We have seen rumors and whispers of a possible buyout of Avadel Pharmaceuticals (AVDL) by Jazz Pharmaceuticals (JAZZ) for it’s nightly one time narcolepsy drug. I predict there is a high probability of a buyout by Jazz Pharmaceuticals.
Why would Jazz Pharmaceuticals (JAZZ) buyout Avadel Pharmaceuticals (AVDL)?
Avadel is developing FT218, a controlled-release formula of sodium oxybate, as a treatment for narcolepsy. The drug is being tested in the phase 3 Rest-On clinical trial comparing FT218 to Xyrem, a sodium oxybate product from Jazz Pharmaceuticals that has to be dosed twice a night. As a controlled-release formula, FT218 only has to be taken once a night.
This means that it could be far more convenient for the patient to take Avadel’s drug instead of the Jazz drug. This very well threatens the whole existence of Jazz Pharmaceuticals.
Furthermore, Avadel didn’t really need the cash right now. The biotech ended the third quarter with $72.5 million in the bank, which Avadel estimated would “fund operations well into 2021.” Nevertheless, smart companies raise capital when they can, not when they have to, and the added cash will give Avadel more firepower to launch FT218, assuming it’s approved by the Food and Drug Administration.
So what’s happening now with Avadel Pharmaceuticals (AVDL)?
The company is now waiting for NDA/FDA approval for their drug. The efficacy results for FT218 appeared to be promising. If the drug eventually wins regulatory approval, it should be a commercial success for Avadel. The market for sodium oxybates that are taken twice each night is estimated to be around $1.7 billion annually. Avadel’s market research indicates that physicians and patients would be highly interested in a once-nightly drug.
At a market cap of less than $350 million, Avadel won’t need much in the way of sales of FT218 to support that valuation, especially since Avadel expected to generate $55 million in revenue in 2019 from its sterile injectable hospital products and received FDA approval for a fourth product in December.
Jazz Pharmaceuticals (JAZZ) sales seem to be falling amid pandemic
Jazz Pharmaceuticals has been almost entirely dependent on that of Xyrem, a two dose nightly narcolepsy drug responsible for more than 70% of the company’s revenue. If Avadel’s drug which is a one dose nightly drug gets approved then it’s game over for Jazz.
Currently narcolepsy patients who are using the Jazz drug need to wake up in the middle of the night to take the second dose, in which the patient will lose sleep and is less convenient. With Avadel’s drug, the patient only takes it one time for the night and gets to get full hours of sleep uninterrupted by taking a second dose.
Because Avadel’s drug is more efficient it is certainly a buyout target for Jazz.
Narcolepsy is a chronic sleep disorder that causes an overwhelming desire to fall asleep during the day. Patients with the condition may also experience sudden, frequent, and uncontrolled loss of muscle control during the day, known as cataplexy. The condition affects more than 200,000 people in the United States.
In 2002, the U.S. Food and Drug Administration (FDA) approved Xyrem as the first novel therapy to treat the condition, and it has been recommended by the American Academy for Sleep Medicine as its standard of care. The drug’s active pharmaceutical ingredient (API) is sodium oxybate, which is an orally ingested, liquid anesthetic that induces deep sleep in patients, and is also classified as a Schedule I controlled substance.
Xyrem now accounts for more than two-thirds of Jazz’s $2-billion-per-year revenue, and the drug’s sales are growing by more than 10% annually. It is worth noting that the drug costs more than $5,000 for one 6-ounce bottle, with patients averaging two to three bottles per month for treatment.
Should you invest in Avadel Pharmaceuticals (AVDL)?
Shares of Avadel Pharmaceuticals (AVDL) appear to be a very good investment option, the Money Midnight Indicator is expecting its price to increase considerably in the next several years. The majority of the metrics point to this investment being highly attractive.