Q2 2024 Summary
Published Jan 15, 2025, 11:11 PM UTC- Strong Financial Performance and Path to Profitability: Avadel expects to achieve positive adjusted operating income beginning in Q3 and continue to be positive for the remainder of 2024. In Q2 2024, the company reported net revenue of $41.5 million and gross profit of $38.7 million, both representing a greater than 50% increase from Q1 2024. They were very close to achieving adjusted operating breakeven during the second quarter, with an adjusted operating loss of approximately $1.2 million.
- Expansion of the Oxybate Market and Growing Demand for LUMRYZ: LUMRYZ is experiencing strong uptake from patients switching from twice-nightly oxybate products, as well as from naïve patients and those who previously discontinued oxybate therapy. Notably, 85% of high-volume oxybate prescribers have written for LUMRYZ, and there's an increase in prescriptions from physicians who have never prescribed oxybate before. This indicates that LUMRYZ is expanding the oxybate market beyond its previous size, creating a significant growth opportunity.
- Pipeline Progress with Potential New Indications: Avadel has initiated the Phase III REVITALYZ trial evaluating LUMRYZ in idiopathic hypersomnia (IH), addressing a significant unmet need in this patient population. The company believes LUMRYZ has strong potential in IH due to its once-at-bedtime dosing and the difficulties IH patients face with middle-of-the-night dosing required by other treatments. Additionally, they anticipate a potential FDA approval decision for LUMRYZ in pediatric narcolepsy by September 7. Successful expansion into IH and pediatric indications could significantly broaden LUMRYZ's market potential.
- Potential Intellectual Property (IP) Litigation Risks: Avadel's development of a low-/no-sodium, once-at-bedtime oxybate formulation may face challenges due to possible infringement on Jazz Pharmaceuticals' existing patents, which could delay or prevent product development and commercialization. ,
- Regulatory Uncertainty in Idiopathic Hypersomnia (IH): Questions remain about the time line and regulatory pathway for LUMRYZ in IH, including whether the FDA will require more than one pivotal trial for approval. Such uncertainties could delay market entry and impact future revenues. ,
- Competitive Pressure in the IH Market: LUMRYZ may struggle to gain market share in IH against established treatments like Jazz's Xywav, which already offers once-nightly dosing. Additionally, legal disputes over IP rights in the IH indication could limit LUMRYZ's adoption. ,
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Reimbursement and Revenue per Patient
Q: What's the reimbursement status, and impact on revenue per patient?
A: The company is pleased with its market access team, having about 85% of commercially covered lives with a LUMRYZ policy in place, which has helped initiate patients. Revenue per patient improved from the previous quarter's $120,000 per reimbursed patient. The other segment, representing 15% to 20% of enrollments, is noncommercial, mainly Medicare and Medicaid, with coverage expected to evolve in 2025. -
IP Litigation Updates
Q: Update on IP cases and potential impact on LUMRYZ market presence?
A: The next decision is likely from the APA case in D.C., followed by the patent case in Delaware. The company is confident in its position and prepared to ensure LUMRYZ stays on the market even if a decision goes against them. An antitrust case is set for November of next year, pursuing damages for unnecessary delay of LUMRYZ approval. -
Discontinuation Rates and Persistence
Q: How are discontinuation and persistence rates trending?
A: LUMRYZ has lower discontinuation rates than first-generation oxybate at comparable launch times. Discontinuation rates are higher early in treatment but subside over time, with naïve and previously discontinued patients driving higher rates than switch patients. The company is learning how to intervene to keep the right patients on therapy. -
Growth Plans and Operating Expenses
Q: Will operating expenses increase with growth plans?
A: The company is well-resourced to maximize LUMRYZ's opportunity and is open to investing more if it accelerates growth. Seeing patients from physicians not actively called on suggests potential to pursue that segment more aggressively. This doesn't change their outlook on profitability and generating operating income in the second half of the year. Accounts receivable growth is expected to convert to cash in Q3. -
Idiopathic Hypersomnia Opportunity and Trials
Q: How significant is the IH opportunity, and what's the trial timeline?
A: There's an unequivocal need for LUMRYZ in IH, and the company isn't waiting for competitors to develop the market. Early data points in the Phase III IH trial are positive, with patients moving into prescreening and treatment. The best proxy for trial duration is 15 to 18 months, similar to other oxybate products. Only one pivotal trial may be sufficient for approval, based on precedent. -
Pediatric Market Impact
Q: What impact will pediatric approval have?
A: The pediatric population is about 5% of current oxybate users. While it's a small patient population, over time there's opportunity to convert and expand use. For 2024, it's modestly incremental, but longer-term it's important. -
Market Expansion and New Prescribers
Q: Are new prescribers contributing to growth?
A: The majority of new prescribers haven't been called on by the company, indicating LUMRYZ's strong value proposition. In prelaunch research, half of high-use narcolepsy prescribers who didn't use oxybate said they'd prescribe LUMRYZ. This is a positive sign for building upon. -
Impact from Xyrem Formulary Changes
Q: Has removal of Xyrem from formularies impacted LUMRYZ?
A: The company benefited from patients switching due to Xyrem's formulary changes earlier this year. Their value proposition is strong against all first-generation oxybate, and switch patients remain an important source of business. -
Free Goods Percentage and Market Growth
Q: What is the percentage of free goods, and how is the market growing?
A: Free products are about 20% to 25% of total patient usage, seen as an investment in the launch. Over 80% of the business is commercial. Leading indicators suggest the oxybate market is growing, with previously discontinued patients and new-to-oxybate patients starting LUMRYZ. -
Bioequivalence Pathway for Low Sodium Product
Q: Is there a rapid path to market via bioequivalence for the low sodium product?
A: The company believes there's a viable pathway using bioequivalence, pending FDA agreement. This is based on other products approved via a bioequivalent-only pathway, assuming they can demonstrate bioequivalence.