Avadel Pharmaceuticals is waiting for NDA/FDA approval their drug candidate FT218. FT218  looks to have a good chance of approval. If given regulatory approval, there is a high probability of  attaining  success in the market. The current sodium oxybates available must be taken twice each night.

Narcolepsy affects more than 200,000 people in the US alone. The total worldwide market has an estimated value of about  $1.7 billion each year. Avadel’s (AVDL) research suggests that physicians and patients are interested in a drug that will need to be taken only once nightly.

AVDL  has a market cap of $350 million. With minimal sales the company will have enough revenue to support a $350 million valuation. AVDL presently has enough cash on hand to cover about 22% of its valuation and enough to support the company well into 2021. 

It is speculated that AVDL might be a buyout target for Jazz Pharmaceuticals which has a competing drug product named Xyrem. Xyrem has to be taken twice each night by patients, while Avadel’s FT218 only has to be taken once.

In 2002, the U.S. FDA  approved Xyrem ( sodium oxybate) to treat the narcolepsy. Xyrem has been recommended by the American Academy for Sleep Medicine as its standard of care.

Xyrem accounts for two-thirds of Jazz Pharmaceuticals’ $2 billion annual revenue, and Xyrem’s sales are increasing more than 10% annually. Xyrem costs over $5,000 for a  bottle of 6 ounces of the liquid. Patients average using 2-3  bottles per month. As an example, If 20,000 patients (10% of the narcolepsy patient population)  in the US market were to take Xyrem regularly, the retail cost to do so at 2 bottles per month would add up to 2.4 billion dollars per year.

There is certainly a good reason to believe that Avadel will be able to gain market share with it’s narcolepsy drug, if approved.