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):
The above is likely overly punitive in this scenario but I wanted to be consistent with other similar ideas. As part of the asset sale, AVROBIO did sign on to provide support to Novartis for 12 months under a Separation Services Agreement, which might be why they still need to retain 50% of their workforce. Again, their remaining IP likely still has value, if they can sell it for $10+ million, then we’re looking at closer to $2.00 per share. A reverse merger seems to always be the first option, with the market rallying, maybe those come back in vogue as well.
Disclosure: I own shares of AVRO
