stockspinoffinvesting Posted September 28, 2016 Share Posted September 28, 2016 APVO is a recent spinoff that has been sold indiscriminately (from $8 in the when issued market to $2.75 today). It currently has a market cap of $55mm but has net cash on hand of $65mm (this includes note payable of $20mm from parent EBS). The way I say it, you are getting $40mm of annual revenue and a large promising pipeline for free. The company currently has four commercial products in hematology and immunology that are on track to generate $40mm in sales in 2016. Piper Jaffray expects this revenue to grow to $80mm by 2019. In addition, APVO has a pipeline of therapeutic antibodies targeted at oncology and autoimmune disorders. APVO is focused on a new cutting edge area of biotech called "bispecifics". Big Pharma and more established biotechs have been shelling out large amounts of capital to partner with "up and coming" bispecific biotech companies. For instance, check out the examples below of big pharma paying large upfront payments in order to get access to bispecific pipelines: Example #1: Novartis recently paid Xencor (XNCR) $150mm upfront, plus up to $2.5bn in milestone payments in a partnership on the Xencor bispecific pipeline. Example #2: JNJ recently paid Macrogenics (MGNX) $75mm upfront and up to $750mm in total if it hits certain milestones targets. There are countless others. Just google: “bispecific partnerships” Aptevo is in the process of speaking with most of the major pharma and biotech companies in order to come to an agreement on a partnership. In my opinion, a partnership would be a huge catalyst as it would provide upfront capital and industry validation of Aptevo's pipeline. I also looked at APVO on a P/B and EV/Revenue multiple basis. On a Price to Book value basis, it trades at 0.4x while peers trade at 2.8x. On an EV/Revenue basis, it trades at -0.25x while peers trade at 13.2x. Full write up is here in case anyone is interested: http://bit.ly/2diHKk0 Has anyone else looked at this one? Any thoughts? Link to comment Share on other sites More sharing options...
netnet Posted September 28, 2016 Share Posted September 28, 2016 Spinoff, This looks like a really good idea. I am no expert, but I have done some investing in the space and this looks like a value. I need to dig into the balance sheet, and prudence dictates borrowing when you don't need it, but to get a 35 million line with 65 million in cash, plus the receivable note. These companies can really burn the cash, so I am worried a bit that they may not be managing to their resources. But again I have not looked at current revenues much less the pipeline or anything. Link to comment Share on other sites More sharing options...
netnet Posted September 28, 2016 Share Posted September 28, 2016 I also read your analysis of of 1 year returns on sub 100 million cap spinoff. very interesting. How many stocks were in that category? I had not seen anything approaching those kind of returns. Also how did you compute the returns, off the lows or first day of trading? did you allow for survivor bias, and lastly what years did you research? Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted September 29, 2016 Author Share Posted September 29, 2016 Thanks for your comments netnet. Regarding the balance sheet, yes I agree. It is amazing how quickly biotechs can burn through cash. I agree with you that it is good to raise debt when you are able to. Also, the company that issued thee debt (Midcap) is a very well regarded lender. They are not in the business of losing money. I believe they must have had a lot of confident in the enterprise value of APVO in order to get comfortable loaning money to this microcap biotech at libor + 760. As I mentioned earlier, I believe APVO will announce a partnership soon with a major pharma company and this will provide additional capital and major validation. In terms of spinoff returns by market cap, my data source was bloomberg. I downloaded all data available. Since 2000, Bloomberg had 92 spinoffs who's initial market cap was less than $100mm. I calculated returns from first day of trading. There were many spinoffs that went to zero so my analysis takes into account the underperformers. Link to comment Share on other sites More sharing options...
brendanb22 Posted October 1, 2016 Share Posted October 1, 2016 The success of this company seems to be really predicated on their ability to lock down a partnership. How much do you know about the strength of their pipeline? Just because it's bispecific doesn't necessarily mean it's in demand. Looking through their filings it's clear mgmt is confident in the long term prospects -- a lot of the senior term from emergent jumped ship to APVO and took large equity packages Link to comment Share on other sites More sharing options...
heth247 Posted October 2, 2016 Share Posted October 2, 2016 It seems that the ~$8 when-issued price pre-spin off was only traded for a few hundred shares. In addition, there is ~20M shares outstanding but looking at the trading volume since spin-off in Sept. I don't see major big dumps posts spin-off. So it is really not the case where the original Emergent shareholders don't want it or institutional shareholders are forced to sell and created a bargain. Link to comment Share on other sites More sharing options...
brendanb22 Posted October 2, 2016 Share Posted October 2, 2016 So then how do you explain the large declines post-spin? It does have all the fundamentals of a spin off that would be unwanted by institutions, etc. Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted October 4, 2016 Author Share Posted October 4, 2016 It opened at $4.29 on August 1. Between August 1st and 2nd, 5 million shares traded (about 25% of shares outstanding). I think its a safe assumption that institutions were dumping the stock... Link to comment Share on other sites More sharing options...
brendanb22 Posted October 7, 2016 Share Posted October 7, 2016 how are you getting comfortable with their current product portfolio? What is there that tells you that it will continue to generate and grow revenue? Same goes for their pipeline? Just because they have bispecific products in development doesn't necessarily mean the pipeline will be as valuable as their comps. Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted October 24, 2016 Author Share Posted October 24, 2016 I view the current portfolio of approved products in two buckets. Bucket 1: the legacy products. Bucket 2: XINITY. The legacy products consist of Winrho SDF ($14mm in 2015 sales), HepGam B ($10mm in 2015 sales), and Varizag ($2mm in 2015 sales). These products have been on the market for a number of years, and have been neglected within Emergent Biosolutions as they really didn’t move the needle for the company. There is some low hanging fruit to grow revenue from these legacy products in the form of price increases and expansion to serve different geographies. With regard to price increases, Emergent hasn’t raised the price of these products since they were launched. This is pretty rare in the biopharma world. Now given heightened scrutiny given publicity regarding egregious price hikes (Mylan, Valeant, etc), APVO needs to be careful. But I believe the company does have the ability to raise prices moderately. Additionally, APVO plans to launch these products in additional geographies. Finally, APVO doesn’t have patent protection on these products. Rather the products are protected by manufacturing trade secrets. There are high manufacturing barriers to enter the market, and the products target niche or ultra-niche markets so it is unlikely that there would be increased competition or generic competition. Bucket 2: With regard to IXINITY (hemophilia B), the drug is carving out a niche for lifestyle hemophilia patients. The drug has a half-life of 24 hours. Thus, patients who choose XINITY inject themselves every day and are able be relatively active for the next 24 hours. They can bike or participate in other activities and not worry about contact that would result in serious internal or external bleeding. The other products on the market have longer half-lives. This is convenient from a dosing perspective. But the inconvenience is patients on these longer half-life drugs cannot be as active as if they were on XINITY. Let me explain. If a patient chooses to use the drug with a longer half-life, the active ingredient of the drug will last for three days in the patient’s bloodstream. He can be very active on day one because 100% of the medicine remains in his blood. But on day 2 and 3, he has to be less active as only 50% and 25% of the active ingredient in the medicine remains in his blood. Thus, if he were to get a bruise or cut, it might be difficult to stop the bleeding. XINITY sales grew from $1.7mm in Q1 2016 to $2.5mm in Q2 2016. Thus, APVO saw good sequential growth. Sales have grown sequentially in every quarter since launch. Assuming XINITY is eventually able to take 10% market share, it would generate ~$45mm in sales by 2019. Regarding APVO’s pipeline, I don’t have a strong view. I’m just assuming it’s not worth zero. The company has spent $193.5mm on R&D from 2011 through June 30, 2016 to develop the current pipeline and has many different shots on goal, both clinical and pre-clinical. Aptevo currently has a market cap of $46mm. It has $45mm in net cash and a commitment from EMS to provide an additional $20mm within the next twelve months. So effectively, APVO has $65mm of net cash with a market cap $46mm. Meanwhile, it has an approved product portfolio that will generate $40mm in revenue this year and is growing. It has a pipeline that it has spent $193.5mm to develop. I get that it is burning a lot of cash, but this is par for the course in biotech land. Its biotech peers who are also burning a ton of cash trade at a median valuation of 2.8x book value and 13.2x on an EV / Revenue basis. APVO trades 0.38x book value and a negative EV/ Revenue multiple (because it has so much cash on its balance sheet). This seems ridiculously cheap. As Josh Schimmer (Piper Analyst wrote): “What is unique about APVO is that the valuation, in our view, doesn't even account for the approved product portfolio, let alone any optionality from the bispecifics…..As a spin-off from a company that many investors don’t follow, it’s flying below radar screens as arguably the best way to invest in the bispecific space.” Link to comment Share on other sites More sharing options...
kab60 Posted October 24, 2016 Share Posted October 24, 2016 It looks interesting and cheap optically, but did you look at the insider angle here? If you did, what's your conclusion re incentives/stakes? Link to comment Share on other sites More sharing options...
brendanb22 Posted October 24, 2016 Share Posted October 24, 2016 Does anyone have the Pipar report they could please share? Link to comment Share on other sites More sharing options...
rkluwer Posted November 15, 2016 Share Posted November 15, 2016 Q3 out. Big impairment to goodwill and drug related asset. Current assets stil stands at 100 mio, compared to 113 a year ago. (MC 46,7) Seems like they are having issue with IXINITY (hemophilia B) and the production of this, which could cost some sales in dec and nov. Its a big shame, as its the drug that really seems to gain traction from the report. Other then that, seems like the impairment have also taken place, do to the lower stock Price and the reclassification of there long-term value as the see it. Still waiting for news on a partner, which the are working on.(from stockspin) Link to comment Share on other sites More sharing options...
Steven B Posted November 21, 2016 Share Posted November 21, 2016 Great stuff, I dropped a line at the blog. Any links to the Piper report? That would be greatly appreciated. Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted November 21, 2016 Author Share Posted November 21, 2016 Steve, shoot me an email to rich@stockspinoffinvesting.com and I can send over the Piper report. With regards to the recent quarter,the impairment was definitely disappointing. With that being said, it still trades at 0.6x book value, even after the impairment. I'm going to call IR to better understand the IXINITY production issues, and will post again with more information. In other news, Sessa Capital filed a 13-G showing they own 8.4% of APVO. Sessa is run by John Petry who formerly worked with Joel Greenblatt at Gotham Capital. As such, he is someone who is very familiar with spinoff dynamics and its encouraging that he sees value. Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted November 30, 2016 Author Share Posted November 30, 2016 Just noticed that Perceptive Advisors now owns about 5% of APVO. Who is Perceptive Advisors? They are a biotech/pharma focused hedge fund that has generated net returns of 20%+ since inception in 1999 despite charging 2% management fees and 25% carried interest. Definitely a good vote of confidence. Link to comment Share on other sites More sharing options...
rkluwer Posted November 30, 2016 Share Posted November 30, 2016 Steve, shoot me an email to rich@stockspinoffinvesting.com and I can send over the Piper report. With regards to the recent quarter,the impairment was definitely disappointing. With that being said, it still trades at 0.6x book value, even after the impairment. I'm going to call IR to better understand the IXINITY production issues, and will post again with more information. In other news, Sessa Capital filed a 13-G showing they own 8.4% of APVO. Sessa is run by John Petry who formerly worked with Joel Greenblatt at Gotham Capital. As such, he is someone who is very familiar with spinoff dynamics and its encouraging that he sees value. It seems like IXINITY, is where the Growth is as the moment, so would be very dissapointing, if the don't get the production up and running very soon, as this could kill the Growth the are seeing here. The big catalyst should still be a partner on there platform or one of there drugs!?, maybe if u could ask into this, if the are in any talks at moment, or seeing anything on this front. Gonna be fun to hear on tonights piper cast, if the mention anything on this! Link to comment Share on other sites More sharing options...
muscleman Posted November 30, 2016 Share Posted November 30, 2016 Just noticed that Perceptive Advisors now owns about 5% of APVO. Who is Perceptive Advisors? They are a biotech/pharma focused hedge fund that has generated net returns of 20%+ since inception in 1999 despite charging 2% management fees and 25% carried interest. Definitely a good vote of confidence. Perceptive Advisors have 50% turnover ratio. That means it is really hard to follow them. Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted November 30, 2016 Author Share Posted November 30, 2016 50% turnover doesn't strike me as that high. Essentially turning the portfolio over every two years. Also, the fact that a manager has a 50% turnover rate doesn't discount the fact that as of 9/30, they owned 5% of the company, hence they liked the risk/reward of the stock at that time. From the time of the spinoff until 9/30, the stock has traded between $2.20 and $3.33. It trades at $1.89 today. Now perhaps Perceptive has sold the stock since 9/30, but seeing as the price of stock was $2.56 on 9/30 I think it is probably unlikely. It is simple to follow Perceptive Advisors' portfolio. All we have to do is check in February when the 13F filings come out to see if they still own the stock. Link to comment Share on other sites More sharing options...
rkluwer Posted December 1, 2016 Share Posted December 1, 2016 The webcast from Piper yesterday. http://ir.aptevotherapeutics.com/phoenix.zhtml?c=254374&p=irol-EventDetails&EventId=5237131 The er very optimistic about them selves and talk about there current value/MC to be less then 1/3 of there fair value. A bit promoting in the end i think :). The talk about there manufacturing issue and this this should be solved soon and that the should have an answer on that by year end. The feel the have a lots of things going for them, and that the market just needs to catch on! actually say, the are a massive buy now hahahaha.... and u need to buy before it rockets! hahaha.... hopefully the have something to have it in, but good to hear, the are positive about the future. but again, if the CEO wouldn't be, who would ;). listen to the call. 25 min and an okay sales pitch :) Link to comment Share on other sites More sharing options...
stockspinoffinvesting Posted December 1, 2016 Author Share Posted December 1, 2016 thanks rkluwer. And I obviously agree that its undervalued. But it would be nice to see the management team step up and make some insider purchases if they think the stock is so undervalued! :D Link to comment Share on other sites More sharing options...
rkluwer Posted December 1, 2016 Share Posted December 1, 2016 Yep, that would def be a good sign. Don't really understand the market reaction, sending it Down 5%, on an upbeat webcast. But guess, ppl dont like when management, are too rosy! The where also talking about lots of interest in there platform and in cooperations, so hopefully we will some of this soon, so ppl can get some new comfident into this. The are getting 20 mio more from emergent here in start 17, only that is around 60-65% of current MC. So think there is amazing downside protection, the only worry can be, the burn all the Cash, before the produce anything. (from call, that gives them arround 80 mio in Cash, Cash 30/9 60) But the where even talking about values, if the where to sell products, and that where arround 2x rev. So then 4 products when full operational, would be valued arround 80 mio. - Maybe the should just sell it all and Cash in - 160 mio USD(80 Cash + 80 from sell products) to share :D hahaha..... nice x4 ;) Link to comment Share on other sites More sharing options...
muscleman Posted December 7, 2016 Share Posted December 7, 2016 Regarding the potential for price increases: https://www.goodrx.com/chronic-itp/drugs WinRho's price is $400. Its competitor Rhogam is selling at $114. Hyperrho at $89. IXINITY: https://www.goodrx.com/hemophilia/drugs The $700 price is in line with competitors. Hepagram B: https://www.goodrx.com/hepatitis-b/drugs Recombivax HB and similar vaccine are selling at $100. Hepagam B sells at $700. Varizig: https://www.goodrx.com/chickenpox/drugs $700 price. Competitors sell at $100-200. Why does the bull even propose the potential for price increases in the thesis? :o Link to comment Share on other sites More sharing options...
rkluwer Posted December 20, 2016 Share Posted December 20, 2016 Aptevo changed there deal with morphosys on thursday which made the stock drop til mid 1,80's. http://ir.aptevotherapeutics.com/phoenix.zhtml?c=254374&p=irol-newsArticle&ID=2230147 On Friday the posted positive phase 2 data, and said that this could end up in a partnership on a phase 3 if the data and an ongoing studie shows an positive effect. So def a small chance of some good here. Made the stock jump to 2.93 high. http://ir.aptevotherapeutics.com/phoenix.zhtml?c=254374&p=irol-newsArticle&ID=2230353 Yesterday we dropped down to .,90 Again and closed at 1.97. Just shows that ppl def are ready to sell into the rallies. I did the same and bought back here in mid 1.90's. This still seems like a very good bet and even more so with the positive data, as there haven't been much positive news from Aptevo lately. Link to comment Share on other sites More sharing options...
701 LV Posted September 28, 2017 Share Posted September 28, 2017 APVO closed their deal to sell Hyperimmune Products for up to $74.5 Million. http://ir.aptevotherapeutics.com/phoenix.zhtml?c=254374&p=irol-newsArticle&ID=2303603 Market cap is currently valued at $46M. Link to comment Share on other sites More sharing options...
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