We reiterate a buy rating and plan to keep our position into the first few quarters of the launch. However, the recent royalty agreement with RTW will provide enough cash buffers for the next few years, even if the sale falters, and we are not too worried about it. If the company doesn't turn cashflow positive on time, it may need to raise more cash, leading to shareholder dilution.Underwhelming sales print during the first few quarters due to unforeseen hurdles around step-edits and prior authorization may take place hurting the physician prescribing momentum. We see this net positive for the company as it can provide a robust cash runway for a couple of years and support Lumryz's launch, expected in June 2023. Additionally, AVDL will gain access to $45 million upon achieving quarterly sales of at least $25 million by 2Q24. These developments include an equity offering, an RTW royalty agreement, and a convertible notes exchange, which raised approximately $165 million in cash and delayed the maturity of AVDL's $96m convertible debt until 2027. More detail about the RTW deal can be summarized below:įurthermore, we note that several recent developments have enhanced Avadel's preparedness for a potential Lumryz launch. Furthermore, we believe the RTW deal to be a strong vote of confidence in the drug's commercial success, as royalty investments usually take place after extensive due diligence and are more focused on downside protection. Therefore, we maintain a buy rating and plan to hold into the first few quarters of the launch. Although we do not believe the market expectation around LUMRYZ is that high, the current valuation (~$1.13bn) is modest for the compelling drug that the company holds. We agree that the first-time launch presents a potential overhang, and we usually sell into the launch, but scPharmaceuticals Inc ( SCPH), which we initiated early this year, rocketed 71% during the first few quarters of launch due to the drug's clear clinical benefit and launch preparedness even with a small sales force. The FDA's decision on the ODE was based on the FDA's view that the drug offers major value to patient care over SOC (twice-nightly) drugs. Furthermore, we appreciate the Orphan Drug Exclusivity that gives 7 years of exclusivity to the drug. Of note, the company plans to move forward with 50 personal sales teams and 12 field reimbursement managers, which we believe should be adequate. Thirdly, we believe the company has placed efficient pre-launch efforts (built REMS programming and Patient Services Center, already trained sales team (~50 people), payer discussions ongoing, established network with KOLs and sleep specialists, etc.). Firstly, the market has a relatively small target prescriber base (~5,000 prescribers) secondly, the company's RWE studies would further expedite the market access/pricing negotiations, which we believe the company will disclose additional data in the next few months (faster than expected private and public payer reimbursement can be a big catalyst for the stock). That being said, the next key question is how fast the launch ramp would be here are our reasons why we believe the sales ramp to be fast. The company reiterated that they expect LUMRYZ to launch in early June comfortably. Still, we believe that should be expected, and we are not surprised, considering the drug's mechanism of action (sodium oxybate).įDA Monograph (FDA Monograph) Launch expected in June 2023 fast ramp expected We highlight that the label seems fairly clean, even though there are boxed warnings (i.e., CNS depression, abuse, and misuse concerns). Based on these results, the FDA has deemed LUMRYZ to be clinically superior to existing twice-nightly oxybate products, granting it seven years of Orphan Drug Exclusivity. The company has stated that the approval is based on the successful results of the Phase 3 REST-ON clinical trial, which demonstrated significant progress in all three primary endpoints. We consider ODD as the most robust patent protection that the drug can have, de-risking IP-related concerns. We remind readers that LUMRYZ is the first and only FDA-approved oxybate medication for narcolepsy that can be taken once at bedtime, and it has been awarded Orphan Drug Exclusivity until May 1, 2030. Skynesher/E+ via Getty Images Update: LUMRYZ approved as expectedĪs highlighted in our previous article last month, Avadel Pharmaceuticals' ( NASDAQ: AVDL) LUMRYZ has received FDA approval for treating cataplexy or excessive daytime sleepiness in adults with narcolepsy.
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