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Mail Stop 3561
June 5, 2018
Via E-mail
Brian Markison
Chief Executive Officer
Osmotica Pharmaceuticals plc
400 Crossing Boulevard
Bridgewater, NJ 08807
Re: Osmotica Pharmaceuticals plc
Draft Registration Statement on Form S-1
Submitted May 9, 2018
CIK No. 0001739426
Dear Mr. Markison:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
General
1. Please supplementally provide us with copies of all written
communications, as defined
in Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your
behalf, present to potential investors in reliance on Section 5(d) of
the Securities Act,
whether or not they retain copies of the communications.
Prospectus Summary
Summary Financial Data, page 9
2. We note you make several adjustments in reconciling net loss to non-GAAP
adjusted
EBITDA measure. Please address the following:
Brian Markison
Osmotica Pharmaceuticals plc
June 5, 2018
Page 2
We note your adjustment (d) to remove the step-up cost of the
acquired
inventory. Please explain to us in detail the adjustments and tell
us how you
determined that these adjustments are appropriate when they appear
to result in
individually tailored expense recognition methods. Refer to Question
100.04 of the
Non-GAAP Compliance and Disclosure Interpretations issued on May 17,
2016.
Please explain to us the royalty income adjustment (e) and how you
determined that
this adjustment is appropriate. Revise the description as necessary.
Risk Factors
We have broad discretion in the use of the net proceeds ..., page 59
3. We note your statement that "our management will have broad discretion
in the
application of the net proceeds ... their ultimate use may vary
substantially from their
currently intended use." Please note that you may reserve the right to
change the use of
proceeds, provided that the contingencies are specifically discussed and
the alternatives
to such use are indicated. Please revise your disclosure as appropriate.
Use of Proceeds, page 68
4. Please disclose the maturity of the senior secured credit facilitates
that you will repay.
See Item 4 of Form S-1 and Item 504 of Regulation S-K.
Capitalization, page 70
5. Please revise to disclose in detail the adjustments made in arriving at
the pro forma and
pro forma as adjusted amounts.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Comparison of Years Ended December 31, 2017 and 2016, page 79
6. Please disclose the change in volume for Venlafaxine ER from
year-to-year. Also, please
include a discussion if the decline in revenues due to the introduction
of competitor
products is a known trend that may have a material impact on your
revenues in the future.
Additionally, please disclose the one prenatal vitamin line that was
discontinued during
2017 in the OB Complete line of products. See Item 303(a)(3)(iii) of
Regulation S-K and
Section III.B.3 of SEC Release 33-8350 available on the SEC website
Research and Development, page 82
7. Please expand your disclosure to include the total costs incurred during
each period
presented for your key research and development projects.
Brian Markison
Osmotica Pharmaceuticals plc
June 5, 2018
Page 3
Impairment of Intangible Assets, page 82
8. We note you impaired your product rights, developed technologies and
IPR&D by $7.1
million, $8.8 million and $56.1 million respectively in fiscal 2017. In
order to provide
investors with a better understanding of your financial condition and
results of
operations, please expand your disclosure to separately identify the
underlying products
or projects that are associated with these impairments. For any
individually material
impairment, quantify the charge taken, and expand your disclosure to
address the
underlying causes, including trends, demands, events or uncertainties
that gave rise to the
impairment. Refer to Item 303(a)(3) of Regulation S-K and SEC Release
No. 33-8350.
Osmotica Holdings S.C.Sp. and Subsidiaries Financial Statements
Consolidated Statement of Changes in Partner's Capital, page F-5
9. Please explain in detail the transaction "Valkyrie tax adjustment" in
the amount of
$4,280,774 and the basis for your accounting. Please revise the notes to
financial
statements as appropriate.
Note 3. Business Combination and Other Strategic Investments
Legacy Osmotica Business Combination, page F-23
10. We note you acquired Osmotica Holdings Corporation Limited, or Legacy
Osmotica, as
of February 3, 2016. Please tell us how your determination of the
purchase price of $645
million complies with ASC 805-30-30-7. In this regard, we note that you
transferred
consideration to the former owners of Legacy Osmotica of $325 million of
cash and
contributed your equity interests in Vertical/Trigen valued at $200
million to Osmotica
Holdings S.C. Sp. Please also provide details sufficient to understand
the underlying
values of equity interests contributed as part of this transaction.
Note 5. Inventories, page F-27
11. We note your accounting policy on page F-12 that you capitalize
inventory costs
associated with the products prior to regulatory approval. Please
disclose the amount of
capitalized inventory costs associated with products that have not yet
achieved regulatory
approval for all periods presented. Discuss any contingencies needed to
be resolved prior
to obtaining FDA approval and the related risks and uncertainties in
critical accounting
estimates section.
Note 7. Goodwill and Other Intangible Assets, page F-29
12. We note significant portion of the purchase price for the acquisition of
Legacy Osmotica
was allocated to in-process research and development. Please provide the
following
disclosures.
Brian Markison
Osmotica Pharmaceuticals plc
June 5, 2018
Page 4
Describe each significant IPR&D project acquired;
Disclose the state of completion at acquisition and the extent of
effort necessary to
complete the in-process project(s); and
Present the fair value assigned to each project acquired and
projected costs to
complete by project.
13. We note the tables at pages F-29 and F-30 indicate that you reclassified
$25.2 million and
$264 million of IPR&D to product rights due to product launches during
the years ended
December 31, 2016 and 2017. Please expand your disclosure to identify
the specific
products that were reclassified.
Note 11. Incentive Plans, page F-38
14. We note your units are not publicly traded. Please disclose how you
determined the fair
value of the underlying unit, the estimated grant-date fair value of the
awards and the
assumptions used in calculating the fair value of stock-based awards.
Note 13. Income taxes, page F-44
15. Please disclose the amount of undistributed earnings of your foreign
subsidiaries for the
periods presented as required by ASC 740-30-50-2.
Note 15. Segment Reporting, page F-49
16. Please tell us how you considered the guidance in ASC 280-10-50-40 in
providing
disclosure regarding revenues by product. In this regard, we note that
you describe your
products as either "promoted" or "non-promoted" at pages 76 and 101 and
that you
provide disaggregated information by individual product at page 80 of
management's
discussion and analysis.
Osmotica Pharmaceuticals Limited
Financial Statements
Notes to Financial Statements
1. Organization and Nature of Operations, page f-54
17. Please disclose the date of your fiscal year end.
Brian Markison
Osmotica Pharmaceuticals plc
June 5, 2018
Page 5
You may contact Raj Rajan at (202) 551-3388 or Craig Arakawa at (202)
551-3650 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Michael Killoy at (202) 551-7576 or David Link at (202) 551-3356 with
any other
questions.
Sincerely,
/s/ David Link for
John Reynolds
Assistant Director
Office of Beverages,
Apparel,
and Mining
cc: Craig E. Marcus, Esq.
Ropes & Gray LLP