Please ensure Javascript is enabled for purposes of website accessibility

Why Adverum Biotechnologies Stock Sank in May

By George Budwell - Jun 7, 2021 at 10:00AM

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 uncertainty over the biotech's lead clinical asset weighed on its shares last month.

What happened

Shares of developmental gene therapy company Adverum Biotechnologies (ADVM -0.66%) sank by 11.3% during the month of May, according to data provided by S&P Global Market Intelligence. The biotech's poor showing last month is the result of two interrelated events:

  1. In late April, Adverum announced that its experimental gene therapy for diabetic macular edema (DME), known as ADVM-022, hit a serious snag in its ongoing midstage trial. Specifically, a patient in the trial reportedly developed hypotony (low intraocular pressure) and loss of vision in the treated eye, forcing the company to rethink its clinical program for ADVM-022.
  2. As a direct result of this unexpected clinical setback, Sonic Fund II, a major shareholder of the company, issued a scathing press release demanding the ability to appoint three new board members to oversee ADVM-022's clinical development. 
A close-up view of a strand of DNA.

Image source: Getty Images.

So what

This clinical setback could prove even more costly to Adverum and its shareholders down the road. In short, this experimental gene therapy was on track to become a game changer in a market currently valued at over $10 billion a year.

That's not to say that Adverum won't be able to find a path forward, but the company's core investing thesis is now in serious doubt. As such, the biotech's continued slide in May isn't altogether surprising. 

Now what

Is Adverum a bad-news buy? On one hand, this beaten-down biotech stock is now valued at almost $70 million less than its cash on hand at the end of the first quarter of 2021. That's normally bargain territory in the world of clinical-stage biotechs. 

On the flip side, the market's dire take may, in fact, be warranted. If Adverum can't get this closely watched gene therapy back on track soon, the company's braintrust may have to pivot to an earlier-stage asset -- an event that would undoubtedly set the biotech back years in terms of its march toward being a commercial-stage operation. 

All things considered, this small-cap biotech is probably best viewed as a potential watch list candidate for the time being. 

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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
$1.50 (-0.66%) $0.01

*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
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

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.