Adial Pharmaceuticals Receives Final Reimbursement Payment from Adovate

Rhea-AI Summary

Adial Pharmaceuticals, Inc. (NASDAQ: ADIL; ADILW) received a final development cost reimbursement payment of $350,000 from Adovate, LLC. The company is eligible for up to $83 million in total consideration, including development and approval milestones, commercial milestones, and a low, single-digit royalty. Additionally, Adial acquired a 15% equity stake in Adovate and has anti-dilution protection. This agreement is a significant milestone for Adial's business development and potential future revenue.

Insights

Financial Analyst

The announcement of Adial Pharmaceuticals' receipt of a final development cost reimbursement payment and the terms of the asset purchase agreement with Adovate, LLC, represents a significant financial event for the company. The receipt of $350,000 in reimbursement is a direct infusion of cash, which could positively impact Adial's short-term liquidity. The potential for receiving up to $83 million in total consideration, including development, approval and commercial milestones, is substantial. This agreement could provide a steady stream of income over the longer term, contingent upon successful development and commercialization of the compounds.

From a financial perspective, the agreement also includes a low, single-digit royalty on future sales and a 15% equity stake in Adovate. This equity stake could be valuable if Adovate is successful in its endeavors, offering Adial potential capital gains in addition to revenue from milestones and royalties. The anti-dilution clause protects Adial's investment, ensuring that their ownership percentage is not diminished in future funding rounds until a specific threshold is met. This is a strategic move to safeguard the value of Adial's investment.

Biotechnology Industry Analyst

In the context of the biopharmaceutical industry, Adial Pharmaceuticals' focus on addiction and related disorders is noteworthy. The field of addiction treatment has been gaining increased attention and investment due to the social and economic costs of substance abuse. The deal with Adovate, LLC, reflects a strategic divestiture of assets that allows Adial to monetize its subsidiary's research and development efforts. The development and approval milestones are standard mechanisms in biopharma collaborations, incentivizing the continued advancement of therapeutic compounds. They are typically structured to align the interests of both parties involved in the agreement.

The commercial milestones of up to $50 million indicate confidence in the market potential of the compounds. However, such milestones are contingent upon successful commercialization, which can be uncertain and is subject to regulatory approval and market adoption. The royalty agreement further aligns Adovate's success with Adial's financial interests, providing a continuous benefit from sales without the burden of marketing and distribution costs.

Legal Expert

The asset purchase agreement between Adial Pharmaceuticals and Adovate, LLC, involves complex legal terms that ensure protection and potential profitability for Adial. The anti-dilution protection is a critical legal safeguard in equity agreements, designed to maintain the value of an investor's ownership stake in a company. This clause is particularly important for Adial as it ensures that their 15% equity stake in Adovate is not eroded by future equity raises. However, it's important to note that this protection is not indefinite—it expires once Adovate has received $4,000,000 in cumulative funding, which could affect Adial's leverage and potential returns.

Understanding the legal structure of such agreements is essential for stakeholders, as it provides insight into the potential risks and rewards of the investment. The legal terms outlined in the FAA, including the milestone payments and royalty structure, are indicative of a carefully negotiated deal aimed at balancing risk with the opportunity for significant financial gain.

CHARLOTTESVILLE, Va., Dec. 20, 2023 (GLOBE NEWSWIRE) -- Adial Pharmaceuticals, Inc. (NASDAQ: ADIL; ADILW) (“Adial” or the “Company”), a clinical-stage biopharmaceutical company focused on developing therapies for the treatment and prevention of addiction and related disorders, today announced that on December 16, 2023, it received the final development cost reimbursement payment of $350,000 from Adovate, LLC under the terms of the final asset purchase agreement (the “FAA”) executed with Adovate for purchase of the assets and business of the Company’s wholly owned subsidiary, Purnovate, Inc. Under the agreement, the Company is also eligible to receive up to approximately $11 million in development and approval milestones for each compound (up to $33 million in total development and approval milestones for the first three compounds alone), as well as a total of $50 million in additional commercial milestones, for a total consideration of up to $83 million with potential milestone payments on additional compounds. Additionally, the Company will receive a low, single-digit royalty and acquired a 15% equity stake in Adovate. The FAA also provides for anti-dilution protection from future Adovate equity raises in order to maintain at least 15% ownership in Adovate. The anti-dilution protection expires upon Adovate receiving $4,000,000 in cumulative funding.

About Adial Pharmaceuticals, Inc.

Adial Pharmaceuticals is a clinical-stage biopharmaceutical company focused on the development of therapies for the treatment and prevention of addiction and related disorders. The Company’s lead investigational new drug product, AD04, is a genetically targeted, serotonin-3 receptor antagonist, therapeutic agent for the treatment of Alcohol Use Disorder (AUD) in heavy drinking patients and was recently investigated in the Company’s ONWARD™ pivotal Phase 3 clinical trial for the potential treatment of AUD in subjects with certain target genotypes (estimated to be approximately one-third of the AUD population) identified using the Company’s proprietary companion diagnostic genetic test. ONWARD showed promising results in reducing heavy drinking in heavy drinking patients, and no overt safety or tolerability concerns. AD04 is also believed to have the potential to treat other addictive disorders such as Opioid Use Disorder, gambling, and obesity. Additional information is available at www.adial.com.

Forward Looking Statements

This communication contains certain "forward-looking statements" within the meaning of the U.S. federal securities laws. Such statements are based upon various facts and derived utilizing numerous important assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "projects," "estimates," "plans" and similar expressions or future or conditional verbs such as "will," "should," "would," "may" and "could" are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. The forward-looking statements include statements regarding the Company being eligible to receive total consideration of up to $83 million with potential milestone payments on additional compounds and the potential of AD04 to treat other addictive disorders such as opioid use disorder, gambling, and obesity. Any forward-looking statements included herein reflect our current views, and they involve certain risks and uncertainties, including, among others, our ability to pursue our regulatory strategy, our ability to maintain our Nasdaq listing, our ability to advance ongoing partnering discussions, our ability to obtain regulatory approvals for commercialization of product candidates or to comply with ongoing regulatory requirements, our ability to develop strategic partnership opportunities and maintain collaborations, our ability to obtain or maintain the capital or grants necessary to fund our research and development activities, our ability to retain our key employees or maintain our Nasdaq listing, our ability to complete clinical trials on time and achieve desired results and benefits as expected, regulatory limitations relating to our ability to promote or commercialize our product candidates for specific indications, acceptance of our product candidates in the marketplace and the successful development, marketing or sale of our products, our ability to maintain our license agreements, the continued maintenance and growth of our patent estate and our ability to retain our key employees or maintain our Nasdaq listing. These risks should not be construed as exhaustive and should be read together with the other cautionary statement included in our Annual Report on Form 10-K for the year ended December 31, 2022, subsequent Quarterly Reports on Form 10-Q and current reports on Form 8-K filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it was initially made. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

Contact:
Crescendo Communications, LLC
David Waldman / Alexandra Schilt
Tel: 212-671-1020
Email: ADIL@crescendo-ir.com

FAQ

What is the company name and ticker symbol of the clinical-stage biopharmaceutical company that received a final development cost reimbursement payment from Adovate, LLC?

Adial Pharmaceuticals, Inc. (NASDAQ: ADIL; ADILW) is the company that received the final development cost reimbursement payment.

How much was the final development cost reimbursement payment received by Adial Pharmaceuticals, Inc. from Adovate, LLC?

Adial Pharmaceuticals, Inc. received a final development cost reimbursement payment of $350,000 from Adovate, LLC.

What is the total consideration that Adial Pharmaceuticals, Inc. is eligible for under the agreement with Adovate, LLC?

Adial Pharmaceuticals, Inc. is eligible for up to $83 million in total consideration, including development and approval milestones, commercial milestones, and a low, single-digit royalty.

What equity stake did Adial Pharmaceuticals, Inc. acquire in Adovate, LLC?

Adial Pharmaceuticals, Inc. acquired a 15% equity stake in Adovate, LLC.

Does the agreement with Adovate, LLC provide anti-dilution protection for Adial Pharmaceuticals, Inc.?

Yes, the agreement provides for anti-dilution protection from future Adovate equity raises in order to maintain at least 15% ownership in Adovate.