Aptevo currently has four main revenue-generating products. In 2016, although the commercial portfolio revenue jumped by 30% year over year, its loss doubled to $126 million. The sudden rise in operation loss was due to $71 million impairment. I considered this a conservative accounting approach that Aptevo takes.
As of March there was no goodwill left and only $14.5 million in intangible assets. What is interesting is that Aptevo has a lot of cash. It has total cash equivalent of nearly $61 million, of which $47 million is in U.S. government, agency debt securities and corporate bonds. Aptevo is in good financial shape with only $18.4 million in long-term debt. The company has to pay $1.6 million and $4.9 million in principal and interest payments in 2017 and 2018.
Another interesting thing is the company’s management and ownership. Aptevo’s chairman, Fuad El-Hibri, effectively owns 13% of the company. Intervac LLC, where El-Hibri and his wife own 37.7%, is the second-largest shareholder with 10.2%. Sessa Capital ranked third with ownership of 9.1%. John Petry of Sessa Capital has been quite familiar with spinoff positions as he has spent more than a decade working with Joel Greenblatt (Trades, Portfolio) in Gotham Asset Management.
Aptevo Chairman and CEO Marvin White has moved from Emergent to Aptevo following the spinoff, signaling the bullish momentum in the company’s future.
At $2.1 per share, Aptevo’s enterprise value is only $1.7 million. It’s absurdly cheap for the company, which is generating $36 million in revenue and has several drugs in the pipeline.
Aptevo could have significant risks if it keeps pouring the company’s resources in drugs that turn out to be unsuccessful. With a good level of insider ownership, high cash equivalent on hand and ample debt, Aptevo is a good risk/reward bet for investors.