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- I do NOT provide investment advice; but just share my research. What you read herein is NOT investment advice. Do your own research.
- I do NOT speak for VYNE/Menlo/Foamix. My views are my views only.
- Also visit www.emfcrisis.com , www.rezamusic.com
IMPORTANT POLITICAL NOTE: It's crucial to Dump Trump.
America is at a historic juncture to chose between a man who effectively has no morals, no ethics, no integrity, no competence in governance, no sense of public-service, no respect that America should not turn into a dictatorship, has no respect for the wish of the highest judge of the land, and puts the USA and the world in a very dangerous state of moral chaos and violence associated with bigotry, sexism, racism, etc. Trump promotes violence, and makes fun of disabled people. A corrupt man whose heart is occupied with his ego, and therefore has no love.
A vote for Trump is a vote for the end of America as we know it. He will turn the US into more chaos, by stupidity and incompetence, and he will turn it into a corrupt dictatorship, like the places the Founding Fathers ran away from. A chronic liar is not what you want as a role model for your children.
Biden is not perfect. I don't agree with everything he's done, but he's a man of integrity. Character counts. At least if he lies he knows he's lying. Trump can't tell the difference between lie and truth any more, as Dostoevsky predicted about chronic liars. Biden also knows the job, and will put good people in key roles, vs. e.g., convicted crooks associated with Trump. Harris is a woman of integrity and will help bring importance back to truth!
Your vote counts. Trump and his crooked allies will try to steal the elections, so a landslide win is needed against Trump.
VYNE UPDATE 25 SEP 2020
CANTOR FITZGERALD PREDICTS OVER 800% GAIN
Louise Chen (Harvard MBA), Managing Director at Cantor Fitzgerald has a $15 price target on VYNE (800% gain from current price of $1.60). Her price target may seem extreme, but in Biotech, it's not unusual to have price targets far from current price, and for the stock to actually get to that price. She reminds me of two other hotshot Biotech analyst ladies, who both had very high price targets (above $10) on AVNR when the stock was in $2 range and under manipulation by crooks like Martin Shkreli. AVNR was bought out at $17 a share.
Ms. Chen wrote: "We continue to believe the market opportunity for VYNE’s products and pipeline are underappreciated. Therefore, upwards earnings revisions and multiple expansion should drive VYNE shares higher, in our view. We believe that Amzeeq is a highly competitive product with supporting data that demonstrate a topical minocycline treatment does not pose a risk of resistance. The peak sales potential of Amzeeq is underappreciated and the launch could exceed expectations, despite the COVID-19 pandemic.”
"Other analysts echo Chen’s sentiment. 4 Buys and no Holds or Sells add up to a Strong Buy consensus rating. With an average price target of $7.75, the upside potential comes in at 413%" https://www.tipranks.com/news/article/3-strong-buy-healthcare-stocks-under-5-with-triple-digit-growth-prospects/
I believe public can register and listen in: Thursday, October 1, 2020 from 12pm – 3pm ET. To register for the symposium, please click here. Ted Lain, M.D. (Sanova Dermatology), Julian Moore, FAAD (Hollywood Dermatology) and Linda Stein Gold, M.D. (Henry Ford Health System) will discuss the current treatment landscape and unmet medical needs in treating patients with acne vulgaris and rosacea. Drs. Lain and Moore will discuss their experiences treating acne patients with AMZEEQ® (minocycline) topical foam, 4% and Dr. Stein Gold will discuss ZILXI™ (minocycline) topical foam, 1.5% and her expectations of how the product will be used to treat rosacea patients in her practice. In addition, VYNE management will discuss the commercial progress and plans for these two products. There will be a Q&A session following the formal presentations
NEW ARTICLE ON VYNE
Here's a good new article on VYNE. "VYNE's Current Market Cap Presents An Attractive Opportunity". https://seekingalpha.com/article/4376026-vynes-current-market-cap-presents-attractive-opportunity
STOCK PRICE VOLATILITY
Vyne stock continues to be extremely volatile, up and down over 5 or 10% in a given day. I don't pay much attention to these swings, as such low price stocks are easily manipulated. I'm waiting for increase in sales or other news, so it boosts the stock, and the reverse split, so we get out of this kindergarten range. There's a reason many big funds don't deal with low priced stocks.
VYNE UPDATE 19 SEP 2020 - Surge in Demand/Price
New article: The Ugliest Part of Wall Street: Jim Cramer and his cronies: Adam Feuerstein, Martin Shkreli https://rezamusic.yolasite.com/wallstreetcorruption.php
VYNE --19 Sep 2020: The last couple of days VYNE was up despite significant drops in overall markets. I'm not a stock technical analyst but looking at the intra-day charts, and level 2 action, that there seems to be solid demand for the stock, and that here are deep buy orders that are hidden (showing only a few shares), and thin number of sellers who headfake by showing large blocks for sale which don't exist, with the goal of suppressing the stock in hope of frustrating longs into selling, and hope of buying as cheap as possible. Classic receipe of the immoral, deceptive practices that Jim Cramer promotes. See video link / discussion here: https://rezamusic.yolasite.com/wallstreetcorruption.php
Just after the close on Friday, 18 Sep 2020, significant blocks changed hands. Based on conversation I had not long ago, with a large broker who makes markets for VYNE, these blocks are likely transfer of shares from the broker who accumulated the shares, to fulfil client's buy request.
An investor wrote:
As per statistics released by American Academy of Dermatology, "Approximately 50 million people in the U.S. have acne. Out of these 50 million cases, around 15% of the population have moderate-to-severe acne that results in scarring on the skin. Thus the need for acne treatment is increasing at a rapid rate that is further expected to surge the demand for moderate-to-severe acne therapeutics in the country." So, 7.5M potential users for AMZEEQ. If VYNE got just 10% it would be 750,000 @ $400 or total revenue of $300M. What would VYNE share price be worth then? AND the Rosacea market is another $1B in just the U.S. with no very effective treatment on the market. So Zilxi could be another revenue blockbuster. AND the company has about $100M in cash to take these products forward. ALL ABOARD!
VYNE UPDATE 15 SEP 2020 – Update on VYNE; Talk with Analyst
First a couple of admin items I found out:
- The new website had some hiccups, but it's being improved. For example, the PR area had an issue but yesterday's press release was sent today. Other improvements to the new site will come in later iterations, as is usual in the IT world.
- Yesterday, CEO David Domzalski did a very good presentation. In it he mentioned weekly branded new prescriptions (NRx) volume of 62-65k. I expect Amzeeq will capture a good share of that market.
- Latest company presentation: https://189smkzbr9km80q44s7g0q30-wpengine.netdna-ssl.com/wp-content/uploads/2020/09/VYNE_InvestRel_Presentation_091320-MTW.pdf
Yesterday I had a good chat with one of the analysts who covers VYNE. I asked about takeout (buyout) prospects, and also and if an increased sales-force could significantly impact sales. I took away some very interesting things (put in my words).
- Medical derm sales forces in the market VYNE is in aren't that much larger than VYNE's salesforce size, regardless of company size. So effectively, VYNE's sales team is at the level of a larger pharma's. Kudos to our management. The team is led by Matt Wiley -- our great Chief Commercial Officer.
- VYNE could book a significant gross margin, and given the long patent life, Vyne has the potential of making Amzeeq/Zilxi a solid franchise. Of course there could be interest from dermatology consolidators, but it's just as likely that VYNE is a BUYER of assets, not a seller.
VYNE UPDATE 14 SEP 2020 – M&A / $15 Price Target
VYNE Therapeutics Announces the Appointment of Patrick G. LePore to its Board of Directors
There's something eye catching about this PR. Keep in mind the Executive Management are very shrewed. Look at the wording of the press release: Pat has relevant experience in M&A, etc. etc. -- they put M&A first. Was it arbitrary? I don't think so. It's possible that the are interested parties. No firm offer on the table. David Domzalski told me they'd go for a compelling offer. He repeated: compelling. So my guess is, there's been talk -- Goldman Sachs or whomever, saying, look, we got someone who may be interested... you know, talking the talk. After all the manipulation has gotten the stock to this ridiculously low level, and we know in fact that sometimes potential acquirers engage in such manipulation. Dave probably told them, put a compelling offer on the table and we'll talk.
Of course without an offer on the table he can't talk about it. But he knows there's interest out there. And being the super-CEO he is, he doesn't mind getting some competitive bidding happening. Like any good salesman, he rides on the fact that we have a solid business plan and don't need to sell, we don't need to do reverse split, we don't need to act out of any desperation. We have the goods, if you're interested, come to us. We're not coming to you. But it doesn't hurt for the nice lady to send a wink that she may be interested ... LoL ... So M&A comes first on the list. And the press release continues boasting the fact that our new Director, Mr. Patrick G. LePore, has solie M&A background and "Through Mr. LePore’s leadership, Par increased its value and market presence culminating in its sale to affiliates of TPG Capital for approximately $2 billion..."
Cantor Fitzgerald Reiterates $15 Price Target (per the news item below)
$15 would give VYNE a valuation of 2.5 billion. I know it could happen. I've seen it happen to other biotechs in the same shoes. Current value: $260 million. So we're looking at a potential 10 bagger. Let the bidding war start.
Two investor conferences this week
VYNE UPDATE 9 SEP 2020 – Brilliant Start
- Yesterday was the first day of trading of VYNE. The stock shot up 9% since the previous close under MNLO symbol.
- CEO and CFO bought in the open market over $150,000 worth of stock. Open market buys in biotech are not common but the times that I've seen it, the stock later gain several multiples.
- CEO spoke at Nasdaq bell ringing ceremony. Video: https://www.youtube.com/watch?v=chC8Uny6JBs
What to expect next? I think the company will kick DTC into gear at some point, and we should see a nice rise in sales in the months ahead. Launch of Zilxi in Q4. And many more good news hopefully.
David Domzalski, Chief Executive Officer, will present at:
- H.C. Wainwright Annual Global Investment Conference Date:September 14Time:2:30pm Eastern TimeWebcast:https://wsw.com/webcast/hcw7/vyne/1630674
- Cantor Fitzgerald Virtual Global Healthcare Conference (“Fireside Chat” with analyst Louise Chen.) Date:September 16Time:10:00am Eastern TimeWebcast:https://www.webcaster4.com/Webcast/Page/2495/37311
VYNE UPDATE 8 SEP 2020 – Historic Day - Name Change
Today is a historic day for Foamix / Menlo - as the company gets its new name: VYNE Therapeutics. I had a feeling this name change would come, given the state of things as described in previous posts below.
The new website is up and running: https://vynetherapeutics.com/
The stock will trade as VYNE today, and our management will ring the closing NASDAQ bell. I expect a lot more positive news to come out of VYNE. It's actually kind of cool to have the company and the stock symbol to be the same thing.
I will rename this file to VYNE.php so the URL will change to: https://rezamusic.yolasite.com/vyne.php . The old menlo.php will redirect to the new URL.
Here is a nice note I received from an investor:
Just some personal words speaking of my interest in VYNE:
Having been treated with accutane in my teenage years, I foresee a strong demand for Amzeeq. I remember how we were posponing the accutane treatment for a longtime due to the adverse effects. Also, as Amzeeq is beauty related, the potential of very fast growth if it goes viral on social networks. I’ve started a position at today’s very tempting prices, and plan on adding more.
Thanks for the interview in your webpage, plenty of interesting info and thoughts. I also liked your quotes in your philosophy page.
MNLO UPDATE 28 AUG 2020 – Talk with [VYNE's] Menlo's CEO, CFO, CCO
27 Aug 2020 call with Menlo (NASDAQ: MNLO)'s CEO (David Domzalski), CFO (Andrew Saik), CCO (Matt Wiley)
Yesterday I had a one hour call with Menlo Therapeutics' CEO, CFO, CCO. The CEO said they appreciate my communications, insights, recommendations that I've been sending over the course of the past year (directly to management, since some of us investors consider Menlo's IR (commissioned to LifeSci) as non-existent.
Dave is a breath of fresh air compared to many biotech CEOs I've dealt with. Dave has it all: management skills, sales blood, soft skills, subject matter expertise, big mind. Andrew and Matt are also best-in-class :-)
We covered a lot of areas. I had 6 pages of questions. Here's a summary of my impressions. To be clear, I did not receive any insider information, and this is not an investment advice.
My background is not biotech (it's computer science, management, philosophy, music, law), but have been through thick and thin in biotech as an investor and seen first hand, and battled first hand, with the worst of unethical Wall Street, and kicked some ass in the process (e.g., in collaboration with FINRA).
Current headcount is 100. It was 150 post merger. Some cuts due to Covid (not salesforce) mainly in overseas operations (future of small footprint unknown -- new legislation reduced tax benefit). They've migrated from an internal development model to partnerships/outsourcing so can dial-up/down easily (development, clinical trials). Salesforce consists of 65 people -- 51 reps, 6 managers, head of sales, and admin / marketing / managed care. The organization is lean (can probably be leaner).
Cowan issued a nice note (see below) after the latest prescription data titled "Recent Amzeeq Rx Trends Are Gaining Nice Momentum And Are Cause For Optimism". And a price target of $10/share. Current price: $1.43 !!
CEO said they've seen a meaningful inflection in recent week and they're pleased with the progress [although it could have been a lot better if it wasn't for Covid-19].
The company receives weekly IMS data, as well as historical claims data for the entire dermatology space which helps them target with strategic planning, knowing location of patients, predictive modeling, etc.
Revenue per script: it was anticipated that in the first couple of quarters the company would absorb a lot of the script costs. Coverage is increasing, the third and last PBM should be on board in Q4. Revenue per script should increase as coverage increases. In steady state it’ll be a lot higher than last quarter's average. Net price per plan for payer is $200 to $400.
I asked Matt about the post-Covid-outbreak market “healing”. He said it’s going in the right direction. August should seasonally be a strong month. While scripts have grown, the bounce is not as much as it would have been without Covid19 -- but market is coming back in a reasonable way.
Reverse Stock Split: They had 90% shareholder approval and have a year to do it -- and think about it like I do -- that it should be done at a strategic time for maximum benefit. I've changed my mind about this topic in the last weeks -- I used the Arena model, but Arena hadn't just gone through a bloody merger before their reverse split. They're absolutely not under any pressure to do it (they are not desperate or need to do it). It will happen at the right time.Why max RSS ratio 7 and not 10? One of their main goals for the RSS is to get the share price to a level where some major funds can buy the shares. Some of those funds have a $7 min. Some even have a $10 min. If the conversion is too high, it reduces the size of the float too much and that reduces liquidity (my idea: though a fund can bid up the price to get in). The optimum float size is 30 to 40 mil shares.
Capital Raise: CEO alluded that they're not looking to do a capital raise anytime soon. CFO said they have enough cash till end of 2021. And depending on Covid-19 effect, if sales are good, they may never need to do another raise.
Competition: They monitor competition closely and consider it in their planning. They’re seeing what they saw in market research as well – that topical minocycline is very unique and therefore very disruptive (good). They monitor competition. If competition comes in, it creates “noise” in the market (e.g. acne or rosacea), and noise is considered good in the branded market (helps boost demand). Amzeeq has a very good position in the market irrespective of any newcomers.
DTC: DTC makes sense 6 to 9 month after launch so doctors have enough experience with the drug as new patients are coming to them. Covid changed that timeline. They’re turning on various DTC channels in this and next quarter. Search trends on Amzeeq is not a reliable metric because most new patients don’t know about the drug. So DTC terms help patient land on pages that help educate them about Amzeeq, e.g. acne treatment…
Name Change: The sites of Foamix and Menlo are not fully integrated -- hard to interpret but my sense is they're looking at name change. It’s not that expensive. They’re aware of the baggage after the acquisition. They think about it. Of course they couldn’t tell me if they will or not but I think it makes sense that they do it – and am guessing that they will. And I guess they will do it soon (as postlude to the merger). The CFO has been engaged in name changes before with bigger companies. For a smaller company like us it’s a lot easier.
Options: Options market makers do not consult with the company – and the company is suppose to not be involved in that. So they don’t know. I assume there will be options once we get through this transition.
Cash: Core of expenses in Q2 was 30.5M which was a big decrease. The huge burn in Q2 was related to working capital. At end of Q1 there was a huge accrued liability related to trials. We should not see any more quarterly burn rates like last quarter. They have cash till end of next year. If they hit their revenue targets we may never do another raise. Covid makes it hard to predict.
Cost savings: CEO said he sees it the same was as I that there’s always room for belt tightening (best and most profitable companies still do that). Of course you need to spend money when you need to, but he assured me that they’re mindful of operating efficiently, and running a lean organization, with focus on sales activity and launch. They're selective in their pipeline activity (good; I'm happy they don't start P3 for a while).
Board: We talked about the board of directors, my experience with Lazy-Boy(and Girl) board members in other biotechs. Also, executive management seems top heavy for the small pipeline. Encouraged CEO to be disruptive -- the Board needs him -- he's the boss and should call the shots, and cut, even at the very top. I'm totally for rightsizing, including the board.
Open market buys: CEO will convey message that we want to see Board members buy in open market. He said he likes the idea and is looking into it. Of course he's restricted by MNPI (material nonpublic info) constraints.
Stock action: They're not aware of any institution selling out -- they've asked about the stock action and feedback was it's mainly retail selling -- and probably related to automatic transaction (Stop Loss Orders) [where a market participant who sees a SL-order manipulates the price down to make the shareholder lose the shares at that manipulated low price -- a practice that can be unlawful -- in fact, I'm planning to make a report to my FINRA contacts to investigate it].
Institutions: They've had discussions with large institutional investors, and the feedback is supportive. Institutions have told them, continue to execute and it will work out. Those institutions know what they're talking about :-)
Roadshow: We didn't specifically talk about that but I guess that there may be a road show to present the company to more institutions. Again, purely my guess: I think they will do a name change -- a reverse split -- launch in Q4 as they've said before -- and then it makes sense to get out there and promote the new company :-)
Trust: I shared my experience in this field: Don't trust anybody on Wall Street -- and I know this from very high levels, that surprise is their enemy, and everything you say you will do and won't do can be used against you. So confidentiality is key. And of course, under-promise, over-deliver. And integrity and truthfulness is most important (which they have). Wall Street, as dishonest as it is, punishes management it cannot trust. Also it's documented that some big pharmas which want to buy a small company have engaged in manipulating the stock down. I am happy Dave grasps all these.
Partnership: Cutia partnership: how did they find you? Cutia came to us via their parent organization. They found us. That's awesome :-) -- Dave was only interested if there was a good up front payment. Forget these deals with promises for later. Cash is king now (my words). Very low risk transaction. Small market. Nice up front payment. They will commercialize in China etc. in the future.
EU, CH: They have had and continue to have discussions. The deal just has to make sense. They won't go alone (of course). Main focus in US. But license partner in Ex-US makes sense.
Alliance Management: Is part of the legal group. Not a dedicated person. Makes sense. They are small co, and wear many hats.
Fair Value: What price would you consider for a buyout? This triggered an interesting discussion with Andrew talking about his model for calculating fair value based on peak revenue expectation, but of course, they wouldn't give me a number. But I did some calculations myself -- if you take a couple of drugs at a couple of hundred million peak sale each, you get a very nice valuation that makes analyst estimates very conservative.
Buyout: They're open to consider any compelling offer. They're not out shopping the company. They're focused on building the company. I have a sense that a buyer will step up with a compelling offer. I bluntly asked if there's been any interest. That put them into a limbo and a laughing session ensued (we joked around). Of course I knew they couldn't answer. One commented that they're usually asked that in face-to-face meetings. I said I can read minds even on the phone ;-) -- and the CEO remarked that he likes my style :-)
Leo Pharma: Rumor is they may be a buyer. My sense is that Leo has a lot on their hand and I don't think they're not The one (just my guess). They have a good relationship.
Gave them some feedback on some things, e.g., company presentation, e.g. dominance of while old men with beard that's not our patient space ... anyway I think / hope they will revamp company's IR / PR... and other topics.
IR: We discussed IR at length. They're aware of the concerns and looking at it... I think dedication is very important -- even if it's an internal person who is 30% dedicated to it. Current model with LifeSci seems very expensive and ineffective. Zeno works project based.
Overall, I sensed a lot of confidence in them.
Menlo Therapeutics (NASDAQ: MNLO)
Price Target: $10.00
Recent Amzeeq Rx Trends Are Gaining Nice Momentum And Are Cause For Optimism
The Cowen Insight
The Amzeeq launch was solid up until the pandemic-driven office closures. However, recent Rx trends show a nice recovery/inflection, and with the broadening payor coverage, it does appear that Amzeeq is back on track. With Amzeeq setting a nice foundation, Zilxi for rosacea (Q4 launch) should further leverage. We continue to believe combined Amzeeq/Zilxi sales could eventually exceed $500MM+.
Although the pandemic has had an obvious impact on what was, by any objective measure, a solid initial Amzeeq launch, we believe management now has this critical franchise back on track. Notably, Amzeeq prescriptions are inflecting, with the most recent weekly figures (via both IQVIA and Symphony) showing levels that exceed the pre-pandemic highs, and nicely ahead of our expectations.For perspective, utilizing the most recent weekly total Rx figures and a normalized pricing of roughly $200-250 per Rx would suggest an annualized run-rate of $30-35MM, which is an encouraging recovery post the most onerous part of the pandemic. And with most target physician practices now open (90%+), we believe this Amzeeq momentum should continue, and will soon be leveraged by the Zilxi Q4 launch.
Amzeeq Prescription Trajectory
Recall, Amzeeq launched in January, and despite the pandemic setback, management has already secured roughly 65% commercial lives and should reach 80% by Q4. We believe this underscores Menlo's pragmatic pricing strategy for Amzeeq that should allow for broad coverage to capture of meaningful volumes while still maintaining a healthy $200-250 prescription value (note, management continues to indicate that value per Rx should trend in the $200-400 range although we are using the lower end for conservatism). Our conversations with other dermatology industry participants indicate that they believe this volume-based pricing strategy that will allow for broad coverage makes complete sense given the size of the potential market, and should allow for constructive payor negotiations for Zilxi. And lastly, it does appear that the number of unique prescribers has continued to grow despite the pandemic (to 4,200), another very positive metric this early in its launch.
MNLO UPDATE 26 AUG 2020 --Biotech Investing
An investor wrote me:
"I understand and love the product, just that for bio investments I’m fairly new so I hope to hear more from you."
I happen to have a lot of biotech investment and investment research experience. But I am not a financial analyst or banker etc., so everyrthing I tell you are my opinions, they're not financial professional opinions, and are not investment advice.
Biotech companies are in several key categories from an investment perspective. MNLO is in a special situation that's not glamorous and glittery predsently but I expect it will make a lot of money for me.
Soon it will have multiple products in the market and in that sense it's derisked. It's not doing major risky trials. On P3 coming up which I view as low risk due to the strong P2 data. But focus here is revenue and partnerships or buyout. Not many sellers, and big buyers work with market makers who don't want to run the bid up. So some park the stock and manipulate it. A lot of shares will change hands from retail to institutions and based on my experience this often happens at the lowest possible price. Retail gets taken out at minimum price because it's easy to manipulate emotions of retail. You set up the stock to look like it's doom and gloom, and send some people to trash talk the stock on message boards, and eventually you get a lot of shares sold at rock bottom price.
So I believe that's where we're at. It's a contained, controlled quiet before the storm. I expect a partnership or buyout news, and increasing sales number to change this picture radically.
Just my opinions.
MNLO UPDATE 25 AUG 2020 --Commentary
Why is the Reverse Stock Split taking time? I speculate:
Imagine if you had a big news item pending: an anticipated EU or RoW partnership for example, and a launch in 3 weeks, or other things. Would you do the Reverse Stock Split now or combine it with one or more or all these events. What if you also wanted to change the company name and stock symbol. Same applies. So I think there's a reason RSS is not announced yet.
I scanned a message board. Some very intelligent things posted (all are opinions of their authors and not an investment advice):
- My brother has been using Amzeeq for several weeks now. Dermatologist with decades of experience recommended it. He is very pleased with the results, says he now has smooth skin but still a few red dots, but overall very happy. I just saw him and he looks good. Long and Strong.
- “Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.” Warren Buffet. That's Menlo.
- Waiting game for this. putting away negative emotions and bit by bit accumulation of cheap shares. 20Q4 is around the corner.
- Does this company have a marketing staff? A communications staff? An Investor Relations staff? How can any management team operating in the year 2020 be so limited in communications strategies? I feel like if they hired a good Communications VP the company and stock would be jump started. [Another person: They haven't responded to my questions.] [I also think Menlo's Investor Relations is weak].
- Investors should consider Almirall said it estimated peak Seysara sales at between $150MM & $200MM/year just in the United States. We noted MNLO's AMZEEQ was, more or less, trending to match Seysara's launch in Q12019 before COVID-19. If Almirall (who also sells Aczone) believes Seysara peak sales are $150MM to $200MM just in the US (and Almirall is, without a doubt, an expert in acne) & most believe AMZEEQ is more or less comparable to Seysara then it appears reasonable to conclude peak AMZEEQ sales (worldwide) could also be north of $200MM/year. If, again if, new therapies like AMZEEQ are worth 2 to 5 times estimated peak sales and if, again if, AMZEEQ peak sales are roughly $200MM then it is additional confirmation that MNLO with an enterprise valuation of less than $200MM at $1.60/share is materially undervalued. Our analysis also concludes MNLO management must consider a sale if doing so maximizes shareholder value versus going it alone.
- Anyone that post bearish on this board dont even know anything about this company. If there are facts being presented on why to be bearish then I prefer to see that. Here are some facts about this company that Y’all should know: - 1 product approved and being market since 1qt 2020 - 2nd product approved and will be market on 4th qt of 2020 - 3rd product finish phase 2 with top line results - they got over 100 million on cash - institution increase position since 1qt
- Company is very undervalued and will soon see the price appreciate by time.
- It is quite unfortunate that Amzeeq launch coincided with the Covid19. the entire country and world literally shut down. They said doctor inpatient visits dropped to 23/week for dermatologist from 160!! In July however the trend has started to reverse and hopefully picking back up now. Zilski will launch Q4!! Both are projected in the 200-400M range each peak sales!!! With yet another product going into Ph3!! All of this points to a fabulous buying opportunity here!!!
- Catalyst in October to November 1. Launch of zilxi 2. News of initial insurance coverage of zilxi 3. Completion of 3rd payer contract for amzeeq which would give them a better gross to net 4. Earnings 5. Vaccine news from morsel and pfizer
- Have 32 stocks on my ThinkorSwim streaming watch list. Almost all of them are small biotechs. 29 of those stocks are down today even though the indexes are up. MNLO is down about 2.5% while many of the others are down between 4% and 9%. So this seems to be more of a category hit rather than this particular stock. If by the end of the year MNLO is $5, it won't have mattered today if it was $1.55 or $1.80.
- Once a product is approved it can take many months to create a marketing program, packaging, contacting and educating physicians and having enough out on the market to get sufficient testimonials. That's why it is not unusual and even normal for stocks like this to be in a downturn while these things happen. Even more so with a pandemic going on. But if the company has a good product in a good market, very suddenly this situation can turn around and when the gains come they can be very fast an AMAZINGLY HUGE.
- Holding my shares. Products are real. At some point this should move to $5. Might be six months--but, returns to good to pass up.
MNLO UPDATE 19 AUG 2020 --Next Steps
Over 50% of Menlo (MNLO) shares are now owned by institutions.
What's next for MNLO? In my opinion (not an investment advice):
1) Reverse stock split any day at 1 for 7 ratio. Might be combined with company name, stock symbol change.
2) Partnership or buyout:
- European / RoW partnership
- EMEA, Swissmedic filing
- Both above items might not happen if in buyout talks, which also explains the stock weakness since we know potential aqcuirers sometimes manipulate the stock (it's documented to have happened to other companies).
3) Launch of new drug Zilxi in less than a month; same sales force; mostly same target doctors; low overhead; increased revenue. Insurance coverage for Zilxi already in place and to increase.
4) Excellent reviews about Amzeeq. Increased sales trend should continue.
5) With RSS and increasing sales and new launch institutions will want to increase their ownership.
Lawsuit settlement approved by court a few days ago. Case closed.
I see bright future for MNLO lest macro risks.
Huwan hasn't had a Corona case for weeks. Let's hope that translates to US & RoW.
MNLO UPDATE 13 AUG 2020 -- Email to management
Arena's was a very successful reverse split. They did it immediately after shareholder approval. Stock has over tripled since then.
I don't know why you didn't go for 1-for-10 ratio. I trust Andrew's financial acumen but seem the higher the price the better.
Perhaps you're combining it with a name change etc. - or hopefully a EU filing and/or partnership (or RoW). The stock is very easy to manipulate, including by your friends (our underwriters).
Reminder: play your cards very close to your chest. In Persian they say "the wall has mice and mice has ears". And that info is used against the stock. And reiterate this top secrecy message to your staff -- it has to be a part of the company culture -- people tend to forget that.
Also, reduce your exposure to RF-EMF (wifi, cell, etc. -- go wired internet). It damages the DNA.
More power to you.
MNLO UPDATE 6 AUG 2020-- Key Takeaways & Commentary: Menlo (MNLO) Conference Call 6 Aug 2020 – by Reza Ganjavi
Completed merger. Now Menlo/Foamix is a US based company. Signed partnership for China+. 2 products approved by FDA in < 9 months.
Management is laser focused on shareholder value. They have a solid plan. [I like and trust them – they’re one of the best biotech management teams I’ve ever known. CEO, CCO, CFO are all top notch.]
1 full hour. Many analysts called in. Several analysts congratulated Menlo on the progress.
Amzeeq – Covid19 hurt the market as expected. 90% of dermatology offices are open. Despite limited openings 75% of the reps’ meeting with doctors were face to face (now even higher %). Sample velocity was slow in April and May due to shutdowns but has been recovering in recent weeks. 22169 TRx in Q2. 7.3% growth since Q1 despite Covid blues.
Last week we distributed more samples to offices than any week we have since launch – it was an astonishing number (same level as initial stocking of physician offices in January). Throughput is increasing (samples moving out of the doctor offices). More new offices opening up. More unique weekly prescribers. Market is healing in a very positive direction.
In recent weeks we’ve see very strong recovery in TRx, up 85% from March. Unique prescribers continue to grow -- 4200 new doctors in Q2.
60 speaker programs in Q2 educating over 600 doctors [great!].
Insurance: 63% of commercial lives covered. Negotiation with one PBM ongoing. By Q4, 80% of commercial lives should be covered. $200-$400/scrip.
Week of July 24, we have over 2400 prescriptions. Seeing the recovery we expected. NRx dropped 30% from March to April because of Covid19. The market has not recovered back to February level yet (due to Covid19). The market is healing nicely, but hasn’t completely. We expect it to come back. Patients haven’t gone away. They still need Ameeq. Throughput is healing across the country.
Positive patient testimonials [and online]. Patients are switching to Amzeeq nicely. We’re creating our own lane in acne space. Reality of launch is matching the market research that was done prior to it.
We’re seeing nice reopenings in this space and recent scrip numbers which are just about the pre-Covid-level, and nice weekly increases [fingers crossed the trend continues].
Zilxi for inflammatory lesions of rosacea in adults – first approved minocycline for rosacea – should receive broad market acceptance – launching Q4 – excellent data from trials on over 1500 people, and market research show that patients really like the clean safety profile / tolerability of Zilxi vs. other treatments that irritate them (high discontinuation rate).
Zilxi will be launched mid-September! Salesforce getting ready. High overlap with Acne market (87% - need to reach out to 500 more doctors – existing reps can do]. No need to hire more sales reps. 98% of doctors surveyed intend to prescribe Zilxi! Huge unmet need. Efficacy, clean profile, long-term impact.
Insurance coverage negotiation ongoing – same path as Amzeeq which was effective. [expected 80+% of commercial lives to be covered – at $200 to $400/scrip].
Market is ready. High unmet need. Even more ready because masks exacerbate rosacea symptoms, and acne patients too.
FCD105 positive P2 data (over 470 patients). Best in class potential. Q4 meeting with FDA / and to make plans for P3 (to start 2021H1).
Cash balance over $100 million as of 30 June 2020. No need to raise funds till end of 2021. [with sales traction, partnership deals, credit availability, there’s a chance the company will never dilute again].
Extended credit agreement for 6 months due to Covid. [RG’S COMMENTS:]
I believe this refers to access to non-dilutive credit financing they could obtain once sales reach certain threshold – this is a good thing. Reminds me of AVNR which used debt financing instead of diluting while it was in similar price range at MNLO ($2 range) and had launched Nuedexta – it was bought by Otsuka for $3.5B ($17/share) after it traded for a long time in the $2 share, manipulated by Martin Shkreli, etc. (off topic drama).
When in the 2’s the company was worth around $400M – it did a very good job of self-launching Nuedexta – and did all the things Menlo is also doing (speaker series etc.), and it was bought got $3.5 billion. In MNLO terms that’s around $22 / share. Avanir’s job was harder than Menlo, since Pseudobulbar Affect market was totally raw and AVNR had to develop it from scratch. Acne and Rosacea are ripe markets. Menlo should do even better than Avanir and get taken over for several billion dollars.
Shareholders approved. With Board approval, management can do it. [I think/hope they will, soon – reminds me of ARNA’s RSS which was a big success, stock has more than tripled since then].
Excellent call overall.
PS -- INVESTOR RELATIONS
Lifesci continues to show it's spread too thin and is reactive. Our rep did not know on Monday that the company's shareholder meeting is on that day! And she thought it was a virtual meeting. People can make mistakes but I've heard from others too that LifeSci is not proactive enough because each rep has a ton of companies to "support", and LifeSci gets something like $150,000 a year for that !! Holy Macaroni! They can hire an internet person for less than that na have a dedicated, profesional IR that does many things LifeSci is not doing.
MNLO UPDATE 5 AUG 2020
Reverse Stock Split (RSS) Approved ... RSS should happen this week.
Menlo's shareholders overwhelmingly approved management's proposal to do a reverse split. The ratio will be determined by management. I believe they will go for the highest (1 for 7 shares. If so, if you own 1400 shares you will get 200 shares; if you own 1,400,000 shares you get 200,000 shares; and the share price, will go up 7 times -- so if by then it closes at $2. It will go to $14.
It's much harder to manipulate a $14 stock than a $2 stock -- that, I believe is one reason behind the RSS. Other reasons include the fact that some large institutions are not allowed to buy stocks cheaper than a certain level. This I know as a fact.
Reminds me of ARNA's RSS not long ago. The stock went to around $18 from ~$1.80. Now it's over $63, up 3.5 times. I believe similar positive move awaits MNLO.
ARNA's RSS happened within the same week of approval by shareholders. I think 2 days after the vote the ration was announced and 2 days later the stock traded at the adjusted price (10 times higher in ARNA's case).
If I had to guess, I'd say the company might change name and ticker along with the RSS. I also expect news about EU partnership and/or RoW, ex-US, and ex-China which is already inked.
I feel very confident about MNLO. Doctor and patient adoption of Amzeeq is excellent, and I'm very fond of the company's management.
PS -- my biotech investment guru, Dr. Joseph wrote today the reverse split "should boost the price."
PPS -- Dr. Joseph bought some MNLO today "for the expected RS boost".
MNLO UPDATE 29 JUL 2020
Letter to/about Mr. Joseph Edelman
Billionaire hedgefund manager / biotech analyst Joseph Edelman upped his already large stake in MNLO by another $5,000,000. I researched his background -- very interesting man indeed. Wrote him a letter that can be found at this link (click here). https://emfcrisis.yolasite.com/edelman.php
Excellent New Article
In summary, the author argues that MNLO is deeply undervalued.
- MNLO's enterprise valuation at $1.70/share is <$200MM (after assuming a $25MM Q22020 cash burn). This is less than 80% of MNLO's estimated peak annual sales of $250MM-$300MM/year.
- MNLO's CEO recently said a 2 product <$300MM/peak revenue dermatology company is "sub-scale" & hence subject to consolidation. MNLO's 3rd product then failed suggesting MNLO should now be sold.
- After raising $50MM+ in June 2020 (roughly equal to 2 quarters of operating expenses), our analysis concludes the risk of material MNLO dilution over the next 12 months is low.
- In June 2020 MNLO reported positive Phase 2 top-line data for a 3rd product further making timing ideal to sell MNLO (so a buyer can design the Phase 3 trial).
- Our net analysis concludes MNLO shareholder value is maximized via sale to large dermatology company. MNLO shareholders should get $5.00 to $6.50 per share in such a sale.
MNLO UPDATE 16 JUL 2020
Manipulation ahead of reverse stock split (RSS)
Reverse Split is a very good move for MNLO, but it's being portrayed as a very bad move, by short sellers, because they're worried about its positive impact on the stock. There's a systematic pressure of MNLO's price by entities that are short or are bottom fishing, because shorts are worried about the reverse split.
A RSS will be very bad for shorts for a number of reasons I've explained before. So they're shorting more, pressuring and manipulating the stock (e.g. fake offers), in order to make it look like the Reverse Split is a bad move. And they're posting bogus info that tries to manipulate others to not vote in favor of the reverse split. It's a dirty dishonest game they're playing. I've seen this game before, including with a company whose stock more than tripled after a reverse split. I assume management has the votes already, if not, they should lobby to get the votes. I've seen other bios do that ahead of a key vote.
An additional possibility for manipulation is by potential acquirers. We know as a matter of fact, that in the past some big pharmas interested in acquiring a small company have had brokers manipulate the shares down -- it's illegal but we know it's done (via credible evidence).
So MNLO could be getting hit from these multiple directions but in my opinion it'll all turn out fine and the stock should rebound strongly. The first camp (shorts) usually lose in a situation where the company has excellent approved drugs -- so after RSS I expect the stock price to rebound strongly -- not overnight -- but as more institutional investors come on board. This requires, proactive, active, strong IR, which MNLO doesn't have now -- they use LifeSci, some good people, but spread too thin, and reactive.
And if there is manipulation by an prospective acquirer, that has a positive undertone (interest). Key is trust in management. Anyone who doesn't trust the management should sell. I trust the management. So I'll stay invested.
The wild-card is of course Corona. I'm not happy with all the irresponsible promotion of recklessness, esp. by the Incompetent, Liar-in-Chief, Donald Trump. If people are careful we can tame this pandemic.Coroan is a super virus which I believe is human engineered. And add to it the prevelence of RF-EMF pollution (5G, 4G, WiFi. Bluetooth, Smart Meters, etc.), humanity's immune system is weaker than ever.
But I'm cautiously optimistic Corona will get managed (esp. after Trump's defeat), and stocks will do well.
MNLO UPDATE 6 JUL 2020
A friend asked for my opinion since MNLO has been dropping. Based on years of experience with biotechs, MNLO's drop is not even an event in my opinion -- a non-event. I wrote to him: I don't care I didn't sell at 2.30- I'm not selling at 1.63. Been through these roller coasters too many times with too many stocks, to worry, and I am very confident about Menlo.
Reverse Split should follow ARNA's path (300+% gain)
ARNA was heavily manipulated before the Reverse Stock Spit (RSS). Same story as MNLO. Lot of negativity posted to deter people from the stock while some entities quietly accumulated. After the RSS the stock tripled. Dr. Joe wrote me today that he observes a smiliar pattern in the intra-day chart of MNLO:
Notice in the current day's trading graph of MNLO the unusual geometric trading patterns. This was last seen with ARNA when the price was being driven down prior to their reverse split. I don't know if this is the connection here but certainly it appears that a robot is in charge of the price movements.
(Blue "S" depicts Reverse Split)
Someone wrote about the potential:
As per statistics released by American Academy of Dermatology, approximately 50 million people in the U.S. have acne. Out of these 50 million cases, around 15% population have moderate-to-severe acne that results in scarring on the skin. Thus the need for acne treatment is increasing at a rapid rate that is further expected to surge the demand for moderate-to-severe acne therapeutics in the country."
So, 7.5M potential users for AMZEEQ. If MNLO got just 10% it would be 750,000 @ $485 or total revenue of $365M . What would MNLO share price be worth then? AND the Rosacea market is another
$1B in just the U.S. with no very effective treatment on the market. So Zilxi could be another revenue blockbuster. AND the company has about $130M in cash to take these products forward. ALL ABOARD!
LEO PHARMA BUYOUT OF MNLO? Someone wrote:
Seems like Leo Pharma owns no acne drug also nothing in their pipeline against acne. They want to be a dermatology leader and grow their US business. Is there a better way than acquiring Menlo? They will get 2 products and a potential third one and the technology of Foamix to make even more. They will also save some money because after acquiring Menlo they will never have to pay royalties for Finacea Foam again. Their headquarters in USA are just 30 mins from each other. And just recently a lot of sales people switched from Leo to Menlo/Foamix. Maybe they already know more than we know.
MNLO UPDATE -- Reverse Split / Price Target
Price Target. I got a question about 3-5 year price target.
As you know analysts go max 12 months. I haven't thought about 3-5 years but I'm with Cantor on their $15 target. I think MNLO will not exist 3-5 years from now -- it'll be a division of Johnson & Johnson or so -- so we have to predict buyout price. I'd say $20.
"This is not about whether or not there is a reverse merger, or even what the share price is going to be in 30 or 60 days. Here's what it is about: "As per statistics released by American Academy of Dermatology, approximately 50 million people in the U.S. have acne. Out of these 50 million cases, around 15% population have moderate-to-severe acne that results in scarring on the skin. Thus the need for acne treatment is increasing at a rapid rate that is further expected to surge the demand for moderate-to-severe acne therapeutics in the country." So, 7.5M potential users for AMZEEQ. If MNLO got just 10% it would be 750,000 @ $485 or total revenue of $365M . What would MNLO share price be worth then. AND the Rosacea market is another $1B in just the U.S. with no very effective treatment on the market. So Zilxi could be another revenue blockbuster. AND the company has about $130M in cash to take these products forward. ALL ABOARD!"
Reverse Stock Split (RSS)
Reverse split will be very beneficial for MNLO stock. They're not doing it to stay listed. I think they'll do it to be eligible for investment by big funds; to lower size of float; to weed out penny flippers; etc. I am looking forward to it. 7 to 1 at today's price makes the stock $16.30. And Cantor's $15 will be $105. My buyout target price will be $140, and if scrips get real traction and Corona gets out of the way, and successful launched into Rosacea market in Q4, that target price can be a lot higher. IMHO.
MNLO UPDATE 20 JUN 2020
Stock's Action/ Info From MNLO Market Maker
Large trades at the close / AH are mostly market maker which is transferring the shares it bought to the client. One of Menlo's market makers I talked to said the offering was multiple times over subscribed. He also explained when someone wants to buy a lot of shares they can manage it. He said they buy little by little at right times, and sell it to the customer. He said the transfer to the customer comes at the close / end of the day. So I think that's what these blocks are. And it's bullish. Another thing going for MNLO retail longs is the low institutional interest which means our shares are wanted by institutions. They know the tricks to take shares out of retail hands. I'm holding tight to my shares, in a CASH ACCOUNT.
ANSWER TO QUESTION SOMEONE ASKED:
Over subscribed means there was more demand for number of shares than there were shares available for sale. He told me the entire enchilada plus the green shoe was filled instantly. He explained it as something like an over the wall. I have to find my notes. Which means basically they had all the investors lined up, and when it kicked in, they handed the shares over the wall. It wasn't a process where they had to wait for more investors to come in to fill the demand. And there was far more demand than supply.
I asked about quality of investors. He implied because there was a big demand they could be choosy, and picked the top quality investors (like Perceptive).
Also I should add about the price, that sometimes in after-hours you see a price that's below the close price, with a big lot. I believe that is an average price where the big order is handed to the client. He said they used to mark it up but now they just charge commission -- which I think is around 3000 bucks for 100,000 shares at that brokerage. Big institutions don't get this zero commission stuff we pay at the retail brokers. They pay commission because to fill big orders the broker has to work had (I guess sometimes manipulating the investor psychology to get the best price -- but perhaps that's done by more dodgy places. than the respectable firms that ran our books. I can imagine a sleazy hedge fun employing bots, fake big bids and offers, and other tactics they know work on retail investors to create greed or fear (depending which side they are in), to work it in their favor.
And they're patient. A relationship manager at Credit Suisse in Monte Carlo, where they had many ultra high net worth individuals (UHNWI) told me when they want to buy or sell, they're always patient, and do it little by little to prevent the price from running up or down. I think that's what's happening with MNLO : accumulation of big number of shares by big parties. Little by little. But if other buys step in, sometimes it gets out of hand, and they compete for the same offers, and it becomes apparent, and one bids it up, and meanwhile anybody foolish enough to be short panics, and it gets out of hand for prospective buyers and they have to buy at much higher price. I totally see this happening with Menlo in the weeks/ months ahead, pushing the stock to over $4 if Corona, and other macro factors don't hurt us. And that's without catalysts.
Add to it potential catalysts like EMA /Swissmedic filing, partnerships, buyout, etc. etc., and this baby could rocket up closer to average analyst target, over $5 or Cantor's $15 target.
I was an investor in AVNR which was manipulated like hell by scums like Martin Shkreli (with whom I had direct contact and called out his lies, deception...). That $2.xx stock was bought out for $17.xx per share not long later by a Japanese Pharma -- a 7 bagger for the investor who was willing to wait another year. Will MNLO be a 7 bagger? It's possible. 6 bagger puts us at Cantor's recent reiteration of $15 target. IMHO. I'm not giving investment advice. Just sharing my ideas / research.
PS -- I like this price projection chart someone posted:
MNLO UPDATE 12 JUN 2020
Letter to some analysts, etc.
Menlo "MNLO" (ex-Foamix) has had a number of key news in last days. A brief note on each, FYI:
- Second FDA Approval - Zilxi was approved (topical minocycline for rosacea) -- big under-served market; utilizing same sales force, same prescribers, as Amzeeq. Launch in Q4.
- Positive Phase 2 data for FCD105 - moving to phase 3.
- Good prescription numbers - Amzeeq sales are strong, scrip trends is very positive.
- Secondary - based on feedback I received the secondary was multiple times over-subscribed, and went to top quality investors. It was a wall-over deal that instantly filled.
- Analyst upgrades - several analysts have issued upgrades/notes following FDA approval. E.g.:
- Cantor Fitzgerald analyst Louise Chen said she views the approval positively and believes it sets up the company for a potential "successful" launch of its second FDA approved product in the fourth quarter of this year. Chen, who continues to believe that the peak sales potential for Menlo's products and pipeline are being "underappreciated," keeps an Overweight rating and $15 price target on the shares.
- Menlo price target raised to $3.50 from $2.50 at H.C. Wainwright H.C. Wainwright analyst Oren Livnat raised the firm's price target on Menlo Therapeutics to $3.50 from $2.50 and keeps a Buy rating on the shares. The analyst increased estimates for the company with Amzeeq volume already up 50% over the last four weeks as shutdowns start to lift. Amzeeq is bouncing back from COVID-19 faster than the analyst expected.
- Menlo price target raised to $6 from $3.50 at Northland Northland analyst Tim Chiang raised the firm's price target on Menlo Therapeutics to $6 from $3.50 and keeps an Outperform rating on the shares. The analyst believes Amzeeq and Zilxi will lead to "meaningful revenue growth" for the company. The recent approval of ZIlxi (adds a complementary product to Menlo's dermatology arsenal, Chiang tells investors in a research note.
A couple of guesses (see discussion on these here: https://rezamusic.yolasite.com/mnlo.php
- sings indicate the company may change name, or get bought out.
- Menlo will probably do a Reverse Split (which will be good for the company.
- Menlo is a ripe takeover target. My best guess is Leo Pharma right now -- or Johnson&Johnson.
This is a good overview article (8 June) https://seekingalpha.com/article/4352625-menlo-therapeutics-strong-amzeeq-launch-recent-zilxi-approval-and-positive-fcd105-results
Réza Ganjavi, MBA
MNLO / FOMX / ARNA UPDATE 10 JUN 2020
Notes on Reverse Split & secondary.
Menlo (MNLO), in their latest filing mentioned possibility of Reverse Stock Split (RSS). Here's my 2 cents on the topic based on experience:
Reverse splits are usually bad if the company does it to stay listed. That's not the case here. Our fundamentals are strong. I think RSS will be very good for MNLO. Smaller float. Higher stock price. Those institutions who don't buy stock under $5 will be able to buy. The stock is taken more seriously (I know some veteran investors who don't consider such low priced stocks).
Also it weeds out penny flippers who like low priced stocks and riding it up and down is easy with small capital. Doing so with a stock that's 10 times the price is much harder for them.
Most Stock Splits are not successful because most of them are used for companies under $1 to stay listed. When a stock goes that low, it usually means trouble, and RSS will not fix troubles.
But in other cases, RSS can be very successful. One example is ARNA which did one when it was around $1.50 and it became a $15 stock. Now it's in the $60 range.
Another similarity I see between ARNA and MNLO is that ARNA did a secondary recently at around $50. Soon after the stock was over $60 because of demand.
MNLO just did a secondary (to close today) at 1.85. We know the demand was very strong (as per the book runners), and that makes sense given the prospects for the company and the ridiculously low stock price. So I anticipate MNLO will do well post secondary and go much higher. Right now it's suffering from uncertainty about how many of people in the secondary are going to sell for 10-20 cent profit. I think not many, since the bankers / company selected top quality investors, as per one person in the know I spoke with.
As always do your own research.
MNLO / FOMX UPDATE 9 JUN 2020
Hi Folks. Menlo has had 3 major events. I wrote a bunch of notes that I didn't have time to share. So here they are, below.
STRONG DEMAND FOR SHARES
First, Hot Info (based on my own research / talks with investment bankers / market makers in the know):
The shares in the offering got grabbed like hotcake. Institutions "multiple times over subscribed, including the green shoe" -- lot of potential buyers didn't get shares (so they're potential buyers in open market). As result of such a strong demand the book runners selected the top tier investors who buy and hold a stock, and not suckers who are in for a quick short-term profit.
Obviously a bunch of institutions share my belief that MNLO is grossly undervalued. The stock is now at the per-offering price.
I recommended to management to do a reverse split. I hope it happens soon. It will put the stock on the radar of big boys/girls who don't touch low priced stocks. It'll also weed out the small traders.
Note the kind of secondary that was done: it was pitched to select group of investors who signed NDAs, it was prices, and overnight (over)subscribed... So in reality it's not "public" per se, but it is considered public -- it was a "Wall Cross" transaction.
Also note, Cantor was not a book runner, therefore, Dr. Chen's $15 target is not dithered by C.o.I.
GOOD PHASE 2 DATA
Menlo released phase 2 data for its combo therapy (for acute acne which is expected to become the de facto standard of care), ahead of schedule, and the results were good.
GOT ANOTHER FDA APPROVAL
Menlo received approval for its rosacea drug Zilxi. I consider Menlo a low risk investment for me, in a high risk / high return sector. I view it as low risk with high reward.
Menlo set up for 'successful' Q4 launch of Zilxi, says Cantor Fitzgerald After Menlo Therapeutics announced that Zilxi has received FDA approval for the treatment of inflammatory lesions of rosacea, Cantor Fitzgerald analyst Louise Chen said she views the approval positively and believes it sets up the company for a potential "successful" launch of its second FDA approved product in the fourth quarter of this year. Chen, who continues to believe that the peak sales potential for Menlo's products and pipeline are being "underappreciated," keeps an Overweight rating and $15 price target on the shares.
Menlo Therapeutics price target raised to $3.50 from $2.50 at H.C. Wainwright H.C. Wainwright analyst Oren Livnat raised the firm's price target on Menlo Therapeutics to $3.50 from $2.50 and keeps a Buy rating on the shares. The analyst increased estimates for the company with Amzeeq volume already up 50% over the last four weeks as shutdowns start to lift. Amzeeq is bouncing back from COVID-19 faster than the analyst expected.
Menlo Therapeutics price target raised to $6 from $3.50 at Northland Northland analyst Tim Chiang raised the firm's price target on Menlo Therapeutics to $6 from $3.50 and keeps an Outperform rating on the shares. The analyst believes Amzeeq and Zilxi will lead to "meaningful revenue growth" for the company. The recent approval of ZIlxi (adds a complementary product to Menlo's dermatology arsenal, Chiang tells investors in a research note.
Menlo is settling a lawsuit from 2018 (way before merger with Foamix). We inherited that mess from the old Menlo. But it looks good and will be settled upon judge approval in upcoming hearing. I think their insurance company will cover about half of the settlement amount (seen this in past companies but it could be different). So it's not significant.
NOTES FROM A FEW DAYS AGO
I had a 2 hour talk with one of my key investment buddies and activist investor. We've been through a lot together -- surviving / fighting years of incompetent Arena's ex-CEO, etc., and thank goodness we've done well. He bought FOMX / MNLO and has had a $200,000 gain so he was thankful to me and I to Dr. Joe who turned me onto MNLO (FOMX) -- he currently owns MNLO as well.
MNLO hit another homerun on Friday. News of approval of FMX103 (Zilxi) came mid-day because FDA posted it on their website then, so the company was obliged to issue the press release during the market hours.
It was a crazy day. Even before the announcement the volume was crazy high. MNLO traded 8 times normal volume, and some big blocks went through including a 1.5 million share block that sent the shares to the high of the day (2.88). The volume really picked up around 10:15 when shares went from 2.50 to 2.88, before the PR. I don't know what exact time the FDA announced the approval.
There were a lot of momentum players in the stock as is customary before any PDUFA, and especially more for low priced stocks which makes any Joe Blow qualified to pick up a few shares for a quick trade. I learned a long time ago not to do that because when everybody expects a certain movement in the stock, it usually doesn't happen. Same same here: news came and the stock retreated because the momentum players exited. Had absolutely nothing to do with the PR or its impact on Menlo. The PR was very positive.
Now Menlo has 2 approved products, low overhead, a phase-2 data set due by end of this month (and Dr. Joe thinks it will be positive), other sources of income, etc., and other catalysts I listed in my last message.
Insurance coverage for Amzeeq is really impressive, and Zilxi should get good insurance coverage as well.
I expect all the analysts who cover the stock to come out with statements soon and upgrade their estimates.
I expect institutional interest will significantly rise beyond the current 26%.
I don't expect it, and hope that the company will not do a secondary at this stage.
So I expect a lot of manipulation going forward, in trying to shake out the shares from Retail hands, into institutional hands. I also expect short covering. That's a double boost to the demand channel, and reduction of supply channel, which naturally means higher price.
The key risks, in my opinion are macro. Will Trump start a war? Will there be a Corona second wave?
We talked about this at length -- I also asked a few other friends who are in life sciences. My conclusion is, I'm not so worried about a second wave of Corona. Perhaps I'm too optimistic. In my person life, I DO follow social distancing, and think not doing so is unwise. But I have hippy friends who think it's all a conspiracy to whatever by whomever! No. Corona is very real.
A friend in Alabama who's in healthcare said dermatologist are open and are VERY busy. And the state's daily Corona new cases is about the same as in Switzerland (and Alabama is a lot bigger than the entire Switzerland).
I bought more MNLO on Friday. I'm planning to hold my MNLO shares and will try NOT to make a mistake I've made a few times before in my lifetime: selling too soon.
I really like the CEO -- best biotech CEO I've had in all my years of investing in healthcare. And the new CFO is top notch too. I think and hope they're prepping to sell the company, but another biotech CEO said good companies are bought not sold. But I still don't agree with standing in corner in a dance hall and looking pretty -- you gotta make a move.
I'm sure they're doing the right things: talking ex-US partnerships, etc. etc. I really like Menlo's product profile, and it's an easy match for many partners.
Our friend thinks it's ripe for a takeover by likes of Johnson & Johnson. A Big Pharma with a huge salesforce can make a ton of money off Menlo's products. And the company is lean and easy to take over. But the price has to be right.
I like the idea of waking up one day to the news that MNLO was acquired for a big price. And increasing sales, global approvals...
Do your own research.
MNLO / FOMX UPDATE 31 MAY 2020
I suspect Leo Pharma will buy Menlo.
- Already in partnership together.
- Pays royalty to Menlo.
- Co-plaintiff with Menlo - settled patent fight.
- US office (Madison, NJ) 30 minutes from Menlo's.
- Many Menlo employees worked at Leo before.
- $1.5 billion revenue.
- Focused on dermatology -- very strong synergy with Menlo.
- Shoe in. I'm willing to bet on this one... but, another big player could be in the picture to outbid Leo.
- Already has pipeline for psoriasis - is not unhappy the old Menlo failed.
- Leo's new CEO, Catherine Mazzacco, has a solid background in Dermatology.
- Owner by Leo Foundation (loaded with cash), Denmark's largest commercial foundation, and does a lot of philanthropic work as well.
- Leo's pipeline needs help and could absolutely use two FDA approved products and Menlo's phase 2 asset (data end of June).
- Leo has a large European and Global presence (selling in 130 countries) and selling more Menlo's products is a natural for them.
- Leo seems to likes to increase its revenue in the US market (and globally). It has a very aggressive growth plan which must be accommodated with acquisitions. Who better than Menlo?
- Menlo has not significantly changed their website post merger -- still has old Menlo's irrelevant picture on the first page, etc. -- and Menlo seems to still use Foamix domain emails. So either they're going to change their name / relaunch a new image / new stock symbol -- or they're going to get bought out sooner than we expect. This summer perhaps after P2 data is out?!
Menlo's current value is around $300 million including a good chunk of cash. 100% premium is spare change for Leo ($5/share). But I think Menlo's board will demand more than that, maybe $10+? I like and trust the CEO -- he's the best healthcare CEO I've known in years of investing in healthcare. So I'm confident he'll get the best price for us.
- 2019 Annual Report: https://leo-pharma.com/-/media/corporatecommunications/project/leo-pharma-dxp/leo-pharma/files/annual-reports/leo_pharma_annual_report_2019.pdf
- Global site: https://leo-pharma.com/who-we-are
- US site: https://www.leo-pharma.us
- Leo Foundation: www.leo-foundation.org Video: https://www.youtube.com/watch?v=CBnvBOVTWGM
Do your own research.
MNLO / FOMX UPDATE 29 MAY 2020
Looking beyond PDUFA:
- MNLO fair price using pre-merger metric is $7.24 (see analysis below). Cowan has a $10 target. Current price: $2.50
- Tuesday June 2, MNLO has a PDUFA date. I give it a 85% chance of an outright approval.
- I expect EU and Swiss filing or partnership announcement soon.
- I will not be surprised by news that Menlo has agreed to be acquired. In hands of a big sales organization, Menlo's goodies can generate huge revenues. Executives' emails are still Foamix. And Menlo site hasn't gone through a significant update that it absolutely should have. At least I think the company will change its name and stock symbol. Menlo's board is well stacked with solid background in acquisitions.
- Menlo's ongoing Phase 2 results will be out by end of June. As the saying goes, the big money is to be made with Phase 2 data (not phase 3).
- Amzeeq scrips should get traction and recent news of increased insurance coverage helps.
- FMX103 launch in Q4 will boost revenues, increasing Rx income, with minimal added overhead (same docs, same reps...).
- I believe institutional interest will want to rise, for a number of reasons.
- I believe for a number of reasons $2.50 is very undervalued. That by itself is enough to hold the shares. In 6 months, MNLO should be a LOT higher. I'm not going to blow this one (in the past I sold a few stocks too early).
MNLO / FOMX UPDATE 23 MAY 2020
MNLO fair price using pre-merger metric:
If you held 100 shares of FOMX per-merger, and your cost basis was 4.30, today you own 180 shares and your cost basis is 2.40.
- So 4.30 pre-merger = 2.40 today
- and 4.50 = 2.50
- and 4.10 = 2.28
Now, analyst average target for FOMX was $13.
Nothing has changed in the equation as far as I can see: MNLO's trials failed. FOMX got MNLO's cash and US footprint. So that $13 target is still valid. Translate that to post merger level (*.50 and +1.205...) that $13 = $7.24. However, Cowan upped that to $10. Today's price: 2.24. I think even a first grader can see MNLO is VERY VERY UNDERVALUED.
Corona hurt Avinger a lot, but as the world goes back to normal, Avinger's sales should ramp up. This week AVGR filed a 510(k) with FDA for pre-marketing clearance of Ocelaris, a next generation chronic total occlusion (CTO) crossing system utilizing Avinger's proprietary image-guided technology platform.
Very interesting science. Dr. Joe turned me on to AVGR. He also owes shares. Lumivascular technology allows physicians, for the first time ever, to see from inside the artery during an atherectomy or CTO crossing procedure by using an imaging modality called optical coherence tomography.
I've spoken to AVGR's CFO. They're a very committed management team and are regularly buying shares in the open market.
Latest PR: https://finance.yahoo.com/news/avinger-announces-510-k-filing-123000751.html
ADXS has a very advanced cancer treatment that extends the efficacy of the most widely used cancer drug (Merck's Keytruda). Dr. Joe turned me on to ADXS and he also owns shares. If the next couple of patients show the same positive response as the last two, ADXS's stock should do very well.
Latest PR: https://finance.yahoo.com/news/advaxis-announces-updated-positive-clinical-120010526.html
ARNA is cooking. CEO Amit Munshi just cashed in around $3.5 million of stock options. Stock has gone to upper 50's due to a number of reasons including failure of competitor drug.
This is not an investment advice. Do your own research.
MNLO / FOMX UPDATE 20 MAY 2020
MNLO has been up with very strong volume. Up 7% a day last couple of days. Over 50% gain in a month.
June 2 is PDUFA date for FMX103.
I think it will be approved because:
- It's the same drug as Amzeeq (but higher concentration) and Amzeeq is approved. Only thing higher concentration would cause is safety issues but data show no safety issue.
- The underlying drug, minocycline has been in use for decades.
- Moderate to acute Rosacea has no good treatment right now. Dermatologists use oral minocycline that has a lot of side effects. Topical form is MUCH safer.
- Trials show good efficacy.
What the approval means to Menlo is: Same sales force, same prescribers, so no significant additional overhead to take to market = Cash.
Deal with China is inked. I believe next is Europe/Switzerland/RoW. Same partners can take both products.
Analysts are very bullish. Merger is just settling in. Initial scrip data was very good. On par with other drugs in this space means big sales. If Corona is tamed, and life gets back to normal, scrips should grow nicely. Institutions will pile in when they smell the cash. Counting 103, a third product is back in the market as well which will contribute to revenue.
To me MNLO is a revenue star in making. Cowan's recent $10 price target was not arbitrary.
I'm not giving investment advice. Just sharing my research.
If I would give you one advice, don't trade the PDUFA. This is not a stock to trade for short term gains. It's about scrips and incremental capturing of a nice chunk of a huge market.
MNLO / FOMX UPDATE 28 APR 2020
GREAT NEWS from a respectable analyst. Source: https://finance.yahoo.com/news/3-biotech-stocks-under-4-115140896.html
- The analyst's $10 price target leaves room for shares to skyrocket 609%
- the average price target puts the upside potential at 382%
Menlo Therapeutics Inc. (MNLO)
Menlo’s recent rough going has certainly sounded the alarm bells for some investors, with it now going for only $1.41 per share. The company, which develops foam-based products to treat dermatologic conditions, recently announced that it will be discontinuing serlopitant development after the therapy failed to meet the required endpoints in two Phase 3 trials in Prurigo Nodularis Itch. However, several analysts are standing firmly behind MNLO.
Cowen’s Ken Cacciatore notes that the June 2 PDUFA date for its FMX-103 candidate in rosacea is keeping him optimistic about the biotech’s long-term growth prospects. Based on the almost perfect clinician overlap, FMX-103 can leverage the infrastructure put in place for its Amzeeq product in moderate-to-severe acne.
Expounding on this, Cacciatore said, “...our clinicians continue to highlight their even greater enthusiasm for FMX-103, given that rosacea – although a smaller overall market than acne – has very limited treatment options. Taking the likely lower penetration of Amzeeq into the massive acne market, combined with the likely high penetration of FMX-103 into the smaller rosacea market, we continue to believe that these opportunities could eventually each exceed $250 million-plus in peak sales, which is clearly not reflected in the current valuation.”
Additionally, Cacciatore points out that Amzeeq’s initial release was impressive before COVID-19 took hold of the market, with “the launch was progressing as well as – and if not better – than any recent launch in acne.” Total prescriptions hit the 2,150 mark for the week ending March 13, indicating a revenue run-rate of about $20-$25 million.
“We are encouraged by the initial response to Amzeeq, and believe it bodes well for the likely re-acceleration that will occur following the normalization post the virus pause,” Cacciatore noted
As MNLO has enough capital to establish both FMX-103 and Amzeeq, it’s no wonder Cacciatore left an Outperform rating on the stock. The analyst's $10 price target leaves room for shares to skyrocket 609% in the next year. (To watch Cacciatore’s track record, click here)
All in all, the analyst community echoes Cacciatore’s sentiment. Only Buys have been assigned in the last three months, 6 to be exact, and thus the consensus rating is a unanimous Strong Buy. At $6.80, the average price target puts the upside potential at 382%.
MNLO / FOMX UPDATE 23 APR 2020
Excellent news: Menlo Therapeutics and Cutia Therapeutics Enter into Exclusive License Agreement for AMZEEQ and Approved Topical Minocycline Products in Greater China Transaction provides non-dilutive capital including $10M up-front.
What's next? A partnership in Europe. I've already checked with some dermotologists ex-US who've said they're very interested in prescribing Amzeeq.
Given the smooth approval of Amzeeq in the US, I anticipate ROW approval will be easy. China needs its own test on Chinese people, which our partner will conduct. EMA and Swissmedic approval should be granted on the basis of FDA data, and with that follows South America, some of which has ties to Swissmedic & EMA and approva after they approve.
All this means an expanded target market. I anticipate Menlo will be a very lucrative cash generator. No stock manipulator can stop this train.
I anticipate Big Pharma will realize this soon and after the second FDA approval in June, will start its due diligence (if not already) to make an offer to buy Menlo out.
Cutia Therapeutics would not have paid $10,000,000 up front without due diligence and liking the story.
MNLO / FOMX 9 APR 2020
Just posted update notes for $MNLO , $FOMX (9 April 2020) home.rezamusic.com/fomx.php
FOMX shareholders have started seeing new shares of MNLO in their account. Nice to see share count more than double :-) The float is also going up, but cash is coming in, so the merger is like a capital raise plus other benefits.Old Menlo is FINISHED. The new Menlo is the old Foamix + old Menlo's cash, legal footprint (US based), net operating loss that helps the new Menlo save a lot on taxes, expanded analyst coverage. I, as a FOMX shareholders am very optimistic that the stock will do very well, and eventually rebound far better than pre-merger levels.
New price targets as of 8 April 2020 (for the new-MNLO which has a larger float, and more cash).
- Barclays: $2
- Cowen and Company: $10
- H.C. Wainwright: $2
- Piper Sandler: $5
That's an average price target of $4.75 - price is trading at $1.10 -- 4 bagger from here. I believe smart money is a buyer here. That includes myself, haha -- I also bought this week.
MNLO / FOMX 7 APR 2020
Folks, here's a back of the envelope calculation of MNLO's price target following the old Menlo's bad phase 3 data. Remember, Foamix (FOMX) merged with Menlo for several reasons: they wanted to use Menlo's US legal etc. footprint to become a US-based company. That happened. Synergies are irrelevant since the old Menlo's officially dead. % ownership of the new merged company is now clear: Old FOMX shareholders get 82% and old MNLO holders 18%. Basically old Menlo's science is dead. We (old FOMX) give them 18% of the company for their cash.
Yesterday's conference call had very good info. First and foremost, Amzeeq sales are good. They had 18000 TRx=NRx in first 10 weeks despite the challenging times. Scrips went up last week compared to the week before despite Corona. They're readjusting their approach to sales calls. Of course a lot depends on this damn Corona getting contained.
So what is the new MNLO worth? These are off the top of my head:
- Pre-merger, analysts had avg target of $14.25 on FOMX
- MNLO is worth only its cash (thus the 18%). 82% owned by former FOMX.
- FOMX value before the merger was 60m shares x 4.2 = 250m value -- Analyst target of 14.25 = 855m valuation.
Post merger - after failed old-Menlo trials, shares outstanding will rise to ~130m, former FOMX holders will get more shares to make them 82% holders (~1.2 more shares per share the owned). Cash from MNLO offsets the 18% -- so net should be even. And that 855m target value should remain. Since float is increasing, new target should be $6.50 instead of $13.
That makes MNLO target value $6.50 / share. It's trading at 1.14 right now.
Example: If you had a 1000 FOMX shares pre-merger, in about a week you will get about 1200 more shares of MNLO in your account.
I hope they change the company name, and drop the history of that stupid company we should have never married with. But our management was smart and put in the provisions to protect us, so they didn't gamble with the data. This drop is short term, until the last of uncertainties are resolved. I'm very optimistic about MNLO's future. We have one approved drug, one approval hopefully coming in June. Partner restarting supply/sale of another revenue generating product for us. We have a new CFO who seems very good. If he can massively contain the costs, and make us a lean company, and if Corona is contained (which I think it will be -- remember bird flue SARS etc. -- all were supposed to be the end of the world but went away).
Do your own research - this is not an investment advice.
Take care and reduce your exposure to wireless radiation - it damages DNA, causes cancer. Set yourself up with WIRED INTERNET.
Reza Ganjavi, MBA
Interesting note I saw, from before the merger. Keep in mind due to the increase of share count from taking over old-Menlo's cash, the old references to FOMX price don't apply any more.
-Amzeeq potential conservative sales of ~100 million p/y (300k scripts at $400 each)
-FMX103 potential conservative sales of ~ $50 million p/y (200k scripts at $250 each) Compare to Oracea at $750 a month, topicals are generally sold in a three-month supply
-Earnings per share for these two drugs alone are $2.45 (150 million / 61.25 million)
-A P/E of 20 makes this a $50 share by the end of 2021 assuming approval of FMX103 and patient uptake of both drugs
-FCD105 could have similar earning to Amzeeq, though they could be competing against each other, estimated value unknown
MNLO / FOMX 25 MARCH 2020
Good news: MNLO got a new US-based CFO who is a "heavy weight" in biotech, and even has dermatology experience, and has successful M&A experience.
"will be responsible for leading the Company’s global finance operations, including, financial planning and analysis, investor relations, accounting, tax, treasury, supply chain and information technology."
"Previously, he was CFO at Auxilium Pharmaceuticals, Inc., where he helped lead the execution of Auxilium's growth strategy culminating in the sale of the company for $2.6 billion at an 85% share price premium. Prior to Auxilium, he was Senior Vice President, Finance and Treasurer at Endo..., global consolidations of M&A transactions."
“His experience includes ... leading successful M&A transactions, ... and investor relations."
Mr. Saik said “Menlo is positioned to be a market leader in therapeutic dermatology, and I am thrilled to be joining at this exciting time. We have a differentiated commercial-stage product in acne and a compelling portfolio of late stage dermatology assets. Having had previous experience with dermatology products I recognize that companies such as Menlo, with differentiated offerings and the ability to commercialize multiple products in the near-term, can help lead successful consolidation in the sector. The Company has shown a commitment to serving the needs of dermatology patients and I look forward to applying my experience through the next phase of growth.”
Mr. Saik holds a Master of Business Administration from the University of Southern California and a Bachelor of Arts from the University of California, Los Angeles.
Stock price is very undervalued and still reflects "settlement" of the transaction. I anticipate MNLO will be trading in double digits by end of the year, assuming Corona calms down.
- A number of analysts cover FOMX. 4 have recently restated their position. Looking at these estimates, esp. given they include research not connected to doing business with the company, and based on my experience, I expect these price targets will become a reality. This reminds me of past situations where an ultra low price stock (like FOMX) was bought out at above the average analyst estimate which at the time seemed extremely higher than the current price. So I have a hunch, for the reasons stated in the notes below, that with some patience, FOMX will pay off handsomely for me. You do your own research.
- A new survey of Swiss dermatologists indicates a strong inclination to prescribe Amzeeq when it becomes available. Doctors interviewed indicated they would welcome topical minocycline which has a cleaner side-effect profile than the oral. Swissmedic is expected to approve Amzeeq as smoothly as FDA did, given the strong data package.
- It's wonderful that Foamix owns the worldwide rights to Amzeeq. The field is wide open for inking partnerships in rest of the world (ROW), or launching it directly in Europe. I anticipate we will see a series of partnerships announced in various Ex-US regions.
- The stock's drop post-approval is not a cause for concern for me. If anything, it's creating a buying opportunity while I believe certain entities are trying to take out stop-loss orders, and weak hands. I have faith in the management's ability to execute successfully in:
- a) A successful launch (which this management team has an excellent track record in)
- b) Moving the pipeline forward
- c) Inking strategic partnerships ( or negotiating and all out buyout of the company at an attractive premium)
- d) Conducting very active relationship management with investor community, by ideally hiring a full-time, dedicated, internal IR champion. I like LifeSci but they're spread way too thin for what Foamix needs at this stage. Experience shows companies with a strong internal IR champion, do better, in marketing themselves as an investment product, and thus, boosting the demand channel which naturally makes the share price go up. This is particularly for companies whose stock is being hurt by abusive short selling (artificial supply).
- e) Managing to positively surprise the market. Shorts hate surprises and have shown to be willing to pay a high price for "channel checks" and info that would mitigate surprises. Make the suckers run for cover. Then, artificial supply shrinks and real demand increases (a double-whammy that helps the stock go up).
- Amzeeq's new website is up: https://www.amzeeq.com
- FOMX got approval on its AMZEEQ (FMX101) (topical minocycline) which should be a lucrative money-maker for the company given what we know about the market size, state, success of similar launches, etc.
. FDA accepted FOMX's application for FMX103 with a June 2020 PDUFA date. I think chances of that approval are very good given it's the same vehicle and medicine as FMX101 but different dosage.
. 50+ sales reps will get job offers shortly. Company launching itself directly to 6000 dermatologists who write the bulk of scrips. Kickoff in January, with Rx numbers rolling in shortly afterwards.
. What all this means to the stock is unknown. I've been buying since I believe it's very undervalued. Average analyst estimate is $15.
. Most physicians would not prescribe an oral medication (with severe side effects) to treat a severe skin condition when that same medication can be applied topically and has equal or better efficacy and far lower side-effects.
. Foamix is a ripe takeover target of a skincare pharma like Nestle/Galderma for example since AMZEEQ is posed to be a money maker. Foamix' proprietary tech could be used for other medicines too.
. What's a fair buyout price? $750m seems fair right now ($12.50/share) with much higher valuation with strong Rx numbers.
. FOMX is a good buy for me after approval since the science is derisked, and for a number of reasons I believe the price is still very favorable to buy post approval (I view anything under $5/share as a very good entry price -- some institutions got in around 6 a while back).
Foamix (NASDAQ: FOMX) Improving patient lives by offering groundbreaking innovations in dermatology
The following is not an investment advice. Do your own research. I'm just sharing my research.
My interest in Foamix Pharmaceuticals (Nasdaq: FOMX) was triggered by a tip from a PhD friend who's a senior principle pharmaceutical consultant. Two PDUFA dates are on the horizon, and the stock seems undervalued in relations to a number of analyst estimates. Here's a summary of my due diligence on FOMX.
It seems most of the hard times is behind for Foamix – years of research and intense capital need has flourished in solid sets of efficacy and safety data, two filed NDAs, and a launch plan that’s destined for success in capturing a ripe, ready market.
Keep in mind Foamix’s solution addresses a need which so far no other company has been able to address: An effective topical minocycline. Why topical? Because oral minocycline has severe dirty systemic side effect profile.
Acne is the most common skin condition in the world.
“The effect that Acne has on quality of life is equal of the effect of asthma on quality of life of an adolescent”. Dr. Christina Kim, Dermotologist, UCLA.
There are many stories about the well-known, nasty side effects of oral minocycline. One instance is documented in this video titled “Minocycline almost killed me”.
Novel Delivery Platform
The company’s Novel Molecule Stabilizing Technology (MST) Delivery foam has several key competitive advantages:
- Stabilizes hydrophobic molecules
- Surfactant & irritant free formulation maintains barrier function, improves tolerability and compliance
- Natural moisturizing formulation
- Low mechanical sheer enhances spreadability
- Oil-based excipients instigates sebum dissolution
- Targets delivery of minocycline directly into the pilosebaceous unit
- Favorable resistance profile.
The first PDUFA date, scheduled for 20 October 2019, is for FMX101: 4% minocycline foam for treatment of moderate-severe acne.
The second PDUFA is expected in 2020Q2, for FMX103: 1.5% minocycline foam for treatment of moderate-severe rosacea.
The safety and efficacy of both products have been well established via multiple trials. Foamix is going into FDA approval with a solid set of data. I expect both products to be approved hands down by the FDA. I expect international regulatory filings to follow FDA approval and for these products to become the standard of care for mild-severe acne and rosacea.
Commercial Opportunity for FMX101
The commercial opportunity for these products is enormous. Skeptics could argue that generic minocycline is cheap. That’s true. However, Foamix enjoys a number of market differentiating factors, i.e.
- Vehicle technology (see above list of competitive advantages)
- Minocycline potency
- Resistance profile
- Systemic absorption
The size of the branded acne medication market in 2018 was 5.2 million TRx, $3.4 billion.
Acne Market Size (according to Symphony Health)
$3.4 billion was spent when a cheaper generic alternative was available, but the branded alternatives are inferior to FMX101’s unique advantages. Therefore, Foamix has a very good chance of capturing a big chunk of that annual $3.4 billion (and growing) market.
Similar launches in the acne market over time have yielded positive first year uptake, averaging ~295k prescriptions. Year three average was ~564k. Again, if the past is any indication of the future, Foamix could fill around 300,000 prescriptions for FMX101 in 2020.
Launch of FMX101 is scheduled for January 2020, upon FDA approval on or before 20 October 2019. The company wants to launch the product itself, which makes sense, given the dermatology market is not a complicated one and reaching key prescribers is streamlined. Foamix has assembled a sizable salesforce (with offers going out right after approval is granted).
Recent acne launch highlights demand for new products. Sarecycline was launched in January 2019, and has had durable growth over time, which signals market need and acceptance of novel antibiotic agents. Its TRx grew from 1193 in Jan 2019 to 26049 in July 2019. This bodes well for Foamix.
The company has not yet announced pricing. It will probably be in the $200-$400 range.
In terms of insurance coverage, since it will take some months to secure coverage, the company may provide synthetic coverage to help patients have minimum out of pocket, in the first months of the launch. However, payers have shown a favorable reaction to the target product profile (TPP) for FMX101. FMX101 is viewed as a novel route of administration and not merely a simple reformulation.
Payers like the lower risk of systemic side effects given the topical formulation and less exposure due to lower dose. Payers have also indicated FMX101 is clearly differentiated from other products that are hard to differentiate and which have price in excess of perceived value.
At the <$400 net price range, FMX101 would have access without highly restrictive PAs or step edits.
Commercial Opportunity for FMX103
The size of the branded rosacea medication market in 2018 was 1.3 million TRx, $759 million. Launches in the rosacea market over time have yielded and average of ~192k prescriptions in the first year. Year three ~312k. More than half of Acne targets will also be Rosacea targets.
Rosacea Market Size (source: Symphony Health Solutions)
The launch of FMX103 will leverage much of the infrastructure used to launch FMX101, reducing the need for additional investments.
Foamix is not just about FMX101 and FMX103. The company is moving forward an interesting pipeline (see details on www.foamix.com)
Analyst Opinion, Valuation
After the recent offering and milestone-based financing that's in place, Foamix is financially strong to take both FMX101 and FMX103 to market. Several analysts covering the stock have price targets averaging $15. Currently the stock is trading at around $3. In August 2019, Bank of America reiterated a price target of $11.
Recently I spoke with an analysts who covers the stock and has a $16 price target. I asked him about his opinion of Perceptive Advisors' engagement with Foamix. Some investors were wondering if Perceptive would cash the shares they received in low 2's now that the stock is higher, or will they go for the big prize. The analyst said that Perceptive has a very good reputation for long term achievements and is not the kind of company, in his opinion, that would go for a 50% gain. They've been long-term investors in Foamix and I don't see that changing. The analyst added that he's looking forward to the FDA decision, and that:
There's nothing more validating than good benchmarked data on approved drugs...
... which we have in the case of Foamix, as demonstrated above.
Most valuation models used by various analysts supports the average $15 share price.
H.C. Wainwright's Dr. Selvaraju has called FOMX
Earlier this month, Cantor Fitzgerald issued an investor update in which they reiterated their Overweight rating and $15 price target. Louise Chen (Harvard MBA) wrote that a 25 physician survey supports her positive view on the market opportunity for Foamix's FMX101, and that if approved, FMX101 has the potential to address a significant unmet need in the treatment of moderate-to-severe acne, which remains a difficult condition. Cantor believes Wall Street is underestimating the uptake of the acne drug.
Today, 16 October 2019, Barclays issued a note to its investors reiterating a $10 price target, and an Overweight rating. Barclays predicts a 90% chance of approval with a price target raised to $12 upon approval.
I also asked the analyst about the CEO, David Domzalski, whom I've developed a lot of respect for. The analyst said he's met him and thinks very highly of him, and that he's very experienced in launching drugs in the past, which is very important.
I believe having a CEO with solid prior launch experience is an important factor. There are examples of poor launches where the CEO of the development company did not have prior launch experience and was overwhelmed by the dynamics. One example is Arena Pharmaceuticals (Nasdaq: ARNA)'s ex-CEO and founder, Jack Lief who did a very poor job of managing the launch of Lorcaserin post FDA approval with partner Eisai. Jack Lief should have given the helms to a seasoned CEO who had executed successful launches before, but given he was the founder of the company, he viewed the company as his baby and this attachment (known in academia as Founder's Syndrome) deprived the company from having the kind of leadership it deserves: someone like David Domzalski. Jack Lief was later ousted by Arena's Board.
It takes a special calibre CEO to make a launch successful, and Mr. Domzalski seems to have what it takes -- he's been there and done that before.
The company has stated it is in partnership talks for Ex-US territories. It makes sense that it covers the US market itself. However, I would not rule out the potential for a buyout as the company’s MST technology can be used for delivery of a variety of drugs, and, the current targeted medical conditions are lucrative enough that an acquirer Big Pharma could easily recover the cost of an acquisition with a year or two of sales.
I will not be surprised to hear buyout news right after approval, in 2019 Q4. What would be a fair buyout price? I think the analyst average price is a good indication: $15/share (5-bagger from here).
No FDA approval is risk-free. Investors should consider this risk. However, for my own investment decision regarding FOMX, I consider both assets to be de-risked, due to very strong safety and efficacy data, and therefore anticipate both to be approved in October 2019, and around May 2020. Launching a new medicine also carries risks. But given the management profiles of Foamix, and state of the target market, I am confident about a successful launch. Macro risks are always there but my personal motto is, never bet against the US economy, since it's the hub of innovation and the economic engine of the world which has proven itself over the years to be very robust and resilient.
Company’s latest presentation is very informative: https://ir.menlotherapeutics.com/static-files/263c74b9-0cef-4f42-bb2c-f3ec879e6e28
#FOMX #biotech #investing #acne #rosacea #mnlo #amzeeq