It's a nice day in Manhattan and amazingly all the snow from the 2nd largest storm in history is gone. Jogging is back on the agenda.
These are difficult times for PPHM investors re a bear market in biotech
accompanied by a political attack on drug company pricing, and the extremely low market valuation for the stock. IMO it is not merely an undervaluation but (as I've said before) a complete misvaluation. Hopefully, either clinical/ FDA news or partnering will at some point change the mindset.
For now, I'd like to comment on a couple of areas where I think I have good historical perspective.
1. Avid is currently at a near 40mm run rate on outside business with an approx 50% gross profit and growing. With Avid II coming on line it is likely that in 12-18 months Avid will be at 70-80mm run rate and worth 2x-3x the current market cap of PPHM. The demographics of this manufacturing business suggest a long growth ramp over many years. One could envision Avid eventually growing into a business doing a couple of hundred million dollars a year in rev. IMO PPHM already looking into sites for Avid III and Avid IV .
In addition, Avid seems to be going into the consulting business on client FDA certification for manufactured product and intl certification. Also, going into the business of consulting for clients on FDA clinical trial process. This business should be high gross profit as there is no manufacturing cost nor raw materials only expertise.
In some cases, where PPHM is particularly enamored with a product, PPHM appears willing to barter some of these consulting and manufacturing services for partial product ownership. This may be very attractive to small biotechs that are cost constrained. It implies some hidden product upside.
Avid alone IMO suggests PPHM is misvalued.
2. I notice a lot of discussion on Steves' demeanor and presentation at Noble Financial on 1/18/16.
I have attended at least 10 presentations by SK and the "delivery" is always the same---very dead pan. His manner and dress are that of a lab clinician that just took off his apron and threw on a jacket and came to lecture in a very clinical manner. The content changes with different slides as events and clinical data progress but the demeanor remains the same.
If you are of the Marshall McCluhan school that "the medium is the message", then the presentation is very dry and unimpressive. Steve is no PT Barnum and so far the market is expressing that judgement in valuation (along with doubts from the reconfiguration of PH II data).
If you are interested in the "underlying message itself", then the presentations are power packed with corporate value creation. There is value to a very cold, clinical , unemotional way of proceding. You don't kid yourself, and you are data driven. (The more knowledge you bring to the presentation the more you get out of it.)
It harks back to the Buffett adage that "In the short run, markets are a popularity contest. But, in the long run, markets are a weighing machine." Buffett has become one of the richest investors in the world by buying what he feels is "weighty" when it is "unpopular".
One last word on Steves' presentation. For years he has been advised to speak not only about the science but also to investors about the potential value of the company----i.e. comps, discounted current value, size of target market, risk reward ratio, collaborations, Avid valuations, etc.. I note that in this presentation one of his slides deals with the target market size which runs into the many billions of dollars. This is one "small step for a man" in the right direction. One wonders why that has been so difficult to do in the past and why whole sections of his presentation are not devoted to the business side of PPHM.
3. CJ Gaddy has done us all a service with a masterful compilation on Steves' slides that have to do with PS as the central "ligand" versus all the other "receptors" that interact with this ligand. This coincides with my thoughts on the"weighted value" of the PPHM patent position. CJGs' presentation indirectly speaks to the value of those patents as well as to MOA.
a. PPHM has a decade long patenting advantage due to the early on genius of Phil Thorpe.
b. PPHM has over 150 patents covering PS/Bavi about half of which lay out the technical innovation and half of which are defensive in nature.
c. PPHM now has later generations of patents covering such things as Beta Bodies.
4. The Bavi/PS/ Immuno Stimulation patent combine looks very strong to me.
a. PS is ubiquitous--it is a "constant" or "cornerstone" molecule if you prefer.
b. PS is the immuno checkpoint furthest upstream, with the fewest side effects
c. PS is the most "efficient" and "comprehensive" ligand and IMO the most cost beneficial.
d. Bavi is the only "late Phase Mab" I can find accessing both PS and the Immuno system
e. PPHM patents re PS/Bavi are both of "design" and "substance" which makes them very difficult to circumvent.
5. On a different topic altogether::
My guess is that R. Birge will want to publish his results in a reputable journal or magazine and want to do so before he goes on speaking tour. IMO that means in the first half of Feb.. In this kind of a scientific paper Ray will lay out his complete thinking as to why PS is a "Global Immuno Checkpoint". The data IMO is massive so we will have to hope it is not edited down. If there is too much editing we lose the train of scientific logic.
I expect this paper to be written in very precise scientific language down to the molecular level. We will have to hope that PPHM has learned how to PR such a scientific work and explain the conclusions in plain investor English. If PPHM does PR such a paper, it will be an interesting communication test for the new PR people.
Most importantly we will have to hope that Dr. B begins to draw the connection from PS-- to Bavi --to PPHM --to PPHM late stage clinicals in this paper. In all the research I read on PS, I never see the connection to PPHM which is the company with the leading patent position and clinical program in this area. Hopefully, that starts to change. LACK OF UNDERSTANDING OF THIS CORPORATE CONNECTION TO ALL THE WORK BEING DONE ON PS. is another reason why PPHM is completely misvalued.
The bearish case is largely based on the argument that PPHM is not to be believed in what they say about the science. I find this case to be more and more worthless as more and more outside confirmation comes forward i.e. R Birge, AZN, NCCN, MSK/ Wolchok, etc..
6. As has been noted in Steves' recent presentation, PPHM can unblind the Sunrise Trial at 80% eventing.
This makes it high probability that first look-in will occur 1st qtr as suggested by PPHM since the look-in will be based on 1/3 of 80% eventing rather than a larger percentage. Assuming that there is no malfeasance and no futility the trial will continue. Some bears make the argument that this is a non event. IMO there is more of interest here. Once the first look-in has occurred investors can time line the second look-in fairly accurately and invest or speculate accordingly. The second look-in which includes efficacy is of course more important so being able to time it is important.
IMO stay focused on underlying value creation.
Best Regards in these difficult market times re valuation and volatility.
All of the above just IMO
RRdog
--------------------------------------------------------------------------------
Invest for retirement at E*TRADE.
