SVB Securities slashed the price target of Avadel Pharmaceuticals (NASDAQ:AVDL) to $6 from $18, but maintained an “overweight” rating, after the FDA delayed full approval of FT-218 because of a patent issue.
Shares of Avadel fell $2.31 to close at $1.07 on May 26 on heavier than normal turnover of 18 million shares.
Analyst Marc Goodman writes that the FDA decision could delay the launch of FT-218 for the treatment of narcolepsy to the third quarter of 2023 from the third quarter of 2022.
The delay puts the company into a “precarious position regarding the ability of its balance sheet to fund the company through the launch and pay back debt of $144-million of convertible notes due 2023,” he added.
“We still believe that FT-218 should get full approval in 2023 and can become an approximately $500-million product in the narcolepsy space with its differentiated 1x nightly formulation if the company is properly funded,” Mr. Goodman said.
“And we think that the company still has a chance to either maneuver through these issues (find alternative financing structures) or sell the asset for more than where the stock is trading, and thus we will try to be patient for this saga to play out.”
However, Mr. Goodman admitted that “this story has become a much more high-risk situation and many things must go right for this to work.”
