Commitments and Contingencies

Litigation

The Company is 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. The Company accrues 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, 2018 and December 31, 2017, there were no contingent liabilities with respect to any threat of litigation, arbitration or administrative or other proceeding that are reasonably likely to have a material adverse effect on the Company’s condensed consolidated financial position, results of operations, cash flows or liquidity.

Some of the patents covering our Noctiva^TM product (the “Noctiva Patents”) are the subject of litigation initiated by Ferring Pharmaceuticals Inc. and two of its foreign affiliates, who manufacture a competing product known as Nocdurna. Nocdurna is not yet commercially sold in the U.S. but was approved by the FDA in June 2018. In this litigation, Ferring seeks to invalidate and disputes the inventorship of the Noctiva Patents, seeks damages for various alleged breaches of contractual and common law duties, and seeks damages for alleged infringement by Noctiva^TM of Ferring’s “Nocdurna” trademark. Avadel and certain other parties including Serenity Pharmaceuticals, LLC (the licensor of the Noctiva Patents) are actively defending this litigation, and have made certain counterclaims against Ferring, including for infringement of the Noctiva Patents and a declaratory judgment of noninfringement with respect to Ferring’s “Nocdurna” trademark. The court has dismissed Ferring’s inventorship claim and its claims for alleged breaches of contractual and common law duties, although these dismissals may be appealed by Ferring. Adverse outcomes from this litigation could result in a commercial launch of Nocdurna and could have other material adverse effects on our efforts to successfully commercialize Noctiva^TM.

Material Commitments

The Company has a commitment to purchase finished product from a contract manufacturer for the years ending December 31, 2018 and 2019. The commitment for this arrangement, at minimum quantities and at the 2018 and estimated 2019 contractual prices is $1,304 and $956, respectively. Also, the Company has a commitment to purchase finished product from a contract manufacturer for a five-year period commencing in 2018. Commitments for this arrangement, at minimum quantities and at the 2018 contractual price over the remaining life of the contract, are as follows for the years ended December 31:



Purchase Commitment	Balance

2018	$	660
2019	1,082
2020	1,320
2021	1,320
2022	1,320
Thereafter	220
Total	$	5,922

The Company has a commitment with a contract manufacturer related to the construction and preparation of a production suite at the contract manufacturer’s facility. The Company expects to pay approximately $300 through the first quarter of 2019 with respect to the initial build of the production suite. Subsequent to the initial build and preparation of the production suite, this commitment also includes annual production suite fees of approximately $3,000 to $4,000 which would commence at the time of FDA approval of the product and continue thereafter for five years.

Other than commitments disclosed in Note 14: Contingent Liabilities and Commitments to the Company’s consolidated financial statements included in Part II, Item 8 of the Company’s 2017 Annual Report on Form 10-K and those noted above, there were no other material commitments outside of the normal course of business. Material commitments in the normal course of business include long-term debt and post-retirement benefit plan obligations which are disclosed in Note 9: Long-Term Debt and Note 12: Post-Retirement Benefit Plans, respectively, to the Company’s consolidated financial statements included in Part II, Item 8 of the Company’s 2017 Annual Report on Form 10-K and long-term contingent consideration payable as disclosed in Note 8: Long-Term Related Party Payable, to the Company’s condensed consolidated financial statements included in Part I, Item 1 of this report.