MS Conference Call Exclusive: Reflecting on the 1st Half of 2019

Last Updated on July 9, 2019 by Sultan Beardsley

Now that we are in the heat of summer the books have closed for the first half of the year. Here in the exclusive piece for our subscribers in which our team will individually reflect on our first half performance and overall market developments. We will then discuss our expectations, developments, and thoughts going in to the second half of 2019. We thank you our subscribers for joining us on this journey to financial growth. We look forward to an engaging and informative second half of 2019.

Zion Miller – Chief Executive Officer

2019 has been an exciting and stressful year for all of us in the investment community. From a small blog focused on GALT in 2018 to the platform we are growing today, I couldn’t be more proud and excited for where we will be a year from now! I would like to take this opportunity to thank everyone who has joined the community and finds value in our service, if we can improve our service to better fit your needs please let us know! I’m also extremely excited to see all the improvements for our service come to fruition with new support from UNM Anderson helping us accelerate our growth.

The first half of 2019 presented many areas for appreciation in our portfolios and presented many unforeseen headwinds with the ongoing trade wars (etc.). Recently I moved to Japan to better understand these pain points and others in efforts to identify risks prior to the broader markets receiving news and thus profit from market reactions. I believe these new tumultuous events present us with a unique opportunity for growth in our portfolios and further assist in perfecting our investment strategies. I have begun shifting my focus to long term ESG/sustainable plays which I believe will lead my portfolio to sizable “safe” returns within the coming years. Plays such as Ørsted have supported this ESG investment approach and have been a safe haven from the tumultuous turns in the broader markets. As tensions arise, climate change and other significant factors get closer to having massive impact, investments of this nature are proving to not only be ethical but more lucrative than traditional approaches.

Ultimately I foresee continued volatility in the market and am keeping a close eye on drug price discussions. I believe this will present us with unique opportunities such as covered below by Sultan. Additionally I foresee continued swing opportunities in the ETF’s LABD & LABU. The second half of 2019 is shaping up to continue and potentially grow on a measure of volatility. I anticipate that this will be driven by things such as the political debates, twitter posts and other unforeseen events. Due to this forecast, I will be focusing my core on ESG and other sustainable solutions. This in part is in reaction to the oil industry reporting some concerning numbers which markets seem to be neglecting. in 2019 Oil producers where reported to be planning on sourcing only 21% of capital from cash flow from operations. The rest of the funding is essentially debt and historically appears to be from debt. This in combination with other looming statistics facing the industry (which I will be covering more in depth soon) are a major component I see as supporting a sustainable investment approach. These massive oil giants aren’t profitable, it’s only a matter of time until the proper equilibrium is reached. This is increasingly seeming to offer a massive opportunity in renewables moving forward. Stay tuned for more coverage and deep dives into the thesis we are developing in reaction to this data.

Good luck trading and let’s secure that bag!

Sultan Beardsley- Chief Operating Officer

I’d like to start my discussion with a reflection on the last 11-months. Zion Miller and myself founded MS Money Moves in August 2018. Those of you with us from the beginning can surely recall our rudimentary blog brimming with articles about Galectin Therapeutics (GALT). Since then we’ve pitched many investment ideas. Some yielded lackluster returns like the PDUFA run-up for Catalyst Pharmaceuticals (CPRX). Others like Verastem Oncology (VSTM) taught us expensive lessons about the power of short selling and the importance of market penetration. Whereas winners such as AcelRx (ACRX) and SCYNEXIS (SCYX) flirted with triple digit gains in a matter of weeks. I am grateful for all our subscribers who joined our community. Continue to grow with us and I have no doubt we can all achieve our financial goals. Thank you for your support, let’s get this bread!

The first half of 2019 has been a roller-coaster. Healthcare stocks bounced back with a vengeance alongside the greater markets in January climaxing on April 5th. The DOW, S&P, and NASDAQ on the other hand continued to charge upward to new highs into early May. The XBI (SPDR Biotech ETF) sold off in April due to political rhetoric on healthcare reform. By May 2019 the market seemed to realize that Medicare for all was a far cry from becoming law any time soon. But then trade talks with China broke down sending the entire market into a spiral. During June trade tensions eased superficially allowing the market to rebound. The SP, NASDAQ, and DOW all hit new all-time-highs yet again last week.

In terms of price performance, my number one biotech stock pick ADMA Biologics (ADMA) has outperformed the market since January 1st (gained +43.5% YTD), but underperformed since April 1st (-28%). This is disappointing since many of our members entered within the last 90-days. Fundamentally speaking, though, ADMA has became increasingly fit to succeed during this latter time period. I’ll now discuss my thoughts about ADMA for the rest of the year in addition to stocks added to my portfolio in the past 60-days. As part of my macro-strategy I will be looking at SPY 2020/2021 puts to hedge against a downturn in the markets.

ADMA Biologics (ADMA)

In the next 6-12 months I anticipate ADMA will reach a price of $8-12 dollars a share. ADMA is entering the intravenous immunoglobulin (IVIG) market with two premium products, BIVIGAM and ASCENIV. There is an ongoing shortage of IVIG medicine and the properties of both formulations should command premium pricing of $110 and $500 per gram, respectively. ADMA has 5 batches of BIVIGAM on hand. Eventually ADMA wants to expand the label for ASCENIV to include the respiratory syncytial virus (RSV). RSV is a life threatening infection with limited treatment options. In the meantime, doctors can still prescribe ASCENIV for RSV off-label. The biggest threat right now is the remaining 4 million shares held by the Biotest Divestiture Trust (BDT). As part of the Biotest Business Transaction ADMA exchanged ~10 million shares for a manufacturing facility in Boca Raton, FL and rights to BIVIGAM and Nabi-HB. The BDT is being forced to divest from ADMA to satisfy anti-trust laws. We should expect them to finish closing out their position by the end of the year. Its my hope that management lines up a buyer for the shares, or extinguishes a commensurate amount of shares on the market. The remaining catalysts for 2019 is the commercial launch of BIVIGAM in Aug 2019, ASCENIV in Oct-Nov, a formal announcement of pricing, and third/fourth quarter earnings. An Oppenheimer analyst report projects sales revenue in 2020-2022 of $62M, $113M, and $217M. On July 8th ADMA announced that the license for BIVIGAM and Nabi-HB has been officially transferred from Biotest to ADMA Biologics.

You can read more here in these analyst reports from Jefferies and Oppenheimer.

Regenexbio (RGNX)

Gene therapy is an emerging market segment I am very bullish on. Companies poised to bring competitive therapies to market in the next 1-3 years are a must have for any portfolio. Regenexbio (RGNX) is one such company. As of May 24th, Novartis (NVS) owned AveXis Inc. gained FDA approval of its gene therapy Zolgensma for pediatric patients with Spinal Muscular Atrophy (SMA). Zolgensma is comprised of an adeno-associated virus (AAV) gene delivery vector licensed from RGNX. RGNX’s arsenal of AAV vectors is the basis of its NAV-Platform licensed from Pennsylvania State University (Penn). In exchange, RGNX pays Penn developmental/commercial milestones, royalties and gave them equity. The fact that a big pharma player like Novartis and 11 other companies license technology from RGNX speaks volumes about the strength of their patent portfolio. Several catalysts are expected in the second half of the year. For a complete list read this article. The one I am most excited about is top-line phase 2 data testing RGX-314 in wet age-related macular degeneration (wet AMD). The Wet AMD market is dominated by Regeneron (RGEN) and Roche (RBBHY). Novartis (NVS) has a piece of the pie as well via a license agreement with Roche. If RGX-314 proves curative it would replace existing treatment options. Its perceivable that not just a buyout could happen, but a bidding war. That said, you should not invest in RGNX just because it could get bought out.

Evolus (EOLS)

EOLS is striving to become second only to Botox in the facial neurotoxin market within 2-years. It’s share price has been beaten down ~-50% in the past three months. The selling of 4-million shares by EOLS’s former parent company ALPHAEON on May 15th incited the most recent sell-off. What I like most about EOLS aside from having a competitive product is its marketing strategy and managements execution of it. Phase 1 of EOLS’s launch strategy (the Jeuveau Experience Treatment) went so well that initiation of phase 2 (consumer conversion program, aka #NEWTOXNOW) was accelerated. In this stage customers are offered up to $75 discounts on their beauty treatment. I will be monitoring the #NEWTOX movement on social media to gain a sense of Jeuveau’s market penetration and acceptance. The other thing to remain vigilant about is litigation between Evolus, its partner Daewoong, Allergan (AGN), Medytox. The latter two sued the former two claiming IP infringement. It strikes me as a desperate attempt to keep a major competitive threat off the market (i.e. Jeuveau). You can monitor the legal proceedings by making an account here.

Krystal Biotech (KRYS)

KRYS is on track to be the first to market with a gene therapy treatment (KB103) for generalized recessive dystrophic epidermolysis bullosa (RDEB). Phase 2 data announced on June 24th showed a decisive treatment benefit from KB103 compared to a placebo. There are two companies, Fibrocell Science (FCSC) and Abeona Therapeutics (ABEO), with autologous gene therapy programs for RDEB. In addition to having a first mover advantage, there are several other factors that give KRYS an edge. KB103 uses a hepatitis-B virus vector which has over a 100-fold greater payload capacity than the AAV and Lentiviral vectors deployed by its competitors. This allows KB103 to deliver an entire gene plus regulatory sequences making for high gene expression. If all goes well KB103 would become the first ever “off the shelf” gene therapy. Whereas autologous gene therapies require, 6-months buffer period for therapy prep, a visits to a clinic, and uncomfortable treatments, KB103 can be applied from the comfort of home. Moreover, it does not need to be customized for each individual eliminating that 6-month buffer period. KRYS has the cash to move KB103 through late-stage development quickly. In 3Q19 and 4Q19 I’ll be watching updated phase 2 data (especially response duration), the outcome of a meeting with FDA to discuss the phase 3 protocol, initiation of phase 3 for KB103, and interim phase 1/2 data for KB105. Phase 3 top-line data for KB103 should be reported in the first half of 2020 if all goes well.

Kevin

Hey team, I would like to start by thanking everyone for the support you have given me and the team. Whether here at MS, Twitter, FB, Stock Twits, Trading View, Instagram etc. I truly enjoy helping where I can. As some of you may know, trading has allowed me to live a nice life and pays my College tuition. Trading volatility and chart patterns is something that is constantly changing thus the need for continuing education.

As I learned at a recent StockTwits meetup, traders are constantly looking for that extra “edge.” It became apparent that although some may know what these tools are, they may not understand how to use them. Just as I explained at the meetup, technical analysis is not something someone learns over night. I want you to know I am always looking for that edge with charts to bring back and teach. Making sure we learn technical analysis is a very important aspect to the stock market, especially Biotech.

I believe building on these skills will only make us stronger together. I wanted to make sure you all know that if you ever have charts of your own and would like extra eyes on them for confirmation, feel free to tag me or PM me. If you post them in the Premium Forum, with a #VolatiltyWatch you get yourself an opportunity to have your chart posted in our Chart Gallery for thousands of other people to see YOUR call. You can also post anywhere on Stocktwits (or any other social media platform), tag me and I’ll come take a look. A lot of money was saved by others doing this during the first half of this year and I want to make sure everyone has this same opportunity.

So what am I watching in the second-half? Up until a couple weeks ago, I would have never told you Social Media and Crypto Currency. I recently shared a video called “How to Trade #Election2020.” Thank you If you already watched the video, I went over some of the hype with some of these social media giants, including some detail on Facebook’s newly announced Libra Coin.

One may ask why TF Social media? A few months ago, I had the luxery to attend a social media conference in Sacramento California where Political Science Department heads from various Top-tier Universities had an interesting panel discussion about the future outcomes of social media. So you have an idea of the level of IQ that was packed in this place, there were professors from MIT, NYU, Florida state, Texas A&M, just to name a few. . . This gave great insight into studies being done with social media, data privacy and an interesting conclusion about how the 2016 election was won via Twitter.

Looking at the array of political opponents and the wide spectrum in which they represent, I believe we will see an even higher influx of money in social media advertising for the run-up to the 2020 election. According to The Washington Post, there was over $6.5 Billion, with a “B” spent on advertising during the 2016 election. As social media continues to expand, It is my understanding that only more money will be spent to reach citizens through social media. Not to mention the countless businesses that run daily ads to reach clients. Fun fact, the advertising during the 2018 election grew to about $8 billion between the House of Representatives and Senate.

This brings me to other exciting ways to diversify. I recently started trading Crypto and Alts to see what the hype was about. Now after extensive research, I want to warn that statistics show approximately 90-95% of traders fail. This is not for the meek. Trades are largely based of key technical levels, just as any other market. Crypto markets are starting to show signs of convergence with broader markets, which tells me more people are using them as a different way to trade and diversify their portfolios.

As I happily found, trading Bitcoin and Alts was largely technical based. This made for simple swing trades and could give tremendous opportunity for anybody who likes a little risk in their portfolio. I understand this is new, but I found it trades very similar to biotech’s (volatility) and chart patterns. Before trading please make sure you understand the Six-P’s: Patience and perseverance prevents piss poor performance. For anyone interested in investing, I ran a poll on various social media platforms and found the majority of people currently in Bitcoin and Altcoins call themselves “investors” rather than “traders.”

In closing, I would love to utilize the forum more often with your charts and/ or ticker ideas. Maybe YOU can be shared as the person who posted “MS Biggest Gainer” for members outside the service to see what they are missing. I would like to help each of you improve with your charting skills. We are going to learn use volatility to our advantage. I have already started posting tips in each chart I publish in the gallery so make sure you check those out as we move forward, to learn more. When we all work together as a trading team it will only help our buy side momentum going into trades. All in all, I really enjoyed the markets first half of the year, stay patient and keep pushin’!

Chris Stang – Chief Pharmaceutical Officer

The first half of 2019 was very tumultuous for me, both for my market performance and personally. Personally, I graduated from pharmacy school and am prepared to enter the workforce, which I am very excited for. Performance wise, I appreciated great success on my Array Biopharma pick, which culminated in Array being purchased by Pfizer. Along the lines of buyouts, we saw several large mergers and acquisitions starting with the early January acquisition of LOXO Oncology by Eli Lilly, which was quite surprising in my opinion. We also saw large mergers including Celgene and Bristol-Myers Squibb and now recently the Abbvie and Allergan. In total, we saw roughly $111 billion in Biopharma M&A during the first half of 2019 (source: EvaluatePharma). Other notable news in the first half of 2019 was the stepping down of FDA Head Scott Gottlieb, who has now joined the Board at Pfizer. Going into the second half of 2019, Biotechs that I am holding Amarin (AMRN), Calithera (CALA), Seattle Genetics (SGEN), Sesen (SESN), and TG Therapeutics (TGTX). High on my watch list for the second half of 2019 include Verastem (VSTM), Ionis (IONS), Eyepoint (EYPT), and AVEO Oncology (AVEO).

While we saw a lot of volatility in the first half of 2019, I expect the trend to continue into the second half of 2019. Not only will we have developments pertaining to Trump and trade wars looming, but we will also gain volatility from the democratic party’s presidential election debates. While the current president has made addressing drug prices a priority, the majority of the of policy has been targeting middle men in the drug supply process, and less so actual drug companies. However, I anticipate democrats will emphasize drug prices heavily, putting an “X” on bios back. I also anticipate the democrats will get much screen time, as there will be less republican debates in this election cycle to share screen time with, at least during the primaries.

We have seen success in the defense sector, however again, the traditional democratic platform will include cutting defense spending, which may be a risk for this sector. This headwind can be paired with the recent meeting of Trump and North Korea at the G20, which could simmer the unrest on that front. Conversely, the sector may seen tailwinds from unrest with Iran, but how these balance out is yet to be seen. One sector I am looking at or upside is clean energy. One of the traditional democratic platforms is progressive emphasis on clean energy away from traditional fossil fuels. This may come in the form of tax breaks or credits for citizens and companies that purchase or produce solar, wind, or other clean energy components and/or power. Such discussion may provide upside in this sector under the assumption of a healthier environment for these companies. While I will continue to invest and trade in the biotech sector, I will look to diversify in several sectors, like clean energy, to reduce risk exposure.