Avadel Pharmaceuticals plc (AVDL) Earnings Call Transcript & Summary

Greetings, and welcome to the Avadel Pharmaceuticals Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Austin Murtagh. Thank you, and you may begin.

Good afternoon, and thank you for joining us on our conference call to discuss the final FDA approval of LUMRYZ. You can access the press release announcing the approval on our website, www.avadel.com. As a reminder, before we begin, the following presentation includes several matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 include risks that products in the development stage may not achieve scientific objectives or milestones or meet stringent regulatory requirements, uncertainties regarding market entry and acceptance of products and the impact of competitive products and pricing. These and other risks are described more fully in Avadel's public filings under the Exchange Act included in the Form 10-K for the year ended December 31, 2022, which was filed on March 29, 2023, and subsequent SEC filings. 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. On the call today are Greg Divis, Chief Executive Officer; Dr. Jennifer Gudeman, Senior VP of Medical and Clinical Affairs; and Richard Kim, Chief Commercial Officer. Tom McHugh, Chief Financial Officer, will join us for Q&A following the call. At this time, I'll turn the call over to Greg.

Thank you, Austin. Good afternoon, everyone, and thank you for joining us on this exciting and momentous day. This is the day we've been waiting and preparing for and is certainly a celebration for the entire narcolepsy community for Avadel and for all our stakeholders who have supported us on our journey. Earlier today, the FDA granted final approval to LUMRYZ, making it the first and only once-at-bedtime oxybate therapy for use in the treatment of cataplexy or excessive daytime sleepiness in adults with narcolepsy. LUMRYZ has the potential to offer people with narcolepsy an important and differentiated treatment option for effectively addressing their symptoms with the possibility of an uninterrupted night's sleep. In addition, we are also pleased to announce that the FDA granted LUMRYZ orphan drug exclusivity, which equates to 7 years of market exclusivity through May 1, 2030. We are proud that LUMRYZ has received this recognition of clinical superiority over the current available twice-nightly oxybates due to the major contribution to patient care provided through its once-nightly dosing regimen. The 7 years of market exclusivity, combined with our patent protection through early 2042, only enhances the potential of the longer-term growth of LUMRYZ in the overall narcolepsy market. Before we start today, I would like to take a moment to thank all our stakeholders who supported us and contributed to our journey to bring LUMRYZ to the narcolepsy community. Without you, today would not be possible. And more specifically, I'd like to recognize and sincerely thank the nearly 700 patients who participated in our clinical trials, you are and will always be the inspiration for us. At Avadel, patients are the center of everything we do. An FDA-approved LUMRYZ is a testament to our relentless dedication to improving the lives of patients with transformative medicines. In our pursuit of developing LUMRYZ, we routinely and consistently heard from people living with narcolepsy and from health care providers alike that there is a critical need for an effective therapy option that can manage their symptoms while allowing for the possibility of an uninterrupted night's sleep. And we believe LUMRYZ can and will fill this need. Until today, a once-at-bedtime oxybate treatment for narcolepsy was not available, and people living with narcolepsy were forced to awaken every single night for their second dose. With today's approval and the promise of a potential uninterrupted night's sleep, we believe that LUMRYZ can positively impact the treatment experience for all eligible treated patients, increasing oxybate utilization overall and importantly so, helping even more patients in the $3 billion-plus once-at-bedtime oxybate market. Over the next few minutes you will hear from Jennifer, who will review highlights from our approved prescribing information, and from Richard on our narcolepsy market outlook as well as the current state of our launch readiness. We will then conclude with a Q&A session. We've been building towards this data, bringing LUMRYZ to all eligible patients as quickly as possible with final approval and orphan drug exclusivity in hand, we are poised for growth as we transition to a fully commercial company. We are well-equipped with the resources, capabilities and expertise to support our ambitions as we look to make a significant and positive impact on this multibillion-dollar opportunity. Thank you again for joining us today, and I will now turn the call over to Jennifer.

Thank you, Greg, and thank you all for joining us on this important day. This is a significant milestone, and we are proud to be able to deliver on our promise to patients and clinicians. LUMRYZ is an extended release, once-at-bedtime formulation of sodium oxybate for the treatment of cataplexy or excessive daytime sleepiness in adults with narcolepsy. As a reminder, sodium oxybate has a well-established clinical benefit and safety profile based upon more than 20 years of utilization in the United States and over 15 years of availability in Europe for the treatment of narcolepsy. As you saw in our press release, our full prescribing information is available at avadel.com, and I want to emphasize how pleased we are with the final label. Of course, a strong label comes from strong safety and efficacy data, which was generated in our pivotal randomized clinical trial and will be described shortly. As with all FDA-approved oxybate products, LUMRYZ caries a box warning regarding CNS depression and abuse and misuse and thus requires a REMS or risk evaluation and mitigation strategy. Since early April, our REMS program has been ready to go live, simply waiting for this final approval. The recommended starting dose of LUMRYZ is 4.5 grams administered orally and can be increased by 1.5 grams per night at weekly intervals to an effective dose of 6 grams, 7.5 grams or 9 grams based upon an individual's response in control of their EDS and/or cataplexy as well as tolerability to the medication. With this approval, patients with narcolepsy will finally be able to access a single bedtime dose of extended release sodium oxybate. Also, a benefit is the premeasured unit-of-use packet available for patients. One part of the label we know will be of interest to clinicians is Section 2.3, which is switching patients from immediate release or twice-nightly sodium oxybate and it's very straightforward. Clinicians simply prescribe LUMRYZ at the nearest equivalent dose in grams per night to the total twice-nightly dosage. Let's turn now to efficacy. As you may recall, there were 3 co-primary endpoints in our pivotal trial, maintenance of wakefulness test, CDI improvement and mean weekly change in cataplexy attacks, all of which had p-values of less than 0.001 compared to placebo and clinically meaningful improvements with all 3 therapeutic doses of LUMRYZ. Efficacy began at week 3 with the 6-gram dose and improved as patients progressed through the week 8 evaluation of the 7.5-gram dose and week 13 for the 9-gram dose. Observed adverse reactions were related to known tolerability effects of any oxybate. Moreover, when we analyze adverse reactions week by week, we saw, at all doses, a decrease in all reactions in 1 to 2 weeks as patients adapted to a dosage, which we present in our primary publication by Kushida, et al. Beyond today's final approval and the clear clinical data supporting it, our open-label extension and switch study, RESTORE, further supports the clinical value proposition of LUMRYZ. And we will be presenting additional interim RESTORE data as well as additional posters and presentations at the upcoming sleep meeting. We have executed a thoughtful publication strategy to support our launch and currently have 9 peer-reviewed publications with more in development that will further augment the scientific evidence to support LUMRYZ. Let's now hand the call over to Richard Kim, our Chief Commercial Officer, to discuss our launch readiness. Richard?

Thank you, Jennifer. What a day and what an exciting opportunity ahead of us to be able to bring once-at-bedtime LUMRYZ to people with narcolepsy, who are seeking a new treatment option. With the introduction of this important therapy, the narcolepsy community will no longer have to normalize forced awakenings during the middle of the night and will have the potential to manage their EDS and cataplexy while also providing the opportunity for a more natural sleep-based cycle. Let me start by stating that over the last 2 years, as a company, we have made it a priority to deeply understand the narcolepsy market. This includes conducting more than 25 unique market research studies with over 2,000 stakeholders, including people with narcolepsy, sleep specialists and payers, who represents a vast majority of covered lives in the U.S. We also conducted 3 discrete choice experiments to deeply understand trade-off priorities that will be evaluated by sleep specialists and patients when they have different oxybate product attributes to choose from. The knowledge we have amassed has allowed us to ensure that we are focused on the largest areas of unmet need and can do things like determine sleep specialist prioritization, patient segmentation, demographics and density mapping and much more. We have built and will continue to build the most contemporary and well-integrated commercial data set with advanced analytics capabilities to optimize our launch performance. In addition to our market research and data analytics, we have held advisory board meetings with leaders and meetings with community members, which totaled in the hundreds of interactions. And throughout, we consistently heard about the unequivocal need for once-at-bedtime LUMRYZ. Going forward, our connectivity to the narcolepsy community will remain a top priority. When we think about the size of the oxybate market and the potential of LUMRYZ, from a patient claims perspective, our analytics suggest the market opportunity could be roughly double that of the current twice-nightly oxybate market with more than 30,000 potential eligible patients and market opportunity of $3 billion. More specifically, we announced that there are about 16,000 patients who are currently treated with twice-nightly oxybates for narcolepsy, and that the market has not really grown despite the introduction of a mixed-salt version. These patients are one group we will focus on as we believe a number of these potential switches will be motivated to move to LUMRYZ, which is supported by our open-label RESTORE study, where after 3 months of LUMRYZ therapy, patients who switched from twice-nightly oxybates are asked which dosing regimen do they prefer. Unsurprisingly, 94% prefer the once-nightly dosing regimen of LUMRYZ over twice-nightly oxybates. Beyond these 16,000 currently treated twice-nightly oxybate patients, we also know that there are 10,000 to 15,000 patients within just the last 2 to 3 years, who have tried to discontinue the twice-nightly oxybate therapy because they did not have a positive experience. From our market research, the top few stated reasons why patients discontinue are lack of efficacy and the inability to take a second middle of the nighttime dose. We know these 2 reasons are very intertwined. Because the patients missed their second dose, they are likely to have an inadequate response. These patients are another important group as they were engaged to initiate an oxybate, are generally under the care of a sleep specialist and are highly unlikely to try another twice-nightly oxybate. So the last patient segment, those who are naive to oxybate treatment, of which there are about 3,000 patients annually, they are also strong candidates for LUMRYZ. Our work shows us that most of these specialists will prefer to offer once-at-bedtime LUMRYZ to their patients over twice-nightly oxybates as they state the importance of not asking a person with narcolepsy to forcibly wake up during the middle of the night when they've never had to do so before. In previous market research, as many as 40% of patients stated that when they were offered twice-nightly oxybate, they refused, in large part due to the complexity of dosing. Today, of course, these patients are all within current oxybate-prescriber offices. And with the introduction of LUMRYZ, our research shows that a greater portion of patients will be treated with oxybate by these sleep specialists and that a greater number of new prescribers will consider prescribing LUMRYZ, where currently, they do not prescribe any oxybate therapy at all. Over time, our research suggests that patient -- oxybate patients could grow by 50% from what the market reflects today. Now this is all supported by extensive market research that informs us that the majority of oxybate-eligible patients, whether currently on a twice-nightly formulation, previously treated with twice-nightly oxybates or [ NIA sleep therapy ], state that they are interested or significantly interested in learning more about once-at-bedtime LUMRYZ. And importantly, interested or significantly interested in initiating therapy with LUMRYZ. When we think about these sleep specialists, we have performed several demand market research projects, and the results have all been very supportive. When I showed the product profile representative of the approved label, sleep specialists consistently give LUMRYZ the highest stated intent to use share from all oxybate options. Interestingly, when we break down our intent to prescribe data for LUMRYZ with current oxybate prescribers, not only do we see high intended use within high- and medium-volume prescribers, but also with current low prescribers. More specifically, even with the low prescribers of twice-nightly oxybates, we saw a significant increase in future intended oxybate usage, driven almost exclusively through once-at-bedtime LUMRYZ. When evaluating our strategy for coverage of sleep specialists, our claims data shows that about 5,000 sleep specialists have accounted for all oxybate prescriptions in the last 3 years. We also know that about 1,600 of these sleep specialists make up 80% of the overall prescription volume with less than 500 making up 50% of the overall oxybate narcolepsy volume. We have built our sales team to cover the entire oxybate prescriber universe with a heavy focus initially on the top 1,600 oxybate prescribers to get these high-volume sleep specialists exposure and earlier experience with LUMRYZ. Let's now turn to payers. We've been in conversations for some time with the payer groups across the country, representing about 85% of all covered commercial lives. We've had several and multiple conversations with key decision makers of PBMs and GPOs. And overall, the receptivity has been excellent and indicates a strong understanding of the value of once-at-bedtime LUMRYZ. We are very pleased with the progress made. And now with our final approval in hand over the upcoming months, we expect event towards coverage decisions. Now like for any new specialty product launch in the U.S., it does take some time to gain formulary coverage. There is a clear difference between a formulary coverage decision, which is governed by preset processes and individual payer postapproval versus early reimbursement of LUMRYZ. At launch, we do expect that initial prescriptions of LUMRYZ will be reviewed and reimbursed through medical necessity. This is a process already very familiar to sleep specialists and is used before any prior authorization criteria associated with formulary coverage has been determined. With nearly 2 years of ongoing engagement with our key payer customers and overall approach to access and distribution, we believe we are in a very good position leading into the launch. Before I move on to our launch readiness and organizational buildout, let me cover one more important topic as pricing is also a key component of our launch strategy. Our focus with the payers has always been to ensure parity access for LUMRYZ with other branded oxybates. Despite having a highly differentiated clinical value proposition compared to the twice-nightly oxybates, we are pricing LUMRYZ on a per gram basis at parity with a branded twice-nightly mixed-salts product to be at $64.67 per gram. Okay. Let's turn our -- to our launch team buildout where we have made significant progress. We will have a team of about 50 sales representatives. And our first wave is now trained and have just started in the field. In parallel, we have a field reimbursement team of 12 to exclusively work with sleep specialists to assist them in submitting and processing prescriptions for LUMRYZ. And similar to the sales team, the first wave is now trained and in the field. We have worked hard to attract and build what we believe is an exceptional team of people who collectively are experienced in rare diseases and sleep disorders, will embody our core values and are focused on patient success. With the final approval in hand, we are kicking off our LUMRYZ brand communications. We are excited that later today, our initial lumryz.com website will go live, and we will begin broader, now approved messaging to the narcolepsy community. One of our keys to driving the LUMRYZ launch will be our program to support product fulfillment. Central to this will be our patient services center, and we are proud to announce the launch of our [ Rise Up ] patient support center. Rise Up will provide support and education to help patients, who have been prescribed LUMRYZ, get access to their medication and longer term, support them with refills, reauthorization and be a personalized support team. Our Rise Up team will have dedicated nurse care navigators, who have all been certified as prior authorization certified specialists. Giving them expert training and reimbursement, and will be assigned to each specific sleep specialist's office and their patients so that they have ongoing, consistent relationships and knowledge of each step of the process for each patient case. Our Rise Up team is staffed up, trained and will be ready to begin taking inbound calls. Additionally, our specialty pharmacy network is on board. One of the keys to our product fulfillment plan was to allow for a limited but broader distribution of LUMRYZ. The FDA approved our specialty pharmacy distribution plan as part of our REMS, and our network includes the 3 SPs that are aligned to the 3 GPOs that account for about 85% of the commercially insured patients who use oxybates. We believe there is benefit from both the patient and the payer for fulfilling their dispensed LUMRYZ within their own network. The last topic to cover before I hand it back to Greg is timing. Our goal is to have commercial supplies of LUMRYZ available for shipment to patients about a month from today. We have spent a lot of time strategizing and planning to get to this point. And trust me, no one is more motivated than us to see the first wave of patients receive and begin their treatment with LUMRYZ. We have a clear and intuitive value proposition with once-at-bedtime LUMRYZ that could be transformative for people with narcolepsy. Our launch strategy is clear, and we are ready and excited to be in this position. In the near future, we plan on providing more details on our launch and commercial plans at an Investor Day. Thank you for your time today, and now let me turn it back to Greg.

Thank you, Richard, and thank you again for joining us on this monumental day for patients living with narcolepsy and for Avadel. As the first and only FDA-approved, once-at-bedtime oxybate for the treatment of narcolepsy, LUMRYZ has the potential to change the standard of care for patients and truly transform Avadel. With FDA approval and orphan drug exclusivity in hand, the organization moving to final commercial readiness and initial launch supply expected to be available in about 4 weeks, we will now set out to realize the full promise of once-at-bedtime LUMRYZ for all stakeholders, which is just the beginning for Avadel in our vision of improving the lives of patients we are committed to serving. We look forward to updating everyone as we progress toward our full commercial launch of LUMRYZ and providing even more detailed updates and plans at our upcoming Investor Day. With that, we will open the call for questions. Operator?

[Operator Instructions] Our first question comes from François Brisebois of Oppenheimer.

Congratulations. It's been a long road, and I'm glad it's all working out at this point here. So just a couple of questions now on the commercial front, which are good questions, the potential problems to have or obstacle challenges to have here. So I was wondering, obviously, the AG is more of an extension of the brand, but can you help us understand the impact of especially true generics and when you would expect those to come in? And just is it possible that a patient that is on a once-nightly could ever be asked to go back to a twice-nightly just to make sure that it's not working for them so they you would go back? Just take a little color on the true generic potential impact.

Richard, do you want to handle that?

Yes. Sure. Frank, thanks. It's great to hear your voice, man. So yes, as far as the AG is concerned right now, I guess what we can sort of say short term in the marketplace, what we have been seeing from claims data is really more of a cannibalization of the twice-nightly sodium oxybate so far. And to your question of whether or not a payer would force someone who's doing well on LUMRYZ to go on to a twice-nightly, in our conversations thus far, we see that as highly unlikely. When patients -- these are very different clinical value propositions. And in our conversation with payers, it's still a few years out, but at this point in time, we would sort would say it would -- we would see it as very highly unlikely that a payer would ever force that to happen. So there's time to play out. But right now, our conversations with the payers have been great, and we're just looking ready to get it out there and getting this over the finish line with the coverage decision. So thanks for your question.

Okay. Great. And then just one last one here. And sorry if you -- to mention the word litigation again to you guys. But just trying to figure out, are there any -- you got ODE, but are there any potential steps like on PI? And just if so, if there was an injunction, just any comment on a potential time line of resolution, or just anything on the litigation side that we should know about.

Well, I think first and foremost, we're pleased to have addressed some of those matters related to our approval and have found ourselves where we are today with the final approval in hand and orphan exclusivity earned from that standpoint. I think if you have questions regarding other potential sources of litigation matters, I think it's a better question for the other company. We obviously have to be prepared for any potential scenario, and that's what we will be. But at this stage, we're -- we'll continue to prepare and look to be able to serve this patient community as early as early next month.

One moment for our next question. Our next question comes from Ami Fadia of Needham & Company, LLC.

Great. Well, congratulations to everyone. It's been a long time coming, and it's great to see LUMRYZ at the start line for the launch. First question from me is as you think about the implementation of the REMS program, can you talk about how long it would take for the physicians that you're targeting to get enrolled into the REMS so that they can start to basically call the different number once they've described LUMRYZ? And also, if you can describe to us what would change for the physician office versus what they were doing before when they were prescribing Xyrem or Xywav with now LUMRYZ as an option. Outside of calling a different number, what else do they need to do differently from an administrative standpoint?

Thanks, Ami. Jen, do you want to start on that?

Sure. Happy to. So Ami, a really important question, I'm happy to share that lumryzrems.com is active and up, and we are ready to begin the certification process. So we have the benefit of tentative approval, which allowed us to build the REMS and go fully operational as of today with the final approval. We anticipate that enrollment is going to be fairly straightforward and quick because this is a process that clinicians are already accustomed to you. And the core element for REMS enrollment are the same, it's all designed to keep patients safe. So it's a process of reviewing the prescribing information and the prescriber brochure and then testing that they understand it and then enrolling their patients and onward to the actual prescribing of the medication after the REMS enrollment.

Got it. Okay. And maybe a different question from me. Just with regards to the open-label study, can you give us some color on how many patients are currently remaining in that study? And how would you think about transferring those patients into paying patients over time?

Yes. I think currently, there's just a little bit under 100 remaining in the open-label extension, Jen will corroborate that for me. And from a process standpoint, obviously, you have to close that study out in an ordinary fashion, in an organized fashion. So we'll begin that -- those steps now to begin to close patients out and transition them into Rise Up and into our program kind of in an organized manner. Jen, anything you want to add to that?

I completely agree. And I'll -- the only thing I'll add is that my note went out to all of the investigators today to let them know that final approval was received and to alert them to our LUMRYZ REMS process, and we look forward to working with them on that transition.

Okay. Maybe a last quick question from me. You've obviously submitted data to the FDA based on which you received the orphan drug exclusivity. Can you share some of the highlights of that, which would also perhaps form some of the core of the marketing message for the product as to how -- what are some of the differentiating points obviously outside of it being more convenient? But what are the implications of that? If you could share any data with us today.

So I would say, generally, we provided data that supported the benefits of only -- of a single once-at-bedtime dosing administration. That data came in the form of the review of adverse event-related data. It came in the form of patient-specific research and patient feedback, both qualitatively and quantitatively, both from us and from independent third parties. And the collective body of evidence resulted in what we believe would always -- would have always been the case, which was we were obviously granted orphan drug exclusivity for LUMRYZ, which explicitly stated that we've been granted clinical superiority due to a major contribution to patient care over both and all currently available forms of the twice-nightly oxybates. And we're very pleased with that result. And we look forward to sharing that information with customers as we go forward.

One moment for our next question. Our next question comes from David Amsellem of Piper Sandler.

So just a couple on my end. Just coming back to pricing, is it fair to say that the net realized price is more likely than not going to look closer to the Xyrem AG as opposed to Xywav? Can you just comment on that because there is a pricing differential even though it's not a vanilla generic? So that's number one. And then my second question is, as you think about LUMRYZ in IH, do you have a sense of when you may move forward with the study there to the extent you want to move forward? How should we think about that and just expansion opportunities in general beyond just the -- looking at it on label?

Yes. David, thanks. Richard, do you want to maybe open with a comment on pricing?

Yes. Sure. Thanks for the question, David. So we're not going to get into net pricing in this call. However, what I can sort of say is I think our clinical value proposition of LUMRYZ has been made very clear to payers and how it differentiates versus the twice-nightly. So I think sort of our position is we don't really necessarily have to be positioned against the twice-nightlies. So I think from our perspective, we represent a very different value proposition compared to the twice-nightly oxybate. So even though that there are differential pricing today between an AG and some of the branded oxybates, David, the way -- if you're modeling anything, I'm not sure you necessarily sort of think about comparing us to an AG at this stage. So right now, the conversations with the payers have been very clear about our position. And so right -- we feel like we're in a very good position to achieve the coverage goals that we're looking for.

Yes. I think I agree with all of that. And on your IH question, it's certainly something we have been planning for and thought about, and certainly, we'll talk more about in the future. Most importantly for us was to get to this date, get to this decision and begin to prepare for launch and ensure we're well-positioned to do so. But I think when it comes to other opportunities from a life cycle management perspective to expand the potential patient population who could benefit and will benefit from a potential once-at-bedtime treatment option, I think you'll see that comment, over time, in the form of, really, 3 different kind of options. The first one is expanded age indication opportunities. Obviously, we're approved for adults. And so the opportunity to go into pediatrics is something that we've done a bit of work on now in already. Alternate formulations to introduce for those who are salt sensitive or have certain medical conditions that require a different sort of formulation, we certainly have begun that development work in earnest with our -- using our once-at-bedtime technology. And then other indications, and IH is certainly one at the top of the list in that regard.

One moment for our next question. Our next question comes from Marc Goodman of SVB Leerink.

Just a follow-up on this pricing question. Can you talk maybe about where is Jazz right now as far as the average dosing? And how long do you expect your product to kind of get up to that average kind of dosing, the titration? And just -- I guess what I'm getting at is really trying to push into what's the average selling price that you expect and how fast you expect it to get there just with respect to over the course of the year and gross to net? Just how to think about what we should be modeling.