Alvotech — financial distress indicators
Financial-health summary
Alvotech's reported numbers place it in the 'Very weak' financial-health band (distress score 71/100). The main indicators are liabilities exceed assets (negative equity), operating profit does not cover interest and very high leverage. Independently, the Ohlson accounting model puts its 1-year failure probability at 80% and the market-implied (Merton) default probability is 13.2%. In its favour: strong current ratio (1.76).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Total liabilities are 1.20× total assets.
Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of 'insolvent' in 11 U.S.C. §101(32).
Interest coverage (EBIT / interest) is 0.54×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
Total debt is 6.5× EBITDA.
Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.
O-score 1.37 → model probability 80%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Merton distance-to-default 1.11 σ → PD 13.2%.
Investment-grade issuers typically have 1-year PD well below 1%.
Operating cash flow negative in 3 of the last 3 years. The company is profitable, so this likely reflects working-capital or loan-book growth.
A business that cannot fund itself from operations depends on external capital to survive.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (1.76).
- Revenue still growing (+20% YoY).
- High insider/promoter ownership (60%) aligns management with survival.
📰 Recent news scan
- LOTTE Biologics and Alvotech announce US-based manufacturing agreement to increase global supplyYahoo Finance · 2026-10-08
- Alvotech (ALVO) Could Be 14% Undervalued On Manufacturing Capacity UpdatesYahoo Finance · 2026-10-08
- Alvotech and LOTTE Biologics announce US-based manufacturing agreement to increase global supplyYahoo Finance · 2026-10-06
- Alvotech Soars 13% on FDA Nod That “Effectively Doubles” US Humira Biosimilar CapacityYahoo Finance · 2026-10-05
- Alvotech stock surges after FDA manufacturing approvalYahoo Finance · 2026-10-05
- FDA approves additional U.S. manufacturing capacity for SIMLANDI®, Alvotech’s biosimilar to Humira®Yahoo Finance · 2026-10-05
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Alvotech's financial-health indicators show?
As of 2026-10-08, Alvotech's public financial data places it in the 'Very weak' band with a distress score of 71/100, driven by liabilities exceed assets (negative equity), operating profit does not cover interest and very high leverage. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Alvotech's financial distress score?
71/100 ('Very weak'). Ohlson O-score 1.37 (model 1-year failure probability 80%). Merton distance-to-default 1.11 σ (model default probability 13.2%).
What works in Alvotech's favour?
Strong current ratio (1.76). Revenue still growing (+20% YoY). High insider/promoter ownership (60%) aligns management with survival.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other Pharma & Biotech companies with distress indicators
- ABVC BioPharma, Inc. (ABVC)Very weak 100/100
- AKAN (AKAN)Very weak 100/100
- Endovia Health Sciences, Inc. (EDVA)Very weak 100/100
- Elicio Therapeutics, Inc. (ELTX)Very weak 100/100
- IM Cannabis Corp. (IMCC)Very weak 100/100
- NeuroSense Therapeutics Ltd. (NRSN)Very weak 100/100
Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.