HilleVax (HLVX) (~$85MM market cap) is a clinical-stage biotech that focuses on developing vaccines, their initial focus has been on a vaccine (HIL-214) designed to treat severe acute gastroenteritis events in infants. On Monday, the stock crashed below cash as HilleVax announced their HIL-214 trial did not meet its primary endpoint and showed no clinical benefit observed across secondary endpoints. Unfortunately, little other disclosures were made; there was no announcement of seeking strategic alternatives, no workforce reduction and no estimate of current cash. The only mention of a go forward strategy was the line:
The Company plans to discontinue further development of HIL-214 in infants and is exploring the potential for continued development of HIL-214 and HIL-216, HilleVax’s Phase 1 ready vaccine candidate, in adults.
The piece about continuing to explore the potential development of HIL-216 is slightly concerning as broken biotechnology companies go. HIL-214 (the failed vaccine) was licensed from Takeda (which owns 14% of HLVX), HIL-216 was a separate licensing agreement with a Chinese pharmaceutical company, Kangh, and thus management might make the argument the HIL-214 failure shouldn't cloud the potential for HIL-214. However, as we've seen with many others, often the board along with their advisors determine that the cost of capital is too high to continue on their own and they'll likely decide to pursue strategic alternatives.
Running through my typical back of the envelope liquidation math:
There could be two catalysts here, one on the announcement of strategic alternatives and another on the ultimate conclusion, but HLVX is a bit riskier than others that are further along in their wind down process.
Disclosure: I own shares of HLVX
Thank you for the idea. How has Frazier Life Sciences Management handled similar situations in the past?
ReplyDeleteI'm not familiar with Frazier Life Sciences, but maybe others are and will comment.
DeleteHi MDC, any thought about jumping back in on MEIP? Seems like they still have a ton of cash left and with the CEO out and strategic alts announced this could be another decent basket play
ReplyDeleteHow much cash do you calculate they have?
DeleteYeah, I'm still following this situation. Kicking myself a bit that I sucked my thumb on ABIO that also involved Cable Car as an activist, but the back of the envelope math doesn't quite pencil out for me at the current price. Without ascribing any value to the IP, I get something closer to a $3.75 liquidation value.
DeleteTang Capital with a 9.5% stake.
ReplyDeletehttps://www.sec.gov/Archives/edgar/data/1191935/000121465924012823/j712243sc13g.htm
https://ir.hillevax.com/news-releases/news-release-details/hillevax-announces-reduction-force
ReplyDelete40% RIF
"charges associated with the workforce reduction of approximately $3.4 million primarily related to employee severance payments, benefits and related termination costs." Part of me thinks this is pretty low considering it's 40% RIF. But perhaps this is likely for non executive roles & so cannot be pro rata for the whole org.
DeleteHow are you thinking about the size of this RIF? Indicates management wants to roll the dice more here on HIL-214 (adults)/216?
DeleteThe markets ah reaction was negative, my presumption being due to the “continued development” comments. My opinion is that the real world doesn’t function as markets would like. In the real world cutting a workforce in half or more, or the sale of a business, don’t happen overnight. The market doesn’t like this. You’re paid to take a longer view.
ReplyDeleteWould agree. And suspect there were buyers who were speculating on a greater RIF who now just want to exit.
DeleteThat was the same language as before, important to include the "potential to" continue development part, they haven't made a decision.
DeleteMDC / All - What do you make of Tang filing a 13-G & not a D ? Surely they would get an automatic bump from a D & effectively put the company in play.
ReplyDeleteAADI failed clinical trial, announced 80% RIF and pausing new enrollment. About 70m ncav and 180m nols. 24m+ SO and around 3m shares via options. With the RIF, they might become CF positive with their one current product.
ReplyDeleteThanks, I'll take a look.
DeleteJust FYI, I think its RIF of 80% of R&D team, and about 32% of total FTEs.
DeleteCheck out ANTX, Just cratered, trading 30% net cash, BML took a 20% stake very recently. Could be interesting if they announce a big cut in work force soon.
ReplyDeleteThanks - I do like that one too. Don't own it yet, a bit fully invested at the moment, trying to patiently wait for a few of these others to play out.
Deletemeant to reply here: does the poison pill not concern you?
DeleteThanks for ANTX idea!
DeleteDoes the poison pill here not concern you?
ReplyDeleteIt does not not concern me, but not that much.
Delete@MDC, to what extent, if any, will rate cuts impact the broken biotech basket play?
ReplyDeleteEveryone is debating 25bps versus 50bps right now, seems a bit meaningless to me, I don't know if we're going to get significant enough rate cuts to really moved biotech stocks significantly? Open to smarter opinions, but as of now, don't think it'll matter too much to the "basket".
Deletehttps://ir.hillevax.com/static-files/38bad8de-41fc-43b3-b74f-87411ba51923 25% RIF
ReplyDeleteIs the 25% RIF part of the earlier announced 40% RIF or separate?
ReplyDeleteIt is separate
DeleteRIF in an 8-k just now. Promising
ReplyDelete^ EJL
ReplyDeleteI’m also getting a bit closer to $3 for residual. Looks like expenses will really fall come 1/1. Would be nice.
ReplyDeleteI see low 2's for an ultimate liquidation value even if they're super efficient from here, the q4 spend was probably already pretty large relative to remaining assets (50c+/sh?). Seems like this is already pricing in either some IP value or an attractive reverse merger.
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