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Wednesday, July 24, 2024

Failed Vaccine Trial, Pre-SA, Trading Below Cash

HilleVax (HLVX) (~$85MM market cap) is a clinical-stage biotech that focuses on developing vaccines, their initial focus has been on a vaccine (HIL-214) designed to treat severe acute gastroenteritis events in infants.  On Monday, the stock crashed below cash as HilleVax announced their HIL-214 trial did not meet its primary endpoint and showed no clinical benefit observed across secondary endpoints.  Unfortunately, little other disclosures were made; there was no announcement of seeking strategic alternatives, no workforce reduction and no estimate of current cash.  The only mention of a go forward strategy was the line:

The Company plans to discontinue further development of HIL-214 in infants and is exploring the potential for continued development of HIL-214 and HIL-216, HilleVax’s Phase 1 ready vaccine candidate, in adults.

The piece about continuing to explore the potential development of HIL-216 is slightly concerning as broken biotechnology companies go.  HIL-214 (the failed vaccine) was licensed from Takeda (which owns 14% of HLVX), HIL-216 was a separate licensing agreement with a Chinese pharmaceutical company, Kangh, and thus management might make the argument the HIL-214 failure shouldn’t cloud the potential for HIL-214.  However, as we’ve seen with many others, often the board along with their advisors determine that the cost of capital is too high to continue on their own and they’ll likely decide to pursue strategic alternatives.

Running through my typical back of the envelope liquidation math:

HilleVax does have an ATM in place they leaned on pretty heavily in Q1 to raise approximately $15MM, if they continued into Q2 (which you can tell they did a bit based on the change in share count from 3/31 to 5/6 when the last 10-Q was published) it would only add upside to the math.  The risk is really in the burn rate going forward from here (also note, my Q2 number above is an estimate based on Q1) since we don’t have any indication from management on their plan, my $50MM in a total guess but using some experience from the last dozen or so of these, hopefully it is directionally correct.

There could be two catalysts here, one on the announcement of strategic alternatives and another on the ultimate conclusion, but HLVX is a bit riskier than others that are further along in their wind down process.

Disclosure: I own shares of HLVX

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