Looking Asymmetrical

It’s certainly been an interesting start to 2024 with double digit percentage moves in most stocks I follow. The swings have been strong but the direction varied. Half the movers are up and half down with no real rhyme or reason.

For example, both enVVeno (NVNO) and INmune (INMB) finished 2024 with strong gains. Since then, INmune has continued its upward trajectory, gaining 12%. Meanwhile, NVNO has inexplicably backed off 20%.

Also giving back some recent gains is the XBI. Since I wrote positively about the index back on October 28th (In Support of the XBI), it has been on an absolute tear.

That has left the index overbought and butting up against long-term resistance…

As always, the question is not “how did we get here?” but, instead, “where do we go from here?” The answer, unlike in October when it was clear we were due for a rally, is more convoluted now.

Sentiment around the FED’s direction of future interest rate moves was the catalyst that started the move higher. Risky assets were underowned and are the best place to be in a declining rate environment. It was time for them to rally.

Now, the market has baked in the reversal in rates and, at the same time, the likelihood of significant cuts appears to be rather mixed. The big driver of lower rates is certainly on hold. However, higher rates are not necessarily coming, either. We are now seeing bond bulls and bears locking horns and the future is highly uncertain.

The end result, in this investor’s opinion, is a market that will be difficult to navigate overall but offers significant opportunities for stock pickers. As I wrote last week, micro cap is undervalued relative to their larger siblings at possibly the greatest level of disparity in history. Micro cap is the land of opportunity and, if you pick companies that execute over the course of 2024, there are significant gains to be found.

As I’ve written in the past, investors should always be looking for opportunities with asymmetrical risk/reward. These would be companies that have opportunities for substantial upside with limited to no downside. Looking at 2024, I see two stocks with programs that fit this criteria.

Anixa (ANIX) has started the year off quite well, gaining 13%. The company has a vaccine program that is going well. This is a known fact and, most likely, represents the vast majority if not all of the value in ANIX.

Less well known, and earlier stage, is their cell therapy program (called CER-T by the company). Initially targeting ovarian cancer, this program has the potential to be a therapeutic against all solid tumors. In a nutshell, the upside here is immense.

However, I believe there is little if any value to this program in the shares of ANIX. Less than a handful of patients have been dosed and, while results have been promising, enrollment has been an issue causing delays to getting meaningful results out to investors.

2024 reckons to be the year where it all changes for CER-T. Expect to see multiple cohorts dosed over the course of the year, enabling the company to determine if the therapy works as well as they hope.

That’s the great thing about cancer programs…we’ll have that answer this year and, if it’s positive, the stock should soar. Meanwhile, were it to fail, I’m not sure it would have a meaningful market impact. No one owns Anixa for the CER-T program…it’s simply icing on the cake.

Ditto for INmune Bio (INMB) and their INKmune program. After the dosing fiasco of the last few years, I’m quite convinced investors have shelved all expectations for the product. That, in my opinion, is a mistake.

Now that they are treating patients in the US (and their up to 8 centers open on the prostate trial), we can expect enrollment to move along nicely. Meaning a program with limited eyeballs or investor expectations could generate clinically positive solid tumor cancer results in 2024. This would be a game changer for the stock and come, to most investors, out of left field.

The JPMorgan Healthcare Conference took place last week in San Francisco.

TFF Pharma (TFFP) was out running around SF looking for capital as they will need some soon. With great interim results out of their ongoing phase 2 programs, there should be significant interest. As we saw with IN8bio (INAB) recently, at a certain valuation it’s not “fundraising overhang” as much as a potential “financing catalyst”. I’m hopeful TFFP gets their deal done soon and expect the stock to perform very well from these levels once the balance sheet is repaired.