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Why Shares of Micro-Cap Biotech Avadel Are Ripping Higher

Why Shares of Micro-Cap Biotech Avadel Are Ripping Higher

Micro-cap biotech Avadel Pharmaceuticals PLC (NASDAQ: AVDL) was adding about one-half to its market capitalization Monday on roughly 27 times the average trading volume.

What Happened

The FDA has agreed to Avadel's proposed changes to the statistical analysis plan for the Phase 3 REST-ON study, which will result in a reduction to the sample size as well as the estimated time of completion, according to the company. 

The REST-ON study is a double-blinded, randomized, placebo-controlled late-stage trial evaluating the efficacy and safety of once-nightly FT218, a formulation of sodium oxybate using the company's proprietary Micropump technology for the extended-release oral suspension in treating excessive daytime sleepiness and cataplexy in patients suffering from narcolepsy.

Avadel said the study will now evaluate 205 patients versus the initially targeted 264 patients, with 193 patients already having been enrolled.

The company now expects completion of enrollment by the end of 2019 and is targeting a top-line data readout in the second quarter of 2020.

This is one year ahead of expectations to complete enrollment, according to Avadel. 

Why It's Important

Drug development is a laborious, time-consuming and expensive exercise. The time and resources Avadel can now save on developing FT218 due to the FDA determination come as a windfall for the company.

"This REST-ON clinical trial update is a direct result of an overall strategic review of the entire FT218 program. The addition of our recently appointed medical and clinical team members was instrumental in this important development and their contributions have put us on track to save significant time, resources and capital in the completion of the REST-ON clinical trial," Avadel CEO Greg Divis said in a statement. 

Once-nightly FT218 has been accorded Orphan Drug Designation by the FDA for the treatment of narcolepsy, or excessive daytime sleepiness, on the premise that it could be clinically superior to a formulation of sodium oxybate that is already approved by the FDA for the same indication.

The twice-nightly product currently marketed is estimated to have an annualized market potential of $1.6 billion. Avadel's once-nightly formulation, because of its superior efficacy and safety, could take a significant share of the market, the company said. 

Avadel shares were trading higher by 34.42% to $4.54 at the time of publication Monday. 

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