Let’s Get Ready To Rumble (2nd Half Preview)

To steal a line from Charles Dickens, “It was the best of times. It was the worst of times. Then it was pretty darn good again.” And now we have reviewed the first six months of 2021 and can get on to other business.

Well, perhaps it does deserve a little more detail; closing the first six months up a relatively modest 7% was never more dramatic. Sitting in mid-February with gains of over 30% net, I knew that good times couldn’t last forever. Likewise, staring at down close to 20% while only in April, I was convinced we’d see an improvement.

The micro-cap pendulum did indeed reverse, leading to a solid recovery. The explanation for the volatility in the portfolio is relatively simple to explain as it all stems from the pandemic and the associated fiscal policies out of DC. A simple explanation, but the reality is things were much more complex and most investors have been perplexed by all the price action.

There were, however, real winners and losers within the portfolio as not all stocks are created equal. Here’s how our coverage universe did in the first half, with last year’s final returns put in for comparison.

Looking at the returns, one could surmise that 2021 has been a great year so far, what with a 53% average return. However, that number is deceptive as three stocks drove the average much higher. Without Performant (PFMT), which was a late add to the coverage universe, ParkerVision (PRKR) and Quest Resource Holding (QRHC), the average stock at TW was down 4% year-to-date…much more in line with how the first half felt, right?

Our performance lagged the average stock due to large positions in Atomera (ATOM), INmune Bio (INMB) and TFF Pharma (TFFP). I have become quite committed to letting winners ride, rather than trade around positions. As these three stocks had huge 2020’s, and as I was massively overweight TFFP and INMB in particular, their weighting in the portfolio grew to the point where they have a very large impact on performance.

But, I really don’t want to spend too much time focusing on the past. For all investors, it’s the future that matters the most. As they say, “past performance doesn’t guarantee future returns”. We underperformed in the first half by sticking with 2020’s winners and suffering that hangover. I think the second half of 2021 will see a reversal by our larger holdings and I’m very enthusiastic about the opportunities in front of us.

So, without further ado, I will go through each stock in the portfolio, detailing the upcoming catalysts and also the risks. I’m always asked for a year-end price target, so I’ll even throw that in there for fun. Realize the targets are based on all the positives happening along with a market that continues to stay at elevated levels. It’s highly doubtful the targets will be hit across the board; just several companies hitting the targets could lead to a very profitable 2nd half.

Amryt (AMYT): Amryt is set up for a big 2nd half with two very positive catalysts coming at them. First off, their acquisition of Chiasma should close in the third quarter. There is a shareholder vote in July and things should move quickly afterwards. The acquired drug, MYCAPSSA, is a great opportunity and a perfect fit for Amryt’s salesforce to drive adoption. I believe Amryt got Chiasma at a bargain price (due to a slow drug launch during the pandemic) and this will be demonstrated over the next couple years.

Later this year, Amryt has their upcoming PDUFA date for Filsuvez, a potentially blockbuster drug. The FDA has been working closely with Amryt and all signs point towards approval, which should drive the stock higher.

These catalysts both come after Amryt reports its second quarter results. These should be very positive. If you listened to the Q1 conference call, Amryt put up 10% growth without a Lat-Am order this year, which they had in Q1 last year. That order has been pushed into Q2 and is “significant”. Thus, growth should be very strong in the second quarter.

Amryt continues to beat forecasts and raise guidance with their current portfolio. They are fully funded and generating cash. With the two catalysts added to the current business strength, I expect the stock to have a great second half. My year-end target, based on the closed acquisition and approval in EB, is $25-30. It’s still cheap at that price…

Anixa (ANIX): With two trials expected to enter phase 1 dosing in the second half of 2021, Anixa is poised for a significant upward move.

In July, the Company should begin dosing patients in their breast cancer vaccine trial, run in partnership with The Cleveland Clinic. The Clinic is a world-class research institute and this program has had excellent pre-clinical data. Early results should be available to investors later in 2021 and, if positive on the biomarkers, would be a great catalyst for the stock.

Their other lead program, a CAR-T type therapy being developed in conjunction with The Moffitt Cancer Center, is currently in the registration process with the FDA. It seems like the program will have its CAR-T IND approved in the next few months and also be dosing patients in 2021.

Each of these programs has the potential to be a blockbuster and worth billions of dollars. Meanwhile, the Company has raised substantial cash and is funded for the next several years. With a current market cap of only $115M, there is significant upside to Anixa. I expect to see the stock rally with both programs entering human trials and believe this will be a $10 stock or more by year-end if all goes according to plan.

Atomera (ATOM): Atomera typified the Dickens-like 1st half of 2021 with a massive run-up of about 300%, a retreat of down below January 1st levels, then a roughly 50% bounce into July.

What sparked the rally? The company’s long-anticipated inking of a JDA was the ignition switch for a stock primed to move. What’s exciting about this is that the first JDA was simply that; the first of what we expect to be many JDAs or Phase 4 contracts.

Atomera continues to present customers with compelling data that will push adoption. We expect to see several more contracts in the second half of 2021 and think ATOM will have another strong run. Likely past $50, which is our year-end target.

Fortress Bio (FBIO): with so many programs going on, Fortress is, in the words of Maverick, a “target rich environment”. Starting with Journey, which has gotten more active on the corporate partnership side, results are due in mid-August. Expect to see record numbers from this subsidiary that is cash-flow positive and driving a lot of the value here.

Beyond Journey, the other partner companies have a lot going on. Q3 will see Mustang will initiate pivotal trial in MB-107 file an IND for MB-207. Their non-Hodgkins lymphoma program, MB-106, will be presenting more data in Q4. Meanwhile, Cyprium will begin rolling submission in the second half of 2021 and the Alexion acquisition should close, starting the clock on Caelum’s eventual acquisition by Astra, an event that is likely early in 2022.

The company is also going to be hosting a second annual 2-day R&D summit with B.Riley on August 17 – 18th. This will feature a ton of updates on the rest of the portfolio including many of their private companies. With all the catalysts, and the disappointment of Avenue behind them, I expect to see Fortress over $5 by year-end.

Hancock Jaffe (HJLI): The cheapest stock in my universe, trading modestly higher than Enterprise Value, Hancock represents a compelling risk/reward opportunity. This is particularly true as we enter a time where the most important catalysts in the Company’s history are teed up.

The VenoValve is entering human trials starting this month. They have 20 sites lined up and I expect implantations to run ahead of schedule. My guess is that patients will be lined up to get the device as there is simply no alternative in the market; the large number of sites speaks to the demand that exists.

We should start getting some data from the pivotal trial later this year. If the device achieves success only close to that seen in the previous trial, it will be an easy approval process and will likely see many suitors prior to the final FDA submission. I believe this stock will more than double this year and a $15 year-end target could possibly be doubled again in 2022.

INmune Bio (INMB): in a second half filled with exciting catalysts, INmune possibly stands apart from the rest. This is not due to the expected July announcement of a first patient dosed in their INKmune trial. We expect this to happen any day now and INKmune could be a very exciting product, but it’s just icing on the proverbial cake.

The Go/No-Go decision in their Quellor trial is also anticipated for the month of July. Many trials are showing the effectiveness of TNF-Inhibitors in Covid patients and I expect to see a thumbs up from the Data Safety Monitoring Board. It is possible they could give it two thumbs up and say it’s blowing away standard of care, but that’s only a slim possibility. Most likely, it’s a “go” and a positive catalyst, but still just more icing on the cake.

The “cake” here would be the August release of the complete data set for their phase 1 trial of XPro1595 in Alzheimer’s Disease. This data will come with another KOL call and the Company continues to drop hints that it’s going to be mind-blowingly positive.

What does that mean? Looking at other companies in the AD space, Eli Lily (LLY) got $20B in market cap post a positive phase 2 trial. Both Annovis (ANVS) and Cassava (SAVA) are up over 1,000% this year on the back of their phase 2 data. INmune will not be showing cognitive data, but the opportunity for INMB to more than double on the news that they reduce neuro-inflammation alone is quite real. My year-end target is $50. I think it’s possible that it’s greatly exceeded.

LexaGene (LXXGF): LXXGF is demonstrating great progress in picking up clients in the veterinary arena and we can expect to hear more about this. Revenues will follow and this will help put a floor in the stock.

However, the bigger catalyst was discussed in a press release on Friday when LexaGene talked about the progress they are making towards an Emergency Use Authorization. If, as planned, the Company can get listed on Nasdaq and get an EUA, the stock should easily be worth $1.50 by year-end.

Lantern (LTRN): many positive events are in store for Lantern as they move into the second half of 2021. Starting with LP-300, the Company is going to be entering phase 2 trials targeting never-smokers who get lung cancer, a greater than $1B TAM. The drug has compelling biomarker data from previous trials that suggest this is a great target for them and this program should start getting more attention from Wall Street later this year.

We should also learn more about upcoming phase 1 trials for LP-184 in several different cancers as well as the Company’s ADC program. I expect at least one more trial to commence in 2021 and lots more data from pre-clinical work being done with partners like Johns Hopkins and Fox Chase Cancer Center.

Perhaps the biggest value driver this year is their RADR A.I. system, which is expected to pass the 10 billion data point mark in 2021. This program is driving their clinical development of cancer drugs, helping select biomarkers and target audiences. This enables faster and cheaper cancer programs and is the future of personalized medicine.

As all these programs advance, I believe LTRN could double to $30 by year-end.

Performant (PFMT): there’s been a big seller in the market which has weighed on PFMT. I expect to see that volume to get eaten up over the coming weeks and that alone should be the biggest catalyst for the stock.

Beyond that, earnings should be a positive catalyst as the Company is firing on all cylinders. Through in a debt refinancing later this year and some non-deal roadshows and the stock should be back to hitting new highs by year-end. Target of $6 is conservative and will likely be handily exceeded during 2022.

ParkerVision (PRKR): several major catalysts await ParkerVision in the second half of 2021. These start with a Markman ruling on the second Intel case taking place in Texas. That ruling has already been partially decided and we should hear about the complete ruling sometime in the first part of July. It seems to be going wildly in PRKR’s favor as did the other recent Markman.

Looking further out, there should be more small lawsuits filed and, importantly, more settlements thereof. The recent settlement with Buffalo is likely the first of many and, once the trend is established, the market will start to give Parker more credibility in these numerous cases.

The biggest catalyst will be getting a date on the calendar for the Qualcomm lawsuit. The judge is expected to give motion rulings over the next 1-2 months and set a pre-trial hearing. These hearings are typically 2-6 weeks prior to the trial date and we should learn about this over the summer. Expect a trial this year and the stock to move up in anticipation thereof. Target at year-end is $2.

Quest Resource Holding (QRHC): for Quest, it’s all about execution not exciting catalysts. But, that doesn’t mean the second half won’t be rewarding for investors. Quest continues to beat street expectations and ESG is becoming a hotter topic daily. I believe these trends will continue and Quest, which has been setting new highs rather consistently of late, will continue to do so as well. Target for year-end is $10.

TFF Pharma (TFFP): sometimes the best is saved for last. Certainly in the case of TFF, you have the company with the most potential catalysts pulling up the alphabetical caboose of our coverage universe. Here’s a list of what we are expecting from TFF.

Starting with the internal programs, Voriconazole should have data from their asthma cohort in July and Tacrolimus should have their phase 1 data also in the third quarter. The Company will have end of phase 1 meetings with the FDA on both products and then both internal programs expect to enter pivotal trials in Q4. I think these are tremendous value drivers and we could see partnering activity sometime next year if not sooner.

In their partnership with UNION Therapeutics, a pre-IND meeting with the FDA has been scheduled they will likely be starting phase 1 trials for both oral and inhaled versions of Niclosamide in the 2nd half. Data triggers the first payment to TFF on this deal and we could see that later this year, but likely early next.

The Augmenta partnership will move into phase 1 in second half on their lead monoclonal asset. They will also be releasing data on a Covid Delta variant in several weeks. If that’s positive, might get more aggressive on FDA side with this co-developed product.

Meanwhile, the company is getting very close on inhaled CBD product through their Plus Products relationship. Market test on formulations is ongoing and revenues from this are likely to start sometime in Q3. Plus is not the only game in town for TFF and we could also see another partnership in this space later in the year.

Felix biotech is still waiting on their series A financing. When this happens, that relationship gets consummated and TFF should receive a nice check. I anticipate this transpiring well before year-end.

Another partner, Greenlight is testing materials in real time. If the TFF formulation is successful, a deal is triggered. Expect to hear about that in Q3.

That covers most of the already announced programs, but there is so much more to the story. According to CEO Glenn Mattes, of the top 20 global pharmaceutical companies (by revenue), the Company has open MTAs and is actively working with ten of them. TFF has guided to at least two meaningful partnership announcements this year and they are emphatically sticking with that guidance.

I have been frustrated with the stock performance of TFF, but don’t let that make you think that progress isn’t happening behind the scenes. There’s a lot going on and thin film freezing is a disruptive technology that is about to take off. The second half is very loaded with explosive catalysts and I think we could see TFFP at $30 or more by year-end.

TW Research's Disclaimers & Disclosures: TW Research may have been compensated for writing this article. For a full list of disclaimers and disclosures, please visit http://tailwindsresearch.com/disclaimer/.

2 COMMENTS

  1. Thanks Dan. Love your optimism. I hope you are right with many of your picks. I am with you on INMB, TFFP, ATOM, ANIX, LTRN, and PRKR. I only have a negative return with TFFP at this point. I came to the party a little late in TFFP and should have stuck with my discipline and waited for the chart to improve before investing as I did with the others. I think many of your picks could be huge in the coming months if things come together as you believe. I’m really frustrated with TFFP, it really looks like it wants to go lower at the moment, so I’m waiting for momentum to change. I do better following my charts before investing. It works for me. My philosophy is I would rather be late and right, than early and wrong. I was early and wrong when I first invested in TFFP (knucklehead decision). I make them sometimes! Just waiting on the catalysts for this to turn around.

    Have a blessed 4th of July and thanks for all you do!

  2. Thanks for the excellent update on where we are. Could you comment at some point about Aerovate’s dry powder technology versus TFF’s? They were in the news this week and it seemed to coincide with some retrenching of TFF’s price.

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