Avadel Pharmaceuticals PLC Sponsored ADR Aktie

Welcome to Morgan Stanley Global Healthcare Conference. I'm Sean Laaman, Head of U.S. mid-cap biotech Equity Research here at the firm. Before we begin, research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have Avadel. We have CEO, Greg Divis; CFO, Tom McHugh; and COO, Susan Rodriguez. So welcome to the 3 of you.

Before we commence the broader Q&A, maybe if we could get a high-level view of Avadel.

Yes. First of all, thanks for having us here and the opportunity to participate in your conference. It's much appreciated. Avadel is a growing biotech company that has really transformed itself in the last 5-plus years.

We're now in our ninth quarter of our launch of LUMRYZ, a first and only once-at-bedtime oxybate for the treatment of narcolepsy for patients suffering from EDS and cataplexy, both adults and pediatrics. But it's a very dynamic and exciting time for us right now as we just -- we're in the middle of our ninth quarter of continuing adding more patients and growing our business and growing prescribers with over 3,100 patients on LUMRYZ.

We've moved into the cash flow positive state as a commercial stage organization. We're in the back end of our pivotal Phase III trial for an indication expansion in idiopathic hypersomnia, which we expect to complete enrollment by the end of this year.

And just last week, we announced an acquisition, a licensing deal for a new program to expand our oxybate portfolio with a development stage compound called [indiscernible] oxybate. So there's a lot of catalysts, a lot of milestones and a lot of great momentum going on with the business today.

Awesome. That's a great jumping off point. I've got some macro considerations for you. So with China's rise in biotech innovation, how are you thinking about the competitive position here for Avadel and will this influence your R&D and business development strategy?

Well, I think for us and the spaces where we're focused in the therapeutic areas and where we're of greatest interest, we search the globe for opportunities. And from that perspective, we look for places and opportunities and programs that could bolster our portfolio and address the unmet needs of patients who we're trying to serve every day.

So for us, geographic location is less important than finding the right sort of novel innovative developments that can truly make a difference in patients and help continue to build our business much like the transaction we announced last week, which was with an Asian company. So we certainly are searching everywhere for those opportunities.

Wonderful. And are you leveraging AI as part of your business strategy? And how do you think about AI as a potential disruptive force?

Well, I think today, it's the price of entry in many ways, right? And for us, you're always looking for ways where we can deploy AI or breakthrough disruptive technologies to advance our business, in all aspects of our business, whether that's commercially from an analytics standpoint, we have reams of data within our ecosystem that enables us to deploy large language learning models to be more predictive in what may occur in the future to deploy the right intervention at the right time to serve the patient or whichever stakeholder in the best possible way. But it's really across all aspects of our business, be it clinical, commercial, manufacturing, quality, CMC. It's here to stay, and we're probably just scratching the surface.

And on the regulatory side, a lot of discussion in biotech on FDA, MFN tariffs. Anything that you'd like to call out there?

Yes, it's something we obviously pay close attention to taking those in some order. From an FDA perspective, our engagement has been quite productive and responsive and on time. We had an orphan drug designation for our idiopathic hypersomnia indication, which was on time. Our engagement with the FDA has been quite responsive and productive, both telephonically in writing and in-person meetings. So from an FDA perspective, we haven't seen any issues.

From an MFN standpoint, our business is really in the U.S. So LUMRYZ is not available ex U.S. So there's real no issues for us relative to MFN. And from a tariff perspective, over 4 years ago, we began the process to onshore our manufacturing to the U.S. where we could serve all of our customers and all of our patients through a domestic -- solely domestic source, which gave us both the benefit of redundancy in our supply chain going back 4 years ago, but also the benefit to source all of our API from the domestic sources here in the U.S.

Great answer. Starting with LUMRYZ, can you give us an overview of the narcolepsy treatment landscape, gives the differentiation of pathologists between NT1, NT2 and IH and maybe how you size the patient populations in those baskets?

Yes. So overall, we estimate there are about 160,000 patients suffering from narcolepsy, of which about 80% of them are on treatment. Majority of them are on wake-promoting agents for the daytime symptoms that they're experiencing, excessive sleepiness. About 2/3 of the patients actually also suffer from nighttime symptoms, and that's where these patients then need additional therapy.

We estimate that around 50,000 patients are eligible for oxybate therapy, of which within that context, so that would be our total available market at this time for LUMRYZ, which around 15,000 are currently on an older oxybate on therapy, around 15,000 are previously discontinued. And the remainder are potential new to oxybate patients, which is about 25,000 patients, which we see, on average, 4,000 to 5,000 new patients starting oxybate therapy every year. So this is the total available market for LUMRYZ.

And what we're finding in terms of the opportunity for LUMRYZ is that as we grow our writer base and they advance through the adoption cycle, we're sourcing from all of those patient segments.

And I guess just to hone in on oxybate and promotion of the healthy sleep architecture. Can you talk through that and how it compares to other therapies?

Yes. So as I mentioned, 2/3 of narcolepsy patients experience nighttime symptoms, and this is disruptive nighttime sleep, hallucinations. The big promoting agents really do not address these nighttime symptoms. And that's where, as a 24-hour condition, narcolepsy, what you see with oxybate, which is highly differentiated is that not only do they address those nighttime symptoms and promote healthy sleep architecture, but they also are associated with very high levels of daytime efficacy. So 24-hour condition, nighttime and daytime effects of oxybate.

I think it's one of the things that makes LUMRYZ so unique is that it's really the only treatment today that doesn't disrupt the night. It actually improves the night. Wake-promoting agents or twice-nightly oxybate either insomnia or forcibly awaken someone to take a dose in the middle of the night, but LUMRYZ doesn't require that to happen. So in a 24-hour condition, as Susan noted, between daytime and nighttime, the LUMRYZ value proposition and in the future, the low oxybate value proposition is quite compelling.

Sure, sure. It sounds like it. Maybe just to move on to the XWPharma series of questions. So you recently announced the pipeline vision with valiloxybate. Can you walk us through your decision to add to your pipeline and how this is aligned with your overall vision for the sleep space?

Yes. I think first and foremost, it is very strategic for us in terms of where we are today and the incredibly strong foundation we have built in the rare sleep disorder space with LUMRYZ and what we've been able to do. We are very bullish and believe that the future of oxybate use is migrating to extended-release oxybate. And that's what LUMRYZ is the real first extended-release innovation to the oxybate category from that standpoint.

So being able to add to that foundation with oxybate is something that was quite attractive to us. And when you think about it, we're not doing this at the end of the life of our product where I'm trying to extend -- we're trying to extend the tail to kind of an end-of-life life cycle management strategy. This is a portfolio strategy that's happening at the beginning of the life of LUMRYZ to build a portfolio of extended-release oxybate that can address all the needs for all patients and provide the opportunity to treat more patients with an Avadel oxybate.

So strategically, it makes great sense from that standpoint. And then if you then think about the development pathway forward, it's highly capital efficient from a development standpoint. It's highly time efficient from a clinical standpoint and from a regulatory standpoint. So it really checks all the boxes for us in terms of a strategic fit and really works well in terms of where the company is today and provides a significant opportunity for patients as well as for our company and, of course, our shareholders.

Sure. Can you talk a little bit about working with XWPharma, a bit of familiarity with the business, how you came across this opportunity, give investors a bit of a sense about the genesis of the relationship.

Yes. To cover that, I kind of go back maybe 4.5-plus years ago, when we first reached out to them to talk about a potential collaboration, and there was a different management team at that time with the company, and there wasn't interest to want to collaborate at that point. So we proceeded forward with our business, including beginning to do our own development work on our own in-house novel formulations to potentially develop a once -- extended release, once-at-bedtime, low or no sodium oxybate.

And as we went through that process, and I would describe it in 2 phases, we did a lot of development in terms of trying -- starting with sodium oxybate, the original API and modifying it inside of our manufacturing process. And over time, we decided to add a different pathway, which was to start developing a novel API. So starting with a novel stable API gave us a lot more of an ability to modify that API from a release profile over time.

So as we began that pathway, it took us back to XW. There were some new people there. And that is really where the genesis of the discussion picked up. And I would say the best thing about the last number of months of our due diligence is that we've been able to spend some time not only looking at all of the data they've generated in-house and get very comfortable with what they've developed, but also all of their interactions with the FDA.

And we even had, for the last couple of months, an opportunity to get our hands on their product and do a little work with it and see how it's made and see how it works, which the combination of all those things gave us a lot of conviction in terms of the high probability of success by entering into this partnership that now we're entered into and we're off and running.

Great. Great. And what are the next steps for the asset? What's the next steps for the regulatory piece and open up the market?

Yes. The way we see that moving forward is the next step for us is what we'll characterize as our initial PK study and our initial PK work. which will begin a little later this year. There's some steps we have to take, make some clinical trial supply and whatnot. But that should begin by the end of this year and carry on into Q1 of next year.

And our expectation is -- and our goal and our target is to have our final formulation by the end of Q1, which will then put us on really 2 paths. The first path is then to take that formulation and make our registration batches, which will both supply our registration pivotal PK trial as well as begin to prepare for our NDA. And then in parallel, we'll engage with the FDA, looking at all the previous correspondence between FDA and XW to then map out our course to run our registrational pivotal PK trial, which will take us a bit of time. And by the time that product comes off at 12 months of stability, our target is to be in a position sometime in 2027 to file this NDA.

Wonderful. And maybe finish this line of question just by talking through some of the deal economics.

Yes. It's -- not only was the product and where it fit in this development and how synergistic it was and strategic it was for our business, the deal structure was equally as compelling for us because the team at XW is firmly believes of the potential of oxybate longer term. And our goal was to want to do this deal off our balance sheet.

So it is -- we'll pay what amounts to $20 million in upfront investments to acquire the rights. There is $30 million in success-based clinical development milestones that tied to key milestones heading toward a potential NDA approval. And then everything else is commercially post-approval commercial back-end milestones that are obviously highly attractive as the more successful the product can become. But we believe in all of our research with physicians since we just finished a large project, researching this with physicians and the possibility of LUMRYZ and valiloxybate certainly should be the oxybate portfolio of choice and valiloxybate's product profile in and of itself is quite compelling for prescribers.

Interesting. Maybe on to LUMRYZ. So you've recently raised guidance $265 million to $275 million for the year. I think you had 3,100 patients on drug at the end of 2Q. So maybe talk through some of the planks of the raised guidance and what underpins your confidence that you're going to hit that number.

Well, I think let's start with just what's happening inside the business and from a demand and all the key attributes and maybe Susan, you can cover that.

Yes, sure. So it's really our confidence in the underlying growth drivers that have propelled us to that 3,100 patient number. First, we have significant penetration across the writer base. 1,600 writers account for 80% of total oxybate use, and we actually have them writing LUMRYZ very early in the launch.

Now that we're 9 quarters post launch, we have an opportunity to track their writing longitudinally. And what we see is quite consistent that they adopt LUMRYZ for what they see as their problem patients early on, and we're waiting for a better solution for the patients who are not doing well on the older therapies based on the results that they saw in that first bolus of patients where they switch them to LUMRYZ, they rapidly expand their use to previously discontinued patients to new to oxybate patients. So we're sourcing patients from all patient types across all writers, growing the depth of writing.

And in addition, the end of that adoption cycle, they revisit patients who are on the older therapies that they thought were doing well, and they actually now see that better is possible given their LUMRYZ experience. So we continue to fill that funnel with switch patients. So broad writer base, growing depth of writing across all patient types in parallel with the investments we've made in our sales force capacity, we can maintain that intensity of coverage on those high writers and at the same time, continue to add writers and capture the rest of the opportunity in the oxybate space.

And what we see is that these lower volume offices that only have -- they only treat a small number of patients are actually quite receptive to the LUMRYZ message, the LUMRYZ profile. They see it as an easier drug to use. They really appreciate the service from Avadel and the time they spend in their office. So our growth is being driven not only from depth of writing across the writer base, but also continuing to bring on new writers persistently. That's the demand side.

On the other side, the presence that we have in the office to actually drive those enrollments through to a conversion, so a conversion to a reimbursed patient. So working hand-in-hand with the office to make sure they submit the documentation they need as quickly as possible so that, that patient gets approved and becomes a reimbursed mainline patient. Then the engagement with the patient when you're initiating therapy, our specialty pharmacy engagement, our nursing engagement with that patient through the initiation process, all of these fulfillment services that we provide the office and the patient drive this percent to reimbursed conversion rate, drive increased persistency, not just in new to oxybate patients, but actually all of our patient types.

So the growth that we've been seeing quarter-over-quarter is being driven by that continued productivity of expanding use of LUMRYZ across all patients. And then at the same time, really these revenue drivers, which are around percent to reimbursed patients, increased persistency. And we see all of that continuing with the investments we've made really paying off even earlier than we expected. And much of this was accomplished at the end of the fourth quarter. We saw an immediate result in the first quarter, and then we saw even better results in the second quarter, and we anticipate that persisting. I'd like to just make one more comment, if that's not enough to drive growth momentum. What we're seeing is increasing requests for LUMRYZ.

So patients are coming in and requesting LUMRYZ. And because we have that presence across the broad writer base, they're familiar with the drug. They're happy to put them on LUMRYZ upon request. And that's the result of our direct-to-patient efforts, which we've also recently last quarter, even further expanded our investment there. So that's another lever that clearly another growth driver for LUMRYZ.

Wonderful. Very full answer. So in sort of penetration levels, I guess, so maybe I'm jumping too far ahead. But where do you think you'll be at the end of the year on that $265 million, $275 million number, whether it's sort of market share, patient share, give us a sense of the runway beyond that point.

Yes. Well, first of all, from a run rate, we just -- we think it's quite long and quite high from a run rate perspective. We haven't guided specifically to patients. We have obviously guided to revenue. And I think all the things that Susan talked about that have transposed into really durable improvements in our business is what gives us a lot of confidence in terms of being able to achieve our uplift in guidance that we provided at the end of Q2.

So from that standpoint, we're -- the business is growing, the improvements are sustainable and every patient now that gets added is really just dropping to free cash flow.

Well, fantastic. And can you give us any sort of sense of what the discontinuation or persistency rates are in terms of numbers and how much sort of headroom you've got to go to improve upon that and how that dosing frequency might feed into that?

Well, I can say, as an innovator in the space, it's been fascinating to see now 9 quarters post launch, like once-at-bedtime -- the extended release technology enables once-at-bedtime, delivery of a full therapeutic dose and it's released aligned to the patient's natural sleep cycle and affords the patient the opportunity for uninterrupted sleep and daytime efficacy. So this whole profile of LUMRYZ is really driving the uptake.

And what we're actually seeing is that the extended release profile and the benefits it affords is increasingly seen as an efficacy benefit. When we talk about persistency then if you think about the favorable profile of the drug, how well the patient is feeling on the drug, that clearly contributes to forward momentum on persistency. The level of sophistication on our patient engagement.

So not only did we expand nursing capacity, but we've really elevated the level of service with credentialed nurses experiencing chronic conditions, behavioral health, predictive analytics on more customized engagement with each patient. And all of these things are continuing to move the persistency in a good direction. The last time we spoke about it was at the end of the fourth quarter, we mentioned a 14% discontinuation rate.

Since then, we haven't been specific on what the rates are, but I can tell you that in the first quarter, we saw better than 14%. In the second quarter, we continue to see improvement. So -- and we are continuing to execute this in a market-leading manner where we'll hope to get -- drive that persistency to a level the market has never seen before. We'll see, but we certainly have every indication that it will continue.

A couple of questions I have on the IH degradation. So in May, you announced a favorable ruling for lifting the injection on the FDA review of LUMRYZ outside of narcolepsy. Can you provide more color here? And any updates on what the next steps are?

Yes, sure. I'll take that. So it was an important outcome, a good outcome for that decision. It allows us to pursue clinical studies, open-label extension study, study other indications for LUMRYZ and important ability to get FDA approval for any of those. Other things are happening on the litigation front. There's 2 decisions we would expect this year.

One is a decision around the ongoing royalty rate on LUMRYZ. This relates to patent litigation from last year. That decision we expected any time now. The other, which is more near term and much more focused is the antitrust suit, where we've sued our competitor for being delayed for approval and entry into the market. This relates to a REMS patent that was improperly listed in the Orange Book. That patent is -- the trial is scheduled to begin November 3. We expect a decision very soon thereafter, maybe within a few days of that trial concluding. In that case, we're seeking over $1 billion of damages. So it's very important to us. It's certainly an area of shareholder focus.

And moving to LUMRYZ NIH, the clinical trial. So I think you're expected to complete enrollment this year. And can you give us a sense on maybe future time lines or the construct and design of the clinical trial?

Yes. Taking those in reverse order, Sean. So it's a -- the concept of the clinical trial design is really exactly the same as it was for the mixed salt oxybate, which has -- which demonstrated a statistically significant improvement and was the basis of their approval in idiopathic hypersomnia. And so that the trial design is well established and strong precedent at the FDA.

And as you noted, we expect to complete enrollment by the end of this year. If you just forward that out from a time line standpoint, we would expect if last patient in comes in before the end of the year, last patient out will come in before the end of Q1. we should have top line data by the end of Q2 and be heading towards an NDA submission in the back half of 2026 and then a subsequent action date in 2027.

Got you. Moving on to the competitive landscape. So well, just over the weekend, a couple of data releases from Takeda and Al on the orexin 2 front. Just give us a sense of how you see the competitive position of LUMRYZ with the potential new drug class like orexin 2 agonist coming to market.

Yes. So overall, we think that the excitement around the novel mechanism of the orexin as a wakefulness agent is excellent. We were the first innovator in this space with our extended-release LUMRYZ after decades of just one single player in the space. And as a part of this innovation moving forward, we could see the durability of oxybate. I mean their proven efficacy and safety on the 24-hour condition.

And as I mentioned to you before, there's a subset of patients, 2/3 of patients have nighttime symptoms. So the orexins are really being studied for their daytime effects. Today, we have patients that are -- most patients are on some kind of wake-promoting agent and then a subset are put on oxybate. And that -- so where the orexins play in this space is a novel mechanism for another wake-promoting agent, one that seems to be very effective. We'll see how things continue to pan out. But we have persistently heard in working with our physicians that we talk to every day are treating physicians who are increasingly adopting LUMRYZ, our opinion leaders.

We heard panels yesterday post the orexin data releases, where it's really quite consistent that these 2 classes of therapy are complementary. So therapeutically, they're used for different intended purposes. And while orexins may be an excellent advancement for daytime symptoms and rate-promoting effects that the role of oxybate therapies and the efficacy they bring on the 24-hour condition will remain a very critical part of the whole therapeutic picture.

And that's on the orexin 2 agonist. What about competitive position does this oxybates like Xywav or even branded generic high sodium competitors?

Yes. So really, Sean, we are an innovator in this space. So introducing our proprietary extended-release technology allows for this once-at-bedtime delivery of a full therapeutic dose with uninterrupted sleep and proven daytime efficacy. And as I mentioned, what we're seeing in the marketplace as evidenced by the wider uptake and the increased depth of use across all patient types, they're seeing that patients who are put on LUMRYZ are actually doing better.

And just at the SLEEP conference this week, we actually had a poster presentation with a real-world study that was conducted post approval looking at switch patients and the baseline of those patients showed them to be within somewhat of a normal ESS range. When they were switched to LUMRYZ, they got better. So that study actually proves what we're hearing from physicians in the real world in terms of LUMRYZ now being an advance in how you can deliver oxybate therapy to patients.

So we are really very strongly positioned advancing the care for these patients. And when we -- in our research and we ask physicians to project their use of LUMRYZ 12 months from now, the projections are quite healthy and continuing to expand use given the way the drug has delivered in the real world with their patients and the extent to which Avadel supports them in their office for fulfillment services as well as the patient services that we deliver.

So all of these things are driving the landscape towards extended release, LUMRYZ use and then ultimately, our oxybate portfolio of extended release module.

So how much of your growth do you think is coming from at the moment from taking share from Xywav, Xyrem versus naive starts?

So I mean physicians are increasingly selecting LUMRYZ over the older agents. So obviously, as the switch patients are directly coming from those agents, but previously discontinued patients. So they exhausted their opportunity on the older therapies.

Now there's a new option and they're being put on LUMRYZ. And what we're -- and then [ inminooxybate ] patients, increasingly, we are the drug selected for those patients instead of the older therapies. And we're also seeing that writers who actually never used oxybate before who are now prescribing LUMRYZ. And that's because of it's an easier product to initiate with patients. And as a result, we're getting new oxybate writers as well. So we are becoming the increasingly preferred agent as well as growing the marketplace.

And just maybe one point on top of that. If you look at our mix of business today, right? The 3,100 you referenced earlier, half of those patients are switched and the other half are somewhat split between the other 2 patient segments of the oxybate and [indiscernible].

How are you thinking about net price generic alternatives become more available in the coming years?

Yes. I mean it's something we have looked at and have studied what potentially could happen with Xyrem generics full stop potentially coming into the market and what impact it may have on both the demand and on the pricing side of things.

And I think from our viewpoint, we've got a great proxy of -- from a demand perspective of what may or may not occur, which is from a demand perspective, we've seen an authorized generic in the market before we ever launch. But we launched into a market with a generic in it already, and it has really had no impact on our business at all. And furthermore, there are some plans today that require a patient to step through an authorized generic for a new patient before they can get to a branded oxybate, LUMRYZ or the mixed salt product as examples. And in those plans, we perform as well, if not better, than in plans where we have a co-preferred position with.

So we're quite confident that in the presence of Xyrem generics, LUMRYZ's growth and potential will continue to be there from that perspective. And from a net pricing standpoint, there's no doubt that payers will use every opportunity to try to increase their discounts and reduce their net cost. But we feel quite confident in the value proposition of LUMRYZ. It's not substitutable and that what that may mean if a Xyrem generic is preferred for new patient starts, the switch market just gets bigger, right?

And when it comes to the switch landscape, if you will, for patients coming off of a to oxybate, LUMRYZ is well positioned to capture the substantial majority of that.

Sure. And how do you think about oxybate fitting into a polypharmacy approach for narcolepsy, particularly orexin 2 agents are indeed successful? And do you think will it require studies? What will potentially happen there, one at a late agent, one to knock you out?

As I mentioned, if you look at the continuum of narcolepsy patients, 80% of them are on some kind of promoting agent. So -- and then placed on oxybate. Sometimes they're taking off the weight promoting agent depending on the results for the patient, but in many cases, they're not. So polypharmacy is not unusual because of the 24-hour nature of the condition and the fact that there is a possibility for patients that aren't well managed on their daytime agents to actually be able to be treated with oxybate with very, very, very strong results.

So that clearly is what happens today, and we anticipate that happening going forward. And with the innovation of extended-release oxybate like LUMRYZ, valiloxybate and then orexins for the daytime, it will just be an innovative space that will continue to offer patients options, both for monotherapy and polypharmacy.

What I would add to that is that if you research it with physicians, whether it's with a single key opinion leader or 200 physicians in a panel of research, which we've done both, -- they all want to use them together. They want to use LUMRYZ or oxybate with an orexin. They believe they're complementary and should be the standard of care in the future. And it's something we're interested and certainly wanting to explore and see how we can establish that both in terms of data generation and collaboration.

Right. Okay. So you've just recently done a deal. But if you look at maybe remind investors your cash flow and your balance sheet position? And how do you think about going beyond the potential oxybate franchise?

Yes. So maybe I'll start with where we were. We reported Q2, we had about $82 million of cash on the balance sheet. Cash flow positive for the quarter. It was a good quarter for us, profitable almost any measure, cash flow, operating income, net income. And for the year, we expect to be cash flow positive for the year. That takes into account the upfront payment we have for valiloxybate as well as any additional development costs we may incur. As we're looking -- again, as we look ahead and we think about profitability in the future, as we think about capital deployment in the future, we're focused on revenue growth, driving patient demand.

We'll always be disciplined about our operating expenses, but always with an eye towards maximizing operating leverage. And then on capital deployment in the future, as we think about this, it's always through the lens of what's going to maximize shareholder value. The good news for us is we're cash flow positive. We have no debt on the balance sheet. We have a lot of different optionality for us and expectation of continued strong cash flow from LUMRYZ to support our activities.

Sure. And how do you think about geographic expansion?

Yes. There's been a lot of inbound interest in LUMRYZ ex U.S. from that standpoint by third parties. And as we announced in our valiloxybate deal, except for a few countries in Asia, we have global rights to valiloxybate as well. We do that. We'll continue to evaluate those opportunities through the lens of what I would describe as, first, do no harm to our opportunity in the U.S. from that perspective.

The active pharmaceutical ingredient for LUMRYZ or for valiloxybate in the future potentially is DEA regulated. So you get quota. You only have so much product you can get. So we need to make sure that there's enough adequate product to more than meet the demands in the U.S. market. from that perspective. So that's really the lens at which we look at it. But we'll continue to evaluate those opportunities to make sure we can serve patients globally as appropriate with, of course, through the lens of what we're doing here in the U.S. now.

Fantastic. And we've got just over a minute left. But is there anything I haven't asked that I should have asked or any message that you'd like to leave investors today to wrap up the session?

No, comprehensive on the questions. I think if we think about where we are today in the next 12 to 15 months, we're in a very unique position, not only to continue to deliver on the launch and build the foundation of LUMRYZ that we've been building, but there's a number of other key catalysts and milestones coming up, whether it's completing the IH trial by the end of this year, completing final formulation work on oxybate by Q1, reading out the IH trial mid next year, filing the IH NDA second half of next year. And of course, conducting a potential registration pivotal PK study for valiloxybate. So a lot of catalysts, a lot of milestones and a lot of opportunities for us to serve more patients and build more value.

We might close the call or close proceedings there, but thank you, Greg, Susan and Tom.

Thank you, Sean.

Appreciate you coming.

Yes. Thank you, Sean.

Welcome.

Greetings, and welcome to at Avadel Pharmaceuticals Second Quarter 2025 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your first speaker, Austin Murtagh with Precision AQ. You may begin.

Good morning, and thank you for joining us on our conference call to discuss Avadel's second quarter 2025 earnings. As a reminder, 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 and uncertainties are described in Avadel's public filings under the Exchange Act included in the Form 10-K for the year ended December 31, 2024, which was filed March 3, 2025, 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; Susan Rodriguez, Chief Operating Officer; and Tom McHugh, Chief Financial Officer. I'll turn the call over to Greg.

Welcome, everyone, and thank you for joining us to discuss Avadel's second quarter 2025 results. Following my opening remarks, Susan will provide an update on our continued commercial progress. Tom will review our financial results, and I will conclude with a Q&A session.

We are incredibly pleased with the results we achieved in the second quarter, including growing patient demand with 3,100 active patients on LUMRYZ as of June 30, a 63% increase compared to the second quarter of last year, generating $68.1 million in LUMRYZ net revenue, a 64% year-over-year increase and delivering quarter-over-quarter improvement in key patient metrics, including persistency, percent of reimbursed patients on therapy and patient mix.

Additionally, the second quarter marked our eighth consecutive quarter where we added new patients from all 3 patient segments. We expanded use from repeat LUMRYZ prescribers and added new prescribers, both oxybate experienced and those who previously never prescribed an oxybate, which underscores how LUMRYZ is not only competing in the oxybate market, it is also expanding it.

We also achieved important financial milestones in the second quarter as we generated $15 million in cash and for the first time since launch, net income of nearly $10 million, resulting in earnings per share of $0.10. Given the positive momentum and improving trends in the first half of 2025, we are raising our full year 2025 revenue guidance to $265 million to $275 million, reflecting our confidence in our continued commercial execution, combined with the positive impact the investments we've made are having.

Additionally, to further support LUMRYZ's future growth opportunity, based on the positive return we have seen to date with our incremental investments, coupled with Susan's leadership and insights, we continue to identify new areas for targeted investments we believe can further propel patient demand for LUMRYZ and expand patients on therapy. Susan will discuss these dynamics shortly. We are pleased our 2025 launch investments are yielding tangible improvements as LUMRYZ uptake remains robust, patient persistence continues to improve, while new patient starts are occurring more efficiently and being reimbursed at a higher rate.

Furthermore, LUMRYZ's novel extended-release profile provides additional significant growth opportunities with potential expanded indications across other hypersomnia disorders. Specifically, based on physician and patient insights, we continue to be excited about LUMRYZ's significant potential in idiopathic hypersomnia, or IH, and view this, if successful, as a meaningful opportunity to amplify LUMRYZ's potential positive impact on even more patients.

To recap our progress on IH, in June, we received orphan drug designation from the FDA for LUMRYZ's use in IH on the hypothesis that LUMRYZ may be clinically superior to current approved therapies and provide a major contribution to patient care due to its once-nightly dosing regimen. Specifically, FDA stated for the third time, LUMRYZ may provide a major contribution to patient care due to its once-nightly dosing for patients with IH, a chronic sleep disorder that requires potentially lifelong treatment. This is an important milestone for us as the unmet medical need in IH remains high with approximately 42,000 diagnosed patients limited to a single FDA-approved first-generation oxybate therapy that is currently only reaching approximately 11% of that population.

If approved for use in IH, LUMRYZ could potentially enable eligible patients to experience an extended-release oxybate treatment for the first time, providing an important benefit for this population that struggles so significantly with sleep inertia. By offering an innovative novel therapeutic option that is specifically designed for the patient to receive a full therapeutic dose night after night with the added benefit of no forced awakenings, we believe could elevate the standard of care in IH and potentially unlock the significant expanded oxybate market opportunity for LUMRYZ.

That said, enrollment in our Phase III REVITALYZ trial evaluating LUMRYZ in IH is ongoing and enrolling patients at approximately 40 leading U.S. sleep centers. We are well on our way to completing enrollment in REVITALYZ by the end of 2025 followed by data readout in 2026 to support a potential future supplemental NDA filing during the second half of 2026.

If approved, we believe LUMRYZ could transform the treatment of IH, improve care for patients and further demonstrate its clinical and commercial potential in idiopathic hypersomnia. In addition to the pursuit of the IH indication, we continue to advance our efforts on the potential to expand our oxybate portfolio to include an extended-release formulation, providing a once-at-bedtime dosing regimen with a low or no sodium profile. The target product profile for this formulation program continues to be bioequivalent to LUMRYZ.

We believe that offering this expanded oxybate portfolio option could serve as an additional complementary treatment option that addresses the potential needs of all eligible patients suffering from our approved indications who deserve the proven efficacy of a consistent full therapeutic oxybate treatment, night after night with a once-at-bedtime dosing regimen, providing the potential added benefit of uninterrupted sleep.

Our continued investment in this strategy is reflected in part by our increase in operating expenses and related guidance for the second half of 2025. We currently expect to provide an update on this program by year-end. Now touching briefly on our litigation. In June, we were pleased that the U.S. Court of Appeals unanimously affirmed a prior decision in favor of the FDA in a suit brought by Jazz Pharmaceuticals.

The appeals court ruling removes any doubt that LUMRYZ will remain available for narcolepsy patients and affirmed the FDA's determination that extended-release LUMRYZ is clinically superior to all first-generation immediate-release oxybates and that its once-at-bedtime dosing provides a major contribution to patient care. In addition to this important court victory, we're actively pursuing additional legal actions against Jazz to protect our rights and intellectual property, including, but not limited to, our antitrust case, which is currently scheduled for a jury trial beginning on November 3 of this year, whereby we are seeking total potential recovery in excess of $1 billion.

To wrap up my opening remarks, we are encouraged by the progress made across all aspects of our business and in particular, the execution of our commercial team, which is driving the strong performance of our LUMRYZ narcolepsy franchise. This, combined with the work we are doing to expand potential future patient populations who could possibly benefit from LUMRYZ, along with our continued progress on the litigation front, sets us up for a strong second half of 2025 and continued positive momentum and growth into the future.

With that, I'll now turn the call over to Susan for details on our commercial developments. Susan?

Thank you, Greg. Before I begin, I would like to thank the Avadel team for providing me with the opportunity to lead this impressive commercial organization and work together to transform the lives of patients living with hypersomnia disorders via innovative sleep technology.

Our second quarter marked nearly 2 years of LUMRYZ's availability on the market and our performance represented by the roughly 3,100 patients now on therapy reflects the robustness of our commercial foundation and the value next-generation LUMRYZ brings to patients with narcolepsy. The impact of our launch can also be seen in the behavior of LUMRYZ prescribers.

Since launch, we have seen HCPs who prescribe LUMRYZ for the first time, demonstrate a rapid adoption of LUMRYZ, highlighting the drug's favorable profile and ability to treat patients in need of a new option despite being on first-generation oxybate. HCPs perceive to increasingly select LUMRYZ as their oxybate of choice and expand their prescribing to previously discontinued and new to oxybate patients in addition to switch patients.

A growing number of oxybate writers are becoming LUMRYZ writers and are persistently expanding their use across all 3 patient types. Additionally, we are seeing writers who have not historically written for oxybate, prescribe LUMRYZ. The impact we are making across the narcolepsy treatment paradigm is appearing in the real world comparable to what has been presented in the literature as more and more patients are reporting positive LUMRYZ experiences back to their HCP.

This is consistent with the results captured in the open-label Phase III extension switch RESTORE study, where among the switch participants, 94% preferred LUMRYZ over the older oxybate and 91% reported easier adherence to the medication schedule for LUMRYZ. It is clear that the novel option of once-at-bedtime dosing of a full therapeutic dose is driving robust patient uptake and favorable treatment experience with LUMRYZ.

Additionally, our commercial focus and execution, including our additional 2025 commercial investments are further amplifying our success. In particular, our expanded investment to optimize the reach and frequency of office and patient services to our growing prescriber base has further accelerated uptake and is driving favorable enrollment conversion rates to reimburse patient starts and patient persistency improvements.

Further, our direct-to-patient efforts, combined with HCP's growing comfort level with LUMRYZ are driving patient requests for LUMRYZ and new enrollments. As such, we are expanding our investment in these programs in the second half of 2025 to leverage this opportunity and further fuel growth momentum.

As commercial investments like these prove out and continue to catalyze our launch, we are pleased to leverage our learnings and invest in the launch even more so. As an example, we're further expanding our sales force to 60 representatives to support our continued focus on the growing provider base and to optimize reach and frequency to gain additional new prescribers.

Additionally, we are increasing our investments in key HCP and patient-centered programs based on the positive insights and return we've experienced in the first half of 2025.

Before I turn it over to Tom, I want to highlight our presence at the Sleep 2025 meeting, where we hosted multiple oral presentations and published more than a dozen abstracts. Our team had a productive team in Seattle, connecting with the broader sleep community across all levels, scientific, clinical and commercial.

In summary, Q2 was a strong quarter for Avadel, reflecting LUMRYZ's advancing market position across the oxybate space. We will continue to drive our promotional and operational execution intensity to capitalize on this momentum and maximize the potential for LUMRYZ.

With that, let me turn the call over to Tom to walk through our Q2 financial results.

Thanks, Susan. Before I begin, please note that full financial results are available in the press release issued this morning and the 10-Q. I will also be referencing non-GAAP financial results, which can be found on our Investor Relations website at investors.avadel.com.

There are a number of positive financial results to report for the second quarter, and I'll start with an update to revenue guidance. We are raising full year guidance to $265 million to $275 million from prior guidance of $255 million to $265 million, which reflects our confidence in the continued growth of LUMRYZ. We expect to generate $71 million to $75 million in net revenue in the third quarter, which at the midpoint represents a 46% increase over the prior year.

We believe we have clear visibility to deliver on the updated guidance, which is based on the favorable trends in the first half of 2025, including growing patient demand and improvements in key patient metrics such as persistency and patient mix. We expect these improvements to continue and are reflected in our expectations for second half revenue contribution.

In terms of top line results, for the quarter ending June 30, 2025, net revenue was $68.1 million, reflecting sequential growth of 30% versus Q1 and 64% compared to the same period last year.

Gross profit was $61.8 million, reflecting sequential growth of 32% versus Q1 and 60% compared to the same period last year. I'll also note that gross profit in the current year includes a noncash adjustment in cost of goods sold or a potential 3.5% royalty on LUMRYZ net revenue related to the Delaware Court memorandum and opinion issued in September 2024.

A ruling from the Delaware Court regarding a future ongoing royalty rate is pending. And while we intend to appeal the underlying jury decision regarding the validity of the patent, from an accounting standpoint, we have included an accrual in cost of goods sold.

Turning to operating expenses. Total GAAP operating expenses for the second quarter were $52.9 million versus $51.5 million in the prior year. The current quarter includes $6.1 million of noncash charges. And after adjusting for these, cash operating expenses for the quarter were $46.8 million.

As we enter the second half of 2025, given the successful results from the LUMRYZ investments made at the start of the year, we are making further investments in our sales force and direct-to-patient and physician marketing programs to continue propelling patient demand. We are also continuing our investments in the low or no sodium extended-release formulation.

We currently expect that cash operating expenses in the third quarter will be in the range of $50 million to $55 million and noncash expenses will be in the range of $6 million to $8.

With respect to operating income, the second quarter marks the fourth consecutive quarter of positive operating income as adjusted for the company. Adjusted operating income calculated as gross profit of $61.8 million minus cash operating expenses of $46.8 million was $15 million. As patients on therapy continue to increase, we expect incremental revenue complemented by a highly leverageable cost structure to increasingly flow through to operating income.

And turning to the bottom line. The quarter ended June 30, 2025, marks the first time the company has generated net income since LUMRYZ was launched. Net income for the quarter was $9.7 million or $0.10 per diluted share compared to net loss of $13.8 million or $0.14 per diluted share for the same period in 2024. And the current quarter includes a $3.2 million noncash tax benefit resulting from a change in estimated tax liabilities.

I'll conclude with a few comments on cash and cash flow. We generated $15 million of cash during the second quarter and ended the quarter with $81.5 million of cash, cash equivalents and marketable securities. We believe cash on hand and our expectations of sustainable positive cash flow provides ample runway to fund our commercial plans and the IA clinical program.

With that, I'll turn the call back to Greg for closing remarks.

Thank you, Tom. Before we open the call for Q&A, I'd like to summarize the opportunities we believe can unlock value for Avadel in 2025 and beyond.

First, oxybate market momentum behind LUMRYZ is strong, with our commercial investments accelerating our impact and further advancing LUMRYZ's pursuit of being the oxybate of choice. We delivered strong results during the first half of 2025 and expect continued execution and growth throughout the remainder of the year, supported by targeted investments in the commercialization of LUMRYZ. We are well positioned to generate sustainable cash flow based on the trends we are seeing, which is further underscored by our highly leverageable cost structure and our increased 2025 revenue guidance.

We're pursuing opportunities to maximize the potential of our unique once-at-bedtime formulation with pursuit of an expanded indication in idiopathic hypersomnia and are confident in our team's ability to turn the promise of our innovative science into reality that could possibly benefit even more eligible patients.

And finally, underpinning our progress lies our robust and growing intellectual property portfolio that protects LUMRYZ and its unique innovation until 2042. This innovation and the oxybate market potential of LUMRYZ are foundational strengths we will continue to protect and defend as we advance towards the currently scheduled antitrust jury trial, which is set to begin in just under 3 months.

As always, we thank you for your time and your continued support, and we will now open the line for Q&A. Operator?

[Operator Instructions] Our first question is going to come from the line of Andrew Tsai with Jefferies.

Congrats on the execution and hitting profitability. so first question on the overall guidance raise. It looks like it -- it does imply Q3, Q4 will certainly grow, but maybe moderate a little bit compared to Q2 over Q1. Is it because your guidance is conservative? Or is it because maybe Q1 was seasonally soft, hence, a strong Q2 or could Q3, Q4 have some kind of seasonality as well? So some color around the quarterly trajectory would be helpful behind the guidance.

Yes. Thanks, Andrew, for the question. I think as we look forward on the back of what we've learned in the first half and the progress we've made in a number of areas, when we think about the guide, we have to add more patients. We have to continue to grow patients to be able to achieve even the low end of the guide from that perspective.

So our assumptions in that guide is that we'll continue to grow and that the improvements we've seen throughout the process and throughout the first half, whether that's in our efficiency of getting patients started or persistency or percent reimbursed, all continue to perform at or better levels than what we've seen in the first half. So our guide is based up on those metrics sustaining themselves and improving. And if they do better than what we're currently projecting, we'll have an opportunity to revisit that in the future.

Yes. Andrew, it's Tom. Just as a follow-up. We always take a very thoughtful approach to the guidance we provide and how it can be seen. So I view we're looking at the second half of the year as evidence of durability of the investments we made in the first half of the year, particularly in the first quarter. And always, never forget, of course, that going from Q1 to Q2, you get a lift from the gross to net impact in Q1. So we're going to get a lift from Q1 to Q2 just as a result of that.

Right. And second question follow-up is, would you be willing to share how many patients initiated therapy during Q2? I think that can help us determine the intra-quarter dropout rate. And going forward, would you expect that intra-quarter dropout rate to decline further or stabilize from here? And would that be driven by more patient education or more oxybate switch patients entering your overall mix?

Yes. Inherent in your question, Andrew, thank you is how are things happening on a persistency basis. The primary KPIs we'll talk about will be patients on therapy at the end of the quarter and therefore, solving for net patient adds and, of course, revenue. In terms of the progress we've seen in Q2 versus Q1, we were very pleased in Q1 in terms of what we would describe as almost the immediate impact of the interventions we deployed around persistency. And that progress in Q1 continued into Q2, and we saw some improvements in Q2 as well.

As we go forward, our assumptions are that, that progress is durable and the opportunity to improve it is less dependent upon patient mix, although we've seen an improvement in patient mix as well because we've had such success in terms of impacting persistency during the first half of the year. And it's really more about executing and continuing to get even more tailored and specific to each individual patient to help them on their journey on LUMRYZ, all of which we've seen positive trends and durable trends so far through the first half of the year.

Now that we've turned the corner on profitability, every patient regardless of type is going to contribute to the bottom line.

Our next question comes from the line of Ami Fadia with Needham & Company.

Congratulations on the nice execution in the first half of the year. I have a few quick questions on the second quarter reported number. Could you give us a sense of what the implied annual price that was realized in the second quarter was? And if there was any change in inventory stocking that impacted the quarter? And then I have a question on the guidance.

Yes. So Amy, in terms of the annualized net revenue per patient, you just work through the math of net revenue and the number of patients we reported on therapy. it works out to about 92,000 annualized per year. Clearly, an improvement over Q1. And again, I'll refer back to the gross to net improvement that we get from Q1 into Q2.

And in terms of your question on inventory stocking, there was really no impact quarter-over-quarter. It is something we monitor quite frequently, but there was really no impact on revenue quarter-over-quarter as a result of inventory stocking levels.

Yes. The only thing I would add to Tom's comments on price is that the nice uplift in price we've seen wasn't solely based on that gross to net. The execution of the initiatives we delivered and executed on in the first half of the year have contributed to that improvement as well, which, again, we believe is -- has demonstrated durability in Q2 and so far in the early parts of Q3.

Understood. Okay. And then with regards to the guidance, what is your implied maybe at the low end or the midpoint of the guidance, how many patients on treatment are you assuming by the end of the year? And if you could give us a sense of where you see the net price evolve by the end of the year?

Yes. I mean I think in terms of the guidance, we're not comment specifically on where we expect the year-end in terms of patients on therapy, but clearly looking more granularly at Q3. List at the low end, we do need to durability and the improvements we made, the investments we made sticking throughout the quarter. So at the low end, it implies about the same level of net patient adds from -- that we saw in Q2. But clearly, with an opportunity for improvement as we continue to focus on all the patient metrics, not just net patient adds, but also persistency, compliance and a number of other things.

Any color on price?

I'm sorry, what was the question? Yes. I think when you think about pricing through the balance of the second half, I think we're at a place now that's probably a reasonable proxy as we go forward from here. We've gotten the -- at least as a baseline, we've gotten the benefit of the gross to net evolution from Q1 to Q2.

And we believe the progress we've made on other aspects of our execution are durable to our net price and obviously, opportunities we're focused on to try to make that better. So -- but for now, we feel good about where the net price is today.

Yes. And again, clearly, you get the lift from Q1 to Q2. I echo Greg's comment that I think I would -- for lack of a better term, I mean, I describe a steady state from coming off of Q2 into the remainder of the year.

Our next question comes from the line of David Amsellem with Piper Sandler.

So 2 for me. One is, can you talk about how you're thinking about the impact of the orexin longer term on your narcolepsy business? And then secondly, regarding IH, do you anticipate a significant switch market from Xywav to LUMRYZ? Or do you think ultimately, you can grow the pie overall?

Yes. David, thanks. On your first question relative to orexin, it's obviously something we continue to spend a lot of time on to understand and really primarily through discussing and engaging with physicians and clinicians, both key opinion leaders as well as the community and academic-based prescribers, right? And I think there's been a number of themes that have emerged for us and pretty extensive work we've done trying to assess this landscape, this orexin, if you will, hypersomnia landscape.

I think relative to oxybate, the most important things that we've heard from clinicians is that oxybates play an important role and will continue to play an important role now in the future. Narcolepsy is a 24-hour condition and the nighttime-related symptoms, both today and in the future need to be addressed from that standpoint. And only oxybates have proven to be able to do that with -- durably for nearly 2 decades now from that standpoint.

I would say when it comes to the role of orexins and oxybate, physician feedback to us would say they see it as more complementary from that standpoint and the opportunity to potentially use an orexin with an oxybate could emerge as a new standard of care in the future. But there's equally questions that remain on orexin as well, given the data is still pretty new and it's an evolving data set for sure over the next number of years that, in some cases, may not really materialize until it's in the real world.

But I think in terms of where we see the future, we believe based upon physician insights that oxybates have an important role today. We will continue to have that important role to treat the nighttime as an important treatment option for patients and that LUMRYZ is well positioned in this regard to be both a stand-alone treatment option or a potential complementary treatment option with some of these emerging new therapies.

In terms of your question on IH, today, just a little over 10% of the diagnosed, if you will, patients under care are being treated by the only approved oxybate and the only approved product for IH at this point. In our view, we see a much larger greenfield than that for us. We think the opportunity to grow the pie is real and substantial. And that's how we view the IH potential for us, not through the lens of what limited number of patients have been treated to date, but how many patients really need to be treated. And that's the opportunity for LUMRYZ.

Our next question is going to come from the line of Marc Goodman with Leerink Partners.

Can you just talk about how you're thinking about the sizing of the oxybate market, the number of patients, just what the growth rate is just first quarter, second quarter, how you're thinking about it going forward, if that's changed? I know you've talked about the 3 buckets of where you expected to get patients and stuff. I'm actually referring to more of what you've seen. Obviously, Jazz has reported, Harmony has reported. You have a good sense of what the market looks like. So what's going on out there? And just give us a sense of growth and stuff.

Yes. I mean I think when we think about the oxybate market and in particular, LUMRYZ, we can point to very specific data points that tells us that the market through our lens is growing, right? We don't have complete visibility to every product and every product's use in the category. But clearly, there's a lot of promotional efforts going on in the category. And that drives higher diagnosis rates that drives more awareness that drives more patients potentially in to be treated.

And that's a good thing for patients, and it's a good thing for the market from that perspective. But whether you're looking at it in the context of every quarter adding a prescriber who didn't previously run an oxybate or treating patients who have been off of an oxybate for quite some time and have decided to come back in because of LUMRYZ's availability, these are all really good signs for us that the market at least through the lens of what LUMRYZ is offering is bringing new and more patients in relative to what's been there historically. I don't know, Susan, if there's anything you'd like to add to that.

Yes. No, exactly. And overall, from a perspective of potential for LUMRYZ, we are persistently drawing from previously discontinued patients as well as switch patients which represent within the current marketplace, a significant momentum for LUMRYZ.

I guess just as part of the question, obviously, when you first launched, it really felt like there was an expansion of the market going on in number of patients. I was just curious if you still felt like what's your best expected oxybate number of patient growth rate for this year is? I mean, are we talking 2%, 3%? Are we talking 5%, 6%...

Yes. I think being that precise is not so important to us because we don't see what's happening with some of the data around the AD or the original first-generation oxybate from that standpoint. What we see is where we're sourcing business from and what that means in terms of the pie, if you will, that we're grabbing share from and grabbing -- starting new patients on therapy and all that gives us confidence that LUMRYZ is attracting and bringing patients into the market that haven't been in either ever or haven't been in quite some time.

Exactly. And just since launch quarterly, persistently, we've identified new prescribers that historically have not been oxybate writers. So there's clearly an opportunity given the profile of LUMRYZ for physicians who treat a lot of narcolepsy patients that haven't historically used oxybate to adopt LUMRYZ. And what we're hearing from those physicians when we speak to them is that the simplification of the dosing profile really gives the HCP the opportunity to initiate oxybate therapy with their patients. So there's clearly opportunity there. We've seen it persistently since launch, and we anticipate continuing to draw from that group.

Our next question comes from the line of Ash Verma with UBS.

This is Steve on behalf of Ash and and congrats on the quarter. I have 2 questions on antitrust case, if I may. The first one, how do you establish the time period that you were unable to enter the market at 1 half year as claim? There were -- I think there were multiple factors at play beyond just improper listing of competitors' rent pattern.

Are you confident in the 1 half year time window? Or can it be shorter? My second question is, we did not see any resolution based on the summary judgment motion in June. So what do you make of that development?

Yes. Thanks for the question. When it comes to those specific matters relative to any litigation, we're just not going to comment on it at this point. But I appreciate the questions. And all of that will become more clear in under 3 months.

Our next question comes from the line of Raghuram Selvaraju with H.C. Wainwright.

Congrats on the solid quarter. I just wanted to ask about how you are thinking about, in particular, marketing and promotional strategies in support of LUMRYZ in the idiopathic hypersomnia market versus the market in which the product is currently labeled. And how you are viewing the principal differences between these 2 indications from a promotional strategy perspective? And if you can give us a sense of whether there are likely to be differences in marketing strategy as you position the product in this future new indication?

Yes. Thanks for the question. I think -- so maybe I'll make a couple of comments and then turn it over to the expert who we're really fortunate to have her on our team. I think as we think about the 2 different patient types, so to speak, where you have narcolepsy patients who generally have a hard time staying awake versus ICE patients who have a hard time waking up, it's very different matters that we have to deal with from that perspective.

And the value proposition of LUMRYZ is, we believe, if -- again, if approved and all the things that we're doing on IH pan out, will be an important treatment option for them. I think from a -- what's our go-to-market strategy, we'll talk about more that much more in the future when those things -- when the time is right for that and appropriate for that.

But I think most importantly in this regard is that there's a lot of synergy, if you will, or a lot of overlap in terms of the same prescribers, the same sleep specialists who are treating -- they're treating hypersomnia disorders in totality, and IH is one of them for sure. So Susan can certainly provide more context as appropriate. But I appreciate the question. There'll be more to talk about that in the future.

Yes. I would just add, as Greg mentioned, there is really a very large overlap in terms of the sleep specialists who see who are currently treating narcolepsy patients who will become our targets with the launch of the IH indication. And what's really notable is that today, we're seeing this incredible momentum and driving increased uptake of LUMRYZ across these exact high narcolepsy patient doctors.

And what they report back to us in terms of the reason for their expanded adoption across not just switch patients, but new patients and previously discontinued patients is the value of the extended release profile of LUMRYZ. -- the value of the extended release technology platform that LUMRYZ brings to the market, which enables once a bedtime dosing for a full therapeutic dose.

That's the reason from a product profile standpoint, that's what's driving the growth momentum today in narcolepsy and that very profile is extremely valuable to achieve your treatment objectives for an IH patient.

So we will definitely have a running head start in terms of familiarity of the fit for LUMRYZ given its profile in the IH patient population, and we will customize our marketing and promotional approach to really drive expansion of that market, identifying IH patients and leveraging the profile that LUMRYZ brings to actually treat those patients, which today are going broadly untreated.

And just one other quick one, if I may. If you're looking ahead to the Sleep conference and in particular, what data might be presented with respect to the orexin pathway modulators at that event, do you think that there may or may not be any information presented at that conference that might alter the competitive landscape dynamics picture?

I think everyone is looking forward to World Sleep and seeing more details on both the Phase III and Phase II data that have at least provided kind of high-level top line data so far from that perspective. And I think we'll be more equipped to answer that question in the future.

We've done our research and continue to do our research on this landscape, if you will, even very recently in the last couple of weeks talking to dozens and dozens of physicians post the top line readout of some of the data.

And we're drawing our insights and our perspective based upon kind of real time of the real data, and we'll continue to do that over time and have us help think through what all this may mean. But the one thing that's been consistent as we've been working on this for the last number of quarters is that the role of oxybate is important and will continue to be important now and in the future.

Our next question comes from the line of David Hoang with Deutsche Bank.

Congrats on the strong quarter. So I have 2. First, could you comment on the, I guess, the current mix of switch patients and naive patients? Is that still a focus for you? And where would you like to see that mix trend over the next few quarters? And then with your increased investment in the launch, can you just talk a little bit more about what exactly you're hoping to achieve with the prescribers? And is increasing the depth or the breadth of prescribing more important?

Thanks, David. Susan?

Yes. So today, if we look at our total patients on therapy, over half of them are switch patients. And we're actually quite encouraged with the whole adoption cycle across our prescriber base. We're rapidly growing our prescriber base. And what we found is that it's quite consistent in terms of how they adopt LUMRYZ, starting with patients that are on treatment that they have been in need of new options. So we get some switch patients very early in the adoption cycle.

And then what we're finding is that with their favorable experience of LUMRYZ, they are rapidly expanding to new to oxybate discontinued patients and then continuing to actually adopt LUMRYZ for switch patients because they identify that patients that they thought may have been effectively managed, in fact, could be doing a lot better as they're seeing patients come back with their experience on LUMRYZ.

So we are in a really, really positive steady state in terms of this adoption cycle where as we grow our prescriber base, they are continuously expanding their use of the drug. And the use of LUMRYZ is increasingly reflecting just their patient population in terms of who they have currently on treatment and the new and the previously discontinued, and we are drawing from all of those patient groups, which is really speaking positively to the future for LUMRYZ.

In terms of the prescriber base, we really have captured the majority of the highest prescribers, those highest volume doctors, and they are adopting LUMRYZ across all of their patient types. So what we're seeing is what's growing the business is the expanded use of LUMRYZ in the existing prescriber base with consistent growth of new prescribers.

And these new prescribers are in those lower volume offices that we're really getting to all of the narcolepsy patients. And also, we are growing new prescribers, as we had mentioned before, physicians who see a lot of narcolepsy patients that haven't necessarily used oxybate historically. So we're in a very good balance of our growth coming evenly from depth of use as well as expanded writer base.

And I think just to tap into that tag on to that, David, is the investments we're looking at is to continue to accelerate that, both at the prescriber level, but also at the patient level as well, right? And continuing our efforts in an amped-up manner for lack of a better word, in our efforts to communicate and activate and educate patients.

Yes, it's not surprising when we talk to patients, what they'll tell you is that they really prefer the profile of LUMRYZ. The profile of LUMRYZ is really quite a patient-friendly profile. So our direct-to-patient efforts to date has really been generating new enrollments. We're increasingly hearing from HCPs.

Our research has captured this that more and more patients are coming in and asking for LUMRYZ and what -- and they're happy to actually prescribe it because they're comfortable with the drug. They're comfortable with the servicing that Avadel provides the office and the patient. They're seeing the good results. So we have some strong momentum being driven by the patient-driven request. So our expanded investments are clearly focused on leveraging that opportunity.

Our next question is going to come from the line of Chase Knickerbocker with Craig Hallum.

Congrats on the quarter. Most of my questions have been answered, but maybe just a bigger picture one for you, Greg. If we kind of think about kind of your balance sheet, obviously, now with your net cash position and going to get stronger. Can you kind of speak to your guys' activity on the BD side? And any sort of commentary that you're willing to give on kind of the profile of something you'd be willing to look at, whether that's something that's mid- or late-stage clinical or whether or not you'd be more interested in kind of leveraging your commercial platform immediately with some sort of commercial acquisition?

I think the most important answer to that question, Chase, is that is we're laser-focused on what is most important to drive value today and in the near term for the company, which is the execution of our launch and fully maximizing and realizing the full potential of LUMRYZ and narcolepsy, executing our life cycle management initiatives, in particular, IH and some of the other work or formulation work we're doing. But we have a team that evaluates things in the marketplace for which we'll be very disciplined about in that regard in terms of what would or wouldn't be something that would make sense for Avadel.

Listen, our shareholders have enabled us the opportunity to build an infrastructure and a capability to commercialize in this space. And those are the things we're focused on, and that's where we should be paying our attention to primarily as anything that may be inorganic from that perspective, for lack of a better word. But -- I'll be very clear, like our focus is on accelerating the launch and moving our life cycle management and expanded indication efforts forward as our primary priorities.

Thank you. And I would now like to hand the conference back over to Greg Divis for closing remarks.

Thank you again, everyone, for joining us today and spending time. We look forward to any follow-ups and have a great day. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.