Avid Bioservices Inc. in the last seven years has transformed from a struggling clinical developer of cancer drugs to a growing drug contract manufacturer.
In 2020, it hired a seasoned executive, Nick Green, who spent tens of millions of dollars to improve its facilities in Orange County.
He oversaw a stock that soared from a market cap around $400 million when he took over to more than $2 billion in 2022, its highest valuation ever.
However, slow manufacturing runs caused sales to decline in fiscal 2024, and the stock went from more than $34 to almost as low as $4 in late 2023.
On Feb. 5, it officially became a private company in an all-cash sale valued at $1.1 billion.
Shareholders approved the acquisition by private equity firms GHO Capital Partners LLP and Ampersand Capital Partners for $12.50 a share, a 22% premium to a 20-day average share price preceding the November announcement.
“We gave a recommendation to all shareholders that they should take the deal,” Chief Executive Green told the Business Journal. “We thought the valuation and significant immediate cash consideration for the company was difficult to turn down.”
Since taking over a company that was struggling in 2020, Green led Avid to increase its manufacturing output in Orange County. Before the acquisition closed, analysts had expected sales to climb 17% this fiscal year to $164 million and accelerate another 21% to almost $200 million in fiscal 2026; the latter revenue estimate is more than triple from when Green began.
Part of the reason for that growth is the company completed a three-year construction program to expand its revenue, generating capacity from approximately $120 million annually in fiscal 2021 to more than $400 million annually.
“Avid’s recent investments, both in capacity and its exemplary team, have created a strong foundation for future growth,” GHO Managing Partners Alan MacKay and Mike Mortimer said in a statement.
“Avid perfectly exemplifies a company that is operating in high growth markets supporting the growing biotech sector in research and development and big pharma and large biotech for the commercialization of cutting-edge biologics.”
Seasoned Healthcare Investors
The most recent offer from GHO and Ampersand was their third, according to Green.
“We didn’t go out looking to sell the company,” he said.
Avid’s board turned down their first two offers until settling on a valuation that felt “very compelling” to shareholders, Green said.
GHO and Ampersand’s familiarity with contract development and manufacturing organizations (CDMO) makes them ideal partners for Avid, Green said.
London-based GHO Capital is a specialist investor in global healthcare. Its portfolio includes other CDMOs like Ardena, Sterling Pharma Solutions, RoslinCT and Alcami Corp.
Ampersand in Boston manages $3 billion in assets and has been active in the CDMO space for a long time, Green said.
“Everything I’ve heard about them has been very positive,” he said. “They bring to bear their drive for excellence, a whole host of attributes that I think will be very good for Avid as it is, I’m sure, for the other companies that they sponsor.”
Avid had a $799 million market cap before being taken off Nasdaq (Nasdaq: CDMO). The company had $279 million in liabilities, including $154 million in convertible senior notes, as of Oct. 31.
The transaction equated to an enterprise value of approximately $1.1 billion, a 6.3 times multiple to consensus fiscal 2025 revenue, Avid said.
No Leadership Changes, Remaining in Tustin
No leadership changes in relation to the acquisition are expected to take place.
“The reason the businesses is attractive, I think, is because the management team has done a good job,” Green said.
He said that there are no plans to move the company out of Tustin and that doing so would be “almost impossible.”
Avid, which has about 371 employees as of a year ago, has approximately 213,000 square feet of space spanning two campuses, including its mammalian protein process development facility, two mammalian protein commercial manufacturing facilities, a cell and gene therapy facility and corporate offices.
In 2023, Avid completed construction of its $75 million, 53,000-square-foot manufacturing facility in Costa Mesa just one year after breaking ground.
The facility, which is next to John Wayne Airport, is about a 15-minute drive from Avid’s multi-building Tustin headquarters. Avid built the facility to expand into cell and gene therapy, a market that’s expected to grow more than 18% annually through 2028.
Company Pivot from Drug Development to Manufacturing
Avid began in 1993 as Peregrine Pharmaceuticals developing biologics. In 2002, it formed Avid Bioservices as a wholly owned subsidiary, signing its first client for manufacturing services a year later.
Peregrine’s main focus was drug development, however, its clinical trials for a cancer drug had failed and was losing the company tens of millions of dollars annually by 2017.
In 2018, the company pivoted from developing drugs to becoming a pure CDMO, manufacturing biologics for pharmaceutical companies, and changed its name to Avid.
The company hired several new executives, including Chief Financial Officer Daniel Hart and Chief Commercial Officer Matthew Kwietniak.
Prior to Green’s arrival, the company reported an annual loss of $15.2 million on sales of $59.7 million.
In 2021 during Green’s first year as CEO, Avid nearly doubled sales to $95.9 million.
Business in recent years has been affected by market issues.
It has been particularly difficult to secure funding for biotech, which represents a significant portion of Avid’s customer base, Green said.
Coming off the pandemic when there was large amounts of money going into biotech, the sector is now having to compete with technology such as artificial intelligence.
“I don’t think there’s a page of a business magazine that you read through that doesn’t have AI,” Green said.
Long History of Running CDMOs
Green has been involved in CDMOs for all of his life.
In the past 30 years, he has headed 31 global pharmaceutical facilities in nine countries on four continents.
The British native began working at a chemistry venture his father was involved with following graduation from university. He studied chemistry at Queen Mary University of London and earned his MBA from the University of Huddersfield.
Eventually, he built one of the first contract drug manufacturing facilities in the world.
He most previously headed Therapure Biopharma Inc., a biopharmaceutical company in Mississauga, a city bordering Toronto on Lake Ontario.
Avid had all the attributes to build a really good CDMO, Green said.
“Quality is absolutely paramount when your products end up in humans, and the company had an outstanding track record in quality,” he said.
He credits the team that the company has developed over the years, as well as investing money into new capabilities, for Avid’s success.
“It’s certainly not a one man show,” Green said. “A lot of people put a lot of work, time and effort creating what we’ve got today.”
