Avadel Pharmaceuticals plc (AVDL) Earnings Call Transcript & Summary

Fantastic. Listen, guys, thank you, guys, so much for joining us. Pleasure to have Avadel management join us.

Greg, there's a lot to talk about. It seems like there was a point in time where we were talking about the recruiting of your Phase III for narcolepsy with the novel formulation of sodium oxybate. That come -- that's done, you've established that once-nightly works. I think the real question for a lot of investors from here are, not so much about whether your once-nightly works, it's really all about legally and technically when and how fast you can get to market. And there's several and legal regulatory questions that come with that. So I'm going to jump right into it. But first, Greg, when do you expect to file?

Thanks, Umer. And again, thanks for having us participate in your conference. We appreciate the opportunity to continue to talk about the exciting things happening at Avadel with our once-nightly FT218. From a filing perspective, we have made substantial progress. We're in, what I would call, the last few feet of the climb. The NDA from a completeness perspective is done. It is now with our publisher, so -- and going through some final QC check. So all the work is complete. So we would expect to file this month in December.

And what -- just so I know. What were the steps that had happened between on your Phase III reported and now?

Well, we went from top line to complete data readout, which took a little longer. And then at that point, we could request our pre-NDA meeting with the FDA, which normally takes 90 days. We've gotten feedback from them. We had a few other things that we would describe as more kind of perfunctory in nature that we needed to complete within the NDA. And all that has been done in the context of a global pandemic, and all that's been on track. And now we're kind of at the very end of it right now and excited to finish it here over the next few weeks and get it to the agency.

Got it. Greg, one of the feedbacks from a lot of investors was, people had very good interactions while they were getting ramped up on the trial with Jordan, your prior Chief Medical Officer, he stepped down. So one of the questions that always comes up going into the filing of the Chief Medical Officer leaving, could you just catch us up on that?

Yes, for sure. And we're pleased to say that Jordan has, as we've communicated when his decision to leave, that he's remained with us as a consultant and has been active through this process, ensuring the NDA has stayed on track and has continued to play a key role in the prosecution of all the completeness of it. So his decision was a personal one to go to work with a former mentor and friend in a new area for himself, and -- but did not leave us, if you will, without his full support, and will continue to be with us, all the way through the PDUFA date and the -- and our future approval.

Got it. Okay. So the NDA is done. And there are several technical steps that come with that. One of them is when you file a 505(b)(2), you're referencing Jazz' safety data, which is fine. But now you're -- you have to certify on the patents or not, depending on the strategy you use. One of the points you've been very clear about is you guys feel reasonably comfortable that Jazz's patent estate is not a hold up to you guys getting to market. However, I think there's a bit of a misunderstanding among some folks that you have to certify Paragraph IV regardless. Can you catch us up on why you don't necessarily have to certify Paragraph IV on certain patents like valproate and REMS? And how the 30-month stay only happens if you certify Paragraph IV.

Yes. Yes. Again, it's a topic we obviously discuss a lot. And I think from kind of the simplest description is that, whether you're dealing with our situation or not, a 30-month stay only occurs when the reference listed drug owner, so to speak, files a patent infringement suit in response to an applicant's Paragraph IV patent certification, right? Our NDA, which is now complete and in its final publishing stage, does not -- will not and does not include a Paragraph IV patent certification. We're pursuing another pathway that is allowed, which includes our relevant carve-out statements that confirms that the FT218 label, which again, is done in its draft form and part of our NDA, does not read on the use codes that are associated with those few remaining Orange Book-listed patents for this RLD. So in short, without a Paragraph IV certification, the possibility of a 30-month stay on approval just does not exist.

So what would be Jazz's basis of suing you guys then, the fact that you have filed an NDA?

I have no basis or really any reason to believe there's any basis for Jazz to sue us at this point.

So your base case is no lawsuit, but Jazz...

Well, I don't -- it should be -- someone should ask them what they intend to do. They certainly have been public with regards to their intent to defend their intellectual property, but we're very keenly aware of their intellectual property, and we're not in the business of infringing others' intellectual property from that perspective. So we'll continue to proceed, and we'll be prepared regardless of what anyone does from that standpoint.

Got it. Now Greg, one of the -- I remember when I was learning the basics of patent law unsuccessfully, one of the points I read was a carve-out strategy, a Section viii carve-out, where you're not certifying on patents. A Section viii carve-out strategy applies to an indication. For example, a drug has 2 indications, and you only file for 1 indication. And that's called the skinny label it out, meaning the other indication is not. So that would be one way of avoiding an Orange Book patent, which would be indication-specific. What I was not familiar with, as I was ramping up, was a Section viii carve-out strategy being used for beyond the indications, for example, on drug-drug interaction, stuff like that. Can you catch us up on any precedents or examples of that?

Yes. Again, another great question that we get and we talk about quite a bit. And I think kind of the caveat to all of that is that every situation is unique to itself. Every product and development has its own issues they need to deal with. And for us, we certainly have a pathway that we're pursuing. But when we thought and study this historically, a, we wanted to look for NDAs, right? We wanted to look for 505(b)(2)s that were NDAs who were not looking to carve-out indications, but we're really looking to carve out other matters. And specifically, we look for drug-drug interaction carve-outs, right? So we wanted to find those examples. And we found a couple of them. We found a culture scene product that was an NDA called Mitigare, which included a successful carve-out of DDI language. We found an orphan drug that was an allopurinol containing product called [ puroxan ], also included a successful carve-out of their DDI language. But I think all of that, what's most important to remind investors, is that because FT218 is a 505(b)(2) that will have its own data and it will not be substitutable for the twice-nightly product. In other words, we share the same drug substance, but we are a very different drug product. We have substantially more latitude than, if you will, the typical ANDA applicants that allows us to craft our label that reflects our formulation-specific data, which is different than that, in many cases, than out of the references to drug. And therefore, allows us to develop our drug product in a certain way that allows us to carve around any of those perceived hurdles related to those Orange Book-listed patents.

Greg, I'm assuming you are familiar with the attempt by some generics previously to the [ arm ] generics, particularly, to carve out that valproic language. You're familiar with that, right?

Yes.

And are you aware of what data they were trying to use? Or you're not using any data, just legal arguments?

Yes. In this regard, it's apples and oranges and another topic we discussed because as the generics were attempting to, if you will, skinny their label and remove the DDI language, they were doing so and still wanting to be substitutable as an ANDA. And candidly, we agree with the agency's decision to not allow that to occur, right? But we are not an ANDA, right? We are, again, a different drug product carrying the same drug substance, but we'll have our own label that is not substitutable for the reference-listed drug. So contrary to the generics, we won't be substitutable. And therefore, we'll have our own label, given that we have the larger, greater latitude, so to speak, that reflects our formulation-specific data. So in the case of the generics, they were denied because their label is meant to match. In the case of our product, as an NDA, our labels will not match.

Got it. Okay. That's very clear. Now the next question is, I want to come back to -- actually, let's finish off the patent part. So you file, and you're basically saying, look, none of the Jazz patents are relevant for us because we don't claim to operate, and we don't need their REMS, which is really the primary patent estate. On the REMS part, I'm assuming you guys would just create your own REMS. I think there's a lot of impression that exists on that.

Yes. Again, what we've said relative to REMS is that it's a topic just like the drug-drug interaction data that we will have engaged the FDA on early in this process. We believe that the agency doesn't like REMS's blocker of competitions, and there's a clear road map in terms of what an ultimate REMS could be. And our NDA, as we described, is complete and now in its prosecution and it's publishing at this point as we finished the last few feet of this NDA program for our filing. And in our NDA is our full set of REMS docks. So we have been through that already. So in short, yes, you're right.

Got it. And Greg, I'm sorry, I don't need to go back to valproate question again, it's a big part of the skinny label strategy you're using. But let's say you file, and then you get feedback from FDA. So FDA will presumably do this review with you on whether they think -- because it's FDA's decision, ultimately, whether they think the valproate language should be on the label or not. When, in the review process, would you know? Because theoretically, if FDA enforces that, you might have to turn your filing status to a Section viii over to a Paragraph IV if that were to happen.

Yes. Again, another question we get is, when do we think this will be adjudicated? And from our experience, right, if the agency has any questions or concerns about any aspect of our label, and in this case, this related carve-out statement, our experience would suggest that those sorts of questions tend to come during a substantive part of the NDA review, right? So the next 60 days after we file will really be a review for completeness. And then once accepted and officially accepted for filing, the substantive component of the review begins. And we believe that those sorts of questions, if there are any, will come in the form of request for further information in that regard in our exchange back and forth with the agency. I will say that we believe that we'll become much more confident in our strategy as the review progresses. But we don't expect because history tells us that as the NDA is going on, the agency doesn't typically provide some sort of affirmative correspondence that this section of your NDA is approved and can go forward, right? It's usually no correspondence on the FDA in this matter is typically a favorable sign. So -- but as you noted, in the event, there becomes some material change in this strategy based upon feedback from the agency, it is certainly something whether it happens over the next first 60 days or in the substantive portion of the review, it's certainly something we will immediately inform the investment community of. So I guess, in short, the longer it goes, where we haven't made any commentary on it publicly, you can either infer that the FDA has been through it and agrees with our strategy, or it's still subject to their complete review.

Got it. But if there were to be a change, you will notify the Street?

Absolutely.

Okay. Got it. So that makes sense. And then -- okay. So we've talked about the patents. We've talked about this -- about the carve out. What about exclusivity? Because one of the questions was around Xywav exclusivity, how that would -- so let's say -- so let's go with that for a second. Xywav was given ODD, orphan drug designation, but not ODE, which is orphan drug exclusivity. And at least not at launch, although Jazz says, you know what is still pending, there's no final decision yet. Let's say we find out tomorrow, Jazz has orphan drug exclusivity on Xywav. How does that impact your filing status in any way?

Yes. So again, I think we certainly agree with your initial comments that it appears that, at least per the Orange Book as well as the orphan drug database, that the FDA has ruled on this already and it wasn't convinced that, that formulation offered any sort of safety or efficacy advantage or a major contribution of patient care because in the Orange -- or in the orphan drug database, it's certainly received orphan drug designation that was equivalent to that of Xyrem, which was granted in, I believe in 2002, and its orphan drug exclusivity, which is documented for the twice-nightly alternate salt formulation expired in 2009. So from our standpoint, it looks like there has been a decision made on it. But again, we're not privy to anything else that may or may not be going on. And we're not surprised by that decision because there just doesn't -- there's no evidence to support that there is any sort of increased risk of hypertension or CV risk with twice-nightly sodium oxybate in its current form over nearly 20 years of use. But to your question, any unlikely event that, through some other mechanism or through some continued process that it does receive orphan exclusivity, then once-nightly FT218 is going to have to demonstrate its advantages over that formulation prior to its 7 years of exclusivity exiting. So in other words, we would also need to be granted orphan exclusivity, which we're pursuing. Again, our NDA is written, and in that is our exclusivity request, which is a follow on from our orphan drug designation, which we were granted, and we believe we have a meaningful argument and a lot of evidence to support the clinical benefits of our once-nightly FT218 over any formulation of a twice-nightly product primarily due to the known risks and problems associated with that middle-of-the-night dosing.

Right. Greg, I don't know, it's my opinion that -- so if you look at the way FDA thinks about orphan drug exclusivity, one of the things they say, is for same salts and -- or for slightly different formulations, the bar is very high. They need to see something materially more than that. And I think that might be why Jazz is struggling with getting ODE, orphan drug exclusivity, in the first place. And if that's the case, I sometimes wonder, once-nightly is definitely very convenient for the patient, but may not meet that bar from an FDA perspective. So there is a realistic possibility where neither Jazz nor Avadel gets orphan drug exclusivity. Do you think that's a possible base case?

Well, again, it is certainly a case for sure and one that we've obviously evaluated and are keenly aware of and make sure we're prepared, whichever scenario we go. But I think it's important to say that we're very proud of the fact that we are the first to innovate a once-nightly GHB product, that clinical trial certainly demonstrate can deliver a meaningful clinical benefit to patients from that standpoint. So again, we feel very good about that. And because of that, we certainly have taken the necessary steps beyond orphan drug exclusivity to protect that from an intellectual property perspective and ensure we have both a current and a developing robust intellectual property portfolio that we believe will continue to provide protection for us well beyond the typical 7-year orphan exclusivity period.

Got it. Okay. Makes sense. So if everything stays on track, Greg, and when I say on track, I'm talking about you filing an NDA. And let's say, FDA, decides to agree with you that they're going to let you not have that valproate language on label, presumably Jazz, and theoretically, there may be a case for Jazz, assuming you guys for some legal argument. But it doesn't sound like in that scenario where FDA agrees with you on valproate, it doesn't sound like there will be any hold up to you guys getting approval and starting to launch, even if a litigation is pending. Is that fair? Or would you need clarity on that Jazz litigation irrespective?

Yes. Again, I can't speak to what anyone else may or may not do from that perspective. We know of no reason. We know what our data says. We know of no reason why anyone would want to treat additional barriers, post approval, for a once-nightly FT218 to come to market. But I can't begin to predict what they will or won't do in that regard. We'll be prepared regardless of whichever direction.

Got it. Greg, one last one from my perspective from -- which would be very important, both for Jazz and for Avadel, which is what happened was when all the generics filed their cases on Xyrem, they all got a 2026 settlement date or earlier, if someone else comes earlier. And it turns out, the authorized generic, which was Roxane, which became Hikma, was given a '23 date, and they said, "Well, this is authorized generics. So it's not the same as generics." And that's fine. But now there are several pay for delay and antitrust cases ongoing on this topic. And the preliminary feedback from legal experts on this is, this could be high risk from -- and this could be a high risk, and it could possibly accelerate the launch timing for twice-nightly generics. How do you think about that risk? And do you think there's a realistic possibility we could see an acceleration of launch timing?

Well, again, I think we've attempted to plan for all different potential scenarios. And we're obviously, although we're not intimately aware of the details of what's happening on the other suit that's happening on the multi-source generics in the AG, we certainly are prepared in whatever direction that may or may not go, and we'll be prepared accordingly. But I think it's important to note that we've done and just recently completed an extensive amount of research with literally hundreds of patients currently on treatment, hundreds of prescribers who prescribe sodium oxybate regularly. And when you talk to them about, not just different salts or once-nightly, but you include in things like generics and whatnot, it's unequivocal in our view that whether it's a lower sodium, an alternate salt or generic, once-nightly is certainly more preferred from that perspective. Multi-source generics come in, whereas, unlike the AG, where we think pricing likely remains reasonably robust because Jazz has been quite vocal that they get the lion's share of the margin of that AG, we would expect price compression for sure, but those multisource generic players are going to have to figure out how they're going to build their own REMS, who's going to pay for it and things of that magnitude. We still believe, no matter what happens in that regard, there's a meaningful place for a once-nightly sodium oxybate product in the form of once-nightly FT218 that can have a meaningful benefit to patients and very beneficial to our shareholders given the value of the market. And really, quite frankly, the number of patients who aren't getting treated today as well, because they don't want to take the twice-nightly product, which is an issue, whether it's a brand or a generic.

Got it. Just in closing then, Greg, could you walk us through -- so oxybate program, great, you've clinically certainly met all the objectives, unless regulatory elements will play out. But how are you thinking about -- and now that you have a fairly biotech investor base as well, I'm curious, how are you thinking about taking the micropump platform forward in other directions?

Yes. I think, first and foremost, we've made a lot of progress over the last 20, 24 months primarily because of our focus and attention on directing the progress on once-nightly FT218. And that continues to be our priority, both the approval and launch preparation accordingly. So we can make sure we bring FT218 to patients and physicians as soon as possible. That being said, our technology platform provides a variety of opportunities from a life cycle management perspective and a portfolio expansion perspective, right? We can accommodate new formulations. We can accommodate new indications, all of which we've done work on in terms of exploring. And as time progresses, we'll certainly be in a potential to capitalize, but we're not going to do that at the risk of ensuring we're fully ready and executing across the once-nightly FT218 at this point.

Fantastic. Thank you so much. We're looking forward to being in touch.

Yes, we appreciate the opportunity and -- to be here, and thanks for the time.

Absolutely, Greg. Hope you well.

You, too.