Avadel Pharmaceuticals PLC (AVDL) 2020 Q3 法說會逐字稿

Greetings. Welcome to Avadel Pharmaceuticals' Third Quarter 2020 Earnings Call. (Operator Instruction] Please note, this conference is being recorded. I will now turn the conference over to your host,

Tom McHugh, CFO. Thank you. You may begin.

Good morning, and thank you for joining us on our conference call. This morning, we issued our third quarter financial results news release, which 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 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, including the Form 10-K for the year ended December 31, 2019, which was filed on March 16, 2020, 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 with me today is Greg Divis, our Chief Executive Officer, and I will now turn the call over to him.

Thank you, Tom. Good morning, everyone, and thank you for joining us on our third quarter 2020 conference call. I will begin with several important updates on our business outlook, highlighting the significant progress made in key milestones achieved over the past several months. I will then turn the call over to Tom, who will review the financial results for the quarter, and we will conclude with a Q&A session.

First and foremost, as we progress toward what is the most significant milestone in our company's history to date, Q3 2020 has been a quarter where, although we had very little to say publicly, we made significant progress in identifying and unlocking substantial future potential value for our shareholders. With the continued progress on the regulatory front, including the pending filing of the NDA for our once-nightly FT218, coupled with the significant identified market expansion opportunities for a once-nightly sodium oxybate treatment, we are more excited than ever about the future for Avadel, our shareholders and the patients we serve.

With that, let's get into some details. Our team has continued to execute on or ahead of our expectations as we have advanced from top-line data in the second quarter through to full data analysis, pre-NDA meeting, ongoing productive regulatory interactions and are now finalizing our NDA for submission before year-end. I'm proud of our team and their commitment to achieving this next important milestone in our pursuit of bringing once-nightly FT218 to thousands of patients with narcolepsy who we believe are dissatisfied with their current treatment options. As we have stated in the past, we are committed to delivering this NDA to submission ahead of recent competitor benchmarks. And with our planned filing before year-end, we will do just that. I'm confident that we are compiling a robust and complete NDA for FT218, which includes the results from the REST-ON study. These results show that all 3 doses tested demonstrated statistically significant and clinically meaningful improvement for all 3 co-primary endpoints compared to placebo. Furthermore, we have completed our analysis of the secondary endpoint data, which showed that FT218 was highly significant for endpoints that tested additional measures of daytime sleepiness, sleep architecture and other narcolepsy symptoms compared to placebo at all 3 doses. The full data demonstrated that FT218 was positive on all sensitivity analyses of the 3 co-primary endpoints, thus confirming the robustness of the data.

Additional subgroup analysis of the REST-ON study demonstrated comparable results of FT218 in both narcolepsy patients with and without cataplexy, as well as those on concomitant wake-promoting agents compared to those not on wake-promoting agents. In addition, results from responder analyses for the maintenance of wakefulness test and mean weekly cataplexy attacks further supports the potential clinical benefits of FT218.

If approved, FT218 could be the first once-nightly therapy to address both excessive daytime sleepiness and cataplexy in patients with narcolepsy. The complete clinical profile of once-nightly FT218 from primary endpoints, the secondary endpoints to post hoc responder analyses has demonstrated statistically significant results indicative of a narcolepsy treatment option we believe, if approved, can truly help patients. With that said, in order to preserve our ability to present these and more data at future medical conferences or have it published in peer-reviewed journals, we are not offering more specifics at this time. However, we look forward to presenting this data in detail as well as very interesting and compelling post hoc data at scientific conferences throughout 2021 and beyond.

We are pleased with the progress we have made in Q3, specifically as it relates to our NDA and are confident in our regulatory and filing strategy via the 505(b)(2) pathway. We look forward to keeping our shareholders and all interested stakeholders updated on its submission, and we currently plan to notify you at the time of our submission as well as when we receive FDA's confirmation of acceptance.

In parallel with preparing the NDA for filing, we have continued to execute our market preparation plan. Inclusive of this has been a recently completed FT218-specific commercial assessment in what has now become a very dynamic narcolepsy marketplace. This comprehensive assessment has yielded additional very positive insights into the significant potential opportunity for FT218 to bring a meaningful therapeutic option to not only currently treated patients but also a large contingent of patients who are candidates for sodium oxybate treatment but are not currently being treated. Simply stated, our research informs us that as many as 60% of sodium oxybate eligible patients are not receiving treatment today, with the primary reason being twice-nightly dosing related challenges. In fact, current or previously treated twice-nightly sodium oxybate patients ranked once-nightly dosing as the most important driver of their treatment preference, placing it higher in importance than efficacy and side effect profile.

Furthermore, our analysis of 5 years of sodium oxybate patient claims reveals that nearly 50% of all newly treated twice-nightly sodium oxybate patients discontinued their treatment within 12 months of initiation, with nearly half of that group discontinuing within the first 30 days, which we believe speaks to the dissatisfaction that exists with current twice nightly treatment options and most importantly, provides further support for the significant potential market opportunity for once-nightly FT218. The 60% of sodium oxybate eligible patients who are not receiving treatment today, based on our estimates, represents approximately 22,000 patients in addition to the roughly 15,000 patients who are currently treated with twice-nightly sodium oxybate. We believe these findings point to a significant opportunity for FT218 above and beyond the current and nearly $1.8 billion twice-nightly marketplace. This comprehensive market assessment includes in-depth research with over 200 sodium oxybate prescribers, over 220 current or previously treated sodium oxybate patients, more than 75 caregivers, more than 20 office or nursing staff from sodium oxybate treating offices and 15 large national and regional health plans and PBMs, representing a significant majority of insured lives.

Furthermore, we analyzed over 5 years of narcolepsy patient claims data as diagnosed and treated, representing over [160,000] unique narcolepsy diagnosed patients, including more than 14,000 sodium oxybate patients. The specific and cumulative analysis of this data has provided deep insights in framing our go-to-market strategies and valuing the opportunity for FT218 for patients and for our shareholders. We unequivocally believe, based on our insights received from large cohorts of treating physicians, treated patients and caregivers that once-nightly FT218, if approved, will be an important treatment option when considered in light of other GHB-derived treatments. In this regard, we have and remain committed to the science and the evidence as being the driver of quality patient care, and we believe the science and the evidence is on our side.

Taking this a step further, a recent peer-reviewed article published in sleep medicine evaluated more than 60 research studies in human subjects and examined the data surrounding cardiovascular risk associated with sodium oxybate treatment. In almost 2 decades of use in the treatment of narcolepsy, sodium oxybate has demonstrated an excellent cardiovascular safety profile. Increased cardiovascular risk, such as incidence of hypertension related to its sodium content, has not been flagged as a therapeutic issue in the vast majority of patients. And the article concluded that existing evidence does not support an increased cardiovascular risk due to sodium oxybate exposure even at a 9-gram daily dose. A link to this study is included in our press release.

During the third quarter, we also announced the initiation of the RESTORE study, an open-label extension and switch study to evaluate patients switching from twice-nightly sodium oxybate to once-nightly FT218. In addition to gathering longer-term data with once-nightly FT218, the RESTORE study also provides us an opportunity to generate important data for physicians on switching patients from twice nightly sodium oxybate to once-nightly FT218. We believe this data will be useful for clinicians in the future and for Avadel in our commercialization efforts for FT218, if approved.

Progress has continued in our enrollment of RESTORE as more sites become activated under the COVID-related requirements. We are pleased with the high level of interest, especially from current twice-nightly patients, where we are seeing nearly all treated switch patients being stabilized on the same or lower dose of once-nightly FT218 compared to their previous daily dosing of the twice-nightly product. Although it is early in the trial, we are pleased with what we are learning and will update the market as appropriate. And please note, this trial is not a requirement for our NDA and has no material impact on our pending NDA submission.

The third quarter was a period of significant progress for Avadel. The advancement of our NDA toward an expected filing before the end of the year, coupled with the significant market opportunities we continue to uncover, both reaffirms the strategy we embarked on over 20-months ago as well as, most importantly, reinforces our opportunity to create significant value for our shareholders and the patients we serve.

Before I provide a few closing remarks and open up the line for a brief Q&A session, I will turn the call over to Tom to provide an overview of our financial results for the quarter. Tom?

Thanks, Greg. As previously announced, on June 30, we completed the sale of our sterile injectable drugs to Exela Sterile Medicines. And as a result, we did not report revenue for the third quarter of 2020. As a reminder, total transaction value was $42 million, of which we expect to receive $25.5 million in 2020, and the remaining balance of $16.5 million will be collected in the first half of 2021.

R&D expenses were $5.6 million in the third quarter 2020 compared to $7.5 million in the third quarter of 2019. This decrease on a year-over-year basis was primarily attributed to the completion of the FT218 clinical study during the first quarter of 2020 as well as lower headcount due to the restructuring activities initiated during 2019. The SG&A expenses were $8.4 million in the third quarter of 2020 compared to $5.3 million in the third quarter of 2019. The year-over-year increase is primarily the result of higher stock-based compensation, professional fees and market preparation costs related to FT218.

Net loss for the third quarter 2020 was $11.7 million or a loss of $0.20 per diluted share compared to a net loss of $8.9 million or a loss of $0.24 per diluted share for the same period in 2019. The increase in net loss is primarily the result of the year-over-year decline in revenue due to the sale of sterile injectable products on June 30, 2020. The decrease in diluted loss per share is due to a higher number of shares outstanding, resulting from equity issuances completed during the first half of the year. Before I discuss our path -- pardon me, before we discuss our cash position, just a brief comment on the year-to-date tax benefit of $9.3 million reflected on the income statement. This was largely driven by an income tax benefit of $9.5 million we recorded in the first quarter of 2020, which resulted from the passage of the Coronavirus Aid, Relief, and Economic Security Act or CARES Act. The CARES Act allows us to carry back net operating losses to periods when the statutory tax rate was 35% versus our current tax rate of 21%. The 14% rate differential when applied to our NOLs represents the majority of the $9.5 million benefit. Cash, cash equivalents and marketable securities were $231.6 million as of September 30, 2020. We believe our current cash on hand, plus the remaining collections from the June 30 sales transaction will support our expected financial requirements to complete the NDA submission, compile additional supporting scientific data to position FT218 in the market and ramp up our market preparation of FT218, which includes both preparing FT218 for the market and preparing the market for FT218.

Now I'll turn the call back to Greg for closing remarks.

Thanks, Tom. In closing, we are pleased with the execution against our strategic plans and our current position as we prepare to submit the NDA for FT218. I'm very proud of every team member's contribution to this effort, especially over the past several months as the world had faced COVID-19. We are here today as a result of the support of our shareholders, the alignment and commitment from our Board of Directors and the hard work of a talented and committed team that continues to deliver on key milestones even during these unprecedented times.

Rest assured that the Avadel team is hard at work and committed to providing the best results for all stakeholders, including patients, providers and our shareholders. Looking ahead, we remain focused on and committed to achieving the regulatory and market preparation milestones for the FT218 program that will maximize shareholder value and bring a potentially meaningful treatment option to the tens of thousands of patients with narcolepsy who could potentially benefit from FT218.

We look forward to providing investors and all stakeholders with further updates in the future. And with that, we're ready to open the line for Q&A. Operator?

[Operator Instruction] Our first question is from Ami Fadia with SVB Leerink.

This is [Ethan] on for Ami. Jeff has made a point of emphasis earlier this month on the benefits of low sodium, and it appears this will be sort of a core marketing message for Xywav. Maybe help us understand, how well understood is this low-sodium proposition among fleet positions or maybe also from the payer side in terms of the potential for reduced sodium load to lower downstream health care costs?

Well, thank you for the question. Again, I think, first and foremost, from our perspective and talking to all of our stakeholders, despite being -- having limited presence in the marketplace and despite not being out there for a number of months, if not years, talking about things like once-nightly FT218, we're very pleased with the research and the feedback that we're receiving on the value and the opportunity for FT218. Whether we're speaking to patients or whether we're speaking to health care professionals who are treating physicians. And we're not talking to one physician here or one physician there, talking to low-large cohorts of treating physicians who report back when looking at our product profile in the presence of a very dynamic narcolepsy marketplace, once-nightly FT218 shows out very, very well. So we're very excited about the prospects of the value and the opportunity for once-nightly FT218. We certainly have heard in our research that there is a cohort of patients who could benefit from other formulations of sodium oxybate, whether that's due to comorbidity issues or other matters. And we think having more treatment for patients is better than -- in treatment options for patients is better than not. But we're very focused on bringing once-nightly FT218 to the market because we believe it has largely universal appeal for large cohorts of potential patients who either are and aren't happy or haven't been treated and could be treated with sodium oxybate in the form of a once-nightly FT218.

Okay. That's very helpful. Maybe just a quick follow-up. Now with Wakix having gotten to cataplexy indication, maybe just curious what your research sort of suggests in terms of their impact on us?

Again, we -- as we've completed a lot of this recent commercial assessment, we've been able to factor in the role of new treatments that have come to the market in the last number of months, if not 18 months or longer, including recent approvals. And again, in the context of that research very recent, certainly, we see the use of pitolisant in certain places, in certain patients from that perspective, and we believe the same thing, having more treatment options for patients is a good thing. We remain highly, highly encouraged by what our research has told us. Both in the terms of where once-nightly FT218 will fit in the treatment options for patients and for health care professionals, we feel very pleased with what we've learned from a market expansion standpoint where nearly 6 out of every 10 patients identified by treating physicians as candidates for sodium oxybate therapy but are not going on treatment, primarily due to dosing related challenges, create a whole additional opportunity for us in a very targeted audience that we think can create meaningful value for patients and equally as important, meaningful value for our shareholders.

Our next question is from David Amsellem with Piper Sandler.

So just 2. So just -- maybe, Greg, if you can remind us mechanically how potential litigation with Jazz would work once you have submitted and have an accepted NDA? In other words, when should we think about earliest that Jazz could potentially initiate litigation to potentially force a Paragraph IV certification? Just help us through that process.

And secondly, can you comment on the once-nightly low-sodium oxybate form that Jazz is moving to, at least early stage development? And specifically, your thoughts on the extent to which that product could run sale of your intellectual property. Just remind us your thinking there.

Thanks, David, and thanks for the questions. I think first and foremost, as we speak, are you -- to answer the question about our thoughts on what legal action other companies may or may not take and when they may or may not take it, is certainly a question for other companies. As it relates to asserting a Paragraph IV certification and/or any potential litigation around that, the parties who will determine that will be in exchange between us and the FDA, right? Jazz really has some bearing on enforcing the Paragraph IV certification and subsequently, forcing litigation as a result of that. That is a result of our submission and the FDA's review of our submission. And as we've said publicly numerous times, we're fully and keenly aware of their relevant Orange Book-listed patents. We -- although we share the same drug substance, we are a different drug product. We are an NDA with a different label and our own data. We have shared our data with the FDA. We have shared our proposed labeling with the FDA. We have received feedback that has guided our strategy here. And although we recognize that it's all subject to FDA review, we believe we have a pathway forward from that standpoint. And there should be no basis for future litigation. That being said, we can't speak to what other parties may or may not do.

As it relates to your question on other formulations of sodium oxybate, and what it may or may not do relative to our intellectual property, again, we don't know other than what's been stated publicly or what people have reported on other formulations that other folks are working on, we have been focused on for a number of years of both developing as the first company to really prove and innovate and demonstrate an extend release GHB product can deliver a once-nightly effective treatment, and we are going and have protected that with intellectual property. As we noted, we just had another formulation patent granted in Q3, and we would expect more patents to be granted in the coming months, if not longer, as we continue to prosecute and build our patent estate around this important development and this important innovation that we discovered. So from that standpoint, we will assert our intellectual property rights accordingly. And we feel confident that we have a broad, robust protective IP estate, both approved currently and in development that will not only protect the specifics of FT218, but all GHB-based formulations and not just the molecule of formulation, but how that formulation performs, right? So again, that will play itself out over the future, but we feel very, very confident about what we've developed, where we're going with it and the opportunity we can bring for patients.

Our next question is from Paul Matteis with Stifel.

Great. Yes, just a follow-up on that. Obviously, again, you're in no control over who tries to sue who and when. That said, I'm just kind of curious throughout the review process, what are the time points or actual events during an NDA review that I think you can communicate with us that helps the investment community understand whether or not there's going to be a [30-month day]? Are there other events throughout where you have discussions that kind of reaffirm your conviction in your labeling strategy? Or is this something where we really ultimately won't know until the PDUFA?

Yes. Thanks, Paul. Appreciate the question. And again, I think we've tried to be fairly consistent and as transparent as we can be on this topic, as we think about it, right? Clearly, we'll have an update relative to the acceptance of the filing a day 6 between day 60 and day 74, roughly, when we will modify the status of our filing at that point and the kickoff, if you will, of a defined PDUFA date and whatnot. So that will be the first stage. That certainly reviews the application for its completeness. We don't believe that, that marks a period in time where definitively key questions -- key answers to key questions have been clarified from that perspective. We think it will be a matter of review. And that will go on throughout the review period, accordingly. We're quite confident that we will get very comfortable as time goes on with the direction we're heading and the answers that we're getting in our exchange with the FDA during the review process. But I will say that I don't envision a scenario where we get out in front of a decision on the NDA and tend to clarify matters that are of importance that people want to have the answer to unless for some reason the FDA says it's okay. But we certainly don't want to get out in front of the FDA before they have a chance to rule officially on things. So we've always thought about it as it really coming to light and clarity around the PDUFA date. That being said, we have an obligation unequivocally, if we learn something different along the way that we will need to disclose that right away. So as we think about, the longer we go and no information is shared, there's really 1 of 2 outcomes that could be. One is the FDA has decided on it, and we're in good shape or they haven't completed their review yet, but they certainly -- if we're silent, haven't told us you have to certify yet. Because once -- if they do that, which we don't think will be the case. But if they do, then we will have an obligation to notify the market right away.

Got it. Okay. And just one follow-up on that. For competitive reasons, certainly understand why you guys have been quiet on your DDI data and its implications for your filing strategy. Do you think during the NDA review or at any time point between now and the PDUFA, we'll we kind of learn about the data behind your strategy? Or does it make sense to just still kind of be close to the vest with that?

I think the way we think about it now, it makes sense for us to continue to stay close to the vest and follow the current strategy, which we believe is in the best interest of both the approval and the potential value creation for FT218 in the future.

Our next question is from François Brisebois with Oppenheimer.

Just a first one, to touch on the low-sodium part. Can you just remind us when you do your research of the general age of sodium oxybate patients of narcoleptic patients, is this something where I can understand co-morbidities being a bigger issue with an older population. But can you just remind us of the general population of these patients?

Yes. I mean -- and with patients distributed across -- obviously, across all age groups, when you look at this 5 years and 160,000 narcoleptic patients, patients with narcolepsy that we assessed, including 14,000 twice-nightly sodium oxybate patients over the course of that period, we get a lot of insights and a lot of data, including demographic data. And I think the data is, I would say, 70%, 80% plus of patients are under the age of 55. I think it's, 90% plus under the age of 55. The largest cohort really run between kind of 18 to 44, with the big chunk kind of in the 30s, so to speak. That's the largest -- the average patient is in their mid-30s, the most predominant demographic is female, so on and so forth.

Okay. Great. And then I know you've answered this from many different angles, but there's one more different angle. On the -- in terms of the NDA submission and then the acceptance of the submission and then all the way to the PDUFA, when you submit and then when the (inaudible) gets accepted, is there any way -- just remind us what is publicly available from the submission for a competitor to probably see and start thinking about what they might want to do? Is there anything that's available to find?

There's nothing public during the review period, no. It will not become public until -- post the approval, and then it's really then just really a summary basis of approval that you can get, which isn't the full...

Okay. And then just lastly here, in terms of -- can you just remind us your -- in terms of reps and the process from how long this should take to approval? And then your thoughts about potentially launching the amount of reps that you would need for that?

Yes. I think, again, our assumptions are that we'll have a standard review. We'll be prepared in the event we get a priority review. We are prepared but our base case assumption is a standard review period, which will be 10 months from filing from when we submit here later this year. And then 8-months after the 60-day acceptance window. So the -- so that's our base case assumptions in terms of current time to approval. In terms of sales force, as the largest contingent of folks who we would be bringing on board, that would be a very closer-to-the-end hiring decision relative to when we bring them on relative to time to train them and get them into the market in time such that when we're -- when we launch, we're able to -- we're fully staffed and ready to go.

In terms of numbers, I think we have some assumptions now. We've always talked about somewhere in the neighborhood of probably 50 to 60 reps, in that neighborhood. There's no reason to think that, that number is any different right now. But we'll continue to evaluate that, Frank, given what is the responsiveness of in-person promotion versus virtual promotion in the customers now in a post-pandemic world where things have just changed and how much will they go back to what the way it was versus the way it is. I think those are things we'll continue to evaluate to determine not only how many, but what's the right mix. And from that standpoint. And we certainly appreciate and recognize that under 2,000 physicians represent over 80% of the volume of this business, under 4,000 probably represents more than 90%. And that's the same treating physician base we're doing our research with, who are treating sleep disorders, routinely. And they're the ones who are also telling us that 6 out of every 10 eligible patients who should be on this molecule are not being put on it for -- primarily due to dosing-related challenges. That's where we're going to spend our time, and that's where we're going to spend our focus.

Our next question is from Oren Livnat with H.C. Wainwright.

I have a couple. I guess, besides all these litigation and game theory issues that everyone else was asking about, and I detect a lot of investors are also concerned about the potential disruptive impact of twice-nightly authorized generics in the 2023 time frame. So in light of your strong market research that you updated us on today, and maybe other conversations you've had with payers, can you characterize, one, how much share of the market -- I don't mean guidance per se, but just how much share of the market big picture do you think you could quickly convert through switches and/or market growth even ahead of potential generic entry? And then when they do come, what do you think the impact will be on your ability to switch or to acquire de novo patients? And I have one follow-up.

Yes. Oren, thanks for the question. I think, first and foremost, to answer your question, our research to date, which as talked to a lot of payers in this regard, is that the introduction of an authorized generic is not likely going to have a material impact on coverage scenarios or restrictive -- restrictions or barriers anymore so than already exist in the sodium oxybate marketplace today, right? There are step edits, there are certain tests required and medical documentation required and many payers to get access to the current sodium oxybate treatments. And even in the presence of an authorized generic, that's being viewed as much more of a line extension, if you will, to the twice-nightly product. And so we don't expect, based upon feedback from payers, that, that will have a dramatic impact in terms of shifting the landscape or restricting the opportunity or forcing people to move in a certain direction. Now maybe the AG launches very differently than what that assumption assumes, which is that they'll price kind of typically as AGs do, but if they do something different, we'll have to evaluate what happens at that point in time. That being said, we think the market will remain, from a value and pricing standpoint, where it is today, relatively consistent as we think about it through now through the end of 2025. And for us, that's the window to grab as much share as we can.

What impact -- well, let me step back, what does our research tell us about the opportunity for once-nightly FT218 in a very dynamic narcolepsy market, that includes other formulations of sodium oxybate, other sodium forms, lower sodium, that includes generics that includes the other agents that are getting approved. And we're very bullish on the opportunity for once-nightly FT218. Our research with patients and physicians in those scenarios really shows once-nightly FT218 commanding a healthy share of the market. And some of that is fueled by market expansion and some of that is fueled by taking share from existing patients. So we feel really good about the opportunity to do that in that window between approval and launch and, let's say, the end of 2025.

I think once we hit 2026, and we see what happens with multisource generics, how many come in, how many are willing to invest in a REMS program and do the things required around this molecule, that's to be determined. But we have -- as we've said publicly, we can only assume at this stage that there'll be for newly diagnosed patients. That's what our research tells us today that new patients to treatment will have to step through a twice-nightly generic potentially. And what does that mean? That means that perhaps the denominator of twice-nightly -- of eligible patients for branded sodium oxybate products like once-nightly FT218, the denominator may be a little smaller. But we also know that half of those patients who start on twice-nightly therapy and are being supported extensively with a program today, which I'm not so sure will be the same when generics come, are still dropping off of therapy within the first 12 months of treatment. So again, maybe it takes a little longer for the patients to find their way to branded sodium oxybate options, but we still believe with market expansion, with the ability to take share, we have an opportunity for a company that has -- that's, in our view, unbelievably undervalued and a true value disconnect with where we are today to really create substantial value for our shareholders.

Okay. And if I could just ask one follow-up on that discontinuation number. I mean, you highlighted 2 different pieces of data in your script. I think you said the primary reason for patients knocking on the drug is the dosing of twice nightly and I don't know how -- what percentage primary is. But in it you also highlighted that 50% of patients are dropping off. Are you able to see anywhere in the data or reconciling any of this data that tells you that of those 50% or more that are dropping off in less than a year, that it is, in fact, the dosing that's the reason they discontinued? Or is that ambiguous?

Yes. So it's an excellent question. And it really is -- there are 2 different cohorts of data points from different sources first, right? So when you think about the 60% who aren't going on treatment today, those are physicians telling us, these are the patients who are, in their mind, candidates for sodium oxybate and either because the patient has chosen or the physician has chosen not to put them on that, on sodium oxybate. And the primary reason more than any other -- and there's only a handful of reasons. More than any other, primary reason is dosing related challenges, right? So maybe that's compliance, maybe that's not wanting to get up in the middle of night. There's a degree of anxiety associated with that dosing schedule, the twice-nightly dosing schedule that creates challenges for patients. So those are all reasons why not to put somebody on therapy. The 50% comes from the cohort of patients who we looked at over 5 years, where we have good longitudinal data over an extended period of time, and we can see what happens with them. Now that's just true claims data that said these unique patients who started on month 1 by month 12, half of them were off of therapy. And within that cohort, of that 50% that dropped off, half of them actually dropped off in the first 30 days of treatment. So that -- when you get that kind of data, and that really is somewhat confirmatory to data we generated a couple of years ago, only more current because we took it all the way through the end of 2019 in terms of most recent data cuts. So we have very current data in this regard. And when you get that research, that data, then you got to go out and talk to patients who have discontinued. And then what we hear in our research for patients who have discontinued. And when you talk to physicians on their patients who have discontinued, you really get 3 primary reasons: 1 is dosing-related challenges as the primary; 2 are tolerability-related challenges as next; and 3 would be cover-, payer- or access-related challenges that may exist. So those are the 3 primary reasons.

Our next question is from Matt Kaplan with Ladenburg.

Just wanted to dig in a little bit more in terms of the initial market research that you're seeing, specifically, I guess, the primary reason patients -- the 50% of patients are coming off of sodium oxybate in a year and maybe dovetail that with what you're seeing in the RESTORE study, the switching study from twice-nightly sodium oxybate to FT218. And how you think FT218 can address some of those primary issues of patients that are coming off of sodium oxybate within 1 year. Can you describe that?

Yes. Again, I think when you look at the discontinuation of patients, which is a really objective assessment on longitudinal analysis of unique patients over the course of the treatment period. So there is no subjective data. It really is looking at claims and understanding what's happening to that patient during their treatment where they're captured. And you see a lot of -- we learn a lot of information about narcolepsy treatment at large, but for these twice-nightly sodium oxybate patients, that 50% is a number that jumps out at us. So when you -- again, when you go -- as we just discussed, when you go back and try to research the rationale behind that, you hear things, dosing related challenges, high levels of anxiety due to the middle-of-the-night dosing. You hear tolerability issues, they couldn't tolerate the drugs, right? From that perspective. And then some market access, but it's predominantly primarily dosing-related challenges followed by tolerability. So to your question is, how do we think about the 218 profile relative to that -- those challenges. And we believe, a, we clearly have a solution for the once-nightly -- the twice-nightly challenges that are a major reason why people discontinue. And it's not -- shouldn't be a surprise that people have discontinued for that reason. When we talk to 220 patients, and we talk to large cohorts of currently treated or previously treated patients. And you ask them on an unaided basis that what's the most important thing? When you think about your sodium oxybate treatment, what's most important for you is you could have it. And unequivocally, once-nightly dosing comes up first and foremost, far more than that safety or efficacy or anything else. And things like other types of formulations don't even come up at all from that standpoint. They're not even identified as potential need. Then when you go further and you give patients at what we would consider a bit of a controlled experiment where you blend attributes of different sodium oxybate products and assets to those same patients to rank the attributes of specific products, even when you blend our attributes with attributes of other sodium oxybate formulations, once-nightly dosing is clearly the most preferred and most important attribute for patients. So it doesn't make -- it makes sense that the reason why they're coming off is because of dosing-related challenges, and that's the most important to them in terms of their treatment. So we do believe that we are a potential solution. Can we solve the tolerability issues? We don't know. We're very pleased with the clinical profile of once-nightly FT218. We believe the adverse event profile and the data we published on top line speak for itself. And we think our product, the profile of once-nightly overall -- 218, overall stands on itself, right? We believe it can be a meaningful treatment for patients, and we're excited to navigate through the NDA and get it to patients and create value for our shareholders.

Great. And then in terms of the RESTORE study, would you think the learnings there will be able to show in terms of differentiated profile for FT218?

Yes. Matt, it's a great question. Again, I think it's really important to remember that the quality of the RESTORE study and the impact and the results of that is really to help inform clinicians as to how the switch may occur, right? We're going to generate patient-reported feedback on that trial as well for switch patients, which will be interesting from that standpoint. But most importantly from that study is doing it right and doing robustly. So we generate quality data to help inform the health care community on what does the switch look like, right? How is it happening, right? What does the data tell us in terms of patients? And it's early. We're first to acknowledge it's early. We're not going to jump to conclusions, but we're also not surprised by the fact that nearly all the patients who have switched to date are on the same or many on a lower dose -- on a lower stable dose of once-nightly FT218. That's -- we'll see if that trend continues. But so far, we're pleased with that result. And it becomes really important data as we get closer to an approval and a launch. And we would expect to have the trial completed by then. And again, we get a lot of questions just like do you need to do this for the NDA? And hence, the point that it's not required for our NDA. It's really meant to help support clinicians in their decisions on how they'll switch in the future.

This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thank you, Sherri. Appreciate it. And thank you, everyone, for joining us on our call today. Stay safe and be healthy, and we wish you all the best, and have a great rest of the day. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.