Avadel Pharmaceuticals plc will undergo a corporate restructuring to assure the financial health required to maximize the value of “FT218,” which is currently in Phase III development for the treatment of excessive daytime sleepiness (EDS) and cataplexy in patients suffering from narcolepsy.
“It is clear that FT218, an investigational, once-nightly formulation of sodium oxybate, is the company’s most promising and commercially-attractive asset targeting a large orphan market with an estimated value of nearly $1.5 billion in 2018,” says Greg Divis, interim CEO of Avadel, in a release. “If approved, we believe FT218, with once-nightly dosing, will provide a significant improvement for patients over the current standard-of-care. Our focus going forward is to direct our resources toward this development program. As part of our review of the company’s operations, we have engaged third-party experts to evaluate the ongoing clinical development program of FT218, including the REST-ON Phase III clinical trial, with the objectives of accelerating enrollment and assuring NDA [new drug application] filing readiness. To date, 149 patients have been randomized in the study, 56% of the overall enrollment goal.”
Geoffrey Glass, chairman of Avadel’s Board of Directors, says, “Following recently-announced management and board changes, we undertook a comprehensive review of our existing businesses and corporate strategy. The restructuring plan announced today marks an important step toward restoring Avadel’s financial health and creating a pathway to enhance shareholder value. This plan simplifies Avadel’s business, preserves capital, and creates needed focus and clarity. While the restructuring unfortunately affects a majority of our employees, this action is required to enable the company to maximize the value of FT218 for the treatment of narcolepsy.”
Avadel expects that the restructuring and other cost-saving actions will result in $70 to $75 million in cost reductions during 2019 as compared to 2018, of which $55 to $60 million is expected to result from the exit of NOCTIVA. NOCTIVA’s performance since launch has been highly disappointing despite a substantial investment of resources. The company says NOCTIVA no longer warrants such a level of support, and Avadel will be better positioned for the future by exiting the business entirely. Once fully implemented, the plan will lower the company’s cost structure by $80 to $90 million in 2020 and beyond when compared to 2018. Avadel estimates it will incur approximately $10 to $15 million of one-time pre-tax charges for severance and other costs related to the restructuring, primarily during the first half of 2019. The company’s cash and marketable securities balance as of December 31, 2018 was approximately $100 million.
The company’s workforce will be downsized by more than 50% as part of the restructuring. The focus of the remaining company and corresponding resources include FT218 and hospital products related capabilities and functions. Separately, Avadel Specialty Pharmaceuticals LLC, a special purpose entity and wholly-owned subsidiary responsible solely for NOCTIVA-related activities, made a voluntary filing on February 6, 2019, under Chapter 11 of the United States Bankruptcy Code. Avadel Pharmaceuticals plc and other corporate entities remain solvent and substantially unaffected. This action is not expected to materially impact any other aspect of the Company’s business, including the ability to operate its sterile injectables hospital business and complete the FT218 Phase III clinical trial. As part of this action, Avadel expects to record in the fourth quarter of 2018 a pre-tax non-cash impairment charge of approximately $66 million related to NOCTIVA intangible assets. The restructuring actions do not trigger a default or violate covenants related to the 4.50% Exchangeable Senior Notes due in 2023.