Alkermes to Acquire Avadel Pharma in $2.1 Billion Deal
The deal values Avadel at up to $20.00 per share, yet the stock trades higher, suggesting investors may anticipate a competing bid.
Alkermes plc has agreed to acquire Avadel Pharmaceuticals plc in a deal valued at approximately $2.1 billion, a strategic move designed to bolster Alkermes' position in the neuroscience market by adding a promising narcolepsy treatment to its portfolio.
The Dublin-based biopharmaceutical companies announced a definitive agreement under which Alkermes will purchase all outstanding shares of Avadel for $18.50 in cash per share. The deal also includes a non-transferable contingent value right (CVR) that could add another $1.50 per share, bringing the total potential consideration to $20.00. However, Avadel's shares were trading at $22.94 in recent market activity—significantly above the offer price—indicating that investors may be holding out for a higher bid or questioning the deal's current terms.
The centerpiece of the acquisition is Avadel's flagship product, LUMRYZ, a once-nightly formulation of sodium oxybate for treating cataplexy or excessive daytime sleepiness in adults with narcolepsy. According to company projections, LUMRYZ, which received FDA approval in 2023, is expected to generate net revenues between $265 million and $275 million in 2025.
"This acquisition is a significant step in our strategy to become a leader in the sleep medicine market," Alkermes stated in its announcement. The company believes LUMRYZ will complement its own late-stage pipeline, which includes alixorexton, an orexin 2 receptor agonist also being developed for narcolepsy.
Deal Structure and Market Reaction
The transaction's structure hinges on both immediate cash and future clinical success. The $1.50 per share CVR payout is contingent on the U.S. Food and Drug Administration (FDA) granting final approval for LUMRYZ to treat idiopathic hypersomnia in adults by the end of 2028. This additional indication would significantly expand the drug's commercial potential.
The market's response has been notable. While acquisition announcements typically cause the target company's stock to trade just below the offer price, Avadel's shares have remained well above the $20.00 maximum consideration. This premium suggests that arbitrageurs and investors may believe the Alkermes offer undervalues Avadel's pipeline and that a rival bidder could emerge. With Avadel's stock having traded as high as $23.57 in the past year, the current offer represents a discount from its recent peak, fueling speculation.
Alkermes, with a market capitalization of approximately $4.83 billion, is a larger and more diversified entity than Avadel, which has a market value of around $2.24 billion. The acquisition represents a significant investment for Alkermes, aimed at accelerating its revenue growth and securing a foothold in a competitive therapeutic area.
The boards of directors of both companies have approved the acquisition. The transaction is expected to close in the first quarter of 2026, pending the satisfaction of customary closing conditions, including approval from Avadel shareholders and regulatory agencies.
For Avadel shareholders, the deal crystallizes value while offering further upside through the CVR. For Alkermes, it provides an immediate revenue stream and a strategic asset that aligns with its long-term focus on central nervous system disorders. The key question now is whether another suitor will step forward before the deal closes, validating the market's optimistic pricing of Avadel's shares.