Stop Worrying about the Fed and Love Biotech

Edward Kim  |

The Federal Reserve Open Market Committee begins its two-day meeting today, at the end of which it will certainly announce an increase in the Federal Funds Rate. Fed Chair Janet Yellen broadcast the need for this clearly two weeks ago as we've discussed, and last week’s positive jobs reports only reaffirms her and our position.

So, don’t worry about it. The rate hike is baked into the market, as are at least two more before year end.

Rather, let’s focus on one of our core industry segment themes of microcap biotech, a group of stocks that won’t be negatively impacted by quarter-point rate increases. In fact, these companies could even benefit from a rotation out of their large cap brethren if the much Trumpeted corporate tax relief doesn’t meet expectations.

At least a dozen of the small biotech companies we’ve been following will be presenting at the Roth Capital conference today.

Last week, we highlighted PhaseRx (NASDAQ: PZRX). CEO Robert Overell, PhD, will be presenting today at 5:00pm Pacific time, with a live audio webcast available at PhaseRx's corporate site.

Here are three others that we’ll be watching today.

Aethlon Medical (NASDAQ: AEMD) - 10:30am Pacific time

Tonix Pharmaceuticals (NASDAQ: TNXP) - 12:30pm Pacific time

Recro Pharma (NASDAQ: REPH) - 2:30pm Pacific time

Aethlon is developing immunotherapeutic technologies to treat infectious diseases and cancer. The company’s Hemopurifier device – which was named by Time Magazine as one of "The 25 Best Inventions of 2014" - targets and captures viruses and toxins that are hidden from the body’s natural immune defenses and aren’t addressed with traditional antiviral therapies.

The company announced yesterday that it had concluded a feasibility study in which the Hemopurifier was well tolerated in end-stage renal disease patients who were also infected with hepatitis C.

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Source: Aethlon Medical presentation at BIO Conference, Oct. 18, 2016

The company believes that its Hemopurifier can fulfill the broad spectrum medical countermeasure objective of the Department of Health of Human Services that is directed toward bioterror, pandemic threats and other pathogens.

Jim Joyce, Chairman and CEO, of Aethlon, will be presenting today at the Roth conference at 10:30am Pacific time. A live audio webcast will be available on the company’s corporate site.

Tonix is developing treatments for post-traumatic stress order (PTSD). Its lead candidate, TNX-102 SL, received Breakthrough Therapy designation by the FDA in December 2016 for the treatment of PTSD. Two weeks ago, the company announced the successful synthesis of a potential smallpox vaccine that showed protective activity in mice.

The stock lost 58% of its value in September 2016 when results of TNX-102 SL in fibromyalgia patients “did not achieve statistical significance in the primary efficacy endpoint of the proportion of patients who reported a 30% or greater reduction in pain.”

While the study did achieve clinically meaningful results when analyzed by other standard statistical approaches, the company should be recognized for responding swiftly to the news, discontinuing the fibromyalgia program immediately to focus on the advancements it had been making in PTSD. It’s critical for these companies to manage their resources and not throw good money after bad.

Source: Tonix Pharmaceuticals corporate presentation, March 2017

Seth Lederman, MD, President and CEO of Tonix, will be presenting at 12:30pm Pacific time today at the Roth conference. A live audio webcast will be available at the company's corporate site.

Recro Pharma is developing non-opioid products to treat acute pain for patients in hospitals and ambulatory care settings. Commonly prescribed opioids have significant side effects, including addiction, constipation and respiratory depression. The company strives to maintain meaningful pain relief without the side effects.

The company announced last month that it had completed enrollment for its Phase 3 study to evaluate the safety and tolerability of intravenous (IV) Meloxicam for moderate to severe pain following major surgery.

Source: Recro Pharma Investor Presentation, March 7, 2017

Recro Pharma differs from most biotech companies in that it generates revenue today. The company's cash-flowing contract development and manufacturing division makes Ritalin and Focalin (ADHD) for Novartis (NYSE: NVS), Verelan (hypertension) for Teva Pharmaceutical (NYSE: TEVA), verapamil (generic Verelan) for Lannett (NYSE: LCI) and Zohydro ER (hydrocodone) for Pernix (NASDAQ: PTX).

Gerri Henwood, Recro Pharma's President and CEO, will present today at the Roth conference at 2:30 pm Pacific time. A live audio webcast will be available at the company's corporate site.

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