AVROBIO (AVRO) (~$76MM market cap) is the latest broken biotech that is trading below net cash to announce they are pursuing strategic alternatives. AVROBIO is a clinical stage gene therapy company that sold one of their assets, AVRO's cystinosis gene therapy program, to Novartis in May for $87.5MM in cash, while retaining their HSC gene therapy for Gaucher program which they had previously announced intentions to initiate a Phase 2/3 trial later this year. With the strategic alternatives announcement, AVROBIO announced they were pausing development efforts (and laying off 50% of their workforce), but the remaining IP assets likely have some positive value unlike others in the broken biotech basket. If any readers have expertise in this area or insight into the potential value, please comment below.
Doing my quick back of the envelope math on what a liquidation scenario would like (to be clear, a liquidation wasn't mentioned as one of the options they were considering, but I still find it helpful):
Disclosure: I own shares of AVRO
Hmm, can you explain how did you get to that NCAV figure? Seems rather high to me.
ReplyDeletehttps://www.sec.gov/Archives/edgar/data/1681087/000114036123029221/brhc20054252_ex99-1.htm
DeleteI just used the proforma 3/31 numbers in the above 8-K. Anything materially off there? I'll be honest, I tried to throw it together quick.
Seems in line with my guesstimate. Big unknown is the cash burn during the next few quarters. Probably anonymous didn't use the pro forma balance sheet (?).
DeleteJust saw this, thanks @MDC @writser. Yeah, I wasn't looking at the pro-forma balance sheet in my screener. The SG&A/Q expense historically seems to dangle around the 7~8M mark but it'll be interesting to see how long this re-structure goes for and what's the final burn.
DeleteIm involved in this now as well, but are there any taxes that should be accrued on the asset sale? Would that go onto the books just as a gain, or would they be able to show a significant basis there?
ReplyDeleteThey have a large NOL, I would assume $0 taxes. In most of these biotech liquidations, they sell for a loss compared to their cost basis.
DeleteIf they burn through the NOL and have to pay taxes, I bet you will be happy holders :)
Deletewhy do you consider 4Q Burn additionally? We have the balance sheet as of 31/3 and the burn in Q2. So why deduct additional G&A burn for 4 quarters?
ReplyDeleteIt might be overly conservative, but they just announced strategic alternatives yesterday. Depending on their intended path, these things take time. They also still have 50% of the workforce and the Separation Services Agreement with Novartis that is 12 months long. Feel free to make your own assumptions, I like to do 4Q's, just to account for any unseen expenses. No precision behind it.
Delete"Concurrently with the MPSII License Agreement, the Company entered into a collaborative research funding agreement with UoM (“CRFA”). Under the CRFA, the Company has agreed to fund the budgeted costs of an investigator-sponsored Phase 1/2 clinical trial to be sponsored by UoM in connection with the development activities under the MPSII License Agreement, which are currently expected to equal approximately £9,900 in the aggregate. "
ReplyDeleteThis should be dead, right? If all research is canceled any tail obligations on this trial owed to Manchester should have been included in the Q2 writedown?
sell this turd
ReplyDeleteDo you still own this? Any updated after Q3 10Q? Thanks.
ReplyDeleteI do still own it, no real change to the thesis, just waiting for a conclusion to the strategic review.
Deletehttps://www.businesswire.com/news/home/20240130047688/en/
ReplyDeleteReverse merger with Tectonic Therapeutic (TECX). Some of these reverse mergers have actually performed well post closing, thinking about TALS/TRML, been a bit of a biotech rally recently, maybe the market's appetite for these are back.
What's your view on this?
Deletegarbage
ReplyDeletePre market is pretty upset about it.
ReplyDeleteIndeed. I don't have the ability to full judge Tectonic, at least in only a morning, but some of these tend to do well after the initial reaction. FIXX's reverse merger was pretty hated but has bounced back, GRPH's reverse merger was liked a little better and has begun rallying into the close. Sometimes it just takes time for the shareholder base to rotate.
DeletePlus a CVR!
ReplyDeleteI'm guessing you're semi-joking, or fully joking, but I did have people who sounded like they knew at least tell me the Groucher assets were worth something. A CVR structure post closing with a management team that's not really incentivized to maximize that value isn't the best structure. But maybe there's a few pennies of value in there too.
DeleteWill be interesting to see what Tang/BML's reaction will be ? Also whether the board ignored major shareholders.
ReplyDeleteI've sold out of this one for now. Mostly making room for new ideas and already have a few post announcement broken biotechs I'm holding through the deal (KNTE, FIXX, GRPH). The target here is early stage, no cash, not super hopeful on the CVR. But it still probably trades up into the deal as the shareholder base turns over.
ReplyDelete