Avadel Pharmaceuticals Q1 2025 Earnings Report

Avadel Pharmaceuticals EPS Results

• Actual EPS: -$0.05
• Consensus EPS: -$0.07
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: -$0.30

Avadel Pharmaceuticals Revenue Results

• Actual Revenue: $52.51 million
• Expected Revenue: $50.57 million
• Beat/Miss: Beat by +$1.95 million
• YoY Revenue Growth: +93.20%

Avadel Pharmaceuticals Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 8:00AM ET

Avadel Pharmaceuticals (NASDAQ:AVDL) operates as a biopharmaceutical company in the United States. Its lead product candidate is LUMRYZ, a formulation of sodium oxybate, which is in a Phase 3 clinical trial for the treatment of excessive daytime sleepiness or cataplexy in adults with narcolepsy. The company was formerly known as Flamel Technologies SA and changed its name to Avadel Pharmaceuticals plc in January 2017. Avadel Pharmaceuticals plc was incorporated in 2015 and is headquartered in Dublin, Ireland.

Avadel Pharmaceuticals Q1 2025 Earnings Call Transcript

Key Takeaways

• Avadel saw 100% year-over-year growth in LUMRIZE patients to 2,800 in Q1, added 300 net new patients (50% vs Q4), generated $52.5 M net revenue (90% growth) and raised full-year guidance to $255–265 M.
• The Federal Circuit vacated the injunction blocking LUMRIZE approvals beyond narcolepsy, allowing Avadel to pursue new indications and clinical trials, including idiopathic hypersomnia (IH).
• A 15% salesforce expansion plus doubled field reimbursement and nursing support teams boosted patient starts and persistency across new-to-oxybate and switch segments.
• Enrollment in the Phase 3 REVITALIZE trial for IH is on track to finish by year-end 2025, with topline data expected early 2026 and an NDA to follow, targeting a 42,000-patient diagnosed population.
• Avadel delivered its third consecutive quarter of positive adjusted operating income, expects $60–63 M in Q2 net revenue, and now forecasts $30–40 M in full-year cash flow on disciplined $180–200 M expenses.

Presentation

[Operator]

Greetings, and welcome to Avadel Pharmaceuticals First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. Accompanying slides for this call can be found on Avadel's Investor Relations website. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

[Operator]

It is now my pleasure to introduce Austin Murtagh with PrecisionAQ. Thank you. You may begin.

[Austin Murtagh, Director of Investor Relations & External Communications at Precision AQ]

Good morning, and thank you for joining us on our conference call to discuss Avadel's first quarter twenty twenty five 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 ks for the year ended 12/31/2024, which was filed 03/03/2025, 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.

[Austin Murtagh, Director of Investor Relations & External Communications at Precision AQ]

On the call today are Greg Divis, chief executive officer and Tom McHugh, chief financial officer. I'll now turn the call over to Greg.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Welcome, everyone, and thank you for joining us to discuss Avadel's first quarter twenty twenty five results. On today's call, I will provide insights and commentary on the drivers of our performance during Q1 and the outlook for the remainder of this year. I'll conclude my opening remarks with additional company updates that we believe will further strengthen and accelerate our business in the future. Tom will then provide an overview of our financial performance and guidance, and we'll wrap up with a Q and A session. To start, let me underscore our continued confidence in Lumruns, which saw accelerated patient adoption and expanded physician prescribing throughout the first quarter of twenty twenty five, further building on our early launch momentum.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

We are pleased with the strong progress we made during the first quarter of the year and remain confident in our ability to continue to deliver on our growth plan. Accordingly, as noted in our press release, we raised our full year guidance. We were equally pleased with yesterday's favorable decision from the Federal Circuit Court of Appeals regarding Avadel's ability to pursue indications for Lumeris beyond narcolepsy. The Court of Appeals rejected key elements of the Delaware trial court's injunction that had prohibit us from applying for FDA approval for Loom Rise for any indication beyond narcolepsy, from offering open label extensions to trial participants using Loom Rise, and from initiating new clinical trials or studies with Loom Rise. This is a clear win for Avadelin for patients, as we are now able to proceed with the development of LUMRIZE for additional indications, conducting clinical studies, and seeking FDA approval for those indications, including IH.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Since the beginning of 2025, we have seen improvements across our key launch metrics for LUMRIZE, including patient enrollments, new patient starts, persistency rates, and most importantly, the accelerated growth of net new patients on therapy. This progress reflects the investments we have made in strengthening our leadership team, refining our commercial strategy, providing additional patient support, expanding our customer facing roles, and as such, expanding our provider and patient engagement. While we are pleased with these promising early results, we're not remotely satisfied and expect to build on this momentum through the remainder of this year and beyond. We ended the first quarter with 2,800 patients on Loomrise, reflecting 100% growth over the same period last year. Additionally, we reaccelerated the growth of net new patients during Q1, delivering an increase of 300 patients, which is a 50% increase compared to the fourth quarter of twenty twenty four.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Lastly, despite the typical Q1 seasonality headwinds, we generated $52,500,000 in net revenue, which represented greater than 90% growth versus Q1 of twenty twenty four. Our commercial performance underscores the strong clinical value proposition of Loomrize and its unmatched advantage as a once at bedtime oxybate. Given the positive momentum year to date, we are raising our revenue guidance to $255,000,000 to $265,000,000 for the full year. Tom will provide additional details related to this later in the call. As you may recall, effective January 1, we increased our sales force by 15%, expanding our target focus and our sales team capabilities.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

The execution of this and related initiatives resulted in positive patient demand growth across all patient segments during Q1 versus Q4, including growth in switch patients, starts, and an expansion of our LUMRIZE prescriber base. We are encouraged by the continued expansion of new writers who previously, according to currently available data, had not prescribed an oxybate, but who are now beginning to prescribe LUMRIZE. We believe this is another strong data point highlighting how LUMRIZE is both competing in the oxybate market and growing it. Complementing our sales force, we doubled the size of our field reimbursement team. This expansion, which also took effect January 1, has rapidly demonstrated the ability to drive additional patient starts faster while enabling this team to spend more time in the field directly engaging with targeted prescribers and their office staff, all of which has resulted in an improvement in new patient starts across all patient segments in Q1 when compared to Q4.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

And lastly, we turn our attention to the expansion of our nursing support team, which also doubled in size effective January 1. This is our team who is directly engaging with patients prior to, at the start of, and during their LUMRICE treatment. In Q1, we saw an improvement in persistency, or in other words, a decrease in our discontinuation rate when compared to Q4. Importantly, that improvement occurred across all patient segments, including new to oxybate patients, and in particular, during the first ninety days of treatment. This positive impact is a result of both the expansion of the team and the implemented training that is designed to both assist patients getting onto therapy and also provide ongoing support during their LUMRIZE treatment.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

The cumulative impact of these positive trends has resulted in a reacceleration in the growth of the most important patient metric, which is net new patient adds, where we delivered 50% growth in Q1 versus Q4. Furthermore, the additions of our new commercial leaders in sales and patient services have been positive catalysts to our recent performance. We expect this will be further enhanced by the impending appointment of our next executive commercial leader. From a timing perspective, we are in the very final stages of this process and expect to announce the appointment of a highly accomplished and experienced rare disease leader who we believe will elevate our capabilities and accelerate our performance. Now moving beyond LUMRIZA's launch in narcolepsy, a few additional updates that are key to Avadel's future growth and value creation.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

First, enrollment is progressing and on track in our phase three REVITALIZE trial evaluating loomrites and idiopathic hypersomnia. As previously communicated, we expect to complete enrollment in the trial before the end of twenty twenty five and are targeting top line data in the first part of twenty twenty six, followed by an NDA filing thereafter. To give you a sense of the size of the IH opportunity, there are approximately forty two thousand patients diagnosed and only one FDA approved treatment available today, which has reached approximately 10 of that population. If approved for use in IH, we believe Luminase has the potential to unlock a significant additional unrealized market opportunity. Prescribers regularly express their excitement about the future prospect of being able to prescribe Lumrise for indications beyond narcolepsy and specifically IH.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

We consistently hear that having an uninterrupted, predictable, consistent, and fully prescribed oxybate dose night after night is important to patients and physicians. BlueMrise currently offers that potential for narcolepsy patients who have difficulty staying awake and believe it is only an intuitive to extend that potential possibility to IH patients who struggle with waking up. With clear market potential and vocal community support, we believe Loomrise, if approved, is well positioned to potentially transform the IH patient experience. Beyond LUMRIs, we are advancing efforts around a once nightly lower low sodium oxybate program aligned with the target product profile that is bioequivalents to LUMRIs. We believe this alternative formulation could serve as an additional compelling treatment option to serve patients dealing with hypersomnia related disorders who could also benefit from the opportunity of an uninterrupted, predictable, consistent, and fully prescribed oxybate treatment night after night.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Now moving briefly on to our litigation, we remain confident in our comprehensive legal strategy. And while we're waiting for decisions on certain prior matters, we are actively pursuing the following actions against Jazz to protect and further build our business. First, our ongoing defense in the initial patent lawsuit, where as noted, we won an important appeal yesterday. Next, the antitrust case against Jazz, currently scheduled for a jury trial in early November in which we are seeking total potential recovery well in excess of $1,000,000,000 And finally, our recently initiated offensive patent suits in which we are serving the once nightly use of their mixed salts product in IH, as described in its label, infringes five Avadel patents, and which reflects our unwavering commitment to protect our intellectual property. Wrapping up my opening remarks, we're encouraged by the progress made across all aspects of our business, and in particular, the reacceleration of our Lumrise narcolepsy franchise and yesterday's court decision.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

We remain focused on sustaining this momentum as we continue working toward a long term goal of $1,000,000,000 in Lumrise narcolepsy revenue while expanding our impact to potential patient populations in the future who may also benefit from a once at bedtime Loom Rise, leveraging our innovative technology platform. With that, let me turn the call over to Tom to walk through our financial results.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Thanks, Greg. 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 reviewing non GAAP financial results, which can be found on our Investor Relations website at investors.avadel.com. Looking at the momentum in patient demand as we closed out Q1 and continued progression through the first month of Q1, we raised our guidance to appropriately reflect our performance expectations for the

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

remainder of 2025. As Greg noted earlier, we raised our full year 2025 net revenue guidance to $255,000,000 to $265,000,000

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

from $240,000,000 to $260,000,000 We also are raising our guidance for patients on therapy to 3,400 to 3,600 patients by year end from 3,300 to 3,500 patients in prior guidance. While we are increasing revenue guidance, we are maintaining our previous full year cash operating expense guidance of 180,000,000 to $200,000,000 At this time, given the long term and unknown implications of industry wide changes around potential tariffs and policies impacting biotech, we want to also provide visibility into our near term expectations for Q2 performance. In that regard, we expect to generate 60,000,000 to $63,000,000 in net revenue during the second quarter of twenty twenty five, with cash operating expenses in the range of 45,000,000 to $50,000,000 And by providing this additional guidance during today's call, we hope to impart more certainty and confidence in our full year guidance as we close out the first half of the year. Overall, our increased guidance underscores our conviction in the commercial investments we made at the beginning of this year, what they were designed to achieve, while further confirming that Loomrise is on its way to achieving a billion in revenue. And turning to financial updates, in the quarter ended 03/31/2025, we reported net revenue of 52,500,000.0 and gross profit of $46,900,000 compared to net revenue and gross profit in the prior year quarter of $27,200,000 and $25,700,000 respectively.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Additionally, I'll note that gross profit in the current year includes an adjustment in cost of goods sold for potential 3.5% royalty on Loomera's net revenue related

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

to

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

the Delaware court memorandum and opinion issued in September of twenty twenty four. But to be clear, while this matter is pending a final resolution, it is a non cash expense. 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 a non cash accrual and cost of goods sold. Also worth highlighting, as we scale above and beyond the $50,000,000 quarterly revenue level, we expect incremental revenue and patient additions to increasingly flow through to the bottom line.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

This marks the beginning of a period of financial leverage for Avadel. And moving forward, we expect the growth in revenue and cash flow to continue over the coming year, while maintaining financial discipline with regard to operating expenses. And turning to operating expenses, while we reported 93% increase in year over year net revenue, we reported a 3% decrease in total operating expenses. Total GAAP operating expenses for the fourth quarter were $49,900,000 versus $51,700,000 in the prior year. The current quarter includes $5,000,000 of non cash charges comprised of stock based compensation of $4,200,000 and depreciation and amortization of $800,000 After adjusting for these items, cash operating expenses for the quarter were 44,900,000.0 The leverage inherent in our operating model is increasingly evident as incremental revenue and patient additions continue translating effectively into improved cash flow and profitability.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

We view this as a key inflection point and a validation of the strategic investments we've made during our initial launch phase. With respect to cash, the company ended the first quarter with $66,500,000 of cash, cash equivalents and marketable securities. We also want to take the opportunity during this call to provide perspective on our path to achieving sustainable operating breakeven and cash flow. During the first quarter, GAAP operating loss was 3,000,000 After adjusting for non cash operating expenses, adjusted operating income was a positive $2,000,000 calculated as gross profit of $46,900,000 minus cash operating expenses of 44,900,000.0 This marks the third consecutive quarter of positive adjusted operating income for the company. And while cash flow was negative in the first quarter due to working capital requirements and higher gross nets, we expect cash flow for the full year, based on current plans and assumptions to be in the range of 30,000,000 to $40,000,000 versus previous guidance of 20,000,000 to $40,000,000 And on a final note, we want to address a topic that is top of mind for many, tariffs.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

As some of you may have heard from our public comments over the last month, based on what we know today, Avondale currently does not expect to be materially impacted by recent trade policy developments as we've taken steps over the past four years to onshore all aspects of our manufacturing, which in turn build strategic and derisking redundancies into our supply chain. Importantly, we source our API from two suppliers, both in The United States, and this has resulted in the majority of our manufacturing now being based in The US. And in addition to sourcing all API in The US, our US based manufacturer is already FDA approved and is fully operational. With that said, we have the ability, if needed, to source exclusively from our US domestic partners. With that, I'll turn the call back to Greg for closing remarks.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Thank you, Tom.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Before we open the call for Q and A, let me summarize the opportunities that we believe can unlock value for Avadel in 2025 and beyond. First, our commercial investments have accelerated our growth and further advanced our growing leadership position in the narcolepsy community. We achieved strong results during the first quarter and expect continued execution during the remainder of this year. We are well positioned to generate sustainable positive cash flow from the trends we are seeing, which is further bolstered by our highly leverageable cost structure and our increase in 2025 revenue guidance. We're pursuing opportunities to maximize potential of our unique once at bedtime formulation beyond narcolepsy through our life cycle management initiatives and are confident in our team's expertise to turn the promise of our innovative science into reality that could possibly benefit even more eligible patients.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Based on our successful past actions to diversify and derisk our supply chain, we are well positioned relative to the current tariff dialogue as our infrastructure is predominantly based in The US, and we currently anticipate little to no impact. And finally, underpinning our progress lies our robust and growing intellectual property portfolio that protects Lumrise and its underlying innovation until 02/1942. This is a foundational strength that we will continue to protect and defend, which is representative in our recent actions in this regard. As always, we thank you for your time and your support in joining us today. And we'll now open the line for Q and A.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Operator?

[Operator]

Thank you. As a reminder, to ask a question, you will need to press 1, 1 on your telephone. Our first question comes from the line of Mark Goodman of Leerink. Please go ahead, Mark. Mark, your line is open.

[Operator]

Please make sure your line is unmuted. And if you're not speakerphone, lift your handset. We'll go to the next question, which comes from the line of Andrew Tsai of Jefferies. Your question please, Andrew.

[Andrew Tsai, SVP at Jefferies Financial Group]

Hey, good morning. Thanks for taking the questions. Congrats on the nice progress. My first question is around the revised 2025 guidance. At the midpoint, it's around two sixty.

[Andrew Tsai, SVP at Jefferies Financial Group]

You did 52.5 in Q1 you're guiding to 61.5 at the midpoint for Q2 so about 115,000,000 for first half twenty twenty five so is it fair to assume to get to your guidance sales should be growing at a similar pace in Q3 and Q4 or could there be bumpiness along the way and if you had to rank order all the reasons why, you're growing such as improved gross to net less dropouts more patient at what would that growth be based on, exactly? Thank you.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Andrew, it's Tom. Thanks for the question. Yeah, you're exactly right. The first half of the year at the midpoint of the guidance, it's about $114,000,000 in the first half of the year, which obviously leads to playing growth in the second half of the year. In terms of your question around a sequence or sort of the cadence of quarterly net revenue, our goal is always is to grow quarter over quarter.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

And with leaving plenty of room to grow in the second half of the year, we would expect sequential growth quarter over quarter for the remainder of the year.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah. Andrew, this is Greg. Thanks. In terms of your second question about like what are the drivers and can we pinpoint or point to the major initiatives that have driven some of the improvements? I think, in short, we've seen every key metric improve versus Q4.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

So I can correlate the expansion of our sales team and the expansion of our and switch and some modifications to our commercial execution that have driven more demand at the top of the funnel. Our expansion of our field reimbursement team certainly has pulled through patients faster to get more patient starts. And then the early signs of our work on persistency certainly has trended very well to start the year. I think in all cases, we expected to see most of that improvements begin to kick in in Q2 and beyond as we were getting our teams up and running. So we're pleased that we've jumped off pretty fast from that perspective and have continued that momentum here in the first month of Q2.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

So we're excited about those prospects. And I think all aspects of it are advancing in the right direction. And, you know, but recognizing we've got a lot more to accomplish and a lot more to deliver.

[Andrew Tsai, SVP at Jefferies Financial Group]

Right, makes sense. And then secondly, congrats on winning the appeal case yesterday. Was the precise nature of that ruling aligned with your base case scenario or was that perhaps the best case scenario for you? And then where do we go from here? When would be the next quote unquote litigation update?

[Andrew Tsai, SVP at Jefferies Financial Group]

Is it basically when or if LUMRIZE is approved in IH later in 2027?

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, I think the short answer is that was our base case assumption. And we're pleased with the results that came out as it's a clear and favorable and critical decision for us and for patients. So given the Fed Circuit overturned some key aspects, important parts of that injunction. In terms of what's next in that regard, that will be dependent upon others from that perspective. For us, it just gives us the clear path to continue to execute our plans that we had been planning to execute and advancing toward an NDA submission in NIH as we complete the trial from that standpoint.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

So we're pleased with that decision and look forward to continue moving forward.

[Andrew Tsai, SVP at Jefferies Financial Group]

Great. Thanks again. Congrats.

[Operator]

Thank you. Our next question comes from the line of David Amsellem of Piper Sandler. Please go ahead, David.

[David Amsellem, Sr. Research Analyst at Piper Sandler Companies]

Thanks. So just a couple for me. With IH, your competitor announced patient metrics last night for their product. And I'm just wondering, how are you thinking about the patient footprint potential patient footprint for Lomerize NIH? Do you think it'll look similar to what we've seen for your competitor?

[David Amsellem, Sr. Research Analyst at Piper Sandler Companies]

That's number one. And then number two, just taking a step back, being a single product company, certainly has its pitfalls, particularly in this macro environment. I guess my question is, the success of Loomera is notwithstanding, what's your appetite for bringing in another asset or assets to further drive growth of the company? Thanks.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, to your first question on how we view the IH opportunity, we view it as highly untapped and right for new treatment options that offer our own unique and differentiated clinical value proposition. And we believe from that standpoint, like we've seen with narcolepsy, we can be successful sourcing patients from all segments, right? Patients who are diagnosed and not being treated today with an oxybate, patients who may want to or who struggle with waking up in the middle of the night to take a treatment that for a condition where, you know, deep sleep inertia makes it very challenging, or for, you know, new patients who are coming into the fold, so to speak. So we believe it's right for those positions, all those opportunities. And Loom Rise is well positioned in that regard for this patient population, as we've heard, you know, extensively time and time again, from physicians and patients alike, who are looking for a treatment option where you can get the consistent, predictable, full therapeutic treatment night after night.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

And that's what Lumerize offers. In terms of your comment or question about IA, about, you know, kind of as a single product asset, we view it as a pipeline in a program from that perspective. We believe there's multiple shots on goal to leverage the innovative technology that we've developed with Loomrise and our platform to potentially benefit more patients who are pursued through lifecycle management and other related initiatives. So when you think about capital allocation and what's most important, focusing on the launch, deploying our capital to drive the commercial execution and launch of Loomrise is number one. And executing these initiatives from a lifecycle management number is number two, for sure.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

It doesn't mean we wouldn't be in the appetite or have the appetite to add assets or programs to our portfolio that is strategic and aligned with what we're doing today. And that's key. But from that perspective, our priorities are as I've just laid out.

[David Amsellem, Sr. Research Analyst at Piper Sandler Companies]

Okay. Thank you.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Thanks, David.

[Operator]

Thank you. Our next question comes from the line of Mark Goodman of Leerink. Please go ahead, Mark.

[Marc Goodman, Senior MD - Neuroscience at Leerink Partners]

Hey, guys. Sorry about that before. Tom, can you give us a sense of the average selling price in the quarter and how you're thinking about that for the rest of the year? Have there been any changes with respect to in the guidance and stuff? Thanks.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Mark, thanks for the question. Listen, just as a reminder, Q1 is always heavily affected And if you just work through the math of our net revenue and average patients on therapy, average net revenue for all patients, including patients on free drug, averaged a little under $80,000 annualized. But again, with the reminder that Q1 is always impacted by gross to nets, our expectation is that net revenue is going to improve throughout the year.

[Marc Goodman, Senior MD - Neuroscience at Leerink Partners]

And so for the full year, you're expecting it to be what? Last year was around $96,000 What are you thinking this year?

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Yeah, listen, it's hard to predict the full year, Mark. Maybe I'll just reference last year as an example. Q1 to Q2, we saw an improvement in net revenue per patient of about 5% from Q1 to Q2. I think that we're looking right now, based on what we see today, the same sort of improvement from Q1 to Q2 of this year. But again, the full year is always hard to predict, but we're expecting improvement in net revenue, certainly for the full year versus what we saw in Q1.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah. And I think a major driver of that over time, Mark, will be more patients on therapy longer at steady doses relative to the number of new starts, which obviously started a lower value from that perspective.

[Marc Goodman, Senior MD - Neuroscience at Leerink Partners]

Thanks.

[Operator]

Thank you. Our next question comes from the line of David Huang of Deutsche Bank. Please go ahead, David.

[David Hoang, Director, Senior Analyst, Biotechnology at Deutsche Bank]

Hi, thanks so much for taking the questions and congrats on the quarter. So just a couple on, I guess, kind of what you're seeing in terms of the patient mix. So did you get, I guess, a better mix of switch versus new to oxybate patients this quarter? I seem to remember, last quarter you talked about moving it in a more favorable direction. And then can you just talk a little bit about the tactics which were used to improve persistency, especially among the new to oxybate patients and whether you think there's room to further improve persistency?

[David Hoang, Director, Senior Analyst, Biotechnology at Deutsche Bank]

Thank you.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Thanks, David. On your first question about mix, I think most importantly, we saw every patient segment improve in Q1 versus Q4, with an acceleration in switch patients from that standpoint. So we did see on a percentage basis, we saw an improvement in switch as an overall relative to our patient starts in Q1. So we're pleased with that progress. That's in large part driven by our commercial execution and both a combination of expanding our reach and how we've layered in some additional initiatives and focus for our organization to really drive that demand across the entire universe of potential prescribers, which is where we saw a lot of growth coming in Q1 from physicians who I would say have prescribed or marginally prescribed, but not consistently prescribed or hadn't prescribed at all.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

We saw a lot of improvement in that area as a function of us expanding our reach from that perspective. In terms of your question around persistency related matters, I think most important, what we've done is we've expanded our nurses so their caseload can really allow them to have a more in-depth kind of engagement with the patient, not only at the beginning of the process, but all the way through the process. And as a result of that, we've implemented a number of initiatives in terms of at initiation of treatment and post initiation of treatment to continue to engage the patient regularly, in particular during these first kind of ninety days. And again, know, by no stretch do I think we've gotten to the floor. I think there's opportunities to continue to do better and our programs and initiatives operating at even a more efficient and effective level.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

But we're really pleased to see that as early as Q1, we saw a trend going the other direction, which was something that we thought was possible, but we thought was more unlikely. And we thought we'd start seeing that impact later this year. But we've seen it from the get go. And again, that has continued through the first month of Q2.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Yeah, listen, maybe I'll just add to

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

that persistency and switch patients are important from a revenue perspective, certainly. But really, all patients are important to us. And as I commented during the prepared remarks, I would characterize we've sort of reached that critical mass of patients on therapy, where every patient that's added at this point is a drop to the bottom line for us.

[Operator]

Thank you. Our next question comes from the line of Miriam Beghidi of LSC. Please go ahead, Miriam.

[Myriam Belghiti, Equity Research Analyst at LifeSci Capital, LLC]

Hello, and congrats on the quarter. Thank you for taking my question. Just on the news from yesterday, it sounded like the the federal court kind of remanded to the district to the district court reconsideration on the patent infringement issue. Could you just explain what that entails exactly and whether an injunction is still possible, just given the news there?

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah. Without trying to get play attorney from that perspective in totality, on this matter where the Federal Circuit vacated the notion of enjoining us from seeking approval, what the district court or what the Fed Circuit basically said is they're sending it back to the district court on the basis that analysis that the district court had in making that enjoining us on seeking approval was too speculative and tenuous to reasonably conclude that enjoining Avadel from applying for FDA approval is necessary to prevent future infringement. So what in essence the Fed Circuit did is they remanded it back to the district court to consider that in the future from our perspective. But for us, it's very clear and very straightforward that that vacatur gives us a pathway to file and secure and seek FDA approval. And that is a very important next step in our strategy here to be able to pursue that.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Because I'll remind everybody, 24 ago, we were enjoying from doing that. And now we're not, which is really, really important from that perspective for us as we think about our strategy to advance LUMRI's NIH or even other potential indications as we do that work. This is an important win for us, and we're very pleased with the outcome.

[Myriam Belghiti, Equity Research Analyst at LifeSci Capital, LLC]

Makes sense. Congratulations on that win. Thank you.

[Operator]

Thank you. Our next question comes from the line of Ash Verma of UBS. Please go ahead, Ash.

[Di Zhao, Equity Research Associate - Biopharmaceuticals/Biotechnology at UBS Group]

Hey, good morning. This is Dee on behalf of Ash. Congrats on the news yesterday. So, I have two and a follow-up question, if I may. So, the first one for the IH, confident are you that your competitor may not attempt to block you with another preliminary injection when you ultimately try to seek the FDA approval?

[Di Zhao, Equity Research Associate - Biopharmaceuticals/Biotechnology at UBS Group]

And the second one on the lumiride patient mix, do you have any specific goal for where you want the split to be in terms of, like, a naive versus switch patients? Like, how are you tracking towards that goal? And I have a follow-up after that. Thanks.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, so I'll take the first part of the question and then we can certainly Tom can comment on mix a little bit. I think it's really important to again remind everyone that, well, first of all, I won't speak for what other parties may or may not do. That's not for me to predict provide commentary on what others may do. It's our responsibility to be prepared for any situation that can occur, which I can assure you we have been. And there's been a lot of historical commentary that we would be denied from getting an approval in narcolepsy.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

We'd be blocked from getting orphan exclusivity. All of those things occurred. And I'll remind you that we got an approval with orphan drug exclusivity in narcolepsy twice for adults and for pediatrics. And that was confirmed by a district court from that standpoint. So the district court, along with the FDA, has a clear understanding of the clinical superiority and differentiation of lumirides in narcolepsy.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

And it was recognized that the public interest would be served having our superior drug available for people with narcolepsy. Right? We're prepared to continue to develop lumirides in other indications like IH to the same lens from that perspective. And we believe the opportunity to bring lumarize to those patients is really, really important. What anyone else tries to do, they'll do from that perspective, we'll be prepared for it.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

And we have, we believe, a track record that shows that we can be successful.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Yeah, with regard to your question on patient mix, again, we're really pleased with the results we saw in Q1, including one of the metrics, which was an improvement in the percentage of our patients who started therapy and remained on therapy. That were switch patients. That was off from Q4 going into Q1. But just a reminder, the oxybate market is a large market. And we're focused on growing all patient segments, whether it be switch patients or new to oxybate patients or return to oxybate patients.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

And for us, as I commented just a few minutes ago, we have reached that critical mass of patients on therapy, where patient growth, regardless of which patient segment, is going to contribute to our profitability and our cash flow.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

I think it's a really important comment that I'm just going to reemphasize that our source of patients, we're not relegated to only seeking patients from new to oxybate patients. We're not only competing in the 3,000 or 4,000, five thousand patients who are coming in every year to get new to oxybate as a new to oxybate patient. Although we're getting patients in that segment, we're sourcing patients from switch and previously treated who are returning to oxybate. And that pool is, you know, multiple times larger than that of the new to oxybate patients. So we're confident in our prospects to continue to grow and to continue to build Zumranz.

[Di Zhao, Equity Research Associate - Biopharmaceuticals/Biotechnology at UBS Group]

Thanks for that. And just a follow-up, like, I wanted to understand more on the 2026 implication for narcolepsy market pricing just based on the potential for generic entry. Can you share your latest thoughts on that? And is setting up the ramp cost prohibitive for generics and thus you see a very low chance of that happening? Thanks.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, thanks. I would say our overall kind of macro view on the potential for additional generics in 2026, much like what we've seen with the current authorized generic, it has had very little, if at all, impact on pricing or opportunity and formulary positioning and uptake for any branded oxybate for that matter, and in particular, our case, Lumerise. So I think we have to be prepared. And I can't comment as to whether or not the wherewithal of potential generic suppliers will or won't invest in a REMS. They're going to have to.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

If they want to be in it, they're gonna have to invest in it, and they're gonna have to manage it accordingly. But we do we have done a lot of work in this regard in dealing with our payers and what we can expect could potentially be the the the net impact of this if it does come and pricing does collapse for the relatively speaking for the multi source generics in this case. And our view is that where they're likely to be positioned is going to be in the case for, if you will, new to oxybate patients. So in that case, if they are positioned as, in some cases, a step edit for new to oxybate patients have to fail a twice nightly generic, if you will, from that standpoint, we think we're very well positioned to capture the switch patient coming off of that start. In particular, under our view that the investments that we have to make and other companies have made to try to help patients stay on therapy is high and it costs a lot of money.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

I'm not sure that every generic company will do that. But from our perspective, we think we're well positioned to continue to grow Loomrise in the face of more generics. In particular, like I just said, the largest segment we're getting patients from are switch and previously returned previously treated and discontinued. And we're well positioned to get continue to get those as well as any step through to from a new to OXMAY patient.

[Di Zhao, Equity Research Associate - Biopharmaceuticals/Biotechnology at UBS Group]

Great. Thank you and congrats again.

[Operator]

Thank you. Our next question comes from the line of Ami Fadia Needham. Please go ahead.

[Ami Fadia, Senior Analyst at Needham & Company]

Good morning. Thanks for taking my question. It's nice to see the progress that's been made in the quarter with all the changes that you made effective early in the year. Can you give us some color on and maybe any specifics you can share around the discontinuation rates, how they have evolved and what assumptions you've made in your updated guidance for the year? Yeah, And then I have one or two other questions.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, thanks, Ami. I think the best way to think about how we think about and to share with you how we think about the improvements in discontinuations or lack or decline in those or and or the improvement in persistency is when you look at how we think about those rates inside inside of a quarter in Q4, we had calculated that discontinuation rate to be about 14%. And in Q1, although we had assumed that maybe that would stay flat or tick up in Q1 because of our patient mix in Q4, we saw that number go down. So our number is lower than fourteen percent. And we saw that occur across all patient types with the most pronounced impact on new to oxybate and in particular in the first ninety days.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

So our expectation is that we should continue to see some improvement in that regard as we continue to move forward and our systems and our programs get even more effective from that perspective. It will never get to zero, but we will continue to drive it as low as we can get from that standpoint.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Yeah. And Ami, on your question regarding, I'll say implications to guidance on the improvements and persistency is part of the reason we raised We have certainly increasing levels of confidence and conviction in the programs we put in place. Our goal is to continue to move forward and continue to improve. And to state the obvious, the longer we keep patients on therapy, the higher revenue is going to be.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

So it's an important initiative for us. And again, we're just very pleased with what we saw in Q1 and what we're seeing for continuing trends in the very, very early part of Q2.

[Ami Fadia, Senior Analyst at Needham & Company]

Got it. Can you also talk about some of the sort of offensive lawsuits that you highlighted in your prepared remarks in IH? Can you elaborate on that? It sounds like that that's a new lawsuit. And then with regards to the federal court decision that was sent back to the district court, can you talk about the timelines around next steps there?

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, on your first question around the other suits that we have filed, this is us just asserting our innovation and our that we've developed in the form of Loomrise and related formulations and products for hypersomnia related disorders. And so we have taken our own actions against Jazz in this regard in our view that their label and their IH label specifically around once nightly dosing for a small percentage of their patients, infringes our intellectual property. So it's very straightforward from that perspective. We have five patents that have been allowed and granted that we believe they're infringing. And so we've asserted our rights as we have the right to do from that perspective.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Again, I think as it relates to the decisions that came out of the court yesterday, I think most important from that standpoint that we're obviously pleased with that decision, right? We're pleased. We think it's a clear, concise, straightforward, and an important win for us. In terms of what happened next, there is, I would just say, administrative steps that have to occur. Parties need to meet and confer.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

The Delaware court has set a timeline to report back to them by, I think it's May 22. So there's things that are going to begin to occur between both parties from that perspective. But at the end of the day, we're very pleased with this decision to put us in a pathway to go forward. Thanks, Ami.

[Ami Fadia, Senior Analyst at Needham & Company]

Got it. Maybe if I can squeeze in one quick question. Is that okay?

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Sure.

[Ami Fadia, Senior Analyst at Needham & Company]

Okay, great. Just with regards to the low sodium one hundred ninety formulation, you've continued to sort of work on that. Any specific color or timeframe you can put on that? That would be helpful. Thank you.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

No, I think our expectation is we'll have more to say this year in this regard based on the work we've and the efforts our team has deployed during the first part of this year and where we think that that's an important step for us as well. We'll look forward to providing updates in the future on it. Thanks, Ani.

[Ami Fadia, Senior Analyst at Needham & Company]

Thank you.

[Operator]

Thank you. Our next question comes from the line of Chase Knickerbocker of Craig Hallum. Please go ahead, Chase.

[Chase Knickerbocker, Senior Equity Research Analyst - Healthcare at Craig-Hallum Capital Group LLC]

Good morning. Yes, congrats on the nice results here. I'll share mine as well. Just first from me, as we await some data on the orexin agonist this year, can you just remind us on how you see the market flushing out over the next couple of years as it relates to NMEs and these how you see the competitive environment, how you see kind of the split of the market, how these drugs can work together, etcetera?

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Yeah, I think, first and foremost, we like everyone are paying close attention to this and following it accordingly. And there's clearly a lot of investor enthusiasm about their prospects. But for us, what we're most interested in is the clinicians and or prescriber perspective. I would and we've done a lot of work in this regard. We've come off of a fairly large recent comprehensive research project talking to both key opinion leaders and a broad base of sleep experts, sleep specialists who treat a lot of these patients.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

And there's certainly excitement about this mechanism of action because of the nature of their wakefulness or weight promoting prospects. I think there's less clear view in terms of what impacts they may have on the nighttime. And what physicians tell us very clearly is that, narcolepsy and these disorders are both daytime and nighttime conditions from that standpoint. And so the view we get that should the erections navigate all the different regulatory and clinical and regulatory related matters that they have to navigate to get to a final and full approval at some point in the future, the feedback we receive from physicians is they certainly see an important role for oxybates in particular because of its benefit in the nighttime and the opportunity for that to have complementary benefit to the daytime. But when you think about the disruptive nighttime sleep, hallucinations, sleep paralysis, These things are important to be considered and oxybates are the standard of care in that regard.

[Gregory Divis, CEO at Avadel Pharmaceuticals]

So we're quite bullish on the prospects of LUMRIZE in the oxybate category in a post erection world from that standpoint. And it's something we'll continue to stay close to as their development programs continue to move forward.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Hey, Chase, it's Tom.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Maybe I'll just add to that. Listen, it's very exciting technology and the investor community is obviously very interested in orexins. But it's a long road, right, from going from a controlled clinical setting to an FDA approval and ultimately to commercialization. It's a long path, and sometimes a difficult path. And we're probably two to three years away from seeing orexins come on the market if they do get through the approval process and commercial launch process.

[Chase Knickerbocker, Senior Equity Research Analyst - Healthcare at Craig-Hallum Capital Group LLC]

Thanks for the thoughts, guys. And then, Tom, maybe one more for you. Thanks for all the comments on the manufacturing side. But just to kind of put a finer point to it, can you just as we await kind of the pharma tariffs in the next couple of weeks, can you remind us, let us know kind of how you treat transfer pricing within your organization and whether or not there could be any potential exposure there depending on how these tariffs are struck? Thanks.

[Thomas McHugh, CFO at Avadel Pharmaceuticals]

Yes, Chase, I don't want to venture too far into the theoreticals and hypotheticals on that question. But we are an Irish domiciled company. But I want to reiterate the point that we have domestic US manufacturing throughout the supply chain that's available to us, which really mitigates substantially, if not altogether, the potential impact of tariffs. So I don't really want to get too far into the question around transfer pricing, but I feel like we're really well situated right now. And we're prepared for whatever may come down the road with respect to tariffs.

[Chase Knickerbocker, Senior Equity Research Analyst - Healthcare at Craig-Hallum Capital Group LLC]

Thanks, guys.

[Operator]

Thank you. I would now like to turn the conference back to Mr. Divis for closing remarks. Sir?

[Gregory Divis, CEO at Avadel Pharmaceuticals]

Thank you very much. We appreciate all of you joining us today, and we look forward to providing you additional updates throughout the balance of this year as we continue to make progress. Thank you very much. Have a great day.

[Operator]

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

Participants

Executives

• Gregory Divis, CEO
• Thomas McHugh, CFO

Analysts

• Austin Murtagh, Director of Investor Relations & External Communications at Precision AQ
• Andrew Tsai, SVP at Jefferies Financial Group
• David Amsellem, Sr. Research Analyst at Piper Sandler Companies
• Marc Goodman, Senior MD - Neuroscience at Leerink Partners
• David Hoang, Director, Senior Analyst, Biotechnology at Deutsche Bank
• Myriam Belghiti, Equity Research Analyst at LifeSci Capital, LLC
• Di Zhao, Equity Research Associate - Biopharmaceuticals/Biotechnology at UBS Group
• Ami Fadia, Senior Analyst at Needham & Company
• Chase Knickerbocker, Senior Equity Research Analyst - Healthcare at Craig-Hallum Capital Group LLC