Agree with your conclusion on the risk profile of these 'failed biotech' strategic review situations - I have compiled stats for the last 3 years and they were pretty much 50/50 in terms of the outcome (positive vs. negative market reaction).
The problem is boards may actually think they are maximising shareholder value when doing reverse mergers/acquisitions/in-licensing since the NPV of these options often looks higher (though opinions may certainly differ). In fact, boards are supposed to maximise the value over the 'long-term' and for all shareholders (not just the special sits/activist ones looking for a quick return on a liquidation/sale). More cynically, another problem could be that compensation arrangements may incentivise transactions vs liquidation.
I owned both THRD and SPRB but thankfully THRD in far bigger size. For THRD's case it was clear in the transcript management appreciated that the market hated them continuing with their plans THB335 too which is rare in biotech.
SPRB was the stalking horse for the Eiger BioPharmaceuticals bankruptcy asset and if you look at who ended up winning the auction (AMLX) you'll see the market really liked the idea. It came down but it's still ~double from when AMLX won. So my thinking was maybe these guys aren't total idiots and it could work. Unfortunately they chose a really bad asset that the market is unwilling to fund so this is toast and I sold for a L.
Buying a new drug to develop can work out but it's far more random than just returning the cash. I really liked the THRD management and I would've liked to see those guys develop a new drug so I was a little disappointed to see them folding up shop, but cash is good with me too! :)
Fair points self-devil advocating yourself - but THRD with the EXACT June 30 cash balance! That time was different.
Side note - I had a tiny position but.....20/10 lasik hindsight.
Agree with your conclusion on the risk profile of these 'failed biotech' strategic review situations - I have compiled stats for the last 3 years and they were pretty much 50/50 in terms of the outcome (positive vs. negative market reaction).
The problem is boards may actually think they are maximising shareholder value when doing reverse mergers/acquisitions/in-licensing since the NPV of these options often looks higher (though opinions may certainly differ). In fact, boards are supposed to maximise the value over the 'long-term' and for all shareholders (not just the special sits/activist ones looking for a quick return on a liquidation/sale). More cynically, another problem could be that compensation arrangements may incentivise transactions vs liquidation.
I owned both THRD and SPRB but thankfully THRD in far bigger size. For THRD's case it was clear in the transcript management appreciated that the market hated them continuing with their plans THB335 too which is rare in biotech.
SPRB was the stalking horse for the Eiger BioPharmaceuticals bankruptcy asset and if you look at who ended up winning the auction (AMLX) you'll see the market really liked the idea. It came down but it's still ~double from when AMLX won. So my thinking was maybe these guys aren't total idiots and it could work. Unfortunately they chose a really bad asset that the market is unwilling to fund so this is toast and I sold for a L.
Buying a new drug to develop can work out but it's far more random than just returning the cash. I really liked the THRD management and I would've liked to see those guys develop a new drug so I was a little disappointed to see them folding up shop, but cash is good with me too! :)