Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________

FORM 8-K
___________________

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 8, 2017
___________________

AVADEL PHARMACEUTICALS PLC
(Exact name of registrant as specified in its charter)
___________________
Ireland
(State or Other Jurisdiction
of Incorporation)
 
000-28508
(Commission File Number)
98-1341933
(I.R.S. Employer
Identification No.)
 
Block 10-1
Blanchardstown Corporate Park, Ballycoolin
Dublin 15, Ireland
 (Address of Principal Executive Offices)
 
 
 
Not Applicable
(Zip Code)
 
 

Registrant's telephone number, including area code: +353 1 485 1200
___________________


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
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. o











Item 2.02     Results of Operations and Financial Condition.

On November 8, 2017, Avadel Pharmaceuticals plc (the “Company”) issued a press release announcing its earnings for the third quarter ended September 30, 2017. That press release is attached as Exhibit 99.1 and is incorporated herein by reference.

The information responsive to this Item 2.02 of this Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as may be expressly set forth by specific reference in such a filing.

Item 7.01             Regulation FD Disclosure.
 
On November 8, 2017, the Company posted to its website a set of presentation materials in conjunction with its earnings call and webcast to assist participants with understanding the Company’s financial results for the quarter ended September 30, 2017. A copy of this presentation is attached hereto as Exhibit 99.2.

The information responsive to this Item 7.01 of this Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as may be expressly set forth by specific reference in such a filing.

 Item 9.01    Financial Statements and Exhibits.
 
(d) Exhibits
 
 
 
 
 
99.1
 
99.2
 
 
 
 
* This information shall be deemed to be "furnished" and not filed herewith.

 


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 hereunto duly authorized.
          AVADEL PHARMACEUTICALS PLC
          By:            /s/ Phillandas T. Thompson
        Phillandas T. Thompson
        Senior Vice President, General Counsel and Corporate Secretary

Date: November 8, 2017

 Exhibit Index
99.1
 
99.2
 


Exhibit
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Avadel Pharmaceuticals Reports Third Quarter 2017 Results
Total Revenues for the Third Quarter Were $39.7 million
Full Year Revenue Guidance of $165-$175 million Unchanged
Acquired License for Noctiva
Dublin, Ireland – November 8, 2017 - Avadel Pharmaceuticals plc (NASDAQ: AVDL) today announced its financial results for the third quarter ended September 30, 2017.
Highlights Include:
Total revenues for the third quarter 2017 were $39.7 million, compared to $32.1 million in the third quarter 2016.
GAAP net income for the third quarter of 2017 was $21.7 million, or $0.52 per diluted share, compared to GAAP net loss of $20.0 million, or $0.48 per diluted share, in the third quarter of 2016.
Adjusted net income for the third quarter of 2017 was $3.7 million, or $0.09 per diluted share, compared to an adjusted net loss of $3.5 million, or $0.08 per diluted share, in the third quarter of 2016. (1) 
On September 1, 2017, the Company acquired the commercial license for Noctiva™, the first and only product approved by the U.S. Food & Drug Administration (FDA) for the treatment of nocturia due to nocturnal polyuria in adults.
Cash and marketable securities at September 30, 2017 were $115.6 million, down from $173.8 million at June 30, 2017, largely as a result of cash used for the Noctiva license acquisition.
Cash used for share repurchases totaled $16.7 million for the nine months ended September 30, 2017.

Mike Anderson, Avadel's Chief Executive Officer, said, "The third quarter of 2017 was another strong quarter for Avadel. Operationally, the Company continues to execute. We have generated $30 million in operating cash flow year-to-date, and we have maintained our full year revenue guidance of $165-$175 million. Our strong financial performance over the last few years has allowed us to invest in the development and acquisition of proprietary specialty products that will provide the Company with long-term growth opportunities."
Mr. Anderson continued, "In early September, we took another step forward in the continued pursuit of becoming a fully integrated specialty pharmaceutical company when we acquired the license to commercialize Noctiva. Noctiva is the first and only product approved by the FDA for the treatment of nocturia, and aligns with our mission to offer patients differentiated specialty products that are safe and effective. We also believe Noctiva is an excellent strategic growth opportunity for Avadel, as it is the only available FDA approved product for this indication and has excellent patent protection through 2030 with the potential to deliver meaningful shareholder value."
Third Quarter 2017 Results
Revenues during the third quarter of 2017 were $39.7 million, compared to $32.1 million during the same period last year. The increase in revenues was due to Akovaz®, which was not fully launched in the third quarter of 2016. However, this increase was partially offset by a decline in Bloxiverz® revenues, primarily as a result of additional competition to neostigmine in the form of an alternative molecule, sugammadex, and continued pricing pressure due to four competing neostigmine products. On a GAAP basis, net income was $21.7 million during the third quarter of 2017, or $0.52 per diluted share, compared to a net loss of $20.0 million, or $0.48 per diluted share, for the same period last year. This increase in net income on a year-over-year basis was attributed to $9.9 million of gains related to changes in the fair value of related party contingent consideration for the third of quarter 2017, compared to $20.8 million of

_______________________________________________________________________________________________________________________________________________________________ 
1Non-GAAP financial measure: Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.


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expense in the same period last year. Changes in the fair value of related party contingent consideration are non-cash items, and do not reflect the cash amount paid to related parties. Cash payments can be found in the Consolidated Statement of Cash Flows.
Research and development expenses totaled $8.1 million for the third quarter of 2017, flat compared to the same period last year. Sequentially, research and development expenses were up from $6.8 million in the second quarter of 2017 as a result of increased spend on the REST-ON clinical trial. Research and development expenses are expected to increase in the fourth quarter of 2017 as the Company continues to open clinical sites in the United States and looks to add sites in new countries.
Selling, general and administrative expenses were $11.6 million in the third quarter of 2017, compared to $12.7 million in the same period last year. This decrease was largely due to a lower in stock based compensation expense period over period, partially offset by higher payroll and benefit costs as the Company continues to hire new employees to support future growth of the business.
Adjusted net income for the third quarter of 2017 was $3.7 million, or $0.09 per diluted share, compared to an adjusted net loss of $3.5 million, or $0.08 per diluted share, in the same period last year.(1) The increase in adjusted net income is largely attributable to an increase in revenues from Akovaz® and a lower adjusted effective tax rate of 58% compared to 283% in the prior year period. Please see the Supplemental Information section within this document for a reconciliation of adjusted net income and adjusted diluted EPS to the respective GAAP amounts.
2017 Guidance
The Company reiterated its full year revenue guidance of between $165 and $175 million. During the fourth quarter of 2017, the Company expects to spend approximately $15 million on launch preparation costs for Noctiva, and between $8 to $10 million in research and development costs, principally associated the REST-ON clinical trial. For the full year, research and development costs are now expected to be in the range of $30 to $35 million and selling, general & administrative costs are expected to be in the range of $60 to $65 million, inclusive of the Noctiva launch preparation costs. As a result of the Noctiva costs, the Company slightly lowered its full year adjusted diluted EPS guidance to $0.25 to $0.35, down from $0.30 to $0.45.

Conference Call
A conference call to discuss these results has been scheduled for Wednesday, November 8, 2017 at 10:00 a.m. EDT. A question and answer period will follow management's prepared remarks. To access the conference call, investors are invited to dial (844) 388-0559 (U.S. and Canada) or (216) 562-0393 (International). The conference ID number is 6289129.  A live audio webcast can be accessed by visiting the Investors section of the Company’s website, www.avadel.com. A replay of the webcast will be archived on Avadel’s website for 90 days following the event.
About Avadel Pharmaceuticals plc:
Avadel Pharmaceuticals plc (NASDAQ: AVDL) is a specialty pharmaceutical company that seeks to develop differentiated pharmaceutical products that are safe, effective and easy to take through formulation development, by utilizing its proprietary drug delivery technology and in-licensing / acquiring new products; ultimately, helping patients adhere to their prescribed medical treatment and see better results. The Company is headquartered in Dublin, Ireland with operations in St. Louis, Missouri, United States and Lyon, France. For more information, please visit www.avadel.com.
About Noctiva™
Noctiva is the first and only formulation of desmopressin acetate, a vasopressin analog, approved by the FDA for the treatment of nocturia due to nocturnal polyuria in adults who awaken at least two times per night to void. It is a proprietary low-dose formulation of desmopressin acetate administered through a patent-protected preservative-free intranasal delivery system. Noctiva is dosed as a single spray in one nostril 30 minutes before bedtime, and is approved in two

_______________________________________________________________________________________________________________________________________________________________ 
1Non-GAAP financial measure: Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.


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dosage forms of 0.83 mcg and 1.66 mcg. Noctiva is expected to become available to patients in the second quarter of 2018. (Full Prescribing Information available here).

Important Safety Information and Indication for Noctiva (desmopressin acetate)
WARNING: HYPONATREMIA

NOCTIVA can cause hyponatremia. Severe hyponatremia can be life-threatening, leading to seizures, coma, respiratory arrest, or death.

NOCTIVA is contraindicated in patients at increased risk of severe hyponatremia, such as patients with excessive fluid intake, illnesses that can cause fluid or electrolyte imbalances, and in those using loop diuretics or systemic or inhaled glucocorticoids.

Ensure serum sodium concentrations are normal before starting or resuming NOCTIVA. Measure serum sodium within seven days and approximately one month after initiating therapy or increasing the dose, and periodically during treatment. More frequently monitor serum sodium in patients 65 years of age and older and in patients at increased risk of hyponatremia.

If hyponatremia occurs, NOCTIVA may need to be temporarily or permanently discontinued.

Safe Harbor: This press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “project” and similar expressions, and the negatives thereof, identify forward-looking statements, each of which speaks only as of the date the statement is made. Although we believe that our forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business and operations, our business is subject to significant risks and as a result there can be no assurance that actual results of our research, development and commercialization activities and our results of operations will not differ materially from the results contemplated in such forward-looking statements. These risks include: (i) risks relating to our license agreement with Serenity Pharmaceuticals, LLC including that our internal analyses may overstate the market opportunity in the United States for the drug desmopressin acetate (the “Drug”) or we may not effectively exploit such market opportunity, that significant safety or drug interaction problems could arise with respect to the Drug, that we may not successfully increase awareness of nocturia and the potential benefits of the Drug, and that the need for management to focus attention on the development and commercialization of the Drug could cause our ongoing business operations to suffer; and (ii) the other risks, uncertainties and contingencies described in the Company's filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2016, in particular under the captions “Forward-Looking Statements” and “Risk Factors,” including without limitation: our dependence on a small number of products and customers for the majority of our revenues; the possibility that our Bloxiverz®,Vazculep® and Akovaz® products, which are not patent protected, could face substantial competition resulting in a loss of market share or forcing us to reduce the prices we charge for those products; the possibility that we could fail to successfully complete the research and development for pipeline products we are evaluating for potential application to the FDA pursuant to our "unapproved-to-approved" strategy, or that competitors could complete the development of such products and apply for FDA approval of such products before us; the possibility that our products may not reach the commercial market or gain market acceptance; our need to invest substantial sums in research and development in order to remain competitive; our dependence on certain single providers for development of several of our drug delivery platforms and products; our dependence on a limited number of suppliers to manufacture our products and to deliver certain raw materials used in our products; the possibility that our competitors may develop and market technologies or products that are more effective or safer than ours, or obtain regulatory approval and market such technologies or products before we do; the challenges in protecting the intellectual property underlying our drug delivery platforms and other products; and our dependence on key personnel to execute our business plan.

_______________________________________________________________________________________________________________________________________________________________ 
1Non-GAAP financial measure: Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.


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Except as may be required by law, we disclaim any obligation to publicly update any forward-looking statements to reflect events after the date of this press release.
Non-GAAP Disclosures and Adjustments
Avadel discloses certain non-GAAP financial measures, including adjusted net income and loss and adjusted net income and loss per diluted share, as management believes that a comparison of its current and historical results would be difficult if the disclosures were limited to financial measures prepared only in accordance with generally accepted accounting principles (GAAP) in the U.S. In addition to reporting its financial results in accordance with GAAP, Avadel reports certain non-GAAP results that exclude, if any, fair value remeasurements of its contingent consideration, impairment of intangible assets, amortization of intangible assets, restructuring costs, foreign exchange gains and losses on assets and liabilities denominated in foreign currencies, but includes the operating cash flows plus any unpaid accrued amounts associated with the contingent consideration, in order to supplement investors' and other readers' understanding and assessment of the Company's financial performance. The Company's management uses these non-GAAP measures internally for forecasting, budgeting and measuring its operating performance. Investors and other readers should review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most closely applicable GAAP measure set forth below and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. The table provided within the following “Supplemental Information” section reconciles GAAP net income and loss and diluted earnings or loss per share to the corresponding adjusted amounts.
*******
Contacts:
Michael F. Kanan
 
Chief Financial Officer
 
Phone: (636) 449-1844
 
Email: mkanan@avadel.com
 
 
 
Lauren Stival
 
Sr. Director, Investor Relations & Corporate Communications
 
Phone: (636) 449-5866
 
Email: lstival@avadel.com


_______________________________________________________________________________________________________________________________________________________________ 
1Non-GAAP financial measure: Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.


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AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Revenues:
 
 

 
 

 
 
 
 
Product sales and services
 
$
39,147

 
$
31,340

 
$
138,009

 
$
104,858

License and research revenue
 
528

 
747

 
484

 
2,303

Total
 
39,675

 
32,087

 
138,493

 
107,161

Operating expenses:
 
 

 
 

 
 

 
 

Cost of products and services sold
 
3,790

 
2,844

 
12,253

 
10,657

Research and development expenses
 
8,095

 
8,143

 
22,093

 
21,135

Selling, general and administrative expenses
 
11,563

 
12,740

 
35,804

 
33,491

Intangible asset amortization
 
564

 
3,702

 
1,692

 
10,918

(Gain)/loss - changes in fair value of related party contingent consideration
 
(9,906
)
 
20,848

 
(30,107
)
 
52,989

Restructuring (income) costs
 
(549
)
 

 
3,173

 

Total operating expenses
 
13,557

 
48,277

 
44,908

 
129,190

Operating income (loss)
 
26,118

 
(16,190
)
 
93,585

 
(22,029
)
Investment income, net
 
1,110

 
490

 
2,689

 
1,080

Interest expense, net
 
(263
)
 
(264
)
 
(789
)
 
(702
)
Other income (expense) - changes in fair value of related party payable
 
768

 
(1,828
)
 
2,988

 
(6,135
)
Foreign exchange gain (loss)
 
(133
)
 
1,249

 
(127
)
 
(12
)
Income (loss) before income taxes
 
27,600

 
(16,543
)
 
98,346

 
(27,798
)
Income tax provision
 
5,921

 
3,451

 
21,830

 
18,212

Net income (loss)
 
$
21,679

 
$
(19,994
)
 
$
76,516

 
$
(46,010
)
 
 
 
 
 
 
 
 
 
Net income (loss) per share - basic
 
$
0.54

 
$
(0.48
)
 
$
1.87

 
$
(1.12
)
Net income (loss) per share - diluted
 
0.52

 
(0.48
)
 
1.81

 
(1.12
)
 
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding - basic
 
40,061

 
41,241

 
40,839

 
41,241

Weighted average number of shares outstanding - diluted
 
41,339

 
41,241

 
42,194

 
41,241








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AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 
 
September 30, 2017
 
December 31, 2016
 
 
 
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
37,449

 
$
39,215

Marketable securities
 
78,161

 
114,980

Accounts receivable
 
24,080

 
17,839

Inventories, net
 
5,870

 
3,258

Prepaid expenses and other current assets
 
3,373

 
5,894

Total current assets
 
148,933

 
181,186

Property and equipment, net
 
3,180

 
3,320

Goodwill
 
18,491

 
18,491

Intangible assets, net
 
94,256

 
22,837

Research and development tax credit receivable
 
3,547

 
1,775

Income tax deferred charge
 

 
10,342

Other
 
9,020

 
7,531

Total assets
 
$
277,427

 
$
245,482

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Current portion of long-term debt
 
$
301

 
$
268

Current portion of long-term related party payable
 
30,986

 
34,177

Accounts payable
 
8,564

 
7,105

Deferred revenue
 
1,927

 
2,223

Accrued expenses
 
47,997

 
17,222

Income taxes
 
7,026

 
1,200

Other
 
507

 
226

Total current liabilities
 
97,308

 
62,421

Long-term debt, less current portion
 
614

 
547

Long-term related party payable, less current portion
 
76,131

 
135,170

Other
 
6,911

 
5,275

Total liabilities
 
180,964

 
203,413

 
 
 
 
 
Shareholders' equity:
 
 

 
 

Preferred shares, $0.01 nominal value; 50,000 shares authorized; none issued or outstanding at September 30, 2017 and December 31, 2016, respectively
 

 

Ordinary shares, nominal value of $0.01; 500,000 shares authorized; 41,435 and 41,371 issued and outstanding at September 30, 2017 and December 31, 2016, respectively
 
414

 
414

Treasury shares, at cost, 1,673 and 0 shares held at September 30, 2017 and December 31, 2016, respectively
 
(17,506
)
 

Additional paid-in capital
 
391,416

 
385,020

Accumulated deficit
 
(254,440
)
 
(319,800
)
Accumulated other comprehensive loss
 
(23,421
)
 
(23,565
)
Total shareholders' equity
 
96,463

 
42,069

Total liabilities and shareholders' equity
 
$
277,427

 
$
245,482





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AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
 
 
 
 
Cash flows from operating activities:
 
 

 
 

Net income (loss)
 
76,516

 
(46,010
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 

 
 

Depreciation and amortization
 
2,664

 
11,555

Loss on disposal of property and equipment
 

 
110

Loss (gain) on sale of marketable securities
 
(550
)
 
666

Foreign exchange loss
 
127

 
12

Grants recognized in research and development expenses
 

 
(70
)
Remeasurement of related party acquisition-related contingent consideration
 
(30,107
)
 
52,989

Remeasurement of related party financing-related contingent consideration
 
(2,988
)
 
6,135

Change in deferred tax and income tax deferred charge
 
322

 
(5,680
)
Stock-based compensation expense
 
6,019

 
10,541

Increase (decrease) in cash from:
 
 

 
 

Accounts receivable
 
(6,240
)
 
(7,594
)
Inventories
 
(2,612
)
 
2,080

Prepaid expenses and other current assets
 
1,924

 
671

Research and development tax credit receivable
 
(1,576
)
 
(1,794
)
Accounts payable & other current liabilities
 
804

 
1,291

Deferred revenue
 
(283
)
 
(2,198
)
Accrued expenses
 
9,324

 
2,700

Accrued income taxes
 
5,826

 

Earn-out payments for related party contingent consideration in excess of acquisition-date fair value
 
(24,729
)
 
(14,486
)
Royalty payments for related party payable in excess of original fair value
 
(3,446
)
 
(1,790
)
Other long-term assets and liabilities
 
(517
)
 
2,032

Net cash provided by operating activities
 
30,478

 
11,160

 
 
 
 
 
Cash flows from investing activities:
 
 

 
 

Purchases of property and equipment
 
(533
)
 
(1,000
)
Acquisitions of businesses
 

 
628

Purchase of intangible assets
 
(52,139
)
 

Proceeds from sales of marketable securities
 
153,398

 
46,483

Purchases of marketable securities
 
(115,893
)
 
(96,199
)
Net cash used in investing activities
 
(15,167
)
 
(50,088
)
 
 
 
 
 
Cash flows from financing activities:
 
 

 
 

Earn-out payments for related party contingent consideration
 
(961
)
 
(6,834
)
Royalty payments for related party payable
 

 
(1,117
)
Reimbursement of loans
 

 
(61
)
Cash proceeds from issuance of ordinary shares and warrants
 
376

 

Share repurchases
 
(16,707
)
 

Net cash used in financing activities
 
(17,292
)
 
(8,012
)
 
 
 
 
 
Effect of foreign currency exchange rate changes on cash and cash equivalents
 
215

 
656

 
 
 
 
 
Net decrease in cash and cash equivalents
 
(1,766
)
 
(46,284
)
Cash and cash equivalents at January 1,
 
39,215

 
65,064

Cash and cash equivalents at September 30,
 
$
37,449

 
$
18,780

 



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AVADEL PHARMACEUTICALS PLC
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per share data)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Revenues by Product:
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Bloxiverz
 
$
9,920

 
$
15,591

 
$
37,541

 
$
65,958

Vazculep
 
9,573

 
9,340

 
29,906

 
29,167

Akovaz
 
18,561

 
5,568

 
65,110

 
5,568

Other
 
1,093

 
841

 
5,452

 
4,165

Total product sales and services
 
39,147

 
31,340

 
138,009

 
104,858

License and research revenue
 
528

 
747

 
484

 
2,303

Total revenues
 
$
39,675

 
$
32,087

 
$
138,493

 
$
107,161





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GAAP to Non-GAAP adjustments for the three-months ended September 30, 2017
 
 
 
 
 
 
 
 
Exclude
 
Include
 
 
 
 
 
 
GAAP
 
Intangible asset amortization
 
Foreign exchange (gain)/loss
 
Restructuring impacts
 
Contingent related party payable fair value adjustment
 
Contingent related party payable paid/accrued
 
Total adjustments
 
Adjusted GAAP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product sales and services
 
$
39,147

 
$

 
$

 
$

 
$

 
$

 
$

 
$
39,147

License and research revenue
 
528

 

 

 

 

 

 

 
528

Total
 
39,675

 

 

 

 

 

 

 
39,675

Operating expenses:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of products and services sold
 
3,790

 

 

 

 

 

 

 
3,790

Research and development
 
8,095

 

 

 

 

 

 

 
8,095

Selling, general and administrative
 
11,563

 

 

 

 

 

 

 
11,563

Intangible asset amortization
 
564

 
(564
)
 

 

 

 

 
(564
)
 

Changes in fair value of related party contingent consideration
 
(9,906
)
 

 

 

 
9,906

 
7,264

 
17,170

 
7,264

Restructuring costs
 
(549
)
 

 

 
549

 

 

 
549

 

Total
 
13,557

 
(564
)



549


9,906


7,264

 
17,155

 
30,712

Operating income (loss)
 
26,118

 
564

 

 
(549
)
 
(9,906
)
 
(7,264
)
 
(17,155
)
 
8,963

Investment and other income
 
1,110

 

 

 

 

 

 

 
1,110

Interest expense
 
(263
)
 

 

 

 

 

 

 
(263
)
Other expense - changes in fair value of related party payable
 
768

 

 

 

 
(768
)
 
(963
)
 
(1,731
)
 
(963
)
Foreign exchange gain
 
(133
)
 

 
133

 

 

 

 
133

 

Income (loss) before income taxes
 
27,600

 
564

 
133

 
(549
)
 
(10,674
)
 
(8,227
)
 
(18,753
)
 
8,847

Income tax provision (benefit)
 
5,921

 
201

 

 

 
(507
)
 
(515
)
 
(821
)
 
5,100

Net income (loss)
 
$
21,679

 
$
363

 
$
133

 
$
(549
)
 
$
(10,167
)
 
$
(7,712
)
 
$
(17,932
)
 
$
3,747

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted(1)
 
0.52

 
$
0.01

 
$

 
$
(0.01
)
 
$
(0.25
)
 
$
(0.19
)
 
$
(0.43
)
 
$
0.09

Weighted average number of shares outstanding - diluted
 
41,339

 
41,339

 
41,339

 
41,339

 
41,339

 
41,339

 
41,339

 
41,339


(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.



https://cdn.kscope.io/a06a0cf7a5a4229301cf2ee44fa47737-q22017earningsrelease.jpg

 
 
 
 
GAAP to Non-GAAP adjustments for the three-months ended September 30, 2016
 
 
 
 
 
 
 
 
Exclude
 
Include
 
 
 
 
 
 
GAAP
 
Intangible asset amortization
 
Foreign exchange (gain)/loss
 
Contingent related party payable fair value adjustment
 
Contingent related party payable paid/accrued
 
Total adjustments
 
Adjusted GAAP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
Product sales and services
 
$
31,340

 
$

 
$

 
$

 
$

 
$

 
$
31,340

License and research revenue
 
747

 

 

 

 

 

 
747

Total
 
32,087

 

 

 

 

 

 
32,087

Operating expenses:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
Cost of products and services sold
 
2,844

 

 

 

 

 

 
2,844

Research and development
 
8,143

 

 

 

 

 

 
8,143

Selling, general and administrative
 
12,740

 

 

 

 

 

 
12,740

Intangible asset amortization
 
3,702

 
(3,702
)
 

 

 

 
(3,702
)
 

Changes in fair value of related party contingent consideration
 
20,848

 

 

 
(20,848
)
 
5,884

 
(14,964
)
 
5,884

Restructuring costs
 

 

 

 

 

 

 

Total
 
48,277

 
(3,702
)
 

 
(20,848
)
 
5,884

 
(18,666
)
 
29,611

Operating income (loss)
 
(16,190
)
 
3,702

 

 
20,848

 
(5,884
)
 
18,666

 
2,476

Investment and other income
 
490

 

 

 

 

 

 
490

Interest expense
 
(264
)
 

 

 

 

 

 
(264
)
Other expense - changes in fair value of related party payable
 
(1,828
)
 

 

 
1,828

 
(785
)
 
1,043

 
(785
)
Foreign exchange gain
 
1,249

 

 
(1,249
)
 

 

 
(1,249
)
 

Income (loss) before income taxes
 
(16,543
)
 
3,702

 
(1,249
)
 
22,676

 
(6,669
)
 
18,460

 
1,917

Income tax provision (benefit)
 
3,451

 
1,329

 

 
1,021

 
(385
)
 
1,965

 
5,416

Net income (loss)
 
$
(19,994
)
 
$
2,373

 
$
(1,249
)
 
$
21,655

 
$
(6,284
)
 
$
16,495

 
$
(3,499
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted(1)
 
(0.48
)
 
$
0.06

 
$
(0.03
)
 
$
0.53

 
$
(0.15
)
 
$
0.40

 
$
(0.08
)
Weighted average number of shares outstanding - diluted
 
41,241

 
41,241

 
41,241

 
41,241

 
41,241

 
41,241

 
41,241


(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.







https://cdn.kscope.io/a06a0cf7a5a4229301cf2ee44fa47737-q22017earningsrelease.jpg


 
 
 
 
GAAP to Non-GAAP adjustments for the nine-months ended September 30, 2017
 
 
 
 
 
 
 
 
Exclude
 
Include
 
 
 
 
 
 
GAAP
 
Intangible asset amortization
 
Foreign exchange (gain)/loss
 
Restructuring impacts
 
Purchase accounting adjustment - FSC
 
License revenue
adjustment
 
Contingent related party payable fair value adjustment
 
Contingent related party payable paid/accrued
 
Total adjustments
 
Adjusted GAAP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product sales and services
 
$
138,009

 
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$

 
$
138,009

License and research revenue
 
484

 

 

 

 

 
1,100

 

 

 
1,100

 
1,584

Total
 
138,493

 

 

 

 

 
1,100

 

 

 
1,100

 
139,593

Operating expenses:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Cost of products and services sold
 
12,253

 

 

 

 
(46
)
 

 

 

 
(46
)
 
12,207

Research and development
 
22,093

 

 

 

 

 

 

 

 

 
22,093

Selling, general and administrative
 
35,804

 

 

 

 

 

 

 

 

 
35,804

Intangible asset amortization
 
1,692

 
(1,692
)
 

 

 

 

 

 

 
(1,692
)
 

Changes in fair value of related party contingent consideration
 
(30,107
)
 

 

 

 

 

 
30,107

 
25,396

 
55,503

 
25,396

Restructuring charges
 
3,173

 

 

 
(3,173
)
 

 

 

 

 
(3,173
)
 

Total
 
44,908

 
(1,692
)
 

 
(3,173
)
 
(46
)
 

 
30,107

 
25,396

 
50,592

 
95,500

Operating income (loss)
 
93,585

 
1,692

 

 
3,173

 
46

 
1,100

 
(30,107
)
 
(25,396
)
 
(49,492
)
 
44,093

Investment and other income
 
2,689

 

 

 

 

 

 

 

 

 
2,689

Interest expense
 
(789
)
 

 

 

 

 

 

 

 

 
(789
)
Other expense - changes in fair value of related party payable
 
2,988

 

 

 

 

 

 
(2,988
)
 
(3,428
)
 
(6,416
)
 
(3,428
)
Foreign exchange gain
 
(127
)
 

 
127

 

 

 

 

 

 
127

 

Income (loss) before income taxes
 
98,346

 
1,692

 
127

 
3,173

 
46

 
1,100

 
(33,095
)
 
(28,824
)
 
(55,781
)
 
42,565

Income tax provision (benefit)
 
21,830

 
603

 

 

 
17

 

 
(1,776
)
 
(1,822
)
 
(2,978
)
 
18,852

Net income (loss)
 
$
76,516

 
$
1,089

 
$
127

 
$
3,173

 
$
29

 
$
1,100

 
$
(31,319
)
 
$
(27,002
)
 
$
(52,803
)
 
$
23,713

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted(1)
 
1.81

 
$
0.03

 
$

 
$
0.08

 
$

 
$
0.03

 
$
(0.74
)
 
$
(0.64
)
 
$
(1.25
)
 
$
0.56

Weighted average number of shares outstanding - diluted
 
42,194

 
42,194

 
42,194

 
42,194

 
42,194

 
42,194

 
42,194

 
42,194

 
42,194

 
42,194


(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.



https://cdn.kscope.io/a06a0cf7a5a4229301cf2ee44fa47737-q22017earningsrelease.jpg

 
 
 
 
GAAP to Non-GAAP adjustments for the nine-months ended September 30, 2016
 
 
 
 
 
 
 
 
Exclude
 
Include
 
 
 
 
 
 
GAAP
 
Intangible asset amortization
 
Foreign exchange (gain)/loss
 
Purchase accounting adjustments - FSC
 
Contingent related party payable fair value adjustment
 
Contingent related party payable paid/accrued
 
Total adjustments
 
Adjusted GAAP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Product sales and services
 
$
104,858

 
$

 
$

 
$

 
$

 
$

 
$

 
$
104,858

License and research revenue
 
2,303

 

 

 

 

 

 

 
2,303

Total
 
107,161

 

 

 

 

 

 

 
107,161

Operating expenses:
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of products and services sold
 
10,657

 

 

 
(1,525
)
 

 

 
(1,525
)
 
9,132

Research and development
 
21,135

 

 

 

 

 

 

 
21,135

Selling, general and administrative
 
33,491

 

 

 

 

 

 

 
33,491

Intangible asset amortization
 
10,918

 
(10,918
)
 

 

 

 

 
(10,918
)
 

Changes in fair value of related party contingent consideration
 
52,989

 

 

 

 
(52,989
)
 
19,321

 
(33,668
)
 
19,321

Total
 
129,190

 
(10,918
)
 

 
(1,525
)
 
(52,989
)
 
19,321

 
(46,111
)
 
83,079

Operating income (loss)
 
(22,029
)
 
10,918

 

 
1,525

 
52,989

 
(19,321
)
 
46,111

 
24,082

Investment and other income
 
1,080

 

 

 

 

 

 

 
1,080

Interest expense
 
(702
)
 

 

 

 

 

 

 
(702
)
Other expense - changes in fair value of related party payable
 
(6,135
)
 

 

 

 
6,135

 
(2,618
)
 
3,517

 
(2,618
)
Foreign exchange gain
 
(12
)
 

 
12

 

 

 

 
12

 

Income (loss) before income taxes
 
(27,798
)
 
10,918

 
12

 
1,525

 
59,124

 
(21,939
)
 
49,640

 
21,842

Income tax provision (benefit)
 
18,212

 
3,920

 

 
533

 
2,986

 
(1,165
)
 
6,274

 
24,486

Net income (loss)
 
$
(46,010
)
 
$
6,998

 
$
12

 
$
992

 
$
56,138

 
$
(20,774
)
 
$
43,366

 
$
(2,644
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share - diluted(1)
 
(1.12
)
 
$
0.17

 
$

 
$
0.02

 
$
1.36

 
$
(0.50
)
 
$
1.05

 
$
(0.07
)
Weighted average number of shares outstanding - diluted
 
41,241

 
41,241

 
41,241

 
41,241

 
41,241

 
41,241

 
41,241

 
41,241


(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.





q32017earningscallslides
Q3 2017 Earnings Conference Call September 8, 2017


 
2 Safe Harbor This presentation may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “project” and similar expressions, and the negatives thereof, identify forward-looking statements, each of which speaks only as of the date the statement is made. Although we believe that our forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business and operations, our business is subject to significant risks and as a result there can be no assurance that actual results of our research, development and commercialization activities and our results of operations will not differ materially from the results contemplated in such forward-looking statements. These risks include: (i) risks relating to our license agreement with Serenity Pharmaceuticals, LLC including that our internal analyses may overstate the market opportunity in the United States for the drug desmopressin acetate (the “Drug”) or we may not effectively exploit such market opportunity, that significant safety or drug interaction problems could arise with respect to the Drug, that we may not successfully increase awareness of nocturia and the potential benefits of the Drug, and that the need for management to focus attention on the development and commercialization of the Drug could cause our ongoing business operations to suffer; and (ii) the other risks, uncertainties and contingencies described in the Company's filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2016, in particular under the captions “Forward-Looking Statements” and “Risk Factors,” including without limitation: our dependence on a small number of products and customers for the majority of our revenues; the possibility that our Bloxiverz®,Vazculep® and Akovaz® products, which are not patent protected, could face substantial competition resulting in a loss of market share or forcing us to reduce the prices we charge for those products; the possibility that we could fail to successfully complete the research and development for pipeline products we are evaluating for potential application to the FDA pursuant to our "unapproved-to-approved" strategy, or that competitors could complete the development of such products and apply for FDA approval of such products before us; the possibility that our products may not reach the commercial market or gain market acceptance; our need to invest substantial sums in research and development in order to remain competitive; our dependence on certain single providers for development of several of our drug delivery platforms and products; our dependence on a limited number of suppliers to manufacture our products and to deliver certain raw materials used in our products; the possibility that our competitors may develop and market technologies or products that are more effective or safer than ours, or obtain regulatory approval and market such technologies or products before we do; the challenges in protecting the intellectual property underlying our drug delivery platforms and other products; and our dependence on key personnel to execute our business plan. Except as may be required by law, we disclaim any obligation to publicly update any forward-looking statements to reflect events after the date of this presentation.


 
3 Strategy Execution Cash Generation Proprietary Product Development Business Development $39.7 Million Q3 Revenues $30 Million in Operating Cash Flow YTD REST-ON Phase III Trial of FT218, Micropump® Sodium Oxybate In-licensed Noctiva™ on September 1, 2017 Continued Growth Through Cash Generation, Application of Proprietary Technology and Business Development Noctiva is not yet available for prescription For full prescribing and important safety information please see slide 16 in the appendix


 
4 Noctiva™ First & Only FDA Approved Product to Treat Nocturia due to Nocturnal Polyuria in Adults Noctiva: Proprietary, low-dose (7 – 27x lower than existing forms), intranasal desmopressin acetate formulation Condition: Nocturia due to nocturnal polyuria causes patients to awaken 2 or more times / night to urinate Prevalence: ~40 million U.S. patients with nocturia* Diagnosed: Independent research & claims data estimate 3 million patients diagnosed & on some form of treatment * *Data on file Noctiva is not yet available for prescription For full prescribing and important safety information please see slide 16 of the appendix


 
5 Hospital Products *Based on IMS data For full prescribing information for Bloxiverz, Vazculep and Akovaz, please see slide 17 of the appendix **AV001 is part of Avadel’s Unapproved Marketed Drug (UMD) strategy, for which it takes currently unapproved products through the FDA approval process Bloxiverz® ~35% share of neostigmine market volume in Q3* Four competing neostigmine products during the 3rd quarter Sugammadex has taken ~ 50% neostigmine volume* Akovaz® ~42% share of ephedrine sulfate market volume in Q3* Four competing neostigmine products during the 3rd quarter More competition expected in 2018 Vazculep® ~40% share of 1mL vial volume 100% share of 5mL & 10mL vial volume* Two competing 1mL formats More competition expected in 2018 AV001** Undisclosed sterile injectable product Market value ~$30 - $40 million Filing mid-2018 Hospital Products Accounted for $38 Million of 3Q 2017 Revenues


 
6 REST-ON Progress 5 of 6 sites active in Canada 24 of 31 sites active in US 16 of 18 sites active in Europe Additional sites to be added in US and UK Sodium Oxybate Naïve Criterion Remains High Hurdle During Screening Process For more details on our clinical trial, please visit www.rethinknarcolepsy.com


 
7 Non-GAAP Financial Results *Reconciliations from GAAP to Non-GAAP can be found in the appendix Three Months Ended (in 000s) 09/30/17 06/30/17 09/30/16 Sales $ 39,675 $ 47,411 $ 32,087 Cost of products and services sold 3,790 4,561 2,844 Research and development expenses 8,095 6,792 8,143 Selling, general and admin expenses 11,563 12,429 12,740 Intangible asset amortization — — — Restructuring costs — — — Operating Expenses 23,448 23,782 23,727 Contingent consideration payments and accruals 7,264 8,516 5,884 Operating income (loss) 8,963 15,113 2,476 Interest and other expense (net) 847 264 226 Other expense - contingent consideration payments and accruals (963) (1,166) (785) Income (loss) before income taxes 8,847 14,211 1,917 Income tax provision 5,100 6,046 5,416 Net income (loss) $ 3,747 $ 8,165 $ (3,499) Diluted earnings (loss) per share $ 0.09 $ 0.19 $ (0.08) (in $000s, except for per share amounts)


 
8 GAAP Financial Results Three Months Ended (in 000s) 09/30/17 06/30/17 09/30/16 Sales $ 39,675 $ 46,311 $ 32,087 Cost of products and services sold 3,790 4,561 2,844 Research and development expenses 8,095 6,792 8,143 Selling, general and admin expenses 11,563 12,429 12,740 Intangible asset amortization 564 564 3,702 Restructuring costs (549) 1,069 — Operating Expenses 23,463 25,415 27,429 (Gain)/loss - changes in fair value of related party contingent consideration (9,906) (13,230) 20,848 Operating income (loss) 26,118 34,126 (16,190) Interest and other expense (net) 714 501 1,475 Other income (expense) - changes in fair value of related party payable 768 1,670 (1,828) Income (loss) before income taxes 27,600 36,297 (16,543) Income tax provision 5,921 7,370 3,451 Net income (loss) $ 21,679 $ 28,927 $ (19,994) Diluted earnings (loss) per share $ 0.52 $ 0.68 $ (0.48) (in $000s, except for per share amounts)


 
9 Revenues (GAAP) (in $000's) Q3 2017 Q2 2017 Q3 2016 Q3 2017 vs. Q2 2017 Q3 2017 vs. Q3 2016 Bloxiverz $ 9,920 $ 13,719 $ 15,591 $ (3,799) $ (5,671) Vazculep 9,573 10,154 9,340 (581) 233 Akovaz 18,561 20,912 5,568 (2,351) 12,993 Other 1,093 2,320 841 (1,227) 252 Total product sales and services 39,147 47,105 31,340 (7,958) 7,807 License and research revenue 528 794 747 (266) (219) Total revenues $ 39,675 $ 47,899 $ 32,087 $ (8,224) $ 7,588


 
10 Cash Flow Summary (in $000's) Nine Months Ended September 30, Total Cash and Marketable Securities 2017 2016 Beginning Balance 154,195 144,802 Operating Cash Flows (excl tax and earnout payments) 73,258 49,636 Earnout/Royalty Payments (29,136) (24,227) Income Taxes (14,605) (22,200) Acquisition of Noctiva Asset (52,139) — Share Repurchases (16,707) — Capital Spending (533) (1,000) Other 1,277 2,656 Change in Total (38,585) 4,865 Ending Balance 115,610 149,667


 
11 2017 Non - GAAP Guidance 2017 Guidance Updated Previous Sales $165M - $175M $165M - $175M R&D Expense $30M - $35M $30M - $40M Income Tax Rate 55% - 65% 60% - 70% Diluted EPS (Adjusted) $0.25 - $0.35 $0.30 - $0.45


 
12 APPENDIX


 
13 GAAP to NON-GAAP Reconciliations GAAP to Non-GAAP adjustments for the three-months ended September 30, 2017 Exclude Include GAAP Intangible asset amortization Foreign exchange (gain)/loss Restructuring impacts Contingent related party payable fair value adjustment Contingent related party payable paid/accrued Total adjustments Adjusted GAAP Revenues: Product sales and services 39,147 — — — — — — 39,147 License and research revenue 528 — — — — — — 528 Total 39,675 — — — — — — 39,675 Operating expenses: Cost of products and services sold 3,790 — — — — — — 3,790 Research and development 8,095 — — — — — — 8,095 Selling, general and administrative 11,563 — — — — — — 11,563 Intangible asset amortization 564 (564) — — — — (564) — Changes in fair value of related party contingent consideration (9,906) — — — 9,906 7,264 17,170 7,264 Restructuring costs (549) — — 549 — — 549 — Total 13,557 (564) — 549 9,906 7,264 17,155 30,712 Operating income (loss) 26,118 564 — (549) (9,906) (7,264) (17,155) 8,963 Investment and other income 1,110 — — — — — — 1,110 Interest expense (263) — — — — — — (263) Other expense - changes in fair value of related party payable 768 — — — (768) (963) (1,731) (963) Foreign exchange gain (133) — 133 — — — 133 — Income (loss) before income taxes 27,600 564 133 (549) (10,674) (8,227) (18,753) 8,847 Income tax provision (benefit) 5,921 201 — — (507) (515) (821) 5,100 Net income (loss) 21,679 363 133 (549) (10,167) (7,712) (17,932) 3,747 Net income (loss) per share - diluted(1) 0.52 0.01 — (0.01) (0.25) (0.19) (0.43) 0.09 Weighted average number of shares outstanding - diluted 41,339 41,339 41,339 41,339 41,339 41,339 41,339 41,339 (in $000s, except for per share amounts)


 
14 GAAP to NON-GAAP Reconciliations GAAP to Non-GAAP adjustments for the three-months ended June 30, 2017 Exclude Include GAAP Intangible asset amortization Foreign exchange (gain)/loss Restructuring impacts License revenue adj. Contingent related party payable fair value adjustment Contingent related party payable paid/accrued Total adjustments Adjusted GAAP Revenues: Product sales and services $ 47,105 $ — $ — $ — $ — $ — $ — $ — $ 47,105 License and research revenue (794) — — — 1,100 — — 1,100 306 Total 46,311 — — — 1,100 — — 1,100 47,411 Operating expenses: Cost of products and services sold 4,561 — — — — — — — 4,561 Research and development 6,792 — — — — — — — 6,792 Selling, general and administrative 12,429 — — — — — — — 12,429 Intangible asset amortization 564 (564) — — — — — (564) — Changes in fair value of related party contingent consideration (13,230) — — — — 13,230 8,516 21,746 8,516 Restructuring costs 1,069 — — (1,069) — — — (1,069) — Total 12,185 (564) — (1,069) — 13,230 8,516 20,113 32,298 Operating income (loss) 34,126 564 — 1,069 1,100 (13,230) (8,516) (19,013) 15,113 Investment and other income 527 — — — — — — — 527 Interest expense (263) — — — — — — — (263) Other expense - changes in fair value of related party payable 1,670 — — — — (1,670) (1,166) (2,836) (1,166) Foreign exchange gain 237 — (237) — — — — (237) — Income (loss) before income taxes 36,297 564 (237) 1,069 1,100 (14,900) (9,682) (22,086) 14,211 Income tax provision (benefit) 7,370 201 — — — (909) (616) (1,324) 6,046 Net income (loss) $ 28,927 $ 363 $ (237) $ 1,069 $ 1,100 $ (13,991) $ (9,066) $ (20,762) $ 8,165 Net income (loss) per share - diluted(1) 0.68 $ 0.01 $ (0.01) $ 0.03 $ 0.03 $ (0.33) $ (0.21) $ (0.49) $ 0.19 Weighted average number of shares outstanding - diluted 42,487 42,487 42,487 42,487 42,487 42,487 42,487 42,487 42,487 (in $000s, except for per share amounts)


 
15 GAAP to NON-GAAP Reconciliations GAAP to Non-GAAP adjustments for the three-months ended September 30, 2016 Exclude Include GAAP Intangible asset amortization Foreign exchange (gain)/loss Contingent related party payable fair value adjustment Contingent related party payable paid/accrued Total adjustments Adjusted GAAP Revenues: Product sales and services 31,340 — — — — — 31,340 License and research revenue 747 — — — — — 747 Total 32,087 — — — — — 32,087 Operating expenses: Cost of products and services sold 2,844 — — — — — 2,844 Research and development 8,143 — — — — — 8,143 Selling, general and administrative 12,740 — — — — — 12,740 Intangible asset amortization 3,702 (3,702) — — — (3,702) — Changes in fair value of related party contingent consideration 20,848 — — (20,848) 5,884 (14,964) 5,884 Restructuring costs — — — — — — — Total 48,277 (3,702) — (20,848) 5,884 (18,666) 29,611 Operating income (loss) (16,190) 3,702 — 20,848 (5,884) 18,666 2,476 Investment and other income 490 — — — — — 490 Interest expense (264) — — — — — (264) Other expense - changes in fair value of related party payable (1,828) — — 1,828 (785) 1,043 (785) Foreign exchange gain 1,249 — (1,249) — — (1,249) — Income (loss) before income taxes (16,543) 3,702 (1,249) 22,676 (6,669) 18,460 1,917 Income tax provision (benefit) 3,451 1,329 — 1,021 (385) 1,965 5,416 Net income (loss) (19,994) 2,373 (1,249) 21,655 (6,284) 16,495 (3,499) Net income (loss) per share - diluted(1) (0.48) 0.06 (0.03) 0.53 (0.15) 0.40 (0.08) Weighted average number of shares outstanding - diluted 41,241 41,241 41,241 41,241 41,241 41,241 41,241 (in $000s, except for per share amounts)


 
16 Noctiva™ (desmopressin acetate) Boxed Warning WARNING: HYPONATREMIA NOCTIVA can cause hyponatremia. Severe hyponatremia can be life-threatening, leading to seizures, coma, respiratory arrest, or death. NOCTIVA is contraindicated in patients at increased risk of severe hyponatremia, such as patients with excessive fluid intake, illnesses that can cause fluid or electrolyte imbalances, and in those using loop diuretics or systemic or inhaled Glucocorticoids. Ensure serum sodium concentrations are normal before starting or resuming NOCTIVA. Measure serum sodium within seven days and approximately one month after initiating therapy or increasing the dose, and periodically during treatment. More frequently monitor serum sodium in patients 65 years of age and older and in patients at increased risk of hyponatremia. If hyponatremia occurs, NOCTIVA may need to be temporarily or permanently discontinued.


 
17 Product & Safety Information www.bloxiverz.com www.vazculep.com www.akovaz.com Full Prescribing & Safety Information www.karbinaler.com http://www.aciphexsprinkle.com http://cefaclororal.com http://flexichamber.com Akovaz® Bloxiverz® Vazculep® Noctiva™ Karbinal™ER Aciphex®Sprinkle™ Cefaclor Flexichamber®