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A Seldom Discussed Detail Reignites The Avadel Bullish Case

Mar. 05, 2020 12:49 PM ETAvadel Pharmaceuticals plc (AVDL)15 Comments
Zhiyuan Sun profile picture
Zhiyuan Sun


  • Demand for Avadel's stock from institutional investors has made me think twice about my bearish stance on the company.
  • The FDA would not have reduced the number of patients needed for FT-218's clinical trial unless there was a robust response from the drug compared to placebo or Xyrem.
  • Even if FT-218 isn't superior against Xyrem, the drug can still serve as a discount branded competitor.

Image result for narcolepsyImage Source: Medium

In my November article, I expressed skepticism as to whether Avadel's (NASDAQ:AVDL) FT-218 (once-per-night sodium oxybate) can achieve the same level of efficacy as Xyrem (twice-per-night sodium oxybate) based on its pharmacokinetic parameters in Phase 1.

At the time, I strongly believed the drug would fail its investigation. However, the company's recent closure of a $65M equity offering with multiple biotech hedge funds captured my curiosity.

When institutional investors pull the trigger on battered biotech stocks, I like to rethink my research. After all, if a team of experts working for these funds did their due diligence and concluded the drug works, then I may be missing something in my analysis.

Putting myself in their shoes, I have uncovered a seldom discussed detail which warrants a 180 degree turn to my outlook on AVDL.

I now believe the drug is more than likely to succeed in its investigation to match the efficacy of Xyrem, with just one single dose of sodium oxybate before bed.

The rest of the story is what bulls have already heard before. Here's a summary: If the drug succeeds (and is very likely to), then narcoleptic patients would no longer have to wake up in the middle of the night to administer Xyrem for another 4 hours of sleep. Therefore, patients already on Xyrem should switch en-mass to FT-218. Since Xyrem has an addressable market of $1.6B based on Xyrem's FY2018 revenues, this is likely to cause FT-218's sales to skyrocket and create massive wealth for AVDL's shareholders.

The potential to achieve 9 to 10 figures in sales is quite fruitful for a company with only $480M in enterprise value. Hence, let's take a look as to why the bull case for AVDL has been reignited.

The Problem With FT-218's Fortune Telling


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Zhiyuan Sun profile picture
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Analyst’s Disclosure: I am/we are long AVDL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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