Avid Bioservices Inc (CDMO)

[bfiest]

Good article Jake. My take after reading the article. Mega CDMO’s purchasing smaller CDMO’s has slowed at this point because there is a shrinking pool of attractive candidates and the multiples demanded by the smaller CDMO is not warranted at this time. An attractive candidate is one that does cell and gene therapy and is an API or drug manufacturer with a pristine reputation, available capacity and substantial revenues. Avid does cell therapy but not gene therapy. Avid qualifies as an API manufacturer with a pristine reputation and available capacity. What avid doesn't have are substantial revenues. This is what the market is looking for. Of course as revenues are hopefully built capacity will lower. So one question is how much capacity should they be building and when should they be building it?

Current Tariff’s and anti trade policies play into Avid’s hands because they are a purely domestic player and companies may be forced to re-localize manufacturing operations back in the US if the global market becomes less attractive.

Bottom line they need to close some deals and build revenues. They need a good strategy surrounding capacity and they need to maintain their pristine reputation, assuming that reputation is still in tact. Avid does that and they move into that attractive takeover target category. Let's close some deals.