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CHESTERFIELD, Mo. - ASL Strategic Value Fund, a long-term investor in Avadel Pharmaceuticals (NASDAQ:AVDL), has called on the company’s board to explore strategic alternatives, including a potential sale. The investment fund cites the underperformance of Avadel’s stock and management’s failure to capitalize on the launch of its narcolepsy drug, Lumryz. The company, currently valued at $781 million, has received strong support from Wall Street analysts, with a consensus "Strong Buy" recommendation and price targets ranging from $13 to $22.
Despite Lumryz’s clinical superiority to other sodium oxybate formulations, ASL criticizes Avadel’s management for poor communication with investors and a disappointing rollout, which they believe has led to significant shareholder value erosion. Avadel’s stock has lagged behind the NASDAQ, with a year-to-date decline of 22.84% and a concerning six-month drop of 47.71%. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, suggesting potential upside for investors. InvestingPro subscribers have access to 10 additional key insights about Avadel’s financial health and market position.
The fund has suggested that Avadel retain an investment bank to review all possible alternatives, including selling the company. ASL also proposes issuing a contingent value right to shareholders related to potential recoveries from ongoing lawsuits against competitor Jazz Pharmaceuticals (NASDAQ:JAZZ).
Avadel’s legal actions against Jazz allege anti-competitive behavior, including the improper use of the REMS patent to delay Lumryz’s market entry. The main lawsuit, set for trial in November 2025, could lead to damages of approximately $4.5 billion if successful, which would significantly impact Avadel’s valuation.
In addition to Lumryz, Avadel is pursuing a new indication for the drug to treat Idiopathic Hypersomnia (IH). If approved, this could open up a market of an additional 40,000 patients. Management has projected that capturing 20% of this market could generate up to an additional $1 billion in revenue. The company already demonstrates impressive operational efficiency with a gross profit margin of 91.92%, while maintaining a healthy liquidity position with a current ratio of 2.97. Get deeper insights into Avadel’s financial metrics and growth potential with a comprehensive Pro Research Report, available exclusively on InvestingPro.
The fund’s letter to Avadel’s Chairman Geoff Glass emphasizes the need for immediate action to maximize shareholder value, citing the potential for annual revenues to exceed $1 billion from Lumryz in the narcolepsy market alone. This revenue could translate to earnings of over $6 per share, with additional earnings if the IH indication is approved.
The communication from ASL Strategic Value Fund reflects its position as a significant shareholder and its dissatisfaction with the current trajectory of Avadel Pharmaceuticals. The company has not publicly responded to the fund’s letter. This report is based on a press release statement from ASL Strategic Value Fund.
In other recent news, Avadel Pharmaceuticals experienced a significant event as the company’s fourth quarter revenue fell short of analyst expectations, with an approximate net product revenue of $50.0 million compared to the anticipated $52.7 million. Despite this shortfall, the company’s Q4 revenue was a significant increase from last year, with a more than 150% rise from $19.5 million. For the full year of 2024, Avadel reported a net product revenue of approximately $169.0 million, a significant increase from $28.0 million in 2023.
In a recent development, Piper Sandler adjusted its outlook on Avadel, reducing the price target to $13.00 from the previous $24.00, while maintaining an Overweight rating on the company’s stock. This adjustment followed Avadel’s pre-announcement of flat fourth-quarter sales for its product Lumryz, which included an approximate $6 million inventory headwind. Despite this, Piper Sandler remains optimistic about Lumryz’s future growth, acknowledging potential challenges but noting Lumryz’s intellectual property protection extending into 2042.
Avadel also issued sales guidance for 2025, projecting $240 million to $260 million, a 50% growth at the midpoint compared to 2024. However, this falls short of the consensus estimate of approximately $286 million. These are the recent developments regarding Avadel Pharmaceuticals.
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