A few weeks back I wrote about catalysts that weren’t going to help your stocks. It was meant to be a little tongue in cheek but it’s truly that kind of market. In case you require further proof of the ongoing tough environment for stocks, this week I’ll point to Anixa (ANIX) as the leader of the pack.
I’ve pointed to Anixa’s data presentation at AACR, which took place this past Monday, as a key catalyst for the stock. The data didn’t disappoint; it was fantastic. However, after running up 50% in the three weeks leading into the presentation, shares of Anixa proved that it’s still a “sell the news” market, trading down 25% after the data.
Twenty-five percent! In a market that is difficult at best, this action was beyond crazy. What happened here? And, what should investors do? I think I know the answer to both questions.
Anixa did run up too much into the data, so was destined to have a pause if not a pullback. The 25% face plant was more than anyone could have expected. There are a few people who believe the press release was, to put it nicely, rather lame. It lacked a compelling statement and made it tough to determine just how good the data was. But, I don’t think this caused the drop.
Simultaneously to the PR, Anixa put the AACR poster online. Unfortunately, they initially posted the wrong one! A bit of an embarrassment to say the least. But, posters are rather illegible to non-scientists and they corrected the mistake very quickly. My opinion, this didn’t cause the drop either.
Leading into the data, as ANIX made its very big move, many investors purchased options as their way of playing the data. When this happens, market makers are generally the ones on the other side of the trade. The open interest in the April $5 calls spiked to close to 3,000 options.
With that large an open interest, as the stock went through first $5 and then $6, market makers were taking it on the chin. My guess here is that they continued to short going into the news, then drove the stock back down below $5 in an effort to have the options expire worthless.
When a stock trades relatively small volumes and has no upcoming catalyst, it’s easily manipulated by market makers. In the case of Anixa, I believe this is exactly what happened and why the stock went down. There were not new buyers post the data, but there were sellers. Combine this with motivated market makers leaning on the shares and it’s look out below!
Okay, so if I’m right about why the stock was down, what should we do going forward? Personally, I thought the stock was oversold and, once the options expire (which they did on Friday) it was likely to start trading back to highs. I bought stock Monday afternoon and have made 10% already on that position.
I believe investors should not only stick with Anixa but should be buyers here. Let me dig into the data a little to justify this thinking.
On Tuesday, I published an interview with Dr. Kumar which is well worth a read. There are several key takeaways from the interview that justify my thinking that Anixa is an even better buy now than it was prior to the AACR meeting.
First off, the vaccine showed a 100% success rate in seeing immune response. That means in every patient, the vaccine did what it was intended to do. This is fantastic. Think about the covid vaccine. What is its response rate? We all know it’s wildly variable. Anixa seeing a response from every patient is simply unheard of.
With the vaccine generating an immune response, the biggest questions then become efficacy and timing. Vaccine trials are proving a negative…it takes a long time to show that people aren’t getting sick with the vaccine as opposed to patients getting better with a therapeutic. These products take forever to come to market. And, that’s only if they are efficacious.
Well take heart investors, the other big news from my interview was when Dr. Kumar discussed a new cohort to the trial involving the vaccine being used in treating current cancer patients in conjunction with Keytruda. For those of us who are disappointed that we might not know if the vaccine works for years, this is a game-changer.
By testing the vaccine in current patients, we should know within a year or so if it works on killing cancer. Proving a negative takes years, but showing cancer killing on current tumors takes little time. While success in this new cohort won’t definitively prove the vaccine’s efficacy, it will show that it can kill cancer and, as such, go a very, very long way towards reducing the risk of the vaccine trial.
Instead of waiting for a vaccine, if the Keytruda arm works, you’re likely looking at accelerated approval and having a treatment on the market in about half the time. Instead of waiting and wondering over the next 5 years or so, we are now looking at a program that could be worth hundreds of millions (or more) in a much shorter time frame. My thinking is that the market will take a while to catch on to this but, once it happens, Anixa should be trading a lot higher.
In the current market for biotech, value creation is taking place while stocks are not moving. I wrote about this a few times recently, with the Provention acquisition as my primary example. RDRX getting acquired last weekend was simply another data point in support of my argument.
Anixa is creating substantial value and one never knows when this gets fully reflected. It could be on an acquisition, which is highly likely within 12-18 months. Or, the market could start catching on to this program and its value could increase starting today. My guess is that the stock trades back towards $6 once we get through options expiration this week.
Whether the stock trades up now or on an acquisition, I believe we are looking at a company with a great product in development and a very attractive valuation. I’m content to sit with my large position and wait for the inevitable payday.
What an ugly week around here. Anixa, which traded down around 17%, was not the only stock taking it on the chin. We had 5 stocks down over 10% and every single component of the TW universe closed lower. It wasn’t pretty.
Two weeks ago, maybe best week ever. Last week, one of the worst. The bottom line is this market is going to remain difficult in micro-caps for the foreseeable future and we can only hope for some exciting company specific events to help demonstrate the value inherent in the portfolio.
The next big thing for investors to focus on in micro-caps is the Russell 2000 reconstitution. This takes place every June but the preliminary forecasts always come out in early May. I took one of last year’s spreadsheets and updated for current market caps.
Based on my very quick read, there are going to be close to 400 names at risk of coming out of the Russell 2000. This is using last year’s cutoff of $240M for the lowest end of the index. Likely, with the market relatively unchanged from last June, this cutoff will be pretty close to accurate.
In TW’s universe, Atomera (ATOM) is at risk of being dropped. Meanwhile, there are no companies moving up into qualifying from our group, with Anixa and INmune Bio (INMB) being the two that come closest. Needing approximately 50% each to get there, I’m not holding my breath for either one.
Every year it seems the index arbitration takes place earlier and earlier. Perhaps that’s what is weighing on ATOM right now? The stock acts terrible. They do report next week. Hopefully we get something good out of that to support the shares.
This weekend IN8bio (INAB) will be presenting data at the European Bone Marrow Transplant Annual Conference. From their last PR, this is what to expect…
- Updated data on durability of responses and long-term complete responses (CRs) in leukemia patients treated with INB-100 will be presented; no dose-limiting toxicities have been observed
- New correlative data on immune reconstitution and gamma-delta T cell proliferation for Cohorts 1 and 2 will be presented
INAB has done nothing but deliver on their promises from day one. Yet, the stock is hitting an all-time low on a daily basis. Concerns over the balance sheet and financing are weighing on the shares.
How can they overcome this? As the CEO told me, he is a common shareholder and is equally concerned about dilution. The company has oft stated their desire to close on a partnership. For a CEO who has yet to fail to deliver, a partnership would be game changing. The bet here is that they can do so. At this valuation, even if they don’t I think investors will do just fine. It’s that cheap.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://
Hi Dan. Any idea why TFFP is getting beaten up so badly today?
None that I’m aware of. Wil let you know what I learn if anything.
I made almost 100% on a small position in INAB today! 100% return in a week is a gift-Thanks Dan! You must trade these small biotechs on any piece of good news because they are all trading stocks. The danger is falling in love with these names and then round-tripping. I’ll re-enter on the next pullback to the mid-$1 range.