SEC Filing | RVL Pharmaceuticals

View:

Download DOC

Download PDF

Download XLS

Download XBRL

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38709

RVL Pharmaceuticals plc

(Exact name of registrant as specified in its charter)


Ireland		Not Applicable
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

400 Crossing Boulevard

Bridgewater, NJ 08807

(Address of principal executive offices)

(Zip Code)

(908) 809-1300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary shares, $0.01 nominal value per share	RVLP	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

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. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

There were 99,149,955 ordinary shares ($0.01 nominal value per share) outstanding as of August 10, 2022.

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "plan," "should," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives and financial needs. Examples of forward-looking statements include, among others, statements we make regarding: our intentions, beliefs or current expectations concerning, among other things, future operations; future financial performance, trends and events, particularly relating to sales of Upneeq; U.S. Food and Drug Administration, or the FDA, and other regulatory applications, approvals and actions; the continuation of historical trends; our ability to manage costs and service our debt; and the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs.

We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place significant reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include the following:

●

Due to our dependence on one product, Upneeq, our business could be materially adversely affected if Upneeq does not perform as well as expected.

●

Our business may be adversely affected by the ongoing coronavirus outbreak.

●

Upneeq may fail to achieve market acceptance by clinicians and patients, or others in the medical community, and the market opportunity for Upneeq may be smaller than we estimate.

●

If we are unable to successfully commercialize Upneeq, or develop new products, on a timely or cost effective basis, our operating results will suffer.

●

Our profitability depends on our customers’ willingness to pay the price we charge for Upneeq. If we decide to lower the price we charge for Upneeq our profitability could materially suffer.

●

Our marketing and sales expenditures may not result in the commercial success of Upneeq.

●

There is no certainty that we will be able to get FDA approval of arbaclofen extended release (“ER”) and no certainty that we will be able to realize any value for arbaclofen ER if we decide to license or divest the product.

●

We expend a significant amount of resources on research and development, including milestones on in licensed products, which may not lead to successful product introductions.

●

If we are unable to maintain our sales, marketing and distribution capabilities, or establish additional capabilities if and when necessary, we may not be successful in commercializing Upneeq.

●

We depend to a large extent on third-party suppliers and distributors for Upneeq, including Nephron Pharmaceuticals, and if such suppliers and distributors are unable to supply raw materials for manufacture and deliver Upneeq in a timely manner, or are unable to manufacture Upneeq at a scale sufficient to meet demand, it could have material adverse effect on our business, financial position and results of operations.

●

If Upneeq does not produce the intended effects, our business may suffer.

Table of Contents

●

Failures of or delays in clinical trials are common and have many causes, and such failures or delays could result in increased costs to us and could prevent or delay our ability to obtain regulatory approval and commence product sales for new products.

●

The drug regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

●

We are, and will continue to be in the future, a party to legal proceedings that could result in adverse outcomes.

●

Other factors that are described in Part 1, Item 1A "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2022.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Table of Contents

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited).	5
Unaudited Condensed Consolidated Balance Sheets – June 30, 2022 and December 31, 2021	5
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and Six Months Ended June 30, 2022 and 2021	6
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity – Three and Six Months Ended June 30, 2022 and 2021	7
Unaudited Condensed Consolidated Statements of Cash Flows – Three and Six Months Ended June 30, 2022 and 2021	8
Notes to Unaudited Condensed Consolidated Financial Statements	9
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	21
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.	31
ITEM 4. Controls and Procedures.	31
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.	32
ITEM 1A. Risk Factors.	32
ITEM 6. Exhibits.	33

SIGNATURES	34

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements (unaudited).

RVL PHARMACEUTICALS PLC

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)


	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	27,413	$	40,444
Other receivables		1,833		2,133
Inventories, net		528		838
Prepaid expenses and other current assets		9,287		12,901
Financial commitment asset		1,128		3,063
Total current assets		40,189		59,379
Property, plant and equipment, net		713		866
Operating lease assets		871		1,368
Indefinite-lived intangible assets		27,210		27,210
Goodwill		55,847		55,847
Total assets	$	124,830	$	144,670
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable	$	5,437	$	3,777
Accrued liabilities		11,947		13,077
Current portion of debt		607		2,409
Current portion of obligations under finance leases		1		5
Current portion of lease liability		552		839
Income taxes payable - current portion		11		1
Total current liabilities		18,555		20,108
Long-term debt (measured at fair value and representing $55,000 of aggregate unpaid principal)		42,900		43,800
Warrant liability		4,273		3,220
Long-term portion of lease liability		349		592
Income taxes payable - long term portion		68		66
Deferred taxes		174		151
Total liabilities		66,319		67,937
Commitments and contingencies (see Note 11)
Shareholders' equity:
Ordinary shares ($0.01 nominal value, 400,000,000 shares authorized, 83,617,567 and 83,297,567 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively)		836		833
Preferred shares ($0.01 nominal value, 40,000,000 shares authorized, no shares issued and outstanding)		—		—
Euro deferred shares (€1.00 nominal value, 25,000 shares authorized, no shares issued and outstanding)		—		—
Additional paid in capital		594,132		591,730
Accumulated deficit		(536,457)		(517,530)
Accumulated other comprehensive income		—		1,700
Total shareholders' equity		58,511		76,733
Total liabilities and shareholders' equity	$	124,830	$	144,670

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

RVL PHARMACEUTICALS PLC

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Net product sales	$	8,448	$	1,482	$	14,392	$	2,255
Royalty revenue		—		28		—		190
Licensing revenue		—		10,000		15,500		10,000
Total revenues		8,448		11,510		29,892		12,445
Cost of goods sold		2,227		709		4,371		1,388
Gross profit		6,221		10,801		25,521		11,057
Selling, general and administrative expenses		20,169		21,047		44,003		37,999
Research and development expenses		1,176		2,052		2,038		4,256
Impairment of intangible assets		—		7,880		—		7,880
Total operating expenses		21,345		30,979		46,041		50,135
Operating loss before gain on sales of product rights, net		(15,124)		(20,178)		(20,520)		(39,078)
Gain on sales of product rights, net		—		—		—		5,636
Operating loss		(15,124)		(20,178)		(20,520)		(33,442)
Interest expense and amortization of debt discount		978		494		1,963		1,015
Change in fair value of debt and interest expense		(740)		—		304		—
Change in fair value of warrants		(3,455)		—		1,053		—
Other non-operating (income) expense, net		(78)		1,202		(5,115)		1,193
Total other non-operating (income) expense		(3,295)		1,696		(1,795)		2,208
Loss before income taxes		(11,829)		(21,874)		(18,725)		(35,650)
Income tax expense, continuing operations		277		94		202		90
Loss from continuing operations		(12,106)		(21,968)		(18,927)		(35,740)
Income from discontinued operations before income taxes		—		4,454		—		9,153
Income tax expense, discontinued operations		—		213		—		752
Income from discontinued operations, net of tax		—		4,241		—		8,401
Net loss	$	(12,106)	$	(17,727)	$	(18,927)	$	(27,339)
Change in fair value of debt due to change in credit risk, net of tax		—		—		(1,700)		—
Comprehensive loss	$	(12,106)	$	(17,727)	$	(20,627)	$	(27,339)
(Loss) earnings per ordinary share:
Basic and diluted, continuing operations	$	(0.14)	$	(0.35)	$	(0.23)	$	(0.57)
Basic and diluted, discontinued operations		—		0.07		—		0.13
Basic and diluted	$	(0.14)	$	(0.28)	$	(0.23)	$	(0.44)
Weighted average ordinary shares outstanding:
Basic and diluted		83,580,906		62,767,400		83,535,655		62,723,011

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

RVL PHARMACEUTICALS PLC

Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except share data)


									Accumulated
									other
	Ordinary shares				Additional		Accumulated		comprehensive		Total
	Shares		Amount		paid in capital		deficit		income (loss)		shareholders' equity
Balance at January 1, 2021		62,545,832	$	625	$	548,070	$	(452,610)	$	(2,229)	$	93,856
Share compensation		173,299		2		1,309		—		—		1,311
Net loss		—		—		—		(9,612)		—		(9,612)
Payments for taxes related to the net share settlement of equity awards		—		—		(358)		—		—		(358)
Balance at March 31, 2021		62,719,131	$	627	$	549,021	$	(462,222)	$	(2,229)	$	85,197
Share compensation		128,931		1		1,232		—		—		1,233
Net loss		—		—		—		(17,727)		—		(17,727)
Payments for taxes related to the net share settlement of equity awards		—		—		(249)		—		—		(249)
Balance at June 30, 2021		62,848,062	$	628	$	550,004	$	(479,949)	$	(2,229)	$	68,454

Balance at January 1, 2022		83,297,567	$	833	$	591,730	$	(517,530)	$	1,700	$	76,733
Share compensation		217,844		2		1,326		—		—		1,328
Net loss		—		—		—		(6,821)		—		(6,821)
Payments for taxes related to the net share settlement of equity awards		—		—		(57)		—		—		(57)
Change in credit risk associated with fair value of debt		—		—		—		—		(1,700)		(1,700)
Balance at March 31, 2022		83,515,411	$	835	$	592,999	$	(524,351)	$	—	$	69,483
Share compensation		102,156		1		1,207		—		—		1,208
Net loss		—		—		—		(12,106)		—		(12,106)
Payments for taxes related to the net share settlement of equity awards		—		—		(74)		—		—		(74)
Balance at June 30, 2022		83,617,567	$	836	$	594,132	$	(536,457)	$	—	$	58,511

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

RVL PHARMACEUTICALS PLC

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


	Six Months Ended June 30,
	2022		2021
Cash Flows from Operating Activities:
Net loss from continuing operations	$	(18,927)	$	(35,740)
Net income from discontinued operations		—		8,401
Net loss		(18,927)		(27,339)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		180		7,914
Share compensation		2,418		2,409
Change in fair value of debt		(2,600)		—
Change in fair value of warrants		1,053		—
Impairment of intangible assets		—		7,880
Deferred income tax benefit		23		267
(Gain) loss on sale of fixed and leased assets		(94)		1,244
Gain on sale of product rights, net		—		(5,636)
Amortization of deferred financing and loan origination fees		1,935		552
Write off of deferred financing and loan origination fees		—		37
Change in operating assets and liabilities:
Other receivables		300		3,875
Inventories, net		310		1,606
Prepaid expenses and other current assets		3,614		(1,004)
Trade accounts payable		1,659		(1,004)
Accrued and other current liabilities		(1,151)		(5,209)
Net cash used in operating activities		(11,280)		(14,408)
Cash Flows from Investing Activities:
Proceeds from product rights disposal		—		7,300
Proceeds from sale of fixed and leased assets		94		25
Purchases of property, plant and equipment		(27)		(1,398)
Net cash provided by investing activities		67		5,927
Cash Flows from Financing Activities:
Payments on finance lease obligations		(4)		(27)
Payments on insurance financing loan		(1,802)		—
Payments for taxes related to net share settlement of share-based awards		(131)		(607)
Proceeds from issuance of ordinary shares under ESPP		119		139
Debt repayments		—		(5,300)
Net cash used in financing activities		(1,818)		(5,795)
Net change in cash and cash equivalents		(13,031)		(14,276)
Cash and cash equivalents, beginning of period		40,444		114,053
Cash and cash equivalents, end of period	$	27,413	$	99,777

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Organization and Nature of Operations

RVL Pharmaceuticals plc, an Irish public limited company, together with its subsidiaries (the “Company”), is a specialty pharmaceutical company focused on the development and commercialization of products that target markets with underserved patient populations. In July 2020, the Company received regulatory approval from the FDA for RVL-1201, or Upneeq, (oxymetazoline hydrochloride ophthalmic solution), 0.1%, for the treatment of acquired blepharoptosis, or droopy or low-lying eyelids in adults. Upneeq was commercially launched in September 2020 to a limited number of eye care professionals with commercial operations expanded in 2021 among ophthalmology, optometry and oculoplastic specialties. In February 2022, Upneeq was commercially expanded into the medical aesthetics market.

On August 27, 2021, the Company closed the divestiture of its portfolio of branded and non-promoted products and its Marietta, Georgia, manufacturing facility (the “Legacy Business”) to certain affiliates of Alora Pharmaceuticals (“Alora”) for $111 million in cash upon closing, subject to certain adjustments, and up to $60 million in additional contingent milestone payments. Pursuant to the agreement the Company retained the rights to Upneeq and to arbaclofen extended release (“ER”) tablets which is under development for the treatment of spasticity in multiple sclerosis.

With the divestiture of the Legacy Business the Company’s commercial operations are conducted by its wholly-owned subsidiaries, RVL Pharmaceuticals, Inc. (“RVL Pharmaceuticals”) and RVL Pharmacy, LLC, (“RVL Pharmacy”). RVL Pharmacy operates pharmacy operations dedicated to the processing and fulfillment of prescriptions for Upneeq.

Unless otherwise indicated or required by the context, references throughout to “RVL,” or the “Company,” refer to the Company’s continuing operations following the sale of the Legacy Business to Alora.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and under the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. In management’s opinion, the interim financial data presented herein includes all adjustments (consisting solely of normal, recurring adjustments) that are necessary for a fair presentation. All intercompany accounts and transactions have been eliminated. Certain information required by U.S. GAAP has been condensed or omitted in accordance with rules and regulations of the SEC. The operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2022 or any period thereafter. The accompanying condensed consolidated balance sheet data as of December 31, 2021 was derived from the audited consolidated financial statements.

Management believes that the disclosures included herein are adequate to make the information presented not misleading in any material respect when read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Those audited consolidated financial statements include a summary of our significant accounting policies, updates to which are included in this Note 2.

Discontinued Operations—Upon divestiture of a business, the Company classifies such business as a discontinued operation, if the divested business represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The results of businesses that have qualified as discontinued operations have been presented as such for all reporting periods. Results of discontinued operations include all revenues and expenses directly derived from such businesses; general corporate overhead is not allocated to discontinued operations. Reclassification changes to the accompanying unaudited condensed consolidated statement of cash flows have been made to conform to the current period presentation.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The divestiture of the Legacy Business qualifies as a discontinued operation and therefore has been presented as such. See Note 4, Discontinued Operations, for more information.

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported throughout the financial statements. Actual results could differ materially from those estimates.

Supplemental Cash Flow Disclosures—Supplemental cash flow disclosures are as follows (in thousands):


	Six Months Ended June 30,
	2022		2021
Cash paid for:
Interest	$	2,931	$	5,349
Income taxes	$	142	$	1,913

Recently Issued Accounting Standards

In August 2020, the FASB issued Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This standard simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The standard requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance related to the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. The standard, which allows entities to adopt the guidance through either a modified or fully retrospective method of transition, becomes effective for the Company, as a smaller reporting company, for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company is currently assessing the impact of adoption of ASU 2020-06.

There are no other recently issued accounting standards that are expected to have a material impact to the Company’s financial position or results of operations upon adoption.

Note 3. Liquidity

At June 30, 2022, the Company had cash and cash equivalents of $27.4 million, an accumulated deficit of $536.5 million, and total long-term debt with aggregate principal maturities of $55.0 million, with such maturities commencing in March 2024 and extending through October 2026 (see Note 8). In addition, the Company’s primary indebtedness contains various restrictive covenants including minimum liquidity and minimum quarterly product sales requirements. For the six months ended June 30, 2022 and 2021, the Company incurred net losses from continuing operations of $18.9 million and $35.7 million, respectively. For the six months ended June 30, 2022 and 2021, the Company used $11.3 million and $14.4 million, respectively, in cash for operating activities.

The divestiture of the Legacy Business in 2021 resulted in the loss of substantially all the Company’s revenue generating assets. The Company’s current business plan is focused on the continued launch and commercialization of Upneeq, which has and will continue to diminish the Company’s cash flows in at least the near term. The Company will require additional capital to fund its operating needs, including the expanded commercialization of Upneeq and other activities. The Company expects to continue to incur significant expenditures and sustained operating losses in the future.

Management of the Company does not believe that current sources of liquidity will be sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months following the date the accompanying unaudited condensed consolidated financial statements are issued without raising additional funding. As a result, there is a

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

substantial doubt as to the Company’s ability to operate as a going concern. The Company’s ability to continue as a going concern will require it to obtain additional funding, generate positive cash flow from operations and/or enter into strategic alliances or sell assets.

Management’s plans to address these conditions include pursuing one or more of the following options to secure additional funding, none of which can be guaranteed or is entirely within its control, (i) raise funds through additional sales of ordinary shares, through equity sales agreements with brokers/dealers or other public or private equity financings, (ii) raise funds through borrowings under existing debt facilities and/or convertible debt, and/or (iii) raise non-dilutive funds through product collaborations and/or to partner or sell a portion or all rights to any of the Company’s assets.

In August 2022, the Company raised an aggregate of $43.9 million, comprised of $23.9 million in aggregate gross proceeds from the private placement of ordinary shares and, concurrently, $20.0 million from the issuance of second tranche Senior Secured Notes (see Note 16), to enhance liquidity in furtherance of certain of management’s plans as described above.

There can be no assurance that the Company will receive cash proceeds from any of these potential sources or, to the extent cash proceeds are received, such proceeds would be sufficient to support its current operating plan for at least the next 12 months from the date the accompanying unaudited condensed consolidated financial statements are issued. The sale of additional equity or convertible debt securities may result in dilution to the Company’s shareholders. If the Company raises additional funds through the issuance of debt securities or preferred shares, these securities could provide for rights senior to those of its ordinary shares and could contain covenants that would further restrict its operations. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business, and therefore do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

Note 4. Discontinued Operations

On August 27, 2021, the Company announced the closing of the divestiture of its Legacy Business to certain affiliates of Alora for $111 million in cash upon closing, subject to certain adjustments, and up to $60 million in additional contingent milestone payments. During the six months ended June 30, 2022, the Company received an aggregate of $5.0 million in cash from Alora related to contingent milestone payments earned in connection with the sale of the Legacy Business, such income was recognized and classified within other non-operating income, net in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

The Company has determined the divestiture of the Legacy Business represents a strategic shift that will have a major effect on its business and therefore met the criteria for classification as discontinued operations. Accordingly, the Legacy Business is reported as discontinued operations in accordance with Accounting Standards Codification 205-20, Discontinued Operations. The results of operations from the Legacy Business are classified as discontinued operations in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. Applicable amounts in prior periods have been recast to conform to this discontinued operations presentation. The Company recognized a gain on the sale of the Legacy Business upon closing.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The following table presents the results of discontinued operations (in thousands):


	Three Months Ended		Six Months Ended
	June 30, 2021		June 30, 2021
Total revenues	$	23,289	$	46,234
Cost of goods sold (inclusive of depreciation and amortization)		12,235		25,045
Selling, general and administrative expenses		2,426		4,396
Research and development expenses		1,744		2,850
Income from operations		6,884		13,943
Interest expense and amortization of debt discount		2,465		4,904
Other non-operating income, net		(35)		(114)
Income from discontinued operations before provision for income taxes		4,454		9,153
Income tax expense		213		752
Income from discontinued operations, net of tax	$	4,241	$	8,401

The following table presents the significant non-cash items and purchase of property, plant and equipment for the discontinued operations that are included in the accompanying unaudited condensed consolidated statements of cash flows (in thousands):


	Three Months Ended		Six Months Ended
Cash flows from operating activities:	June 30, 2021		June 30, 2021
Depreciation and amortization	$	3,274	$	6,583
Share compensation		101		204

Cash flows from investing activities:
Purchases of property, plant and equipment	$	912	$	1,226

Note 5. Revenues

The Company’s performance obligations are to provide its pharmaceutical products based upon purchase orders from customers. The performance obligation is satisfied at a point in time, typically upon delivery, when the customer obtains control of the pharmaceutical product. The Company collects payments in advance from its customers.

The following table presents disaggregated revenues from contracts with customers (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net product sales - Upneeq	$	8,448	$	1,482	$	14,392	$	2,255
Royalty revenue		—		28		—		190
Licensing revenue		—		10,000		15,500		10,000
Total revenues	$	8,448	$	11,510	$	29,892	$	12,445

On July 28, 2020, the Company entered into a License Agreement with Santen Pharmaceutical Co. Ltd (“Santen”), granting Santen exclusive development, registration, and commercialization rights to RVL-1201 in Japan, China, and other Asian countries as well as Europe, the Middle East and Africa (“EMEA”) countries (the “License Agreement”). Under the License Agreement the Company is entitled to certain development and regulatory milestone payments. The Company is also entitled to royalty payments on net sales of RVL-1201 in Santen commercialization territories.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

During the three and six months ended June 30, 2021, the Company received a $10.0 million milestone payment from Santen which was recognized as license revenue as all performance obligations were met.

On March 29, 2022, RVL Pharmaceuticals entered into the First Amendment to License Agreement (the “Amendment”) with Santen, amending the License Agreement. Under the terms of the Amendment, effective March 31, 2022, RVL Pharmaceuticals became entitled to receive an upfront cash payment of $15.5 million, and the remaining developmental and regulatory cash milestone payments, were removed. Pursuant to the terms of the Amendment, new developmental and regulatory cash milestone payments with an aggregate value of up to $1.0 million will be payable to RVL Pharmaceuticals. In addition, the territories were expanded to include additional EMEA countries and Canada, and during the first five years following the effective date of the Amendment, Santen was granted an option to expand the territories to include Russia, subject to additional upfront and milestone payments of $2.0 million and $1.0 million, respectively. Further, under the terms of the Amendment, if RVL Pharmaceuticals desires to enter into an agreement to license certain rights related to the License Agreement to a third party in Russia, then Santen will have a right to exercise an option to expand the territories to include Russia or to match the terms of the agreement with the third party.

During the six months ended June 30, 2022, the Company recognized $15.5 million in license revenue from Santen under the Amendment as all performance obligations were met.

When the Company receives consideration from a customer, or such consideration is unconditionally due from a customer prior to the transfer of products to the customer under the terms of a contract, the Company records a contract liability. The Company classifies contract liabilities as deferred revenue. The Company had deferred revenue of $0.9 million at June 30, 2022 and an immaterial amount at December 31, 2021 (see Note 7).

Contract assets primarily relate to rights to consideration for goods or services transferred to the customer when the right is conditional on something other than the passage of time. Contract assets are transferred to accounts receivable when the rights become unconditional. The Company generally does not incur costs to obtain or fulfill contracts meeting the capitalization criteria under ASC Topic 340, Other Assets and Deferred Costs. The Company had no contract assets at June 30, 2022 or December 31, 2021.

The following table presents the various adjustments recognized against gross product sales (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Gross product sales	$	8,538	$	1,483	$	14,565	$	2,256
Less provisions for:
Chargebacks		(2)		(1)		(3)		(1)
Discounts and allowances		(88)		—		(170)		—
Net product sales	$	8,448	$	1,482	$	14,392	$	2,255

Note 6. Other Receivables

Other receivables result primarily from payroll retention credits and other miscellaneous activities.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 7. Accrued Liabilities

The following table presents the components of accrued liabilities (in thousands):


	June 30,		December 31,
	2022		2021
Accrued expenses and other liabilities	$	5,313	$	7,897
Accrued compensation		4,101		4,504
Accrued royalties		1,079		200
Deferred revenue		931		67
Accrued research and development		523		409
Total accrued liabilities	$	11,947	$	13,077

Note 8. Financing Arrangements

The following table presents the components of long-term debt and financing obligations (in thousands):


	June 30,		December 31,
	2022		2021
Senior Secured Notes (measured at fair value)	$	42,900	$	43,800
Note payable — insurance financing		607		2,409
Total debt and financing obligations		43,507		46,209
Less: current portion of debt		(607)		(2,409)
Long-term debt	$	42,900	$	43,800

The following table presents the aggregation of principal maturities of long-term debt and financing obligations (in thousands):



Year Ending December 31,	Debt Obligations
Remainder of 2022	$	607
2023		—
2024		11,000
2025		11,000
2026		33,000
Total future minimum payments		55,607
Less: current portion of debt principal		(607)
Non-current portion of debt principal	$	55,000

Senior Secured Notes

On October 1, 2021, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with, among others, Athyrium Opportunities IV Acquisition 2 LP (“Purchaser”) providing for the issuance of senior secured notes in three separate tranches (the “Senior Secured Notes”). On October 12, 2021, the Company issued $55.0 million first tranche notes, a portion of the proceeds of which, together with the proceeds from a concurrent underwritten equity offering, were used to repay in full the obligations under a prior credit agreement.

Prior to October 12, 2022, upon satisfaction of certain conditions, including a minimum net product sales target for Upneeq over a specified period of time, the Company may request second tranche notes of up to $20.0 million. Prior to October 12, 2023, the Company may request third tranche notes of up to $25.0 million, in the sole discretion of the Purchaser.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The Senior Secured Notes bear interest at an annual rate of 9.0% plus adjusted three-month LIBOR, with a LIBOR floor of 1.50% and LIBOR cap of 3.00%, payable in cash quarterly in arrears. At June 30, 2022, the interest rate applicable to the Senior Secured Notes was 10.5%. Effective July 1, 2022, the interest rate applicable to the Senior Secured Notes was approximately 11.3%.

In addition, the restrictive covenants in the Note Purchase Agreement require the Company to comply with certain minimum liquidity requirements and minimum quarterly product sales requirements. At any time, the Company is required to maintain unrestricted cash and cash equivalents greater than or equal to $15.0 million, and, as of the end of each fiscal quarter, it is required to maintain consolidated Upneeq net product sales greater than or equal to specified quarterly thresholds (currently at $4.0 million for the quarter ending June 30, 2022, and increasing in $1.0 million increments each quarter thereafter until the quarter ending June 30, 2024, for which quarter and all subsequent quarters the threshold is $12.0 million). At June 30, 2022, the Company was in compliance with all conditions of the Note Purchase Agreement.

During the year ended December 31, 2021, the Company incurred aggregate debt issuance costs of $2.1 million related

to the Senior Secured Notes, $1.5 million and $0.6 million of which were recognized as financial commitment assets

underlying the first and second tranche notes, respectively.

The Company elected the fair value option of accounting on the Senior Secured Notes upon issuance and, accordingly, a proportionate amount of related debt issuance costs were immediately written off. The Company’s residual financial commitment asset related to the undrawn second tranche notes, is being amortized over the relevant one-year commitment period. During the three and six months ended June 30, 2022, the Company recognized $0.9 million and $1.9 million, respectively, of amortization expense from the second tranche financial commitment asset with such expense being recorded within interest expense and amortization of debt discount in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss. At June 30, 2022 and December 31, 2021, the second tranche financial commitment asset had a carrying value of $1.1 million and $3.1 million, respectively, and was recorded within current assets in the accompanying unaudited condensed consolidated balance sheets. If the second tranche notes are drawn within the one-year commitment period, the Company will expense the remaining balance under the fair value option of accounting.

On a recurring basis, changes in fair value of Senior Secured Notes will be presented in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss at each reporting period (see Note 13).

In the six months ended June 30, 2022, the Company obtained waivers from the Purchaser of mandatory repayments of an aggregate of $5.0 million in principal of the Senior Secured Notes as otherwise required under the Note Purchase Agreement, in exchange for a consent fee of $0.2 million, resulting in net retained proceeds of $4.8 million.

In August 2022, the Company entered into an amendment to the Note Purchase Agreement (Note 16).

Prior Credit Agreement

Prior to October 12, 2021, the Company was party to a Credit Agreement, dated February 3, 2016 and as amended from

time-to-time, under which an aggregate principal amount of $327.5 million of secured term loans were previously issued

(the “Prior Term Loans”) and that provided for revolving credit commitments up to $50.0 million (the “Prior Revolving

Facility,” and together with the Prior Term Loans, the “Prior Credit Agreement”).

During the three and six months ended June 30, 2021, pursuant to the terms of the Prior Credit Agreement, the Company exercised its right to cure a shortfall in certain financial covenants which resulted in the mandatory prepayment of $5.3 million against the Prior Term Loans. During the three and six months ended June 30, 2021, the Company wrote off an

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

immaterial amount of debt issuance costs relating to such prepayment, with the related expense classified within other non-operating gain or loss in the unaudited condensed consolidated statements of operations and comprehensive loss.

Note 9. Share-Based Compensation

The following table presents the components of share-based compensation expense (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Share options	$	442	$	122	$	992	$	223
Performance stock units		—		228		—		453
Restricted stock units		723		763		1,339		1,492
Employee share purchase plan		44		18		87		37
Total share-based compensation expense	$	1,209	$	1,131	$	2,418	$	2,205

At June 30, 2022, aggregate unrecognized share compensation expense related to unvested awards was $5.4 million which is expected to be recognized over a weighted-average remaining service period of 1.59 years.

Note 10. Earnings (Loss) Per Ordinary Share

The following potentially dilutive securities have been excluded from the weighted average ordinary shares outstanding in the computation of diluted earnings (loss) per share because the impact of including them would have been anti-dilutive:


	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Performance and restricted stock units	1,057,158	2,149,329	1,057,158	2,149,329
Share options to purchase ordinary shares	5,414,496	2,666,696	5,414,496	2,666,446
Warrants to purchase ordinary shares	16,100,000	—	16,100,000	—
Ordinary shares to be purchased through employee stock purchase plan	271,571	23,322	271,571	23,322

Note 11. Commitments and Contingencies

Legal Proceedings

The Company is a party in legal proceedings and potential claims arising from time to time in the ordinary course of its business. The amount, if any, of ultimate liability with respect to such matters cannot be determined. Despite the inherent uncertainties of litigation, management of the Company believes that the ultimate disposition of such proceedings and exposures will not have a material adverse impact on the financial condition, results of operations, or cash flows of the Company.

On February 16, 2018, the Company received FDA approval for its amantadine extended release tablets under the trade name Osmolex ER and filed a Complaint for Declaratory Judgment of Noninfringement of certain patents owned by Adamas Pharmaceuticals, Inc., who filed counterclaims against the Company. On December 2, 2020, the Company entered into an agreement to settle the litigation with Adamas, under which both parties agreed to drop their respective claims relating to the patent litigation, and Adamas agreed to acquire the global rights to Osmolex ER from the Company for $7.5 million. The sale of the global rights to Osmolex ER closed in January 2021 and a gain of $5.6 million was recorded in the unaudited condensed consolidated statements of operations and comprehensive loss under gain on sale of product rights, net.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

Note 12. Income Taxes

The following table presents the relationship between income tax expense or benefit from continuing operations and income or loss before income taxes from continuing operations (dollars in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Loss before income taxes, continuing operations	$	(11,829)		$	(21,874)		$	(18,725)		$	(35,650)
Income tax expense, continuing operations		277			94			202			90
Effective income tax rate		(2.34)	%		(0.43)	%		(1.08)	%		(0.25)	%

Income tax expense or benefit in the quarterly periods is based upon the estimated income or loss for the full year. The composition of the income or loss in different jurisdictions and adjustments, if any, in the applicable quarterly periods influences the periodic expense or benefit.

The relationship between pre-tax income or loss and income tax expense or benefit is greatly affected by the impact of losses for which management cannot claim a tax benefit, non-deductible expenses, and other items that increase tax expense without a relationship to income, such as withholding taxes and changes with respect to uncertain tax positions. The change in the effective income tax rate in the three and six months ended June 30, 2022 when compared to the three and six months ended June 30, 2021, is primarily related to our recognition of individually minor tax expenses during the respective periods.

Note 13. Financial Instruments and Fair Value Measurements

The Company’s financial instruments subject to fair value measurements include cash and cash equivalents, other receivables, trade accounts payable, accrued liabilities, long-term debt and warrant liabilities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial Assets— Cash and cash equivalents, generally consisting of investments in interest-bearing money market accounts, are measured at fair value on a recurring basis using Level 1 measurements. Fair value inputs for these investments are considered Level 1 measurements within the fair value hierarchy because money market account fair values are known and observable through daily published floating net asset values. The fair value of the Company’s cash and cash equivalents, being the same as their carrying value, were $27.4 million and $40.4 million at June 30, 2022 and December 31, 2021, respectively.

Financial Liabilities— The Senior Secured Notes, a material component of long-term debt (see Note 8), and our warrant liabilities, a material component of total liabilities have each been measured and carried at fair value since their issuance in October 2021. Such instruments represent financial liabilities whose measurement contains significant unobservable inputs, which management considers to be Level 3 measurements under the fair value hierarchy.

The Company uses a discounted cash flow technique, an income-based approach, to determine the fair value of the Senior Secured Notes. This technique relies upon an assumption of pricing the Senior Secured Notes to their maturity (without mandatory or voluntary prepayments) and incorporates inputs such as contractual repayment terms, maturity, and discount rate. The most significant unobservable input for the Senior Secured Notes is the discount rate which is estimated by performing a yield analysis that relies upon the discount rate observed in the initial issuance of the Senior Secured Notes as well as certain benchmark debt instruments with observable pricing from which conclusions are drawn on the change in the discount rate from period to period.

Table of Contents

RVL PHAMACEUTICALS PLC

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

The Company uses the Black-Scholes Merton option-pricing model to value the warrants. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, and volatility. The most significant unobservable input for the warrant liabilities is volatility. Given the limited trading volume and period of time the Company’s stock has been traded in an active market, the expected volatility is estimated by taking the average historical price volatility for industry peers, consisting of several public companies in the Company’s industry that are similar in size, stage, or financial leverage, over a period of time commensurate to the expected term of the warrants.

The following tables show financial liabilities subject to fair value measurement on a recurring basis and related information on fair values, valuation techniques and unobservable inputs (dollars in thousands):


		At June 30, 2022

Financial Instrument	Fair Value		Valuation Technique	Unobservable Inputs
Senior Secured Notes