Good morning. My name is Rob and I will be your conference operator today. At this time I would like to welcome everyone to the Avadel Pharmaceuticals' Third Quarter 2022 Earnings Call. [Operator Instructions] Thank you. Austin Morton [ph] from Avadel Investor Relations. You may begin your conference..

Good morning, and thank you for joining us on our conference call to discuss third quarter 2022 earnings. 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 assume scientific objectives or milestones or make 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, 2021, which was filed on March 15, 2022, and subsequent SEC filings.

Except as required by law, Avadel undertake 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; Dr.

Jennifer Gudeman, Vice President and Medical and Clinical Affairs, Richard Kim, Chief Commercial Officer; and Tom McHugh, Chief Financial Officer. At this time, I'll turn the call over to Greg..

Thank you, Austin. Good morning, everyone, and thank you for joining us this morning to discuss Avadel's third quarter 2022 results. Q3 was another important quarter for Avadel and our pursuit to bring LUMRYZ to people with narcolepsy.

Most importantly, LUMRYZ, our investigational once-at-bedtime oxybate therapy for the treatment of cataplexy or excessive daytime sleepiness in adults with narcolepsy was granted tentative approval by the FDA in July. The FDA's formal decision of granting tentative approval results in three very important developments for Avadel.

First, it validates LUMRYZ's safety profile and clinical efficacy and as such, has confirmed that LUMRYZ is approvable as a once-at-bedtime therapy. We view this as a major regulatory derisking event for Avadel.

Second, it enables us to complete work on key launch-related activities, including the build-out of the REMS program and the manufacture of commercial launch supply. We made significant progress in these activities in Q3 and are on track to have both completed before the end of the year.

Lastly, it confirms that the potential latest date we should receive a final approval decision is after expiry of the REMS patent, which will occur on June 17, 2023, approximately 7 months from now.

A final approval will then be followed by a launch that is expected no later than Q3 of 2023 into what we believe is a $3 billion-plus market opportunity.

We will continue to take the necessary actions to bring LUMRYZ to final approval, and more importantly, to provide access to people with narcolepsy who are desperately seeking new treatment options.

Very recent comprehensive market research that Richard will highlight shortly, continues to confirm the significant interest in LUMRYZ across all patient and physician segments, all of which is supported further by what we see in the real-world data coming from our RESTORE study, where 94% of twice-nightly switch patients prefer the once-at-bedtime dosing of LUMRYZ.

The combination of the real-world data of RESTORE, along with our extensive market research and data analytics confirms our belief that LUMRYZ is well positioned to capture a meaningful share of the projected $3 billion-plus once-at-bedtime oxybate market.

Although our base case assumption is to receive a final approval decision following expiration of the REMS patent in June of 2023, we continue to pursue efforts that could potentially lead to a final approval decision sooner.

More specifically, the Delaware Court has granted our expedited request and has scheduled a hearing on our renewed motion to delist the REMS patent from the Orange Book for next week on Tuesday, November 15 at 10 a.m. Eastern Time.

We look forward to the Delaware Court's decision and the opportunity to potentially accelerate the timeline to a final approval and subsequent launch for LUMRYZ. With that, I'll turn the call over to Jennifer to provide details on our recent data presentations.

Jennifer?.

Thanks, Greg, and good morning. As Greg said, this was an important quarter of progress for Avadel. We continue to add to the robust body of evidence supporting LUMRYZ. These extensive and positive data will support the launch, following potential final FDA approval.

Let's start with the Test Congress held a few weeks ago, where we had three posters presented with updated data from our open-label study RESTORE. First, we provided further confirmation of long-term safety and tolerability with LUMRYZ among the 180 participants who received at least one dose.

Second, for patients not previously taking an oxybate, most have been efficiently titrated to a stable dose within one month. The majority of switch patients, they remain at once-nightly dose of LUMRYZ equivalent to their previous total nightly intake of immediate release oxybate.

These more real-world data will be instructive for clinicians to consider when we launch commercially. Understanding the patient perspective and experience is critical to Avadel. After three months on therapy of LUMRYZ, switch patients are asked which dosing regimen may prefer.

As we have seen consistently, there is an overwhelming preference for dosing that only LUMRYZ will offer, with 94% stating they preferred the once-nightly dosing regimen over twice nightly. Let's look at some of the reasons for that preference by understanding the challenges with twice-nightly oxybate.

For those switching from either of the twice-nightly oxybate, we asked at baseline about their experience with the second dose, which revealed several key points. First, about two thirds of participants had accidently missed their second dose in the past three months. Of these, 80% reported feeling worse the next day.

These data align with what we hear directly from patients as having a negative impact to them, frequently missing a dose and feeling worse the next day. Next, 61% reported taking their second dose more than four hours after the first dose. Of these, 88% confirmed that they experienced next day grogginess.

These data also align with what we hear anecdotally - from patients. Lastly, approximately 25% of participants reported the need for someone else to wake them for the second dose. Now turning towards the ANA meeting.

We were very pleased to debut data in partnership with the Mayo Clinic that examined more than 2,000 patients with narcolepsy seen at Mayo in the past 20 years. These were compared to an equivalent number of a matched cohort of patients without narcolepsy to identify the top 20 comorbidities increased in the narcolepsy cohort.

Among the top 20 comorbidities increased, three were sleep conditions, three were psychiatric conditions. Both are well recognized to be increased in people with narcolepsy. What generated considerable interest were two additional findings. First, five gain-related disorders were significantly increased in the narcolepsy cohort.

Second, the top 20 comorbidities did not include hypertension or other types of cardiac disease, such as myocardial infarction or stroke. We have additional real-world data from the collaboration with the Mayo Clinic that we will be submitting for 2023 medical congresses specifically focused on the cohort that has been treated with sodium oxybate.

What we and the narcolepsy community are most excited about is when LUMRYZ is available and real-world evidence can be generated to further validate the transformational impact of LUMRYZ for people with narcolepsy. I will now turn the call over to Richard to provide details on the commercial opportunity and our advancing preparations for launch.

Richard?.

Thanks, Jennifer. And good morning, everyone. I'll provide updates on our growing market insights and our overall launch readiness. But today, I'd like to start with a reminder of why we do what we do.

This fall, our team attended a lot of meetings with seat [ph] specialists and people with narcolepsy to continue to demonstrate Avadel's commitment to the narcolepsy community. At each conference, we were asked several times unsolicited, when our product will be approved and made available.

These people are well aware of LUMRYZ and have told us, they are waiting for it. Now to take the step further, I want to share a patient family story that has really stuck with me. A couple of weeks ago, one father told us that every single night, he wakes up at 3 a.m.

to call his son in college so that he does not miss taking the second dose of oxybate and that he just can't wait for the day where both he and his son don't have to wake up at 3 a.m. in the middle of the night for his son to attend classes the next day.

As much as we focus on people with narcolepsy, we sometimes overlook the impact on family members and caregivers. This is just one of the many personal stories that we often hear and continues to remind us, why we cannot relent in our pursuit of bringing once-at-bedtime LUMRYZ to people with narcolepsy and their families.

Let me now transition to our continued focus on advancing our deep understanding of the narcolepsy market, which continues to inform our launch of planning.

We conducted a new quantitative market research project from over 130 narcolepsy treaters that once again validated our key market assumptions and offered some important new insights about current non-oxybate prescribers.

While we ask several questions, one key takeaway is that oxybate use will increase once LUMRYZ is available across oxybate prescribers and even current non-oxybate prescribers. Here are a few key points from this market research. First, all prescribers can identify patients who are eligible for oxybate therapy.

However, many eligible patients are still not treated. High-volume oxybate prescribers state using oxybate in about 45% of their narcolepsy patients with another 20% eligible, but not being treated with an oxybate.

By comparison, low-volume oxybate prescribers stay using oxybate in under 10% of all narcolepsy patients with an additional 20% eligible, but not being treated with an oxybate. Second, when shown the LUMRYZ product profile, current oxybate prescribers predict that oxybate market utilization as measured by market share will grow by at least 50%.

Third, for narcolepsy prescribers who do not use oxybates, these HCPs state that one in four of their narcolepsy patients are oxybate eligible despite not currently prescribing the twice-nightly formulations. Now the top reasons for not using oxybates are similar with other groups.

In that, the prescribers are concerned with reimbursement challenges and the inability of their patients to comply with twice-nightly dosing.

However, when shown the LUMRYZ product profile, almost half of these current non-prescribing oxybate HCPs stated, they would use LUMRYZ in the future and that they can already identify eligible patients they would treat.

We also see awareness about Avadel, LUMRYZ and once-nightly sodium oxybate increasing compared to last year, with the greatest awareness increase in high oxybate prescribers.

What this all translates into is that when LUMRYZ is available across all oxybate prescribing segments, these HCPs intend to give LUMRYZ the highest share of scripts in a growing future oxybate market.

Now when we look at the oxybate market from a patient claims perspective, our analytics suggest that the market potential for LUMRYZ could be roughly double that of the current twice-nightly oxybate market, with more than 30,000 potential eligible patients. Recall, the estimated total patient position [ph] consists of three key segments.

First, approximately 16,000 actively treated twice-nightly patients. Second, an estimated 10,000 to 15,000 potential patients previously treated with an oxybate who have discontinued twice-nightly therapy within the last 3 years.

And third, roughly 3,000 new oxybate patient starts, and in this segment, we expect robust yearly growth of 25% to 50% per year in the future.

All three patient segments have expressed high levels of interest in LUMRYZ and along with HCPs, are also aligned in the belief that once-at- bedtime dosing is the most important attribute for an oxybate therapy when comparing different formulations. Thus, demonstrating our preference for LUMRYZ over the current standard of care.

Now turning to our launch readiness efforts. Q3 was a busy quarter for our team.

We made significant progress building our commercial launch supply for LUMRYZ and all the programs that will enable the fulfillment of a prescription after approval, mainly the detailed build-out of the REMS, our ongoing patient support services development, and finalization of the contracts for our specialty pharmacy network.

The progress we have made will enable us to shorten the time from a final approval decision in June to full launch of LUMRYZ in the third quarter of 2023. As Jennifer mentioned, we had a strong showing at the CHEST and ANA congresses, as well as attending and presenting at some of the first live patient organization meetings in a couple of years.

On the payer front, our team had several key meetings with the decision makers at the GPOs and PBMs that manage over 85% of the commercially insured lives. We continue to advance our conversations with them around contracts and coverage for LUMRYZ, and the feedback continues to be positive. One more key update on launch readiness.

We just began to build out our launch team, knowing that we are now only about 7 months away at the latest from a final approval decision. This first portion of our build-out plan paired with what remains, balances are need to be launched-ready, while continuing to be thoughtful about how and when we invest our resources.

We look forward to providing more updates on future calls. With that, I will now turn the call over to Tom for an update on the company's financials.

Tom?.

Thank you, Richard. 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. I'll start with the balance sheet where we reported $106.5 million of cash, cash equivalents and marketable securities as of September 30, 2022.

The company also had $143.8 million convertible notes, which includes $117.4 million maturing in October of 2023. Subsequent to September 30, we completed an open market repurchase at a discount to par of $8.9 million of the $26.4 million of notes that mature in February of 2023.

As a result, the amount that matures in February was reduced to $17.5 million. Excluding restructuring charges, total operating expenses in the quarter ended September 30, 2022, were $17 million compared to $25.7 million in the same period in 2021 and $26.3 million in the quarter ended June 30, 2022.

The decrease in operating expenses in the current quarter resulted primarily from cost optimization actions taken by the company. And we are on track to reduce quarterly cash operating expenses, excluding inventory purchases to our target range of $12 million to $14 million.

R&D expenses were $2.9 million in the quarter ended September 30, 2022, compared to $4.4 million for the same period in 2021. The $1.5 million decrease is due to lower costs related to the manufacturer of LUMRYZ and lower compensation costs.

SG&A expenses were $14.1 million in the quarter ended September 30, 2022, compared to $21.3 million for the same period in 2021. The decrease is a result of a number of factors, including lower cost of marketing, compensation, medical affairs and consulting fees.

Net loss for the third quarter 2022 was approximately $20.1 million or $0.33 per diluted share compared to net loss of approximately $22 million or $0.38 per diluted share in the same period in 2021. I will now turn the call back to Greg for closing remarks..

Thank you, Tom.

To wrap up, being approximately 7 months away from the backstop date on which we expect to receive a final approval decision for LUMRYZ and a potential launch shortly thereafter, we are focused on executing the most important priorities that offer us the opportunities to both, accelerate a final approval decision and shorten the time between approval and launch.

Receiving tentative approval for LUMRYZ is a significant derisking element to our mission and our overall value proposition as a company, which is further supported by all of our customer insights and stakeholder feedback, which continue to demonstrate the significant opportunity for LUMRYZ to command a meaningful share of the $3 billion plus once-at-bedtime oxybate market.

We will remain relentless in our efforts to fully realize the value of LUMRYZ for all stakeholders, including patients, prescribers and investors. We thank you for your support, and we look forward to providing future updates on our progress. With that, we will open the call for questions.

Operator?.

[Operator Instructions] And your first question comes from the line of Francois Brisebois from Oppenheimer. Your line is open..

All right. Thanks for taking the question. Congrats on the progress here. So just a quick couple of ones here. In terms of building out the REMS, can you just maybe help us understand what challenges can come up when you build out REMS? Why it might be straightforward, why it might not be? Just a little more color around that..

Yeah, Frank, it's Greg. Thanks. I would describe it really in two steps. There's a technology component to this and an infrastructure required to actually execute and do the necessary work to ensure safe use, that the REMS program is designed from an IT infrastructure, programming and whatnot.

And then there becomes a second piece of that, which is staffing it as you get - fully staffing it as you head toward a final approval and a subsequent launch. So again, we partnered with a leading very experienced REMS provider who has great experience with controlled substances.

And so from that standpoint, the execution of our build-out to date, which again, is expected to be completed from an operational standpoint before the end of this calendar year, is on track. We'll clearly, as we head toward a final approval, begin to staff up the necessary resources to operationalize it.

But the underlying, if you will, components of it, will be done well in advance..

Okay. Great. And then in terms of RESTORE data, you guys keep showing some good data on it.

Is there - is that data useful or important for the payers - from the payer's perspective in terms of reimbursement?.

Well, maybe I'll let Richard comment on that..

Hey, Frank. Thanks for the question. Yeah. The great thing is, we're really blessed with a bank of full range of clinical data that Jennifer and her team have actually produced from both, from RESTORE and now the posters from RESTORE. So I would say, everything has been very useful with the conversations with payers.

And as we get into more in-depth conversations, the fact that 94% of patients, when previously being on a twice nightly prefer to be on the once-nightly formulation, I think, bodes well. So in short, the answer is yes, Frank, we'll absolutely leverage that in the appropriate payer settings going forward as well..

Okay. Great. And then I just - sorry, last question. I feel like I have to just ask about it here. The - in terms of the Delaware hearing on the 15th here, so next week.

Can you just kind of maybe walk us through the potential, although, it's hard to say, but the potential outcomes in terms of timelines? Or is a decision made, do you expect it to be made on the bench? And if not, if the decision is in your favor, what does that mean in terms of next steps here? Just to get a better feel for what can happen on the timeline?.

Yeah. I think, to describe that situation kind of at large and how we view it is as well, we're not going to speak obviously to the specifics of the litigation, just not - it's not what we do.

But from a process standpoint, we were pleased that after the claim construction hearing that the Delaware Court decided to grant our request for an expedited hearing on this motion to delist, which as we noted, is next Tuesday.

And what will be argued by both sides will be, should this patent be listed in the Orange Book? That will be a major part of that hearing. And for reference purposes, all of the documentation, all the briefings from both parties, what work on this specific matter were completed by the end of August. So it's been briefed fully for quite some time.

So on Tuesday, will be the chance for both sides to issue their - argue their sides, respectively. The outcome of that, we would expect to be one of two things. The court will either agree with us that, that patent is not Orange Book listable because of the nature of that patent or won't agree with us.

If he agrees with us, if the court agrees with us, then we would certainly go down the path of - expect it to go down the path of a request to have that patent delisted, and we would immediately begin our work to transition from a tentative approval to a final approval decision. So in this case, there will be two steps.

It will be a delisting required [Technical Difficulty] and then subsequent to that will be the FDA's final approval decision. So in terms of timing and how and when that will occur, will the judge rule from the bench or not? We have no insight from that perspective.

We're just pleased that he has granted our expedited request for the hearing and look forward to Tuesday's meeting..

Perfect. Thank you very much..

Your next question comes from the line of Ami Fadia from Needham. Your line is open..

Hi. Good morning, everyone. Thanks for taking my questions. Firstly, I wanted to understand how you're thinking about sort of coverage of FT218 in the context of the possible entry of generic XYREM early next year, as well as how you're thinking about contracting with payers.

Can you give us some color around some multi dynamic there? And then how are payers thinking about or what feedback have you received from payers with regards to the potential of patients from XYREM or XYWAY switching on to FT218 in the future? Thanks. And I have more questions later. Thanks..

Richard, do you want to take that?.

Yeah, sure. No, great questions. Thank you. First, it's been just great for the team to be out in front of the payers again, one-on-one meetings. Also, this fall, the PCMA and AMCP meetings. Overall, our basic strategy, as we've stated several times, has been to really seek parity coverage compared to the branded oxybate as well.

And when we think about our conversations with the payers. Well, first and foremost, we've always assumed generics and authorized generic will be in the market by the time we launch. And the general feedback that we sort of hear from the payers is, they're really treating the - at least the authorized generic is really more of a brand extension.

Most people are predicting that it will be priced similar to other authorized generic potentially in about a 15% price discount range compared to the brand. But also keep in mind that XYREM is currently priced about 8.5% more expensive than XYWAY And so our overall strategy, once again, is really more parity.

So when we think about our sort of contracting sort of philosophy, first and foremost, we're going to be going through what others haven't, which is contracting directly with the 3 GPOs before we launch. So we're well under our way with our conversations across the 3 major GPOs.

And what I can sort of say is, I think the feedback has been really positive. They've sort of had - oxybates have had really no competition for 20 years. So the fact that there's another branded compound coming to marketplace, I think the payers have really enjoyed the conversation. I mean, we're not naive.

We know that they want to leverage us in their conversations. But the one thing I'll say the team has done an excellent job of, it's also really conveying our clinical value proposition across the board as well. So we feel like we're in the right place where we need to be with the payers right now.

And we're really sort of impressed with the progress that we've made so far with the GPOs. And also, the PBMs around the downstream coverage decisions is later. So we really think we're sort of right in the right sweet spot right now with where we should be with the payers today..

Great. Thanks. And my second question is, can you help us sort of set expectations for how to think about the ramp next year? Let's just assume for that purpose, but it will be some time after June. So in that context, two things I wanted to understand better.

How long would it take to really get the rents up and running, given that you have to wait until approval to start to seek sort of physicians to sign up and get familiarized with the new processes. And where are the early adopters coming from? Would it be XYWAY or XYREM? Thanks..

Yeah. So I think, on the first question, we don't view the actual REMS build out to be a rate limiter in terms of impacting our timeline post an approval. We certainly will be actively engaging with physicians' post and approve. We certainly can engage with physicians on REMS to register them, so on and so forth until after a final approval, for sure.

But we don't view that as a significant rate limiter relative to our timing from an approval to a launch. What at one point previously was going to be upwards of 6 months, we've significantly condensed that down, given the work that's been done to date and will continue to be done prior to a final approval decision.

And Ami, I'm sorry, your second question regarding REMS that you had the question on, could you just restate?.

The second part on REMS was, how long do you think it would take for physicians to familiarize themselves with the new processes or sort of the form that needs to be filled to send a patient to your sort of patient support hub? The other question I had was just around, where do you see early adopters coming from, whether it would be from XYREM or XYWAY?.

Yeah.

Richard, do you want to take that question?.

Yeah. So maybe first, as far as sort of the timing for the physicians. Obviously, REMS certification is really a critical component to make sure that we have the right and appropriate use of our products. But it's not a really laborious process. People in essence, really familiarize themselves to the PI and some training on board.

So it shouldn't take very long. And it's not dissimilar to what has been done in the past, but clearly, we have our own unique label. So we don't see that as really a long process, Ami. And as far as sort of where do we see the sources business coming from.

From our market research that we've just done this latest wave, the candid answer is, pretty much all segments of prescribers and types of patients. Clearly, there's a lot more familiarity with current high oxybate prescribers. But we see from our research that both, XYWAV and XYREM patients are very interested in learning more about LUMRYZ as well.

And we've also sort of seen a bit of a tapering of XYWAV uptake in the marketplace as well. So we see great opportunities as XYWAY patients tend to be more motivated for earlier doctors as we've done - seen from our market research. And for the XYREM patients, our value proposition is probably even more - is very clear for them as well.

So we're going to be focusing our initial efforts really on the high users within the marketplace, will clearly support all users. But at the end of the day, what our research continues to sort of show is, we have great opportunities within the current oxybate prescribers. There are high volume, the low volume ones.

And what was really interesting for us to sort of see in this latest wave of market research is, for current narcolepsy prescribers who don't use oxybate, almost half of them said, they would want to prescribe LUMRYZ when it becomes available as well. So we'll sort of time those out over the first stages of launch.

But we're just really delighted to sort of see that the LUMRYZ value proposition comes across very clearly to all of our segments that we're trying to speak to..

Yeah. The only thing I would add to Richard's comment, Ami, is that these 30,000 to 35,000 patients that we've described in these three segments, they really predominantly fall within that highly concentrated source of business, the 1,600 physicians that make up 80% of that volume. It's all within that same group from that standpoint.

So as Richard referenced is kind of the high oxybate users, it is a very concentrated opportunity for us where the lion's share of our opportunity exists. So thank you..

Got it. Thank you..

And your next question comes from the line of Chris Howerton from Jefferies. Your line is open..

Hey, good morning. Thank you so much for taking the questions.

I guess two for me would be with respect to the ongoing RESTORE study, could you give us a sense of the durability that you're seeing of patients on LUMRYZ and just how that might translate to persistency on the commercial market? And then I appreciate all the kind of discussion with respect to launch readiness.

Could you give us a little more understanding in terms of what specifically you expect your commercial team to look like? And maybe a little bit more about the distribution and timing of hiring for that team. Thank you..

Yeah. Thanks, Chris.

Jen, do you want to start on RESTORE?.

Yeah, absolutely. Good morning, Chris, thank you for the question. So just to level set, the RESTORE study began in March of 2020, obviously, coinciding with when the pandemic started. What we put out this October is that we've had about 27% of participants discontinue in this study.

So being open label and the fact that these participants are having to travel to the clinical trial site once a month to pick up their medication because it is a Schedule 1 until the point of approval, we are not surprised by that rate of discontinuation.

In fact, I could have understood if it were higher with the requirement to travel to those sites on a monthly basis. I think what we're most pleased about is that there's a very low rate of discontinuation due to adverse reactions. In October presentations, we had noted that it's about 5% of participants who have discontinued due to adverse events.

And we know that tolerability can be one of the biggest challenges with taking any oxybate formulation..

Thanks, Jen..

That's really helpful. Thank you..

Richard, maybe you can just kind of frame up kind of the commercial team we'll be building toward?.

Yes, super. No, thanks for the question, Chris. So first, as we've mentioned previously, we retained some of our key skill sets so that we could obviously keep our momentum going for our launch readiness here. Overall, what we've sort of stated is our goals to have somewhere around 50 sales representatives out there.

As Greg had mentioned, there's 5,000 prescribers, 1,600 make up 80% of the volume. So we know that we can cover all of those prescribers with that sales team. We also will have other key field members such as our field reimbursement team that we will have out there as well.

We have - as mentioned, we have just begun hiring some folks back into the mix here as well. And what we'll be building backwards from is sort of that backstop of that June approval date. But obviously, we're trying to remain flexible, depending on where some of the hearing outcomes become as well.

So the buildup has begun in a very targeted way, but we're going to make sure that we're ready to peak at the latest for a June approval of next year..

Awesome.

And Greg, do you mind if I maybe sneak in one more follow-up?.

Go ahead, Chris..

Okay. Great. And Tom, I'm really happy to see that you purchased some of the notes that were due in February, I guess.

Is that still kind of the plan to be potentially opportunistic for those notes that are still outstanding? Or any additional comments you want to make around the strategy there?.

Yeah. No, it is opportunistic in nature, Chris, and we had a good opportunity to buy some dose back at a discount. Our commentary in the last couple of months is that our assumption with regards to cash runway is that the notes that come due in February need to be settled in cash anyway.

So we were able to just accelerate the purchase a little bit and save some money along the way..

Okay. Well, that's awesome, like I said, nice to see. And thanks for taking the question..

Thanks, Chris..

Your next question comes from the line of Adam Evertts from LifeSci Capital. Your line is open..

Great. Thank you. One sort of clarification for me.

On the survey data mentioned by Richard on this call, is that a new survey or additional details from prior surveys? And I guess, either way, do you expect to present those data at a medical meeting or other format in 2023?.

Yeah. It is a new - it's new research. We're constantly updating and refreshing our understanding of the market. So this is some data from a very, very recent large quant study that Richard referenced. And I don't know if we'll present that specific data in a scientific congress.

But we'll certainly continue to provide some of these insights and learnings as we go forward, both in these sorts of events and then potentially at a future kind of prelaunch commercial day..

Great, awesome. Thank you..

Your next question comes from the line of Marc Goodman from SVB. Your line is open..

Greg, first, just on the legal stuff.

If the Delaware Court next week gives you a negative outcome, right, the patent should be listed, then is there anything left? I'm trying to remember if there are any other issues that you could do? Or is that it, we're waiting until June?.

Yeah. I think that's the primary - depending on the ruling next - whenever it occurs after next Tuesday, the base case assumption is June 17 expiry and an approval decision post that. Otherwise, whatever happens next week will either give us an opportunity to bring that up a little earlier, potentially depending upon timing.

And otherwise, as Richard described, we're operating toward the base case of June..

Right. I'm just saying like the administrative process that got thrown out, this is the result of the Markman hearing. So basically, like this is it, right? I mean, if it goes negative, fine, okay. We'll just go to that scenario where it's June, right? There's nothing else that you're going to do legally..

Yes. There's no other legal matters, if you will, pending that could react or result in something sooner, correct..

Right. Okay. Good. And then just to be clear, on the positive outcome, it's unclear if we figure out right then and there next week if it's a positive view or if it takes - what do you think? It could be a couple of weeks. It could take a month.

How long do you think this judge is going to take?.

It's really too difficult to predict, I would say. It would be inappropriate from that standpoint. We're pleased that after the claim construction hearing on October 25, it was only 3 days later that he decided to grant us our request for this expedited hearing.

So again, we believe the court understands the matter quite well and the urgency that we've expressed accordingly and are glad the hearing is less than 7 days away from now..

Got it. Okay. Thanks.

And then, Tom, just on managing through with the finances, I guess, number one, have you tapped the ATM at all? Don't you have that ability?.

Yeah, that's right, Marc. And what we - it's in our 10-Q, we raised about a little over $10 million during the third quarter from sales off the ATM. But if we - that is a no - that's right..

Right.

And so is that included in the $106.5?.

It is, yes..

Okay. And then I'm sorry, I just I didn't catch the date.

When did you buy the $9 million in the open market for the convert?.

It was over the course of the third quarter. So there was no single purchase..

Tom.

The convert was a recent purchase?.

The note. My apologies, Marc. No, we repurchased the notes in the open market just earlier this month actually. It was just about a week ago..

I see. Okay. And how have discussions been with the convert holders in general? I mean I would - I guess rates have really backed up pretty darn quickly.

So what's been the discussions like?.

Listen, I think I would characterize them as constructive. We haven't done any formal engagement with the convertible note holders. I think they, like us, are being deliberate in our approach. We want to see how this next legal proceeding plays out for the hearing next week, before making decisions on what to do.

But I would generally characterize our discussions as constructive..

And have you, as a management team, also been in discussions potentially with doing some type of royalty deal? Have those discussions started as well? And is everything kind of hinging on waiting to next week before anything moves forward?.

Yeah, fair question, Marc. And over the last several months, we've been really consistent in our thinking and our communications that we do want to see how these - the legal things played out. Of course, we know how the DC 1 played out and we have Delaware coming up next week. We're looking at all options.

And the time to execute and the form of finance we may pursue. It's - I wouldn't necessarily say that the legal proceeding is a gating item to us, but we do want to see how it turns out, because a favorable outcome, of course, just puts us in a better position.

And as Greg noted earlier, a decision that's not in our favor puts us to a base case and a planning timeline of June of next year towards an approval decision..

Yes. The other thing I would add, Marc, that - just I would just add, Marc. We've been quite -- I would say a couple of things. One, we've been very prescriptive in our thinking about financing the company and the launch.

And this - and the notion and the consideration of a form of committed capital that comes upon the approval and upon the launch, for us with over $100 million of cash on hand, is every bit as valuable as cash in the balance sheet today.

So we've had extensive discussions with a number of parties who do think - who could potentially be sources of that sort of committed capital in the future upon the advancement in progress of the NDA to a final approval. So again, I don't want to send the message that we're just waiting for, after the hearing.

Like we've done a lot of work to put ourselves in a position to begin to execute coming out of next week or whenever that ruling is and recognizing that the timelines between an approval decision after next week, if it goes in our favor or in June of next year, have become compressed a little bit and have begun to converge on themselves.

So we're actively involved in solving how we fund the company at launch and through the lens of, what's in the best interest of our shareholders for sure..

Thanks..

And your next question comes from the line of Matt Kaplan from Ladenburg Thalmann. Your line is open..

Hi, good morning.

And I just wanted to zero in on the kind of the sodium oxybate narcolepsy, cataplexy market dynamics that you're seeing and hearing out there after attending these meetings recently in discussions with payers, PBMs? What's your sense in terms of the impact of and what's going on with the low salt [ph] twice-nightly product out in the marketplace? And I guess, secondly, you mentioned kind of the 3 components of the 30,000 patients.

What's your sense in terms of being able to expand the sodium oxybate market after full approval and launch?.

Thanks, Matt.

Richard, do you want to take that?.

Yeah, sure. Thanks, Matt. So first, as far as the payers are concerned, they are very on top of what's been going on in the marketplace. And as I mentioned before, we've had really great conversations with them.

Maybe one sort of thing I can add that I didn't mention before is, when payers are thinking about sort of switches, how to look at AGs, one of the benefits that we have coming to this marketplace of that sort of more than 30,000 patients that have been treated, the vast majority have already been exposed to an oxybate.

So we're very confident that payers will acknowledge that they've already experienced an oxybate before, which bodes very well for us even in light of an AG or anything coming to the marketplace. So overall, as far as the payers are concerned, we think we're very well positioned.

And as we think about where the market will expand, what we've learned from this market research that we did most recently is, there's still quite a few patients that are viewed to be oxybate eligible who are not receiving oxybate, probably greatest within low oxybate users currently and non oxybate users, clearly.

So we a see opportunities there for them to just prescribe to patients they've already identified and including the opportunity in longer term is to get more de novo patients into the mix here as well.

What we sort of see from our research is - from this latest round is that the market should grow by at least 50% with the introduction of LUMRYZ in the marketplace with once again, the largest percentage growth coming from lower users who probably have really struggled with the proposition of twice-nightly oxybate in the past.

So the good news is, we see growth opportunities within the high oxybate users still but maybe even a higher percentage of growth opportunity from lower and clearly getting some non-prescribers into the mix as well..

Okay. That's helpful. Thanks for the added color..

[Operator Instructions] Your next question comes from the line of Chase Knickerbocker from Craig Hallum. Your line is open..

Good morning, everyone. I just want to put a finer point on some of the questions Chris asked. Around the ramp of your commercial capabilities, what specifically has been added in this first tranche of hiring, I guess, you mentioned on the call, some key field personnel on the MSL [ph] side.

Is it some of the management around sales capabilities? And I guess, assuming base case of June approval, how should we think about the ramp of sales personnel hiring? Richard, what kind of timeframe do you want most of the reps on board to be able to really get them trained up in preparation for launch? Thanks..

Thanks, Chase.

Richard, do you want to start?.

Yeah, sure. Hey, Chase. So yes, we - just a couple of areas that we have focused in on the initial wave is, we have hired a new head of sales, so that we can get the framework for the sales force going. And we've also selectively added some more of our payer resources as well with where we are in our conversations with the GPOs and the PBMs as well.

So we'll be sort of selectively adding to a few places, clearly balancing sort of the financial sort of situation with our need to grow. But once - and if you think backwards to June, our goal is to really peak at the right time.

And with the fact that we've now compressed the time from a final approval potential decision in June, to a 3Q launch, our goal is to bring on a lot of our field force before that approval timeline as well, because we want to make sure that they are familiar with the territory, with their customers and everything as well.

So we continue to sort of balance the need. We're sort of in a position to be able to pull that off. But as Greg and Tom have mentioned, also still balancing sort of where we may wind up with some of the proceedings from both, legal and the financial raises as well. So I feel, right now, we're in a really good spot.

The great news is there's been a lot of interest in people wanting to come join Avadel. So with the folks that we've retained and kept here, and our plans around building out once again, our goal is to really peak at the right time to sort of be ready for that June backstop date..

Yeah. I think, Chase, I would just add to that, that we've got a really kind of disciplined approach and a detailed plan of how we build toward a June decision and then a launch thereafter. And then how do you pull that up if you have any - in the event there's good news and that decision comes sooner, right, from that standpoint.

So again, I think it's all mapped out. We know where kind of things that got -- that are longer kind of poles in the tent that require more work leading up into those days, and those are the roles that Richard noted that we'll bring on board. So I appreciate the question..

Yes. Helpful color. Thanks. And then just 1 last for me, if I could. Around a potential positive outcome if we make that assumption, being at its - we're sitting in November now. I mean, what does it accelerate your kind of thinking on potential approval with those extra regulatory matters and getting the patent deal less that needs to happen.

In your thoughts, what is it kind of due to accelerate approval now that we're in November. Thanks..

Yeah. Again, I think, there is two steps to that process. The first is getting a decision from the court and then that results in the delisting and then the FDA making a final approval decision that we obviously would be working to want to have done as soon as possible from that standpoint.

But any sort of positive momentum that create - that moves us in that direction earlier than June is just upside from our standpoint, recognizing that we're only 7 months away.

So I think that we've noted that the timelines have converged a little bit from that standpoint as the cases in Delaware have slipped a little bit, but we're certainly pleased that this important hearing is taking place next week from that standpoint.

I think ultimately, it really is a function of the difference between launching, as we've said kind of in Q3, if we go to June and launching before that, if we - if a decision and approval come sooner. And any launch earlier, quite frankly, is better, simply put from that standpoint..

Yeah, understood. Makes sense. Thanks for the question, guys..

Your next question comes from the line of Paul Matteis from Stifel. Your line is open..

This is James on for Paul. Thanks for taking our question. Maybe just a quick clarifying one on DEA scheduling. I guess, can you remind us the latest there? And is there anything that needs to happen there post full approval? And would that be kind of gating to any other kind of prelaunch activities that need to occur? Thanks so much..

Yeah. Thanks. There's - first of all, congress has already determined what the scheduling requirement of sodium oxybate is or oxybate product is a Schedule III. So anything that has to happen administratively whether it be from DEA related or whatnot, isn't a rate limiter relative to us coming to market from that standpoint.

It's not - it's all contemplated in our consideration of timing. If we had an approval after June 17 and an expectation that we would launch therefore in Q3, we'll be - certainly be ready to launch in Q3, that contemplates any of those sorts of matters..

Got it. Thanks. That's helpful..

Thanks, James..

And there are no further questions at this time. This does conclude today's conference call. We thank you for your participation, and you may now disconnect..