Failed Biotech/SPAC, Buying and selling Under Money

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Pardes Biosciences (PRDS) ($90MM market cap) is one other biotech for the basket, this morning the corporate introduced poor scientific outcomes, an 85% discount of their workforce and the choice to pursue strategic options.  The corporate has a questionable historical past, it was based shortly after the covid pandemic started in 2020 to pursue new therapies for viral illnesses that result in pandemics, they entered right into a merger settlement with a SPAC in June 2021 and accomplished the deSPAC course of in December 2021.  Fortunately for them, this was earlier than we began seeing heavy belief redemptions, with virtually all the SPAC money being delivered to Pardes plus a $75MM PIPE funding.  Pardes has one asset, Pomotrelvier, a covid therapy that simply failed to satisfy its Part 2 major endpoint, thus triggering the halt of their improvement program.  Even when trial was profitable, it looks as if society has moved on from covid and the share worth mirrored the skepticism that this may very well be a business product.

What makes Pardes barely extra attention-grabbing is their restricted historical past, not like others, they have not had time to construct up vital NOLs (solely have $66MM) that is likely to be engaging to a reverse-merger accomplice.  Pardes additionally does not have a major lease or different main shutdown prices, so whereas a reverse-merger is probably going nonetheless the primary possibility, this one is likely to be a robust candidate for a reasonably clear liquidation.  I do marvel once we see a shift in direction of extra liquidations, as we get increasingly of those pursuing strategic options, there cannot be sufficient reverse-merger offers to go round (we nonetheless have dozens of SPACs doing the identical too).

Of their 8-Ok launched as we speak, Pardes disclosed a present money stability of $172.4MM and $5.7MM of severance associated prices to be incurred within the second quarter associated to the workforce discount. For the margin of security swag, I included a yr’s price of G&A, it will not be that top however ought to give loads of room for unexpected bills. I purchased a small place as we speak.

Disclosure: I personal shares of PRDS

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