Adverum Biotechnologies, Inc. (ADVM) was subject to a 6.49% drop in share price on April 9th, 2021, now sitting at USD$9.08. Given that they are still in the clinical stages, the full potential of their profitability is still being determined. Nevertheless, ADVM management has time and time again assured investors of their focus on and progress towards commercialization.
What does ADVM do?
The profitability ADVM is banking on will come from the development of their first mass market gene therapy product, ADVM-022, which they hope to submit for a Biologics License Application by 2024. If things go as intended, ADVM-022 will help in the treatment of retinal vascular diseases. What sets it apart from existing treatments is its efficacy and reduction in the frequency of treatments required. This, of course, reduces the burden on patients and healthcare providers alike.
Sonic and ADVM Tied at the Hip
The Sonic Fund II, L.P. (“Sonic”) holds shares amounting to 5.3% of ADVM’s outstanding stock and has been highly involved in the ongoings of ADVM. This became a point of contention when Sonic espoused its serious concerns about the management of ADVM, and strongly suggested replacements. In a letter from Sonic to the Board Chair of ADVM, Mr. Machado, ADVM was accused of not having made sufficient progress in rectifying serious deficiencies. For the sake of these corrections, Sonic strongly urged the appointment of experts from its suggested nominees to positions of authority.
Did ADVM Drop the Ball?
The primary concern that Sonic noted was ADVM’s abysmal failure in regards equity return to its shareholders. To illustrate, the letter references the fall from an enterprise value of USD$1.6 billion to less than USD$630 million from the time Dr. Fischer joined as CEO to the last reported quarter.
Plagued with Management Failure?
Another very pressing concern is the way ADVM failed to adequately address a side-effect of ADVM-022, namely ocular inflammation. In September of 2019, ADVM first reported the “promising” results of its ADVM-022 trial. The mitigation of the concerning ocular inflammation was not addressed. Realizing how devastating this issue is for potential and current investors, Sonic outlined a response strategy that involved a timely and transparent response with the aid of a vast panel of retinal experts to show the company’s commitment to investor concerns. ADVM failed on all three counts.
Is this it for ADVM?
Sonic is very adamant that the company’s failures translate directly to the failures of its management. For the outlook of the company to look any brighter, the inadequacy of the management team has to be addressed. Nevertheless, there is potential in what the business is doing, which is why Sonic is leading the charge of shareholders to address governance issues to unlock and maximize that potential.