In this monthly newsletter edition, I am sharing intriguing special situation opportunities that have caught my interest over the past month.
Here is what you will find in this post:
- Pliant Therapeutics (PLRX) – Potential bid from Kevin Tang
- LAVA Therapeutics (LVTX) – Strategic Review/Potential Sale
- Zytronic (ZYT.L) – Nano-cap liquidation
- Cliq Digital (CLIQ.DE) – Management privatization
- +8 other opportunities published on SSI
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Pliant Therapeutics (PLRX) – Potential bid from Kevin Tang
PLRX is yet another busted biopharma targeted by prominent activist Kevin Tang. The stock trades at a 60% discount to net cash, making it a prime candidate for a potential Tang-style cash + CVR bid in the coming weeks.
A few weeks ago, PLRX announced that its key Phase 2b/3 trial was suspended upon the recommendation of the Data Safety Monitoring Board. The stock dropped by about 75%, yet a week later, the company hired an independent committee of professionals to review the data (management had to remain blinded). This step was taken because management stated that it “has not been able, through review of blinded data, to determine the rationale for the DSMB’s recommendation to pause enrollment and dosing in the trial.”
Recently, independent experts confirmed that the DSMB’s review was accurate. As a result, PLRX has fully discontinued the development of the drug.
This is when Tang takes the stage. A few weeks ago, while the independent expert review was ongoing, he was shorting PLRX shares at above $3. Once the failure was fully confirmed, the stock dropped by half to around $1.50, and the activist began accumulating a long position. According to the filed 13D, Tang now owns 9.6% of the stock and is in discussions with management regarding various strategic alternatives.
PLRX has two early-stage drugs: one in Phase 1 and the second one ready for Phase 1. Essentially, the company has too much cash and no promising drugs in the pipeline, a perfect target for Tang.
Worth noting, that the board is staggered, management is well compensated, and owns no stock. Unsurprisingly, the company has just adopted a poison pill in response to Tang’s filing, so they could drag this one out for awhile. The mitigating factor to this is just how large the discount to net cash is today, giving us enough time to wait and see if Tang drops an offer.
LAVA Therapeutics (LVTX) – Strategic Review/Potential Sale
LVTX is a clinical-stage immuno-oncology-focused biopharma that trading at a 20% discount to net cash and that has just initiated a strategic review. There is a strong chance the company will sell itself to a third party, with the potential sale of its asset portfolio worth more than its current market cap.
Moreover, just a few days ago, prominent biopharma investor and activist BML Investment Partners established a 7.4% stake in the company, further supporting the thesis that its development pipeline holds significant value. If the company continues as a standalone entity, its cash runway is only sufficient until 2027.
LVTX has a potentially valuable asset pipeline, with two key partnership assets, one with Pfizer and one with Johnson & Johnson, likely representing the bulk of the company’s value today.
Seagen was the original partnership party for LAVA-1223 (targeting EGFR-expressing solid tumors) until it was acquired by Pfizer. The partnership cost Seagen $50m upfront in 2023, plus $650m in potential milestone payments. In March of last year, Pfizer triggered a $7m payout to LVTX, so the drug development is likely progressing here.
The partnership with Johnson & Johnson dates back to 2020, when LVTX received an undisclosed upfront payment. Since then, the partnered drug (JNJ-89853413) has progressed through preclinical studies, triggering one of the first milestones, a $5m payment following the IND filing and the start of clinical development. The details of this deal remain undisclosed, but it could hold meaningful value as well.
The company also has its own Phase 1 development asset for the treatment of hematologic malignancies (AML and MDS). The IND was submitted in Q2 2024, with the Phase 1 trial dosing its first patient in January 2025.
While I cannot determine the exact value of all these assets, they are certainly worth more than zero—and in a favorable scenario, potentially more than the current market cap (=$35m). All the while, there is some degree of comfort in a 20% discount to net cash as we await the resolution.
Adding further support to this thesis, all pre-IPO investors remain on the shareholder base, with almost none meaningfully reducing their positions. Collectively, these parties own more than 50% of the stock. On top of this, the board is not staggered, allowing more flexibility for players like BML if it wants to push for change.
Another factor supporting a potential sale is management’s shareholder-friendly approach in initiating the strategic review. They acknowledged that, with only one clinical-stage development asset, exploring alternative paths for value maximization would be in the company’s best interest. At the same time, LVTX has reduced its workforce by 30% and extended its cash runway from 2026 to 2027. Such proactive steps are rare in the biopharma space and further strengthen the case for a sale.
Zytronic (ZYT.L) – Nano-cap Liquidation
Zytronic, a UK-listed nanocap, confirmed a wind-down last month after failing to find a buyer. A few days ago, management announced expected liquidation proceeds of 46-60 pence per share, implying a 15-53% upside from the current levels. The process should conclude within 9 months.
The provided upper-range estimates seem reasonable. The company has few assets, mostly cash, some inventory, and three owned facilities (~78k SQF). While comparables are scarce, I found a nearby warehouse (900m away) valued at £43.5/sqf. Applying the same metric, ZYT’s properties would be worth ~£3.4M. There’s uncertainty around the exact valuation, but if I’m directionally correct, this could be quite interesting.
Here are my back-of-the-envelope liquidation estimates:
- £3.9M in cash as of February (no debt)
- £1.5M in inventory, marked at half book value (mostly raw materials per H1’24 reports)
- £0.5M in other NWC (from H1’24 reports)
- £3.4M for properties, based on the calculations above
- less £1M in cash burn from March to now (assumes zero WC swings, just opex burn)
- less £1.5M in further miscellaneous liquidation costs (advisory and legal fees. ACHL, another UK firm in liquidation paid a wind-down agent ~£400K, so this seems reasonable)
- less £1M in severance (previous restructuring saw 14 employees laid off with £134K paid; for the remaining 48 employees, this estimate seems conservative)
This totals 0.57 pence per share, slightly below management’s upper-range estimate, This would be around 44% upside.
Briefly on the risks:
- Given the company’s small size, estimate errors could have a meaningful impact on the final liquidation value. However, the fact that both management’s and my own estimates are relatively close provides some confidence that at least the low-end estimates will be met.
- The company will enter a trading halt on April 1st until the FY24 annual report is filed, meaning we won’t be able to actively trade around the idea for a certain period. If you’re unable to establish a position within this timeframe, it’s at least worth tracking. It could become even more interesting as we gain more clarity on the financials when the FY24 report is released.
Cliq Digital (CLIQ.DE) – Management privatization
Potential management privatization through a delisting of German content streaming business, CLIQ, which trades at less than 2x 2025E EBITDA, is profitable and has a third of its mcap in net cash. There is at least a 20-30% upside from the current levels.
A couple of weeks ago, CLIQ announced it’s considering a delisting and is now in talks with Dylan Media for a potential partial tender offer. Dylan Media is a vehicle for CLIQ’s execs, who collectively own 9% of CLIQ, so they’re negotiating financing now.
Most likely, Dylan Media will announce a partial tender offer, and then CLIQ itself will follow up with another partial tender offer. After both tenders, the company could delist. Recently, they postponed their April AGM to a later date.
The stock looks cheap, management wants to take it private, and they’re figuring out how to do it. Dylan Media was created just in October 2024, so together with the AGM move, this clearly shows their intentions are serious and have been in the works for a while.
CLIQ’s business is basically content arbitrage: licensing and bundling a mix of movies, TV shows, games, music, and more. Some platforms are bundled content hubs (Cliq.de, Vimovigo), while others are niche, single-content plays (e.g., Screamstream for horror movies).
The business holds up purely due to marketing, flooding the internet with ads, pushing for instant sign-ups, and getting people into a 30-day free trial. The customer registers, forgets about it (or doesn’t cancel in time), and gets charged later.
The value of the content isn’t great here. The whole game is spending less on customer acquisition (CAC) than what they make back from those who stick around. It’s an ultra asset-light model, no original content, just licensing and bundling cheap third-party stuff. For a while, it worked super well. CLIQ was growing very fast (3x ebitda from 2020 to 2023), right up until last year.
In 2024, credit card refund policies changed, making refunds easier and faster. CLIQ’s churn spiked, growth reversed, and the company started cutting spending to stay profitable. Instead of the €360-380m in revenue and €52-58m EBITDA they’d projected for 2024, they ended up with €243m in revenue and just €21m in EBITDA. Previously, CLIQ had a mid-term goal of €500m in revenue by 2025. They later tweaked it to a run-rate goal, but that’s off the table now too.
For 2025, guidance shows a continuing (though slight) decline. It could be stabilizing at this point. Worth noting, such businesses don’t deserve high multiples. However, the current valuation looks bizarrely low given that the co is profitable despite the scale-down and the sheer amount of net cash on the balance sheet. While I can’t confirm this, I found an interesting comment on SA stating that this sort of business goes for between 2.5-6x EV/EBITDA in private markets.
That said, the company was buying back stock last year (instead of paying a dividend) – around 8-9% of outstanding shares at an average price of €8.45/share (vs. €6/share today). A decent amount. And now they want to privatize the whole company. Execs were buying shares too, here is a qoute from Q1 2024.
”Well, the situation did not change materially as far as I know and personally purchased almost 3K of shares at the end of February against the stock price of around €18. Today, I also purchased another 1,000 shares.”
At just 3x EV/2025 EBITDA, there is at least a 30% upside from current levels.
8 other ideas posted on SSI during March
If you’re a special situations investor seeking actionable insights, be sure to follow me on X/Twitter and consider upgrading your SSI subscription.
The 8 opportunities listed below have been posted on SSI during March (for paying subscribers only):
- Tender with odd-lot provision that resulted in $600 gain (link).
- SOTP unlock setup driven by an activist who is about to take control;
- Pending takeover and boardroom saga that will resolve over the coming few months;
- Company sale, where investors are getting a free CVR;
- Privatization of a US-listed Chinese company by its parent;
- A bet on activist efforts failing;
- A liquidation that is likely to wrap up faster than expected;
- A bet on an increase mandatory bid.
Thank you for reading my newsletter!