Ideas Elsewhere: AVROBIO (AVRO)

Strategic Review/Potential Liquidation – 14%+ Upside


A few weeks ago, Clark Street Value brought attention to a strategic review of AVROBIO. It’s a busted biotech that has suspended all treatment developments, laid off 50% of the workforce, and announced a strategic review. Liquidation is among the potential outcomes of this review.

Clark Street Value estimates the ‘likely overly punitive’ liquidation value at $1.72/share, implying a 14% upside from current levels. On top of that, there might be some potential value in AVRO’s remaining IP assets. While the valuation of AVRO’s gene therapy treatments is outside of my competence, it’s interesting that BML Investment Partners has recently reported a sizeable 9% position in the company. It would be strange if BML got involved only for the 14% spread, so probably more value could be extracted here. Kevin Tang also reported a 6% stake last month (shares were trading much lower at the time), shortly after AVRO announced a big sale of one of its therapy programs.

A reverse merger is a risk given AVRO’s relatively large pile of cash and NOLs, which makes it an attractive target. Management owns 9.2% (worth around $6.5m at current prices). Meanwhile, the 3 top execs received $4.3m in combined compensation last year and over $8m in 2021.

Note: The ‘Ideas Elsewhere’ section is intended to highlight interesting event-driven investment ideas by other authors. These ideas are not my own, and I am simply summarizing them to bring attention of SSI subscribers. I do not intend to actively follow the developments of these ideas, so you should expect limited updates or follow-ups in the comments section.

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