Earnings call transcript: Avadel Pharmaceuticals Q4 2024 reveals revenue miss

Avadel Pharmaceuticals (NASDAQ:AVDL) presented its Q4 2024 earnings, reporting revenue of $50.41 million, falling short of the $52.48 million forecast. The company posted an EPS of -$0.05, below the expected -$0.02. Despite these misses, Avadel’s stock rose by 4.05% to $8.23, reflecting investor optimism around future growth prospects and strategic initiatives. According to InvestingPro data, the company maintains impressive gross profit margins of 91.92%, indicating strong operational efficiency. Additional InvestingPro insights reveal 8 more key factors affecting AVDL’s performance.

Key Takeaways

• Avadel’s Q4 2024 revenue was impacted by inventory channel changes, resulting in a $6 million shortfall.
• The company achieved positive cash flow in Q4 and maintains a cash balance of $73 million.
• Avadel’s LumRise product for narcolepsy continues to show strong market penetration with nearly 200 million in net sales.
• The stock price increased by 4.05% post-earnings, indicating positive investor sentiment despite revenue misses.

Company Performance

Avadel Pharmaceuticals demonstrated robust year-over-year growth with Q4 2024 revenue of $50 million compared to $19.5 million in Q4 2023. This growth is driven by the success of LumRise, their oxybate therapy for narcolepsy, which has seen significant market penetration. The company is also expanding its sales force and support teams to enhance market reach and patient support. InvestingPro analysis shows the company operates with a moderate debt-to-equity ratio of 0.51 and maintains strong liquidity with a current ratio of 2.97, providing financial flexibility for expansion.

Financial Highlights

• Revenue: $50.41 million, up from $19.5 million in Q4 2023.
• Earnings per share: -$0.05, missing the forecast of -$0.02.
• Cash balance: $73 million as of December 31, 2024.

Earnings vs. Forecast

Avadel reported an EPS of -$0.05, missing the forecast of -$0.02 by 3 cents, and revenue of $50.41 million, below the expected $52.48 million. This represents a revenue miss of approximately 3.9%. The revenue shortfall is attributed to inventory channel changes.

Market Reaction

Despite the earnings miss, Avadel’s stock rose by 4.05% to $8.23, reflecting investor confidence in the company’s strategic direction and future growth potential. The stock is currently trading above its 52-week low of $7.39, indicating resilience in investor sentiment. InvestingPro Fair Value analysis suggests the stock is currently undervalued. Get access to the comprehensive Pro Research Report, part of InvestingPro’s coverage of 1,400+ US stocks, for detailed valuation analysis and growth prospects.

Outlook & Guidance

For 2025, Avadel projects full-year revenue between $240 million and $260 million, representing a 50% increase at the midpoint. The company aims to expand its physician reach and improve patient persistency, targeting a $1 billion revenue opportunity in the narcolepsy market. InvestingPro analysts anticipate continued sales growth, though profitability remains a challenge in the near term. The company’s market capitalization currently stands at $762 million, with analyst price targets ranging from $12 to $22 per share.

Executive Commentary

CEO Greg Divis stated, "2025 will be a year of growth and a year where we can and will go further and faster." CFO Tom McHugh added, "We believe that 2025 is forecasted with an appropriate degree of conservatism." These comments reinforce the company’s strategic focus on growth and market expansion.

Risks and Challenges

• Inventory channel changes impacting revenue.
• Market competition in the narcolepsy treatment sector.
• Dependence on LumRise for significant revenue generation.
• Regulatory challenges in expanding indications for LumRise.
• Economic conditions affecting healthcare budgets and patient access.

Q&A

During the earnings call, analysts inquired about patient mix challenges and persistency improvement strategies. Avadel addressed these concerns, emphasizing their focus on enhancing patient support and intervention strategies to improve long-term treatment adherence.

Full transcript - Avadel Pharmaceuticals PLC (AVDL) Q4 2024:

Conference Operator/Introducer: Good afternoon, and thank you for joining us on our conference call to discuss Avadel’s business update and outlook for 2025. Moving to Slide two. As a reminder, before we begin, the following presentation includes several matters that constitute forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding the company’s expectations on preliminary commercial metrics, unaudited financial results, forward looking patient metrics, revenue opportunity and revenue estimates, and the success of the commercialization of BloomRise. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward looking statements.

These risks and uncertainties are described in Avadel’s public filings under the Exchange Act included in the Form 10 ks for the year ended 12/31/2023, which was filed on 02/29/2024, and subsequent SEC filings. The forward looking statements made today are as of the date of this call and except as required by law, Avadel undertakes no obligation to update or revise any forward looking statements contained in this presentation to reflect new information, future events or otherwise. In addition, we may refer to certain non GAAP measures during this call, and these measures should not be considered in isolation or as alternatives to or substitutes for financial measures determined in accordance with generally accepted accounting principles in The United States. On the call today are Greg Divis, Chief Executive Officer and Tom McHugh, Chief Financial Officer. At this time, I’ll turn the call over to Greg.

Greg Divis, Chief Executive Officer, Avadel: Welcome, everyone, and thank you for joining us today. As we’re now eighteen months into the launch of BloomRise, we’ve decided to take a slightly different approach to our January business update and 2025 preannouncement. As such, turning to Slide three, today we will cover the following topics. We’ll provide a LumenRise launch update and review priorities and actions being taken to accelerate the launch. We’ll review our Q4 and full year 2024 preliminary results and for the first time provide initial revenue guidance for 2025.

We’ll review the progress and a path forward toward achieving the $1,000,000,000 potential revenue opportunity for LumRise. And lastly, provide an update on our lifecycle management programs and our 2025 key milestones. Moving to the next slide. As a company, we’ve made tremendous progress over the last few years, building our business and capabilities to enable our transformation of the sleep space for patients, for their families and their healthcare providers, while overcoming attempts by our competitor Jazz to delay Loomrise coming to market. Our progress has been brought to light for me recently with a patient story from Texas.

A nurse practitioner working in the emergency room was really struggling with the dosing of the first generation mixed salt product. And as such in a discussion with her physician made the decision to switch to Lumerise. And according to her sleep specialist, she is functioning better and has also been able to decrease her daily dose of stimulant. Most importantly, she has expressed how happy she is with her now simplified and effective treatment regimen. This is just one of many examples of the feedback we regularly receive from physicians and patients alike.

Based on this feedback, the impact we’re having and the progress made to date, we remain confident in our belief that Lumerise is a best in class therapy for people with narcolepsy and is on its way to market leadership. Like other rare disease products at this early stage of launch, we are in a critical period of establishing the initial foundation upon which the continued and future success of BloomRise will be built. On Slide five, as we move into 2025 and our foundation continues to strengthen, our LumRise launch priorities are threefold. First, expanding our physician reach and impact across all patient segments. Second, accelerating our investments in activating switch patients and finally, driving improvements in patient persistency.

2025 will be a year of growth and a year where we can and will go further and faster. So let’s review our launch to date results and our key priorities for this year. Moving to Slide six. Since launch, we have delivered strong and consistent demand in our initial primary targeted audience, resulting in nearly 200,000,000 in net sales, more than 3,700 patient starts and greater than 2,500 patients on therapy today. From a patient perspective, we have generated demand from all patient types, which was initially led by switch patients at approximately fifty percent of all patient starts.

More recently on Slide seven, we have seen a shift in our patient mix with the rapid growth of new to OXIVATE patients, who when combined with previously treated patients in Q4 represented sixty two percent of all starts. Importantly, reimbursed patients now represent nearly three quarters of all patients on therapy. As stated on Slide eight, these results have been primarily driven by two physician segments. First, we have seen successful LumRise uptake with a segment of physicians who have become our early adopters and are core to the foundation we are building. This group of less than 500 early adopters have delivered nearly two thirds of all Lumerise patient starts, yet only represents a quarter of the total oxibate market opportunity.

The second group of physicians are those who have previously never prescribed an oxibate before. This group now represent approximately fifteen percent of our patient starts further validating the emerging market expansion opportunity Lumerise offers. These early successes are the result of focused commercial execution against important segments of prescribers, which validates that we can generate significant Lumerise demand. This also demonstrates that we have much more work to do in this highly competitive and concentrated rare disease market. With the same level of focus and consistent execution during 2025, we believe we will achieve significant results with the remaining 75% of the existing oxoBate market we have not yet materially penetrated.

This group of under penetrated prescribers is a key pathway to continued growth and in particular switch patient growth, a primary focus for us in 2025. Based on our ongoing physician and patient market research, which is supported by our promotional response analysis, these physicians are typically slower adopters and require more consistent and improved commercial execution and impact, which is something we have addressed. In addition, we are deploying programs and initiatives to unlock future switch patients. This is important as some patients based on research can be concerned about reimbursement matters such as out of pocket costs or even losing access to OXOBATE if they consider switching, all of which are being actioned. Turning to Slide nine, switch patients are and will remain a critical focus as they typically have an easier path to securing reimbursement and initiating Lumerus.

They have proven to have meaningfully higher persistency rates and on average represent a greater revenue opportunity. As such as stated on Slide 10, our demand based priorities for this year are focused on accelerating the growth of patients on therapy, and in particular switch and reimburse patients. We will do this by expanding and upgrading our sales force and deploying tools and tactics to drive greater switch patient focus and impact on this underpenetrated market opportunity. We’re increasing our direct to OXIBATE patient marketing efforts to accelerate OXIBATE patient education and activation to ask for LumRise, while continuing our pursuit of market leadership in the new to brand OXIBATE patient segment and capitalizing on the market expansion momentum we are building. And lastly, we’ll continue our focus on increasing our reimbursed patient mix toward 80% and beyond with account and channel specific strategies.

If patient demand is priority one, persistency improvements are priority 1a. Moving to Slide 11, the narcolepsy market has had long standing challenges with successfully keeping patients on oxubate therapy. First generation oxubates have historically experienced more than fifty percent of new patients discontinuing therapy each year with approximately half of that in the first thirty days. More recently based on data we have reviewed, the twelve month discontinuation rate for new first generation oxfate patients is now approximately sixty five percent. This is something we believe hasn’t received the attention it deserves as there wasn’t any competition, but now there is and for us it is a priority.

Just as we believe Lumerise will become the treatment of choice for oxubate eligible people with narcolepsy, we’re equally committed to being a leader in persistency as well, helping ensure patients have their own personal optimal Lumerise treatment experience and the associated benefits they deserve. For Lumerise, we expected persistency would be impacted as our patient mix became more heavily weighted to new to oxbate patients and our cumulative cohort of existing patients grew. This expectation has materialized as our new to oxbate patient cohort is growing, which from a persistency perspective is being addressed with actions we believe will improve this important metric. As it states on Slide 12, specifically what we know is adverse events are one of the primary reasons for discontinuations. These tend to be common oxubate specific side effects such as nausea, dizziness and vomiting that typically occur when starting or increasing a dose and depending on severity can lead to potential discontinuations.

However, they generally subside within one to two weeks, providing an opportunity to impact this by ensuring expectations are appropriately set with patients and deploying timely patient specific interventions. This is important because as patients progress to their steady state dose and efficacy increases, satisfaction with their treatment increases and the likelihood of discontinuation declines, especially early in a patient’s treatment as nearly two thirds of discontinuations occur in the first ninety days. Thus providing a very clear window and opportunity to deploy patient specific tailored messaging. And even though BloomRise’s persistency rates are higher than that of the first generation oxibates, that is neither good enough nor the appropriate standard. This year we believe there’s an opportunity to improve the overall persistency rate, which begins by impacting the first ninety days of treatment and stabilizing the overall discontinuation rate.

Transitioning to slide 13, to address this we have recently made meaningful changes to both our strategy and our resources, including doubling our nursing team and our patient services center, allowing for more frequent and tailored patient interventions, including prior to the start of therapy to better set treatment expectations. Increasing our field support team to deliver physician specific interventions in advance of their patients’ LumRise refill expanding our partnership with our specialty pharmacies, deploying custom pharmacy based compliance and persistency programs And lastly, progressing additional field based patient support services that can go beyond the traditional telephonic and digital intervention tools to a more direct personal high touch intervention at the patient and physician office level. All these investments are designed with the goal of improving persistency both early in and throughout a LumRise patient’s treatment experience by delivering the right message to the right patient at the right time. So wrapping up, we are committed to leading the way for patients in persistency and beyond. All the while providing the opportunity to free oxibate eligible people with narcolepsy from forcibly waking

Tom McHugh, Chief Financial Officer, Avadel: up in the middle of

Greg Divis, Chief Executive Officer, Avadel: the night, night after night for a condition that as FDA stated is antithetical to the goal of improving sleep. Now to translate this into our Q4 results and 2025 financial expectations, let me turn it over to Tom.

Tom McHugh, Chief Financial Officer, Avadel: Thanks, Greg. We’ll start with how we currently estimate 2024 will wrap up followed by our expectations for 2025 and beyond. Moving to Slide 14, I’ll highlight a few preliminary twenty twenty four fourth quarter results and we’ll provide more detail when we announce full year earnings later this quarter. Starting with Q4, we estimate that net revenue will be approximately $50,000,000 compared to $19,500,000 in the fourth quarter of twenty twenty three. We also estimate Q4 revenue was impacted by approximately $6,000,000 as there was about $1,500,000 less weeks of inventory in the channel at the end of Q4 versus the end of Q3.

GAAP operating expenses are expected to come in at approximately $50,000,000 and excluding about $6,000,000 non cash charges for stock based compensation and depreciation and amortization, cash operating expenses are estimated approximately $44,000,000 Importantly, our cash flow metric continues to improve and cash flow for the quarter was positive and any cash will be approximately $73,000,000 at December 31 versus $66,000,000 at September 30. With respect to some key patient metrics, there were over 600 patient starts during the quarter, resulting an increase of over 200 patients on therapy. We saw a slowdown in the conversion enrollments to patients and starting therapy as we entered the holiday season. And absent the holiday impact, we believe that patient starts would have been consistent with the 700 per quarter pace of the first three quarters of the year. During 2024, there were more than 2,700 patient starts and over 3,700 since launch, And all of which resulted in two thousand five hundred patients on therapy as of December 31 compared to nine hundred at the end of last year.

I’ll turn now to Slide 15 and current expectations for 2025. Earlier, Greg reviewed our key launch priorities and depending on the execution against those as well as other plans and assumptions, we are projecting the following full year results. Revenue is is projected to be in the range of $240,000,000 to $260,000,000 which represents about a 50% increase at the midpoint of guidance over 2024 full year revenue. We believe that 2025 is forecasted with an appropriate degree of conservatism regarding patient starts and patient mix, which are way more heavily to do the OCCUPADE patients and revenue could be higher with improvements in several key assumptions such as patient demand, patient mix and persistency. With a highly leverageable cost structure, we also expect the cash flow for 2025 will be positive and in the range of $20,000,000 to $40,000,000 and that we can fund the ongoing launch in Phase III IH study from cash on hand and cash flow from operations.

I’ll wrap up my commentary on Slide 16 with what we believe and how we can achieve the $1,000,000,000 plus revenue opportunity for Lumerise. We expect that over the next several years, Lumerise will become the leading Osterbase therapy for the treatment of narcolepsy and that the Osterbase market will continue to expand just as we have seen since the launch of Lumerise. The path towards achieving a billion of revenue is straightforward, requiring a constant base of approximately 8,000 reimbursed patients. In eighteen months of the launch, we are nearly 25% of the way towards achieving that goal with over 1,800 reimbursed patients on therapy. And with three patient segments totaling over $50,000 50 thousand patients, there are multiple paths to gain the number of reimbursed patients needed to achieve 1,000,000,000 of sales.

However, for example, if only thirty percent of the 50,000 patients initiate treatment with Lumerise and factoring in persistency, Lumerise will become a $1,000,000,000 plus product, all of which is being built on highly leverageable operating structure poised for significant cash generation and earnings. At current gross margins, projected GAAP operating expenses and our existing tax and capital structure, we estimate that reaching $1,000,000,000 of revenue will yield approximately $6 of diluted earnings per share. And with that, I’ll turn the call back to Greg.

Greg Divis, Chief Executive Officer, Avadel: Thank you, Tom. Before we wrap up and open it to Q and A, let me provide a brief update on the work we’re doing with our lifecycle management programs on Slide 17. First and foremost, we have a sustainable high growth franchise in Lumerise that can drive significant long term value with current patent protection to early two thousand and forty two. And that value opportunity extends potentially beyond that of Lumerise and narcolepsy. As previously stated, we are conducting our Phase three revitalized trial in idiopathic hypersomnia or IH, which is currently enrolling as planned and is expected to be completed in the second half of this year.

Of note, we have a legal matter we must resolve around the potential NDA filing and approval of LumRise NIH. Assuming we are successful in this regard, we currently expect to be able to file the NDA approximately six months post completion of our pivotal trial. We have become quite bullish on the potential prospects of BloomRise and NIH, both because of what we’ve learned and what we hear directly from clinicians and leading key opinion leaders. As stated on Slide 18, there are approximately forty two thousand diagnosed IH patients under the care of physicians, yet less than eight percent are being treated with the only FDA approved treatment. What we hear from clinicians is that many patients due to their deep sleep inertia associated with IH cannot physically wake up in the middle of the night to take a second dose and therefore are not able to benefit from a full therapeutic treatment.

As such, we routinely hear that the Lumerai’s value proposition for patients is potentially even greater in IH than in narcolepsy. In addition, our formulation scientists continue to work with our third party partners on developing a once nightly lower no sodium oxybate formulation, having a target product profile bioequivalent to LUMRISE. And if successful, we intend to pursue FDA approval for this product to treat both narcolepsy and IH. Turning to Slide 19, as we start the new year, key milestones for this year include our quarterly financial and launch related results include revenue, patient demand, patient mix and net patients on therapy, This is the successful completion of our pivotal IH trial and progress toward NDA filing readiness. Updates on our no low sodium development programs and of course our continued progress in ongoing litigation matters as previously noted including the November antitrust jury trial against Jazz, as well as the advancement of our recent patent infringement suits.

We filed against Jazz to protect our one slightly OXIVATE innovation. Moving to slide 20, in closing, we have built a strong demand based foundation for LumRise, which continues. We’re investing in the areas to accelerate the launch and address the challenges in our pursuit of the $1,000,000,000 LumRise potential. We’re advancing our lifecycle management programs that offer, if successful, a significant expanded oxivate market opportunity for LumenRise, all of which is supported by robust intellectual property portfolio extending into early two thousand and forty two, a portfolio we are continually expanding. Lumenrise represents a meaningful value creating opportunity built on a highly leverageable cost structure, which should result in significant cash and EPS generation over the coming years and through its patent life.

Furthermore, this cash generation foundation creates potential optionality to invest in the growth of Avadel and or return capital to our shareholders. In 2025, we look forward to many more stories like our ER nurse practitioner from Texas. We’re optimistic for the future and look forward to providing additional commercial updates as appropriate. We thank you for your time today and as always for your support. We will now open the line for Q and A.

Operator?

Conference Operator: Thank you so much. And as a reminder, that is. It comes from the line of Francois Briscoe with Oppenheimer. Please proceed.

Frank, Analyst, Oppenheimer: Hey guys, thanks for the questions and the updates. I just wanted to better understand a little bit, maybe Tom, if you can go into, if we just kind of see the patients on therapy and we see the sales, right, there’s the net revenue per patient that you kind of look at, that comes in at a certain number. Can you help us understand why how to think about that number going forward? Does it change and maybe the change from that number versus third quarter and where it came in? Because it does seem like your number of patients starts was almost in line, the holidays took it off, but 600 was a solid quarter.

So just a little more on the net revenue per patient and how that can get better with reimbursement? Thank you.

Tom McHugh, Chief Financial Officer, Avadel: Thanks, Frank. And maybe a good starting point is a question you asked at the beginning, which is where patients were at twelvethirty one. And as we’re thinking about revenue heading into 2025, we have to make an assumption that a percentage of those patients will discontinue during the course of 2025, which of course impacts the exit run rate. And then in terms of comparison of Q3 to Q4, we did have net patient adds, perhaps a driver which we anticipate was going to happen was the change in the inventory level in the channel, which impacted revenue by about $6,000,000

Frank, Analyst, Oppenheimer: Okay, great. And is that $6,000,000 on that note, is that because the inventory play is something to be expected a little bit. Was the $6,000,000 more than expected? Or was that kind of in line with what you guys expected?

Tom McHugh, Chief Financial Officer, Avadel: Frank, I think from my standpoint, it was in line with what I expected. We signaled this during the Q3 call that we expected to be fewer weeks of inventory in channel twelve thirty one. It’s really a function of capacity constraints or storage constraints at the specialty pharmacies where they had indicated they were at capacity in the Q3. So I wouldn’t take it certainly would not take it as an indication of any slowdown in demand. It’s just the specialty pharmacies couldn’t carry any more than they could at September 30.

In a normalized range, I think two to four weeks is a normalized range to think about. It’s tough for me to predict where we’ll be at the Q1 or subsequent quarters. But But I would think about inventory of losing the channel in that range of two to four weeks.

Frank, Analyst, Oppenheimer: Okay, great. And then just lastly, going forward, in terms of metrics to be expected for us to understand better the persistency and the new patients versus the switch patients. Is this something that you’ll give clarity on going forward just to see how these actions are going or we don’t know yet?

Greg Divis, Chief Executive Officer, Avadel: Yes. Frank, the way we think about it going forward is patient demand in the form of patient starts, patient mix in terms of source of patient and of course net patients on therapy. We think all of those metrics will provide the sort of clarity you’re looking for.

Frank, Analyst, Oppenheimer: Perfect. Thank you very much.

Greg Divis, Chief Executive Officer, Avadel: Thank you.

Conference Operator: Thank you. Our next question comes from the line of Andrew Tsai with Jefferies. Please proceed.

Andrew Tsai, Analyst, Jefferies: Hey, thanks. Good afternoon. Thanks for taking my questions and thank you for sharing the progress and expectations. So maybe the first question around the 2025 guidance on the patient numbers. If I take the midpoint of patients initiating therapy in 2025, I think that’s I’m assuming that’s on top of the three thousand seven hundred you have today.

And if that’s the case, then taking that resulting number and then working out the math with the patients on Lumerai’s guidance that you have at the midpoint. Basically, is it correct to think that the implied discontinuation rate by year end twenty twenty five could be closer to fifty percent? I’ll start off with that. Thanks.

Tom McHugh, Chief Financial Officer, Avadel: Yes. Listen, Andrew, I don’t disagree with your math. So that is what it implies. This is one of those areas we think there’s really great opportunity for improvement versus our current assumptions, which is why we made the investments we made around persistency and driving patient demand. We believe we’ve taken appropriate approach towards forecasting 2025 at a conservative level.

And what we are thinking about for 2025 is that we’re going to be more heavily weighted towards new to oxalate patients, which does impact overall persistency.

Andrew Tsai, Analyst, Jefferies: Thanks. And I guess I’d have to think about it more, but you did mention how your current guidance is conservative, but it makes me think how conservative is this ultimately, how much higher could these revenues be ultimately? Do you have actually a little bit more color around that? And then how much is it from the in terms of growing patient volume or driving less discontinuations more realistically that can drive higher sales in 2025 in your

Speaker 6: guidance? Yes.

Greg Divis, Chief Executive Officer, Avadel: Andrew, I think first of all, I think most important is if we think about the first six quarters of launch, we had a strong start. We clearly have hit some challenges with persistency here in the second part of ’20 ’20 ’4. And we have taken the actions to address those persistency matters and also ensure our focus on driving switch patients. So your question as to which one is more important, the answer is they’re both important. And I’ll just again restate that if you look at where we’ve indexed our efforts early in the launch, in our early adopters, we have actually significantly penetrated that audience and it’s over representative of their potential within the oxalate market.

If we can continue to replicate that over time, we should have that sort of success and beyond across all patient segments. So we do think there are opportunities to improve and beat, if you will, how we’ve guided. I would say at this point, we need to continue to assess the interventions and the impact of those interventions and give us opportunity in subsequent quarters to provide more clarity in that regard.

Andrew Tsai, Analyst, Jefferies: Thanks. And then very last quick question, maybe you did share in the slide and I missed it. How should we think about the overall mix of your LUMRISE patients going forward by year end? Would you still expect the same proportion that you’re seeing right now, year end 2024? Thanks.

Tom McHugh, Chief Financial Officer, Avadel: Yes. So, Andrea, it’s Tom. So what we had put on the slides, the mix of patients in the fourth quarter was certainly more heavily weighted towards Nu to Oxivate and previously tried to discontinue. As we’re looking into 2025, again, I would view this as one of those assumptions we made on more conservative basis. We think we’re going to continue to be overweighted in terms of new to oxybate and prusitriptan discontinued.

In improving the patient mix, will certainly drive an improvement in revenue.

Andrew Tsai, Analyst, Jefferies: Thank you so much.

Conference Operator: Thank you. One moment for our next question. That comes from the line of Mark Goodman with Leerink. Please proceed.

Mark Goodman, Analyst, Leerink: Yes, a

Amit Fadia, Analyst, Needham and Company: couple of

Mark Goodman, Analyst, Leerink: things. First, I may have missed this, but the average selling price was what, like if it was $100,000 in the second quarter, ’90 ’6 thousand dollars in the third quarter, what was it in the fourth quarter?

Tom McHugh, Chief Financial Officer, Avadel: Hey, Mark, it’s Tom. So listen, preliminarily, of course, we’re still closing the books, but it averaged about $96,000 if you just take the revenue reported and adjusted for the inventory of $6,000,000 divide that by the average number of patients on therapy, it works out to about $96,000 per quarter.

Mark Goodman, Analyst, Leerink: So apples to apples, it’s about so it’s the same, it’s third quarter is what you’re saying?

Tom McHugh, Chief Financial Officer, Avadel: I think it’s third quarter, that’s right.

Mark Goodman, Analyst, Leerink: Okay, fine. And then just secondly, historically when I mean in order to get

Andrew Tsai, Analyst, Jefferies: to $1,000,000,000 are

Mark Goodman, Analyst, Leerink: you basically counting on the IH indication? Is that what we’re counting on? I mean when a product goes to $170,000,000

Greg Divis, Chief Executive Officer, Avadel: to $250,000,000 I

Mark Goodman, Analyst, Leerink: mean obviously a new indication can change the growth trajectory. But outside of that we’re used to seeing growth rates that kind of slow each after year. So we have to be thinking that this indication slows a little bit over the next couple of years in growth rates. It’s not going to become a billion in narcolepsy, right? This is narcolepsy and IH.

Tom McHugh, Chief Financial Officer, Avadel: Mark, the way we think about it, what we’ve talked about in terms of $1,000,000,000 opportunity excludes IH.

Mark Goodman, Analyst, Leerink: Uh-huh. So can you talk about is there an expectation that 2025 is a growth year of 40 something percent, whatever the number is to get to the midpoint and then it actually is faster in 2026? I mean, because traditionally that’s not normally what we see.

Greg Divis, Chief Executive Officer, Avadel: Yes. I think from our perspective is there is a significant amount of patient opportunity to grow LumRise, whether from the three different patient segments that Tom described and our penetration of those respective patient segments doesn’t have to be significant to be able to realize those sorts of numbers only in narcolepsy alone. And we’ve seen those levels of penetration in our early adopter audiences already, right? So if we can continue to translate that into the broader audience, then we believe over time and the slope of that curve will progress the way it progresses, we can get to those sorts of numbers on patients given the opportunity and what we hear in our market research, right, from that perspective. I will say it’s not a it certainly is a therapeutic category where consistent growth continuously quarter after quarter after quarter has been demonstrated and we believe we can continue to execute and deliver on

Speaker 6: that over time

Greg Divis, Chief Executive Officer, Avadel: and based on the patient source and opportunity we have and what we hear from our research.

Mark Goodman, Analyst, Leerink: And just last question, because I guess this kind of answers when peak sales would be peak sales would be the year before you go LOE. When are you assuming the LOE?

Greg Divis, Chief Executive Officer, Avadel: Yes. We’re not defining when peak sales are, but at this point as we described in the call, we have patent protection right now through early two thousand and forty two. Thank you.

Conference Operator: Thank you. One moment for our next question, please. Comes from the line of Amy Fadia with Needham and Company. Please proceed.

Amit Fadia, Analyst, Needham and Company: Hi, good afternoon. Thanks for taking my question. Can you talk a little bit about what has been the dynamic with switch patients and why we’ve seen a reduced mix of switch patients and what your assumption is in your 2025 outlook for what percent of patients will be switch patients and what do you think you need to do to really increase that mix? That’s my first question.

Greg Divis, Chief Executive Officer, Avadel: Yes. Again, I think the data shows what occurred. We’ve seen early in the launch a much higher percentage of them. And as we’ve gotten to the last couple of quarters, it has slowed down and stabilized to a certain extent in the kind of low to mid the mid higher thirty percent of the total patient population of our total patient starts. In part, we’ve gotten, I would say, for lack of a better word, those who are waiting and looking for AlumRise.

And now we’re in particular in our early adopters. And now we are in the market really expanding our reach and investing our efforts to both educate direct to patients through our direct to patient activities to educate them and activate them to go see Gloomrise where we’ve done that to date, we’ve seen that be successful. And we’ve expanded our sales force to expand our reach to be able to get wider and get more frequency into this other 75% of the underpenetrated market opportunity. And we think in both those scenarios, we’re going to continue to see growth in neuteroxibate and previously treated and discontinued. And we’re focused on accelerating the switch, which if we do those things, our entire demand will grow.

Amit Fadia, Analyst, Needham and Company: Got it. Just a few thoughts to your guidance for 2025, you’ve sort of characterized it as something that

Frank, Analyst, Oppenheimer: has

Amit Fadia, Analyst, Needham and Company: upside. What do you think could be the biggest driver of upside? And when you talk about the persistency rates of 50% that you’ve assumed in your guidance, what do you believe you need to do to sort of increase that persistency rate? And what could drive the persistency rates to be better than the Jazz products

David Amsellem, Analyst, Piper Sandler: that have been on

Amit Fadia, Analyst, Needham and Company: the market for many years? And then I have one quick last question.

Tom McHugh, Chief Financial Officer, Avadel: Sure. Hey, Amit, it’s Tom. I’ll take the first part of the question. There’s I consider there’s really three primary assumptions that could drive revenue above the guidance we provided, each one of which is not insignificant and taken in combination and working together provides even more even a larger result. The three assumptions really are just really total patient demand.

And of course, if you drive more patients at the top and you have more net patient adds during the course of the year. Patient mix defined really as the mix of switch patients versus non switch patients to characterize Asimply, that’s also a powerful driver of revenue. The higher the mix goes towards switch, the more revenue we believe we generate. And the third is persistency, which we’re we’re making the right investments to improve that. And but you take those three, they’re individually or in combination and that clearly would drive us above the revenue guidance.

Greg Divis, Chief Executive Officer, Avadel: Yes. And to your question of why do we think we can improve persistency vis a vis other products in the category. We’ve already demonstrated that we have higher persistency rates from the data we look at across all patient types and all time periods to date that we’ve been on the market. So we have numerically a better persistency rate, if you will. But from our perspective, with as our patient mix shifted and the opportunity to keep patients on therapy, it’s an investment and a priority for us because we work so hard to get them on therapy and we know that when they get through the first ninety days, which is where the majority of these discontinuations occur, that their treatment experience and their satisfaction only continues to rise.

So what we’re really deploying is incremental resources deployed in particular centered around the first ninety days where we engage with the patient, we engage with the office staff and physicians in an attempt to really positively impact from before they start therapy to at different points in time during their journey, especially in the first ninety days. Now every patient is important and every patient type is important in that regard whether the first ninety days or beyond and all of our programs are designed to impact everybody in that regard. But the new to OXIBATE and the previously treated and discontinued have markedly higher discontinuation rates than the switch patient, which is why the mix of patient matters in that regard, why a focus on switch patients is important as well. But also we have to have the tools and the tactics to try to meet the patient where they are and help them stay on therapy, which is something we haven’t done until recently.

Amit Fadia, Analyst, Needham and Company: Understood. Okay. Just last quick question. Just could you elaborate on where the appeal to the injunction on IH is at and what stage of the litigation we are at and when we can expect a decision?

Greg Divis, Chief Executive Officer, Avadel: All that I can say on the appeal of the IH appeal is that the oral arguments, I believe are scheduled for February 7. And then we would subsequent to that, we would expect a decision sometime from the appellate court sometime thereafter, right? When that is, not really sure. The last time we were in front of that group on the REMS related patents, we had a decision in fairly quick short order. But it could also be later in Q1 or early in Q2.

We don’t know. So but the oral arguments are February 7.

Amit Fadia, Analyst, Needham and Company: Thank you.

Conference Operator: Thank you. One moment for our next question. That comes from the line of Olive one moment please

Speaker 6: Yes.

Greg Divis, Chief Executive Officer, Avadel0: Great.

Amit Fadia, Analyst, Needham and Company: Can you just

Speaker 6: talk a little bit more and I’m sorry I had to jump on and off this call, so I’m sorry if you addressed it. But can you talk more about these interventions? I think you said they’re sort of beyond traditional telephonic and digital intervention. Presumably, I don’t know if that’s mostly on the post initiation patient support side or if this is on the free initiation education side with doctors and or patients. Just talk more about what are you doing differently that you didn’t do before and why that wouldn’t have occurred for you to do initially?

And also, maybe I missed this as well, but is the mix of patients that you’re at now at this stage in the launch meaningfully different than you would have expected? And why do you think that is in terms of higher waiting towards new to patient? Is switching existing patients that weren’t already warehoused and eager and unhappy and waiting to switch to something. Is that proving harder than you expected? Are patients just seeing their doctors less often than you expected?

If you could just talk more about all of that? Thanks.

Greg Divis, Chief Executive Officer, Avadel: Yes. Or in terms of the initiatives that we’re taking on relative to persistency, whether it’s the expansion of our nurses, whether it’s the expansion of our field sales team, whether it’s our partnerships with our specialty pharmacies or the additional field based opportunities that we’re evaluating and progressing, I would say all of them are things we hadn’t been doing until recently. So we continue to advance those capabilities from that perspective and assess their impact and how they are effectively improving the patient’s treatment experience. So I think the one thing we’ve learned over the course of in particular the last number of months is that the notion of one size fits all isn’t the right approach, right? Each patient type has their own different nuance and how we intervene based upon the patient is really, really important and we continue to get smarter as we talk to patients about that and how we can become more, if you will, almost predictive in terms of who’s at risk of a discontinuation and how do we deploy interventions in advance of that to prevent it, right, from that standpoint.

So in terms of your comment about your question about switch patients, I think the first thing I would comment is that the switch opportunity is robust for us and it hasn’t changed and it still represents, respectfully, the largest portion of our patient starts, right? It’s left and I think that is in part because of the some of the low hanging fruit we got. And I think we’re now in a rare disease where we are unlocking patients, we are in offices and online communicating to patients and physicians to give them the reasons why they should or should consider LumRise. And we’ve done a lot of research in this regard and we noted some of that research. Some of that concerns or hesitation is centered around reimbursement or concerns about out of pocket costs, which certainly isn’t an issue for us, but certainly is something that we’ve got to make sure patients understand as one example of the things that they’re comfortable with as they consider changing a therapy in a rare disease where only a handful of small subset of physicians have a lot of patients, most have a few patients and the intervention opportunities aren’t regular like they are in larger mass markets.

Speaker 6: Okay. And there’s a lot of moving parts in this guidance and I’ll admit that’s a bit confusing, at least on without having a chance more time to dig into it here. But just as we think about, besides the math of just discontinuation rates, which will hopefully improve on average, is there any sort of phasing or cadence that you expect in this year with regards to some of these new all of the above new starts and different patient types coming online with these initiatives? Is this going to be a back half weighted? I guess it speaks to Mark’s question earlier that will be come out of the year maybe at a higher growth rate than we are in the first half as these initiatives take hold?

Greg Divis, Chief Executive Officer, Avadel: Yes. Or maybe I’ll start and then maybe Tom can wrap a little bit additional commentary. I think first, the thing that’s very clear to us and even was clear during the first four plus quarters of launch, where we were building this really strong foundation is that the demand at the top of the funnel, whether you measure that in enrollments or new patient starts continues to be robust and strong and consistent and we see that not changing. The opportunity for that to accelerate is really continuing the growth we’re seeing in new to OXOBIATE and SWITCH patients, but add in a growth if you will an improvement in SWITCH patients, right, from that perspective. So that’s why it’s a focus for us.

How long it takes for these investments to take hold and have consistent impact is something we’re evaluating all the time. I certainly believe that we’ve got our field teams and our nurses team, nursing teams and whatnot all in place now and trained and operational here as we enter the new year. And we’ll continue to assess the effectiveness of those initiatives to be able to both build demand like we think we can and keep patients on therapy like we think we can.

Speaker 6: And just lastly, I’m sorry, did you say how many reps you had and now have in the field?

Greg Divis, Chief Executive Officer, Avadel: We’ve added about 15% on the rep side. We’ve doubled our field support teams and we’ve doubled our nurses.

Speaker 6: Okay. How many reps is that out there now?

Greg Divis, Chief Executive Officer, Avadel: 53.

Speaker 6: Got it. All right. Thanks so much.

Greg Divis, Chief Executive Officer, Avadel: Thanks, Owen.

Conference Operator: Thank you. One moment for our next question. And it comes from the line of David Amsellem with Piper Sandler. Please proceed.

David Amsellem, Analyst, Piper Sandler: Hi. Thank you for taking our question. This is Alex on for David. I’ve got one question for you. Looking ahead at longer term dynamics, how are you thinking about adoption in IH for Loomrise assuming positive data?

In other words, are you envisioning expanding the market or do you see a lot of the LumRise potential here coming at the expense of ZaiWave? Just sort of help us understand how you’re thinking about this opportunity.

Greg Divis, Chief Executive Officer, Avadel: Yes. Again, I think without providing a whole lot of commentary around this given we’ve got to get through our clinical trial, get through our approval and deal with the upcoming oral arguments and appeal process. I would say most importantly and again the research we’ve heard most recently and trying to understand the opportunity for LUMRISE is that there’s a whole lot of room here for LUMRISE to fit in. Whether that and I think the dynamics that we see in narcolepsy to some extent although there’s more patients being treated with narcolepsy, we think we’ll likely potentially translate into IH to a certain extent. But the IH penetration today is again less than eight percent based upon diagnosed patients and what we think are the actual IH patients on therapy with the twice nightly product.

So from our viewpoint, there’s a lot of room both inside of those being treated, but even bigger outside of that. And all indications we have is it’s an opportunity to source all from multiple patient segments just like we’ve seen in narcolepsy accordingly should we be successful in our clinical program and the related legal matters.

Amit Fadia, Analyst, Needham and Company: Thank you.

Conference Operator: Thank you. One moment for our next question please. And this is from the line of Ash Verma with UBS. Please proceed.

Greg Divis, Chief Executive Officer, Avadel1: Hi. Yes. Thanks for taking my questions. I have two. So just for $20.25, like I’ve been trying to do this math, but like what are you assuming on pricing?

It seems like there is disconnect even after factoring your 50% persistence. And I assume that typically in this market pricing doesn’t necessarily get impacted that meaningfully. So that’s the first one. And then second, has the recent leadership departure resulted in any kind of disruption in the sales momentum?

Andrew Tsai, Analyst, Jefferies: Thanks.

Greg Divis, Chief Executive Officer, Avadel: So I’ll take the second question. And from my perspective, the answer to that is no. In terms of disruption from the field, the field is very focused on what they’re doing and all of our field leadership team and our commercial leadership team is intact, still operating and driving the things that need to be driven from that perspective. So in that point, we don’t believe so from what we’ve experienced so far. And on the pricing, I’ll turn it over to Thomas.

Tom McHugh, Chief Financial Officer, Avadel: Yes, actually, the way I would think about pricing is for a listen, for a reimbursed patient who’s on for full year, there’s really no much of a change year over year from 2024 to 2025. But what does impact when you get down to an average per patient number on a new revenue basis is really the patient mix. And persistency does impact the calculation of the net revenue for switch patients versus a new to activate patient. And while we believe we’ve forecasted conservatively, That factor, that mix of patients does impact net revenue per patient on an overall basis.

Greg Divis, Chief Executive Officer, Avadel1: Thank you.

Conference Operator: Thank you so much. And one moment for our next question, please. And it’s from the line of Marianne Belghedi with Lifesize Capital.

Greg Divis, Chief Executive Officer, Avadel2: Thank you for the update. Just one question for me. I’m just curious whether the is driving discontinuation in the new to oxibate for Lumerai differ from those seen in the first generation oxibate? You mentioned that historically those have been quite high. So just wondering what gives you the confidence that these new initiatives will meaningfully address this issue?

Greg Divis, Chief Executive Officer, Avadel: Well, it’s a great question, Miriam. And I think ultimately as we’ve studied this and sought seek to understand what’s happening and why, there’s a few things that really stand out, right? Number one, as we stated, like across all time points and different patient segments, I would say that we numerically have better discontinuation rates or we like to think higher persistency rates, but not good enough, especially as our patient mix changes. And we’re on a total patient population that’s smaller, right, with 2,500 patients on therapy. So for us, when you as we’ve researched this, talked to patients, talked to those who have experienced the sorts of things that drive discontinuations, it’s clear that the majority of it happens early on.

A big driver of that is how their expectations are set and how care is offered to them through the course of dose titration because side effects come with starting and dose titration, yet they do subside over time. And while your dose increasing to your steady state dose to get the ideal therapeutic effect, you’re going to have adverse events along the way and helping the patient navigate through those is really, really important. So again, our view is that we can have an impact in this regard. We have made the investments to do that and we continue to deploy those efforts and we’ll have an opportunity to understand over time, which ones we think are working the most effectively and how do we double down on those and which ones need to be enhanced and how do we do that.

Greg Divis, Chief Executive Officer, Avadel2: Got it. Thank you for answering my question.

Conference Operator: Thank you. One moment for our next question. It comes from the line of Chase Knickerbocker with Craig Hallum. Please proceed.

Greg Divis, Chief Executive Officer, Avadel0: Thanks and good afternoon. So just wanted to take a little bit more on the efforts on the demand side and how you can improve the mix on what is entering the funnel on kind of maximizing switch patients. Can you just add a little bit more detail on how you’re kind of focusing reps to kind of improve that mix entering the funnel more towards switch patients? Is there a decent number of kind of medium to high prescribers out there that are still kind of new to you and you still need to reach? Or is it mainly existing writers who have a meaningful cohort of OXIBATE users who are just sticking with first generation therapy?

Thanks.

Greg Divis, Chief Executive Officer, Avadel: Yes, I would thanks, Chase. I would answer it this way, right? I think number one is, you got to understand where the physician is on their buying kind of in their buying journey, so to speak, and their adoption journey of BloomRise, right? In some case, we have physicians who have not prescribed. We have some high volume prescriptions physicians who have not prescribed.

But by and large, our 25% of the market that’s driving two thirds of our volume to date where we have really high penetration relative speaking, has been directly related to our efforts and our promotion, right? So I would say as you get to the other 75% who may be slower doctors, may be harder to see, may be lower tiered physicians and have who have fewer patients and some have a lot of patients, it really requires consistent in our view, consistent focus and commercial execution against it, understanding where that position is in their kind of adoption sequence. Is this a physician who we should be targeting to switch patient to? Is this one who we should be starting anew to activate with? Our focus though is to grow all patient demand with an emphasis on how do we unlock more switch patients, right?

And again, we’re working with our teams to deploy those tools and tactics to do that. But there’s ample opportunity across all of our segments recognizing that where we’ve over indexed our time, we’ve done quite well and that’s laid the foundation. And now we’ve got to expand that if we want to keep building and growing and all of our research would tell us that that can happen and that’s what we’re doing.

Greg Divis, Chief Executive Officer, Avadel0: And then just last for me on the persistency side. Is there any kind of early signs of success with any maybe earlier stage pilot programs that you kind of put in place or specific teams out there in the field in specific geographies who have done better from a persistency rate perspective? And kind of that you can share as far as potentially showing early signs of success at some of these efforts that you’re instituting? Thank you.

Greg Divis, Chief Executive Officer, Avadel: Yes. Thanks, Chase. Given most of our resources are just operational now, I would say it’s a little bit premature to draw any sort of definitive conclusions. I would say that what we’ve really tried to understand in addition to what’s happening at the physician at the patient level is to really understand where discontinuations are an issue at the physician level, right, in terms of perhaps their practice and how they manage patients or what is the result what is the resulting risk of discontinuation inside of specific physician practices. And taking the opportunity to engage and connect with those physicians who do a really, really good job from them, from their perspective and from what the data tells us, learning and deploying and the sorts of lessons that they deploy both not only at the patient level, but to the physician level as well.

And that’s the reason why we’ve expanded our resources to be able to do both.

Andrew Tsai, Analyst, Jefferies: Thanks, Greg.

Conference Operator: Thank you. One moment, we have a follow-up from Mark Gutman with Leerink. Please proceed.

Mark Goodman, Analyst, Leerink: Yes. Hey, just a follow-up since we’re kind of resetting expectations here, Tom, first quarters are always a little funky. Maybe you can comment on first quarter a little bit and how to think about it. And then second of all, did I see the numbers correct? You ended ’24 with two thousand five hundred patients.

You’re expecting to end three thousand four hundred patients at the end of this year. So like if you just took like a simple average times the price that’s the same price as 2024, you get a number that’s much above your range. So what am I doing wrong?

Tom McHugh, Chief Financial Officer, Avadel: Let me break them down one by one. The it looks early to comment on Q1, Mark. We’ll probably be in a better position to write an update on that and how we’re progressing when we do our Q4 call later this month or later this quarter. In terms of the magnetitecaling revenue for the year, you have to take 2,500 as we exit therapy. We’re projecting that out of 800 to 1,000 patients, so probably gives you to 3,300 to 3,500.

And then I would for some of that take the average net revenue for patients we’ve been doing. But don’t forget, listen, you have to adjust the 2,500 starting point a little bit, because of discontinuations. We don’t get the full year benefit of those patients being on therapy.

Mark Goodman, Analyst, Leerink: I see. So it’s a kind of a titration issue. Okay. Thanks.

Tom McHugh, Chief Financial Officer, Avadel: Thank you.

Conference Operator: And this ends our Q and A session for today. I will turn it back to Greg for final comments.

Greg Divis, Chief Executive Officer, Avadel: Thank you. Just a few final comments to say first, thank you for spending your time and here on this afternoon, we look forward to any follow ups. And again, after the first number of quarters of launch building our foundation, we do believe we are focused on the right things to both accelerate the demand and impact the persistency and we look forward to providing those updates to you as we go forward. Thanks.

Conference Operator: And with that ladies and gentlemen, we conclude today’s conference. Thank you for participating and you may now disconnect.

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