(+) Rapport fra markedet i USA – TW Research Group

Market movements are similar to the arc of a pendulum. They swing way past fair value in one direction only to see the inertia stop and a reversal in the other direction. This consistent back and forth happens with all markets but is really turbocharged in the case our microcap universe where the future can be so uncertain that discounting it is much more art than science. The true embodiment of the market’s pendulum motion is biotech where earnings are years from happening and investor mentality can shift from raw excitement over miracle drugs to sheer panic over funding concerns in the course of a few weeks or even days. This year, only half over, has brought us both agony and then joy in levels that are so far out of the norm that it feels like the proverbial “hundred year storm” is swirling constantly around the group. Lately biotech has been strong. How strong? This graph published on August 7th, and curtesy of TW reader Florian Buschek, puts it in full perspective. The rally in biotech is one of the strongest ever seen. Normally this would be a big red flag and suggest that a major dive is right around the corner. However, the new norm is one dramatic move after another and this outsized rally comes on the heels of the biggest selloff the XBI has ever endured. Despite the big gains, we are still trading well below 2021 highs. It was that brutal, the selling we saw. My thinking on the market remains unchanged. I believe we have seen a bear market rally and the next big movement is likely lower. At the same time, however, I feel the lows seen by many TW stocks earlier this year were panic-driven crazy-ass cheap valuation tipping points and (unless individual company fundamentals fail us) will not be seen again. I continue to preach overall caution while feeling very comfortable with my companies and their current valuations. Why is it that markets are trading with such volatility? Like the weather where every week we hear about new records being set not only in temperature but in rainfall, drought, tornado activity or whatever metric you choose, markets have undergone their own version of climate change. Whereas in the past, the vast majority of money invested in the market was actively managed we are now in a time of computer algorithm dominated trading. Indexed money dominates the large cap names and top-down macro strategies dictate market movements. In the smaller cap names, this translates into trading activity that is almost bizarre. What do I mean by this? Allow me to give you an example. On May 24th I had a limit order in place to sell some TFFP for one of my accounts. That day I got an emailed report from Schwab on a portion of the sale being executed. Then another, and another, and…well you get it. Here’s a partial viewing of that sale. Over a span of five minutes or so, I received 11 different trade confirmations. Ten of these were on 7 share lots. With TFFP at $6.46 a share, that means someone decided to buy $45 dollars worth of stock. Ten different times. These are obviously not random and they are not some teenager playing with his paper route money (totally dating myself there, no kid has paper routes anymore). This is completely algorithmically-driven trading with some black box deciding that based on the price of the FAANG stocks and the value of the dollar relative to the yen, but keeping in mind the 10-year yield and always paying attention to wheat prices, it makes a lot of sense to buy $45 dollars worth of probably 3,000 different microcap companies. And, then to do it over and over. The buyer in this case knows nothing about, and doesn’t care to learn about, TFF Pharma. Who is Glenn Mattes? What is thin-film freezing and how will it change drug delivery? Meaningless to them and information that might impact their thinking so they actively don’t want to know it. The black box says buy $45 bucks of TFF and they do so. Repeatedly if necessary. I’m sure they make money. And, in the selloff of the last year, guaranteed they outperformed TW. We were long and wrong. But, this game that works for the black box guys…the game in which they scalp pennies and generate low risk, high single digit to mid-teens returns…is wherein the massive volatility has arisen in microcap stocks. It is also wherein we have opportunities to buy what would be private market unicorns at near or below book value. The black box doesn’t care about the future prospects of a company nor does it care what the current valuation is. It only cares what the algorithm says to do. And, the more money that goes into algorithmic trading, the wilder the swings and the better the opportunities for investors who can take the long-view and do the homework. Speaking of TFF Pharma (TFFP) , they reported earnings this past week. As I told anyone going into the call, if you expect something game-changing to happen right now, you need to back it down. TFF remains a company on the verge of massive success but Aug. 11th was not destined to be the breakout day. That day is coming, however, and it will be soon. There were several key takeaways from the call and I’ll cover them all…the good and the bad. Here you go. UNION…Glenn didn’t spend a lot of time discussing UNION but he did say the option clock is now officially ticking. That’s important as we need to get some conclusion there.More important, however, was the clue he dropped. UNION is working with the Company on phase 2 trial design. That tidbit was almost just thrown in there and I actually called to confirm this was the case; it is. In my opinion, UNION has no choice but to exercise their option. TFF’s version of niclosamide is the best out there and the risk to a core piece of their business would be huge if someone else were to take this over. UNION needs it.Now, we know they are working on phase 2 and this really cements that UNION is moving forward with TFF. I’m thinking we have until mid-September, worst case, to hear if the option is exercised but the odds of it happening, IMO, are greatly weighted in TFF’s favor. I’m feeling very good about this. VORI and TAC…these programs continue to rock and roll. I’ll quote Glenn here as I feel this was very important.”We also expect both the VORI and TAC programs to gain more visibility in the very near-term. Dr. Bradley Gardiner from the Royal Alfred Hospital in Melbourne, Australia has been selected to provide a podium presentation on the ongoing Compassionate Use Study of our Voriconazole Inhalation Powder at the International Congress on Lung Transplantation, taking place in Paris, France on September 8 and 9. Notably, in this lung transplant patient, we observed the expected lack of drug-drug interactions when administering Voriconazole by inhalation, thus the patient did not require dose adjustment of their Tacrolimus immunosuppressant, which is not possible with oral Voriconazole and demonstrates one of the safety advantages we expect to further demonstrate in our ongoing Phase 2 study. We remain very excited about the value these two programs are created for TFF and look forward to providing further updates.”The whole promise of the TFF Platform is encapsulated in that quote. Lack of drug-drug interactions and safety advantages are the key outcomes one can expect from an inhaled version as the drug uptake is improved and, therefore, dosage can be limited. A podium presentation on their version of a generic drug demonstrates the value add from TFF. As investors await the results of TFF’s phase 2 programs in VORI and TAC, it’s important to remember these are open label studies. Glenn knows how they are progressing. Let’s reread the last sentence I quoted, “ We remain very excited about the value these two programs are created for TFF and look forward to providing further updates. ” Do you think these trials are going well? Both VORI and TAC will be partnered off early in 2023. The value of these programs alone justifies an investment in TFFP. TFF is getting very close on partnerships. This has been the biggest bugaboo for investors; rightfully so as the Company has missed their timelines in terms of inking deals with partners. But, missed guidance aside, thin film freezing is a game changing technology and it’s going to happen. Here’s Glenn again on projects with top 20 pharma companies.”We have multiple projects that we’re working with them. And those programs are getting quite detailed. Some of them in the very last stages of producing data and others that are at the starting gate. And we’re really excited about. And wish we could — frankly, we wish we could share some of these with you…if you knew what we were working on, you can understand the competitive nature of what Thin Film Freezing could be doing for those companies and their compounds in their marketplaces.”I’ve done a mea-culpa before and I’ll say it again. TFF was earlier stage than I thought when initially investing. It was earlier stage than Glenn thought, too, from his missed targets. But, the initial excitement was not only justified, it was possibly understated. TFF is highly likely to ink deals with a large number of the largest drug companies in the world. This is some serious technology and it’s on the doorstep of happening. The Company tapped the ATM. This was, in my opinion, a mistake. I get it, the stock is thin and an investor was looking to put some money to work, which the company facilitated. It’s not a big deal…and yet it is.By tapping the ATM, even if only for $400,000, a can of worms was opened. I can hand-hold and say that they are not actively selling but…well, they did sell. So, I don’t believe we’ll see anything more from the ATM at these prices but my guidance on this has been proven wrong so investors will have to draw their own conclusions as to how to factor the ATM into their thinking. Malcolm Fairbairn leaving the board is for personal reasons and not indicative of anything to do with the Company. Nor is it an indication that he’s a seller of stock.I know Malcolm and spoke to him after his resignation. He is highly supportive of both TFF and Glenn. Post my call, I came away unconcerned and will leave it at that. Those are the key points from the call. For me, I’m as excited as I ever was but with more confidence in the future than I have had in a while. It’s been frustrating not having deals signed while thinking they are coming. For those of you who were smarter than I and were not fully loaded over the last year, this is now a great buying opportunity. The perfect storm of UNION, VORI and TAC, and external partnerships all happening in the 2nd half of 2022 seems highly likely at this time. Buckle up and enjoy the ride. DISCLAIMER Innholdet på Investornytt representerer ikke Investornytt AS´ meninger, men er forfatternes egne subjektive ytringer. Innholdet på Investornytt skal ikke sees som finansielle råd. Aksjehandel, kryptovaluta, kryptokunst og all form for trading er svært risikabelt og du kan i verste fall tape mer enn du har investert. Alle må gjøre sine egne vurderinger og ikke handle basert på informasjon på Investornytt. Personer i eller nærstående Investornytt AS eier de omtalte aksjene, fondene og/eller andre investeringene. Investornytt er ikke ansvarlig for noe tap, hverken direkte eller indirekte som følge av bruk av informasjon som fremkommer på Investornytt.

(+) Rapport fra markedet i USA – TW Research Group

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