Tuesday, May 17, 2022

IBI Research On Enlivex: Delivering A Mega Blockbuster

 

Summary

  • The current bear market created significant opportunities for you to invest in fundamentally strong biotech companies.
  • As a powerful therapeutic innovator, Enlivex is developing a novel and highly efficacious medicine known as Allocetra.
  • The cellular therapy Allocetra is poised to deliver robust data for sepsis and thereby capture a vast market.
  • The Allocetra combination with an immune checkpoint inhibitor demonstrated extremely strong efficacy for mesothelioma.
  • Enlivex is positioned to capture a significant portion of the solid tumor niche.
Macrophage destroying bacteria

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Enlivex

Doing what everybody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all. - Phil Fischer (Warren Buffett's mentor)

Amid a bear market, your most powerful human emotion that is fear kicks in. As fear is the most powerful human emotion, it can cause an intelligent investor like you to make imprudent decisions. For instance, you can have the urge to sell prematurely at a loss. Keep in mind, temporary declines are simply paper losses that are not realized unless you sell. As you can see, FEAR is nothing more than False Expectations Appearing Real. Hence, you should focus on analyzing fundamentally robust stocks to acquire at a deep discount during this time. In doing so, you're breaking away from conventional wisdom to do things differently for better results.

That being said, I've been researching the investment landscape to bring you more fundamentally esteemed companies for your consideration. If you've been following my research, you know that my sweet spot is oncology and cellular therapy. After all, my father-in-law passed away in recent years from cancer. As such, I'm driven to assist therapeutic innovators in delivering hope to patients worldwide. That aside, a good number of CAR-T developers that I covered over the years have been acquired. In this research, I'll feature a fundamental analysis of a premier cellular therapy innovator known as Enlivex (ENLV) and provide my expectation of a potentially lucrative investment.

ENLV chart

StockCharts

Figure 1: Enlivex chart

About The Company

As usual, I'll present a brief corporate overview for new investors. If you're familiar with the firm, I suggest that you skip to the next section. Operating out of Nes Ziona (Israel), Enlivex is dedicated to the innovation and commercialization of next-generation cellular therapy to treat cancers and deadly conditions. As it captures lightning in a bottle, Enlivex is reprogramming a crucial cell of the body's natural defense (i.e., immune) system coined macrophage that, in and of itself, is analogous to the Israelis Commando.

By enlightening the Commando, Enlivex's medicine (dubbed Allocetra) can restore the body's homeostasis or balanced state to defeat deadly diseases. As a universal, off-the-shelf cellular therapy, Allocetra is currently being investigated as a treatment of organ failure associated with sepsis (i.e., sepsis-OF), acute respiratory distress syndrome related to COVID (i.e., COVID-ARDS), and in combination with other drugs for solid tumors.

Figure 2: Therapeutic pipeline

Revolutionary Treatment With Allocetra

As you can imagine, the macrophage is at the heart of Allocetra. As such, you should understand its basic science to appreciate this life-saving medicine. From the figure below, you can see that the macrophage/dendritic cells are involved in an immune homeostatic state. For simplicity's sake, I will refer to both of those phagocytose cells as macrophages.

In one state, your macrophage activates the immune system by releasing chemical messengers for the recruitment of specialized cells to decimate invaders. In the opposite situation, these important cells reduced their chemical signaling to relax the immune environment. As such, your ability to tinker with this crucial balance can lead to desired therapeutic outcomes.

macrophage role in homeostasis

Enlivex

Figure 3: Macrophage's roles in immune-homeostasis

Let us dig deeper into this phenomenon. Viewing the depiction below, you can see that the macrophage balance state is disrupted. Specifically, these macrophage continues to release chemical messengers after engulfment. Consequently, that causes a massive release of chemical messengers descriptive of a storm-like event known as a cytokine storm. Ultimately, the excessive cells/chemical messengers lead to organ damage.

cytokine storm

Enlivex

Figure 4: Abnormal response via cytokine storm

Here's where the magic is happening with Allocetra to restore the biological balance for treating diseases. To develop Allocetra, Enlivex first collected mononuclear cells (i.e., lymphocytes, monocytes, natural killer cells, or dendritic cells) from healthy donors. Second, the company galvanized these cells (in a non-genetic modification) for them to express PtsSer. As a surface protein on dying cells (i.e., one undergoing apoptosis), PtsSer incites macrophages to engulf Allocetra for processing and antigen presentation. You can view the fancy term antigen-presentation as biological intelligence delivery between the immune cells.

Of note, you might think this is simplistic. Be that as it may, Albert Einstein said that simplicity is ingenious. On that note, you can think of the hyperactive macrophages in the body (i.e., those causing diseases) as a pack of wild/hungry and agitated dogs. After you fed them with Allocetra, they became calmer and obedient. As a ramification, Allocetra is highly relevant to immune-related diseases where the macrophages are going nuts.

Allocetra mechanism of action

Enlivex

Figure 5: Allocetra mechanism of action

Treating Sepsis-OF

Shifting gears, you should see how Allocetra is galvanized to tackle various deadly conditions. The first one on the list is sepsis (i.e., severe blood infection) which can lead to organ failure. In the initial phase of sepsis, various immune cells go haywire to release excessive biological signaling molecules such as IL, TNF, IFN, etc, in a phenomenon dubbed cytokine storm.

From the figure below, you can appreciate the complexity and intricacies of these chemical messengers in sepsis/cytokine storms. With the excessive chemokine/cytokine releases and their interaction, you can bet that it's not efficacious in subduing any particular one. Hence, it's scientifically sound and strategically superb to control the monocytes (i.e., baby macrophages) for them to regulate those chemical messengers.

cytokine storm in sepsis

Enlivex

Figure 6: Cytokine storm associated with sepsis

All of that sounds dandy but how does Allocetra perform in actual studies? Well, in the Phase 1b clinical trial, reprogrammed macrophages in sepsis patients showed substantial reductions in various chemical messengers (i.e., IL-10, IL-1Ra, C-CSF, IL-6, IL-1-B, TNF-a, and INF-y).

Phase 1b data for Allocetra in sepsis

Enlivex

Figure 7: Phase 1b data for Allocetra is sepsis

Importantly, those improvements lead to a meaningful reduction in the time to discharge from the hospital ICU. From the figure below, you can appreciate that the time to discharge for patients treated with Allocetra (i.e., green line) hit 8-days; whereas, non-treated patients (i.e, blue line) continue beyond 28-days.

Additionally, the SOFA score (i.e., an indication of organ failure) is also substantially reduced for Allocetra-managed patients. Of note, it's important that you see if the biomarkers or chemical messengers correspond to clinical improvement. When it does (as it is with Allocetra) you know the drug actually works.

That being said, I forecasted a 70% (i.e., strongly favorable) chance that Allocetra will generate positive clinical outcomes for the sepsis franchise in the future. From my system of Integrated Forecasting, a 70% equates to your regular 90% numerical score. As I keep track of my forecasting over the years, you can see my records to get a feel for what to expect from the upcoming event.

Phase 1b clinical results of Allocetra

Enlivex

Figure 8: Phase 1b clinical results of Allocetra

Given that sepsis is the third leading cause of death in the US, you can imagine that Allocetra is positioned to capture a vast market. Without an approved medicine, the severe sepsis market is estimated at $33B in the U.S. alone. As you know, I'm a realist. As such, I don't expect Allocetra to capture 100% of this market. In simply capturing 5% of this niche, you're looking at $1.6B in revenue.

estimated sepsis market

Enlivex

Figure 9: Estimated sepsis market

Ingenious Solution for Cancers

In decimating cancers, there are two key molecules. The first that you're more familiar with is the T-cells. The second is macrophages which are just as important as T-cells. You've already mastered the macrophage balance that I elucidated earlier. Nevertheless, you should dig deeper into their dual roles in cancer promotion and prevention to ascertain their value.

Notably, cancer changes the tumor microenvironment (i.e., TME) as it invades the body. Specifically, cancer cells recruit and promote "pro-inflammatory macrophages." Consequently, these bad macrophages release chemical messengers that suppress your body's defense system. Essentially, these rogue macrophages assist cancer in wreaking havoc by putting the immune system to sleep. That way, cancer can roam freely to devastate your body. Adding further injury to the insult, cancer cells also reduce the resident macrophages (i.e., good macrophages) population.

converting enemies into allies-TAM to combat cancers

Enlivex

Figure 10: Converting enemies into allies-TAM to combat cancers 

Now, you can tell that the revolutionary approach toward defending against various cancers is to restore the aforesaid macrophage balance. Simply put, it is uncanny to re-engineer the macrophage to be non-inflammatory while boosting the resident macrophage population. And, that's exactly what Enlivex is doing with Allocetra. Precisely speaking, Allocetra has the capacity to wake up the "suppressed macrophages" that are enslaved by cancers. That way, these macrophages can go back to the homeostatic state to destroy these rogue cells.

changing macrophage tumor microenvironment for treating cancer

Enlivex

Figure 11: Changing macrophages TME for treating cancers

Leveraging Allocetra's powerful mechanism of action, Enlivex is assessing its use in combination with other cancer drugs (i.e., chemotherapy and immune checkpoint inhibitors) for various solid tumors. Since combination therapy is the cornerstone of prudent cancer management, you can anticipate great future data outcomes.

Despite being in its infancy stage of development, Allocetra's early results demonstrated that it delivers synergistic outcomes when given in combo with a CD19 CAR-T. That is to say, it has been shown in the preclinical model that Allocetra treatment leads to a reprogramming of the macrophage to induce solid tumors more responsive to CD19 CAR-T.

Allocetra efficacy in preclinical model

Enlivex

Figure 12: Allocetra efficacy in the preclinical model

Interestingly, when you want to ascertain if the drug truly works, you can give it in combo with another molecule that negates your drug's effectiveness. Accordingly, Enlivex administered Allocetra with D89 (a molecule that prevents macrophages from engulfing Allocetra). Consequently, the reprogramming effects are no longer observed.

early Allocetra data in solid tumors

Enlivex

Figure 13: Early Allocetra data in solid tumors

Disruptive Data For Mesothelioma

On May 9, Enlivex presented extremely robust data for Allocetra with an immune checkpoint inhibitor in a mesothelioma mouse model at the International Society for Cell and Gene Therapy Annual 2022 Meeting. As you can see, mesothelioma is one of the deadliest cancers. And, it takes a long time to develop this dreaded disease. After exposure to asbestos (typically from work relating to construction, pipe fitting, and shipyards), it may take as long as 30 years for the cancer to develop.

Adding further injury to the insult, there are limited treatment options with subpar efficacy for mesothelioma. The immune checkpoint inhibitors (i.e., ICI) that target the CTLA4/PD1 are currently FDA approved as first-line treatment options for patients having unresectable malignant pleural (i.e., lung) mesothelioma.

Accordingly, Enlivex injected mice with mesothelioma to study the effect of both Allocetra and an ICI (i.e., anti-CTLA4) over time. As shown below, the rodents that did not receive any treatment all died on Day81. Those that received ICI alone had only a 25% cure rate which is comparable to those that received Allocetra (high dose) alone (i.e., 28.5%). Keep in mind with the disease context, 25% is still significant.

Remarkably, mice that received the combo (i.e., high dose Allocetra plus ICI) enjoyed the phenomenal 100% cure rate. Now, the low dose allocetra/ICI combo only experienced the 67% cure rate, which tells you there is a "dose-response" relationship which is a strong indication of therapeutic efficacy.

Allocetra combo data for mesothelioma

Enlivex

Figure 14: Allocetra combo data for mesothelioma

As Allocetra has an ingenious mechanism of action, I'm not surprised by the powerful efficacy. By restoring the immune balance, Allocetra unlocks the therapeutic power of ICI in a synergistic fashion. That is to say, Allocetra ingeniously shifted the balance from pro-tumor associated macrophages (i.e. TAMs) toward anti-tumor ones which fully release the immune brake for ICI.

Imagine it this way, your body's immune system is like a race car against cancer that can now hit the gas pedal while having its brake fully released. That's how you uncannily achieved the 100% cure rate for the deadly cancer, mesothelioma. Commenting on the stellar data, the Chief Scientific Officer (Professor Dror Mevorach) enthused, 

This reproducible and statistically significant data strongly support Allocetra's proposed therapeutic mechanism of action of reprogramming macrophages in solid tumors. We believe that, in contrast to CAR-T, CAR-NK and other anti-cancer cell therapies directed at tumor antigens, Allocetra restores macrophage homeostasis in the tumor environment via reprogramming of pro-tumor macrophages. This may ultimately allow immune checkpoint inhibitors to be exponentially more effective.

As a powerful ramification, the data positioned Allocetra to be a crucial component of combination treatment for mesothelioma as well as other solid tumors. As you can appreciate, servicing the solid tumor market would unlock tremendous value for the company due to its vast size. Growing at the 15.0% CAGR, the solid tumor market is projected to reach $424.6B by 2027.

From the data presented above, you saw that Allocetra is highly efficacious even as a stand alone drug or monotherapy. Nevertheless, Allocetra has the therapeutic prowess to exponentially ramp up the efficacy of other approved medicines like the ICIs.

With combination therapy being the cornerstone of prudent cancer management, there is substantial unlocked value in the Allocetra's solid tumors franchise. As such, if the drug combo can demonstrate similar results in advanced clinical trials, this would position big pharma to acquire Enlivex. It's a no-brainer not to do so. At the very least, they would be inclined to in-license Allocetra to maximize the sales of their flagship ICI blockbusters.

Clinical Advancement

As the clinical stage is set for Allocetra to advance, you can expect much more fundamental developments from this franchise. Empowered by extremely strong Allocetra data, Enlivex is poised to commence a series of clinical studies this year for the Allocetra/ICI combo for advanced-stage solid tumors. According to the CEO (Oren Hershkovitz, Ph.D.),

Based on these results, Enlivex is planning to initiate a series of clinical trials during 2022 that are designed to evaluate Allocetra in combination with FDA-approved ICI therapies in patients with advanced-stage solid tumors. To date, we have infused Allocetra in dozens of hospitalized patients in fragile condition ... We believe that the proposed differentiated mechanism of action of Allocetra, together with the safety and tolerability it has demonstrated in these prior studies, as well as the encouraging efficacy results of our preclinical solid tumor models, highlight an intriguing opportunity for Enlivex to provide another layer of life-saving therapy for patients who have few available options.

Like a Rolls Royce set to outperform, Enlivex already completed the development of its frozen Allocetra formulation ahead of time (i.e., in Q1 this year). As you can see, this is a huge development because frozen Allocetra has tremendous advantages over the liquid formulation. Instead of 96 hours, frozen Allocetra now has years of shelf-life. Therefore, it substantially improves Allocetra's scalability and shipping logistics for a rapid ramp up. Moreover, it lowers the development and commercialization costs, thus improving profitability.

Eager to deliver a great medicine to patients, Enlivex is poised to use frozen Allocetra for the Phase 2 sepsis trial that was started back in 2021. Additionally, the company would use this excellent formulation in all future studies. Notably, the firm is meticulously working to amend the protocol for the said trial to include a wider patient base.

Specifically, Enlivex expanded the patient base to include sepsis related to biliary, urinary tract, and peritoneal infections. The vast expansion would lead to a broader label for Allocetra once approved in the future. With the inclusive protocol submission to regulators, this would push back your Phase 2 data release for sepsis by six to eight months. 

I can imagine that the market doesn't like that any form of delay. Nevertheless, I strongly believe this is a strategic and highly prudent move by the esteemed management that would massively benefit you (as a shareholder) and patients in the coming years. After all, it expedites the clinical studies and commercialization approval process by one year earlier while conferring all the aforementioned advantages. 

Similar to the Allocetra's solid tumors franchise, I also ascribed a 70% (i.e., strongly favorable) chance of robust Phase 2 clinical results and beyond for the Allocetra sepsis development. I based my rationale on prior data (i.e., the excellent Phase 1 results as elucidated above), decades of forecasting experience, and my intuition. 

Allocetra FranchisesAnticipated Clinical Development
Allocetra plus ICI for various solid tumorsTo initiate two Phase 1/2 clinical studies in 2H2022
Allocetra for sepsisOngoing Phase 2 study (estimated data report pushed back by 6-8 months due to protocol improvement for frozen Allocetra. Notably, the frozen Allocetra expedite the overall trials completion and marketing launch by 1 year ahead of schedule)

Figure 15: Various clinical advancements

Subduing COVID-ARDS

As you know, the world has recently turned upside down due to the ongoing pandemic. You have the Delta variant passed only to suffer the devastating ramifications of Omicron. Based on my understanding of the viral life cycle, I believe that COVID is here with us forever. It's likely to remain endemic, similar to the seasonal flu. As COVID mutates at 1/2 the pace of the flu virus, you're likely to see a new strain every two years. And as you need a new annual flu vaccine, you'll likely need to have a novel COVID vaccine at least biannually.

Though vaccines are overall effective, they don't work 100%. Not all people take their vaccine. You know how divided Americans are regarding COVID vaccination. Due to ineffective vaccination campaigns, patients are subjected to a potentially lethal condition coined acute respiratory distress syndrome, i.e., ARDS. Since Allocetra can subdue cytokine storms, it can be potentially efficacious for COVID-ARDS.

From the scientific view, Allocetra should work for COVID-ARDS. Nevertheless, I'm not impressed with the early data shown below. That is to say, there is no control arm to provide you with more evidence about its efficacy. If I have to forecast at this point, my intuition is telling me that it has a 60% (i.e., slightly favorable) chance of positive future data. However, Allocetra's success is not dependent on COVID-ARDS. As you can appreciate, it's closely tied to the sepsis-OF and the solid tumor franchises.

Phase 2b outcomes for Allocetra in COVID-ARDS

Enlivex

Figure 16: Phase 2b outcomes for Allocetra in COVID-ARDS

On this front, Enlivex recently announced that the company is deprioritizing Allocetra's development for COVID. You can appreciate that this an ingenious move by the management because we are at the tail end of the pandemic. As such, the variant strains are now much less severe while being more infectious. Moreover, the regulatory environment is much stricter than before. There are also several approved COVID drugs and vaccines with deep expertise in that space.

Taking all that into consideration, it's highly prudent that Enlivex deprioritized this program to divert the cash into other more fruitful innovation. Due to this decision, the cash runway is now substantially lengthened to 3Q2024.

Strong Management

One of my M7 Criteria for growth biotech is management. As you can appreciate, strong management is one of the most, if not the most, important aspects of your investment. Esteemed management can in-license new molecules to boost the pipeline prospect. Moreover, high-performance management will "walk the talk" to execute for you.

Looking at the figure below, you can see that the company Founder and Executive Chairman (Shai Novik) has a stellar track record of accomplishment. It would take a whole day to go over the accolades that the Cornell graduate with distinction (Mr. Novik) wrapped under his belt. Most notable is the fact that Mr. Novik founded Prolor Biotech, a company he later sold to Opko Health (OPK) for $560M. You might be thinking, would he do the same for Enlivex? While I can't speak on his behalf, that's a possibility.

In my view, grooming a young company to sell to a larger operator is a sign of sophisticated management. Simply put, it enables loyal shareholders to enjoy substantial rewards from the merger and acquisition. Concurrently, it allows a larger biopharma to unlock the drug's value in delivering hope to patients on a much larger scale.

robust management

Enlivex

Figure 17: Robust management

Additional Patents

Like a fruit-bearing tree that continues to yield great fruits, Enlivex announced on May 05 that the company received the issuance of US Patent Nos. 11,304,976 and 11,318,163. Having those patents, Enlivex can boost its intellectual protection (i.e., IP) in the US until at least 2036 for claims covering methods of treating sepsis with Allocetra. In sharing the good news to supporters of innovation, the CEO Hershkovitz commented,

These latest patents add important depth to the IP portfolio protecting our sepsis program, with one specifically covering the treatment of sepsis derived from pneumonia, urinary, or biliary tract infections. These are three important sepsis subtypes that we intend to evaluate in our Phase II trial of Allocetra. As we continue to advance this trial and our other programs, we plan to pursue additional patents in key geographies around the world to help maximize the value of our pipeline.

If you recall, the fact that Enlivex is seeking protocol amendment for its Phase 2 sepsis trial makes sense. After all, the company recently received more patent coverage for those additional septic indications. Riding the broader patent coverage and label for sepsis, you can appreciate that Allocetra would be a larger blockbuster than what the market anticipated.

Competitor Landscape

On the cellular therapy landscapes, the dominant players that I covered are all now acquired. An example is Kite Pharma (KITE), which is a Gilead Sciences (GILD) acquisition. Another one is Juno Therapeutics (JUNO). It's now a Celgene (CELG) subsidiary. The next-generation competitors include Nkarta (NKTX), Fate Therapeutics (FATE), and Rubius Therapeutics (RUBY).

Looking at the picture below, you can see that the next-generation cellular therapies like Enlivex enjoy key advantages. They include being off-the-shelf, scalable, and low cost. Furthermore, they focus on novel modalities. Despite the competition, you can bet that this market is large with plenty of room for all innovators. Growing at the 25.6% CAGAR, the cellular therapy niche is expected to reach $48.11B by 2027.

competing cellular therapies

Enlivex

Figure 18: Competing cellular therapies

Asides from analyzing the competitor's mechanism of action, you should briefly size up their market value. That way, you can get an idea of where Enlivex would appreciate in the future. In the figure below, you can see that Enlivex is currently valued at only $78.6M whereas competitors are worth multiple folds higher.

CompaniesModalityEstimated market cap
EnlivexMacrophage$93.3M
Kite PharmaT-cells$11.9B (Gilead acquisition price)
Juno TherapeuticsT-cells$9B (Celgene acquisition price
Fate TherapeuticsStem cells$2.3B
NkartaNK-cells$677.2M
Rubius TherapeuticsRed blood cells$117.2M

Figure 19: Comparative market analysis/relative value

With such powerful medicines, you'd expect Enlivex's market cap to be much higher. As such, I believe there is a huge mismatch in the intrinsic value of this stock versus its current market valuation. Echoing Warren Buffett's wisdom, "Price is what you pay, value is what you get." Interestingly, you can see that Enlivex is much more valuable than the price that you're paying for your shares.

Valuation Analysis

To ascertain the mismatch in Enlivex's intrinsic value, you should take a deep dive into its valuation. That way, you can gauge how much your investment is truly worth. Of note, valuation can be subjective due to various financial modeling available. There is no one size fits all approach. I noted in the prior IBI research,

Wall Street analysts typically employ a valuation method coined Discount Cash Flows (i.e., DCF). This valuation model follows a simple plug-and-chug approach. That aside, there are other valuation techniques such as price/sales and price/earnings. Now, there is no such thing as a right or wrong approach. The most important thing is to make sure you use the right technique for the appropriate type of stocks.

Given that developmental-stage biotech has yet to generate any revenues, I steer away from using DCF because it is most applicable for blue-chip equities. For developmental biotech, I leverage a combination of both qualitative and quantitative variables. That is to say, I take into account the quality of the drug, comparative market analysis, chances of clinical trial success, and potential market penetration. Qualitatively, I heavily rely on my intuition and forecasting experience over the years.

Molecules and franchises

Market potential and penetration

Net earnings based on a 25% margin

PT based on 18.3M shares outstanding and 10 P/E

"PT of the part" after appropriate discount

Allocetra's sepsis-OF

$2B (estimated based on the $33.0B severe sepsis market with a 6.0% market penetration)$500M$273.0$27.30 (90% discount)

Allocetra's cancer franchise

$2.5B (Estimated from the $424.6B solid tumor market by 2027 with a highly conservative 0.5% market penetration)$625M$341.5$34.15 (90% discount)

Allocetra's COVID-ARDS

$100M (Estimated from the $1.0B COVID market with 10.0% market penetration)

$25M$13.6$0.68 (95% discount)

The Sum of The Parts

$62.12

Figure 20: Valuation analysis

As Allocetra's still in the early developmental stage, I ascribed an extremely high discount to all three franchises. Of those franchises, COVID-ARDS received the highest discount because Enlivex is winding down this asset. Moreover, I believe this franchise also has a low chance of working. As to Allocetra's sepsis-OF and solid tumor, they have a much higher chance of success and thereby received only a 90% discount vs. 95% for COVID-ARDS.

If you view the isolated parts, the Allocetra-OF franchise is worth $27.30. In other words, this alone is worth more than the stock's current market valuation of $4.28. When you combine all assets together in the Sum of The Part (SOTP) valuation, Enlivex is worth at least $62.12. Specifically, that's 14.5X higher than the current market price, thus indicating that Enlivex is trading at a deep bargain to its intrinsic value.

Given the magnanimous mismatch, you might not believe Enlivex has such upsides. Notwithstanding, such an opportunity is available to companies flying under the radar of Wall Street. Coupled with the current Biotech Bear Market, you can imagine why Enlivex is such a great opportunity. After all, stocks are beaten down substantially. Back in the 2008 Great Recession, I bought $1,000 of Genworth Financial (GNW) to enjoy over 10 fold wins (i.e., $12,000) in the subsequent year.

Financial Assessment

Just as you would get an annual physical for your well-being, it's important to check the financial health of your stock. For instance, your health is affected by "blood flow" as your stock's viability is dependent on the "cash flow." With that in mind, I'll assess the Fiscal2021 earnings report for the period that ended on December 31.

Like other developmental stage biopharma, Enlivex has yet to procure revenue. After all, the company is still innovating rather than launching its drugs. Therefore, let's check other meaningful metrics. As follows, the research and development (R&D) registered at $12.8M compared to $6.0M for the year prior. I view the 113.3% R&D increase positively because the capital invested today can translate into blockbuster profits tomorrow.

Additionally, there were $14.3M ($0.81 per share) net losses compared to $9.5M ($0.90 per share) net declines for the same period a year prior. On a per-share basis, the bottom line improved by 10%. It's excellent for a developmental-stage company to improve its bottom line which is reflective of strong operation by the management.

About the balance sheet, there were $86.4M in cash, equivalents, and investments. Against the $19.2M yearly OpEx, there should be adequate capital to fund operations into 3Q2024. As you know, the cash runway is significantly lengthened due to reprioritization away from COVID. While on the balance sheet, you should see if Enlivex is a "serial diluter." After all, a company that is serially diluted will render your investment essentially worthless.

Given that the shares outstanding increased from 13.1M to 17.8M, my math reveals a 35.8% annual dilution. At this rate, Enlivex falls within my 30% ballpark for a profitable investment. Now, this rate is a bit high. And yet, it makes sense for Enlivex to raise capital to fund its drug through the development process, especially during this brutal bear market.

financials

Enlivex

Figure 21: Key financial metrics

Potential Risks

Since investment research is an imperfect science, there are always risks associated with your stock regardless of its fundamental strengths. More importantly, the risks are "growth-cycle dependent." At this point in its life cycle, the main concern for Enlivex is whether the company can continue to generate positive data for all three franchises.

As I ascribed an overall 65% chance of success for sepsis-OF and solid tumors, there is a correspondingly 35% chance of failure. The COVID franchise, however, has a 40% chance of posting negative data. In case of negative clinical reporting, it's likely that Enlivex shares will tumble 50% and vice versa. As a young grower, Enlivex might grow too aggressively and thereby run into a potential cash flow constraint. Be that as it may, the cash runway is quite robust.

Conclusion

In all, I maintain my buy recommendation on Enlivex with the five out of five stars rating. On a two to three years horizon, I expect the $62.12 PT to be reached. I also graded Enlivex with medium investment risk. And, I ascribed a 70% investment profitability/probability score on this company. In a nutshell, you're going to make more money on Enlivex, provided that you hold the stock for the next three years.

From the trading view, my intuition tells me that the Bear Market is exerting tremendous pressure on all stocks. And, Enlivex is no exception. Nevertheless, as we move into H2 this year, the shares are likely to rally. That's due to the additional studies to be launched for solid tumors.

Dr. Tran BioSci's M7 CriteriaStars Rating (Max 5 stars)Rationale
Medicine5/5Allocetra (Sepsis-OF, COVID-ARDS, macrophage-CART) is a potential blockbuster
Market5/5

$1B COVID market, $33.0B severe sepsis market, $272B oncology market 7.2% CAGR, and $48.11B cellular therapy niche having the 25.6% CAGR)

Money5/5$87.6M cash position estimated to last into yearend-2023
Management5/5Stellar
Maturity5/5In the aggressive growth phase (developmental stage) with multiple catalysts
Must-know catalysts5/5

Solid tumor: start two Phase 1b trial combo study in 2Q2022

Sepsis-OF: Interim data of Phase 2 in 1Q2023, Phase 2 completion sometimes 1H2023

COVID-ARDS: Phase 2B data in either 4Q2022 or 1Q2023 (Not as important as other franchises)

Money making5/5Likely to break the bearish trend for trading, good for long-term investment
Overall5/5High-quality fundamental stock

Figure 22: Dr. Harvey Tran's M7 Criteria

Despite the aggressive Biotech Bear market, Enlivex is a story of growth success. Fundamentally speaking, the company is riding on the powerful medicine (Allocetra) and esteemed management. As the molecule advances further in its development, you can expect robust clinical outcomes to break the bearish trend. In the longer horizon, Allocetra will most likely become a mega-blockbuster as it delivers hopes to patients and rewards shareholders. By having prudent management, it's highly likely that the company will continue to expand its pipeline to deliver additional value for you. An acquisition is certainly a possibility because this management has a track record that favors mergers and acquisitions.

As usual, I'd like to remind investors that the choice to buy, sell, or hold is always yours to make. In my view, you should build a full position while waiting to see if the stock trades lower to purchase more. Thereafter, you should wait patiently for the next bull market cycle.

I remember a philosopher once said that patience is the most difficult and powerful of all virtues, for its power grows irresistibly with time. If you're patient with Enlivex, you're likely to reap the most rewards.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.

Business relationship disclosure: Due to my medical and market expertise, companies and third parties like GuidePoint Advisors hired me as a paid consultant. Though being in the industry gives me expert insight on the forefront, my views may not be completely objective. On March 7th, 2022, I entered into a paid consulting Agreement with Enlivex to provide consulting, investor relations, and scientific writing service. After a mutually agreed temporary paused onApril 1st, I resumed my working relationship with Enlivex on May 7th. See complete disclosure and disclaimer at www.drtranbiosci.com/...

Additional disclosure: As a medical doctor/market expert, I'm not a registered investment advisor. Despite that I strive to provide the most accurate information, I neither guarantee the accuracy nor timeliness. Past performance does NOT guarantee future results. I reserve the right to make any investment decision for myself and my affiliates pertaining to any security without notification except where it is required by law. I'm also NOT responsible for the actions of my affiliates. The thesis that I presented may change anytime due to the changing nature of information itself. Investing in stocks and options can result in a loss of capital. The information presented should NOT be construed as recommendations to buy or sell any form of security. My articles are best utilized as educational and informational materials to assist investors in your own due diligence process. That said, you are expected to perform your own due diligence and take responsibility for your action. You should also consult with your own financial advisor for specific guidance, as financial circumstances are individualized. That aside, I'm not giving you professional medical advice. Before embarking on any health-changing behavior, make sure you consult with your own doctor.