Perhaps the best of the big wave surfing competitions takes place at Mavericks. Just south of San Francisco, this lonely stretch of rocky coast is not generally known as a good surfing location. However, when the right combination of currents, wind and swells come together, Mavericks turns into the best spot in the world for surfers looking for the ride of their lives.
This combination of forces that creates the perfect opportunity at Mavericks doesn’t come often. It usually happens only a few days out of the year. Yet, the best surfers are always there when the big waves do arrive. Because, quite simply, there are telltale signs that let the surfers know in advance that it’s about to be game on.
Investing is akin to surfing in that we all want to catch the biggest moves. A stock is like a surf location; sometimes its rideable and other times it’s a waste of time and resources. Entering 2022, TFF Pharma (TFFP) is coming off an extended stretch of agony for its shareholders. But, the forecasts are showing signs that TFF is nearing the perfect confluence of events that could turn it into a Mavericks’ like opportunity for investors.
TFF is Addressing a Large Market Opportunity
Fundamentally, TFF is an incredibly simple yet potentially massive story. They address a large problem which is that roughly 60% of all pharmaceutical products are non-water soluble. This means that they need to be administered either through injection or orally. However, due to lower absorption rates, this is frequently not the ideal delivery methodology for these drugs.
Enter Thin Film Freezing. Through their proprietary, patent-protected technology, TFF Pharma can turn the vast majority of non-water soluble medications into an inhalable powderized version. In doing so, TFF not only increases the water solubility of drugs – it enables direct dosing to the lungs, thereby increasing the absorption of many medications. This allows for lowered doses and fewer side effects, which not only enables more drugs to come to market but also lowers overall healthcare costs.
Thin film freezing can improve the effectiveness of many therapeutics. Some drugs are limited by safety issues associated with the optimally therapeutic dose. Additionally, many drugs poorly penetrate into the deep lung (alveoli). With thin film freezing, drugs can be manufactured in “brittle matrix particles” with an extremely high specific surface area such that they immediately supersaturate upon contact with the target site, such as the alveoli. This way, drugs manufactured with the TFF process can treat respiratory conditions more safely and effectively.
And, it’s not only applicable to drugs created for issues with the lungs. Although the TFF process was initially meant to increase the solubility of poorly water soluble drugs, it is applicable and relevant not only for drugs targeting the lungs, but for drugs targeting distant organs or drugs that need systemic administration.
Thin film freezing can be used to create new chemical compositions in patents, thereby improving existing drugs and extending the runway of these drugs for potential pharma partners. Also, of course, TFF’s potential partners may be interested in using the process to develop drugs that are otherwise unviable. Therefore, the market opportunity for thin film freezing is vast. While some drugs may not be a good fit for TFF manufacturing, the vast majority of all drugs are potential candidates for TFF.
The Perfect Wave is Forming for TFF Investors
In order for an investment to generate big returns, to be the massive wave everyone wants to ride, it takes a confluence of events coming together all at once. TFF has the right opportunity, with a process capable of disrupting the delivery of a large swath of the pharmaceutical market. But, why is now the time?
Fortunately for investors, there are three different influences coming to play around TFF that make this an incredibly timely investment. All three have the potential to hit very soon, making TFF poised for a big move.
The first signal directing investors is more technical in nature. Micro-cap healthcare stocks have just suffered through a period of almost unprecedented underperformance relative to every other index. Historically, times situations like this have led to periods of dramatic outperformance.
Within this group, TFFP was hit particularly hard last year, losing 38%. However, the internal technicals for TFF turned late in the year with the stock trading up in Q4 despite a weaker group and the chart is now looking very attractive.
So, TFF is positioned technically for a rally, but what will drive this to generate dramatic returns? The other two forces coming together for TFF are catalytic in nature and should create the excitement needed to send shares of TFFP on an extended run.
TFF Pharma’s internal programs are all proceeding very smoothly, despite the common Covid-related delays seen by most every clinical stage healthcare company. I expect we’ll see catalysts coming from all three of their programs over the next few months. These include the following likely events.
- Dosing of patients in the phase 2 trial of Voriconazole
- Results from the phase 1 trial of inhaled niclosamide
- Exercise of UNION’s option on the niclosamide program, which will result in a cash payment to TFF
- Dosing of first patients in the phase 2 trial of Tacrolimus
- Dosing of first patients in Augmenta’s phase 1 trial
- Beginning of partnering conversations for both Voriconazole and Tacrolimus
While none of these events are necessarily game-changing for TFF, having a slew of catalysts is essential to creating an extended run in a stock. The string of potentially positive (highly likely in my mind) events coming for TFF should keep momentum strong for the shares and outperformance is likely to continue.
The other force that is coming together on top of this oversold stock with internal catalysts is the likely announcement of at least one major partnership with major pharma. Partnering with one of the top pharmas has been a goal of management and an event that has been disappointingly slow to materialize for TFF investors.
Joint collaboration on a new compound’s development is an essential step before a partnership materializes. TFF has entered into Material Transfer Agreements with over half of the top 20 pharma companies globally. In several of these arrangements, they are working on demonstrating thin film freezing’s efficacy across multiple product lines.
These collaborations appear to be coming towards a successful conclusion. On multiple earnings calls, CEO Glenn Mattes has discussed the “terms sheets on his desk” and predicted closing deals before year-end. He missed that timeline, but his optimism is unchanged; they are close.
Even more telling, in the last several weeks, TFF has updated the company’s investor presentation to include Pfizer in there by name as a collaboration partner. This is not an insignificant development as Pfizer wouldn’t allow their name to be used unless a relationship had progressed to the point where they feel comfortable that it’s going to work out.
What’s It Worth?
When I first picked up coverage on TFF Pharma two years ago, I ran a sum of the parts analysis of the Company. I liked to say that, based on my work, TFFP was worth more than its current value when looking solely at the two (at that time) internal programs, VORI and TAC. The rest of the story was simply upside.
Since then, the Company has had many successes with their internal programs, added more to the mix, and has come a long way towards inking a major deal. I believe the stock is now much more cheaply valued than it was at $5 when I first got involved.
The initial values I came up with for VORI and TAC were, respectively, $5.80 and $10.55 per share. Since that time both programs have completed highly successful phase 1 programs that have significantly expanded the market potential for both products. As they enter phase 2 trials, my NPVs are roughly double what they were before. Similar to Roth Capital, which values TFF at $27 based on solely these two programs and their cannabis program, I think VORI and TAC will be worth about $30 to TFFP shareholders sometime in the next year or two.
But, the value of TFF goes far beyond these two programs, even if you throw in the other internal programs of niclosamide and the Augmenta partnership. It’s the platform aspect of the technology that makes TFF so exciting and could provide returns that are in the 5-10X or even more over time.
Consider for instance the fact that Thin Film Freezing is possibly the only way to take an mRNA vaccine, like those for covid-19, and turn it into a room-temperature stable product. This could change the delivery of vaccines globally and is just one of the many applications that TFF is working on at this time. Applications that are being tested with more than half of the largest pharma companies in the world. In my opinion, it’s only a matter of time until TFF pushes one of these across the goal line.
A partnership with a major pharma company, be it Pfizer or whomever, coming into a stock with strong technicals and a slew of positive fundamental catalysts in front of it, could be the kind of cataclysmic event that would be the icing on the cake for TFF Pharma. Just like surfers converge on Mavericks to catch the biggest waves, expect investors to coalesce around TFFP for what portends to be an epic ride.
* Disclaimer: DFC Advisory Services LLC, dba: TW Research Group, had a prior consulting relationship with TFF Pharma and owns shares and warrants of the Company. For a full list of disclaimers and disclosures, please visit: http://twresearchgroup.com/disclaimer/.
