I am a little bit late posting this one, however as talked about within the remark part of my Mid-12 months replace, I did add Aerovate Therapeutics (AVTE) ($55MM market cap) to my damaged biotech basket. Again in June, Aerovate, a one-shot-on-goal biotech, introduced poor topline outcomes from the Section 2b portion of their AV-101 examine for the remedy of pulmonary arterial hypertension (PAH). A couple of weeks later, the corporate introduced they have been shedding 78% of their workers, costing them $5.6MM, $3MM of which is able to hit in Q3 and This fall. Then one other week later, AVTE formally introduced they have been exploring strategic options:
Aerovate has engaged Wedbush PacGrow as the corporate’s unique strategic monetary advisor to help within the strategy of exploring strategic options, which can embrace however should not restricted to, an acquisition, merger, reverse merger, enterprise mixture, liquidation or different transaction.
Notably, they listed a liquidation as a attainable final result, typically we do not see a liquidation known as out within the preliminary strategic options announcement. One motive is perhaps they haven’t any different product candidates, from their newest 10-Q:
Overview
We’re a biopharmaceutical firm. Our preliminary focus was on advancing AV 101, our dry powder inhaled formulation of imatinib for the remedy of pulmonary arterial hypertension, or PAH, a devastating illness impacting roughly 70,000 individuals in america and Europe. On June 17, 2024, we introduced topline outcomes from the Section 2b portion of our Section 2b/Section 3 Inhaled Imatinib Pulmonary Arterial Hypertension Scientific Trial of AV-101, or IMPAHCT. Topline information confirmed that, whereas AV-101 was typically properly tolerated throughout all dose teams, the examine didn’t meet its major endpoint for enchancment in pulmonary vascular resistance in comparison with placebo for any of the studied doses or present significant enhancements within the secondary endpoint of change in six minute stroll distance. We additionally reviewed information from a number of further secondary endpoints of the Section 2b portion of IMPAHCT, which additionally failed to indicate significant enhancements. Based mostly upon these outcomes and in settlement with the unbiased examine advisory committee, we halted enrollment and shut down the Section 3 portion of IMPAHCT in addition to the long-term extension examine. AV-101 for the remedy of PAH was our solely product candidate in improvement. At the moment, we don’t intend to renew improvement of AV-101 or some other product candidates. In July 2024, we introduced the choice to conduct a complete evaluate of strategic options centered on maximizing shareholder worth. We additionally engaged Wedbush Securities Inc. (Wedbush PacGrow) as our unique strategic monetary advisor to help within the strategy of exploring strategic options, which can embrace however should not restricted to, an acquisition, merger, reverse merger, enterprise mixture, liquidation or different transaction.
I am nonetheless attempting to get my arms round how the brand new SEC shell firm rule goes to play out after going efficient July 1, 2024, however it seems that these one-shot-on-goal sort biotechnology firms, like AVTE, with out different property may fall into the shell firm bucket and could possibly be pushed in direction of a liquidation consequently. Others which are persevering with improvement concurrently pursuing strategic options may make for higher reverse merger candidates, which have typically labored out properly this 12 months. However I am not a lawyer, and thus not totally positive if this new rule means a lot to this a part of the market since biotechs typically do not make outlandish SPAC-like income projections regulators try to stamp out. If others have extra clever ideas, as traditional please share.
My again of envelope liquidation math:
AVTE is fairly clear, there are minimal dilutive securities excellent, minimal working lease remaining and certain the IP worth is nugatory. I nonetheless wrestle a bit with estimating wind down bills, be at liberty to make use of your personal estimate, however at in the present day’s worth, AVTE appears to be comparatively low cost in comparison with my estimate of liquidation worth.
In the event that they do go the reverse merger route, there’s some good possibility worth, apparently RA Capital owns ~32% of AVTE and engineered a profitable reverse merger at ELYM with Tenet Medicines that is seen the inventory go up virtually 200% since that deal was introduced in April.
Disclosure: I personal shares of AVTE
