September 25, 2023

Many biotech companies are worth more dead than alive

Atea Pharmaceuticals

a biotech working to develop antiviral treatments for Covid-19 and hepatitis C may be worth more than alive.

If you bought all of the shares of Atea (ticker: AVIR) and paid off all of its debts, the cash and other liquid assets left on the balance sheet would be worth more than what you spent.

It’s not alone. The collapse in biotech valuations since early 2021 has put a significant number of biotech companies in that position, known as negative enterprise value. It’s a clear sign of how grim things have gotten for small biotechs and how far the industry is from recovery.

As of Wednesday, there were 23 biotech companies with negative corporate values ​​in the United States

SPDR S&P Biotech ETF

(XBI) and the

iShares Biotechnology ETF

(IBB). Many more were on the verge. Of the approximately 280 stocks in the two ETFs, nearly 60 have an enterprise value of less than $100 million.

The question for a growing number of companies in the sector is how long they can keep going.

Last week, a little-known company offered

A tea

a lifeline: Concentra Biosciences, which is controlled by an investment fund called Tang Capital Partners, said it would buy Atea for $5.75 a share, along with a conditional value right that would give Atea shareholders 80% of the proceeds from a license or sale of Atea’s would give drugs.

Concentra’s offer represented a 55% premium to Atea’s closing price of $3.70 the day before the unsolicited proposal went public. But it still only valued the company’s stock at $479.5 million, significantly less than the roughly $618 million Atea had in cash and cash equivalents less its debt at the end of March.

On Tuesday, Atea responded: no way. Atea shares fell 12% to close at $4.12 on Tuesday.

Today, Atea (ticker: AVIR) has a market value of $390 million. The enterprise value, which is calculated by subtracting the company’s cash from the sum of its market value and debt, was $248.8 million on Wednesday, according to


The evolving drama at Atea underscores the strain facing smaller biotech companies struggling with declining cash balances and weak investor interest. Valuations are low: the SPDR S&P Biotech ETF, which tracks the industry, is down 50% from its early 2021 high. But even as biotech announces layoffs after biotech, executives and boards remain hopeful of a recovery and remain they are largely unwilling to accept that their companies are worth as little as the market says they are.

The clock is ticking. Smaller biotech companies need money to develop medicines and do not sell products. With little ability to raise new money, it’s only a matter of time before the clock runs out.

How much of a problem that is for each of the companies depends on whether the cash they have on hand is enough to survive until financing terms change, or whether they can make significant progress with the drugs they are developing.

One of the companies on the edge is


(ALEC), which is working on treatments for neurodegenerative diseases. Shares are down 26% this year. FactSet calculates its enterprise value at -$7 million.

The company, which recently announced layoffs, says it has two years of runway. “We are well-funded through the end of 2025 and have some notable milestones ahead of us,” the company said in a statement.

The enterprise value of the drug manufacturer


is – $465 million, according to FactSet. The company notes that it has recently restructured and has $1.3 billion in cash. It says it expects to spend $275 million or less this year. “With our recent reset, our organization will have a significantly lower expected cash burn, which … opens up more degrees of freedom to deploy our significant scale of capital,” the company said in a statement.

Rate hikes by the Federal Reserve since early 2022 have soured investors in high-risk, long-term bets like biotech. A leading biotechnology analyst, Michael Yee of Jefferies, wrote in early May that he expects biotech stock prices to start rising in the second half of this year as investors expect interest rates to fall in 2024.

If not, the industry could see more companies having to make drastic cuts. The increased stakes could create an opportunity for companies like Concentra, which is targeting Atea.

Concentra has played this game before, most recently in March when a small biotech called Jounce Therapeutics said Concentra had agreed to buy it for $1.85 a share plus a


a 75% premium over the closing price before the deal was announced.

Atea shares rose to $5.06 after Concentra’s bid. Concentra did not respond to a question from from Baron about Atea’s reaction to her offer on Tuesday. Atea declined to comment beyond her public statement. Given the structure of the proposed deal, it seems likely that Concentra will dismantle the company and license its drugs.

Atea continues development of bemnifosbuvir, the antiviral drug against Covid-19. It also tests bemnifosbuvir in combination with another antiviral drug as treatment for the hepatitis C virus.

Entities related to Concentra own 10.9% of Atea, according to a May filing. Now investors will wait to see if Tang and Concentra continue to pursue Atea, and if more similar offers come to other struggling biotechs.

Write to Josh Nathan-Kazis at

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