212) |  |  | $ | 5,769 |  |  | $ | (44,424) |

See accompanying notes to unaudited condensed consolidated financial statements.
- 6 -

AVADEL PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

|  | September 30, 2025 |  | December 31, 2024
|  | (Unaudited) |  |
ASSETS |  |  |  |
Current assets: |  |  |  |
Cash and cash equivalents |  | $ | 79,813 |  |  | $ | 51,371 |
Marketable securities |  | 11,764 |  |  | 22,406 |
Accounts receivable, net |  | 42,444 |  |  | 34,097 |
Inventories |  | 23,905 |  |  | 20,298 |
Prepaid expenses and other current assets |  | 14,300 |  |  | 6,036 |
Total current assets |  | 172,226 |  |  | 134,208 |
Property and equipment, net |  | 467 |  |  | 453 |
Operating lease right-of-use assets |  | 2,544 |  |  | 1,702 |
Goodwill |  | 16,836 |  |  | 16,836 |
Other non-current assets |  | 7,375 |  |  | 11,037 |
Total assets |  | $ | 199,448 |  |  | $ | 164,236 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |
Current liabilities: |  |  |  |
Current portion of operating lease liability |  | $ | 740 |  |  | $ | 582 |
Accounts payable |  | 12,581 |  |  | 7,328 |
Accrued expenses |  | 44,156 |  |  | 40,651 |
Other current liabilities |  | 5,010 |  |  | 273 |
Total current liabilities |  | 62,487 |  |  | 48,834 |
Long-term operating lease liability |  | 1,810 |  |  | 1,122 |
Royalty financing obligation |  | 34,828 |  |  | 35,249 |
Other non-current liabilities |  | 2,098 |  |  | 5,183 |
Total liabilities |  | 101,223 |  |  | 90,388 |
Shareholders’ equity: |  |  |  |
Preferred shares, nominal value of $0.01 per share; 50,000 shares authorized; zero issued and outstanding at September 30, 2025 and December 31, 2024 |  | — |  |  | — |
Ordinary shares, nominal value of $0.01 per share; 500,000 shares authorized; 97,235 issued and outstanding at September 30, 2025 and 96,518 issued and outstanding at December 31, 2024 |  | 972 |  |  | 965 |
Additional paid-in capital |  | 910,391 |  |  | 891,791 |
Accumulated deficit |  | (789,562) |  |  | (794,328) |
Accumulated other comprehensive loss |  | (23,576) |  |  | (24,580) |
Total shareholders’ equity |  | 98,225 |  |  | 73,848 |
Total liabilities and shareholders’ equity |  | $ | 199,448 |  |  | $ | 164,236 |

See accompanying notes to unaudited condensed consolidated financial statements.
- 7 -

AVADEL PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)

|  | Ordinary shares |  | Preferred shares |  | Additional |  | Accumulated |  | Accumulated other comprehensive |  | Total shareholders’ |  |  |  |
|  | Shares |  | Amount |  | Shares |  | Amount |  | paid-in capital |  | deficit |  | loss |  | equity |  |  |  |
Balance, December 31, 2024 |  | 96,518 |  |  | $ | 965 |  |  | — |  |  | $ | — |  |  | $ | 891,791 |  |  | $ | (794,328) |  |  | $ | (24,580) |  |  | $ | 73,848 |  |  |  |  |
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,920) |  |  | — |  |  | (4,920) |  |  |  |  |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 268 |  |  | 268 |  |  |  |  |
Exercise of stock options |  | 60 |  |  | 1 |  |  | — |  |  | — |  |  | 281 |  |  | — |  |  | — |  |  | 282 |  |  |  |  |
Vesting of restricted shares |  | 8 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Employee share purchase plan share issuance |  | 46 |  |  | — |  |  | — |  |  | — |  |  | 408 |  |  | 1 |  |  | — |  |  | 409 |  |  |  |  |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,183 |  |  | — |  |  | — |  |  | 4,183 |  |  |  |  |
Balance, March 31, 2025 |  | 96,632 |  |  | $ | 966 |  |  | — |  |  | $ | — |  |  | $ | 896,663 |  |  | $ | (799,247) |  |  | $ | (24,312) |  |  | $ | 74,070 |  |  |  |  |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 9,665 |  |  | — |  |  | 9,665 |  |  |  |  |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 666 |  |  | 666 |  |  |  |  |
Exercise of stock options |  | 145 |  |  | 1 |  |  | — |  |  | — |  |  | 980 |  |  | — |  |  | — |  |  | 981 |  |  |  |  |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,327 |  |  | — |  |  | — |  |  | 5,327 |  |  |  |  |
Balance, June 30, 2025 |  | 96,777 |  |  | $ | 967 |  |  | — |  |  | $ | — |  |  | $ | 902,970 |  |  | $ | (789,582) |  |  | $ | (23,646) |  |  | $ | 90,709 |  |  |  |  |
Net income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 20 |  |  | — |  |  | 20 |  |  |  |  |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 70 |  |  | 70 |  |  |  |  |
Exercise of stock options |  | 313 |  |  | 3 |  |  | — |  |  | — |  |  | 1,954 |  |  | — |  |  | — |  |  | 1,957 |  |  |  |  |
Vesting of restricted shares |  | 72 |  |  | 1 |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | — |  |  | — |  |  |  |  |
Employee share purchase plan share issuance |  | 73 |  |  | 1 |  |  | — |  |  | — |  |  | 549 |  |  | — |  |  | — |  |  | 550 |  |  |  |  |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,919 |  |  | — |  |  | — |  |  | 4,919 |  |  |  |  |
Balance, September 30, 2025 |  | 97,235 |  |  | $ | 972 |  |  | — |  |  | $ | — |  |  | $ | 910,391 |  |  | $ | (789,562) |  |  | $ | (23,576) |  |  | $ | 98,225 |  |  |  |  |

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AVADEL PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)

|  | Ordinary shares |  | Preferred shares |  | Additional paid-in |  | Accumulated |  | Accumulated other comprehensive |  | Total shareholders’
|  | Shares |  | Amount |  | Shares |  | Amount |  | capital |  | deficit |  | loss |  | equity
Balance, December 31, 2023 |  | 89,825 |  |  | $ | 898 |  |  | 5,194 |  |  | $ | 52 |  |  | $ | 855,452 |  |  | $ | (745,496) |  |  | $ | (23,167) |  |  | $ | 87,739 |
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (27,342) |  |  | — |  |  | (27,342) |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (589) |  |  | (589) |
Issuance of common stock under at-the-market offering program, net of issuance costs |  | 640 |  |  | 6 |  |  | — |  |  | — |  |  | 9,244 |  |  | — |  |  | — |  |  | 9,250 |
Amortization of deferred issuance costs |  | — |  |  | — |  |  | — |  |  | — |  |  | (3) |  |  | — |  |  | — |  |  | (3) |
Conversion of preferred stock into ordinary shares |  | 5,194 |  |  | 52 |  |  | (5,194) |  |  | (52) |  |  | — |  |  | — |  |  | — |  |  | — |
Exercise of stock options |  | 390 |  |  | 3 |  |  | — |  |  | — |  |  | 3,353 |  |  | — |  |  | — |  |  | 3,356 |
Employee share purchase plan share issuance |  | 48 |  |  | 1 |  |  | — |  |  | — |  |  | 583 |  |  | — |  |  | — |  |  | 584 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,389 |  |  | — |  |  | — |  |  | 5,389 |
Balance, March 31, 2024 |  | 96,097 |  |  | $ | 960 |  |  | — |  |  | $ | — |  |  | $ | 874,018 |  |  | $ | (772,838) |  |  | $ | (23,756) |  |  | $ | 78,384 |
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (13,822) |  |  | — |  |  | (13,822) |
Other comprehensive loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (459) |  |  | (459) |
Exercise of stock options |  | 107 |  |  | 1 |  |  | — |  |  | — |  |  | 722 |  |  | — |  |  | — |  |  | 723 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,462 |  |  | — |  |  | — |  |  | 5,462 |
Balance, June 30, 2024 |  | 96,204 |  |  | $ | 961 |  |  | — |  |  | $ | — |  |  | $ | 880,202 |  |  | $ | (786,660) |  |  | $ | (24,215) |  |  | $ | 70,288 |
Net loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,625) |  |  | — |  |  | (2,625) |
Other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 413 |  |  | 413 |
Exercise of stock options |  | 69 |  |  | 1 |  |  | — |  |  | — |  |  | 399 |  |  | — |  |  | — |  |  | 400 |
Employee share purchase plan share issuance |  | 65 |  |  | 1 |  |  | — |  |  | — |  |  | 776 |  |  | — |  |  | — |  |  | 777 |
Share-based compensation expense |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,410 |  |  | — |  |  | — |  |  | 5,410 |
Balance, September 30, 2024 |  | 96,338 |  |  | $ | 963 |  |  | — |  |  | $ | — |  |  | $ | 886,787 |  |  | $ | (789,285) |  |  | $ | (23,802) |  |  | $ | 74,663 |

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AVADEL PHARMACEUTICALS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|  | Nine Months Ended September 30,
|  | 2025 |  | 2024
Cash flows from operating activities: |  |  |  |
Net income (loss) |  | $ | 4,765 |  |  | $ | (43,789) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |  |
Depreciation and amortization |  | 3,008 |  |  | 2,013 |
Share-based compensation expense |  | 14,429 |  |  | 16,261 |
Acquired in-process research & development expense |  | 20,000 |  |  | — |
Other adjustments |  | (1,048) |  |  | (1,052) |
Net changes in assets and liabilities |  |  |  |
Accounts receivable |  | (8,347) |  |  | (24,999) |
Inventories |  | (4,042) |  |  | (5,255) |
Prepaid expenses and other current assets |  | (1,562) |  |  | (1,615) |
Accounts payable & other current liabilities |  | 5,067 |  |  | (3,516) |
Accrued expenses |  | (1,495) |  |  | 9,680 |
Other assets and liabilities |  | (4,105) |  |  | (2,508) |
Net cash provided by (used in) operating activities |  | 26,670 |  |  | (54,780) |
Cash flows from investing activities: |  |  |  |
Purchases of property and equipment |  | (190) |  |  | — |
Proceeds from sales of marketable securities |  | 57,738 |  |  | 298,829 |
Purchases of marketable securities |  | (46,918) |  |  | (261,962) |
Upfront license payment for acquired in-process research & development |  | (15,000) |  |  | — |
Net cash (used in) provided by investing activities |  | (4,370) |  |  | 36,867 |
Cash flows from financing activities: |  |  |  |
Proceeds from issuance of shares off the at-the-market offering program |  | — |  |  | 9,250 |
Proceeds from stock option exercises and employee share purchase plan |  | 4,179 |  |  | 5,840 |
Net cash provided by financing activities |  | 4,179 |  |  | 15,090 |
Effect of foreign currency exchange rate changes on cash and cash equivalents |  | 1,963 |  |  | 238 |
Net change in cash and cash equivalents |  | 28,442 |  |  | (2,585) |
Cash and cash equivalents at January 1, |  | 51,371 |  |  | 31,167 |
Cash and cash equivalents at September 30, |  | $ | 79,813 |  |  | $ | 28,582 |
Supplemental disclosures of cash flow information: |  |  |  |
Interest paid |  | $ | 6,414 |  |  | $ | 3,305 |

See accompanying notes to unaudited condensed consolidated financial statements.
- 10 -

AVADEL PHARMACEUTICALS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
NOTE 1: Summary of Significant Accounting Policies
Nature of Operations. Avadel Pharmaceuticals plc (Nasdaq: AVDL) (“Avadel,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company. The Company is registered as an Irish public limited company. The Company’s headquarters are in Dublin, Ireland with operations in Dublin, Ireland and St. Louis, Missouri, United States (“U.S.”).
LUMRYZ is an extended-release formulation of sodium oxybate indicated to be taken once at bedtime for the treatment of cataplexy or excessive daytime sleepiness (“EDS”) in patients seven years of age and older with narcolepsy.
LUMRYZ was approved by the U.S. Food and Drug Administration (“FDA”) on May 1, 2023 for the treatment of cataplexy or EDS in adults with narcolepsy. The FDA also granted Orphan Drug Exclusivity (“ODE”) to LUMRYZ for treatment of cataplexy or EDS in adults with narcolepsy for a period of seven years until May 1, 2030. In June 2023, the Company commercially launched LUMRYZ in the U.S for the treatment of cataplexy or EDS in adults living with narcolepsy. LUMRYZ was approved by the FDA for use in the treatment of cataplexy or EDS in the pediatric narcolepsy population seven years of age and older on October 16, 2024, and was granted ODE for this patient population through October 16, 2031.
The FDA required implementation of a Risk Evaluation and Mitigation Strategy (“REMS”) to help ensure the benefits of the drug outweigh the risks of serious adverse outcomes resulting from inappropriate prescribing, misuse, abuse, and diversion of the same. Under the LUMRYZ REMS, healthcare providers who prescribe the drug must be specially certified, pharmacies that dispense the drug must be specially certified, and the drug must be dispensed only to patients who have enrolled in the LUMRYZ REMS and completed all REMS requirements, including documentation of safe use conditions.
The Company has initiated a pivotal trial in Idiopathic Hypersomnia (“IH”), REVITALYZ, which is a double-blind, placebo-controlled, randomized withdrawal, multicenter Phase 3 study designed to evaluate the efficacy and safety of LUMRYZ, in treating IH. LUMRYZ was granted Orphan Drug Designation (“ODD”) from the FDA for the treatment of IH on June 5, 2025.
On August 30, 2025, the Company entered into an exclusive global license agreement (the “License Agreement”) with XWPharma Ltd. (“XWPharma”) for the development and commercialization of valiloxybate, a GABA B receptor agonist, in all indications, including the treatment of sleep disorders, such as narcolepsy and IH. Under the terms of the License Agreement, XWPharma grants the Company an exclusive global license to develop, manufacture and commercialize valiloxybate worldwide, excluding mainland China, Hong Kong and Macau. See Note 3: License Agreement for additional details.
As of the date of this Quarterly Report, the Company’s only commercialized product is LUMRYZ. In addition to the aforementioned valiloxybate drug candidate, the Company continues to evaluate opportunities to expand its product portfolio.
Transaction Agreement with Alkermes
On October 22, 2025, the Company announced it had entered into a transaction agreement (the “Transaction Agreement”) with Alkermes plc (“Alkermes”). Under the terms of the Transaction Agreement, Alkermes will acquire Avadel (the “Transaction”) pursuant to a court-sanctioned scheme of arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of Ireland (the “Scheme”), or under certain circumstances, subject to the terms of the Transaction Agreement, a takeover offer (as such term is defined in the Irish Takeover Panel Act, 1997, Takeover Rules, 2022) rather than the Scheme. As a result of the Scheme, the Company will become a wholly owned subsidiary of Alkermes.
At the effective time of the Scheme (the “Effective Time”), holders of the Company’s ordinary shares nominal value $0.01 per share (the “Company Shares”), will be entitled to receive $18.50 in cash per Company Share (the “Cash Consideration”) and a non-transferable contingent value right entitling the holders to a potential additional cash payment of $1.50 per Company Share, contingent upon achievement of the specified milestones set forth in the CVR Agreement (as defined below) (such contingent value rights, the “CVRs” and, together with the Cash Consideration, the “Consideration”). The Transaction has been recommended by the Company’s board of directors (the “Company Board”) to the Company’s shareholders and by the board of directors of Alkermes to the shareholders of Alkermes.
The Transaction is subject to customary closing conditions, including, among other things (a) the approval by the Company’s shareholders of the Scheme, (b) the sanction by the Irish High Court of the Scheme and delivery of the court order to the Irish Registrar of Companies, and (c) the receipt of required antitrust clearances in the United States. The Company expects the Transaction to close in the first quarter of 2026. Additional information about the transaction agreement and the Transaction is set forth in the Company’s Form 8-K filed with the SEC on October 22, 2025.
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Liquidity. The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
The adequacy of the Company’s cash resources depends on the outcome of certain business conditions including the Company’s ongoing LUMRYZ commercialization activities, the Company’s cost structure, and other factors set forth in “Risk Factors” within Part I, Item 1A of the Company’s Annual Report on Form 10-K filed with SEC on March 3, 2025 (the “Annual Report on Form 10-K”) and within Part II, Item 1A in this Quarterly Report on Form 10-Q.
Ordinary Shares
Effective April 15, 2024, the Company’s ordinary shares, nominal value $0.01 per share (“ordinary shares”), became directly listed on the Nasdaq Stock Market. The Company caused a mandatory exchange of its American Depositary Shares (“ADSs”) for the underlying ordinary shares on a one-for-one basis. Accordingly, the Bank of New York Mellon (“BNY Mellon”), as Depositary for the ADSs, issued a notice of termination of its American Depository Receipt program (“ADR Program”) of ADSs to the registered holders of ADSs according to the requirements under the deposit agreement dated January 3, 2017 (the “Deposit Agreement”) among the Company, BNY Mellon and holders of ADSs. The Deposit Agreement terminated on July 15, 2024.
At-the-Market Offering Program
On May 8, 2024, the Company entered into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company may offer and sell its ordinary shares, from time to time, with respect to an at-the-market offering program (“ATM Program”) under which Jefferies will act as sales agent. The Sales Agreement provides that Jefferies will be entitled to aggregate compensation for its services of an amount up to 3.0% of the gross proceeds of any ordinary shares sold through Jefferies under the Sales Agreement.
The ordinary shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-289355), filed with the SEC on August 7, 2025, as supplemented by the prospectus supplement included therein (the “2025 Prospectus Supplement”). This registration statement replaced the previous shelf registration statement on Form S-3 (File No. 333-267198), filed with the SEC on August 31, 2022, as amended, which was set to expire on September 12, 2025. The Company may offer and sell ordinary shares having an aggregate offering price of up to $100,000 under the 2025 Prospectus Supplement.
The Company did not issue or sell ordinary shares under the at-the-market offering program during the nine months ended September 30, 2025. In connection with the Company’s entry into the Transaction Agreement, it suspended sales under the ATM Program.
Basis of Presentation. The unaudited condensed consolidated balance sheet as of September 30, 2025 and the interim unaudited condensed consolidated financial statements presented herein, have been prepared in accordance with U.S. GAAP, the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by U.S. GAAP for complete financial statements or all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Annual Report on Form 10-K.
Certain prior year amounts have been reclassified within the notes to the unaudited condensed consolidated financial statements to condense line items of the same nature to conform with the current year presentation.
The unaudited condensed consolidated financial statements include the accounts of the Company and subsidiaries and reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the dates and periods presented. All intercompany accounts and transactions have been eliminated. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period.
Research and Development (“R&D”). R&D expenses consist primarily of costs related to outside services, personnel expenses, clinical studies, upfront payments for acquired in-process research and development (“IPR&D”), milestone payments incurred prior to regulatory approval of products, and other R&D expenses. Outside services and clinical studies costs relate primarily to services performed by clinical research organizations and related clinical or development manufacturing costs, materials and
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supplies, filing fees, regulatory support, and other third-party fees. Personnel expenses relate primarily to salaries, benefits and share-based compensation. Other R&D expenses primarily include overhead allocations consisting of various support and facilities-related costs. R&D expenditures are charged to operations as incurred. Raw materials used in the production of pre-clinical and clinical products are expensed as R&D costs.
Share-based Compensation. The Company accounts for share-based compensation based on the estimated grant-date fair value. The fair value and requisite service period of market-based performance non-qualified stock options ("market-based NQSOs") is determined using the Monte Carlo valuation methodology on the date of grant. For market-based NQSOs, the Company uses a straight-line method to recognize compensation expense over the award’s requisite service period, net of estimated forfeiture rates.
Recent Accounting Guidance Not Yet Adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The ASU is effective for annual periods beginning after December 15, 2024. Adoption of ASU 2023-09 will not have a material effect on the Company’s financial position or results of operations.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), to require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact adopting ASU 2024-03 will have on its financial statement disclosures.
NOTE 2: Revenue Recognition
The Company’s source of net product revenue during the three and nine months ended September 30, 2025 and 2024 consists solely of sales of LUMRYZ in the U.S.
For the three and nine months ended September 30, 2025 and 2024, three customers accounted for 100% of sales. The following table presents a summary of the percentage of total gross sales to customers:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Sales by Customer: |  | 2025 |  | 2024 |  | 2025 |  | 2024
Caremark |  | 41 | % |  | 43 | % |  | 43 | % |  | 46 | %
Accredo |  | 41 | % |  | 39 | % |  | 41 | % |  | 37 | %
Optum |  | 18 | % |  | 18 | % |  | 16 | % |  | 17 | %

NOTE 3: License Agreement
On August 30, 2025, Company entered into an exclusive global license agreement with XWPharma for the development and commercialization of valiloxybate, a GABA B receptor agonist, in all indications, including the treatment of sleep disorders, such as narcolepsy and IH. Under the terms of the License Agreement, XWPharma grants the Company an exclusive global license to develop, manufacture and commercialize valiloxybate worldwide, excluding mainland China, Hong Kong and Macau.
XWPharma received an upfront payment of $15,000 during the quarter ended September 30, 2025, and will receive an additional upfront payment of $5,000 from the Company in the fourth quarter of 2025. XWPharma is eligible to receive milestone payments associated with certain development milestones of up to $30,000. XWPharma may receive up to an aggregate of $155,000 in performance-based tiered sales milestones for first achievement of annual net sales up to $750,000. For first achievement of annual net sales exceeding $750,000 and up to $3,500,000, XWPharma may receive certain performance-based sales milestone payments equal to 10% of each of those sales milestones. In addition, XWPharma may receive tiered royalties ranging from high-single digit to mid-teens, as a percentage of annual net sales of the licensed products, and also an additional $10,000 milestone payment after the first commercial sale in the U.S. for each indication beyond narcolepsy and IH following the FDA’s approval for same.
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The Company accounted for the License Agreement as an asset acquisition under ASC Topic 805, Business Combinations, as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable IPR&D asset, valiloxybate. There was no material value assigned to any other assets or liabilities acquired in the acquisition. The IPR&D asset has no alternative future use and, as such, the $20,000 total upfront payments discussed above were recorded as a charge to R&D expense during the three months ended September 30, 2025.
The Company has not recorded any of the contingent consideration payments as a liability in the accompanying unaudited condensed consolidated balance sheets as none of the future events which would trigger a milestone or royalty payment were considered probable of occurring as of September 30, 2025.
Unless earlier terminated, the term of the License Agreement will continue until expiration of the last royalty term for the applicable product in the applicable country.
NOTE 4: Fair Value Measurement
The Company is required to measure certain assets and liabilities at fair value, either upon initial recognition or for subsequent accounting or reporting. For example, the Company uses fair value extensively when accounting for and reporting certain financial instruments, when measuring certain contingent consideration liabilities and in the initial recognition of net assets acquired in a business combination. Fair value is estimated by applying the hierarchy described below, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement.
ASC 820, Fair Value Measurements and Disclosures, defines fair value as a market-based measurement that should be determined based on the assumptions that marketplace participants would use in pricing an asset or liability. When estimating fair value, depending on the nature and complexity of the asset or liability, the Company may generally use one or each of the following techniques:
•Income approach, which is based on the present value of a future stream of net cash flows.
•Market approach, which is based on market prices and other information from market transactions involving identical or comparable assets or liabilities.
As a basis for considering the assumptions used in these techniques, the standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
•Level 1 - Quoted prices for identical assets or liabilities in active markets.
•Level 2 - Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
•Level 3 - Unobservable inputs that reflect estimates and assumptions.
The following table summarizes the financial instruments measured at fair value on a recurring basis classified in the fair value hierarchy (Level 1, 2 or 3) based on the inputs used for valuation in the accompanying unaudited condensed consolidated balance sheets:

|  | As of September 30, 2025 |  | As of December 31, 2024
Fair Value Measurements: |  | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
Marketable securities (see Note 5) |  |  |  |  |  |  |  |  |  |  |  |
Government securities - U.S. |  | $ | 11,764 |  |  | $ | — |  |  | $ | — |  |  | $ | 22,406 |  |  | $ | — |  |  | $ | — |
Total assets |  | $ | 11,764 |  |  | $ | — |  |  | $ | — |  |  | $ | 22,406 |  |  | $ | — |  |  | $ | — |

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. During the periods ended September 30, 2025 and December 31, 2024, there were no transfers in and out of Level 3. During the three and nine months ended September 30, 2025 and 2024, the Company did not recognize any allowances for credit losses.
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Some of the Company’s financial instruments, such as cash and cash equivalents, accounts receivable and accounts payable, are reflected in the unaudited condensed consolidated balance sheets at carrying value, which approximates fair value due to their short-term nature.
Royalty Financing Obligation
As of September 30, 2025 and December 31, 2024, the carrying value of the royalty financing obligation under the Royalty Purchase Agreement (“RPA”) approximated its fair value and was measured using estimates of forecasted net product revenue based on current contractual and statutory requirements, specific known market events and trends, industry data, historical trends, current and expected patient demand and forecasted customer buying and payment patterns (Level 3 inputs). See Note 7: Royalty Financing Obligation for additional information regarding the Company’s royalty financing obligation.
NOTE 5: Marketable Securities
The Company has investments in available-for-sale debt securities which are recorded at fair market value. The change in the fair value of available-for-sale debt investments is recorded as accumulated other comprehensive loss in shareholders’ equity, net of income tax effects. As of September 30, 2025 and December 31, 2024, the Company considered any decreases in fair value on its marketable securities to be driven by factors other than credit risk, including market risk.
The following tables show the Company’s available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of September 30, 2025 and December 31, 2024:

|  | September 30, 2025
Marketable Securities: |  | Adjusted Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
Government securities - U.S. |  | $ | 11,684 |  |  | $ | 80 |  |  | $ | — |  |  | $ | 11,764 |
Total |  | $ | 11,684 |  |  | $ | 80 |  |  | $ | — |  |  | $ | 11,764 |

|  | December 31, 2024
Marketable Securities: |  | Adjusted Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
Government securities - U.S. |  | $ | 22,242 |  |  | $ | 164 |  |  | $ | — |  |  | $ | 22,406 |
Total |  | $ | 22,242 |  |  | $ | 164 |  |  | $ | — |  |  | $ | 22,406 |

The Company determines realized gains or losses on the sale of marketable securities on a specific identification method. The Company reflects these gains and losses as a component of investment and other income, net in the accompanying unaudited condensed consolidated statements of income (loss).
The Company recognized gross realized gains of $99 and no gross realized losses for three months ended September 30, 2025. The Company recognized gross realized gains of $410 and no gross realized losses for the nine months ended September 30, 2025.
The Company recognized gross realized gains of $331 and no gross realized losses for three months ended September 30, 2024. The Company recognized gross realized gains of $1,438 and no gross realized losses for the nine months ended September 30, 2024.
The following table summarizes the estimated fair value of the Company’s investments in marketable debt securities, accounted for as available-for-sale debt securities and classified by the contractual maturity date of the securities as of September 30, 2025:
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|  | Maturities
Marketable Debt Securities: |  | Less than 1 Year |  | 1-5 Years |  | 5-10 Years |  | Greater than 10 Years |  | Total
Government securities - U.S. |  | $ | 11,764 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 11,764 |
Total |  | $ | 11,764 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 11,764 |

The Company has classified its investment in available-for-sale marketable debt securities as current assets in the unaudited condensed consolidated balance sheets as the securities need to be available for use, if required, to fund current operations. There are no restrictions on the sale of any securities in the Company’s investment portfolio.
NOTE 6: Inventories
The principal categories of inventories were comprised of the following:

Inventory: |  | September 30, 2025 |  | December 31, 2024
Raw materials and supplies |  | $ | 7,476 |  |  | $ | 5,199 |
Work in process |  | 4,519 |  |  | 4,963 |
Finished goods |  | 11,910 |  |  | 10,136 |
Total |  | $ | 23,905 |  |  | $ | 20,298 |

NOTE 7: Royalty Financing Obligation
On March 29, 2023, the Company and Avadel CNS Pharmaceuticals, LLC entered into the RPA with RTW Investments, L.P. (“RTW”) for up to $75,000 of royalty financing in two tranches. The first tranche of $30,000 became available upon satisfaction of certain conditions which included the Company’s first shipment of LUMRYZ. The second tranche became available to use, at the Company’s election, when the Company achieved quarterly net revenue of $25,000 prior to the quarter ending June 30, 2024. The Company allowed the second tranche to expire on August 31, 2024 and paid a one-time commitment fee of $2,000 to RTW in accordance with the terms of the RPA.
On August 1, 2023, the Company received the first tranche of $30,000. The Company is required to make quarterly royalty payments calculated as 3.75% of worldwide net product revenue of LUMRYZ, up to a total payback of $75,000.
The RPA is recorded as a royalty financing obligation on the unaudited condensed consolidated balance sheets based on the Company’s evaluation of the terms of the RPA. The accounts receivable and inventory balances of LUMRYZ are pledged as collateral for the RPA. There are no subjective acceleration clauses or provisions, and there are no covenants in violation or other clauses that would cause the full amount of the royalty financing obligation to be callable unless a change of control is consummated, as defined in the RPA. As provided under the terms of the RPA following the announcement of the Transaction Agreement, RTW notified the Company of its intent to exercise its put option, as defined in the RPA, which is contingent on the closing of the Transaction Agreement with Alkermes. Given that the put option is effective only if the Transaction closes and any amounts due under the RPA are payable only after the Transaction closes, the royalty financing obligation remains a long-term obligation in the Company’s unaudited condensed consolidated balance sheets.
The Company imputes interest using the effective interest method and records interest expense based on the unamortized royalty financing obligation. The Company’s estimate of the interest rate under the RPA is based primarily on forecasted net revenue and the calculated amounts and timing of net royalty payments to reach the total payback of $75,000. As of September 30, 2025 and December 31, 2024 the effective interest rate is estimated as 25.2%. The Company accounts for changes in the imputed interest rate resulting from changes in forecasted net product revenue using the prospective method.
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The following table shows the activity within the royalty financing obligation account:

Royalty Financing Obligation: |  | September 30, 2025 |  | December 31, 2024
Royalty financing obligation – beginning balance |  | $ | 37,139 |  |  | $ | 33,490 |
Accretion of imputed interest expense on royalty financing obligation |  | 7,008 |  |  | 10,830 |
Less: royalty payments made to RTW |  | (6,414) |  |  | (5,181) |
Less: one-time payment for expiration of second tranche |  | — |  |  | (2,000) |
Royalty financing obligation – ending balance |  | 37,733 |  |  | 37,139 |
Less: royalty payable to RTW classified within accrued expenses |  | (2,905) |  |  | (1,890) |
Royalty financing obligation, non-current |  | $ | 34,828 |  |  | $ | 35,249 |

The accretion of imputed interest expense is reflected as interest expense in the unaudited condensed consolidated statements of income (loss). For the three months ended September 30, 2025 and 2024, the total interest expense related to the royalty financing obligation was $2,415 and $2,820, respectively. For the nine months ended September 30, 2025 and 2024, the total interest expense related to the royalty financing obligation was $7,008 and $8,128, respectively.
NOTE 8: Income Taxes
For the three months ended September 30, 2025 and 2024, the income tax provision was $34 and $88, respectively. The decrease in provision for income taxes recorded was primarily driven by a decrease in interest expense on uncertain tax positions.
For the nine months ended September 30, 2025 and 2024, the income tax benefit was $3,058 and $327, respectively. The increase in the income tax benefit recorded was primarily driven by the release of uncertain tax positions during the nine months ended September 30, 2025 due to the expiration of their statute of limitations.
The Company's cumulative loss position was significant negative evidence in assessing the need for a valuation allowance on its deferred tax assets. Given the weight of objectively verifiable historical losses from operations, the Company has recorded a full valuation allowance on its deferred tax assets. The Company will be able to reverse the valuation allowance when it has shown its ability to generate taxable income on a consistent basis in future periods. The valuation allowance does not have an impact on the Company's ability to utilize any net operating losses or other tax attributes to offset cash taxes payable as these items are still eligible to be used.
One Big Beautiful Bill Act
H.R.1, the One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025. The OBBBA contains a broad range of tax reform provisions affecting U.S. businesses. The legislation did not have a material impact to the Company’s financial position, results of operations, and cash flows during the three and nine months ended September 30, 2025.
NOTE 9: Other Assets and Liabilities
Various other assets and liabilities are summarized as follows:

Prepaid Expenses and Other Current Assets: |  | September 30, 2025 |  | December 31, 2024
Prepaid and other expenses |  | $ | 13,502 |  |  | $ | 5,154 |
Other |  | 798 |  |  | 882 |
Total |  | $ | 14,300 |  |  | $ | 6,036 |

Other Non-Current Assets: |  | September 30, 2025 |  | December 31, 2024
Right of use assets at contract manufacturing organizations |  | $ | 7,153 |  |  | $ | 10,700 |
Other |  | 222 |  |  | 337 |
Total |  | $ | 7,375 |  |  | $ | 11,037 |

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Accrued Expenses: |  | September 30, 2025 |  | December 31, 2024
Reserves for variable consideration |  | $ | 16,437 |  |  | $ | 14,218 |
Accrued professional fees and other |  | 10,980 |  |  | 12,019 |
Accrued compensation |  | 8,834 |  |  | 6,515 |
Accrued upfront license fee for acquired IPR&D |  | 5,000 |  |  | — |
Accrued royalties |  | 2,905 |  |  | 7,899 |
Total |  | $ | 44,156 |  |  | $ | 40,651 |

Other Non-Current Liabilities: |  | September 30, 2025 |  | December 31, 2024
Tax liabilities |  | $ | 2,098 |  |  | $ | 5,151 |
Other |  | — |  |  | 32 |
Total |  | $ | 2,098 |  |  | $ | 5,183 |

NOTE 10: Share-Based Compensation
Market-based Performance NQSOs
On March 5, 2025, the Company granted options to purchase a total of 466 ordinary shares with market conditions to executive officers. The options shall vest in four equal increments if the volume-weighted average price of the Company’s ordinary shares during any 30-calendar day period over the five years after the grant date exceeds $11.00, $14.00, $17.00 and $19.09, respectively. The weighted average grant-date fair value per share of the market-based NQSOs was $6.15. A total of 233 market-based NQSOs vested during the three and nine months ended September 30, 2025. As of September 30, 2025, 233 market-based NQSOs were still outstanding.
Share-based compensation expense related to market-based NQSOs was approximately $900 for the three months ended September 30, 2025 and $2,200 for the nine months ended September 30, 2025.
NOTE 11: Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during each period. Diluted income (loss) per share is calculated by dividing income (loss) by the diluted number of shares outstanding during each period. Except where the result would be anti-dilutive to net income (loss), diluted net income (loss) per share would be calculated assuming the conversion of the Company’s preferred shares, the exercise of outstanding equity compensation awards, and ordinary shares expected to be issued under the Company’s Employee Share Purchase Plan (“ESPP”).
The dilutive effect of the stock options, restricted share awards, preferred shares and ordinary shares expected to be issued under the Company’s ESPP has been calculated using the treasury stock method.
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A reconciliation of basic and diluted net income (loss) per share, together with the related shares outstanding in thousands is as follows:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Net Income (Loss) Per Share: |  | 2025 |  | 2024 |  | 2025 |  | 2024
Net income (loss) |  | $ | 20 |  |  | $ | (2,625) |  |  | $ | 4,765 |  |  | $ | (43,789) |
Weighted average shares: |  |  |  |  |  |  |  |
Basic shares |  | 97,104 |  |  | 96,300 |  |  | 96,812 |  |  | 94,720 |
Effect of dilutive securities—employee and director equity awards outstanding and preferred shares |  | 4,172 |  |  | — |  |  | 3,018 |  |  | — |
Diluted shares |  | 101,276 |  |  | 96,300 |  |  | 99,830 |  |  | 94,720 |
Net income (loss) per share - basic |  | $ | 0.00 |  |  | $ | (0.03) |  |  | $ | 0.05 |  |  | $ | (0.46) |
Net income (loss) per share - diluted |  | $ | 0.00 |  |  | $ | (0.03) |  |  | $ | 0.05 |  |  | $ | (0.46) |

Potential ordinary shares of 1,353 and 1,437 were excluded from the calculation of weighted average shares for the three months ended September 30, 2025 and 2024, respectively, and 3,313 and 1,168 were excluded from the calculation of weighted average shares for the nine months ended September 30, 2025 and 2024, respectively, because their effect was considered to be anti-dilutive. For the three and nine months ended September 30, 2024, the effects of dilutive securities were entirely excluded from the calculation of net loss per share as a net loss was reported in these periods.
NOTE 12: Comprehensive Loss
The following table shows the components of accumulated other comprehensive loss, net of tax effects:

|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
Accumulated Other Comprehensive Loss: |  | 2025 |  | 2024 |  | 2025 |  | 2024
Foreign currency translation adjustment: |  |  |  |  |  |  |  |
Beginning balance |  | $ | (23,656) |  |  | $ | (24,431) |  |  | $ | (24,744) |  |  | $ | (24,121) |
Net other comprehensive income |  | — |  |  | 429 |  |  | 1,088 |  |  | 119 |
Balance at September 30, |  | $ | (23,656) |  |  | $ | (24,002) |  |  | $ | (23,656) |  |  | $ | (24,002) |
Unrealized gain on marketable debt securities, net |  |  |  |  |  |  |  |
Beginning balance |  | $ | 10 |  |  | $ | 216 |  |  | $ | 164 |  |  | $ | 954 |
Net other comprehensive income (loss), net of income tax expense of $0, $0, $0, and $0, respectively |  | 70 |  |  | (16) |  |  | (84) |  |  | (754) |
Balance at September 30, |  | $ | 80 |  |  | $ | 200 |  |  | $ | 80 |  |  | $ | 200 |
Accumulated other comprehensive loss at September 30, |  | $ | (23,576) |  |  | $ | (23,802) |  |  | $ | (23,576) |  |  | $ | (23,802) |

The effect on the Company’s unaudited condensed consolidated financial statements of amounts reclassified out of accumulated other comprehensive loss was immaterial for all periods presented.
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NOTE 13: Commitments and Contingencies
Litigation
The Company is subject to potential liabilities generally incidental to its business arising out of present and future lawsuits and claims related to product liability, personal injury, contract, commercial, intellectual property, tax, employment, compliance and other matters that arise in the ordinary course of business. The Company accrues for potential liabilities when it is probable that future costs (including contingent fees and expenses) will be incurred and such costs can be reasonably estimated. At September 30, 2025 and December 31, 2024, there were no contingent liabilities with respect to any litigation, arbitration or administrative or other proceeding that are reasonably likely to have a material adverse effect on the Company’s consolidated financial position, results of operations, cash flows or liquidity.
First Jazz Complaint
On May 12, 2021, Jazz Pharmaceuticals, Inc. (“Jazz”) filed a formal complaint (the “First Complaint”) initiating a lawsuit in the United States District Court for the District of Delaware (the “Court”) against Avadel Pharmaceuticals plc, Avadel US Holdings, Inc., Avadel Management Corporation, Avadel Legacy Pharmaceuticals, LLC, Avadel Specialty Pharmaceuticals, LLC, and Avadel CNS Pharmaceuticals, LLC (collectively, the “Avadel Parties”). In the First Complaint, Jazz alleges the sodium oxybate product (“Proposed Product”) described in the NDA owned by Avadel CNS Pharmaceuticals, LLC (“Avadel CNS”) will infringe at least one claim of U.S. Patent No. 8731963, 10758488, 10813885, 10959956 and/or 10966931 (collectively, the “patents-in-suit”). The First Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses.
On June 3, 2021, the Avadel Parties timely filed their Answer and Counterclaims (the “Avadel Answer”) with the Court in response to the First Complaint. The Avadel Answer generally denies the allegations set forth in the First Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patents-in-suit), and asserts a number of counterclaims seeking i) a declaratory judgment of non-infringement of each patent-in-suit, and ii) a declaratory judgment of invalidity of each patent-in-suit.
On June 18, 2021, Jazz filed its Answer (“Jazz Answer”) with the Court in response to the Avadel Answer. The Jazz Answer generally denies the allegations set forth in the Avadel Answer and sets forth a single affirmative defense asserting that Avadel has failed to state a claim for which relief can be granted.
On June 21, 2021, the Court issued an oral order requiring the parties to i) confer regarding proposed dates to be included in the Court’s scheduling order for the case, and ii) submit a proposed order, including a proposal for the length and timing of trial, to the Court by no later than July 21, 2021.
On July 30, 2021, the Court issued a scheduling order establishing timing for litigation events including i) a claim construction hearing date of August 2, 2022, and ii) a trial date of October 30, 2023.
On October 18, 2021, consistent with the scheduling order, Jazz filed a status update with the Court indicating that Jazz did not intend to file a preliminary injunction with the Court at this time. Jazz further indicated that it would provide the Court with an update regarding whether preliminary injunction proceedings may be necessary after receiving further information regarding the FDA’s action on Avadel CNS’s NDA.
On January 4, 2022, the Court entered an agreed order dismissing this case with respect to Avadel Pharmaceuticals plc, Avadel US Holdings, Inc., Avadel Specialty Pharmaceuticals, LLC, Avadel Legacy Pharmaceuticals, LLC, and Avadel Management Corporation. A corresponding order was entered in the two below cases on the same day.
On February 25, 2022, Jazz filed an amended Answer to the Avadel Parties’ Counterclaims (the “Jazz First Amended Answer”). The Jazz First Amended Answer is substantially similar to the Jazz Answer except insofar as it adds an affirmative defense for judicial estoppel and unclean hands. Corresponding amended answers were filed in the two below cases on the same day.
On June 23, 2022, Avadel CNS filed a Renewed Motion for Judgment on the Pleadings, with respect to its counterclaim against Jazz seeking to have U.S. Patent No. 8731963 (the “REMS Patent”) delisted from the Orange Book and seeking to have the motion resolved concurrent with the parties’ Markman hearing on August 31, 2022. On July 7, 2022, Jazz filed a response styled as Objections to Avadel CNS’ Motion for Judgment on the Pleadings. On July 14, 2022, Avadel CNS replied to Jazz’s response, and on July 21, 2022, Avadel CNS requested oral argument on its delisting motion simultaneous with the Markman
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hearing. On August 24, 2022, the Court ordered Jazz to respond substantively to Avadel CNS’ motion, which Jazz did on August 26, 2022. Avadel CNS filed its reply on August 28, 2022.
On August 23, 2022, the Markman hearing was postponed. On September 7, 2022, the case was reassigned to a new judge, and the Markman hearing was held on October 25, 2022. At the Markman hearing, Avadel CNS reiterated its request for an expedited hearing on the Renewed Motion for Judgment on the Pleadings for the delisting of the REMS Patent. On October 28, 2022, the Court granted Avadel CNS’ request and scheduled the hearing for November 15, 2022.
The Court held the Markman hearing on November 15, 2022 and issued a claim construction ruling on November 18, 2022. Also, on November 18, 2022 the Court granted Avadel’s Renewed Motion for Judgment on the Pleadings and ordered Jazz to request delisting of the REMS Patent from the Orange Book. On November 22, 2022, Jazz appealed that decision and on December 14, 2022, the Federal Circuit issued a stay of the delisting order until further notice. Oral argument was held February 14, 2023. On February 24, 2023, the United States Court of Appeals for the Federal Court affirmed the previous ruling from the Court, ordering the delisting of the REMS Patent from the Orange Book, which has since occurred. On March 7, 2023, in response to a joint stipulation filed by the parties, the Court issued an order dismissing Jazz’s infringement claims against the Avadel Parties relating to the REMS Patent as well as Avadel Parties’ noninfringement and invalidity counterclaims relating to the REMS Patent.
On March 15, 2023, the parties submitted a Stipulation and Proposed Order Modifying the Case Schedule to accommodate additional claim construction proceedings. On April 26, 2023, the parties filed their Supplemental Joint Claim Construction Brief.
On July 3, 2023, the Court issued a modified scheduling order establishing a new trial date of February 26, 2024.
On July 21, 2023, in response to a Court order, the parties submitted a Stipulation and Proposed Order Modifying the Case Schedule with an updated proposed schedule to accommodate additional claim construction proceedings. On August 4, 2023, the Court entered a modified version of the parties’ proposed schedule, which was revised on August 28, 2023. The parties’ Second Supplemental Joint Claim Construction Brief was filed on October 10, 2023, and a Markman hearing regarding the disputed terms occurred on November 1, 2023. The Court issued its claim construction order on December 15, 2023.
On August 15, 2023, Avadel renewed its request to consolidate this litigation with the litigation described in the Avadel Complaint below. On November 3, 2023, the Court denied that request.
On November 30, 2023, the parties filed cross motions for summary judgment. The parties filed opposition briefs on December 15, 2023. The parties filed reply briefs on December 22, 2023. On February 14, 2024, the Court denied the parties’ summary judgment motions. On February 15, 2024, the Court held its Pretrial Conference. Trial was held from February 26, 2024 to March 1, 2024 (the “February Patent Trial”). On March 4, 2024, the jury returned a verdict of no infringement for U.S. Patent No. 10758488 and infringement of U.S. Patent No. 11147782, with damages of $234.
On March 19, 2024, the Court issued a Supplemental Scheduling Order setting a June 4, 2024 hearing on Jazz’s request for a permanent injunction or ongoing royalty. Briefing on Jazz’s request closed on May 20, 2024, and the hearing was held June 4, 2024. On August 27, 2024, the Court issued an opinion and order enjoining Avadel from infringing claim 24 of U.S. Patent No. 11147782. That injunction excluded certain categories of conduct, including permitting Avadel to continue making, using and selling LUMRYZ for the treatment of narcolepsy and for use in ongoing clinical trials and studies. The August 27, 2024 opinion and order also granted Jazz’s motion for an ongoing royalty, pending additional briefing on the appropriate royalty rate. That briefing closed on September 23, 2024. On August 28, 2024, Avadel filed a notice of appeal concerning the August 27, 2024 injunction (the “Patent Appeal”). On September 3, 2024, Avadel moved in District Court to stay the August 27, 2024 injunction pending appeal. Briefing on that motion closed on September 16, 2024. On September 24, 2024, the District Court denied Avadel’s motion to stay the injunction pending app eal. On September 15, 2025, the Court issued an opinion and order requiring Avadel CNS to pay a future ongoing royalty of 3.85% on sales of LUMRYZ to Jazz through expiration of Jazz’s U.S. Patent No. 11147782 on February 18, 2036.
On September 6, 2024, Avadel moved the U.S. Court of Appeals for the Federal Circuit to stay the injunction pending appeal. Briefing on that motion closed on September 27, 2024. On October 2, 2024, the Federal Circuit granted Avadel’s motion in part, staying the injunction with respect to Avadel’s initiating new clinical trials or studies.
On September 10, 2024, the Federal Circuit entered a briefing schedule concerning the Patent Appeal. On September 30, 2024, Avadel filed its opening brief. Jazz filed its response brief on November 7, 2024. Avadel filed its reply brief on November 18, 2024. On October 2, 2024, the Federal Circuit placed the Patent Appeal on the February 2025 oral argument calendar. On February 7, 2025, the Federal Circuit heard oral argument in the Patent Appeal. On May 6, 2025, the Federal Circuit issued an
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opinion reversing or vacating important aspects of the District Court’s injunction. In particular, the Federal Circuit reversed the portions of the District Court's injunction that prohibited Avadel from offering open-label extensions to trial participants using LUMRYZ and from initiating new clinical trials or studies with LUMRYZ. The Federal Circuit also vacated the portion of the injunction that prohibited Avadel from applying for FDA approval of LUMRYZ for any indication beyond narcolepsy.
On June 17, 2025, Jazz filed a renewed motion for permanent injunction. On July 29, 2025, Avadel filed its answering brief opposition to Jazz’s motion. Jazz’s reply brief was filed August 19, 2025. On September 8, 2025, the Court entered an order denying Jazz’s motion.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Second Jazz Complaint
On August 4, 2021, Jazz filed another formal complaint (the “Second Complaint”) initiating a lawsuit in the Court against the Avadel Parties. In the Second Complaint, Jazz alleges the Proposed Product described in the NDA owned by Avadel CNS will infringe at least one claim of U.S. Patent No. 11077079. The Second Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses.
On September 9, 2021, the Avadel Parties timely filed their Answer and Counterclaims (the “Second Avadel Answer”) with the Court in response to the Second Complaint. The Second Avadel Answer generally denies the allegations set forth in the Second Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patent-in-suit), and asserts a number of counterclaims seeking i) a declaratory judgment of non-infringement of the patent-in-suit, and ii) a declaratory judgment of invalidity of the patent-in-suit.
On October 22, 2021, the Court issued an oral order stating that this case should proceed on the same schedule as the case filed on May 12, 2021.
On September 7, 2022, the case was reassigned to a new judge.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Third Jazz Complaint
On November 10, 2021, Jazz filed another formal complaint (the “Third Complaint”) initiating a lawsuit in the Court against the Avadel Parties. In the Third Complaint, Jazz alleges the Proposed Product described in the NDA owned by Avadel CNS will infringe at least one claim of U.S. Patent No. 11147782. The Third Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses. This case will proceed on the same schedule as the cases associated with the First and Second Complaints above.
On December 21, 2021, the Court entered a revised schedule for the First, Second and Third Complaints, setting a new claim construction date of August 31, 2022.
On January 7, 2022, Avadel CNS timely filed its Answer and Counterclaims (the “Third Avadel Answer”) with the Court in response to the Third Complaint. The Third Avadel Answer generally denies the allegations set forth in the Third Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patent-in-suit), and asserts a number of counterclaims seeking i) a declaratory judgment of non-infringement of the patent-in-suit, and ii) a declaratory judgment of invalidity/unenforceability of the patent-in-suit.
On September 7, 2022, the case was reassigned to a new judge.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Fourth Jazz Complaint
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On July 15, 2022, Jazz filed another formal complaint (the “Fourth Complaint”) initiating a lawsuit in the Court against Avadel CNS. In the Fourth Complaint, Jazz alleges the Proposed Product described in the NDA owned by Avadel CNS will infringe at least one claim of the REMS Patent, which was asserted in the First Complaint. The FDA required Avadel CNS to file a Paragraph IV certification against the REMS Patent, which Avadel CNS did under protest, consistent with its Renewed Motion for Judgment on the Pleadings for the delisting of the REMS Patent from the Orange Book, which was later ordered to be delisted in the above First Jazz Complaint action. Avadel CNS provided the required notice of its Paragraph IV certification to Jazz, and Jazz reasserted the REMS Patent in a separate action following receipt of that notice. The Fourth Complaint further includes typical relief requests such as preliminary and permanent injunctive relief, monetary damages and attorneys’ fees, costs and expenses.
On September 7, 2022, the case was reassigned to a new judge.
On September 21, 2022, Jazz served the Fourth Complaint. On October 21, 2022, Avadel CNS timely filed its Answer and Counterclaims (the “Fourth Avadel Answer”) with the Court in response to the Fourth Complaint. The Fourth Avadel Answer generally denies the allegations set forth in the Fourth Complaint, includes numerous affirmative defenses (including, but not limited to, non-infringement and invalidity of the patent-in-suit), and asserts a number of counterclaims for i) a declaratory judgment of non-infringement of the patent-in-suit, ii) a declaratory judgment of invalidity/unenforceability of the patent-in-suit, iii) delisting of the patent-in-suit from the Orange Book; iv) monopolization under the Sherman Antitrust Act of 1890 (the “Sherman Act”); and v) attempted monopolization under the Sherman Act.
On December 9, 2022, Jazz filed a Motion to Dismiss Avadel’s Antitrust Counterclaims. Avadel filed its opposition brief on December 27, 2022, and Jazz filed its reply brief on January 6, 2022. On January 11, 2023, Avadel filed a request for oral argument on the motion. On May 24, 2024, the Court denied Jazz’s Motions to Dismiss. On June 7, 2024, Jazz filed its Answer to Avadel’s Counterclaims.
On March 6, 2023, the parties filed a stipulation of dismissal, dismissing Jazz’s claims with respect to the REMS Patent and Avadel CNS’s related non-infringement and invalidity counterclaims. The Court entered that stipulation on March 7, 2023.
On May 19, 2023, the Court issued a scheduling order establishing timing for litigation events including i) completion of fact discovery by March 14, 2024, and ii) a deadline for case dispositive motions of September 20, 2024. On January 23, 2024, the parties submitted a stipulation to extend the case schedule. On January 24, 2024, the Court ordered an extension of the case schedule, including i) completion of fact discovery by June 20, 2024 and ii) a deadline for case dispositive motions by January 31, 2025. On January 24, 2024, the Court issued an order setting a pretrial conference for October 30, 2025 and a 5-day trial to begin on November 3, 2025. On April 22, 2024, the parties submitted a stipulation extending certain pretrial deadlines, including i) extending completion of fact discovery to September 27, 2024 and ii) extending the deadline for case dispositive motions to April 4, 2025.
On June 29, 2023, Jazz filed a Motion to Stay the case, pending resolution of its Motion to Dismiss. Briefing on that Motion to Stay closed on August 10, 2023. On March 13, 2024, Jazz filed a Supplemental Motion to Stay, pending the resolution of the post-trial briefing and any appeals from the February Patent Trial. On May 24, 2024, the Court denied Jazz’s Motions to Stay. On June 7, 2024, Jazz filed a Motion for Reargument or in the Alternative to Certify an Appeal. Avadel filed its opposition brief on June 28, 2024. Jazz filed its reply brief on July 12, 2024. On September 25, 2024, Jazz sought leave to file a supplemental brief in support of its Motion to Stay. On October 4, 2024, the Court granted leave to Jazz to file its supplemental brief, which Jazz filed on October 7, 2024. Avadel filed its response on October 21, 2024. Jazz filed its reply on October 28, 2024.
On April 25, 2025, the parties filed Cross-Motions for Summary Judgment. The parties’ response briefs opposing the respective Motions for Summary Judgment are due May 23, 2025. The parties’ reply briefs were filed June 13, 2025. On September 15, 2025, the Court entered an order denying Jazz’s Motions for Summary Judgment. On October 2, 2025, the Court entered an order denying Avadel’s Motions for Summary Judgment.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Avadel Complaint
On April 14, 2022, Avadel CNS and Avadel Pharmaceuticals plc (collectively the “Avadel Plaintiffs”) filed a formal complaint (the “Avadel Complaint”) initiating a lawsuit in the Court against Jazz and Jazz Pharmaceuticals Ireland Ltd. (collectively, the “Jazz Parties”). In the Avadel Complaint, the Avadel Plaintiffs allege that the Jazz Parties breached certain confidential
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disclosure agreements and misappropriated certain of the Avadel Plaintiffs’ trade secrets. The Avadel Complaint further includes typical relief requests such as injunctive relief, monetary damages and attorneys’ fees, costs and expenses, as well as seeking correction of inventorship of certain Jazz patents, for which the Jazz Parties claim ownership, to include former Avadel Plaintiffs’ scientists.
On June 2, 2022, Jazz answered the Avadel Complaint. The Answer generally denies the allegations set forth in the Avadel Complaint and includes various affirmative defenses.
On July 8, 2022, Jazz filed a Motion for Judgment on the Pleadings seeking to have all Counts dismissed for failure to state a claim upon which relief can be granted. The Avadel Plaintiffs’ response to that Motion was filed with the Court on July 29, 2022. Jazz’s reply was filed with the Court on August 5, 2022. On February 2, 2023, the Court held a hearing on Jazz’s Motion for Judgment on the Pleadings.
On September 7, 2022, the case was reassigned to a new judge.
On February 2, 2023, the Court held a hearing on Jazz’s Motion for Judgment on the Pleadings.
On July 18, 2023, the Court denied Jazz’s Motion for Judgment on the Pleadings.
On August 15, 2023, the parties submitted competing proposed scheduling orders, and Avadel requested consolidation with the above First Jazz Complaint litigation. That request for consolidation was denied on November 3, 2023.
On November 17, 2023, the parties submitted an updated joint proposed scheduling order. On January 30, 2024, the parties agreed to a 6-week stay of discovery and submitted a proposed stipulation extending certain case deadlines to accommodate the same. On February 9, 2024, the parties submitted an updated proposed scheduling order consistent with that stipulation, setting the close of fact discovery for August 9, 2024 and a trial date of December 15, 2025.
On March 19, 2024, Jazz filed a Motion to Stay, pending the resolution of the post-trial briefing and any appeals from the February Patent Trial. On May 24, 2024, the Court denied Jazz’s Motions to Stay.
On May 10, 2024, the Court issued a scheduling order establishing timing for litigation events including i) completion of fact discovery by August 9, 2024, ii) a deadline for case dispositive motions of May 30, 2025, and iii) a 5-day jury trial beginning December 15, 2025. On June 11, 2024, the Court entered a stipulation by the parties extending certain case deadlines, including i) extending close of fact discovery to November 1, 2024 and ii) dispositive motions to July 18, 2025.
On July 3, 2024, Jazz filed an Amended Answer to the Avadel Complaint. The Amended Answer generally denies the allegations set forth in the Avadel Complaint and includes various affirmative defenses.
On September 6, 2024, Avadel and Jazz stipulated to stay proceedings pending the resolution of the Patent Appeal above, which the Court entered on September 9, 2024. Following resolution of the Patent Appeal above, the stay was lifted. On July 14, 2 025, Jazz filed a renewed motion to stay pending the resolution of post-trial motions and appeal from the February Patent Trial. On July 28, 2025, Avadel filed its answering brief in opposition. Jazz’s reply brief was filed August 4, 2025.
On July 16, 2025, the Court entered a scheduling order establishing timing for litigation events including i) a close of fact discovery of May 15, 2026, ii) a close of expert discovery February 26, 2027, iii) dispositive motions due April 2, 2027 and iv) a trial date of February 7, 2028.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Second Avadel Complaint
On January 3, 2025, Avadel CNS and Flamel Ireland Limited (“Flamel”) filed a formal complaint (the “Second Avadel Complaint”) initiating a lawsuit in the Court against the Jazz Parties. In the Second Avadel Complaint, Avadel CNS and Flamel allege that the Jazz parties infringe one or more claims of U.S. Patent No. 12167991 through, inter alia, the sale of XYWAV® in conjunction with its FDA-approved labeling. The Second Avadel Complaint includes typical requests for monetary damages and attorneys’ fees, as well as costs and expenses.
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The Jazz Parties filed their Answer on June 11, 2025.
On September 23, 2025, the Court entered a scheduling order establishing timing for litigation events including i) a close of fact discovery September 11, 2026, ii) a close of expert discovery March 12, 2027, iii) dispositive motions due April 22, 2027, and iv) a trial date of September 11, 2028.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Third Avadel Complaint
On January 14, 2025, Avadel CNS and Flamel filed a formal complaint (the “Third Avadel Complaint”) initiating a lawsuit in the Court against the Jazz Parties. In the Third Avadel Complaint, Avadel CNS and Flamel allege that the Jazz parties infringe one or more claims of U.S. Patent No. 12186298 through, inter alia, the sale of XYWAV® in conjunction with its FDA-approved labeling. The Third Avadel Complaint includes typical requests for monetary damages and attorneys’ fees, as well as costs and expenses.
The Jazz Parties filed their Answer on June 11, 2025.
On September 23, 2025, the Court entered a scheduling order establishing timing for litigation events including i) a close of fact discovery September 11, 2026, ii) a close of expert discovery March 12, 2027, iii) dispositive motions due April 22, 2027, and iv) a trial date of September 11, 2028.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Fourth Avadel Complaint
On February 25, 2025, Avadel CNS and Flamel filed a formal complaint (the “Fourth Avadel Complaint”) initiating a lawsuit in the Court against the Jazz Parties. In the Fourth Avadel Complaint, Avadel CNS and Flamel allege that the Jazz parties infringe one or more claims of U.S. Patent Nos. 12226388 and 12226389 through, inter alia, the sale of XYWAV® in conjunction with its FDA-approved labeling. The Fourth Avadel Complaint includes typical requests for monetary damages and attorneys’ fees, as well as costs and expenses.
The Jazz Parties filed their Answer on June 11, 2025.
On September 23, 2025, the Court entered a scheduling order establishing timing for litigation events including i) a close of fact discovery September 11, 2026, ii) a close of expert discovery March 12, 2027, iii) dispositive motions due April 22, 2027, and iv) a trial date of September 11, 2028.
On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Fifth Avadel Complaint
On April 8, 2025, Avadel CNS and Flamel filed a formal complaint (the “Fifth Avadel Complaint”) initiating a lawsuit in the Court against the Jazz Parties. In the Fifth Avadel Complaint, Avadel CNS and Flamel allege that the Jazz parties infringe one or more claims of U.S. Patent No. 12,263,150 through, inter alia, the sale of XYWAV® in conjunction with its FDA-approved labeling. The Fifth Avadel Complaint includes typical requests for monetary damages and attorneys’ fees, as well as costs and expenses.
The Jazz Parties filed their Answer on June 11, 2025.
On September 23, 2025, the Court entered a scheduling order establishing timing for litigation events including i) a close of fact discovery September 11, 2026, ii) a close of expert discovery March 12, 2027, iii) dispositive motions due April 22, 2027, and iv) a trial date of September 11, 2028.
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On October 21, 2025, the parties reached a settlement with respect to this pending case (see Note 15: Subsequent Events - Settlement Agreement for details regarding the settlement). On October 24, 2025, the parties filed a joint stipulation of dismissal with prejudice, which the Court entered on October 27, 2025.
Jazz’s Administrative Procedure Act Complaint
On June 22, 2023, Jazz filed an Administrative Procedure Act suit against the FDA, the U.S. Department of Health and Human Services, the Secretary of Health and Human Services and the Commissioner of Food and Drugs (the “Federal Defendants”) in the United States District Court for the District of Columbia (the “DC Court”) related to the NDA for LUMRYZ. This suit alleges that the FDA’s approval of LUMRYZ was an unlawful agency action and asks the DC Court to set aside FDA’s approval of LUMRYZ. On June 28, 2023, the DC Court granted Avadel CNS’s unopposed motion to intervene in the case to defend the FDA’s decision. On August 14, 2023, the Court entered a scheduling order establishing timing for litigation events including early summary judgment briefing closing December 22, 2023. On September 22, 2023, Jazz filed its Motion for Summary Judgment. On October 20, 2023, the FDA and Avadel filed their Cross Motions for Summary Judgment. Briefing on the parties’ motions closed January 4, 2024. On February 14, 2024, the Court set hearing for oral argument on the parties’ motions for February 27, 2024. On February 21, 2024, the Court rescheduled the oral argument to April 9, 2024. On April 2, 2024, the Court rescheduled the oral argument to May 10, 2024. On May 10, 2024, the Court heard oral argument on the parties’ motions. On October 30, 2024, the Court granted FDA and Avadel’s Motions for Summary Judgment with respect to the sole count in Jazz’s complaint and denied Jazz’s Motion for Summary Judgment regarding the same.
On November 15, 2024, Jazz filed a notice of appeal concerning the Court’s October 30, 2024 ruling (the “APA Appeal”). On January 31, 2025, Jazz filed its opening brief in the APA Appeal. FDA filed its response brief March 17, 2025. Avadel filed its response brief March 24, 2025. Jazz filed its reply brief April 7, 2025. On May 5, 2025, the D.C. Circuit heard oral argument in the APA Appeal. On June 27, 2025, the D.C. Court of Appeals, in a unanimous decision, affirmed the D.C. Court’s ruling and upheld the FDA’s approval of LUMRYZ.
Material Commitments
Other than commitments disclosed in Note 13: Contingent Liabilities and Commitments to the Company's consolidated financial statements included in the Annual Report on Form 10-K, there were no other material commitments outside of the normal course of business.
License Agreement
The Company has entered the License Agreement under which it is obligated to make contingent payments. See Note 3: License Agreement for additional details.
NOTE 14: Segment Information
The Company has determined that it operates in one segment, the development and commercialization of pharmaceutical products, including controlled-release therapeutic products based on its proprietary polymer-based technology. The Company’s Chief Operating Decision Maker is the Chief Executive Officer (“CEO”). The CEO reviews profit and loss information on a consolidated basis to assess performance and make overall operating decisions as well as resource allocations.
All products are included in one segment because the Company’s products have similar economic and other characteristics, including the nature of the products and production processes, type of customers, distribution methods and regulatory environment.
The following table provides information about the Company’s significant expenses provided to the CEO and includes the reconciliation to income (loss) before income taxes:
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|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Net product revenue |  | $ | 77,467 |  |  | $ | 50,025 |  |  | $ | 198,107 |  |  | $ | 118,707 |
Cost of products sold |  | (4,116) |  |  | 6,155 |  |  | 7,827 |  |  | 10,465 |
Gross profit |  | 81,583 |  |  | 43,870 |  |  | 190,280 |  |  | 108,242 |
Operating expenses: |  |  |  |  |  |  |  |
Research and development expenses |  | 27,010 |  |  | 3,803 |  |  | 35,619 |  |  | 10,922 |
General and administrative expenses |  | 19,853 |  |  | 18,328 |  |  | 54,941 |  |  | 68,577 |
Selling and marketing expenses |  | 27,701 |  |  | 17,344 |  |  | 75,827 |  |  | 53,733 |
Other segment items* |  | 5,082 |  |  | 4,722 |  |  | 16,073 |  |  | 14,112 |
Total operating expenses |  | 79,646 |  |  | 44,197 |  |  | 182,460 |  |  | 147,344 |
Operating income (loss) |  | 1,937 |  |  | (327) |  |  | 7,820 |  |  | (39,102) |
Investment and other income, net |  | 532 |  |  | 610 |  |  | 895 |  |  | 3,114 |
Interest expense |  | (2,415) |  |  | (2,820) |  |  | (7,008) |  |  | (8,128) |
Income (loss) before income taxes |  | $ | 54 |  |  | $ | (2,537) |  |  | $ | 1,707 |  |  | $ | (44,116) |

*For the three and nine months ended September 30, 2025 and 2024, the other segment items category includes quality and regulatory expenses and medical affairs expenses.
NOTE 15: Subsequent Events
Settlement Agreement
On October 21, 2025, Avadel CNS entered into a Settlement and License Agreement (the “Settlement Agreement”) with Jazz to resolve the First Complaint, Second Complaint, Third Complaint, Fourth Complaint, Avadel Complaint, Second Avadel Complaint, Third Avadel Complaint, Fourth Avadel Complaint and Fifth Avadel Complaint (collectively, the “Lawsuits”) described in Note 13: Commitments and Contingencies.
The Settlement Agreement provides for, among other things, (i) a payment by Jazz of $90,000 (the “Settlement Payment”) to Avadel CNS, which was timely paid, and a waiver by Jazz of its right to receive royalties and/or damages on sales of LUMRYZ through September 30, 2025; (ii) dismissal of the Lawsuits with prejudice, which occurred on October 27, 2025, following the Settlement Payment; (iii) the payment by Avadel CNS to Jazz of royalties with respect to (1) LUMRYZ sold for narcolepsy at a rate of 3.85% of net sales, (2) LUMRYZ for indications (including any indications related to idiopathic hypersomnia) other than cataplexy or excessive daytime sleepiness in patients with narcolepsy at a rate of 10% of net sales, and (3) LUMRYZ sold for other certain indications as set forth in the Settlement Agreement; (iv) a grant by Jazz to Avadel CNS of a worldwide, non-exclusive, perpetual, irrevocable, non-terminable, non-transferrable (except as expressly provided in the Settlement Agreement) royalty-bearing license, without the right to sublicense (except as provided in the Settlement Agreement), to any past, present, or future patents that could be asserted against LUMRYZ for any indication; (v) agreement by Jazz not to challenge the approval or approvability of LUMRYZ; and (vi) a grant by Avadel CNS to Jazz of a worldwide, non-exclusive, perpetual, irrevocable, non-terminable, non-transferrable (except as expressly provided in the Settlement Agreement), royalty-free, fully paid-up covenant not to sue, without the right to sublicense (except as expressly provided in the Settlement Agreement), Avadel CNS’ patents in connection with XYWAV and XYREM. Royalties payable by Avadel CNS under the Settlement Agreement are subject to certain adjustments as set forth therein.
The parties have also agreed to, among other things, a customary mutual release of all claims arising out of or relating to the Lawsuits.
In settling the Lawsuits, Avadel CNS is not admitting any liability, and entry into the Settlement Agreement does not constitute an admission of liability or fault or an admission regarding the accuracy of any allegation made by the plaintiffs or plaintiffs’ counsel.
Pursuant to the Settlement Agreement, the Company reversed approximately $9,500 of estimated royalties previously recorded in cost of products sold up to June 30, 2025 related to Patent No. 11147782, following Jazz’s waiver of its rights to receive royalties and damages on prior sales of LUMRYZ through September 30, 2025.
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The Company will recognize a gain during the three months ended December 31, 2025 in conjunction with the Settlement Payment received on October 27, 2025, net of approximately $32,700 in legal fees and expenses that were contingent on a monetary settlement.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis
(In thousands, except per share data)
(Unaudited)
You should read the discussion and analysis of our financial condition and results of operations set forth in this Item 2 together with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties, and reference is made to the “Cautionary Note Regarding Forward-Looking Statements” set forth immediately following the Table of Contents of this Quarterly Report on Form 10-Q for further information on the forward looking statements herein. In addition, you should read the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 3, 2025 and Part II, Item 1A in this Quarterly Report on Form 10-Q for a discussion of additional important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report.
Overview
General Overview
Avadel Pharmaceuticals plc (Nasdaq: AVDL) (“Avadel,” the “Company,” “we,” “our,” or “us”) is a biopharmaceutical company. LUMRYZ is an extended-release formulation of sodium oxybate indicated to be taken once at bedtime for the treatment of cataplexy or excessive daytime sleepiness (“EDS”) in patients seven years of age and older with narcolepsy.
On August 30, 2025, we entered into an exclusive global license agreement (the “License Agreement”) with XWPharma Ltd. (“XWPharma”) for the development and commercialization of valiloxybate, a GABA B receptor agonist, in all indications, including the treatment of sleep disorders, such as narcolepsy and idiopathic hypersomnia (“IH”). Under the terms of the License Agreement, XWPharma grants the Company an exclusive global license to develop, manufacture and commercialize valiloxybate worldwide, excluding mainland China, Hong Kong and Macau.
As of the date of this Quarterly Report, LUMRYZ is the only commercial product in our portfolio. In addition to the aforementioned valiloxybate drug candidate, w e continue to evaluate opportunities to expand our product portfolio.
LUMRYZ
LUMRYZ was approved by the U.S. Food and Drug Administration (“FDA”) on May 1, 2023 for the treatment of cataplexy or EDS in adults with narcolepsy. The FDA also granted seven years of Orphan Drug Exclusivity (“ODE”) to LUMRYZ for the treatment of cataplexy or EDS in adults with narcolepsy due to a finding of clinical superiority of LUMRYZ relative to currently marketed oxybate treatments. In particular, the FDA found that LUMRYZ makes a major contribution to patient care over currently marketed, twice-nightly oxybate treatments by providing a once-nightly dosing regimen that avoids nocturnal arousal to take a second dose. The ODE will continue until May 1, 2030. In June 2023, we announced the U.S. commercial launch of LUMRYZ for the treatment of cataplexy or EDS in adults living with narcolepsy. LUMRYZ was approved by the FDA for use in the treatment of cataplexy or EDS in the pediatric narcolepsy population seven years of age and older on October 16, 2024, and was granted ODE for this patient population through October 16, 2031.
The FDA required implementation of a REMS to help ensure the benefits of the drug outweigh the risks of serious adverse outcomes resulting from inappropriate prescribing, misuse, abuse, and diversion of the same. Under the LUMRYZ REMS, healthcare providers who prescribe the drug must be specially certified, pharmacies that dispense the drug must be specially certified, and the drug must be dispensed only to patients who have enrolled in the LUMRYZ REMS and completed all REMS requirements, including documentation of safe use conditions.
Numerous LUMRYZ-related U.S. patents have been issued having expiration dates spanning from mid-2037 to early-2042, and there are additional patent applications currently in development and/or pending at the U.S. Patent and Trademark Office (“USPTO”), as well as foreign patent offices. We currently have 31 U.S. patents listed for LUMRYZ in FDA’s Orange Book.
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We believe LUMRYZ has the potential to demonstrate improved dosing compliance, safety, and patient satisfaction over other treatment options for cataplexy or EDS in patients with narcolepsy.
Avadel has initiated a pivotal trial in IH, REVITALYZ, which is a double-blind, placebo-controlled, randomized withdrawal, multicenter Phase 3 study designed to evaluate the efficacy and safety of LUMRYZ, in treating IH. We expect to enroll approximately 150 adults in the study who are diagnosed with IH. On July 31, 2024, we announced that the first patient was dosed in this study. We expect to complete enrollment by the end of 2025 and to report data and to submit a supplemental New Drug Application in 2026.
The primary objective of REVITALYZ is to demonstrate reduction in daytime sleepiness as measured by the primary endpoint, change in total score of the Epworth Sleepiness Scale at week 14. Secondary endpoints will evaluate the effect of LUMRYZ on additional efficacy parameters including patient and clinician global impression of change, IH severity, and a measure of the functional outcomes of sleep.
LUMRYZ was granted Orphan Drug Designation (“ODD”) from the FDA for the treatment of IH on June 5, 2025. Specifically, ODD was granted based on the plausible hypothesis that LUMRYZ may be clinically superior to the same drug(s) already approved for the same indication, because LUMRYZ may provide a major contribution to patient care due to its once-nightly dosing for patients with IH, a chronic sleep disorder that requires potentially lifelong treatment.
Settlement Agreement with Jazz
On October 21, 2025, our subsidiary, Avadel CNS Pharmaceuticals, LLC (“Avadel CNS”), entered into a Settlement and License Agreement (the “Settlement Agreement”) with Jazz Pharmaceuticals, Inc. to resolve the previously disclosed actions captioned Jazz Pharmaceuticals, Inc. v. Avadel CNS Pharmaceuticals, LLC, C.A. No. 21-691; Jazz Pharmaceuticals, Inc. et al v. Avadel CNS Pharmaceuticals, LLC, C.A. No. 21-1138; Jazz Pharmaceuticals, Inc. et al v. Avadel CNS Pharmaceuticals, LLC, C.A. No. 21-1594; Avadel CNS Pharmaceuticals, LLC et al v. Jazz Pharmaceuticals, Inc. et al, C.A. No. 22-487; Avadel CNS Pharmaceuticals, LLC v. Jazz Pharmaceuticals, Inc., C.A. No. 22-941; Avadel CNS Pharmaceuticals, LLC et al v. Jazz Pharmaceuticals, Inc., et al, C.A. No. 25-09; Avadel CNS Pharmaceuticals, LLC et al v. Jazz Pharmaceuticals, Inc. et al, C.A. No. 25-57; Avadel CNS Pharmaceuticals, LLC et al v. Jazz Pharmaceuticals, Inc., et al, C.A. No. 25-221; and Avadel CNS Pharmaceuticals, LLC et al v. Jazz Pharmaceuticals, Inc. et al, C.A. No. 25-435, each brought in the United States District Court for the District of Delaware (collectively the “Lawsuits”). For additional information about the Lawsuits, see Note 13: Commitments and Contingencies - Litigation and Note 15: Subsequent Events – Settlement Agreement to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Transaction Agreement with Alkermes
On October 22, 2025, we announced we had entered into a transaction agreement (the “Transaction Agreement”) with Alkermes plc (“Alkermes”). Under the terms of the Transaction Agreement, Alkermes will acquire Avadel (the “Transaction”) pursuant to a court-sanctioned scheme of arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of Ireland (the “Scheme”), or under certain circumstances, subject to the terms of the Transaction Agreement, a takeover offer (as such term is defined in the Irish Takeover Panel Act, 1997, Takeover Rules, 2022) rather than the Scheme. As a result of the Scheme, we will become a wholly owned subsidiary of Alkermes.
At the effective time of the Scheme (the “Effective Time”), holders of our ordinary shares nominal value $0.01 per share (the “Company Shares”), will be entitled to receive $18.50 in cash per Company Share (the “Cash Consideration”) and a non-transferable contingent value right entitling the holders to a potential additional cash payment of $1.50 per Company Share, contingent upon achievement of the specified milestones set forth in the CVR Agreement (as defined below) (such contingent value rights, the “CVRs” and, together with the Cash Consideration, the “Consideration”). The Transaction has been recommended by our board of directors (the “Company Board”) and the board of directors of Alkermes.
The Transaction is subject to customary closing conditions, including, among other things (a) the approval by our shareholders of the Scheme, (b) the sanction by the Irish High Court of the Scheme and delivery of the court order to the Irish Registrar of Companies, and (c) the receipt of required antitrust clearances in the United States. We expect the Transaction to close in the first quarter of 2026. Additional information about the transaction agreement and the Transaction is set forth in our filings with the SEC.
Key Business Trends and Highlights
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In operating our business and monitoring our performance, we consider a number of performance measures, as well as trends affecting our industry as a whole, which include the following:
•Healthcare and Regulatory Reform: Various health care reform laws in the U.S. may impact our ability to successfully commercialize our products and technologies. The success of our commercialization efforts may depend on the extent to which the government health administration authorities, the health insurance funds in the E.U. Member States, private health insurers and other third-party payers in the U.S. will reimburse consumers for the cost of healthcare products and services.
•Competition and Technological Change: Competition in the pharmaceutical and biotechnology industry continues to be intense and is expected to increase. We compete with academic laboratories, research institutions, universities, joint ventures, and other pharmaceutical and biotechnology companies, including other companies developing niche branded or generic specialty pharmaceutical products or drug delivery platforms. Furthermore, major technological changes can happen quickly in the pharmaceutical and biotechnology industries. Such rapid technological change, or the development by our competitors of technologically improved or differentiated products, could render our products, product candidates, or drug delivery platforms obsolete or noncompetitive.
•Pricing Environment for Pharmaceuticals: The pricing environment continues to be in the political spotlight in the U.S. As a result, the need to obtain and maintain appropriate pricing for pharmaceutical products may become more challenging due to, among other things, the attention being paid to healthcare cost containment and other austerity measures in the U.S. and worldwide.
•Generics Playing a Larger Role in Healthcare: Generic pharmaceutical products will continue to play a large role in the U.S. healthcare system. LUMRYZ may face competition from manufacturers of generic twice-nightly sodium oxybate formulations. In January 2023, Hikma Pharmaceuticals plc, announced that it launched an authorized generic version of Jazz Pharmaceuticals plc’s (“Jazz”) Xyrem (sodium oxybate). In July 2023, Amneal Pharmaceuticals, Inc. announced that it launched an authorized generic version of Jazz’s Xyrem (sodium oxybate). Further, in September 2025, Amneal Pharmaceuticals, Inc. announced that it received FDA approval of its sodium oxybate oral solution 500 mg/mL Abbreviated New Drug Application which references Jazz’s Xyrem (sodium oxybate).
•Access to and Cost of Capital: Similar to other businesses in our industry and at our stage of development, we will continue to rely on external sources of capital to fund our business. The process of raising capital and the associated cost of such capital for a company of our financial profile can be difficult and potentially expensive. If the need were to arise to raise additional capital, access to that capital may be difficult, expensive and/or dilutive and, as a result, could create liquidity challenges for us.
•History of Net Loss from Operations: LUMRYZ is the only commercial product in our portfolio. We will continue to incur substantial expenses to expand our commercialization of LUMRYZ and to further the clinical development of the valiloxybate drug candidate. While we were profitable in the quarters ended June 30, 2025 and September 30, 2025, we have a recent history of generating losses from operations. We expect to remain profitable but could incur losses in the future if revenue and gross profit from sales of LUMRYZ are insufficient to generate operating income.
Financial Highlights
Highlights of our consolidated results for the three and nine months ended September 30, 2025 are as follows:
•Net product revenue was $77,467 and $198,107 during the three and nine months ended September 30, 2025, respectively, compared to net product revenue of $50,025 and $118,707 for the three and nine months ended September 30, 2024. The increase in net product revenue is driven by the early phases of LUMRYZ launch in the prior period and patient uptake throughout launch.
•Gross profit was $81,583 and $190,280 during the three and nine months ended September 30, 2025, respectively, compared to gross profit of $43,870 and $108,242 for the three and nine months ended September 30, 2024, respectively. Cost of products sold decreased during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024. During the three months ended September 30, 2025, we reversed approximately $9,500 of estimated royalties previously recorded in cost of products sold up to June 30, 2025 related to Patent No. 11147782, following Jazz’s waiver of its rights to receive royalties and damages on prior sales of LUMRYZ through September 30, 2025 pursuant to the Settlement Agreement, offset by higher sales of LUMRYZ.
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•Total operating expense was $79,646 and $182,460 for the three and nine months ended September 30, 2025, respectively, compared to total operating expense of $44,197 and $147,344 for the three and nine months ended September 30, 2024, respectively. Selling, general and administrative expenses increased $10,419 during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, driven by higher employee related costs and costs associated with the commercialization of LUMRYZ, partially offset by decreased legal costs. Research and development expenses increased $24,697 during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024 primarily due to the $20,000 upfront license fees to XWPharma, development costs of the valiloxybate drug candidate, and clinical work to evaluate the efficacy and safety of LUMRYZ given as a once-at-bedtime dose in treating IH.
•Operating income was $1,937 and $7,820 for the three and nine months ended September 30, 2025, respectively, compared to operating loss of $327 and $39,102 for the three and nine months ended September 30, 2024, respectively.
•Diluted net income per share was $0.00 and $0.05 for the three and nine months ended September 30, 2025, respectively, compared to diluted net loss per share of $0.03 and $0.46 in the same periods last year, respectively.
•Cash, cash equivalents and marketable securities increased $17,800 to $91,577 at September 30, 2025 from $73,777 at December 31, 2024. The $17,800 increase in cash, cash equivalents and marketable securities during the nine months ended September 30, 2025 was driven primarily by net cash provided by operating activities of $26,670, proceeds from stock option exercises and employee share purchase plan issuances of $4,179, partially offset by upfront payment for XWPharma license of $15,000.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. To prepare these financial statements, management makes estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosures of contingent assets and liabilities. Actual results could be significantly different from these estimates.
Our significant accounting policies are described in Note 1 of the audited consolidated financial statements included in our Annual Report on Form 10-K. The SEC suggests companies provide additional disclosure on those accounting policies considered most critical. The SEC considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgments and estimates on the part of management in its application. Our estimates are often based on complex judgments, probabilities and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same facts and circumstances, could develop and support a range of alternative estimated amounts. For a complete discussion of our critical accounting policies, see the “Critical Accounting Estimates” section of the Management’s Discussion & Analysis in our Annual Report on Form 10-K filed with the SEC on March 3, 2025.
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Results of Operations
The following is a summary of our financial results (in thousands, except per share amounts) for the three months ended September 30, 2025 and 2024:

|  | Three Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Comparative Statements of Income (Loss) |  | 2025 |  | 2024 |  | $ |  | %
Net product revenue |  | $ | 77,467 |  |  | $ | 50,025 |  |  | $ | 27,442 |  |  | 54.9 | %
Cost of products sold |  | (4,116) |  |  | 6,155 |  |  | (10,271) |  |  | (166.9) | %
Gross profit |  | 81,583 |  |  | 43,870 |  |  | 37,713 |  |  | 86.0 | %
Operating expenses: |  |  |  |  |  |  |  |
Research and development expenses |  | 27,010 |  |  | 3,803 |  |  | 23,207 |  |  | 610.2 | %
Selling, general and administrative expenses |  | 52,636 |  |  | 40,394 |  |  | 12,242 |  |  | 30.3 | %
Total operating expense |  | 79,646 |  |  | 44,197 |  |  | 35,449 |  |  | 80.2 | %
Operating income (loss) |  | 1,937 |  |  | (327) |  |  | 2,264 |  |  | (692.4) | %
Investment and other income, net |  | 532 |  |  | 610 |  |  | (78) |  |  | (12.8) | %
Interest expense |  | (2,415) |  |  | (2,820) |  |  | 405 |  |  | (14.4) | %
Income (loss) before income taxes |  | 54 |  |  | (2,537) |  |  | 2,591 |  |  | (102.1) | %
Income tax provision |  | 34 |  |  | 88 |  |  | (54) |  |  | (61.4) | %
Net income (loss) |  | $ | 20 |  |  | $ | (2,625) |  |  | $ | 2,645 |  |  | (100.8) | %
Net income (loss) per share - diluted |  | $ | 0.00 |  |  | $ | (0.03) |  |  | $ | 0.03 |  |  | (100.0) | %

The following is a summary of our financial results (in thousands, except per share amounts) for the nine months ended September 30, 2025 and 2024:

|  | Nine Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Comparative Statements of Income (Loss) |  | 2025 |  | 2024 |  | $ |  | %
Net product revenue |  | $ | 198,107 |  |  | $ | 118,707 |  |  | $ | 79,400 |  |  | 66.9 | %
Cost of products sold |  | 7,827 |  |  | 10,465 |  |  | (2,638) |  |  | (25.2) | %
Gross profit |  | 190,280 |  |  | 108,242 |  |  | 82,038 |  |  | 75.8 | %
Operating expenses: |  |  |  |  |  |  |  |
Research and development expenses |  | 35,619 |  |  | 10,922 |  |  | 24,697 |  |  | 226.1 | %
Selling, general and administrative expenses |  | 146,841 |  |  | 136,422 |  |  | 10,419 |  |  | 7.6 | %
Total operating expense |  | 182,460 |  |  | 147,344 |  |  | 35,116 |  |  | 23.8 | %
Operating income (loss) |  | 7,820 |  |  | (39,102) |  |  | 46,922 |  |  | (120.0) | %
Investment and other income, net |  | 895 |  |  | 3,114 |  |  | (2,219) |  |  | (71.3) | %
Interest expense |  | (7,008) |  |  | (8,128) |  |  | 1,120 |  |  | (13.8) | %
Income (loss) before income taxes |  | 1,707 |  |  | (44,116) |  |  | 45,823 |  |  | (103.9) | %
Income tax benefit |  | (3,058) |  |  | (327) |  |  | (2,731) |  |  | 835.2 | %
Net income (loss) |  | $ | 4,765 |  |  | $ | (43,789) |  |  | $ | 48,554 |  |  | (110.9) | %
Net income (loss) per share - diluted |  | $ | 0.05 |  |  | $ | (0.46) |  |  | $ | 0.51 |  |  | (110.9) | %

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|  | Three Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Gross Profit: |  | 2025 |  | 2024 |  | $ |  | %
Net product revenue |  | $ | 77,467 |  | $ | 50,025 |  | $ | 27,442 |  |  | 54.9 | %
Cost of products sold |  | (4,116) |  | 6,155 |  | (10,271) |  |  | (166.9) | %
Gross profit |  | $ | 81,583 |  | $ | 43,870 |  | $ | 37,713 |  |  | 86.0 | %
Gross profit as a percentage of net product revenue |  | 105% |  | 88% |  |  |  |

Net product revenue increased $27,442 during the three months ended September 30, 2025. The increase in net product revenue is driven by continual increases in the number of patients treated with LUMRYZ. As of September 30, 2025, approximately 3,400 patients were on LUMRYZ, compared to approximately 2,300 patients as of September 30, 2024. Cost of products sold decreased $10,271 during the three months ended September 30, 2025 as compared to the same period in the prior year. During the three months ended September 30, 2025, we reversed approximately $9,500 of estimated royalties previously recorded in cost of products sold up to June 30, 2025 related to Patent No. 11147782, following Jazz’s waiver of its rights to receive royalties and damages on prior sales of LUMRYZ through September 30, 2025 pursuant to the Settlement Agreement, offset by higher sales of LUMRYZ. Cost of products sold in the three months ended September 30, 2024 included approximately $3,600 of estimated royalties.

|  | Nine Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Gross Profit: |  | 2025 |  | 2024 |  | $ |  | %
Net product revenue |  | $ | 198,107 |  |  | $ | 118,707 |  |  | $ | 79,400 |  |  | 66.9 | %
Cost of products sold |  | 7,827 |  |  | 10,465 |  |  | (2,638) |  |  | (25.2) | %
Gross profit |  | $ | 190,280 |  | $ | 108,242 |  | $ | 82,038 |  |  | 75.8 | %
Gross profit as a percentage of net product revenue |  | 96% |  | 91% |  |  |  |

Net product revenue increased $79,400 during the nine months ended September 30, 2025. The increase in net product revenue is driven by continual increases in the number of patients treated with LUMRYZ. As of September 30, 2025, approximately 3,400 patients were on LUMRYZ, compared to approximately 2,300 patients as of September 30, 2024. Cost of products sold decreased $2,638 during the nine months ended September 30, 2025 as compared to the same period in the prior year. During the nine months ended September 30, 2025, we reversed approximately $9,500 of estimated royalties previously recorded in cost of products sold up to June 30, 2025 related to Patent No. 11147782, following Jazz’s waiver of its rights to receive royalties and damages on prior sales of LUMRYZ through September 30, 2025 pursuant to the Settlement Agreement, offset by higher sales of LUMRYZ. Cost of products sold in the nine months ended September 30, 2024 included approximately $3,600 of estimated royalties. Further, prior period cost of products sold included a portion of inventory purchased or produced that was expensed as research and development prior to FDA approval.

|  | Three Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Research and Development Expenses: |  | 2025 |  | 2024 |  | $ |  | %
Research and development expense |  | $ | 27,010 |  |  | $ | 3,803 |  |  | $ | 23,207 |  |  | 610.2 | %

Research and development expenses increased $23,207 or 610.2% during the three months ended September 30, 2025 as compared to the same period in the prior year. This increase was driven primarily by the $20,000 upfront license fees to XWPharma and development costs of the valiloxybate drug candidate.
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|  | Nine Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Research and Development Expenses: |  | 2025 |  | 2024 |  | $ |  | %
Research and development expense |  | $ | 35,619 |  |  | $ | 10,922 |  |  | $ | 24,697 |  |  | 226.1 | %

Research and development expenses increased $24,697 or 226.1% during the nine months ended September 30, 2025 as compared to the same period in the prior year. This increase was driven primarily by the $20,000 upfront license fees to XWPharma, development costs of the valiloxybate drug candidate, and costs associated with the Phase 3 REVITALYZ clinical trial for LUMRYZ in treating IH.

|  | Three Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Selling, General and Administrative Expenses: |  | 2025 |  | 2024 |  | $ |  | %
Selling, general and administrative expenses |  | $ | 52,636 |  |  | $ | 40,394 |  |  | $ | 12,242 |  |  | 30.3 | %

Selling, general and administrative expenses increased $12,242 or 30.3% during the three months ended September 30, 2025 as compared to the same period in the prior year. This increase was driven by LUMRYZ commercial costs, including higher employee related costs of $5,700 due to increased headcount and recruiting, higher patient and market access of $2,600, higher selling and marketing costs of $2,400, and higher business development of $1,000.

|  | Nine Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Selling, General and Administrative Expenses: |  | 2025 |  | 2024 |  | $ |  | %
Selling, general and administrative expenses |  | $ | 146,841 |  |  | $ | 136,422 |  |  | $ | 10,419 |  |  | 7.6 | %

Selling, general and administrative expenses increased $10,419 or 7.6% during the nine months ended September 30, 2025 as compared to the same period in the prior year. This increase was driven by LUMRYZ commercial costs, including higher employee related costs of $11,200 due to increased headcount and recruiting, higher patient and market access of $7,500, higher selling and marketing costs of $3,500, higher medical education of $2,100, and higher business development of $1,600. The increase was offset by lower legal costs of $10,600 and nonrecurring fees associated with terminating our American Depository Receipt program (“ADR Program”) of American Depositary Shares (“ADSs”) in the prior year of $5,500.

|  |  |  |  |  | Change
|  | Nine Months Ended September 30, |  | 2025 vs. 2024
Investment and Other Income, Net: |  | 2025 |  | 2024 |  | $ |  | %
Investment and other income, net |  | $ | 895 |  |  | $ | 3,114 |  |  | $ | (2,219) |  |  | (71.3) | %

Investment and other income, net decreased $2,219 or 71.3% during the nine months ended September 30, 2025 as compared to the same period in 2024. This decrease was driven primarily by lower interest income of $1,400 and higher foreign exchange losses of $800.

|  |  |  |  |  | Change
|  | Nine Months Ended September 30, |  | 2025 vs. 2024
Income Tax Benefit: |  | 2025 |  | 2024 |  | $ |  | %
Income tax benefit |  | $ | 3,058 |  |  | $ | 327 |  |  | $ | 2,731 |  |  | 835.2 | %
Percentage of income (loss) before income taxes |  | 179.1 | % |  | (0.7) | % |  |  |  |

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Income tax benefit increased $2,731 or 835.2% during the nine months ended September 30, 2025 as compared to the same period in 2024. This increase was primarily driven by the release of uncertain tax positions during the nine months ended September 30, 2025 due to the expiration of their statute of limitations.
Liquidity and Capital Resources
On October 22, 2025, we announced that we had entered into the Transaction Agreement with Alkermes. We have agreed to various covenants and agreements, including, among others, agreements to conduct our business in the ordinary course consistent with past practice during the period between the execution of the Transaction Agreement and the closing of the Transaction. Outside of certain limited exceptions, we may not take, authorize, commit, resolve, or agree to do certain actions without Alkermes’ consent, including: (i) acquiring businesses and disposing of significant assets; (ii) making capital expenditures or incurring liabilities above specified thresholds; (iii) issuing equity; (iv) incurring indebtedness for borrowed money; and (v) repurchasing outstanding ordinary shares or other equity securities. We do not believe these restrictions will prevent us from being able to fund our operations, working capital needs or capital expenditure requirements. The following discussion assumes that the Transaction is not consummated and we continue to operate as an independent entity.
Our cash flows from operating, investing and financing activities, as reflected in the unaudited condensed consolidated statements of cash flows, are summarized in the following table:

|  | Nine Months Ended September 30, |  | Change
|  |  | 2025 vs. 2024
Net cash provided by (used in): |  | 2025 |  | 2024 |  | $ |  | %
Operating activities |  | $ | 26,670 |  |  | $ | (54,780) |  |  | $ | 81,450 |  |  | 148.7 | %
Investing activities |  | (4,370) |  |  | 36,867 |  |  | (41,237) |  |  | (111.9) | %
Financing activities |  | 4,179 |  |  | 15,090 |  |  | (10,911) |  |  | (72.3) | %

Operating Activities
Net cash provided by operating activities was $26,670 for the nine months ended September 30, 2025. Net cash used in operating activities was $54,780 for the nine months ended September 30, 2024. Net cash provided by operating activities for the nine months ended September 30, 2025 was driven by net income of $4,765 and favorable adjustments of $36,389 primarily related to acquired IPR&D expense, share-based compensation expense, and depreciation and amortization, offset by unfavorable changes in working capital of $14,484. For the nine months ended September 30, 2024, net cash used in operating activities was driven by net loss of $43,789 and unfavorable changes in working capital of $28,213, offset by favorable non-cash adjustments of $17,222 driven primarily by share-based compensation expense.
Investing Activities
Net cash used in investing activities was $4,370 for the nine months ended September 30, 2025. Net cash provided by investing activities was $36,867 for the nine months ended September 30, 2024. Net cash used in investing activities for the nine months ended September 30, 2025 consisted of the upfront payment for the XWPharma license of $15,000, offset by the net proceeds received from the excess of sales over purchases of marketable securities of $10,820. Net cash provided by investing activities for the nine months ended September 30, 2024 was due to net proceeds received from the excess of sales over purchases of marketable securities of $36,867.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2025 of $4,179 was a result of proceeds from stock option exercises and employee share purchase plan issuances. Net cash provided by financing activities for the nine months ended September 30, 2024 of $15,090 was a result of net proceeds of $9,250 from the sale of ADSs through the at-the-market offering program (“ATM Program”) and $5,840 of proceeds from stock option exercises and employee share purchase plan issuances.
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Risk Management
The adequacy of our cash resources depends on the outcome of certain business conditions including our ongoing LUMRYZ commercialization activities, our cost structure, and other factors set forth in “Risk Factors” within Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on March 3, 2025 and within Part II, Item 1A in this Quarterly Report on Form 10-Q. We will need to commit substantial resources to support the commercialization of LUMRYZ which could result in future losses or otherwise limit our opportunities or affect our ability to operate our business. Our assumptions concerning the outcome of certain business conditions may prove to be wrong or other factors may adversely affect our business, and as a result we could exhaust or significantly decrease our available cash, cash equivalents and marketable securities balances which could, among other things, force us to raise additional funds and/or force us to reduce our expenses, either of which could have a material adverse effect on our business. Additionally, we are unable to estimate the near or long term impacts of inflation, rising interest rates and the impact of potential tariffs, which may have a material adverse impact on our business.
We believe our existing cash, cash equivalents and marketable securities, along with cash anticipated from sales of LUMRYZ, provides sufficient capital to meet our operating, royalty obligation and capital requirements for the next twelve months following the date of this Quarterly Report.
Other Matters
Litigation
We are subject to potential liabilities generally incidental to our business arising out of present and future lawsuits and claims related to product liability, personal injury, contract, commercial, intellectual property, tax, employment, compliance and other matters that arise in the ordinary course of business. We accrue for potential liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated. At September 30, 2025 and December 31, 2024, there were no contingent liabilities with respect to any litigation, arbitration or administrative or other proceeding that are reasonably likely to have a material adverse effect on our consolidated financial position, results of operations, cash flows or liquidity. For information regarding legal proceedings we are involved in, see Note 13: Commitments and Contingencies - Litigation and Note 15: Subsequent Events - Settlement Agreement to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk
We are subject to interest rate risk as a result of our portfolio of marketable securities. The primary objectives of our investment policy are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and competitive yield. Although our investments are subject to market risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or certain types of investment. Our investment policy allows us to maintain a portfolio of cash equivalents and marketable securities in a variety of instruments, including U.S. federal government and federal agency securities, European Government bonds, corporate bonds or commercial paper issued by U.S. or European corporations, money market instruments, certain qualifying money market mutual funds, certain repurchase agreements, tax-exempt obligations of states, agencies, and municipalities in the U.S. and Europe, and equities. A hypothetical 50 basis point change in interest rates would not result in a material decrease or increase in the fair value of our securities due to the general short-term nature of our investment portfolio.
Foreign Exchange Risk
We are exposed to foreign currency exchange risk as the functional currency financial statements of a non-U.S. subsidiary is translated to U.S. dollars. The assets and liabilities of this non-U.S. subsidiary having a functional currency other than the U.S. dollar is translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and at the average exchange rate for the reporting period for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of this non-U.S. subsidiary will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar. Our primary currency translation exposure is related to one subsidiary that has functional currencies denominated in euro. A 10% strengthening/weakening in the rates used to translate the results of our non-U.S. subsidiaries that have functional currencies denominated in euro as of September 30, 2025 would have had an immaterial impact on net income (loss) for the three and nine months ended September 30, 2025.
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Transactional exposure arises where transactions occur in currencies other than the functional currency. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are reported in investment and other income, net in the unaudited condensed consolidated statements of income (loss). As of September 30, 2025, our primary exposure is to transaction risk related to euro net monetary assets and liabilities held by subsidiaries with a U.S. dollar functional currency. Realized and unrealized foreign exchange gains resulting from transactional exposure were immaterial for the three and nine months ended September 30, 2025.
Inflation Risk
Inflation generally affects us by increasing our costs of labor and supplies and the costs of our third parties we rely on for the development, manufacture and supply of our products. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three and nine months ended September 30, 2025. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if inflation rates rise) due to an impact on the costs to conduct clinical trials, the costs to commercialize LUMRYZ, labor costs we incur to attract and retain qualified personnel, and other operational costs. Inflationary costs could adversely affect our business, financial condition and results of operations.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of September 30, 2025.
Other Changes in Internal Controls
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or 15d-15 that occurred during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The information contained in Note 13: Commitments and Contingencies - Litigation and Note 15: Subsequent Events - Settlement Agreement to the Company’s unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.
ITEM 1A. RISK FACTORS.
Except as set forth below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 3, 2025.
Risks Relating to Our Pending Transaction with Alkermes
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Failure to complete, or delays in completing, the pending transaction with Alkermes announced on October 22, 2025 could materially and adversely affect our results of operations and our share price.
On October 22, 2025, we announced that we entered into a transaction agreement (the “Transaction Agreement”) with Alkermes plc (“Alkermes”). Subject to the terms of the Transaction Agreement, Alkermes will acquire us (the “Transaction”), pursuant to a court-sanctioned scheme of arrangement under Chapter 1 of Part 9 of the Companies Act 2014 of Ireland (the “Scheme”), or under certain circumstances, subject to the terms of the Transaction Agreement, a takeover offer (as such term is defined in the Irish Takeover Panel Act, 1997, Takeover Rules, 2022 (the “Irish Takeover Rules”)) rather than the Scheme. As a result of the Scheme, we will become a wholly owned subsidiary of Alkermes. Consummation of the Transaction is subject to certain closing conditions, some of which are not within our control, and may prevent, delay, or otherwise materially adversely affect the completion of the Transaction. We cannot predict with certainty whether and when any of the required closing conditions, including receiving shareholder approval or required regulatory clearances, will be satisfied or if additional uncertainties may arise and cannot guarantee that we will be able to successfully consummate the pending Transaction as currently contemplated under the Transaction Agreement or at all. Under certain limited circumstances in which the Transaction is not consummated, we may be required to reimburse Alkermes for certain documented, specific and quantifiable third-party costs and expenses, subject to a cap equal to one percent (1%) of the aggregate value of the total cash consideration payable in connection with the Transaction. Risks related to the failure of the pending Transaction to be consummated include, but are not limited to, the following:
•the current market price for our ordinary shares reflects a market assumption that the Transaction will be completed but the trading price of our ordinary shares may decline;
•potential adverse effects on our relationships with current collaboration partners, suppliers, healthcare providers and other business partners, or those with which we are seeking to establish business relationships, due to uncertainties about the Transaction;
•we will remain liable for significant transaction costs, including legal, financial advisory, accounting, and other costs relating to the Transaction regardless of whether the Transaction is consummated;
•the attention of our management will have been diverted to the Transaction; and
•we could be subject to litigation related to any failure to complete the Transaction.
Further, under the Transaction Agreement, we are generally required to conduct our business in the ordinary course, consistent with past practice and are restricted from taking certain specified actions absent Alkermes’ prior written consent, which restrictions could adversely affect our ability to conduct our business.
The occurrence of any of these events individually or in combination could materially and adversely affect our business, results of operations, financial condition, and our share price.
The Transaction Agreement limits our ability to pursue alternative transactions which could deter a third party from proposing an alternative transaction.
The Transaction Agreement contains provisions that, subject to certain exceptions, limit our ability to solicit or knowingly encourage discussions or negotiations with any third party regarding alternative acquisition proposals. It is possible that these or other provisions in the Transaction Agreement might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of our outstanding ordinary shares from considering or proposing an acquisition or that the price at which Alkermes has proposed to acquire us might result in a potential competing acquirer proposing to pay a lower per share price to acquire our ordinary shares than it might otherwise have proposed to pay.
The announcement and pendency of the Transaction could adversely affect our business, financial results and/or operations.
Our efforts to complete the Transaction could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the Transaction will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the Transaction is pending because employees may experience uncertainty about their roles following the Transaction. A substantial amount of our management’s and employees’ attention is being directed toward the completion of the Transaction and thus is being diverted from our day-to-day operations. Uncertainty as to our future could adversely affect our business and our relationship with clients and potential clients. For example, clients and other counterparties may defer decisions concerning working with us, or seek to change existing business relationships with us. Changes to or termination of existing business relationships could adversely affect our revenue, earnings and financial condition, as well as the market price of our ordinary shares. The adverse effects of the pendency of the Transaction could be exacerbated by any delays in completion of the acquisition or termination of the Transaction Agreement.
We have incurred, and will continue to incur, direct and indirect costs as a result of the Transaction.
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We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the Transaction. We must pay substantially all of these costs and expenses whether or not the Transaction is completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.
Risks Related to the Commercialization of Our Lead Product
If our competitors develop and market technologies or products that are safer, more effective or less costly than ours, or obtain regulatory approval and market such products before we do, our commercial opportunity may be diminished or eliminated.
Competition in the pharmaceutical and biotechnology industry is intense and is expected to increase. We compete with other pharmaceutical and biotechnology companies.
The introduction of new products in the U.S. marketplace that compete with, or otherwise disrupt the marketplace for, LUMRYZ or any future product candidates we may develop, if approved, could adversely affect sales of our products. For example, we expect LUMRYZ to face competition from manufacturers of generic twice-nightly sodium oxybate formulations who have reached settlement agreements with the current brand product marketer. In January 2023, Hikma Pharmaceuticals plc, announced the launch of an authorized generic version of Jazz’s Xyrem (sodium oxybate). In July 2023, Amneal Pharmaceuticals, Inc. announced that it launched an authorized generic version of Jazz’s Xyrem (sodium oxybate). Further, in September 2025, Amneal Pharmaceuticals, Inc. announced that it received FDA approval of its sodium oxybate oral solution 500 mg/mL Abbreviated New Drug Application which references Jazz’s Xyrem (sodium oxybate). There are other potential future competitive products that could impact the marketplace. For example, there are some potential competitors who have reached settlement agreements with the current branded, twice-nightly product marketer, which allows for entry of other generic products in 2026, or earlier, under certain circumstances. Beyond generics, there are other potential future products that could impact the larger hypersomnia treatment landscape. For example, there are several companies developing orexin 2 receptor agonists for the treatment of narcolepsy and other sleep disorders.
If the FDA approves a competitor’s application for a product candidate before our application for a similar product candidate, and grants such competitor a period of exclusivity, the FDA may take the position that it cannot approve our 505(b)(2) application for a similar product candidate until the exclusivity period expires. Additionally, even if our 505(b)(2) application for a product candidate is approved first, and we receive a period of statutory marketing exclusivity, we may still be subject to competition from other companies with approved products or approved 505(b)(2) NDAs for different conditions of use that would not be restricted by a grant of exclusivity to us.
Many of our competitors have substantially greater financial, technological, manufacturing, marketing, managerial and research and development resources and experience than we do. Furthermore, acquisitions of competing companies by large pharmaceutical companies could enhance our competitors’ resources. Accordingly, our competitors may be able to develop, obtain regulatory approval and gain market share for their products more rapidly than us.
Risks Related to Our Intellectual Property
Third parties may claim that our current or future product infringes their rights, and we may incur significant costs resolving these claims. Additionally, legal proceedings related to such claims could materially delay or otherwise adversely affect commercialization plans related to such product.
Third parties may claim infringement of their patents and other intellectual property rights by the manufacture, use, import, offer for sale or sale of a commercial product. Further, in connection with us seeking regulatory approval for a product candidate, a third party may allege that our product candidate infringes its patents or other intellectual property rights and file suit to delay/prevent regulatory approval and/or commercialization of such product. In response to any claim of infringement, we may choose or be forced to seek licenses, defend infringement actions or challenge the validity or enforceability of those patent rights in court or administrative proceedings. If we cannot obtain required licenses on commercially reasonably terms, or at all, are found liable for infringement or are not able to have such patent rights declared invalid or unenforceable, our business could be materially harmed. We may be subject to claims (and even held liable) for significant monetary damages (including enhanced damages and/or attorneys’ fees), encounter significant delays in bringing products to market or be precluded from the manufacture, use, import, offer for sale or sale of products or methods of drug delivery covered by the patents of others. Even if a license is available, it may not be available on commercially reasonable terms or may be non-exclusive, which could result in
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our competitors gaining access to the same intellectual property. We may not have identified, or be able to identify in the future, U.S. or non-U.S. patents that pose a risk of potential infringement claims.
We have in the past been, and may in the future become, subject to claims of infringement, which could delay us in obtaining marketing approvals for additional indications for LUMRYZ or otherwise be delayed in marketing LUMRYZ for such other indications as a result of such claims of infringement. We may in the future invest a significant amount of time and expense in preparing to seek approval for LUMRYZ in IH or other candidate indications only to be subject to significant delay or even additional patent litigation before such candidate indications may be approved or commercialized, if at all.
In addition to the possibility of intellectual property infringement claims, a third party could submit a citizen’s petition to the FDA requesting relief that, if granted, could materially adversely affect the NDA and/or underlying product candidate. For example, such a third-party petition could, if granted, materially adversely affect the likelihood and/or timing of NDA approval, content of final product labeling, and/or resulting regulatory exclusivity (if any) for such product.
Parties making claims against us may be able to sustain the costs of patent litigation more effectively than we can because they have substantially greater resources. In addition, any claims, with or without merit, that our product, future products or future product candidates infringe proprietary rights of third parties could be time-consuming, result in costly litigation or divert the efforts of our technical and management personnel, any of which could disrupt our relationships with our partners and could significantly harm our financial positions and operating results.
Risks Related to Our Business and Industry
Significant political, trade, regulatory developments, and other circumstances beyond our control, could have a material adverse effect on our financial condition or results of operations.
We operate globally and, if approved, we may sell our products in countries throughout the world. Significant political, trade, or regulatory developments in the jurisdictions in which we may sell our products, such as those stemming from the change in U.S. federal administration, are difficult to predict and may have a material adverse effect on us. Similarly, changes in U.S. federal policy that affect the geopolitical landscape could give rise to circumstances outside our control that could have negative impacts on our business operations. For example, in 2025, the United States imposed tariffs on imports on its trading partners, including Canada, Mexico, the EU and China. Historically, tariffs have led to increased political and trade tensions. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets. Any changes in political, trade, regulatory, and economic conditions, including U.S. trade policies, could have a material adverse effect on our financial condition or results of operations.
General Risk Factors
Irish law differs from the laws in effect in the U.S. and might afford less protection to the holders of our ordinary shares and any actual or potential takeover offer for the Company will be subject to Irish Takeover Rules.
Holders of our ordinary shares could have more difficulty protecting their interests than would the shareholders of a corporation incorporated in a jurisdiction of the U.S. As an Irish-incorporated company, we are governed by Irish law, including the Irish Companies Act 2014 and the Irish Takeover Rules, which differs in some significant, and possibly material, respects from provisions set forth in various U.S. state laws applicable to U.S. corporations and their shareholders, including provisions relating to interested directors, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors. The duties of directors and officers of an Irish company are generally owed to the company only. Therefore, under Irish law shareholders of Irish companies do not generally have a right to commence a legal action against directors or officers and may only do so in limited circumstances. Directors of an Irish company must act with due care and skill, honestly and in good faith with a view to the best interests of the company. Directors must not put themselves in a position in which their duties to the company and their personal interests conflict and must disclose any personal interest in any contract or arrangement with the company or any of our subsidiaries. A director or officer can be held personally liable to the company in respect of a breach of duty to the company.
It may not be possible to enforce court judgments obtained in the U.S. against us in Ireland based on the civil liability provisions of U.S. federal or state securities laws. In addition, there is some uncertainty as to whether the courts of Ireland would recognize or enforce judgments of U.S. courts obtained against us or our directors or officers based on the civil liabilities provisions of U.S. federal or state securities laws or hear actions against us or those persons based on those laws. We have been advised that the U.S. currently does not have a treaty with Ireland providing for the reciprocal recognition and enforcement of
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judgments in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any U.S. federal or state court based on civil liability, whether or not based solely on U.S. federal or state securities laws, would not automatically be enforceable in Ireland.
In addition, any actual or potential takeover offer for our company will be subject to the Irish Takeover Rules. Under the Irish Takeover Rules, during the course of an offer or at any earlier time during which our Board has reason to believe that an offer for our company may be imminent, the Board will not be permitted to take any action, other than seeking alternative offers, which might frustrate the making of an offer for our ordinary shares unless we obtain approval from our shareholders or from the Irish Takeover Panel for such action. As a result, our board of directors will not be permitted to take any action which might frustrate Alkermes’ offer for our ordinary shares or another third party offer for our ordinary shares. Potentially frustrating actions that are prohibited during the course of an offer, or at any earlier time during which our Board has reason to believe an offer is or may be imminent, include (i) the issuance of shares, options or convertible securities or the redemption or purchase of own shares, (ii) material acquisitions or disposals, (iii) entering into contracts other than in the ordinary course of business or (iv) any action, other than seeking alternative offers, which may result in frustration of an offer. Accordingly, if these restrictions become applicable to us, we may be unable to take, or may be delayed in taking, certain actions, in connection with a financing, commercial or strategic transaction or otherwise, that we believe are in the best interest of the Company.
Changes in tax law could adversely affect our business and financial condition.
We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes to applicable U.S. or foreign tax laws and regulations, or their interpretation and application (which changes may have retroactive application), including with respect to net operating losses and research and development tax credits, could adversely affect us or holders of our ordinary shares. In recent years, many such changes have been made and changes are likely to continue to occur in the future.
For example, the One Big Beautiful Bill Act was signed into law on July 4, 2025 and made significant changes to U.S. federal tax law. In addition, the Organization for Economic Co-operation and Development published the Pillar Two Model Rules on December 20, 2021, defining global minimum taxation of large multinational corporations with greater than 750 million euro in revenue in two of the four previous years, among other criteria. We continue to evaluate the impacts of these legislative changes as additional guidance becomes available.
Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisors regarding the implications of potential changes in tax laws on an investment in our ordinary shares.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
During the three months ended September 30, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).
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ITEM 6. EXHIBITS.

Exhibit No. |  | Description
2.1+ |  | Transaction Agreement, dated as of October 22, 2025, by and between Alkermes plc and the Avadel Pharmaceuticals plc. (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K, filed on October 22, 2025)
2.2 |  | Appendix III to the Rule 2.7 Announcement, dated as of October 22, 2025 (Conditions Appendix) (incorporated by reference to Exhibit 2.2 to the registrant’s Current Report on Form 8-K, filed on October 22, 2025)
10.1‡ |  | Employment Agreement dated as of August 6, 2025 between Avadel Management Corporation and Jerad G. Seurer (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2025, filed on August 7, 2025)
10.2*+^ |  | Amended and Restated License Agreement by and between Flamel Ireland Ltd and XWPharma Ltd., dated as of August 30, 2025 (filed herewith)
10.3* |  | Settlement and License Agreement by and between Jazz Pharmaceuticals, Inc. and Jazz Pharmaceuticals Ireland Limited and Avadel CNS Pharmaceuticals LLC and Flamel Ireland Limited (filed herewith)
31.1* |  | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) promulgated under the Exchange Act
31.2* |  | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) promulgated under the Exchange Act
32.1** |  | Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2** |  | Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104* |  | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

* Filed herewith.
** Furnished herewith.
‡ Management contract or compensatory plan or arrangement filed pursuant to Item 15(b) of Form 10-K.
+ Certain exhibits and schedules to these agreements have been omitted pursuant to Item 601 of Regulation S-K. The registrant will furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.
^ Certain portions of this exhibit have been omitted because they are not material, and the registrant customarily and actually treats that information as private or confidential.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| AVADEL PHARMACEUTICALS PLC
| (Registrant)
Date: November 4, 2025 | By: | /s/ Gregory J. Divis
|  | Gregory J. Divis
|  | Chief Executive Officer
|  | (Duly Authorized Officer and Principal Executive Officer)

Date: November 4, 2025 | By: | /s/ Thomas S. McHugh
|  | Thomas S. McHugh
|  | Senior Vice President and Chief Financial Officer
|  | (Duly Authorized Officer and Principal Financial and Accounting Officer)

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