Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Adverum Biotechnologies Got Crushed Today

By Maxx Chatsko - May 4, 2018 at 12:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The small biopharma announced the departure of both its CEO and CMO.

What happened

Shares of gene therapy biopharma Adverum Biotechnologies (ADVM 2.14%) fell almost 16% today after the company announced that CEO Amber Salzman and Dr. Athena Countouriotis, the CMO, will be leaving the company.

The company characterized the CEO's departure as a mutual decision, motivated by the board's desire to have a CEO based out of headquarters in the San Francisco Bay Area. Dr. Salzman had been cross-country commuting from Philadelphia for the last two years, dating back to the merger of her former company, Annapurna Therapeutics, with Avalanche Biotechnologies, which formed Adverum. 

It appears Dr. Countouriotis resigned her role as CMO as a result of the shake-up at the top. She played a crucial role in efforts to initiate clinical trials following nearly 12 months of delays.

Interestingly, while most biotech companies have an absence of women as executives, both vacancies will be filled by women. Leone Patterson will take over as interim CEO, while Dr. Linda Neuman will become CMO.

As of 11:28am EDT, the stock had settled to a 14.2% loss.

A declining chart on a chalkboard.

Image source: Getty Images.

So what

Uncertainty is about the worst thing that can happen to a stock. Clinical-stage biopharma companies have no shortage of it by the nature of their business, so shaking up the very top of leadership only adds to the list of unknowns facing Adverum Biotechnologies.

The next CEO will take over the helm of an early stage pipeline that includes the drug candidate ADVM-043, which is due to announce initial results from a phase 1/2 trial in the second half of 2018. It's being investigated as a treatment for A1AT deficiency, an inherited condition caused by insufficient supply of a protein that protects the lungs and liver, increasing the risk of developing diseases of those organs. A single dose was shown to improve the condition up to one year out from administration in animal studies, but there's a long way to go to demonstrate the safety and effectiveness in humans.

Now what

Adverum Biotechnologies stock has been on a tear in the last year thanks to a rising tide for anything associated with the term "gene therapy." Even with today's double-digit drop, shares are up over 55% since the beginning of 2018. It ended 2017 with $247 million in cash, and although that will be used quickly, its market cap is now around $340 million. That said, while the therapeutic approach is intriguing, it's important to remember that the drug pipeline is in the earliest stages of development. That means this remains a high-risk biopharma stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Adverum Biotechnologies, Inc. Stock Quote
Adverum Biotechnologies, Inc.
ADVM
$1.20 (2.14%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.