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"We think Avid Bioservices is the most compelling opportunity we see in the market today."

https://seekingalpha.com/article/4162433-sa-interview-identifying-compelling-run-opportunities-2018-seneca-park-research?auth_param=42k1t:1dd6dua:33f19f3f6d5dd0aec87ac0dc3c0c4664&uprof=45

SA Interview: Identifying Compelling Off-The-Run Opportunities For 2018 With Seneca Park Research
Apr. 14, 2018 7:30 AM ET | About: Avid Bioservices, Inc. (CDMO), Includes: ISDR, RCMT, ZMTP
SA Interviews
SA Interviews
Long-term horizon, medium-term horizon, short-term horizon
(3.66M followers)
Summary
Seneca Park Research employs a long/short investment approach in the public equity and credit markets.

The disconnect between business performance and the quoted share price for Zoom Telephonics, how companies can effectively communicate with investors, and maximizing IRR as a value investor are topics discussed.

Seneca Park Research shares a long thesis on Avid Bioservices.

Feature interview
Seneca Park Research ("SPR") invests both long and short in the public equity and credit markets. SPR's investment program is value-oriented and employs rigorous bottom-up fundamental analysis to identify and due diligence attractive candidate securities for its portfolio. We emailed with SPR about its top pick for 2018, how companies can strike the right balance in IR communications, and a few of the compelling opportunities SPR sees in the market today.

Seeking Alpha: Can you walk us through your top pick for 2018, Avid Bioservices (NASDAQ:CDMO)?

Seneca Park Research: We think Avid Bioservices is the most compelling opportunity we see in the market today.

Avid owns a scarce asset: the only pure-play biologics CDMO listed on a major Western stock exchange. CDMOs - outsourced drug manufacturers - are wonderful businesses with high barriers to entry, sticky customers, attractive margins, and extraordinary returns on capital. Operating a biologics CDMO (as opposed to a traditional chemistry CDMO) is as on-trend as one can get, with revenues from biologics drugs expected to triple over the next decade. Avid is in the sweet spot of owning a wonderful asset with tremendous industry tailwinds behind it.

For the last year, the Avid story has been a bit messy. Avid's CDMO business was attached to a money-losing drug development business that had its flagship drug fail its Phase III trial. Management reacted to the news with half-measures, and the company eventually attracted an activist to set things straight. After a proxy fight was threatened, the incumbent board folded and the old management team was thrown out.

Since then, a highly-qualified board and new management team has exited the drug development business, attracted new CDMO customers, changed the company name, changed the company's ticker symbol, raised capital to accelerate growth, and fully pivoted the business to a pure-play biologics CDMO. We think it's extraordinary progress in a short amount of time.

The market, in our view, has not given Avid nearly enough credit for its strategic transition. Should the company fill up its current CDMO capacity and earn peer margins and a peer earnings multiple, we think the shares would be worth $13 apiece. Should the company expand its capacity (Avid has already leased additional space contiguous to its existing footprint) and earn peer margins and a peer multiple, we think the shares would be worth $21 apiece. Avid's stock price currently sits just above $3 per share.

The key is filling up Avid's capacity. On this front, we are enthusiastic as for the first time Avid has invested in a full business development team. Customer wins are the key catalyst for our investment thesis. We find the risk/reward compelling.