Greetings and welcome to the Avadel Pharmaceuticals Third Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Courtney Turiano. Thank you. You may begin..

Good morning and thank you for joining us on our conference call. This morning, we issued our press release providing a corporate update and financial results for the quarter ended September 30, 2021. The release can be accessed on our website www.avadel.com.

As a reminder, before we begin, 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 include risks that products in the development stage may not achieve scientific objectives or milestones or meet stringent regulatory requirements, uncertainties regarding market entry and acceptance of products and the impact of competitive products and pricing.

These and other risks are described more fully in Avadel's public filings under the Exchange Act, included in the Form 10-K for the year ended December 31, 2020, which was filed on March 9, 2021 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; and Tom McHugh, Chief Financial Officer. Dr.

Jennifer Gudeman, our VP of Medical and Clinical Affairs; and Richard Kim, Chief Commercial Officer will additionally join us for Q&A following the call. At this time, I’ll turn the call over to Greg..

Thank you, Courtney. Good morning everyone and thank you for joining us on our third quarter 2021 conference call.

I will begin by providing an update on our business, highlighting the progress we continue to make towards the potential approval and commercialization of FT218, our once at bedtime treatment for managing cataplexy or excessive daytime sleepiness or EDS in adults with narcolepsy.

I will then turn the call over to Tom to review the financial results for the quarter, and we will conclude with a Q&A session where we will be joined by Richard and Jennifer. I will start with an update on the status of our FT218 NDA, which undoubtedly is top of mind for everyone.

As a reminder, in mid-October we received notice from the FDA that the review of our NDA for FT218 was still ongoing and they would be unable to complete the review by the previously assigned target action date of October 15. The agency also informed us that there were no information request at that time.

Over the last three weeks, we've had interactions with the agency, which have been confirmatory with what was communicated October 15, and that the review of our NDA is ongoing and it is progressing.

As an example, we have had exchanges on review matters which are consistent and ordinary course in terms of substance and topics for a company like ours in the late stages of regulatory review.

Although we don't believe it is appropriate to discuss specifics, we are pleased to review us continue to progress and look forward to continuing to work with the agency throughout the remainder of our review process.

Furthermore, consistent with what we have said for the past 10 months, to date we still have not been asked by the agency to certify Paragraph 4 against any Orange Book listed patents. And we continue to believe based on the data we have generated and our regulatory filing strategy, there is no basis to request such a certification.

Additionally, in October, we filed an 8-K regarding a U.S patent application that published on October 21. The question of a drug-drug interaction or DDI is a question that has often been asked over the past few years. And that published patent application clearly discloses there is no material PK drug interaction between FT218 and Divalproex Sodium.

In particular, in the disclosed studies, the systemic exposure ratios of sodium oxybate, measured after administration of FT218 with and without Divalproex Sodium stayed within the 80% to 125% no effect boundary.

This is not meant to imply what will or will not be included in the label for FT218, but simply put, our PK studies indicate there is no material drug-drug interaction. We remain confident in the approvability of FT218 and look forward to continuing to work with the agency to bring this important therapy to patients as quickly as possible.

We're motivated and excited by the tremendous potential of FT218, if approved to offer a meaningful treatment option for patients living with narcolepsy, which is supported by a strong and growing body of clinical evidence.

In this regard, under the leadership of Jennifer, along with her medical team, we have now published our primary manuscript in the leading peer-reviewed journal SLEEP, describing the unmet need for a single bedtime dose, and the data supporting the clinical effectiveness and tolerability of FT218.

Additionally, this quarter, we presented new clinical data from our pivotal Phase three REST-ON clinical trial just last month at CHEST 2021. These data presented further confirm the potential benefits that FT218, if approved, can offer patients and continues to demonstrate that FT218 has a compelling clinical profile.

Specifically when treated with FT218, a significantly greater proportion of participants experienced 25%, 50% and 75% reductions in the number of weekly cataplexy episodes with once at bedtime FT218 at all doses and at all time periods studied compared to placebo.

We also presented the results of a discrete choice experiment, or a DCE, which are increasingly used in health care decisions, including regulatory submissions to understand the specific attributes that drive a patient's treatment preference.

For this IRB approved study, 75 participants with narcolepsy, including 50 current twice-nightly sodium oxybate patients, and 25 past users of twice-nightly sodium oxybate were evaluated to understand the drivers of patient treatment preference for sodium oxybate.

The results of this study demonstrate that dosing frequency is the single most important attribute of an oxybate treatment, with once-nightly dosing being significantly more preferred than twice-nightly dosing.

In addition, the DCE also asked participants to consider the likelihood of taking the medication exactly as directed, and which regimen could reduce anxiety or stress associated with their oxybate treatment for both questions once met the dosing was again identified as the most important driver of a preferred sodium oxybate treatment.

These data continued to underscore the importance of once at bedtime dosing supported by the proven clinical efficacy of FT218 to improve both cataplexy attacks, and measurements of excessive daytime sleepiness. Our vision at Avadel has always been centered around patients and to improve the treatment of their narcolepsy.

And we are confident that FT218, if approved, will not only be effective, but also preferred by patients and health care professionals. As a review of the FT218 NDA continues, our launch preparation readiness plans also are progressing to support the commercialization of FT218.

Over the past 6 plus months, the progress Richard and his team have made is both significant and exceptional. They continue to build a strong team of highly experienced orphan drug launch leaders, and key operational team members who in short order have really accelerated our launch readiness across all critical commercial functions.

And as we have stated previously, the largest addition to our growing commercial team will be our field sales team, which we are prepared to complete following potential FDA approval of FT218.

We also continue to advance work with our external partners to build out our distribution strategy, as we are now finalizing our specialty pharmacy network following the selection of our REMS and patient services partners, respectively.

We recently launched our disease education website, narcolepsydisrupts.com and continue to build out other patient, provider and payer engagement tools and programs to support our launch and launch readiness. On the payer front, we continue to make strong progress and are pleased with the level of engagement payers have had with our team today.

Our market access team was well represented at the PCMA annual meeting for the PBMs and their GPOs as well as at the recent Asembia meeting for Specialty Pharmacy. I personally was able to join our team at PCMA and saw firsthand the high-level of interest and potential future collaboration with us to help serve the narcolepsy patient community.

Our launch strategy and preparations are supported by our ongoing market research, customer insights and data analytics, all of which continue to demonstrate that the FT218 value proposition is clearly understood and is highly valued across patients, prescribers and payers.

We believe that once at bedtime FT218, if approved, has the potential to not only help patients manage their EDS and their cataplexy, but also potentially enable patients to do this while enjoying a more natural sleep wake cycle, which includes the possibility of a desperate -- desperately needed uninterrupted night sleep, that current twice-nightly oxybate simply cannot offer.

Overall from a launch readiness perspective, we continue to make great progress and plan to provide more details of our launch plans, including our views on the market, and the subsequent commercial opportunity following the potential approval of FT218. I'm extremely proud of the dedication of our team getting us to where we are today.

And we're excited about the future for Avadel, the future for our shareholders, and as importantly the future for patients living with narcolepsy, as we continue to advance our vision of bringing once at bedtime FT218 market. With that, I will turn the call over to Tom to review our financials for the quarter.

Tom?.

Thank you, Greg. I'll provide a few highlights for the quarter, and also note that full financial results are available in the press release and the 10-Q. From a balance sheet perspective, we ended the quarter in a strong cash position with $181.1 million of cash, cash equivalents and marketable securities.

And as a reminder, we have $143.8 million of convertible debt that matures in February of 2023. Total operating expenses in the quarter ended September 30, 2021 were $25.7 million, which is a $12 million increase versus the prior year.

The increase is primarily due to a $12.9 million increase in SG&A costs that were offset by a $1.2 million decrease in R&D costs. R&D expenses were $4.4 million in the quarter ended September 30, 2021 compared to $5.6 million for the same period in 2020.

The $1.2 million year-over-year decrease resulted primarily from fewer purchases of raw materials, as well as a decrease in clinical study costs versus the prior year. SG&A expenses were $21.3 million in the quarter ended September 30, 2021, compared to $8.4 million for the same period in 2020.

The $12.9 million year-over-year increase is attributable to a number of factors, including market research costs, medical education costs, implementation costs associated with the preparations for launch of FT218 in compensation related costs associated with increased headcount.

In total, the number of people at Avadel has doubled from 30 at September 30, 2020 to a little over 60 people as of September 30, 2021. Income tax benefit was $5.1 million in the quarter ended -- in the third quarter of 2021 compared to benefit of $5 million in the prior year.

Net loss for the third quarter of 2021 was $22 million, or $0.38 per diluted share, compared to net loss of $11.7 million or $0.20 per diluted share in the same period in 2020. The year-over-year increase in net loss and loss per share was a result of the increase in operating expenses.

Finally, as a review of our NDA for FT218 is ongoing, and our preparations for launch continue, we believe we're in a strong financial position with over $180 million of cash on hand to fund the financial investments needed to prepare for the potential launch of FT218. I will now turn the call back to the operator to open the line for Q&A..

[Operator Instructions] Our first question comes from Chris Howerton with Jefferies. Your line is open..

Hi. Good morning. Thanks so much for taking the questions and look forward to the exciting times for FT218 soon.

So, to that end, Greg and team, maybe the two questions for me would be, how could you describe any communication that you've had with the FDA between kind of the initial notification, and now and just any kind of information you can provide to us around? What might be holding things up and some timelines moving forward to the extent that you can.

Obviously, I know that information likely is limited. But for the second question, maybe you could provide a little more meat here. In the absence of an official approval or FDA decision, what pre-commercial activities can you do ahead of time, like, what things can you do to implement the REMS or things of that nature? Thank you very much..

Thanks, Chris, and thanks for the questions. Regarding the communication to date, since our disclosures and our communication in mid-October, I think we would characterize them fairly ordinary course relative to a company like ours in the late stages of a regulatory review. The work has continued.

The agency, as we stated back in October, requested they needed more time. And that's exactly what they've -- what has occurred. And again, I would I think the way we would characterize it as -- are back and forth with them are things that are typical at this stage of an NDA review.

As it relates to timelines, again, there's nothing we have to share at this stage with regards to timing. We're very pleased that the activity has continued on the NDA and are excited about the prospects of bringing it to a successful conclusion here, hopefully, sooner.

As it relates to the pre-commercial activities, maybe I'll ask Richard to comment on that initially and then -- and I'll add some additional color as necessary.

Richard?.

Yes, thanks, Greg and thanks, Chris, for the question. So, first, for us, our launch and commercial preparations really remain on track. And we're really pleased with the progress that we've made over the last several months. And we can have really use of time very well. Our teams are very busy.

And first and foremost, we're doing a lot to focus on disease education and really connecting with our customers. As Greg mentioned, we just rolled out our first disease asset called narcolepsydisrupts.com.

And we continue to be engaged with patient advocacy groups, and clearly continue to learn about the marketplace, in addition to having live meetings with specialists and clearly what the payers across the country as well. Operationally, we're using this time.

As Greg mentioned, we are now in the final stages of choosing our pharmas, especially pharmacy network, in addition to the fact that we've already chosen our REMS and especially hub providers as well. And we're getting as much work as we can get done. Some work will depend on getting that final approval.

But the work besides that is really progressed in a very nice manner over the last few months..

Yes, thanks, Richard. I think to your question specifically on REMS, there's only so much that we can do at this stage until we have a final label.

So I would describe the heavy lifting, if you will, of the build out of our REMS and its interconnectivity with our entire distribution and patient services model really begins, predominantly post an approval with a final label.

And of course, aside from building it from kind of, scratch, so to speak, we'll also need to go out and train and certify physicians on it as well, once that's complete. So thanks, Chris..

Absolutely. And, Greg, if I may, maybe just another just like clarification to that as well. What about like drugs supply? Sometimes there's things like labeling that's printing and all that kind of stuff.

Is there additional gating materials on that side of the equation as well?.

Yes. Thanks, Chris. There is to a certain extent, the way our product is configured and packaged, we have daily doses that have approved labeling on them that will be subject to our final and approved label.

So some of that work that supports our configure -- our dosing configuration, and the way our product is packaged, is dependent upon a final approval as well.

If at any point in time and if you will be exchanges with the agency on these sorts of matters that are at the latter stages of your regulatory review, we believe we're far enough along to begin to do some of those things, if you will, at risk.

We certainly would do that recognizing that we'll still be subject to whatever the final approved label and information is, that will be required to represent our product from a packaging and labeling standpoint..

That's perfect. Okay. Well thank you so much, Greg. Appreciate it..

Our next question comes from France Francois Brisebois with Oppenheimer. Your line is open..

Hi. This is Dan on behalf of Frank Brisebois. Thanks for taking the questions. Thank you for adding some color on the launch readiness activities.

Just one from my end on the RESTORE study, if you're sharing anything on that, what are you hoping to see on the trial, besides safety any color you can add on the upcoming data?.

Yes. Thanks, Dan. I think, Jen, I will turn it to you..

Yes, absolutely. Thank you for the question. So the deadlines for Spring Congresses on to submit abstracts are on us. And we're submitting information beyond simply the safety that's been generated and is assuring from the RESTORE study.

One of the most important aspects of the RESTORE study is understanding for switch patients, after they have been on 3 months of FT218, which dosing regimen they prefer, once-nightly or twice-nightly. We're very pleased with the responses that we're receiving and those data will debut in the springtime.

We're also seeking to understand patient experience from taking twice-nightly immediate release oxybate and that data as well will be presented in the springtime..

Thanks..

Okay..

And is this just as a follow-up to that, is this similar to the discrete choice experiment or is there -- are you sharing anything on that?.

So with the discrete choice experiment that while it is an IRB approved study is hypothetical.

With RESTORE, this provides the actual real life experience, both from patients describing their experience in taking twice-nightly immediate release oxybate as well as the all important question, once a patient has received both a once-nightly and has prior experience with twice-nightly, which do they prefer? So this is going to be more aligned to actual real life evidence..

Great. Thank you for taking the questions. Thanks..

Our next question comes from Ami Fadia with Needham. Your line is open..

Hi, good morning. Thanks for taking my questions. Just with regards to your meeting with the FDA following the October 15 date, can you give us any color on why the FDA was unable to meet that PDUFA date? And if at all, there's going to be any more -- any new PDUFA data, it sounds like the review is continuing.

And at some point, they will complete the review without necessarily assigning a PDUFA date. And I have one more question. But if you could answer this first, thanks..

Yes. Thanks, Ami. Again, I think what we've shared with everybody is what was shared with us, which was that they weren't finished, and they needed more time to complete the review. They didn't offer a lot of specificity other than that they needed more time.

And in our subsequent discussions and exchanges, if you will, we've seen the review continue and progress in many ways from where we were back in mid-October. They did tell us that it was unlikely they would be completed in October.

And that certainly has been the case and we certainly seen activity and exchange with the agency continue into November as well, for sure over the last number of days. So in terms of what other color we got, we've tried to share everything that that's been communicated with us.

And I think again, our context around what we've been exchanging on is really matters that we would describe based upon our experience much more ordinary course for things late stage in the review process. As it relates to an official target action date, or a new PDUFA date, the agency has not yet at this stage given us a new target action date.

And based on where we sit today, really, we don't see any basis for any sort of formal action that would actually result in a new PDUFA date. For instance, a major amendment that would kick it out 90 days or whatever, from that standpoint. So at this stage, the review progresses.

It's continuing to go on and we're happy about that and believe we’re -- hopefully and based upon the matters that we're reviewing with the agency now, we're in the later stages of this review..

Great. That was helpful. Just a follow-up question to the launch preparations.

Perhaps, can you give us a sense of whenever the approval come, how many weeks post that approval do you think you would be ready with packaged products that's ready for launch? Of course, also, if you could help us understand the DEA approval timeline as well, and how that would drive a launch date post approval? Thanks..

Yes, I think from a launch timing perspective, I would measure the work that has to be done that really kicks off after a final approval on a label, I would measure that more so in the form of months than I would in weeks.

We've always talked that the analogue, one of the base kind of analogues here is the recent mix salt product, which was a little over 4 months, we believe, from approval to launch, which was DEA. Our view was probably DEA centric, and probably a little bit of REMS as well that needed to be updated without having all the color.

I think the difference here is we have the same DEA matters at hand, for sure. But we also have to really build the REMS from the start. And then once that's completed, we need to go out and train and certify physicians accordingly for them to be able to prescribe our product.

So I think when you layer in that with kind of the other, if you will, matter that likely will take a little bit more time as well around commercial supply. We've -- there's some of that, that we can start now based upon what we can do in 2021. But some of that also we'll have to carry over into 2022 as well to ensure we have adequate supply.

So I think from a launch timing perspective, no one wants to launch sooner than we do for sure.

And I think the two kind of drivers of timing center around when do we have an approval, so we have the kind of the jumping off the starting point, and then the execution of all the things that we need to deliver on to be ready to launch fully up -- in 2022.

And that's something we'll certainly communicate more specifically as we get past the approval and are executing all of our launch readiness activities. And again, from our standpoint, no one wants to come to the market faster than we do. However, we need to make sure we do it right, with obviously writing [ph] fast really being the goal..

Understood. Thank you..

Thanks, Ami..

Our next question comes from Marc Goodman with SVB Leerink. Your line is open..

Hi. Thanks for taking my question. This is Rudy on the line for Mark. I've two questions. First, can you walk us through the litigation process with Jazz and expected timeline? Any additional color will be helpful here.

And secondly, can talk about your view of the market dynamics for narcolepsy, especially for the past several months since the launch of Xywav. And did you notice any changes that may impact your commercial study here? Thanks..

Yes. Thanks, Rudy. I'll take the litigation question. And then I will ask Richard to answer or comment on the market dynamics, post the launch of the mix salt product.

With regards to the litigation, it's really, I would say, status quo from what's been communicated to date, right? We have a full trial hearing scheduled for -- towards the end of 2023 to hear the full patent case.

The court had arranged preliminary timing for potential PI or preliminary injunction should one have been filed at this stage one has not been filed. So there is nothing scheduled currently from a PI perspective.

Our expectation continues to be that based at least on the prior schedule that was put in place that a PI hearing should actually one be filed, we would expect to occur in a timely enough manner to not be a deterrent to our launch timing. And again, I think that when there's something more specific to provide, we certainly will.

But in the meantime, I think our only commentary around the litigation is we remain highly confident in our innovation of once at bedtime FT218 and we don't see this litigation as a barrier for us coming to market.

Richard, do you want to answer market dynamics, please?.

Sure. And thanks for the question. So I feel first foremost, we don't really comment on the specifics of other companies launches. However, maybe a couple observations from us. One with the introduction of the mix salt formulation, it does not appear at this stage that there's been a large influx of new patients coming into the marketplace.

Obviously, we're all waiting on more data to sort of check into those dynamics. But additionally, it doesn't appear like the market is going all towards the sodium oxybate, or all towards the mix salt version as well. It looks like there will likely be a good mix of both types of patients by the time we go into 2022 as well.

So I think for us, we just sort of will understand that there are patients who have been motivated to switch to the mix salt version. But there are also patients who have clearly been staying on the sodium oxybate twice-nightly version as well. So I think those are really the underlying dynamics that we see so far..

Got it. That's very helpful. Thank you..

Our next question comes from David Amsellem with Piper Sandler. Your line is open..

Thanks. So just a couple. So first, on the review process, I wanted to touch on the orphan drug exclusivity for Xywav and wanted to ask if it is at all possible that the reason we haven't gotten a decision has anything to do with the ODE for Xywav? Or is that a parallel process that doesn't have any bearing on the review? Can you just talk to that.

And then also just your general level of confidence that there won't be an issue regarding the Xywav ODE. So that's number one. And then number two, just a clarification question.

So to the extent that you do gain in the [indiscernible] approval in the near-term, what is your sense in terms of timing of launch? In other words, how many months do you think you'll need to implement the REMS? And this is sort of bearing in mind that when Xywav got approved, there was a several month lag time between its approval and its launch.

So should we think about a several month timeline between approval and launch for FT218? That would be helpful. Thanks..

one, we are confident that a single bedtime dose of sodium oxybate provides both a greater safety and a major contribution to patient care. Because we all know for nearly 20 years, patients with a sleep disorder have been required to forcefully awaken in the middle of the night to take a second dose of an immediate release medication.

And we believe by eliminating that will substantially improve patient's care. So, what I will say is that when you think about our designation that was granted, it was granted on that plausible hypothesis that FT218 could be clinically superior from a safety perspective, right.

And the basis for this goes or goes back earlier, quite frankly, than our submission in 2018. It goes back to as early as 2013 when the FDA met with key stakeholders from the narcolepsy community.

And they actually identified that the wakening of patients due to the middle of the night dosing as a potentially significant issue and a potential safety issue.

So again, we feel like the robustness of our submission certainly supports its own orphan drug exclusivity, based upon demonstrating clinical superiority over the middle of the night dosing, both from a safety perspective and a major contribution to patient care..

Okay. That's helpful. Thank you..

Thanks, David..

Our next question comes from Paul Matteis with Stifel. Your line is open..

Great. Thanks so much. I just had to two follow-ups. One on orphan drug exclusivity, I thought that was a good question because I guess from our seat, it feels like ahead of filing.

And since you've really had direct engagement with the FDA, as it relates to certification, CMC, the strength of your data and have confidence that there's no outstanding questions there, but have you talked in the past with FDA about what it would take and whether or not your package is sufficient not just to get ODE in a vacuum, but also to break Xywav's orphan drug exclusivity? And then separately, I was wondering if you could just kind of clarify a little bit more specifically, you said that your engagement with the FDA is consistent with the late stage of a regulatory review.

Given that there's no questions what exactly does that mean? Are you sending back and forth draft labels? Like maybe a little bit more detail there would be helpful. Thank you..

Yes. Thanks, Paul. Again, on the later topic -- again, there's without getting into any specifics, because we don't necessarily believe that that's necessarily prudent to talk specifically.

But it could be things that you can imagine from exchanges on draft languages relating to carton or containers relating to your IFU, or your instruction for use or your medication guide for that matter, and, of course, your label or your prescribing information. So again, I would characterize those as matters that are late stage.

The agency doesn't ever exactly tell you where you are in any one area. So those exchanges can go on for a period of time. You may think you're finished with an area and then get more questions at a later date.

But again, I think, based upon our experience and our history, that the topics that we've been engaged with, since October 15, have been consistent with these sorts of later stages of the review. With regards to your question on ODE, again, the basis for our submission centers around twice-nightly dose.

That hasn't changed relative to the introduction of the mix salt product. And again, that product got approved shortly before we actually filed our NDA. So, given that context, I think it's safe to assume that where we could provide information or relevancy to all formulations in place that with sodium oxybate, in our submission, we did.

I would also say that and are leading up to that, and in terms of crafting our orphan drug exclusivity strategy in total, yes, there are opportunities to ask the agency questions about your approach, which I think is fair to say, you should assume we've done that, and that, again, that all centers around the middle of the night dosing and the complications and implications associated with that.

And the data that we generated to support that which hasn't changed relative to any other sodium oxybate or oxybate related formulation in the marketplace..

And Greg, thank you for that. Just now -- just as it relates to breaking ODE or I guess not breaking it, that's more of a -- you get my sense, right.

Transcending someone else's ODE, is that the division that determines that or do they need to get input from a separate orphan office at the agency?.

Yes, the orphan -- the office of orphan products would be the part of the agency that is acting on that part of the review..

Okay. Okay. Thanks for clarifying..

Thanks, Paul..

Our next question comes from Oren Livnat with H.C. Wainwright. Your line is open..

Thanks. I have a few questions. I'm going to keep beating the drum here, I apologize. Answer what you can on the orphan situation. But just to clarify, you've mentioned a few times that obviously Xywav was approved before you filed your NDA. So of course, that was taken into consideration with whatever materials you filed on the orphan front.

But they didn't actually get their exclusivity until, almost 9 months after they’re on approval so well into your review.

So are you in a position to confirm or not, whether you had any post Xywav orphan exclusivity granting interactions on your end with OPD or your reviewer to address any potential issues that may or may not have come up then? And also on the orphan front, can you just confirm, obviously, you've got your ODE on the plausible hypothesis.

I think it's what we may call it that you're safer. I think most of us agree intuitively that they’re safety and material contribution advantages for your product. But is there a hurdle to actually prove it? You've mentioned data, what data do you have to generate to satisfy that theoretically? And what have you submitted? And I’ve a follow-up..

Yes, again, regarding our submission, the basis of our submission is centered around the challenges associated with the middle of the night dosing, as if we’ve generated additional data during post our submission in December, through the point in time of which the NDA is acted on, if we uncover our learn additional information that we thought was relevant to share with the agency, we certainly would have done so as part and parcel to ensure our submission is as robust and complete as possible if new insights were gained from that standpoint.

So whether we did or didn't, is not something we're going to comment on. But I would say that, that work -- that's always ongoing with us in terms of assessing what's happening in the marketplace, and the challenges patients may or may not be experiencing, or insights that we've learned based upon trying to understand those challenges, specifically.

With regards to your second question, in terms of what data could you generate, right? I would say that, the way you look at it, the way we've looked at it is a couple fold. It's not necessarily when it comes to orphan drug about head to head data, or comparative studies, right? There's really two components here.

One is to really ensure that we've done the work to identify the issues that manifests itself to patients from an adverse event or risk perspective, or a safety perspective, as a result of the middle of the night dosing.

No other company has any incentive or motivation to disclose that data, but we've done the work to try to uncover what for the last number of years, what adverse events or risks are associated with that middle of the night dosing.

And that would be information that we use as part of our submission to highlight specifically the challenges there and that are associated with the forcible waking in the middle of the night.

And then again, what data we can provide relative to once at bedtime FT218, that potentially could reduce or mitigate some of those potential issues that have been identified based upon the data that we've generated. So again, that's I think, how we would describe it generally.

I don't know, Jennifer, if there's anything you would add to that?.

Completely agree. Nothing else at [indiscernible] at this time..

Okay, thank you..

Okay. And if all else equal, your filing was good to go and orphan was the only issue if they had already decided that you were blocked.

But otherwise an approvable product, should you have received a tentative approval?.

When you go back to October 15, there's a number of decisions that could have been taken on that day by the agency, if they were in the place that you've described, Oren, yes, they could have granted us a tentative approval subject to the orphan exclusivity, they could have granted us a CRL.

If there was something wrong with our NDA -- they had an issue at that point in time. So and yes, they could have granted us a full approval, which they didn't. But again, what we told them -- what we said is what they told us and -- but the short answer to your question is yes, we could have gotten a TA at this point in time and we hadn't..

Okay. And just quickly, maybe a bit of modeling question. SG&A, even ahead of the PDUFA date this 3Q ramping pretty substantially, I think it's already at almost a run rate where most of [indiscernible] for 2022, in the commercial launch year.

So can you just talk about; one, how much litigation cost is maybe already baked into this SG&A number? And does this keep going up in 4Q? And how fully baked is this number? I know there's different pieces, some things go away, some things come in, but with only a 50 to 60 person sales force, like most of us anticipate, how close to a fully baked commercial quarterly spend might we already be at this level?.

Go ahead, Tom..

Yes. Thanks, Oren. So without any specifics of what's in or out of the SG&A number certainly includes legal costs associated with FT218. With respect to how close to fully baked, I think there's puts and takes in any of our quarterly numbers.

At this point, we have implementation costs associated with preparing for launch, things like building the REMS program, building our patient hub program.

And then the last major component of spend that we haven't committed to yet and will certainly be dependent upon approval of the NDA is the addition of the sales force that will certainly ramp up our costs. But from our perspective, I think our costs are in line with what we have expected.

We've commented previously that our costs will increase quarter-over-quarter, particularly as we approach approval. And again, the last major main component is to bring on board the sales force..

All right. Thanks, guys. Good luck..

Our next question comes from Matt Kaplan with Ladenburg Thalmann. Your line is open..

Hi. Good morning and thanks for taking the questions. Just wanted to make sure -- just clarity on kind of the next steps in the process with FDA given, I guess, the late stage nature of their review, which is still ongoing.

In terms of, can you give us a sense in terms of the timing and next steps on your end in terms of getting information to the FDA, or kind of addressing what items are outstanding to facilitate approval?.

Yes. Thanks, Matt. I would say that we're quite timely in our response back to the FDA in any question or any exchange we have on any of the matters were under discussion with them at this stage of the game. So, we certainly respond quite quickly from that perspective. Again, our expectation is the review will continue to progress.

It will progress at the rate that the FDA allow -- decides it's going to progress. What we have always said is that, as we go forward, if we learn something that we believe should be disclosed to shareholders, investors, we certainly will for sure. And we're just pleased that the review is continued during this period of time.

And the fact that they needed more time certainly appears to be the case.

So if we learned something that we think warrants public disclosure around timing, we certainly -- believe me, we certainly will and otherwise, we'll continue to execute and proceed as efficiently as we can in responding to whatever information or exchanges of documents we have with the agency that we're -- with what we're going through right now..

Okay, that's helpful.

And just a quick follow-up on that in terms of how should we think about this? Is this something that should take weeks? Or in your experience, is it months that you're thinking of it in terms of reaching inclusion?.

Yes, Matt, I just think it's really -- it's impossible for us to answer that question at this stage only because the agency hasn't communicated to us an official timeline formally. And if they -- absent them taking an action that really gives us a PDUFA date, that would be something we would disclose.

If the agency came back to us, or if they have already come back to us and said to us, we intend to be done by this date, it's really, if you will, not a formal or official deadline.

It would be an internal target, just something that not likely we would disclose just because it's not -- it wouldn't be something that they would be held, they could really be held accountable to. And certainly don't think it's in our best interest to put that kind of information out into the public.

That being said, we're pleased that the activities continued, and on the topics that we're engaging on, and we stand ready to respond as quickly as we can if they have any more questions for us..

Got it. Thanks. Thanks for the added color..

Thanks, Matt..

Our next question comes from Robin Garner with Craig-Hallum. Your line is open..

Good morning and thank you. You mentioned a doubling in your headcount.

Has any of the sales force been hired at this point? And other than the sales force, do you anticipate substantially more hiring, in general?.

Yes, we haven't hired any of our sales representatives who would be those customer facing. We'd begin to build out the sales leadership team as they are required to do all the screening and the profiling and identification of candidates that we can hire post an approval.

So some of that -- the leadership and management of that organization is in place. I would describe the additional headcount that would likely come on board, in addition to the sales force with the other -- either customer facing roles that would support, access and coverage related and reimbursement related activities.

And then beyond that, it's primarily really kind of internal headcount to just to continue to manage the infrastructure of the organization that has gotten larger, right. So more support functions to ensure that we can keep up with the pace and the size of the organization as we go forward.

But not materially incremental, over and above the large number of reps that we would additionally add at around 50.

Tom, anything you want to add to that?.

No, that covers it..

Okay, thank you. And maybe this is a question for Tom.

But with the convertible debt coming due, what is your cash management plan for early -- for that time?.

Yes, thank you for the question. We were in a constant planning mode, if you will, and we look at a lot different scenarios, Robin, in terms of future cash feeds, potential capital raises, whatever the organization might need to support the launch of FT218 as well as other growth opportunities for Avadel.

So, without getting into specifics about what we may be doing in the future or particular strategies from the convertible notes, we do view the approval of FT218 as a catalyst forces, if you will, and the convertible notes and addressing those credit maturity is certainly in our planning horizon..

Okay, thank you. And if I may, my last question is just around the FDA.

And whether you're aware of any other companies that have had a similar delay, with no further questions, or data being required by them?.

Well, I would say that, I guess if you look hard enough, you can probably find an example of every situation within the FDA from that perspective. We've been more focused on what's happening, more real time relative to the timing of our NDA.

We certainly know that on the day of October 15, there were at least four other decisions that occurred that day with two CRLs and two of us got basically no action taken with one being driven by PAI not happening, and us saying they just need more time for the review from that standpoint.

And as we sit here today, I mean, that's the context that we were -- we've been trying to understand where we sit from that perspective. And, again, the agency is picked up and continued to do the work. So from our perspective, they needed more time and that's where -- and they continues to progress in advance accordingly.

We know of no outstanding questions, we know of no outstanding requirements from a CMC perspective at this stage. And again, like we said, you never know exactly where they are in the review, because they never tell you when they kind of check a box and move on to the next one.

So we stand ready to react to anything with -- immediately to be able to advance us to a full approval..

Okay, thank you..

Thanks, Rob..

Our next question comes from Jason Gerberry with Bank of America. Your line is open..

Hey, good morning, guys. Thanks for taking the questions. I guess first just for me, just thinking about payer contracting and how that evolves next year.

Mindful, it's a very fluid situation, but I would assume, I guess at a minimum that REMS finalization for FT218 would sort of be needed before you can enter into substantive discussions and having contract struck.

And I guess it would seem logical to me that potentially payers may want to slow play things to pit Avadel against the Hikma generic from a pricing competition perspective.

So my question really is, do you think there's an opportunity if you can get out in front of generic approvals, and make strong offers to payers if that can drive better access for FT218? And then my second question is just I'd love to get your thoughts on Jazz's REMS patent as a gating factor.

I think in the past, you've talked about a two-prong strategy with the courts at FDA and your non-infringing REMS. So I guess how important -- I think there was a recent court ruling that the courts declined to sort of address this issue and pathway.

So just curious, how important do you think that is, and if you can put any context around that, that'd be great. Thanks..

Yes.

So Richard, do you want to start with the payer comment?.

Sure. Absolutely. Thanks for the question, Jason. So, for us, our plans with the payers has been made with or without an authorized generic coming to this marketplace. So we're fully aware that the event could occur in the not too distant future. But we would also argue, it's still a twice-nightly sodium oxybate in the marketplace.

And we've really been focused with our payers and really describing, especially with Jennifer's team's health, really the clinical value proposition that we have with once at bedtime FT218. As far as the timing for contracts are concerned to your point, we'd prefer to have as many [indiscernible] early as possible.

The REMS is not really technically a gating factor for us in those conversations. It's really getting through the approval first. And we've been really pleased with the fact that as a small company, we've had a seat at the table with the largest payers with the key decision makers.

So we are really focused on making sure that our value proposition from a clinical perspective is really understood. And then we will work with the payers to ensure that our goal is to make sure that people with narcolepsy who are in need of FT218 have the opportunity to really access it. So Greg, I guess I'll turn the next question back to you..

Yes. Thanks, Richard. Jason, regarding the REMS patents, if you will, and the one remaining REMS patent with a handful of claims that are remaining, we're obviously very aware of that intellectual property. It's matters that we have to deal with relative to our regulatory submission, and relative to our build out from a -- our own REMS will operate.

And I'll just remind everyone that again, there has been a prior approved REMS program designed by the FDA to effectively meet their -- meet the FDA standards and be an alternative in the marketplace from an FDA perspective.

And although no one's using it, it certainly provides a roadmap for parties like us as a means to in the development and crafting of our REMS program.

We're keenly aware of their intellectual property and believe we have effectively developed a REMS program that will become obvious and clear through the matter of the Court's that we're not infringing it from that standpoint. And that will play out in due course relative to the patent case that's pending currently.

So we don't view it as -- again, that patent or any of the other patents as a deterrent or a blocker to us coming to market. And relative to the Court's recent decision to not to not hear our motion to delist that from the Orange Book. We don't think it's relevant to the merits of the case whatsoever..

Okay, thanks..

Thank you..

Thank you. At this time, I'd like to turn the call back over to Greg Davis for any closing remarks..

Thank you, operator and thank you all for taking the time to join us today and your continued support of Avadel.

I want to provide my assurances to narcolepsy community, to our shareholders, to key stakeholders and our employees, that there's nothing more important to Avadel to doing whatever is required to get FT218 approved as soon as possible and progress to a launch in 2022.

As our NDA review continues, and given the recent interaction with the agency on the NDA, we remain confident on our regulatory filing strategy and the robustness of our complete NDA package.

We are continuing with all launch and commercial preparations to ensure to ensure we are fully ready to offer once at bedtime FT218, if approved, to all eligible patients living with narcolepsy. We look forward to providing you more updates as we continue to make progress. We thank you for your time and wish you all a great day. Thank you..

This does conclude the program. You may all disconnect. Everyone have a great day..