Avid Bioservices, Inc. (CDMO) Investigation

Avid shares fell on Mar. 12, 2024 after the CDMO announced the need to restate its financial performance over several quarters in 2022 and 2023.  The company blamed the misreporting on its misclassification of certain notes as long term liabilities and its failures to record additional interest expenses payable to note holders. 

The debt in question is $143.8 million of 1.250% exchangeable senior notes due 2026 (“2026 Notes”) that Avid privately placed with qualified institutional investors in Mar. 2021.  The 2026 Notes bore a restrictive legend, essentially preventing purchasers from reselling them in the public marketplace unless the sale is exempt from the SEC’s registration requirements. In addition, the indenture governing the 2026 Notes required Avid to remove the legend by Mar. 17, 2022.  Avid has continually reported the 2026 Notes on its balance sheet as long-term liabilities.

Questions about Avid’s accounting for the 2026 Notes began to arise on Mar. 6, 2024, when Avid admitted that it had not removed the restrictive legend when required and, as a result, a holder of at least 25% of the 2026 Notes submitted an acceleration notice declaring “100% of the principal of, and accrued and unpaid interest on, the 2026 Notes to be due and payable immediately.”  The company quantified the accelerated amount at approximately $146 million and said it would pay down the balance using proceeds from a new $160 million private placement of 7% senior notes due 2029 initially convertible into 101.1250 shares of Avid Biosciences’ common stock per $1,000 principal amount of notes.

Then, on Mar. 12, 2024, Avid announced that as a result of the misclassification, its quarterly financial statements for the periods ended Oct. 31, 2022, Jan. 31, 2023, July 31, 2023, and Oct. 31, 2023, and its annual financial statements for the year ended Apr. 30, 2023 should no longer be relied on and will be restated.  Avid also said that, as a result, it would not timely file its quarterly financial statements for the period ended Jan. 31, 2024.

The company’s share price has declined over 66% over the last 12 months.

FREQUENTLY ASKED QUESTIONS ABOUT THE CASE

What is the CDMO investigation about?

We’re investigating whether Avid Bioservices may have intentionally deceived investors by failing to timely remove the restrictive legend on the 2026 notes and continuing to report the notes as long term liabilities.

WHAT SHOULD I DO?

I worked at CDMO. What should I do?

If you were an employee of CDMO, you may have valuable information that could be relevant to the investigation. Hagens Berman is one of the nation’s top whistleblower law firms, and has successfully represented many individuals who come forward with information regarding corporate malfeasance. Under the new SEC Whistleblower program, whistleblowers who provide original information may receive rewards totaling up to 30 percent of any successful recovery made by the SEC. For more information, contact Reed Kathrein at 844-916-0895 or CDMO@hbsslaw.com.

There are multiple law firms participating, do I need to contact all of them?

No, you do not need to contact all participating law firms. Generally, class-action investigations and lawsuits are consolidated into a single case to streamline the legal process, and attorneys from only a few law firms are selected to serve in a leadership role on the consolidated case. Hagens Berman has a proven track record of being appointed to leadership roles in complex, multidistrict litigation regarding investor fraud and other consumer rights issues, and your claim will be handled by attorneys who have helped secure approximately $325 billion in class-action settlements on behalf of individuals who have suffered due to corporate malfeasance and the wrongdoing of other powerful institutions.

AM I ELIGIBLE?

What is the threshold amount to be eligible? What are “substantial” losses?

The threshold amount and the definition of "substantial" losses may vary depending on a number of factors specific to the case, including the size of the company, market cap, shares outstanding and who holds them and the damages alleged by the fraud. In general, to be eligible to participate in a class-action lawsuit, you must be able to demonstrate that you suffered financial losses as a result of the alleged wrongdoing and that your losses meet the criteria set by the court or law firm. Fill out the form and submit your losses.

CAN I PARTICPATE?

Am I affected? What do I need to do to participate?

If you were an investor in CDMO, you may be affected and eligible to participate in the case. To determine your eligibility and potential involvement, fill out the form and submit your losses.

Can any CDMO investor participate?

In most class-action investigations and cases, any investor who meets the eligibility criteria, including purchasing the shares during the relevant period, can participate, regardless of the size of their investment. Fill out the form to find out your rights.

I bought on a non-U.S. Exchange. Can I participate?

No. This investigation only covers shares bought on a U.S. exchange, i.e. NASDAQ or NYSE. Fill out the form to find out your rights.

Am I included if I still hold my shares, or do I need to sell to participate?

Participation is based on purchasing shares during the relevant period, rather than your current holdings. Accordingly, you do not need to sell to participate. Fill out the form to find out your rights.