October Awaits

September to remember? I had such high hopes. Sadly, it turned out to be a very forgettable month and I’m happy to have it behind me.

I was concerned about the market going into the historically weakest month of the year and those fears proved quite justified as stocks suffered across the board. The S&P 500 was down 5% and the Russell 2000 was taken lower by 3%. For TW, we exited the month with a 5% decline in our managed accounts and a bad taste in our mouth.

What was disappointing about September lies not within what happened but, rather, is a function of what didn’t happen. For a month that was looking chock full of meaningful catalysts, several of the most promising events suffered from some minor slippage. These delays made for a truly meh! September but have set the stage for an exciting October and along with the rest of the year.

Here are how all our stocks fared for the previous month…

The big winner was Hancock Jaffe, now going by the name and symbol of enVVeno (NVNO). We had fully expected enVVeno (really don’t like that name, btw) to implant their first patient during the last month. That event failed to materialize but the stock obviously didn’t suffer. The value here, even at $10 and change, is great and we think the upside remains very attractive. I fully expect the Company to finally launch their pivotal trial any day now and NVNO could have an extended run into year-end.

Turning in the second best performance was Amryt (AMYT). They also have a catalyst coming up, which would be the November PDUFA data for Oleogel S-10. Shares of Amryt are a great value play here and, from this level, AMYT could make a big move on a positive FDA outcome.

Also poised for a game-changing catalyst is Anixa (ANIX) who will definitely (my opinion) be dosing their first patient in their breast cancer vaccine trial this month. First in human is a big deal for any company and shares of Anixa are well positioned for a nice move.

INmune (INMB) turned in a weak performance last month as their catalyst of absolutely f’ing wonderful Alzheimer’s data was treated, once again, as a sell the news catalyst. However, other September catalysts of an update on INKmune and expected Quellor data both seem to have been pushed into October. I’m liking the way INMB held support on the chart and the stock has plenty of upside as the street starts to come to the realization that INKmune could be best in class for NK cell programs.

All in all, when I look at the performance of the stocks in our universe, along with all the delays in expected catalysts, I come away with the feeling that down 5% on the month was a better than expected outcome. After doing a great job of ruining my 2018, Hancock Jaffe actually saved last month. Not sure what the odds of that were, but life is nothing if not interesting.

The most interesting activity this past week was in Fortress Bio (FBIO). On Wednesday, the Company announced that AstraZeneca had exercised their option to acquire Caelum, a Fortress partner in which they own over 40%.

Shares of Fortress predictably rallied. I mean, Fortress gets $60 million in cash from this, plus could earn $150 million more in milestone payments. It’s very positive for them, right?

Well, add Fortress to the list of companies that go down on good news as the stock gave back most of its gains on Wednesday, then proceeded to get smacked down on both Thursday and Friday. For the week, FBIO was down 13%. Go figure…

I find this to be another example of the market being dominated by traders. Meanwhile, investors sit on the sidelines after news, waiting for the dust to settle. Fortress is becoming quite a good value play, yet it has many growth drivers.

The next big thing for Fortress is when their partner Checkpoint Therapeutics (CKPT) reports data here in Q4. Cosibelimab is a PD-(L)1 Inhibitor that has shown potential to be a best-in-class product in a multi-billion dollar market. Data coming this quarter, if it’s as strong as all the previous data, could spark a big rally here. Which could, in turn, be the catalyst for turning the tide on Fortress, which owns around a third of Checkpoint.

The second best stock last month was Ondas (ONDS) which was driven higher by an analysts’ day and webcast that went covered their American Robotics drone subsidiary. This is an impressive group that have built a very compelling platform and have a good lead on others in the future growth segment of auto-piloted drones. I suspect we will see a couple years of rapid growth from this segment as the drone industry is set to explode.

Ondas was also presenting at a major railroad industry conference last week, alongside partner Siemens. While drone business is going to ramp rapidly, it’s this wireless communications business that is poised to really drive revenues here over the next 2-3 years…if indeed the expected railroad industry orders start to roll in; the company has guided towards receiving meaningful orders in 2021. I would like to see these start to come to fruition before feeling completely comfortable in pounding the table on ONDS.

Dr. Mark Lowdell, the head of the INKmune program for INmune Bio (INMB), participated in a panel sponsored by B Riley this past week. I found the presentation to be very compelling as an investor in INmune. Here’s a link to the replay.

The two most important aspects of the successful NK programs of the future, according the the B Riley analyst, are having an off the shelf (low cost) therapy and stimulating the innate immune system. These two issues are exactly what INKmune addresses.

I touched base with Dr. Lowdell after the panel to get more detail about the program and upcoming catalysts. Here’s what I learned.

  1. The current patient has just passed day 73, another test day for the NK program. Those results will be available to INmune in the next week or so, although not PR-worthy as they will not be releasing every single test result.
  2. That said, the final test will be on day 119 and that data will be available to investors sometime around December 1.
  3. Blast data from the patient has been collected but is not done being analyzed. Dr. Lowdell says that, due to the age of the patient and severity of the disease, it is highly unlikely that there will be improvement in the bone marrow; if there is, it will be HUGE for the stock.
  4. However, if the bone marrow has stabilized enough to permit a bone marrow transplant, that would be a very positive sign. There’s a much higher possibility this is the case.
  5. INmune expects to announce a second location for this trial opening up sometime in October, which should benefit recruitment.
  6. Recruitment is slow due to the peculiarities of sourcing patients in the UK but they hope to dose a second patient in the program soon.
  7. They did, however, dose another patient under “compassionate use” recently. This is an AML patient who’s Dr. saw the positive results from earlier trials in AML of the parent drug to INKmune and thought it could help their patient. According to the Company, they are not sure if these results will be released, but they are not part of the current trial.
  8. The ability to find patients in the US is much easier, and they are hopefully going to be starting a trial here in the near future. With the pristine safety data to date, along with the fact that a US IND is very similar in terms of paperwork to one in the UK, Dr. Lowdell thinks he can file an IND before year-end. The gating factor right now is finding a location to have the trial.
  9. INmune hopes to be able to dose their first ovarian cancer patient around the end of Q1 2022.

These trials start slowly but INKmune appears to be gathering momentum. I continue to believe that shares of INmune have close to zero value attributed to them from INKmune. This is set to change over the coming months and will provide a nice stream of meaningful news as we enter a lengthy phase 2 Alzheimer’s trial, which should start in December.

Inflation is one of, if not the, biggest concerns facing investors right now. ESG is one of the hottest investment themes in the market. One company in our universe is a true pure-play on ESG and also benefits from inflation. That company would be Quest Resource Holding (QRHC).

Over the last few years, Quest has turned their business around. They are now growing again and generating positive EBITDA. They also have an acquisition expert as their largest investor and chairman of company. I expect growth to not only continue but to see more accretive deals drive the company in the near future. Meanwhile, the stock has come off of recent highs and represents a compelling opportunity.

Atomera (ATOM) was attacked in a blog piece on Seeking Alpha by a short seller. They also tried to attack yours truly in that piece.

The blog itself contained nothing important and was actually off-base with most of the “facts” they presented. What makes it interesting is that the stock closed higher after the hit piece. Shares of Atomera seem to be getting accumulated fairly aggressively and there has also been some very interesting options activity in the stock.

The Company has not had much to say about new customers for quite a while. Perhaps that is set to change soon? Feels like it could be any day now…

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/.



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