Santa Claus Ain’t Coming To Town

Earnings and Interest Rates drive everything in the stock market. At the core of investing, this is all you need to know. When earnings are increasing, stocks go higher. When interest rates are going down, stocks go higher. When the corollaries are happening (ie lower earnings and higher rates) stocks go down.

If you can just remember these two simple facts and let it drive your overall portfolio management strategy, you’ll outperform in the long-term. Ignore them and you’ll find yourself swimming upstream like a salmon…into the teeth of the bear market.

Bear market rallies do happen. They can be bigger moves, quite fast and powerful at times. In November we saw a very sharp upwards move in the market. Investors were hopeful that interest rate increases would slow (or naively even end). Don’t believe it. The FED has been very vocal in saying rates will continue higher.

But, even if rates do reverse, that doesn’t necessarily signal the end of the bear market. This graph was sent to me this week. I found it very scary…

They say a picture is worth a thousand words but I’m going to interpret this one for you in only 16.

After the first FED rate cut, stocks have historically bottomed 200 days later and 24% lower.

Let that one sink in for a minute…

This last rally in the market was caused by investors getting excited about potentially lower rates of rate increases. Yet, history shows us that the FED reversing course doesn’t come close to signaling the market bottom in either time or price.

If you think the FED moving to only 50 basis point increases is positive, guess again. It’s simply less negative for stocks. Nothing else.

But wait, what about the Santa Rally? Don’t stocks generally move higher through the holiday season? I’ve got another picture for you on this one and it’s no better than the last…

The interpretation here is that, in years where the market is down, stocks generally have a pretty mediocre to bad December. Or, to make it even more simplistic…

Santa Claus Ain’t Coming To Town…         

In an otherwise ugly week, INmune Bio ($INMB) was up 9%. Here are three possible explanations for this strong move.

1. Data from ASH. This week, INmune reported data from their INKmune program at ASH. While the data wasn’t necessarily surprising (same four patients that we’ve known about for a while), it was certainly encouraging for this program. Maybe more importantly, these two quotes from the PR set the stage for bigger things to come. 

   With this statement, “The Company is preparing to expand the INKmune™ program to the US in a solid tumor indication,” and this leading thought, “We hope this will be the first of many presentations on this promising program,” INmune has really teased a very bright and promising 2023 for INKmune.

2. Perhaps it wasn’t INKmune but data on INB-03 from the San Antonio Breast Cancer Symposium that drove INMB? This program (which is simply XPro in a non-CNS indication) is providing further proof that reducing inflammation by targeting TNF has broad ranging potential. Inflammation is a major bugaboo for humans across a myriad of diseases. By reducing inflammation, thereby enabling other drugs’ methods of action, XPro could really be the holy grail of co-therapies. In the case of breast cancer, INB-03 took the industry leading ENHERTU to a new level of efficacy. What else is possible?
3. Another possible reason for INMB’s strength was data presented by BioVie ($BIVI). In their Parkinson’s and Alzheimer’s program, BioVie showed moderate success in slowing disease progression. There were some interesting tidbits from their PR that bode quite well for INmune’s programs.

   “Improvements in inflammation (reduction in TNFa) correlated with improvements in cognition (R=0.59, p=0.0259),” gives numerical importance to controlling TNF in Alzheimer’s. 

   Here’s how their CEO interprets this data, “We hypothesize that the modulation of TNFa levels and its inflammatory activation lead to a multitude of changes among the many factors downstream from this master regulator, which collectively lead to improvements in neuronal health and cognition.”

   ***I particularly love how he refers to TNF as the “master regulator”.

   I’m not going to get deep into BioVie here but my interpretation is that their drug has a number of effects on the body. One of these is that it somewhat modulates TNF and they are seeing that modulation as the most important factor in controlling AD progression.

   Translating BioVie’s findings back to INmune, remember that XPro does one thing…it reduces soluble TNF. This is the only action caused by XPro which makes it incredibly specific and effective. BioVie’s drug reduced TNF in roughly 60% of patients. XPro does it in all patients. The aspect of their program in which BioVie found success is a sandbox in which XPro is the schoolyard bully. You want to clear TNF safely, this is the way to do it.

I have been stating for a while that INmune is going to have an explosive 2023. The INKmune program is going to launch in solid tumors in the US. This will be very positive.

More importantly, we will eventually get off the FDA hold for XPro. Findings like those from BioVie that support XPro’s method of action are simply setting the stage here. Once the FDA hold is history, I suspect that there is going to be a line of institutions trying to get into the name. FDA holds make stocks “uninvestable” in the minds of funds…but inflammation is becoming the most important CNS investment theme. Remove the hold and watch the fireworks.

Last Monday TFF Pharma ($TFFP) announced that Glenn Mattes was stepping down as CEO, being replaced by Harlan Weisman. This is a move that was long overdue and had been pushed from investors for many months.

The initial reaction was quite positive, but that jubilation soon soured. The reality is that investors are not sure what to make of TFF with the previous guidance from Mattes being so opaque as to confuse everyone as to the exact status of all the programs.

At this time, investors need clarity. Where do we stand on the internal programs? Which MTAs, of the over 40 they are working on, stand a chance of success? When are we going to see value creating events?

In times of uncertainty, investors head for the doors. And, new money certainly doesn’t flow into stocks. At least not rapidly…I do know several long-term thinkers who were buyers on Friday.

With the $1.15 deal price broken (along with investor frustration over Glenn getting a generous severance), TFF stock suffered another beatdown, closing at $.98. Ugh.

Maybe it’s time to take a step back and look at the big picture? What do we KNOW here? When the trees keep smacking you in the face, the forest can be forgotten. So, let’s review some facts.

1. VORI works. Phase 1 was excellent and the compassionate use data is outstanding.
2. TAC works. Once again, excellent phase 1.
3. Niclosamide phase 1 was a success.
4. BARDA and DARPA deals confirm that thin-film-freezing works better than alternatives.
5. Many MTAs suggest that the platform has huge upside.
6. Aaron Fletcher, the Chairman, has bought a TON Of stock this year.

Looking at all this, TFF seems like a gift horse. But, there are more facts to review.

1. Despite Glenn’s promises, no deals have been signed.
2. Despite Glenn’s promises, internal programs have been delayed.
3. Despite Glenn’s promises, the CBD business has yet to generate revenues.
4. Despite Glenn’s promises, UNION has yet to exercise their option.

Okay, I think you get the point. There are lots of questions here and the main gist of the questions is, “What is real?” We have heard great stories for years. Glenn has a franchise on overpromising and delivering next to nothing. It’s truly been a disaster.

Having a new CEO is the first step. Now, investors need some clarity. Where do we stand on all these programs and what can we bank on coming to fruition in 2023? Investors need answers before they are going to step up and buy stock.

Usually new CEO’s get a hall pass. They get a chance to reset expectations and time to take things under their control. However, they must communicate. In the case of TFF, we have a new leader and he’s yet to come out and address the investor community. Until he does so, TFF will remain in the doldrums. But, once we get some answers, the future will start to come into view and the worm will turn. I wait impatiently for that to happen.