Fannie Mae, Freddie Mac shares tumble after conservatorship comments
Tuesday, Deutsche Bank (ETR:DBKGn) initiated coverage on Avadel Pharmaceuticals (NASDAQ:AVDL) with a Buy rating and a price target of $12.00. The firm’s analyst cited the significant drop in the company’s shares since their peak in April 2024, noting they are currently trading at levels last seen in February 2023, which was before the commercial launch of their drug Lumryz. According to InvestingPro data, AVDL currently trades at $9.09, significantly below its 52-week high of $19.09, though analyst targets range from $13 to $22, suggesting potential upside. The stock has shown resilience with an 11% gain over the past week.
Avadel’s stock experienced a roughly 25% sell-off in January 2025 after the company reported preliminary results for the fourth quarter and full year of 2024, along with revised guidance for 2025. These figures fell short of Wall Street expectations, primarily due to an increased discontinuation rate for Lumryz, their leading product. Despite recent challenges, InvestingPro data shows impressive gross profit margins of 92% and strong revenue growth, with analysts anticipating continued sales growth this year.
Deutsche Bank’s analyst believes that the market has overly punished Avadel’s stock, suggesting that it is currently undervalued. The valuation seems to reflect a pessimistic scenario where Lumryz’s peak sales reach only around $200 million. However, the analyst argues that even a conservative estimate based on a 4X peak sales multiple would indicate a market value of about $800 million, which aligns closely with Avadel’s current trading level.
The analyst highlighted that an improvement in patient persistency or a reduction in discontinuation rates could significantly alter Lumryz’s sales trajectory. If the drug achieves peak sales closer to $525 million, it would indicate a substantial upside for Avadel’s stock. The firm’s positive outlook on the stock is based on this potential for sales growth despite recent setbacks.
In other recent news, ASL Strategic Value Fund, a long-term investor in Avadel Pharmaceuticals, has urged the company to consider strategic alternatives, including a potential sale, due to underperformance and management’s failure to capitalize on the launch of its narcolepsy drug, Lumryz. ASL suggests Avadel retain an investment bank to review all possible alternatives, including selling the company. Avadel is also pursuing a new indication for Lumryz to treat Idiopathic Hypersomnia, which could generate up to an additional $1 billion in revenue.
Meanwhile, Piper Sandler has maintained an Overweight rating on Avadel’s stock, despite reducing the price target from $24.00 to $13.00. This follows Avadel’s pre-announcement of flat fourth-quarter sales for Lumryz and a sales guidance for 2025 that falls short of consensus estimates. However, Piper Sandler remains optimistic about the future growth of Lumryz, citing its intellectual property protection extending into 2042.
On the financial front, Avadel reported preliminary Q4 revenue below analyst expectations, which resulted in a significant share price drop. Yet, the company’s Q4 revenue still represents a more than 150% increase compared to the same quarter last year. For the full year 2024, Avadel generated net product revenue of approximately $169.0 million, up significantly from $28.0 million in 2023. Avadel provided guidance for Lumryz net product revenue of $240 – $260 million in 2025, representing 50% YoY growth at the midpoint. These are the latest developments in the company’s journey.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.