I am a bit late posting this one, however as talked about within the remark part of my Mid-Yr 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 Part 2b portion of their AV-101 research for the therapy of pulmonary arterial hypertension (PAH). A number of weeks later, the corporate introduced they had 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 had been exploring strategic alternate options:
Aerovate has engaged Wedbush PacGrow as the corporate’s unique strategic monetary advisor to help within the means of exploring strategic alternate options, which can embrace however aren’t restricted to, an acquisition, merger, reverse merger, enterprise mixture, liquidation or different transaction.
Notably, they listed a liquidation as a potential final result, usually we do not see a liquidation known as out within the preliminary strategic alternate options announcement. One purpose could be 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 therapy of pulmonary arterial hypertension, or PAH, a devastating illness impacting roughly 70,000 folks in the USA and Europe. On June 17, 2024, we introduced topline outcomes from the Part 2b portion of our Part 2b/Part 3 Inhaled Imatinib Pulmonary Arterial Hypertension Medical Trial of AV-101, or IMPAHCT. Topline information confirmed that, whereas AV-101 was usually properly tolerated throughout all dose teams, the research didn’t meet its main 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 Part 2b portion of IMPAHCT, which additionally failed to indicate significant enhancements. Based mostly upon these outcomes and in settlement with the unbiased research advisory committee, we halted enrollment and shut down the Part 3 portion of IMPAHCT in addition to the long-term extension research. AV-101 for the therapy of PAH was our solely product candidate in improvement. Right now, we don’t intend to renew improvement of AV-101 or another product candidates. In July 2024, we introduced the choice to conduct a complete assessment of strategic alternate options targeted on maximizing shareholder worth. We additionally engaged Wedbush Securities Inc. (Wedbush PacGrow) as our unique strategic monetary advisor to help within the means of exploring strategic alternate options, which can embrace however aren’t restricted to, an acquisition, merger, reverse merger, enterprise mixture, liquidation or different transaction.
I am nonetheless making an attempt 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 kind biotechnology corporations, like AVTE, with out different belongings may fall into the shell firm bucket and could possibly be pushed in direction of a liquidation because of this. Others which might be persevering with improvement concurrently pursuing strategic alternate options may make for higher reverse merger candidates, which have usually labored out properly this 12 months. However I am not a lawyer, and thus not solely certain if this new rule means a lot to this a part of the market since biotechs usually do not make outlandish SPAC-like income projections regulators are attempting to stamp out. If others have extra clever ideas, as regular please share.
My again of envelope liquidation math:
AVTE is fairly clear, there are minimal dilutive securities excellent, minimal working lease remaining and sure the IP worth is nugatory. I nonetheless wrestle a bit with estimating wind down bills, be happy to make use of your individual estimate, however at in the present day’s value, 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 nearly 200% since that deal was introduced in April.
Disclosure: I personal shares of AVTE