Avadel Gets New $23/Share Acquisition Proposal From Lundbeck; AVDL Up Over 16% In Pre-Market

Avadel Pharmaceuticals (AVDL) has received an unsolicited acquisition proposal from H. Lundbeck A/S for up to $23 per share, consisting of $21 in cash at closing and up to $2 in contingent value rights tied to future sales milestones of LUMRYZ and valiloxybate by 2030. This new offer exceeds Avadel's existing agreement to be acquired by Alkermes Plc (ALKS) for up to $20 per share, which included $18.50 cash and a $1.50 CVR contingent on LUMRYZ FDA approval. Avadel's board is currently evaluating the Lundbeck proposal, leading to a 16.94% surge in AVDL shares to $22.50 in pre-market trading as investors anticipate a potentially higher acquisition price.

Analysis

Avadel Pharmaceuticals (AVDL) has received an unsolicited acquisition proposal from H. Lundbeck A/S, offering up to $23 per share, which includes $21 in cash at closing and two contingent value rights (CVRs) totaling $2. This new offer significantly surpasses Avadel's existing agreement to be acquired by Alkermes Plc (ALKS) for up to $20 per share, comprising $18.50 cash and a $1.50 CVR.

The Lundbeck CVRs are tied to future sales milestones: $1 per share if LUMRYZ and valiloxybate collectively reach $450 million in annual U.S. net sales by December 31, 2027, and another $1 per share for $700 million in annual sales by December 31, 2030. In contrast, the Alkermes CVR is contingent upon final FDA approval of LUMRYZ for idiopathic hypersomnia by the end of 2028, presenting different risk profiles for the contingent payments.

Following the announcement, AVDL shares surged 16.94% to $22.50 in pre-market trading, indicating strong investor optimism regarding the potential for a higher acquisition price. Avadel's board is currently evaluating the Lundbeck proposal to determine if it constitutes a "Company Superior Proposal," which could lead to a revised bid from Alkermes or the acceptance of Lundbeck's offer.

Key Decisions for Investors

• Investors should closely monitor Avadel's board decision regarding the Lundbeck proposal, as it could trigger a revised offer from Alkermes or lead to the acceptance of the higher bid.
• Evaluate the specific conditions and timelines associated with both the Lundbeck and Alkermes CVRs to assess the likelihood and risk of realizing the full contingent value.
• Consider the current trading price of AVDL relative to both acquisition offers, weighing the potential for arbitrage against the risk of either deal failing to materialize or being renegotiated.