Avadel Pharmaceuticals Enters into Royalty Agreement with RTW Investments for up to $75 Million
Avadel Pharmaceuticals plc, a biopharmaceutical company focused on transforming medicines to transform lives, announced its entry into a royalty agreement with RTW Investments, LP and certain of its affiliates (“RTW”) for up to $75 million to support the potential commercialization of LUMRYZ™ for the treatment of cataplexy or excessive daytime sleepiness (EDS) in adults with narcolepsy. Concurrently, the company extended the maturity of $96.2 million of its convertible notes to 2027.
“These critical financing activities, including a non-dilutive source of capital with the royalty agreement, as well as the extension of the maturity on $96.2 million of our convertible notes, provides Avadel with added financial flexibility to support the potential commercialization of LUMRYZ for people living with narcolepsy. Further, we are pleased to have the continued support of RTW Investments, a premier partner known for its strategic investments in promising healthcare companies and assets,” said Greg Divis, Chief Executive Offer at Avadel Pharmaceuticals. “The execution of both of these agreements speaks to the potential of LUMRYZ and our aligned confidence in the commercial opportunity ahead as we endeavor on our vision to bring LUMRYZ to the narcolepsy community.”
Under the terms of the royalty agreement, RTW will provide up to $75 million of non-dilutive synthetic royalty financing commitment to Avadel in return for tiered rate, cash royalty payments based on net sales of LUMRYZ in the U.S. RTW will receive royalty rates ranging from low to high single digits based on a certain quarterly sales threshold. Royalty funds become available upon achieving certain regulatory and financial milestones and other customary closing conditions.
Under the terms of the convertible note exchange (the “Exchange”), $96.2 million of the existing $117.4 million convertible notes that would have been due in October 2023 will now be due on April 1, 2027. Following the closing of the Exchange, approximately $21.2 million in existing notes will remain outstanding with terms unchanged. The Exchange is expected to close on April 3, 2023, subject to customary closing conditions.
“Today’s investment reflects our confidence in Avadel and LUMRYZ’s commercial prospects in narcolepsy. The narcolepsy community is eager for an innovative therapy that would relieve them of middle of the night dosing. We are excited to support the company at this important stage of transformation towards a commercial organization,” said Roderick Wong, MD, Managing Partner and Chief Investment Officer of RTW Investments, LP.
BofA Securities acted as sole structuring agent for Avadel on the royalty agreement transaction. JWood Capital Advisors LLC and Jefferies LLC acted as financial advisors on the convertible note exchange. Goodwin Procter LLP acted as legal advisor to Avadel. Gibson Dunn & Crutcher LLP acted as legal advisor to RTW.