CDMO - Avid Bioservices Faces Financial Strain Amid Market Challenges  (Rating Downgrade)

2024-03-08 07:00:00 ET

Summary

• Avid Bioservices' stock plummeted 30% post-earnings; Q3 revenue fell 11%, with significant drops in gross margin and operating income.
• Announced planned $160 million 7.00% Convertible Senior Notes; default on 2026 Notes triggers cross-default, complicating finances.
• The current ratio was 1.35 in October, showing adequate short-term liquidity; however, $146 million in immediate debt repayment looms large.
• Downgrade to "Strong Sell" due to financial instability, eroding trust, and competitive market pressures, despite potential CDMO market growth.

From Caution to Strong Sell: Avid's Rocky Financial Waters

In August, I recommended a "hold" on Avid Bioservices ( CDMO ), a contract development and manufacturing organization, advocating for a "cautious approach due to near-term uncertainties and valuation concerns." The caution has played out, and its stock is off 50% while the S&P 500 is up a healthy 14.8% in the same period....

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