Avadel Pharmaceuticals Plc (NASDAQ:AVDL) is under fire from its shareholder ASL Strategic Value Fund, LP, which is pushing for a complete overhaul of the board following what it describes as a series of strategic failures tied to Lumryz, the company’s once-nightly narcolepsy treatment.

In a letter released Monday, ASL argued Avadel failed to capitalize on Lumryz’s market potential, costing the company hundreds of millions in revenue and diminishing shareholder value.

ASL, which holds approximately $15 million in Avadel stock, criticized the company’s slow patient conversion from Jazz Pharmaceutical Plc’s (NASDAQ:JAZZ) Xyrem to Lumryz, despite the latter having been deemed “clinically superior” by the FDA.

Also Read: Avadel Pharmaceuticals Misses Earnings Estimates But Posts 150% Sales Increase From Narcolepsy Drug LUMRYZ

Since Lumryz’s approval in 2021, only about 1,000 patients have made the switch, which ASL estimates represents a $600 million to $800 million shortfall.

The group called this delay in targeting Xyrem patients a “strategic blunder,” claiming it has shaved $5 to $7 per share from shareholder value.

The fund is urging shareholders to vote out the current board at the July 29 annual meeting. It is pressing Avadel to engage an investment bank to evaluate options for monetizing Lumryz.

This includes exploring partnerships or licensing deals, particularly given its recent Orphan Drug Designation for idiopathic hypersomnia (IH), a move that could generate an additional $500 million to $1 billion in annual revenue if Lumryz is approved for the rare sleep disorder.

Avadel defended its strategy, saying it is actively working with major shareholders and remains committed to unlocking Lumryz’s full value.

The company also highlighted a recent legal win in which a U.S. court affirmed the FDA’s conclusion that Lumryz’s once-nightly dosing is clinically superior to its competitors. However, ASL pointed to ongoing litigation with Jazz Pharmaceuticals, six lawsuits in total, as another area where the board has underdelivered.

With one case heading to trial within four months and over $1 billion at stake, ASL accuses leadership of failing to act urgently or communicate the opportunity to investors.

Beyond strategic concerns, ASL cited governance issues, including uncounted shareholder votes and a lack of transparency around executive pay.

Despite Avadel’s falling market capitalization, from $2.5 billion to $900 million over two years, CEO compensation was $7.4 million in 2024, raising further concerns over accountability.

On Friday, Avadel Pharmaceuticals said the U.S. Court of Appeals for the D.C. Circuit upheld a lower court’s decision siding with the U.S. Food and Drug Administration (FDA) in a case brought by Jazz Pharmaceuticals.

Earlier in June, the FDA granted Orphan Drug Designation to Lumryz for Idiopathic Hypersomnia.

Price Action: AVDL stock is trading lower by 0.40% to $8.83 at last check Tuesday.

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