Avadel Specialty Pharmaceuticals LLC

February 6, 2019

Geez. All the action these days is in busted retail and busted pharma. Here, Avadel Specialty Pharmaceuticals LLC ("ASP") is a MIssouri-based pharmaceutical company engaged in the business of the distribution, sale and marketing of pharmaceutical products focused on chronic urological disorders. It has one product, NOCTIVA. In other words, it is not a manufacturer; it has an exclusive license from Serenity Pharmaceuticals LLC to develop, market and sell NOCTIVA in the US and Canada. The company paid $70mm for the license and Serenity maintained some option value as well, including the right to receive potential milestone payments and royalties from product sales. 

Why bankruptcy? Per the company:

"ASP has experienced several market challenges in its efforts to commercialize and increase sales volume while the overall growth for its product has been slower than anticipated. As a result, ASP has experienced losses since its inception, and as of the Petition Date, has an accumulated deficit, due in part to costs relating to underachieving sales, unanticipated competition, and certain supply agreements. Making matters worse, sales projections based on the current growth trend illustrate a substantially longer period of operating losses than originally assumed."

Or said another way, among other issues, doctors seem unwilling to prescribe NOCTIVA to their worst enemies. Per the company, "health care professionals ahve been unwillint to try (or adop) NOCTIVA." Why not? Well, for starters, there are other agents that physicians use to target the conditions NOCTIVA is formulated to tackle. Moreover, there are "underlying concerns with regard to the potential risks of a serious side effect associated with the active ingredient in NOCTIVA™ (desmopressin acetate), based on prior experience with older formulations of the same active ingredient…." Uh, yeah, that sounds sketchy AF. 

And so this thing has been a money pit. The company's direct (non-debtor) parent has funded approximately $152mm since September 2017 to support the business including $80mm in additional investment that have yielded less than $3mm in net sales. How's that for ROI? As you can probably imagine, that ROI proposition was enough to finally compel ASP's direct parent to stop funding it. 

Consequently, the company sought to perform triage, first by trying (and failing) to locate a co-promoter and, second, by sublicensing its obligations. But, no dice. it filed for bankruptcy to sell its assets and wind down its operations. The bankruptcy constitutes just one part in the overall restructuring efforts of ASP's indirect parent, Avadel Pharmaceuticals plc. The case will be funded, if approved, by a $2.7mm DIP revolving credit facility and $2.7mm unsecured DIP, both provided by the company's non-debtor indirect parent. 

• Jurisdiction: D. of Delaware (Judge Sontchi) 

• Capital Structure: $mm debt     

• Company Professionals:

  • Legal: Greenberg Traurig LLP (Paul Keenan Jr., John Dodd, Reginald Sainvil, Dennis Meloro, Sara Hoffman)

  • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on company name above for free docket access)

• Other Parties in Interest:

  • Avadel US Holdings Inc.

    • Legal: Troutman Sanders LLP (Jonathan Forstot) & (local) Ashby & Geddes PA (Gregory Taylor)