Reviving two old ideas
AVIR and GLTO again
I have again taken a position in Atea Pharma (AVIR). I wrote this up a little over a year ago and flipped it for about a 20% profit within a few months. I kind of forgot about it as I lost interest in these pharma special situations, but given recent events AVIR is too enticing to ignore.
This recent VIC write-up actually piqued my interest again, as there are now three activist investors involved, BML, Tang and Bradley L. Radoff. Who have written angry letters to management (here, here). AVIR has a “also ran” HCV antiviral in development going into phase III and cancelled its CV19 candidate in phase III late last year.
The company has announced exploration of strategic alternatives 2 months ago (right as these shareholder letters appeared) and currently has around $5.3/share in net cash with an annual cash burn of around $1.2/share. The three activists own nearly 20% of shares outstanding, three out of 7 directors are up for election this year and two next year.
I think 4 most likely outcomes are:
AVIR does not find a partner for their HCV treatment and keeps burning cash. Activists will likely increase pressure and try to oust the CEO (who owns 7%). This is the least desirable outcome.
AVIR does find a partner and gets a cash injection and/or lowers cash burn and the market assigns some value to HCV and the stock jumps.
HCV program is discontinued/sold and AVIR is liquidated/sold. Upside around 50-70%. This will likely happen somewhere in 2025 if it happens. I like this option best.
Above outcome but instead of a liquidation/sale a reverse merger happens. Likely bump in the stock price too given the large discount to net cash.
On top of that I expect a reduction in headcount to be announced as a result of the company’s CV19 treatment being discontinued. I will hold the stock for about 6 months or until I get a price jump on no news.
Risk is that another bid will again be rejected. Previously in 2023 a $5.75/share bid + CVR by Tang was rejected.
Second pharma special situation is Galecto (GLTO). Yes I can’t let this one go. It has fallen 60% since I last sold and closed it in October 2024. They currently have about $13-14/share in net cash vs a share price of $4.3. With probable cash burn of $7-10/share in 2025. This is their current IP:
GLTO posted a presentation on their website on January 25th and will hold a presentation tomorrow at an investor conference.
Float is tiny, share price dropped quite a bit on low volume and the discount to net cash is large, and the balance sheet is strong enough to survive for another year and a half or so to make a sale or licensing deal happen. It is still hard to imagine some larger biotech wouldn’t pick this up for $20-40m (vs current mcap of ~$6m).
A hint of good news (like what management plans to do about their lack of funds) and this is back to $6-8/share easily. Speculative, but I think a gamble with a positive expected value so I bought a small position.
Disclaimer: Readers of this blog should do their own due diligence before buying or selling any of the mentioned stocks, since I have been wrong before and cannot guarantee all information in this write-up is 100% factual. I may buy or sell the above mentioned stocks at any time. Past success is no guarantee for future success. Some of the stocks mentioned might have poor liquidity, so make sure to check average daily trading volume before buying or selling anything. I am not your financial advisor.