We recently compiled a list of the 12 Best Small Cap Pharma Stocks to Buy Now. In this article, we are going to take a look at where Avadel Pharmaceuticals plc (NASDAQ:AVDL) stands against the other small cap pharma stocks.
Impact of US Tariffs and Obesity Drug Performance on the Pharmaceutical Industry
Emily Field, Head of European Pharma Research at Barclays, spoke on CNBC on February 20 about the performance of obesity medications, the effects of US tariffs, and the dynamics of the pharmaceutical industry. According to her, the industry might not perform poorly at least in the first half of this year. The effectiveness of obesity medications is still up for debate, though, as leading companies in the field have shown inconsistent results.
Speaking about the tariffs, she stated that since some businesses assemble their products in the US after producing them overseas, their implementation raises several unanswered questions for the pharmaceutical industry. These businesses therefore have relatively low manufacturing costs, which is an important factor to take into account when assessing the effects of tariffs. She thought that these businesses could easily absorb the higher expense of the tariffs. The topic hasn’t come up much on earnings calls this quarter, and the market is nearing the end of the reporting season.
Eli Lilly’s Chief Scientific Officer spoke with CNBC’s Health and Pharma correspondent Angelica Peebles about the weight reduction industry. The domain presents opportunities for easier-to-use treatments, including tablets, and medications that help individuals lose weight, she noted based on the conversation. How much weight reduction users need to observe on top of what they already have is another topic of discussion about the subject. According to Dan Skovronsky, Chief Scientific Officer of Eli Lilly, the majority of the audience seems to benefit from medications that provide about 20% weight loss. According to him, the market for stronger medications that offer at least 25% is smaller.
He also believed that the potential benefits of these weight reduction medications for a wide range of illnesses were the most fascinating thing he had witnessed in his work as a scientist and doctor. The patterns they have been observing in the answers from patients serve as their current source of knowledge.
Our Methodology
For our methodology, we selected stocks with a market capitalization between $250 million and $2 billion and ranked them based on the highest hedge fund sentiment according to Insider Monkey’s database, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A biopharmaceutical research laboratory filled with scientists in white coats, discovering new drugs.
Avadel Pharmaceuticals plc (NASDAQ:AVDL)
Number of Hedge Fund Holders: 27
Avadel Pharmaceuticals plc (NASDAQ:AVDL) is a biopharmaceutical company focused on developing medications for unmet medical needs, especially sleep disorders. Its lead product, Lumryz, is a once-nightly sodium oxybate formulation designed to treat excessive daytime sleepiness and cataplexy in adults with narcolepsy. The company generates revenue through product sales in the U.S. and licensing arrangements. The company also markets hospital-based sterile injectable drugs like Akovaz, Bloxiverz, and Vazculep, which contribute to its revenue.
Avadel Pharmaceuticals plc (NASDAQ:AVDL) reported strong financial results in Q3 2024, with net revenue rising to $50.0 million, up significantly from $7.0 million in the same period last year. Gross profit reached $43.9 million, reflecting strong margins, and the company achieved a positive adjusted EBITDA of $6.1 million. As of September 30, 2024, Avadel had $66 million in cash and equivalents.
Avadel Pharmaceuticals plc (NASDAQ:AVDL) has seen notable growth in the narcolepsy treatment market, with its lead product, Lumryz, showing strong adoption. By the end of Q3, 2,300 active patients were using Lumryz, and 700 new patients were added in the quarter alone. The FDA recently approved Lumryz for patients aged 7 and older, expanding its market potential. For 2025, the corporation expects Lumryz’s net product revenue to reach $240-$260 million, marking a 50% year-over-year growth. A recent favorable court ruling further strengthens the company’s market position and intellectual property rights.
Overall AVDL ranks 8th on our list of the best small cap pharma stocks to buy now. While we acknowledge the potential of AVDL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AVDL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.