Greetings, and welcome to the Alkermes investor call. My name is Rob, and I'll be your operator for today's call. At this time, all participant lines will be placed on mute to prevent background noise. If you should require operator assistance during today's call, please press star zero from your telephone keypad. Please note that the conference is being recorded. At this time, I'll turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.
Thank you. Good morning. Thank you for joining us on the call to discuss our agreement to acquire Avadel Pharmaceuticals. With me today are Richard Pops, our CEO, Joshua Reid, who recently joined us as Chief Financial Officer, and Blair Jackson, our Chief Operating Officer, who will join us for some Q&A at the conclusion of the call. In addition to our press release and Rule 2.7 announcement under Irish law, a slide presentation is available on the investor section of alkermes.com. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see slide five of the accompanying presentation, our press release issued this morning, and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements.
We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we'll open the call for Q&A. As you may be aware, in light of our offer for Avadel, interactions with shareholders and others are now governed by the Irish takeover rules. As a result, Alkermes is restricted from what it can disclose beyond what is already disclosed in publicly available documentation relating to its offer. Therefore, we will not be in a position to answer certain questions relating to the proposed transaction, Avadel, or our plans for the combined business beyond this. With that, I'll turn the call over to Richard.
Thank you, Sandy. Good morning, everyone. This morning, we announced that we've entered into a definitive agreement to acquire Avadel Pharmaceuticals in an all-cash transaction, which we expect to be immediately accretive upon closing. This is a very strategic acquisition for Alkermes. It's compelling from multiple perspectives. We gain an attractive, new, patented, FDA-approved product, which will leverage and increase the scale of our profitable commercial business. We immediately become a key player in the sleep medicine market in anticipation of our progress with Elixer Extant. Acquiring a business that's so well aligned with our current and long-term priorities has been one of our strategic objectives for some time. We believe that this combination positions Alkermes for enhanced growth, innovation, and value creation. Before we dive into the specifics of the transaction, I'd like to take a moment for some additional context for today's announcement.
Over the last several years, we've been disciplined in our approach to business development, evaluating a wide range of opportunities in search of one that could complement our therapeutic focus, our core capabilities, our advancing pipeline, and our focus on profitability. Avadel, a commercial-stage company marketing a proven and differentiated narcolepsy medicine, stood out, meeting all of our criteria strategically, operationally, and financially. The timing of the transaction also underscores our confidence in Elixer Extant. With positive Phase II Elixer Extant in narcolepsy type 1 now in hand, data from Vibrance-2 and NT2 expected in November, and plans to initiate a global Phase III program in narcolepsy early next year, Elixer Extant has the potential to transform the treatment of narcolepsy.
The acquisition of Avadel enables us to enter the sleep medicine market now and establish our presence in the space ahead of the of Elixer Extant. Avadel is a recognized innovator in sleep medicine. It's focused on addressing meaningful, unmet needs for patients living with narcolepsy. Avadel's commercial product, called Lumryz, is the first and only FDA-approved once-at-bedtime oxybate for the treatment of cataplexy or excessive daytime sleepiness in patients 7 years or older with narcolepsy. This differentiated profile eliminates the need for middle-of-the-night dosing, which has long been a burden for patients and caregivers. Since launching Lumryz in 2023, we've watched the Avadel team build and scale a high-performing commercial organization, driving strong demand. New patient starts of Lumryz have outpaced the twice-nightly mixed-salts competitor by more than two to one since launch.
With approximately 3,100 patients on Lumryz therapy as of June 30th and an estimated 50,000 oxybate-eligible patients in the U.S., Lumryz has been on a robust growth trajectory and has significant opportunity ahead. That momentum reflects not only the unmet need in the market but also the strength of Avadel's commercial strategy, their capabilities, and their team. We look forward to welcoming Avadel employees to our organization and working together to build on their momentum. Our strong financial foundation, our expertise in CNS drug development, and our proven ability to scale proprietary commercial products, including our sophisticated understanding of complex regulatory and market access dynamics, position us to further support the growth of Lumryz. We believe Lumryz is an important therapeutic option and a strong addition to our portfolio in its own right.
Against the backdrop of our own development programs in sleep disorders, acquiring Avadel aligns our development pipeline with an approved commercial asset and positions Alkermes to be a leader in the sleep medicine market. Avadel's established and proven commercial infrastructure and experience in rare diseases provide a strong foundation for the potential Elixer Extant. as we integrate Avadel, we jumpstart our capabilities and avoid the need to build a new disease-focused commercial infrastructure from the ground up. This not only allows for meaningful operating efficiencies, it also provides the opportunity to accelerate market uptake Elixer Extant following the successful completion of the development program and FDA approval. By establishing an immediate commercial presence in the sleep medicine market, we have the opportunity to build critical relationships and deepen our understanding of the patient experience and commercial idiosyncrasies in the space.
We expect the financial strength of the combined company will also support a diversified development strategy in sleep disorders. This includes, obviously, the upcoming Phase III Elixer Extant, but also potential label expansion for Lumryz, supported by the Phase III study in patients with idiopathic hypersomnia currently underway and the potential advancement of Valiloxybate, Avadel's in-licensed, salt-free, once-at-bedtime oxybate clinical development candidate. In addition, we'll continue to pursue a broad development strategy for our orexin 2 receptor agonist portfolio, including ALKS 4510 and ALKS 7290, both of which are now in phase one and expected to enter human proof of concept studies next year. The acquisition reinforces our commitment to neuroscience, gives us additional scale, and builds on our legacy of innovation in complex psychiatric and neurologic disorders. Now, from a financial perspective, the transaction is expected to be immediately accretive upon closing.
The Lumryz revenues represent an additional growth driver for our commercial portfolio. With expected 2025 net sales in the range of $265 million- $275 million upon closing, Lumryz will meaningfully augment our revenue and growth profile, and it will further enhance our profitability and cash generation. In summary, this transaction aligns with our strategic and therapeutic focus. It complements our commercial infrastructure, and it adds new capabilities in rare disease. The timing of the acquisition is strategic, and we believe it will position Alkermes to drive meaningful growth and deliver long-term value for our shareholders. Now I'd like to take a moment to introduce Joshua Reid, Alkermes' new Chief Financial Officer. Joshua brings a wealth of experience in strategic finance and operational leadership, and we're very happy to have him on board as we continue to execute on this growth strategy.
With that, I'll turn the call over to Joshua to walk through the financial terms of the transaction.
Thank you, Richard. I'm excited to have joined Alkermes at such a pivotal and transformational moment for the company. Since coming on board, I spent time getting up to speed on the attributes of this proposed acquisition, and I believe it presents a compelling opportunity. Let me walk you through the key financial highlights. Pursuant to the agreement, Alkermes will acquire all outstanding ordinary shares of Avadel for $18.50 per share, payable in cash at closing. In addition, Alkermes will provide Avadel shareholders a non-transferable contingent value right, entitling holders to a potential additional cash payment of $1.50 per share, contingent upon final FDA approval of Lumryz for the treatment of idiopathic hypersomnia in adults by the end of 2028.
Taken together, this risk-adjusted structure offers a potential per-share acquisition price of $20, which represents a premium of 38% to the weighted average trading price of Avadel over the three months prior to today's announcement, or a premium of 12% to Avadel's closing price yesterday, and a total consideration of approximately $2.1 billion. The transaction has been approved by the boards of directors of both Alkermes and Avadel and is expected to close in the first quarter of 2026, subject to the conditions set out in this morning's Rule 2.7 announcement under Irish rules, including certain regulatory approvals and approval by Avadel shareholders. As Richard outlined, upon closing, the transaction will both augment our revenue growth profile and be immediately accretive to our bottom line. Avadel is on a strong growth trajectory and recently transitioned to a net income and cash flow positive profile.
Avadel's capabilities and infrastructure are largely complementary to ours, which is one of the attractive features of the deal. The financial synergies going forward will be largely derived from leveraging a profitable, rare disease-focused commercial infrastructure to support the Elixer Extant and thereby avoiding the costs associated with building those capabilities de novo. Of course, as noted in our Rule 2.7 announcement, we expect there may be certain opportunities for cost efficiencies from leveraging Alkermes' scale, system, and processes across various functions. From a balance sheet perspective, we are entering this transaction from a position of strength. We will announce our full third-quarter financial results next week but are pleased to report that we ended the third quarter with $1.14 billion in cash and total investments and no debt, underscoring the financial strength and flexibility of the business.
We expect to finance this acquisition in part with cash on hand, supplemented by the issuance of new debt of approximately $1.2 billion. This would represent a comfortable leverage ratio for us. We expect to delever in a reasonable timeframe with cash generated by the business. This transaction represents a compelling opportunity to accelerate our growth trajectory and is squarely aligned with our financial and strategic priorities, strengthening our core business, expanding our portfolio, and driving long-term value creation. With that, I will turn the call back to Sandy to manage the Q&A.
Thank you, Joshua. Okay, Rob, we'll now open the call for Q&A, please.
Thanks, Sandy. If you'd like to ask a question at this time, you may press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing your star keys. One moment, please, for our first question. The first question today is from the line of Leonid Timashev with RBC Capital Markets. Please proceed with your questions.
Hey, yeah, thanks for taking my question. I know it's maybe only limited to things you can say, but can you talk maybe about your confidence in the upcoming data for ALKS 2680 and NT2 and IH, and you know, how anything you may be seeing there or feeling about could have impacted the timing of this transaction, your enthusiasm for this transaction, maybe the reasons for this transaction? Thanks.
Hey, it's Rich. I'll take the question. The IH NT2 program continues uninterrupted. We've been looking at this Avadel transaction for quite some time. As it matured, we moved aggressively. I think it just underscores our overall confidence in Elixer Extant in all of its indications right now. Obviously, we have NT1 data in hand now, and we can assess its competitive profile in NT1, which we're quite excited about. We'll get NT2 data probably in November and the IH next year. This is all about building the foundation to be able to launch Elixer Extant as aggressively as possible.
Thank you. The next question is from the line of Paul Matisse with Stifel. Please proceed with your question.
Hey, good morning. Thanks so much for taking my question. Can you guys just help us think about the midterm outlook for Avadel’s once-at-bedtime oxybate? How are you guys thinking about the moving parts in the market with increased Xyrem generics, pricing pressure? I know it's maybe not a totally fair question, but how should we think about this asset or this acquisition as a multiple and what you think a durable revenue number is going to ultimately look like, say, in the late 2020s as this market continues to change? Thanks.
Hey, Paul, it's Rich. You know, under Irish takeover, we really can't make forward-looking statements that are outside of what's inside the documentation around the 2.7 announcement, and there's a lot in there. The general idea from our perspective is that this market is going to continue to grow as new medicines enter it. Our view is that the orexins can be transformational in this space, Elixer Extant in particular. Also, within the oxybate market, you've got a very, very strong competitor with Lumryz. The twice-a-day medicines, generic or otherwise, are not substitutable with the once-at-bedtime medication. We've been watching the growth of the once-at-bedtime category, as I'm sure you have, watching it grow and blossom and addressing unmet needs that patients have. We think that's going to persist.
Thank you. The next question is from the line of Joseph Tong with TD Cowen. Please proceed with your questions.
Hi there. Good morning, and thank you for taking my question. I guess a little bit to extend on that point, do you see a specific type of patient that would be more applicable for an oxybutynin versus an orexin? Maybe second to that, can you talk about the potential competitive dynamics of Lumryz and IH given that Xywav once-nightly is a potential option for some patients on label? How can you, I guess, further differentiate against that? Thank you.
Hey, Joe. It's interesting. As we get deeper into the development of Elixer Extant, and we see the huge benefits that accrue from driving wakefulness at the levels that we are in the NT1 patients so far, we also recognize that the disrupted nighttime sleep is a feature of the disease. I think it's still an open scientific question about how much the orexin agonist at various doses is going to affect that disrupted nighttime sleep. It seems to us that there's going to be a place for oxybate on a going-forward basis no matter what. The orexins will affect that market, but I think there's always going to be an enduring oxybate market, particularly for the once-at-bedtime version of it.
I think our view is that there's increasing optionality for patients with this disease, increasing physician focus on treating it, better and better tools, more and more diagnosis. The overall general trend in the marketplace is going to be for the use of better medicines for better outcomes for patients. In idiopathic hypersomnia, we know, as you mentioned, we've got an approved oxybate in idiopathic hypersomnia already. Avadel studies are underway. We'll look and see how those studies complete, and then we'll talk more about the competitive positioning in idiopathic hypersomnia.
Thank you. Our next question is from the line of Umer Rafat with Evercore ISI. Please proceed with your question.
Hi guys, thanks for taking my question. A couple here, if I may. I'm not on future forecasts, but I just wanted to understand philosophically how you expect genericization and growth and expansion in this market to affect you guys going forward. Secondly, it looks like the once-at-bedtime version of Avadel technology has taken meaningfully longer than I would have thought. I think there's still some prototypes that were under development. Where exactly are we, and was that a core part of your diligence or not? Finally, what's your confidence in the historic revenues that I'm talking about? Because they look like they were fairly flat between 3Q and 1Q, and there was this spike into 2Q. I guess I'm almost wondering, is that when these conversations started? Thank you very much.
Good morning, Umer. Yeah, it's interesting. A lot of our diligence in the whole category, as we got deeper and deeper into the Elixer Extant development program, was trying to understand the role of oxybutynin and the future role of oxybutynin. As I mentioned to Joe in the previous comment, I think that there's going to be an ongoing role for oxybutynin for certain patients. Remember, of the 80,000 patients who are being treated right now for narcolepsy, only about 16,000 are getting oxybutynin right now. There's a particular patient type that benefits and likes being on oxybutynin. The once-nightly is a really nice option for these patients. In fact, much of the new patient starts for the once-nightly come from patients who've been on the twice-nightly version. On the generic growth and expansion question right now, we don't expect it to change.
The twice-nightlies are not substitutable for the once-nightly. They actually had separate orphan status designation by the FDA. It serves a different purpose, has different medical and patient benefits. We think that the once-nightlies are going to continue to have their own niche in the marketplace. I didn't quite understand your second question about the once-nightly. That is their product. The first product.
Low sodium.
Oh, the low sodium. I see, yes. They recently licensed a low sodium product, and that's not yet in the clinic. We'll be assessing that more carefully through our scientific diligence. We've done some work on it. We think it's interesting, and we'll be giving a lot more information as we get our hands on that development program. Also, on just the basic hydraulics on the revenue side, as I mentioned in the call, as of June 30th, they have 3,100 patients on Lumryz out of a 50,000 or so addressable market. The growth rate in new patient starts is what we've been focusing on over the last few quarters, and it's quite robust. You're right, there was a little low in the early part of the year, but that new patient start data has accelerated, and we're confident in their plan going forward.
Thank you.
Our next question is from the line of David Amsellem with Pipe r Sandler. Please proceed with your question.
Thanks. Looking out longer term in the narcolepsy space, and idiopathic hypersomnia for that matter, where you have both orexin agonist and oxybate products, do you at all worry that the oxybate category could be a declining category in the context of multiple orexin agonists available? As you think about not just the strategic fit, but sort of the long-term outlook for the market, what's your view regarding the trajectory of Lumryz once you have multiple orexins in the marketplace, both in narcolepsy and idiopathic hypersomnia? Thanks.
More, David. Again, under the 2.7, the Irish rules, you know we won't make a lot of forward projections, but you should just know that, as I've said before, I think that the oxybate , particularly once-at-bedtime oxybate, can enjoy a privileged position, an enduring position in the narcolepsy marketplace for a couple of reasons. One is that they're, you know, what they do distinctively versus what the orexin 2 receptor agonists are going to do. Number two, as I mentioned, I think to Umar, is that right now, the prevalence in the U.S. is estimated to be something like 200,000 patients with narcolepsy, only about 100,000 of which are diagnosed and only about 80,000 of which are being treated. Why is that? It's because there haven't been really great medicines.
What you see in other therapeutic categories, as you get more and more innovative medicines in the category, providing different benefits to patients, overall diagnosis rates and treatment rates can increase as well. Right now, the once-at-bedtime oxybate market, its dollar volume is driven by a relatively small number of patients. I think that there's an opportunity for the distinctive properties of a drug like Lumryz to continue to endure as the market itself gets more mature.
The next question comes from the line of Jessica Fye with JPMorgan. P lease proceed with your questions.
Hey guys, my question was asked. Thanks.
Thanks, Jess.
You made it easy, Jessicca. Thanks.
Thank you.
The next question comes from the line of Basma with Leerink Partners. Please proceed with your questions.
Hi, good morning. This is Basma from Mark Goodman. Thank you for taking our question. Can you provide more color on what's your take for the value proposition of the low sodium versus high sodium oxybate? Also, we have a question, please, regarding the settlement. It appears that it only applies to Lumryz. We're just confirming, so it doesn't apply to the newly acquired asset from XW Pharma. If that's the case, what is the scenario here? That's it. Thank you.
Yeah. On the low sodium, high sodium, I think that, first of all, in the embodiment of Lumryz, Lumryz's principal clinical attribute is its once-nightly dosing, which obviously has allowed it to carve out a growing presence in the marketplace. If that can be augmented by a low sodium version as well, I think that's all the better. I think the logic of the license that they took earlier this year for a low sodium formulation, which we will develop in the clinic as well. I can't really comment on the settlement at this point. We're not a party to that settlement. I'll refer you to both Jazz and Avadel for the time being on the settlement details.
Thank you.
The next question is from the line of Akash Tewari with Jefferies. Please proceed with your question.
Hey, this is Anastasia on for Akash. Thanks for taking the question. Just to kind of continue on the orexin 2 oxybutynin combo, would you consider using your, if further developed, a low sodium once-at-bedtime oxybutynin for that? If you did not do that, would sodium be a concern for you? Maybe just if you consider offering any kind of price discount on any combo treatment given the patient burden?
Oh, yeah. It's hard to really be talking about any pricing in this. I would say this. In our conversations with experts at World Sleep and other sleep conferences, you do hear discussions about the interest in studying both a Elixer Extant during the day and oxybate at some dose at nighttime. I think we'll wait to see the full profile of the sleep architecture through our dosing in NT1, NT2, and idiopathic hypersomnia before we really formalize those plans. I think that there's an opportunity scientifically for investigation of the concomitant use of the two agents.
Okay. Thanks.
The next question is from the line of Jason Gerbery with Bank of America. Please proceed with your questions.
Hey guys, thanks for taking my questions. Just one, Rich, just conceptually, when you think about the evolution of the market, I mean, by my rough math, it might be like 20,000 patients on oxybate to your point. Its restricted use makes it hard. Do you just generally see the pie being steady and really the growth coming from idiopathic hypersomnia when the orexin start to really penetrate the market? Do you see that kind of overall pie shrinking and just Lumryz's share of that pie growing? I guess the other point is, what is the competitive advantage in your mind versus the other orexin players having an oxybate as well in the bag in terms of enhancing your relevance with the various stakeholders in the space?
Yeah, it's a great question, Jason, because in the conception, like you said, I think that our view is that the overall number of patients being treated for narcolepsy, you know, with aggressive medicines being more focused on improved outcomes, is going to grow the pie. The overall treated population of patients with narcolepsy as Elixer Extant comes to market, it's just going to open up new treatment opportunities and new expectations from patients about what their lives can be like. In so doing, I think that tide lifts a number of ships, including the once-at-bedtime oxybate market. Again, for that subset of patients who are willing to go through what you need to go through to be on an oxybate and the doctors who are going to be part of that REMS program. That's an established part of the market, and I think it will continue to grow.
For us, I think having the two products, there's a couple of ways of thinking about the advantage of it. The first is temporal. Probably the most important from our perspective is it puts us in the sleep market immediately upon closing. We will have a product that's doing a quarter of a billion dollars a year in sales, interacting with the key sleep centers, the key sleep physicians, the key sleep nurses, understanding the payment dynamics, the patient access journey, all that stuff is the prosaic working part of launching pharmaceutical company drugs in this world. We know that intimately through Vivitrol and Aristada and Lybalvi. In a new disease category, it's just going to allow us to burn in all those relationships years in advance of launching Elixer Extant . That's super valued.
Once in the market, though, for a representative from Alkermes to be able to walk into a sleep center and say, "Look, we're not just promoting a single agent. What we're giving is what outcomes or opportunities for patients to benefit at the physician's choice, what are most advantageous for patients in their practice." I think that's a real differentiating feature. We experience that right now by having both Aristada and Lybalvi along, I think, injectable of a certain active moiety and an oral compound of another active moiety. That allows you to position not just selling your own product for your own benefit, but what's the best potential outcome for your patients, agnostic as to the modality that the physician is preferring.
Long answer to a simple question, but it underscores why we're so excited about this, the here and now of adding a diversified revenue product growing into our mix, but also anticipating what it's going to mean for the launch of Elixer Extant .
Got it. Okay. Thank you.
Thank you. The next questions are from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your questions.
Hi, good morning, and congrats on the transaction. I guess, Richard, conceptually, when we think about the different buckets of patients between NT1, NT2, and IH, I'm just curious if you think there are any that perhaps would benefit most from a combination of an orexin and an oxybate.
Doug, it's probably too early for me to make a stratification in that way. I can tell you that what we're learning through our ongoing study in NT1, NT2, and IH is that the patient populations are very different, and there's diversity across those patient populations, even within that differential diagnosis. Not all NT2 patients are created the same. Not all IH patients are created the same. I have a feeling when you look at the data, many patients with narcolepsy type one or narcolepsy writ large have tried an oxybate, and many of them have tried it and stayed with it. Many of them tried it and moved on, whether it was because of the need for twice-nightly dosing or because of the other limitations remains to be seen.
The open question is if you can combine the two in a regimen that really provides significant outcomes for patients, does that open up new opportunities for the use of once-at-bedtime oxybate? That remains to be seen. I think the core hypothesis is that the oxybates are here to stay. They provide different benefits than the orexins for certain patients, and the once-at-bedtime form is a really attractive option for patients.
Thank you. The next question is from the line of David Huang with Deutsche Bank. Please proceed with your question.
Hi, thanks for taking my question. I was just curious, as you did your due diligence on Avadel Pharmaceuticals and Lumryz and the commercial strategy that Avadel has been implementing, you know, and you think about the Lumryz opportunity, do you see a bigger contributor from new to oxybate patient starts versus switch patients? Any thoughts on that dynamic?
Yeah. Blair's here, who's been focused on this as well too. I'll let him answer. I think what was exciting to me is that a number of the new patient starts are coming from the twice-nightly oxybates that are in the market. Blair, go ahead.
Yeah, no, it's a great question. Over the last few weeks to months, we've spent a lot of time with the Avadel commercial team. We were just really incredibly impressed with their approach to marketing this product and just finding a way to make sure they can move patients onto the drug, that they can make sure that the nurses and the doctors are able to engage with those patients and keep them on the drug. I think, you know, without getting into specifics on future forecasts, which we can't go into, what we can say is that both of those, either switches or new starts, are both major contributors to the growth of this product and a key area of focus. It kind of gets to an earlier question we had as to how do we see about the robustness of the forecast moving forward.
We feel really good about their approach, and we feel strong about the growth of this product moving forward. As Richard Pops said, for the potential of oxybates in the marketplace.
Thank you. The next question is from the line of Benjamin Burnett with Wells Fargo. Please proceed with your questions.
Ben, do we have you? All right, Rob, why don't we move on and see if we can catch Ben at the end?
Sure. Our next question will be from the line of Ami Fadia with Needham & Company. Please proceed with your question.
Hi, this is Umer on for Ami. Thank you for taking our question. I'm just curious to understand how IH has been valued in the deal, given that Xywav's already been approved and has been doing well. Thank you.
As you saw in the structure of the deal, we've added a contingent value right based on the ability to enter the market with Lumryz in idiopathic hypersomnia. That, notionally, is valued at another $1.50 per share. We see incremental value for sure in the idiopathic hypersomnia indication, and we'll be moving aggressively to hope to expand the label for Lumryz into that indication. Also, we believe that we'll be in that market with Elixer Extant as well. Once again, just opening up a new area of the market for both products.
Thank you.
Thank you. The next question comes from the line of Yui Ear with Mizuho. Please proceed with your question.
Hey guys, yeah, thanks. Congrats on the deal, and thanks for taking your questions. You guys spoke about being immediately accretive. Just wondering if you can sort of help us understand if there are any potential synergies from the deal. Secondly, when did you guys, if you can disclose, start speaking to Avadel more seriously about this potential takeout? Thanks.
I'll start, and then Joshua can chime in. We say it's immediately accretive because even just on a pro forma combined basis, they've just recently become cash flow positive and profitable, as are we. We're not using any stock in this transaction. This is a cash transaction. We expect the primary synergies come from, as I mentioned before, avoiding the need to build an entirely new commercial sleeve to launch into the rare disease space. We'll leverage a profitable enterprise to do so. In our models, that's extremely valuable to us going forward. On a synergies basis, we expect some modest synergies as we combine the two overlapping organizations, but they're largely complementary to us. Joshua, I don't know if you want to add anything to that.
No, that's right, Richard. You know, of course, as we combine the businesses, there'll be opportunities for efficiencies and cost reduction, certainly by leveraging our scale, system, and processes across various functions. As Richard pointed out, Avadel turned cash flow positive, so even without these synergies, the deal will be accretive to us.
I don't, you know, I won't speak to the history of the deal other than what's in the press release in the $2.7 billion. There'll be a proxy filed and have all the details. We've been watching Avadel Pharmaceuticals' launch of Lumryz since 2023. Two things really wanted to watch mature. One was seeing the trajectory of their business. The second was our Elixer Extant. two years ago, we weren't sure whether we would be in this market. Now we have a lot of conviction that we're going to be in with a really exciting medicine. I think it all matured at the same time.
Okay, thank you.
Thank you. The next question is from the line of Ben Burnett with Wells Fargo. Please proceed with your questions.
Hi, hopefully you can hear me now.
Now we can hear you.
Okay, excellent. I just want to ask, how do you view Avadel's sales force? Do you think that that sales force is sufficient to commercialize also Elixer Extant? Or would you anticipate needing to build that out further?
The sales force is excellent. The commercial team is excellent, and it's appropriately sized for the business that they have now. As it continues to grow, we'll pay attention to that, particularly as these categories mature and the space between the prevalence population and the treated population narrows. Often the sales forces will grow to meet that expanding market. Right now, the sleep specialist market is pretty tight. You don't need a large commercial team to address the principal writers in the space. Over the next couple of years, we'll be watching that. I can guarantee you when Elixer Extant, we'll do so with an appropriately sized sales force. This is just a fantastic way to get ourselves into that market to understand those dynamics intimately.
Great, thank you.
Thank you. At this time, we've reached the end of our question- and- answer session. I hand the floor back to Sandra Coombs for closing remarks.
All right. Thanks, everyone, for joining us on the call this morning on short notice. Please feel free to reach out to the company if you have any additional questions that we can be helpful with. Thank you.
Thank you. This will conclude today's conference. We'll disconnect your lines at this time. Thank you for your participation. Have a wonderful day.