Narcolepsy is a medical condition that causes extreme drowsiness and a tendency to fall asleep anytime whenever you’re in relaxing surroundings. It is sometimes accompanied with cataplexy, where a person loses motor function for several minutes after being triggered by a strong emotion, such as excitement or laughter.
There is a current treatment for narcolepsy and cataplexy, a pill called Xyrem, but it requires 2 doses for a full-night’s sleep: one before bedtime and another in the middle of the night.
Avadel Pharmaceuticals $AVDL is an Irish biotech with a once-nightly pill for the treatment of narcolepsy and cataplexy, and the company has a Phase 3 clinical readout expected in the second quarter 2020.
The Drug With the Catalyst
Avadel’s drug, FT218, is very similar to the current standard of care for narcolepsy, Xyrem; it has the same active ingredient, a molecule called sodium oxybate. But the big advantage of Avadel’s drug is that you don’t have to take it twice during the night, as the drug is made with a proprietary formulation that allows for extended release. The company calls this their Micropump technology.
Here’s a slide from an investor presentation showing their Micropump technology.
Avadel has been around a long time for a biotech, the company was founded in 1990 and IPOed on the Nasdaq in 1996.
This most recent year, shares have produced an incredible 1000% return, trading from a low of $1 to most recent highs at $10.
Here’s the breakdown of the most recent year.
- Avadel announces agreement with the FDA to reduce the number of patients in their clinical study for FT218 (study originally required 264 patients but was renegotiated to 205 patients). Shares rise 33%.
- Avadel announces pharmacokinetic data (describing how the body absorbs the drug) for its drug FT218.
- Avadel announces a secondary offering at of $65 million at $7.09. This is seen as bullish due to the offering price, and stock rises 30% the next day.
History of the Company
Before working on narcolepsy and FT218, Avadel’s business model was to re-certify and sell old drug compounds grandfathered in by the FDA. It currently has 4 compounds on the books that brought in $55 million in revenue in the last twelve months.
But it hasn’t always been roses. In 2018 Avadel’s subsidiary, Avadel Specialty Pharmaceuticals, filed for bankruptcy after their lead drug flopped. The drug, Noctiva, a treatment for nighttime urine overproduction, only had sales of a minuscule $1.2 million.
Upcoming Phase 3 Catalyst
When the Phase 3 results are announced, all eyes will be on comparing FT218 to Xyrem. Will FT218 be as safe and effective as Xyrem, which is taken twice nightly?
Maybe not surprisingly, analysts bullish on Avadel think the drug will have excellent and competitive results, while analysts bullish on Jazz Pharmaceuticals $JAZZ, the incumbent with its Xyrem medication, think that the drug will not be as pharmacologically active.
Here’s a tweet from twitter user @JD4myfab4 talking bullishly about the analyst Landenberg.
If approved, FT218 will be one of the only two medications for a patient population of 200,000 and a $1.7 billion market. Currently Avadel sports a $400 million market cap and so success could mean a large windfall for shareholders.
And increasingly there is speculation that the maker of Xyrem, Jazz Pharmaceuticals $JAZZ could just buy the company to continue its narcolepsy fiefdom.
A successful Phase 3 trial of FT218 unlocks the possibility of an FDA approval and a piece of the $1.7 billion market or a potential buyout for this small cap company. These anticipated results account for the stock’s 1000% return this year so far.
- Ticker: Avadel Pharmaceuticals $AVDL
- Phase 3 Drug Results Due: Second Quarter 2020
- Catalyst Score: 3/5
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