Hello, everybody. My name is Ashwani Verma. I'm a mid-cap biotech and spec pharma analyst at UBS, and our next company here at UBS CNS Day is Avadel. With me today, we have Gregory Divis, our CEO, Richard Kim, our Chief Commercial Officer, and Thomas McHugh, Chief Financial Officer. Guys, how are you doing? Doing great. Thanks, Ash. Thanks for having us. Excellent. Yeah, thanks for taking the time. So this is a fireside chat, and, you know, I wanna take, like, 20 minutes of Q&A and open it up, for investors, to ask, some questions at the end. So that, that's the format. Maybe, Greg, I think it might be helpful, to just give a high-level overview of, of the, you know, the company, LUMRYZ. Just, like, spend a minute and, sort of, provide some context, and then we can dive, dive into the questions. That's great. Again, we really appreciate the opportunity, Ash, to be here. It's a fairly open-ended question, so there's a lot we can cover, but I'll try to be efficient. The company has really been through quite a bit over the last five years, you know, previously a generic injectable company, a pediatric company, but we've really transformed ourselves into a really high-growth biopharmaceutical company, really, at the, just on the starting line, if you will, with the launch of LUMRYZ. And, and for those who aren't aware, LUMRYZ is the first and only once-at-bedtime, oxybate for the treatment of cataplexy or excessive daytime sleepiness in adults with narcolepsy. And LUMRYZ really addresses the most important and significant unmet need for people with narcolepsy who are considering going on an oxybate, and that is being... having to be forcibly awoken in the middle of the night to take a second dose. And I think it's stated very clearly by the FDA with our, in our approval letter and their granting of our orphan exclusivity, that it's just antithetical for patients to be required to, to be forcibly awakened in the middle of the night to take a second dose, for, for patients who are suffering from a condition, a rare sleep disorder condition, whose, whose therapy or their treatment or their, their, their condition is characterized by disturbed or disrupted nocturnal sleep. So we're very proud to be the first and only company to have leveraged our own technology to bring this meaningful improvement, and we believe our value proposition is quite clear, and that our value proposition really not only addresses this unmet need, Ash, but really we believe over time we'll demonstrate it has a positive impact on patients' treatment experience and the management of their condition. So we're really proud of where we are. The company has made tremendous progress over the last number of years, and in particular, the last 15 months, where we've gone from 30 people to over 160 people. We've got an approval. We've navigated some legal challenges that I'm sure we'll talk about. We launched in less than a month, and under Tom's leadership, all of that under, really, Richard's leadership and under Tom's leadership, we've really cleaned up our balance sheet and strengthened ourselves really well, to position ourselves to continue to grow as we embark on this journey of building this... building our company. So again, thanks for the opportunity to be here. Good stuff. Yeah, thanks for that intro. So, I mean, I wanna talk about, like, the, you know, like, the legal updates for... Because I feel that that is the most important thing that matters to the stock and the story at this point. And, yeah, I mean, it was interesting to attend this jury trial in Delaware. I think, like, kind of eye-opening to see how these things play out in real life. But, what I wanted to understand from you is that, I mean, in the sense of, like, where the royalty for the future LUMRYZ sales shakes out, like, how confident are you that it would be at the historical run rate that was determined by the jury? Like, it... I know this is something that is in the hands of the judge, like, how often do you see the judge just kind of like, you know, giving damages that is in line with the jury determination? And anything that you can share on that or on, like, timeline, when do we get to know? What is the process? Those kind of things would be helpful. Yeah. So Ash, maybe just to recap, you know, two weeks ago, we received a split decision. This was related to the patent litigation between us and Jazz Pharmaceuticals. And the net result was a royalty that was determined by the jury, effectively at 0.7%. And what that was for was past damages. So, you know, Jazz was awarded a royalty for past damages. And what's left to be determined now is what royalty might be applied on a go-forward basis, and that's really in the hands of the judge. We don't have an exact timeframe. I would just say it's gonna be months down the road before the judge issues a final ruling on that. But to your question about, you know, how should you think about, or how should we think about a royalty on a go-forward basis? You know, I think you would look at it as bookends at this point. You know, it's 0.7%, perhaps a 3.5%. And you know, the 3.5%, you know, to put a little context behind that, that was the royalty rate that the jury came up with, but it was applied to a percentage of our launch-to-date revenue. So when you apply that, that's how you get to 0.7%. So I think about the bookends as 0.7% to 3.5%. Now, of course, the judge has to decide to make the final ruling, but you know, for, for, for... In that docket, the judge, at least, you know, what we expect is it could be 0.7%, it could be 3.5%, perhaps a little more than either one of those. But that's, that's the way we're thinking about it right now. ... Yeah, yeah. And then there is a separate legal matter that is playing out in the Jazz versus FDA case on the orphan drug exclusivity. If you can talk about that a little bit, like, when—I know this, the date has been moved around a little bit, so what's the latest on that? And, you know, like, what do you think is the likely outcome of that type of a litigation? It'll be good to know from your perspective, what, how you think about this. Yeah, no, certainly. So originally, that hearing, you know, this is the APA hearing where Jazz sued, FDA. We've intervened in the case, you know, on behalf of FDA. Originally, that hearing was February 27th. It got moved to April 9th, is the current date. You know, the reason for the move was really a decision by the judge, you know, at that, to move it to that date based on what was on his docket at the time. You know, it's... I don't really want to give too much of an opinion on potential, you know, how the judge might decide. It's strictly an Administrative Procedure Act. The judge will evaluate, you know, the evidence, if you will, but it's all what's in the written record, so there's really no new evidence to be introduced in that case. In terms of potential outcomes or timing of potential outcomes, you know, we have, you know, developed a view based on, this particular judge's track record, that he could issue a ruling within 60 days of the hearing. So, you know, listen, quite frankly, we'd like to, you know, know what the ruling is, before we execute, too. But that's, that's the timing we're looking at. You know, with respect to potential outcomes, I think it's, you know, listen, Jazz prevails, we prevail. It's a pretty binary event, is the way I'd like to describe it. You know, we... Of course, you know, I believe in the merits of our case, but ultimately, the judge is gonna make a decision. Yeah, yeah. Okay, that's great. I mean, it's good to cover the logistics. I think, I mean, we've hosted, like, expert calls. I know you can't comment there directly, because you're in active litigation. So maybe, maybe we can just switch gears and start to talk about a little bit about the launch and the update coming out from the fourth quarter. So I know that you've actually kind of like, yeah, not given, like, a full year guidance, and the launch metrics have been very strong from our perspective. And what you've done here is kind of like just come out and bless the sell side consensus, which is around $155 million. Do you think that this is kind of like the base case, that you think pretty comfortable that you can get there? Or do you think there is more upside to this, as you make progress moving towards the, you know, the second half of the year? How confident do you think of the sales ramp for 2024? Yeah. So we did confirm, or, you know, made the comment that we were comfortable with, you know, consensus, sell side consensus of $155 million for 2024. And listen, quite frankly, we see, you know, a lot of upside potential to that number. You know, it's. The average number of patients you'd have to have on therapy during the year is about 1,300. You know, Richard will certainly comment on, you know, patient progress, but given how we exited 2023 with, you know, over 1,000 patients who initiated therapy, that number grew to over 1,200 patients who initiated therapy through January 31st. So, you know, we certainly like the run rate we're on, and we believe that the $155 million is very achievable. With the potential for upside, you know, given what we're seeing for patient demand, you know, other variables that come into play are net pricing. You know, of course, the total number of patients on therapy. But yeah, we see, we see a fair amount of upside potential to that consensus number. Yeah. Maybe if you like, Tom or Richard, if you can talk about a little bit about, like, the source of the patients. I mean, you talked about, like, the three different buckets of where you have been getting patients from, like, how do you see for, for this 2024, like, that composition changing? Or if there's any, any of those buckets, like either the experienced or naive patients, where you might get more of attraction, for 2024? Yeah, sure. Thanks for the question, Ash. So yeah, as you know, what we've stated thus far is we've seen the majority of our enrollments in patient ship product being switched patients from the first generation oxybates, more coming from Xywav than from Xyrem, and part of that is just math. There's more of those patients on those therapies right now. But when it comes to the other two segments, you know, the previously discontinued, candidly, we had some people question whether or not that was a real segment. And what we can say is it's a very meaningful segment to us very early on already, that there are a number of patients who have come forward, who stopped the twice-daily oxybate, who have reengaged to start on LUMRYZ again. Maybe an important other component that we saw, sort of, as far as momentum is concerned, in Q4, we saw new to oxybate patients represent a slightly higher percentage of our overall mix of patients compared to Q3. I think all three segments are gonna be very viable for us. Probably, we're still gonna get most from the switch patients, just 'cause there's more of those out there currently today. I think we're starting to see a little bit of flex as far as some of the representation from the other segments as well. Yeah. And so, I mean, the patients who had discontinued, you know, that were previously on oxybate, they discontinued, and you're trying to kind of, like, activate that part of the market, right? Like, what does it take to do that? Because I'm assuming that, if these patients were, let's say, on oxybate, like, first generation oxybate, like, let's say, couple of years ago, would they still need to be coming and seeing a doctor for you to be able to, you know, like, get them to start using LUMRYZ? Or, like, there might be some... Or, could there be patients that have discontinued and not seeking treatment for whatever reason? Could you tap into that possible pool, also? That's right. Yeah, it's a great question. So what we see from our claims data is, from the last four years, there's about 10-15,000 patients who have discontinued first-generation oxybate. 99% of them are still under the active care of a sleep provider from what we can see from claims data right now. So the good news is they're actually being treated and managed for their condition. And, you know, Ash, what we know is the top two reasons why patients discontinued taking a first-generation oxybate previously is it didn't work, and I couldn't take the second dose, and those are very interrelated. What we sort of think is a lot of them felt the benefit of an oxybate, but they couldn't get the full benefit with that second dose as well. That's why we've personally not been surprised that we have seen reactivation. You know, the good news there is they're all in the core audience of the oxybate prescribers that we see today as well. Yeah. And then the new patients that you saw a little bit more mix of that in 4Q. Yeah, like, is that because, like, you are growing the overall pie of the market? Like, or what is causing more of a new patient adds right now versus, you know, in the past, like, there hasn't been much of a new patient to come by here. Yeah, you know, maybe I'll summarize this in a story. A conversation I had with a sleep specialist at the end of last year, who just sort of said to me, "Fundamentally, it's a different conversation with new to oxybate patients. It's not so much of a battle to convince them to you finally. I'm going to get you on this therapy. It's going to help you sleep to function during the day, but I'm going to force you to wake up two and a half to four hours after you take it." So fundamentally, we think for many of these sleep specialists, they're having a different conversation, more straightforward conversation with their new to oxybate patients. But also, at the same time, I think we are like, it's hard to sort of piece together the entire marketplace ever since the data has become a little bit more fragmented. However, one thing we can say is we've added new writers for LUMRYZ who have never, ever written an oxybate before in their lives, who have now come in and written for LUMRYZ as well. So, we're seeing some of that movement on the news. We're getting more engagement of the PVC discontinued. So over time, we believe we'll be able to show that the marketplace is growing beyond the 16,000 patients who are on first-generation oxybates before. Yeah. And then in terms of, like, the prescribers, is most of the use coming from physicians who have primarily you know prescribed Xyrem Xywav before? Or like, I don't know if you can give the you know metrics around, like, how much of it is like sleep centers versus standalone neurologists or any other physician audience that might be involved in this. Yeah, I mean, right now, our basics are there's about 4,500 active writers for oxybate, 1,600 that make up 80% of the volume, and under 500 that make up 50% of the volume. We've clearly got most of our usage from those 500, less than 500, who make up 50% of the volume. And Ash, it's coming from all sorts of places, the large academic centers, the private sleep centers here across the board as well. A good mix of people with subspecialties in both neurology and pulmonology and psychiatry and even internal medicine. So I think what we, we've been very pleased to sort of see is it's been a good breadth of usage. It's not just coming from one sort of segment of prescriber as well. Yeah. Yeah. Just on the discontinuation rate, I mean, yeah, I think the commentary that we've heard from you is that your discontinuation rate on LUMRYZ is running at a significantly lower than the typical, like, 25% at a one-month mark, right? And as you get a little bit more longitudinal data on this, like, what is, you know... Like, where do you think this might shake out? What would be the reason for here to have a lower discontinuation rate versus first generation, you know, first-generation patients? Yeah, you know, I think the data that we sort of see thus far from claims is, on the first generation of oxybates, almost 25% discontinued after one month and almost 50% at 12 months. And to your point, we have seen... What we've stated thus far is we've seen a meaningfully lower rate of discontinuation at all the same time points that we have thus far. And Ash, I think it comes back down to the fundamentals of the market research we did pre-launch, which was the fact that patients, I mean, physicians view oxybates as the most effective product, but patients struggled to always get their full dose. And when you don't get your full dose, you're not getting... You know, you may not get the full therapeutic benefit that you have. We do expect our discontinuation rates to be lower. We're still learning about exactly what they're looking like right now. But thus far, once again, at the same time points, we've seen meaningfully lower discontinuation rates than the first-generation oxybates have had. Yeah. Yeah. And, Tom, maybe I know you briefly mentioned, like, net pricing dynamics that would impact 2024. I mean, to the extent that you can, you know, kind of like comment on, like, what are the pushes and pulls of that, and is there any phasing consideration as we go through the year on where pricing might shake out to be? Yes, Ash. So what we believe and, you know, what we're targeting is that on average, you know, the net revenue per patient per year is about $120,000. There's a lot of underlying assumptions that go into that. One of which is that, you know, we expect that the average strength for patients who are using LUMRYZ is 7.5 grams. And we're, you know, we're sort of at that tipping point right now, and that's exactly what we're seeing. So that assumption has certainly played out for us. You know, the dynamics that, you know, impact the net revenue, no different than any other, you know, any other company or industry. We have gross to nets. You know, they're typically higher in the first quarter of the year, as patient deductibles reset, and we're providing more financial assistance to patients to, you know, to utilize LUMRYZ. But, you know, as we're phasing, you know, to use your term, you know, we're very quickly approaching that net revenue per patient per year. And I, you know, kind of started using the term, we're at this tipping point, and I'd always thought about it more, you know, in terms of we have more patients utilizing LUMRYZ than new patients coming in. And we've crossed that point, so I think we'll very quickly, you know, get to that net revenue per patient per year. ... Yeah. I mean, like, if we look at the historical, you know, revenue reported by Jazz, I mean, there was always, like, going from one Q to two Q, there was, like, a big jump always. Uh-huh. Either that's, like, the delayed benefit of, like, having less volume coming in in Q1 that you're seeing, like, a artificially high Q2. Is that something that you... Do you expect that type of dynamic for LUMRYZ also? Yeah. Yeah, I think that I do believe that net revenue, you know, will increase from, you know, Q1 into Q2. You know, we're probably too early in our launch to really evaluate any type of, any type of seasonal impact, in our business. But, yeah, we would expect that, you know, in terms of that net revenue, you know, will certainly increase as we progress throughout the year, and certainly from Q1 into Q2. Yeah. Got it. Okay. So maybe just like, I think we can... Can we take a pause and just see if there are any questions from investors on the line? If not, then we can come back, and I have a few other follow-ups. We'll now begin the Q&A session. If you have a question, please click on the Raise Hand button, which can be found on the bottom of your Zoom interface. If you have dialed in via telephone, please press star nine to raise your hand and star six to unmute. I'll now stand by for any questions. At this time, there are no raised hands. Got it. Okay. So I think maybe I want to talk about idiopathic hypersomnia, because I feel like that's kind of the underappreciated part of the story. So, I mean, yeah, the... If you can provide any color on, are you seeing any-- I know you're not marketing for IH, but are you seeing any off-label use in IH patients, like, that are taking LUMRYZ right now? Yeah, Ash, you know, to your point, we clearly do not market for off-label uses, but we have seen claims and requests coming in for off-label uses of LUMRYZ thus far. Is it like a substantial portion of patients or to- No. No, I think it's, you know, I think it's really more of a trickle. And, you know, once again, what happens is our Ryz Up refers them to the right specialty pharmacy. So I think there are always going to be some dabblers in any new, new product launch, and we're definitely seeing some of those dabblers within the LUMRYZ launch as well. Right. So one of the things that we've been talking to a lot of, like, experts and physicians, is that, to understand, like, for IH patients, what is the rate of discontinuing or what is the rate of them not taking the second dose versus the narcolepsy patients? You know, like, for the first generation oxybate. Do you have any kind of, like, credible data on that? I've heard some, like, anecdotal numbers around it, but nothing that's a little bit substantive. Yeah. We're trying... It's a great point. We hear the exact same anecdotes you do, and, you know, we're beginning to ramp up more of our more detailed, quantified market research. So probably nothing that we could sort of put in numbers for you today. But similar to what we've done in the past, we are thinking about some of the patient survey work that we've done through other communities to understand this. But once again, what we do hear quite consistently is in IH or in narcolepsy, where it's a massively inconvenient thing to do, in IH, there's just a lot of times the physical inability to wake up to take that second dose. So we hear that quite consistently in the marketplace today. Yeah. So if you can, talk a little bit about, like, your phase three plan, for IH, it will be helpful. Just like, you know, how many patients, what type of, what type of trial design are you thinking? How long could it take, to enroll or, you know, run the study? I think those, those would be pretty, pretty good data points. Yeah. So as we've said previously, we're in really advanced stages of our planning to launch our... and begin enrolling patients in the second half of this year of our phase three IH trial. So the team has done a great job of getting ourselves ready. As you can imagine, all the work you have to do with the FDA, all the clinical supply and CRO involvement, you know, site identification and whatnot. We haven't guided specifically on exactly when first patient in will be, other than second half, and we haven't guided explicitly in terms of timing. I would just characterize a couple things for yourself, Ash, and those on the call or on the webcast. We obviously have studied what has been done in this space, pretty extensively to date, trial designs, sites, enrollment times and whatnot, both for the pitolisant study as well as the mixed study. So, you know, if you look at timing to complete those trials, they really ran from 12-15 months. So, you know, we do think, you know, they're reasonable proxies now, probably upwards of 18 months to complete a trial, is how we think about it today, recognizing that as we get through site assessment and enrollment projections, we may have a more refined number in the future. And if we have a different number, we'll certainly speak to it. Our timeframe will certainly share it. In terms of trial design, we haven't said publicly. That will eventually become available publicly, but I think it's safe to assume that we've looked at what's been done and the clinical communities, and the physician community, and the research community's interest in that sort of design. Because of the limited amount of time, a patient may have to be on placebo, coupled with an opportunity to continue on in an open label extension forum, are good proxies for us is how we're thinking about what the trial could look like. Yeah. So like but that, that includes, like, the enrollment and the trial conduct, right? Like the, sort of like the roughly 18 months that you alluded to. ... Yeah, I mean, I think that's too complete. You know, at least if you look at what's occurred to date, on previous trials, I think that's a good kind of benchmark, at least currently, in terms of, you know, what's the art of the possible based upon historical enrollment trends to complete the primary part of the trial. You know, I wouldn't say that includes any sort of open label extension arm, but to get to the primary endpoints. Yeah, got it. Okay. And then, other question that I get on the story, just around, like, your expectations on, on kind of like, going to cash flow positive, and where do you, if there is any sort of like, need to access the market at some point of time, like, what are you assuming? What is baked in, to, to your, financial projections? So, as we ended 2023 in a really good place. We had $105 million of cash on the balance sheet and really effectively no debt. And what our belief is at this point, you know, it's really based on the trends we're seeing, some other assumptions we're making, is that we'll achieve break even during 2024. We haven't said specifically, you know, when that would occur. I'll use my earlier term, the tipping point. For us, you know, the point, you know, where we hit cash flow break even is when we're about 1,300-1,500 patients on therapy. And again, that refers back to, you know, this, our assumption around average net revenue of $120,000 per year, per patient. We did guide to our expectation for cash operating expenses on our last call for 2024, and our, our assumption is, and our expectation is that cash operating expense is about $40 million-$45 million per quarter. So you can apply the math from there, call it $160 million-$180 million annualized, and that's where that range of patients of 1,300-1,500 on therapy, reimbursed patients on therapy, you know, that's where we hit the break-even point. Yeah, got it. I mean, in the last two minutes remaining, I know this is a big topic, but just, what are your expectations from orexin? I think we are going to get some data from Takeda and Alkermes, but, this is kind of like just a question on the long-term impact of the narcolepsy market. How do you think this could change, as we get clarity on this? Yeah, sure, Ash. I mean, you know, obviously probably a better question to ask some of the companies in development there, but I guess the way we look at it is first, it's always exciting when more therapies and more mechanisms are coming into the class to serve the narcolepsy community. I think as we think about directions, I guess our view would be we're very anxious, like a lot of people, to learn more about what the actual profile looks like. And we believe we'll see more of that at the sleep conference in June in Houston this year. But I think it really is gonna come down to, like, a balance of how much efficacy do you push versus how much, how many adverse events come into the mix, considering this is chronic therapy. So I think that's what we're sort of looking for. And the lower the dose potency that people go for, maybe there's a, you know, as there is today, the room for more combination therapy that is used. Today, almost every patient is a polypharmacy patient in the narcolepsy field today. So... And I think overall, understanding if things stick in NT one versus NT two, all we know today is the oxybate marketplace is less than 10% penetrated in the market today, and we see a lot of room for that growth to come, with or without orexins in the marketplace in the future, as well. Yeah, yeah. Great. All right, we are out of time. Thank you so much for this, and look forward to meeting the dialogue. So good luck with everything. Thanks, Ash. Thanks, Ash. Thanks, everybody. Bye.