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Analysts just chase stocks up and down. They set price targets more on what they can write without getting laughed at as opposed to what they really think something is worth. By that I mean few analysts here would set a $20 target when the stock is $4.75. If/when things turn for the Company, they will all quickly start to chase the stock up too. In that respect, this is a bit like a coiled spring now. The news has been almost all bad, the company was removed from S&P 600, analysts downgraded, etc. When things start to go the other way, you'll see a sharp move higher fueled by all of those things reversing.
I think what's more important is what they didn't say, as opposed to what they did. If there was some real news that was moving the stock, don't you think they would have disclosed it with some kind of PR ahead of this annual meeting? That's sort of all you need to know to help get conviction that this market move isn't really specific to Avid.
Avid does not manufacture small molecules. They manufacture biologics.
Funny enough...I thought this quarter was pretty good in the context of the industry environment. They continue to grow revenue and maintain backlog despite a large portion of their bookings (early stage) basically at zero because of the environment. They are winning projects from other CDMOs that should reap major dividends in 18-24 months and could very well fill the facilities. If biotech funding were to actually come back, I think you'd see another $30-$50mm in revenue from early stage projects start to pile in. If funding is weak through the end of 2025 (which would be 4 years...kind of unprecedented), I still think Avid grows and will generate good EBITDA. What people here can't seem to understand is that incremental revenue has a 70% margin. Do that math. If they add $50mm in revenue from today's base, that's an incremental $35mm of gross profit. Gross margin and profits will very quickly rebound because of this operating leverage. The Company had decent bookings and continued on its path in a weak environment and in what is usually a slower quarter for bookings. Absent the slowdown in biotech funding, I think they would have filled facilities by the end of calendar 2024. I think that has probably been pushed by a year, but the stock will react well before they fill the facilities.
Three more reports this year, including late June when they will give annual guidance. I think backlog could be lumpy, but assuming the trajectory overall continues to be positive with backlog and margins, you should see the stock continue to perform well in my opinion.
He also buys shares regularly through the company's share purchase plan. I think these are his first sales since he's been part of Avid. Given stock compensation is a significant piece of his total compensation, it isn't unreasonable to sell a few shares here and there. These shares are also part of a 10b5-1 plan, so by definition, the sales are not tied to any particular knowledge he has. My speculation is that he probably has a program to sell some small amount of shares at reasonable intervals above $19
This is wise business practice. There is liquidity now just in case so they have basically guaranteed they can finish all the facilities and have money for a rainy day.
As I've been saying for awhile, patience here will pay off. The fixation on short-term trading and random short-term prices does nothing except make everyone go crazy. Big picture, this Company should be filling its capacity by late 2025 is my guess. That is a company that will be doing ~$130mm of EBITDA or more, and given market multiples even now and what is being rumored for Catalent, that would put the stock into the $40s. Don't kid yourself though. There will be bumps in the road, maybe a quarter here and there with new bookings that disappoint, etc. But the long-term trend here is still quite strong. Doing that math, this still sets up for 40%+ annualized returns from today's price through 2025.
The sales are part of a 10b5-1 plan. The parameters are set up in advance and he has no control over the actual sales. It is managed by a third party. With that said, based on the sales, it seems his "program" is to exercise/sell 5k options monthly/quarterly as long as the stock price is above $16. There's nothing more to it than that. If he was selling with access to material non-public information (which he has, because he is on the Board), it would be illegal. That's why programs like this are set up. It allows people with access to information to unwind some of their position based on pre-determined parameters so there are no conflicts. Not everything is tin foil hat...
I don't think there's any kind of organized "walk down." The market is reacting to some negative reports from Catalent, and a few of the cell/gene therapy companies. I don't think Avid is necessarily affected by the same things, but right now the market is selling first and asking questions later.
I actually thought the stock would be up a decent amount on the earnings release given it had traded off recently. I'm not sure what else people were expecting. The revenue and the orders were great and the EPS/margins are irrelevant until they have the new facilities open and they start to fill them. In a tough environment, the company continues to grow, which is top decile in this market. But, I wasn't going to be selling anyway and I do expect that at some point in the future my "sell" decision will happen for me when the company is acquired for a much higher price than today.
There is also sort of a strange notion on this message board that markets are extremely efficient all the time. Just because the stock is at $16 or wherever it ends up today, doesn't mean that's the "correct" price. Was it "correct" when it was in the low $3s in 2020 before going up 10x? There are all sorts of technical and short-term things at play, especially as the company has been added to indices. The only thing that matters is what any investor who owns (or doesn't own, or shorts) thinks that it is worth. Over time, it'll get to the fair price. I will say in a market environment like this, stocks don't tend to make new highs because you're fighting a tidal wave of selling everywhere. That's why patience and continued strong performance are the things to focus on. Like I said, wake up in a few years and in my opinion CDMO will be meaningfully higher.
I'm confused by the negativity. Book to bill > 1, backlog keeps growing, and I expect backlog and revenue to grow much faster as new capacity comes online. The $30s will come, but the real value will be the $40s, $50s, and $60s. This is a compounder. I'd expect a new facility announcement at some point next year given the lead times for capacity to be operational. In a few years, this could be a company with $500-$700mm of revenue capacity with EBITDA margins in the mid 30s %. If you do any kind of reasonable multiple on that math, this stock will be in the mid $60s or higher. It is a tough economic environment out there, and Avid continues to grow and put up record backlog. People should stop anchoring themselves in what the stock used to trade at last November and focus on what it could reasonably be worth in a few years.
It doesn't matter. Just because there's an offer doesn't mean the Board has to accept it and take it to shareholders.
Mark away. I honestly don't care about HGEN. I am not short, it has no significance to Avid, and I'm obviously not long. I just think it is strange that people here become so emotional and defensive on a board. I don't think I expressed anything other than opinion and tried to engage in debate. Your version of debate is "nuh uh no you're wrong boo hoo." You didn't actually try to contradict any of the things I said, which I think were logical. If you don't think they are logical, why not say why you think that? In any event, no further comment from me. Boards like this are meant to add value not to become childish banter amongst emotional investors.
This board is increasingly bizarre and emotional. Emotions typically get the best of investors...
They wouldn't be the plaintiff if they know they have no case...In fact, if they were desperate they'd do exactly what they did...cancel, come up with an excuse, then refuse to pay. I'm not trying to be critical of your investment in HGEN. You can do whatever you want. But, if you actually look at this situation and forget for a moment that you might be invested in HGEN or CDMO...what seems more plausible based on the behaviors? Have you ever sued anybody when you had no case? - Rarely Do people who are strapped for cash stop paying bills? - Often If you were desperate and you thought you had a case, wouldn't YOU be the one to sue to recoup what you thought was yours? - Yes, most likely. But then you look at this and the only thing HGEN did was the "desperate" action.
Fail is maybe too strong a word, but in a world where the FDA was scrambling to approve all kinds of therapies, this didn't pass the test. And now, we are in a place where COVID, though still persistent, has a multitude of other therapies and a much lower severity, at least with current variants. To me, it feels like HGEN missed its window. But again, more telling is that the bar actually should have been pretty low for Emergency Use Approval, and they didn't get it. So what I contend is that even if approved, the demand won't be nearly what they once thought.
This is not my read at all. HGEN has a product that has more or less failed, and is teetering on solvency. My guess is they are looking for any reason possible not to pay various people as they try to preserve cash and fight another day. If you really thought Avid was the guilty party here...why would Avid be the one suing from breach of contract? Don't you think the desperate HGEN would be the one to have sued Avid if Avid was truly at fault here? In any event, HGEN is basically out of the backlog and hasn't been in revenue for a long time. This is a non-event, other than Avid might be able to recover up to $11mm in arbitration over time.
No. Avid fully reserved for this a couple quarters ago. You can see that in their 10Q...
Yes. I prefer for things I love to get cheaper, especially when I haven't sold anything. That means other than staring at today's arbitrary price, I haven't lost anything. I suppose the scorecard will be clear in a few years...
The amusing thing about your reply is that you call a mid to upper teens offer a "low ball" yet you claim the stock is a POS on the way to $4. That's about all anybody needs to see to get an opinion on your credibility. To be honest, I don't even care. You are free to say and do as you like. I just think it is tiring and stupid. Don't you have anything better to do with your life? Like I've said, the best gift for long-term investors here would be for this stock to trend down in a weak market and go to a stupid price like $4. It would literally have 10x+ potential there.
In my opinion, given the share price retreat, there is a significant risk that one of the larger players takes advantage and offers a large premium to today's price, but still a significant discount to what it is worth and where it traded last year. $22 is abysmal. I won't vote in favor of any deal that is less than $35. This is a growing industry and investors are much better off just waiting a few years for the capacity to fill up before they give shares away cheaply.
I do not think HALO's purchase of Antares has anything to do with potentially moving business away from Avid. Literally nothing. Not only is that not the intent, but even if it were, it would be many years of regulatory hassle and approval to make be able to make it, and then you'd need your customers to be ok with that switch. But, more practically, Antares does not even own any manufacturing. They use third party contractors and the compounds they make are not even monoclonal antibodies. So no...that is not even a 1% risk to Avid.
Instead of your incessant posts...why not put your money where your mouth is and just short the stock?
Honestly, though painful short term, as long as you're not selling and crystallizing any loss, this is honestly better for you as a long-term investor if it trades to $10 or $8 or even lower. You could presumably add to your investment significantly there and make a fortune over the next few years. If you don't believe the Avid outlook for 2025 and beyond has changed, this is a gift, in my opinion.
I'm much higher, but over a longer period of time. I could see myself owning this for 5 or even 10 more years given how strong the industry backdrop is and how well the Company is executing. I would expect another announcement on expansion plans probably within the next 12-15 months as well, just given the lead time for new construction. Over the next five years, you could see a business with over $500mm of revenue and probably $175mm of EBITDA annually. That's mid $50s to high $60s, which is a great IRR even over 5 years. Not without risks of course, but I'm not that focused on where this is at Dec 2022 and much more focused on the potential over the long-run.
The last 5 quarters, net new orders averaged a little over $42mm per quarter. To maintain $140mm sales pace/backlog, they need $35mm a quarter. So basically, a couple more decent order quarters and you could see next year easily coming in above $155-160mm.
As long as investors are short-term here...the stock won't do much. Who cares about this quarter or the next? If you believe that they will fill $350mm of revenue capacity at reasonable margins in the next several years, this stock is going much higher. Think about the end game, not tomorrow. The IRR should be strong, and you really don't have to worry about geopolitical events very much...at least with respect to this investment.
I agree with your general sentiment. This has been a lower liquidity drift down with the market...not anybody that knows anything or some large institution dumping. With that said, the comparison isn't totally fair because the 2.3mm/day on the way up was aided by being added to the S&P small cap 600 index, which drove a bunch of volume from indexers. But yes...give it time. Good companies will rise to the top over time. You might have to be a little patient, but the Company continues to grow and the industry continues to thrive. Avid is become more valuable every day, and it'll just take time for the stock to reflect that. But fair value is actually increasing.
The entire market, especially things in the Nasdaq or Russell 2k, has gotten killed. This has nothing to do with short interest or anybody knowing anything. In fact, the underlying info on the company has continued to be positive. They are making great hires in the viral vector business and they officially opened the new facility and are booking business into it. You can find many stocks now at 52 week lows and many stocks down over 50% from recent highs. So, that's definitely unpleasant, but it isn't because of any short interest or anything. In fact, much of the short interest in the stock is just a hedge position for those investors that also own the convertible note.
Your fill might not look attractive in the context of the incredibly short time frame of a week...but if you believe this will be $40+ by early 2024, that's a 40% CAGR from here, which is a great return in both absolute terms and probably relative to the market - and definitely adjusted for what I believe is the low risk you're taking here (risk defined not by volatility of stock price, but by actual business fundamentals).
I do not think the Board or management evaluates buyouts based on where the stock was or is...they will look at fair value. $8 would have looked good when the stock was at $3 in early 2020, but they didn't sell...
Read the footnotes. The sales are just to cover the tax liability as the restricted stock vests. This is a pre-existing company policy.
It will be fine. The market it taking down all growth, but the reality is that the nonsense growth stories that make no money SHOULD probably be going down. Over time, secular growth stories that are profitable will bounce back. All it will take here is a little patience, but if they have $350mm in revenue in a few years this stock will be probably at least 2x higher from today's level in my opinion.
Agree with that. This is just noise and is following the XBI since early November. Who cares.
If you believe the prior math I posted ($350mm in revenue in 2-3 years), this is currently at a roughly 30% IRR for the next 30 months, without a lot of risk or economic sensitivity. And that excludes NOL value, potential buyout premium, and any new facilities they might announce in that time frame.
Forget revenue multiples. Here's why it is attractive in an objective way. Probably within 24-36 months, the company will be doing $350mm of revenue, probably with EBITDA margins of 35%. That's about $123mm of EBITDA, and with very little annual capital spending to maintain that. That's why businesses like this that are growing trade at higher multiples...because they can grow organically, have sticky businesses, and don't require significant capital to maintain business. It would not be crazy to see that trade at 25x EBITDA, and in fact many of the biologic M&A we have seen has been in that range. As an example, CTLT trades at about 20x and has far lower growth over the next few years than Avid. Additionally, CGT has a faster growth rate and better market dynamics, justifying an even higher price (note the 9x Thermo paid...that alone would mean the CGT business at Avid is worth ~$11.25/share). In any event, 25x the $123mm of EBITDA is worth about $38 today at a 10% discount rate. That also ignores any cash they generate between now and then, and any potential new investments they make which are proving to be value-added (CGT spending $75mm to create hundreds of millions in value.) So that's your objective answer. That doesn't mean it can't have a rough quarter here and there, but if they execute on this pathway, the stock is very cheap today and should trend to the high $40s or even higher over time. Now your friend doesn't have to wonder anymore.
I disagree, and I already laid out the math on why they don't need more capital. The Company is about to be a cash machine, generating >$100mm of EBITDA per year with minimal maintenance capital spending. Cash from operations alone can fund any new growth. Or, if something really big came along, they could easily go to 3-4x leverage on their EBITDA and raise $300mm+ in low cost debt.
I do not believe they need financing. They already had an extra roughly $90mm from the convertible offering (net of the proceeds for the Myford expansion). They will also generate a significant amount of cash flow in the next 18 months. The 7/31/21 balance sheet showed $159mm of cash. With this $70mm and probably another $45mm remaining on Myford north and south, they have plenty of cash...and that is before the cash flow generated.
HGEN would be nice because I'm sure people would view it positively, but I don't think it is all that positive or negative (if they fail). I do expect the next backlog report to show significant growth because Nick basically alluded to that on the conference call. Said differently, I think they are winning a lot of decent business that has nothing to do with HGEN.
This is obviously a positive announcement, and as I wrote previously, I'd expect to continue to hear about expansions in the coming years given the industry strength. It is positive to see process development beginning in as little as six months, as that will fuel the manufacturing pipeline when the facility is complete in 18 months. $80mm in incremental revenue is worth about $10-$11/share in incremental value, in my opinion. That's assuming about a 35% EBITDA margin. More interesting food for thought: The new general manager of the facility used to run the same type of facility at Novasep. Novasep was acquired by Thermo Fisher earlier in 2021 at 9.1x revenue, so that's a very clear and recent market precedent suggesting a lot of value here. On that math, this new facility would be worth about $11/share to CDMO.
I don't know exactly what they have in mind for the stock (and to some degree at least short term moves are out of their control), but if the industry strength continues it isn't hard to imagine the company adding ~$100mm or more of revenue capacity every 12-18 months. Said differently, I wouldn't be shocked to hear about another expansion in late 2022 (beyond what I expect will be adjacent technologies by the end of this year). That late 2022 expansion would come online probably in mid 2024. Rinse and repeat. The industry is so strong that you could see them doing this. At some point of course it seems logical that a larger player would pay them a very big multiple and build the growth themselves. Rough math though, if this gets to $400mm of revenue capacity by the end of 2024, you could see a business doing $140-$150mm of EBITDA. That's a $50+ stock, in my opinion.
Time for everyone to relax. A few things:
Avid's backlog at 1/31/21 and 4/30/21 was $120mm and $118mm, respectively. That means that for anywhere from 3 - 6 months in its last fiscal year, Avid had already experienced a surge in backlog. I bring that up because Humanigen is not even listed as a 10% customer for the fiscal year...so less than $9.6mm in revenue and maybe a lot less. If Humanigen was some giant portion of the backlog, wouldn't you have expected that number to be much larger? People get so obsessed with HGEN, but it is only really because that was an announced customer...i.e., Avid decided to PR that one. Keep in mind, Avid DID NOT PR Gilead, which is a much much larger customer. So I'd say focus on the overall picture, not the picture that you might see from PR.
Second, the CEO already stated the backlog is firm and customers must pay for it, and signaled they can still hit their numbers as they see it today.
Finally, listen to the call again. The CEO is basically strongly hinting that the backlog when they report in December will be significant growth. And, I'd still expect them to announce something re: new investments before the end of the year.
Long story short, this is just noise and the stock is illiquid. One uninformed or nervous investor can move the stock significantly. But that can go the other way too, and I am expecting a lot of good news before year end.