What happened

Shares of Avadel Pharmaceuticals (NASDAQ:AVDL) are down 10.3% at 12:28 p.m. after the biotech announced that the Food and Drug Administration approved its nutrition drug Nouress for neonatal babies, although the timing of the launch remains uncertain.

So what

FDA approvals usually cause shares to go higher, not lower, but it isn't clear when -- or even if -- Avadel will launch Nouress, which contains cysteine hydrochloride that's injected. The company said it's "evaluating the timing and process for a commercial launch" of the drug and also noted that a competitor was granted a U.S. patent earlier this year for a competing cysteine hydrochloride product.

Reading between the lines, Avadel appears to be worried about Nouress infringing on its competitor's patent. Complicating the matter further, Avadel has a patent of its own covering Nouress through March 2039.

Red FDA approved stamp.

Image source: Getty Images.

Now what

While it would be nice to have the additional revenue, the potential market for cysteine hydrochloride drugs is only around $50 million annually. Nouress isn't going to be creating that much profit for Avadel, so the potential delay -- or even complete loss -- isn't the end of the world for the company.

Investors would be better off focusing on Avadel's narcolepsy treatment FT218 that's currently in late-stage development, with data expected in the second quarter of next year. With a potential market of $1.7 billion, the opportunity in narcolepsy is substantially larger than it is for Nouress. Avadel will have competition in narcolepsy too, but an easier dosing regimen with FT218 should help it take a good chunk of the market if the drug works as well as the current offerings and is approved.