Alvotech Faces Securities Probe Amid Ongoing FDA and Governance Woes

What happened

Alvotech's share price plummeted approximately 65% over the past year following a complete response letter from the FDA for its AVT05 biosimilar in November 2025, which exposed recurring manufacturing deficiencies at its Reykjavik facility. This led to a significant cut in 2025 guidance, with adjusted EBITDA reduced by roughly $70-130 million to $130-150 million on revenue of $570-600 million, highlighting operational vulnerabilities. The company's high leverage, negative equity, and reliance on a single manufacturing site have amplified investor concerns about regulatory and financial stability. Now, Rosen Law Firm is investigating potential securities claims, alleging that Alvotech may have issued materially misleading business information, adding legal and governance risks to the already fraught narrative. This development underscores the deepening scrutiny of management's disclosures and internal controls, which were already flagged as material weaknesses in recent filings.

Implication

The securities investigation introduces a new layer of uncertainty, potentially leading to costly settlements or judgments that could strain Alvotech's already fragile balance sheet. It calls into question the credibility of management's past assurances, particularly around AVT05's prospects, which may deter future investor confidence and partnership engagements. Combined with persistent FDA issues, this legal overhang could delay critical remediation efforts and European launch timelines, impacting revenue growth and cash flow generation. Investors should monitor the investigation's progress closely, as any adverse findings could trigger further share price declines and covenant pressures on the $1.1 billion debt. Given the 'WAIT' rating, capital should remain on the sidelines until clearer evidence of regulatory resolution, positive free cash flow, and governance improvements emerge.

Thesis delta

The securities investigation confirms and exacerbates the governance and disclosure risks previously identified in the DeepValue report, which already rated Alvotech as 'WAIT' due to operational and financial fragility. It strengthens the case for maintaining a cautious stance, as legal liabilities could further impair the company's ability to navigate its operational challenges and debt obligations. No shift in the core investment thesis is warranted, but the risk profile has heightened, underscoring the need for patience until remediation and financial stability are demonstrated.