Posts Tagged ‘AVGN’

The Official Activist Investing Blog has published its list of activist investments for November:

Ticker Company Activist Investor
ABTL Autobytel Inc Trilogy Inc
ACF AmeriCredit Corp Fairholme Capital Management
ACTL Actel Corp Ramius Capital
ADPT Adaptec, Inc Steel Partners
ARCW Arc Wireless Solutions Brean Murray Carret Group
ATSG Air Transport Services Group Perella Weinberg Partners
AVGN Avigen Inc Biotechnology Value Fund
BBI Blockbuster Inc Marlin Sams Fund
BEE Strategic Hotels & Resorts Security Capital Research & Management
BITI Bio-Imaging Technologies Healthinvest Partners
CHG CH Energy Group Inc Gamco Investors
CHIC Charlotte Russe Holding Inc KarpReilly Capital Management
CPN Calpine Corp Harbinger Capital
CRXX CombinatoRX, Incorporated Biotechnology Value Fund
CTO Consolidated Tomoka Land Co Wintergreen Advisers
CWLZ Cowlitz Bancorporation Crescent Capital
DBD Diebold Inc Gamco Investors
DCAP DCAP Group Infinity Capital Partners
DVD Dover Motorsports Mario Cibelli
ENTU Entrust Inc. Empire Capital Partners
FACE Physicians Formula Holdings, Inc Mill Road Capital
FSCI Fisher Communications Gamco Investors
FTAR.OB Footstar Inc Schultze Asset Management
GBE Grubb & Ellis Company Anthony Thompson
GGP General Growth Properties Pershing Square Capital
GSLA GS Financial Corp FJ Capital Long/Short Equity Fund
HCBK Hudson City Bancorp Gamco Investors
HFFC HF Financial Corp PL Capital
INFS Infocus Corp Nery Capital Partners
INFS Infocus Corp Lloyd Miller
ISH International Shipholding Corp Liberty Shipping Group
KANA.OB Kana Software KVO Capital Management
KEYN Keynote Systems Ramius Capital
KFS Kingsway Financial Services Joseph Stilwell
KONA Kona Grill Mill Road Capital
LCAV LCA-Vision Inc Stephen Joffe
LDIS Leadis Technology Inc Kettle Hill Capital Management
LNET LodgeNet Interactive Corporation Mark Cuban
LTM Life Time Fitness Green Equity Investors
MCGC MCG Capital Corporation Springbok Capital Management
MGAM Multimedia Games Inc. Dolphin Limited Partnership
MGI Moneygram Interntaional Inc Blum Capital
MIM MI Developments Greenlight Capital
MYE Myers Industries Inc Gamco Investors
NAV Navistar International Owl Creek
NLS Nautilus Inc Sherborne Investors
NOOF New Frontier Media Steel Partners
NYT New York Times Harbinger Capital
OEH Orient-Express Hotels SAC Capital; DE Shaw
ORNG Orange 21 Costa Brava
PBIP Prudential Bancorp Inc. of PA Joseph Stilwell
PGRI.OB Platinum Energy Resources Inc Syd Ghermezian
PHH PHH Corp. Pennant Capital Management
PNNW Pennichuck Corp Gamco Investors
PPCO Penwest Pharmaceuticals Co Perceptive Advisors
PRXI Premier Exhibitions, Inc Sellers Capital
PWER Power One Bel Fuse
PXG Phoenix Footwear Group Reidman Corp
RDEN Elizabeth Arden Shamrock Activist Value Fund
SCOP Scopus Video Networks Ltd. Optibase Ltd
SECX.PK SED International Holdings Hummingbird Management
SLTC Selectica Inc Trilogy Inc (Versata Enterprises)
SNG Canadian Superior Energy Palo Alto Investors
SNSTA Sonesta International Hotels Gamco
SUAI Specialty Underwriters Alliance Philip Stephenson
SUMT SumTotal Systems Discovery Capital
SUTM.OB Sun-Times Media Group Inc. K Capital
SUTM.OB Sun-Times Media Group Inc. Davidson Kempner Partners
SWWI Simon Worldwide Inc Everst Special Situations Fund
TIKRF.OB Tikcro Technologies Ltd Steven Bronson
TXCC TranSwitch Corp Brener International Group
TXI Texas Industries Shamrock Activist Value Fund
UIS Unisys Corp MMI Investments
UTEK Ultratech Inc Temujin Fund
WBSN Websense Inc Shamrock Activist Value Fund
WEDC White Electronic Designs Wynnefield Capital
WINS SM&A Mill Road Capital
YHOO Yahoo Carl Icahn
ZLC Zale Corp. Breeden Capital Management

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Avigen, Inc. (NASDAQ:AVGN) is an interesting opportunity: a rare net cash stock with an activist investor in pursuit. Based on its December 1, 2008 closing price of $0.65, the company has a market capitalization of $19.4M and net cash (i.e. cash less all liabilities) of $36.5M, which means that AVGN is trading at 53% of its net cash. Biotechnology Value Fund LP owns around 29% of the outstanding stock and has filed a 13D/A notice (most recent is here) requesting that AVGN “immediately reduce its expenses to as low a level as possible, partner or sell its remaining assets without further investment and take actions to distribute to [AVGN]’s stockholders as much of the resulting cash as possible.”

About AVGN

AVGN (website here) is a “biopharmaceutical company engaged in developing and commercializing small molecule therapeutics to treat neurological and neuromuscular disorders.”

The value proposition

According to AVGN’s most recent quarterly report, the company is bleeding cash, losing $9.4 in the September quarter. AVGN lost $25.2M last year and $24.3M in 2006. It has also had negative Cash Flow from Operating Activities for the September quarter in the amount of $8.4M. The company does, however, have a substantial amount of cash on its balance sheet. Set out below is our summary analysis (the “Carrying” column shows the assets as they are carried in the financial statements, and the “Liquidating” column shows our estimate of the value of the assets in a liquidation):

avgn-summaryAVGN is a net cash stock, with $1.22 of net cash (cash after subtracting Total Liabilities). With its stock price at $0.65, AVGN is trading at a little over half its net cash value. We estimate AVGN’s value in a liquidation at around $38.4M ($1.29 per share).  Given its net cash position of $36.5M or $1.22 per share, this means we have valued the rest of the company’s assets in liquidation at only $1.9M or $0.07 per share.

The catalyst

Biotechnology Value Fund originally filed a 13G notice in relation to AVGN, which indicates a passive investment. By updating to a 13D, Biotechnology Value Fund has indicated that it intends to take an active role in the company. An earlier 13D filing sets out Biotechnology Value Fund’s attitude towards the company:

“At the invitation of the Chairman of [AVGN], [Biotechnology Value Fund] articulated their views regarding the future of the Company in a conference call with the Board of Directors held on October 30, 2008. [Biotechnology Value Fund] stated their strong belief that [AVGN] should immediately reduce its expenses to as low a level as possible, partner or sell its remaining assets without further investment and take actions to distribute to [AVGN]’s stockholders as much of the resulting cash as possible. [AVGN] reported $56 million, or $1.88 per share, of financial assets as of September 30, 2008, consisting of cash, cash equivalents, available-for-sale securities and restricted investments.

[Biotechnology Value Fund] informed the Board of Directors that they think that the previously announced plan of spending [AVGN]’s remaining cash on the development of its early-stage pain drug, AV411 as well as [AVGN]’s corporate infrastructure is fundamentally flawed, especially in light of the current environment for raising additional capital. [Biotechnology Value Fund] believe that AV-411 is a high risk drug candidate that is best developed (if at all) by a larger company with greater financial resources and a lower cost of capital. By the time AV-411 could be commercialized, or even definitively proven safe and efficacious, [AVGN]’s existing cash resources would be depleted. [Biotechnology Value Fund] believe that the investment community clearly lacks confidence in such a plan, as evidenced by recent reports from stock analysts and by the $0.61 per share closing price of [AVGN]’s common stock on October 30, 2008, reflecting only 31% of [AVGN]’s financial assets as of September 30, 2008.

[Biotechnology Value Fund] intend to work with [AVGN]’s Board of Directors to effecuate a prompt return of cash to [AVGN]’s stockholders and intend to bring the matter directly to a vote of stockholders if their efforts with the Board of Directors are unsuccessful.”


It’s always exciting to find a net cash stock with an substantial stockholder demanding a return of cash. While it’s frightening to see AVGN hemorrhaging cash, Biotechnology Value Fund is awake to the opportunity to salvage what remains of the company’s value. If Biotechnology Value Fund is able to cause the company to quickly distribute the company’s remaining cash to stockholders, purchasers at these levels should see a good return on investment.

AVGN closed today at $0.65.

The S&P 500 Index closed at 816.21.

[Disclosure: We do not presently have a holding in AVGN. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.]

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