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Investing.com - UBS downgraded Avadel Pharmaceuticals (NASDAQ:AVDL) from Buy to Neutral with a price target of $20.00 following Alkermes’ acquisition agreement. The company, currently valued at $1.81 billion, has demonstrated strong financial health with impressive gross profit margins of nearly 90%.
The downgrade comes after Alkermes announced last week it would acquire Avadel for $18.50 per share plus a contingent value right (CVR) worth $1.50 per share, contingent on FDA approval of Lumryz for idiopathic hypersomnia by year-end 2028.
The total offer, including the CVR, represents a 12% premium to Avadel’s closing price on Tuesday, October 21. UBS believes the acquisition is likely to proceed given the lack of overlapping mechanisms in the two companies’ sleep portfolios.
Following Avadel’s settlement with Jazz Pharmaceuticals, announced prior to the acquisition deal, UBS has increased its probability of success assumption for Lumryz in idiopathic hypersomnia to 90% from 60%.
UBS now models approximately $510 million in risk-adjusted peak sales for Lumryz, up from approximately $340 million previously, as the firm had previously factored in potential litigation risk with Jazz Pharmaceuticals.
In other recent news, Avadel Pharmaceuticals announced its acquisition by Alkermes in a deal valued at approximately $2.1 billion. Under this agreement, Alkermes will pay $18.50 per share in cash, with an additional potential payment of $1.50 per share contingent on FDA approval for Avadel’s LUMRYZ by the end of 2028. Jefferies responded to this acquisition news by downgrading Avadel Pharmaceuticals from Buy to Hold, adjusting the price target from $22.00 to $20.00. Meanwhile, H.C. Wainwright raised its price target for Avadel to $36.00, maintaining a Buy rating, following Avadel’s global licensing agreement with XWPharma for valiloxybate, a therapy for sleep disorders. This agreement includes an upfront payment of $20 million and potential milestone payments up to $185 million. Additionally, UBS increased its price target for Avadel to $20.00, citing strong second-quarter Lumryz sales of $68 million, which surpassed both UBS’s and consensus estimates. These developments highlight significant strategic moves by Avadel Pharmaceuticals in recent times.
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