Just when it’s hottest in NY, and all the bankers have taken off for the Hamptons, we get to earnings season for the micro-caps of the world. Generally this is not a very big deal as our early stage companies aren’t exactly putting up big revenue and EPS numbers. They do, however, have an opportunity to update investors and this earnings season is one that I’m more eagerly anticipating than normal.
It seems like quite a few of my portfolio companies are at very critical points in their development. Big things are happening for many of these enterprises…or, are they? We should find out quite a lot about the current state of affairs of our holdings over the next few weeks. And I, for one, am looking forward to seeing demonstrable signs of progress from several of them.
But, first let’s cover what happened in July. The average stock in TW’s universe was up 11% for the month, a solid performance that was generally in line with the small cap indexes. Here’s how they each did.
Leading in performance was enVVeno (NVNO) which returned 40%. This is a direct result of the stock being very unloved for a long time and maybe, just maybe, investors starting to realize the following three things; it’s below cash value, their clinical trials are going great, and they are going to introduce a new product with even bigger potential in August.
enVVeno is a name that I’ve worn like an albatross for a while, but I remain steadfast in my belief that data wins in the end and this company is destined for a big exit in the next two years. For an clinical stage company, I believe the risk/reward is very positive here. There is little to no excitement baked into the valuation, yet the product looks outstanding.
Second in performance was Atomera (ATOM), up 25%. This move was driven by the reversal in semiconductors in general, with a nice boost from the $52B bill for bringing increased semi-manufacturing back to the US, which is a major psychological positive for the whole group.
Trading up 24% last month was Anixa (ANIX), a company I covered extensively last week in the newsletter. Anixa took a big hit in the May/June timeframe on non-fundamentally driven selling. This happens with thin micro-cap stocks. The path in front is now clear and their are major catalysts in the next five months. I think this could easily double and, with any luck, might hit double digits before year-end. Is it a buy even after being up 24% last month? Heck yeah.
I believe that the TW universe overall is still very attractive looking out into the second half of 2022. Next week will kick off the investor update calls, with INmune Bio (INMB) providing us peek under the covers on Thursday. I think this could be a very interesting call as there’s a good chance the company has dosed more patients in the INKmune trial as enrollment trends in pharma seem to be finally loosening up.
I also expect to hear an update regarding the FDA hold on the phase 2 Alzheimer’s trial. The company is currently in dialogue with the FDA and management has stated often that they expect this to end in a positive manner; they have also demonstrated this expectation through stock purchases post receiving the FDA’s Complete Response Letter. Removal of the hold should help re-rate INmune as a phase 2 AD company. Generally that means a much higher valuation than the $160M level it’s at now.
While discussing Alzheimer’s, it should be noted that Cassava Sciences (SAVA) issued a PR stating that the DOJ has made inquiries into them for information regarding their clinical data. Somehow SAVA manages to maintain a $650M market cap despite the numerous allegations swirling around the company. I have been suggesting shorting SAVA for a while now and see no reason to get off this bandwagon although I wouldn’t be adding to the position at these levels. This story has a long ways to go before it’s concluded.
Besides INmune, the other shareholder update calls I’m really looking forward to this month are TFF Pharma (TFFP) and Quest Resource Holding (QRHC). Starting with TFF, as I’ve mentioned many times, the ducks are lined up here. I’m excited to hear about the potential partnerships and hope to get good news regarding UNION on the call. Not much is priced into this stock right now and the tables could turn very quickly once investors start to see the underlying opportunities; the ones that prompted insiders to buy $8M worth of stock over the last several months.
Meanwhile, Quest has also seen consistent insider buying while the stock suffers at low levels. Management here has been vocal that inflation is actually a good thing for them and I expect to see numbers from the company beat Wall Street forecasts with strong guidance. This is an undiscovered gem and, as it reaches critical mass through growth and acquisitions, the multiple has to expand.
Overall, I continue to be very optimistic for the TW universe and not so much about the larger cap stocks. The government is avoiding using the word “recession” yet it feels like one is coming soon. As the FED continues to take liquidity out of the system, I expect the market to suffer. We have witnessed a nice bear market rally but that’s all it is.
For those interested in more research on INmune Bio (INMB), please check out the latest article published by Carl Kestens. He does great work and the level of detail here is amazing.
This week, INmune will be attending AAIC (the Alzheimer’s Association International Conference) in San Diego. They have two presentations at the conference, one talking about their use of biomarkers and how it impacts trial design, and a second discussing four phase 2 Alzheimer’s trials (of which they are one).
Prior to AAIC, INmune has been publishing short videos detailing their approach to targeting Alzheimer’s. Here’s one I like in particular that discusses the differentiation between targeting the immune system’s dysfunction versus the more traditional (and rapidly fading) amyloid hypothesis.
Further to both the aforementioned Cassava (SAVA) and the amyloid hypothesis, this article (A ‘total waste’? Drug developers worry if two decades of Alzheimer’s research were pointed at the wrong targets) not only highlights the issues with their programs but suggests there was possible data manipulation (i.e. fraud) way back in 2006. The study in question formed the basis for the whole amyloid hypothesis and could explain why those therapies have failed and will continue to do so. When you target your science based on faulty data, you’re barking up the wrong tree.
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://tailwindsresearch.com/disclaimer/.
