in 2022 I will not be filling your inbox on Christmas Day, instead taking a week off from publishing. This will give everyone a chance to enjoy the holiday without me delivering more coal to readers. A good thing indeed as, on this one point we can probably all agree: this year the market has given investors more than enough coal to fill many stockings.

Normally I would take this opportunity, my last newsletter of the year, to discuss several year-end trades. The last two weeks are generally a time of volatility and nimble traders can do quite well. That’s most likely not the case this year.

One of my regular sounding boards is a long-time trader. In the 1980’s he co-owned the largest market making firm, eventually selling out to Merrill Lynch. He’s been around the block once or twice. He always makes a ton of money the last trading days of the year.

This week he told me he didn’t really want to discuss any stock ideas. As he said, “There are no real buyers. Even if they go up, they go right back down.”

On one hand, his words were preaching to the choir. As I wrote last week in Santa Claus Ain’t Coming To Town, the likelihood of a Christmas rally isn’t very good. Everything is lining up against that.

However, his comments also cheered me up. For a long-term investor, like myself, the fact that no one wants to buy stocks is music to my ears. When everyone is out of the market, you can rest assured that valuations are approaching a nadir. Sure stocks can keep going down. But, for the ones that have been absolutely lambasted, the TFF Pharma (TFFP)‘s of the world, the companies whose share price is reflecting nothing good ever happening again to the company, we are definitely approaching trough valuations.

At some point in the future you will be able to say, “Can you believe we bought shares of (pick your stock) at those prices? That was so crazy.” Are we looking at the lows now? probably not. But, will these prices look good a year or two from now? I am betting on that being the case.

If investors aren’t buying now, what is going to get them to start doing so? Looking at biotech, which seems to be where valuations have cratered the most and where the bulk of my investment activity takes place, traditional catalysts have been sell the news events during this bear market. This slide captures the terrible post-event performance for the group in 2022 (Thanks Paras Sharma on Twitter).

As you can see, attaining a catalyst wasn’t the golden ticket investors hope for. I will say that this performance, as weak as it was, exceeded the market’s. It’s been that bad a year.

The slide does, however, point us in the direction of what will be the savior for the group going forward. In the worst of years, companies that managed to get business development deals done were the best performing “binary event” stocks.

As we bump along here in the trough of a bear market, the big boys out there, the Mercks and Pfizers of the world, have tons of cash. They also have a lot of patent expirations coming up in the next few years. At a time of low valuations and with risks to their revenues going forward, larger companies are certainly going to be buyers of smaller competitors and/or partners with interesting programs.

Get ready for M&A: Large biopharma companies will have $1.7T in dealmaking firepower next year, analyst says ~ Fierce Biotech

I am looking for a meaningful uptick in biz-dev activity as an indicator that biotech has bottomed. We started to see some in the past couple weeks with two major deals announced including Amgen (AMGN)‘s $28 billion takeover of Horizon Therapeutics (HZNP). My guess is 2023 sees a substantial uptick in both M&A and licensing transactions.

What companies in our portfolios could reach an inflection point that attracts a partner? I believe there’s the potential for several biz-dev events to hit in 2023. Here’s my list of potential deals, any one of which, at current valuations, could be highly significant for shareholders.

Anixa (ANIX) will have results from both their breast cancer vaccine phase 1 trial and their ovarian cancer phase 1 CAR-T trial. While early stage, both programs are unique and Anixa has been upfront in their desire to partner these assets prior to phase 2.

enVVeno (NVNO) continues to progress through their pivotal trial. Recent Twitter posts from PI’s involved in this suggest that things are going quite well. We should get some sort of data readout during 2023. Assuming the data continues to be excellent, potential partners will start circling. I believe the product, in a sale, will fetch several hundred million dollars at a minimum. NVNO is trading for under $50M market cap.

INmune Bio (INMB) recently announced data on INB-03 in combination with ENHERTU for treating breast cancer. The data was very positive and management has said that they will not go into clinical trials without a partner. Daiichi is the manufacturer of ENHERTU that gave INmune the drug to run the trial; not a stretch to say they likely watched the results with great interest.

Movano (MOVE) is unveiling their product at CES in January and it looks great. With a stylish design, leading edge technology, and an attractive price point, the product will garner attention. Importantly, the company is looking for this device to be FDA approved for several indications, which is a key differentiator. If, as we hope, their glucose monitoring achieves this status sometime in the next year, I don’t think they’ll be independent for long. Competitors trade in the multiple billions of valuation, MOVE is at $55M in market cap.

TFF Pharma (TFFP) is another company that has been very vocal about partnering their programs. Both the VORI and TAC phase 2s will be completed in 2023 and Torreya Partners has already been engaged to market these programs to partners. So far the company has failed to move the programs forward at pace, but with a new leader, the revised, conservative timelines will likely be achieved. With a market cap well under $50M, any partnership should drive this stock much higher.

Some more thoughts on Anixa (ANIX) as one would have thought this might be a good week for the stock. Why? Because, early in the week, Moderna (MRNA) and Merck (MRK) announced that their melanoma vaccine showed a 44% reduction in disease recurrence.

Another company showing decent results in a cancer vaccine might reflect well on the whole group. On the back of this news, Moderna saw a nice $10B pop in valuation. Moderna jumping around 25%, in a completely different indication from Anixa, should translate nicely into investors thinking ANIX has increased potential to leap higher someday on good news from their vaccine, right?

Not this week. Instead, Anixa rolled over in a big way, going down 14%. Most likely this is due to a lack of near-term catalysts; the death of any stock in a bear market.

Not that Anixa is without catalysts, just none this coming week. That’s where the market’s head is at these days. If investors are forced to look beyond the current month on their calendar, it’s likely ignored.

Which is too bad as, if you want to turn a couple of calendar pages, Anixa looks really good. Early this year, we should see more images from patients in their CAR-T program. And, the company has set a target of delivering their vaccine data at AACR in April. I know that’s four months away but it will be here before you know it.

Merry Christmas everyone! My next newsletter will be on Dec. 31st, where I’ll recap this year and preview the next. As I’ve said multiple times recently, I can’t wait for this year to be over. We are finally approaching the end and good times await.