Third Harmonic Bio (THRD) (~$155MM market cap) is a clinical-stage biotech that just released data on their Phase 1 study for lead candidate THB335 for the treatment of chronic spontaneous urticaria (hives). Alongside the announcement (where the data is apparently good enough to prepare for a Phase 2 study, as usual, no opinion on the science from me), THRD disclosed they were going to evaluate a full range of strategic alternatives and implementing a 50% reduction in workforce (eliminating 27 positions).
The shareholder base looks pretty good here, Atlas Ventures and OrbiMed Advisors own collectively about 25% of the company, other familiar names are present in EcoR1 Capital, BVF Partners and RA Capital. A reverse merger is likely here, possibly with a CVR attached to THB335. I added a small position to the growing broken biotech basket (need some more momentum in deal announcements to clear out room).
Disclosure: I own shares of THRD
Is the reason for the small position due solely to you waiting for more of these to complete? Just curious since this seems relatively clean and the gap between NAV and price oddly large.
ReplyDeleteMostly just re-iterating that all of these in the basket are relatively small bets. I do like this one, curious what push back anyone has to it.
DeleteThe fact that they haven’t outright terminated the program is a bit troubling. If they’re truly looking for a reverse merger, why wouldn’t they just kill it now instead of prepping for Phase 2? A buyer could decide to do that themselves if they wanted to. And it’s not like the data was great - safety issues at higher doses, weaker efficacy at lower doses, efficacy underperforming competitors, etc. So why burn more cash on this while also running a strategic review?
ReplyDeleteKind of feels like the review is really about finding a strategic partner rather than an outright sale. There's been a few semi-busted biopharmas that took this route over the years. But if that’s the case, why signal cash? Maybe they’re keeping all options open, but it still seems like a partnership is the most likely outcome.
The major shareholders barely have board representation - just two seats, one of which is an ex-employee of a major shareholder. Meanwhile, execs are extremely well paid, and the board is staggered.
Feels like there are reasons why this trades where it does. Especially at today's levels.
Thanks, I appreciate the thoughts. The cash burn seems pretty low to 6/30, especially including severance or other contract terminations, don't think they're really ramping up to do a Phase 2 study themselves, but you're right, could be a partnership thing or some kind.
DeleteThe way I see it is that, instead of saying We are just this amount of cash, they say: "We are this cash + an option on THB335". I don't think this is incorrect if you are trying to draw attention on your potential value to an acquirer or a partner.
ReplyDeleteThis is an interesting way of looking at it.
DeleteYAVB even more bullish on this - shareholders all aligned mostly because this has been a dumpster fire and they all want out. Mgmt clearly does with future cash projections!......!!
ReplyDeleteCan you share the YAVB summary ? Tks,
DeleteGeneral Atlantic filed in yest liquidating their position. Had been alot of the selling pressure the past 3 days, will see if can rerate now.
ReplyDeleteA question about the broken biotech concept. There 3 ways for these to work out: liquidation, post-merger pop, or the clinical trial shows promise.
ReplyDeleteBack in mid-2022, when XBI fell to 5-year lows and capital markets were basically closed, a lot of these companies were forced to liquidate (especially the smaller ones). Today, I see a lot more shelf offerings (e.g., ANRO) or mergers (e.g., SLRN) at large discounts to NAV. In short, the companies are choosing to continue drug development rather than returning capital, even if it means accepting a bad deal.
If one doesn't have an opinion about the science, then what basis is there for buying these now? Mean reversion to a more typical NAV discount?
Think you are forgetting Tang et al. show up & offer cash + CVR. I know this doesn't always result in a transaction but I think a good indication would be how much stock the c-suite own. I'm sure it's not a perfect correlation, but show me the incentives... etc..
DeleteThey are always speculative - everything depends on where they choose to spend the cash (which investors often don't know in advance) and the market's reaction.
DeleteContinuing development would be the most preferred option for management/board as NPV looks higher; liquidation is the last resort, more relevant when there's no cash left. Sale to Tang etc. would generally look attractive if it's near or above liquidation value (but then what's the point for the acquirer?).
Some stats here: https://catalystbulletin.substack.com/p/biotech-strategic-reviews-round-up
https://www.globenewswire.com/news-release/2025/04/14/3060758/0/en/Third-Harmonic-Bio-Announces-Plan-of-Liquidation-and-Dissolution.html
ReplyDeleteNice call Matt. Thank you.
ReplyDeleteGreat outcome today. Hopefully we see more liquidations as there’s a number of busted bios out there. Anyone have some insight about what THB335 could be worth?
ReplyDeleteNo idea what THB335 could be worth, but interestingly, the complete washout in biotech while painful might benefit this basket, reverse mergers don't look as attractive as just handing the cash back to shareholders.
DeleteAgreed. ACHL, ALLK, and now THRD will hopefully support more liquidations
DeleteDoes it make sense to hold the shares post dissolution ? The shares will be delisted (per the filing). If so, how will the company disburse the cash ?? Asking because I do not have any prior experience in situations such as these ...
DeleteThe company's agent keeps a share register of the holders, it'll just become non-traded and show up with zero balance in your account. I have a bunch of them, they'll disburse the vast majority of the money before that happens, might get a few more nickels at some point down the road.
DeleteOn the other hand, the difficult capital raising environment might make even more biotechs look for funding via reverse mergers and the like.
DeleteNice win here. Thoughts about what your recycling into ? Have you looked at RPTX ?
ReplyDeleteI have been kicking that one around, do like the setup, obviously a bit riskier than some of these others. I might hold THRD into the liquidation, Q3 is around the corner and the estimated proceeds doesn't include THB335, probably doesn't move the needle much but it is free upside.
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