Jefferies downgrades Avadel Pharmaceuticals stock to Hold on Alkermes deal

Investing.com - Jefferies downgraded Avadel Pharmaceuticals (NASDAQ:AVDL) from Buy to Hold and lowered its price target to $20.00 from $22.00 following acquisition news. According to InvestingPro data, AVDL is currently trading at $18.57, near its 52-week high, with analysis indicating the stock is trading above its Fair Value.

The downgrade comes as Alkermes plans to acquire Avadel Pharmaceuticals and its sleep franchise for up to $2.1 billion, including more than $1.9 billion upfront. The acquisition is expected to close in the first quarter of 2026. The company enters this deal from a position of financial strength, with InvestingPro data showing impressive 89.64% gross profit margins and a "GREAT" financial health score.

The deal coincides with Avadel’s settlement with Jazz Pharmaceuticals, which provides Avadel increased visibility on intellectual property position and commercial rights to its lead drug Lumryz, a differentiated once-nightly oxybate.

Jefferies maintains its view that Lumryz could potentially achieve peak sales exceeding $550 million in narcolepsy treatment.

The firm also notes that idiopathic hypersomnia (IH) represents a potential "$1B+ call option" for the drug beyond its primary narcolepsy indication.

In other recent news, Avadel Pharmaceuticals reported impressive financial results for the second quarter of 2025, significantly exceeding earnings and revenue projections. The company achieved earnings per share of $0.10, surpassing the forecasted $0.03, and reported revenue of $68.1 million, well above the expected $61.4 million. Additionally, Avadel Pharmaceuticals announced a $2.1 billion acquisition by Alkermes, with a deal that includes a potential additional payment contingent on FDA approval of Avadel’s LUMRYZ for idiopathic hypersomnia.

Furthermore, Avadel entered into an exclusive global licensing agreement with XWPharma to develop and commercialize valiloxybate, a therapy for sleep disorders, involving upfront and milestone payments. In light of these developments, UBS raised its price target for Avadel to $20 from $13, citing strong Lumryz sales. Similarly, H.C. Wainwright increased its price target to $36, maintaining a Buy rating, following the licensing agreement with XWPharma. These recent developments highlight a period of significant activity and strategic advancements for Avadel Pharmaceuticals.

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