Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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 adults with narcolepsy. LUMRYZ was approved by the U.S. Food and Drug Administration (“FDA”) on May 1, 2023. The FDA also granted Orphan Drug Exclusivity (“ODE”) to LUMRYZ for a period of seven years until May 1, 2030. In June 2023, the Company commercially launched LUMRYZ in the U.S.

In approving LUMRYZ, the FDA approved a risk evaluation and mitigation strategy (“REMS”) for LUMRYZ to help ensure that the benefits of the drug in the treatment of cataplexy and EDS in narcolepsy outweigh the risks of serious adverse outcomes resulting from inappropriate prescribing, misuse, abuse, and diversion of the drug. Under this 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.

As of the date of this Quarterly Report, the Company’s only commercialized product is LUMRYZ. The Company continues to evaluate opportunities to expand its product portfolio.

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 cost of the Company’s LUMRYZ ongoing 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 the U.S. Securities and Exchange Commission (“SEC”) on February 29, 2024 (the “Annual Report on Form 10-K”).

At-the-Market Offering Program

In February 2020, the Company entered into an Open Market Sale AgreementSM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an at-the-market offering program (“ATM Program”) under which the Company may offer and sell its American Depositary Shares (“ADSs”) through Jefferies as its sales agent. The Company agreed to pay Jefferies a commission up to 3.0% of the aggregate gross sales proceeds of such ADSs under the ATM Program. The initial aggregate offering price of the ATM Program was up to $50,000 of ADSs pursuant to its prospectus dated February 14, 2020 (the “2020 Prospectus”), included with the Company’s Registration Statement on Form S-3 (File No. 333-236258) (the “2020 Shelf Registration”). In August 2022, the Company filed an additional prospectus, dated September 12, 2022 (the “2022 Prospectus”), included with the Company’s new Registration Statement on Form S-3 (File No. 333-267198), in order to allocate up to $100,000 in additional ADSs to the ATM Program. The 2020 Shelf Registration expired on February 14, 2023.

Pursuant to the Sales Agreement, the Company issued and sold 640 ADSs during the three months ended March 31, 2024, resulting in net proceeds to the Company of approximately $9,250. The Company may offer and sell up to an additional $86,528 of ADSs under the ATM Program that remain available for sale pursuant to the 2022 Prospectus.

Preferred Shares

In March 2024, 5,194 Series A Non-Voting Convertible Preferred Shares and Series B Non-Voting Convertible Preferred Shares (“Series B Preferred Shares”) were converted to 5,194 ordinary shares, nominal value $0.01 per share (“Ordinary Shares”) at the option of the holders. Accordingly, there were no preferred shares issued and outstanding at March 31, 2024.

Basis of Presentation. The unaudited condensed consolidated balance sheet as of March 31, 2024 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.

Newly Issued Climate-Related Disclosure Rule. In March 2024, the SEC issued a final rule requiring public companies to disclose climate-related information in their annual and periodic reports. For large accelerated filers, the initial disclosure rules are effective for annual periods for the year ending December 31, 2025. The Company is currently evaluating the effects of the final rule on its disclosures, processes and procedures.