DEFA14A: Avadel Receives Higher Unsolicited Bid from Lundbeck

Avadel Pharmaceuticals' Board deems an unsolicited acquisition proposal from H. Lundbeck A/S for up to $23.00 per share as potentially superior to its existing deal with Alkermes.

Summary

• Avadel Pharmaceuticals plc received an unsolicited proposal from H. Lundbeck A/S to acquire Avadel for up to $23.00 per ordinary share.
• The Lundbeck proposal comprises $21.00 per ordinary share in cash at closing.
• It also includes a non-transferable contingent value right (CVR) for potential additional cash payments: $1.00 per share if LUMRYZ and valiloxybate collectively reach $450 million in total annual U.S. net sales by December 31, 2027, and another $1.00 per share if they reach $700 million in total annual U.S. net sales by December 31, 2030.
• Avadel's Board of Directors determined that the Lundbeck Proposal is reasonably expected to result in a "Company Superior Proposal" as defined in its existing transaction agreement with Alkermes plc.
• The existing agreement with Alkermes, announced October 22, 2025, offers up to $20.00 per ordinary share, consisting of $18.50 in cash and a $1.50 CVR contingent on final FDA approval of LUMRYZ for idiopathic hypersomnia in adults by the end of 2028.
• This determination allows Avadel to provide information to and conduct discussions and negotiations with Lundbeck, but does not permit termination of the Alkermes agreement or entry into a new agreement with Lundbeck at this stage.
• The Board has not yet determined that the Lundbeck Proposal in fact constitutes a Company Superior Proposal and has not changed its recommendation for the Alkermes acquisition at this time.

Sentiment

Score: 8

Explanation: The unsolicited, higher-value proposal from Lundbeck creates a competitive bidding situation, which is generally positive for shareholders. While it introduces uncertainty and potential delays, the prospect of a superior offer significantly enhances shareholder value potential. The Board's determination that it is 'reasonably expected to result in a Company Superior Proposal' is a strong indicator of improved prospects.

Positives

• Lundbeck's unsolicited proposal offers a higher potential total value of up to $23.00 per share compared to Alkermes' up to $20.00 per share.
• The cash component of the Lundbeck offer is higher at $21.00 per share upfront, versus $18.50 from Alkermes.
• The CVR conditions in the Lundbeck proposal are tied to sales performance of LUMRYZ and valiloxybate, potentially offering more direct upside from product success.
• The Board's determination allows for further discussions and negotiations, potentially leading to an even better offer for shareholders.

Negatives

• The Lundbeck proposal introduces uncertainty regarding the previously announced acquisition by Alkermes.
• There is no guarantee that discussions with Lundbeck will result in a definitive superior offer or that any offer will be completed.
• The CVRs in the Lundbeck proposal are non-transferable, limiting liquidity for shareholders.
• The CVRs are contingent on future sales targets ($450 million by 2027, $700 million by 2030), which carry execution risk.
• The process could lead to increased costs related to the acquisition and potential legal proceedings.

Risks

• The ability of the parties to consummate the acquisition in a timely manner or at all.
• The satisfaction (or waiver) of conditions to the consummation of the acquisition, including with respect to the approval of Avadel shareholders and required regulatory approvals.
• The potential impact of the unsolicited proposal from Lundbeck or the possibility that more competing offers may be made.
• Potential delays in consummating the acquisition.
• The ability of Avadel to timely and successfully achieve the anticipated benefits of the acquisition.
• The impact of health pandemics on the parties' respective businesses and the actions the parties may take in response thereto.
• The occurrence of any event, change or other circumstance or condition that could give rise to the termination of the transaction agreement.
• The effect of the announcement or pendency of the acquisition on Avadel's business relationships, operating results and business generally.
• Costs related to the acquisition.
• The outcome of any legal proceedings that may be instituted against the parties or any of their respective directors or officers related to the transaction agreement or the acquisition.
• The unsolicited proposal from Lundbeck may not result in a definitive agreement for an alternative business combination transaction.
• Avadel's expectations and beliefs regarding these matters may not materialize.

Future Outlook

Avadel's Board will engage in discussions and negotiations with Lundbeck regarding its unsolicited proposal. There is no certainty that these discussions will lead to a definitive superior offer or that the acquisition will be consummated on the proposed terms or at all. The company's expectations and beliefs regarding these matters may not materialize, and actual outcomes could differ materially due to various risks.

Management Comments

• Avadel's Board of Directors has determined in good faith, after consultation with its financial and legal advisors, that the Lundbeck Proposal would reasonably be expected to result in a Company Superior Proposal as defined in Avadel's existing transaction agreement with Alkermes plc.
• Avadel's Board has not determined that the Lundbeck Proposal in fact constitutes a Company Superior Proposal under the existing transaction agreement with Alkermes and has not changed its recommendation in support of the Alkermes acquisition at this time.
• There can be no assurance that the discussions with Lundbeck will result in a determination by Avadel's Board that the Lundbeck Proposal is a Company Superior Proposal.
• Avadel will have no further comment on the Lundbeck Proposal until the Board has completed discussions and/or negotiations with Lundbeck.

Industry Context

This announcement highlights the competitive nature of the biopharmaceutical M&A landscape, particularly for companies with promising drug assets like LUMRYZ. The unsolicited bid from Lundbeck, a global pharmaceutical company, for Avadel, a company focused on neuroscience, indicates strong interest in Avadel's product pipeline and market position, potentially driving up acquisition valuations in the sector.

Comparison to Industry Standards

• The Lundbeck proposal of up to $23.00 per share, with a higher cash component ($21.00) and CVRs tied to sales milestones, appears more attractive than the Alkermes offer of up to $20.00 per share ($18.50 cash) with a CVR tied to regulatory approval.
• The CVR structure in the Lundbeck offer, based on collective net sales of LUMRYZ and valiloxybate, provides a different risk/reward profile compared to Alkermes' CVR, which is solely dependent on FDA approval for an additional indication.
• The competitive bidding scenario is common in the biopharma industry for companies with valuable, approved or late-stage assets, suggesting Avadel's assets are highly valued by multiple strategic acquirers.

Legal Proceedings

• The outcome of any legal proceedings that may be instituted against the parties or any of their respective directors or officers related to the transaction agreement or the acquisition.

Stakeholder Impact

• Shareholders: Potential for increased acquisition price due to competitive bidding, but also increased uncertainty and potential delays.
• Employees: Potential for changes in management or corporate structure depending on the ultimate acquirer.
• Customers: No immediate direct impact mentioned, but long-term strategic shifts could affect product development and availability.
• Creditors: No immediate direct impact mentioned.
• Suppliers: No immediate direct impact mentioned.

Next Steps

• Avadel will provide information to and conduct discussions and negotiations with Lundbeck.
• Avadel shareholders will need to vote on the acquisition at a general meeting.
• Lundbeck must announce a firm intention to make an offer or state it does not intend to make an offer by a specified deadline (7 days prior to Avadel shareholder meeting for Alkermes deal).
• Avadel intends to file a definitive proxy statement (including the scheme document) with the SEC.

Key Dates

Recommendation

The unsolicited, higher-value proposal from Lundbeck, deemed by Avadel's Board as "reasonably expected to result in a Company Superior Proposal," creates a competitive bidding scenario that is highly favorable for Avadel shareholders. The increased cash component and higher potential total value suggest a significant upside from the previously agreed-upon Alkermes deal. While there's no guarantee of a definitive superior offer, the current situation strongly indicates that Avadel's shares are undervalued by the Alkermes offer and are likely to trade up towards the higher Lundbeck bid or even higher if a bidding war ensues. This presents a compelling arbitrage opportunity or a strong case for holding for a higher payout.

Keywords

Avadel Pharmaceuticals, AVDL, Lundbeck, Alkermes, acquisition, takeover, unsolicited proposal, contingent value right, CVR, LUMRYZ, valiloxybate, biopharmaceutical, M&A, proxy statement