The proposed merger between Avalanche Biotechnologies (AAVL) and privately held Annapurna Therapeutics is running into resistance from some of Avalanche's institutional shareholders. They want the beleaguered gene therapy company to cancel the deal, sell off assets and return their cash.

Avalanche CEO Paul Cleveland has been meeting with shareholders and analysts this week in New York, trying to rally support for the Annapurna deal.

Last June, Avalanche's lead program for macular degeneration posted mediocre results in a mid-stage clinical trial, collapsing the stock price and forcing then-CEO Thomas Chalberg out the door.

Acquiring Annapurna adds new gene therapy programs for other rare diseases, including Friedrich's ataxia and hereditary angioedema, to Avalanche's pipeline.

Avalanche intends to issue 17.6 million new shares to acquire Paris-based Annapurna. If the deal closes, Annapurna would own 37% of the combined company, which would retain the Avalanche name. The cost of the deal was $106 million based on Avalanche's $6 stock price when the deal was announced on Feb. 1.

Cleveland, who became Avalanche's CEO in November, is pitching the Annapurna combination as a reasonably priced reboot of Avalanche's gene therapy pipeline and a way to rebuild shareholder value over time.

But Avalanche stock was at $40 before last June's blow-up. Today, the stock trades at $5 a share even though cash in the company's bank account at the end of 2015 was worth $10 a share.

Instead of buying Annapurna and burning the existing cash on gene therapy programs which haven't even begun human clinical trials, some Avalanche holders want the company shut down and its remaining assets sold off.

The liquidation of Avalanche could be worth $10-12 s share, according to a hedge fund manager who owns a stake in Avalanche. Other Avalanche shareholders also oppose the Annapurna deal, he said, although it's not clear if there are enough votes to scuttle it.

"There are some of us who would prefer to get paid today rather than wait for the market to appreciate gene therapy again," he said, adding that other Avalanche shareholders also oppose the Annapurna deal.

Whether or not enough "no" votes exist to stop Avalanche from buying Annapurna is not clear.

Avalanche needs a simple majority of voting shareholders to approve the Annapurna deal.

"We haven't counted votes, but based on what we've heard, we feel confident that we have shareholder support," said Avalanche spokesperson Lauren Glaser.

Avalanche proposes to close the Annapurna transaction in the second quarter.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.