ATNF; Anti-Inflammation leaders INflaming the shorts
DISCLAIMER
This is in no way, shape or form, fluid and function, an analytical, qualitative or intelligent compte rendu. There is absolutely no financial advice here because the only financial advice I can give is to research, research, and research. The purpose of this analysis is to serve as an example of an investigation into a company's background, fundamentals, and assets through various lenses to determine if it is a good potential investment for you. The function of this write up is to serve as an educational resource for investors looking to understand how to find good investments. So read and learn some things about a company that might just revolutionize the world of Inflammation.
180 Life Sciences
ir.180lifesciences.c.../company-information
In the simplest terms, 180 Life Sciences is a holdings company for 3 drug pipelines and a ton of patents. Three labs are running research, and in turn clinical programs for 3 separate drugs targeting pathways of inflammation. A method of selling research is to make a company holding a patent then sell said company, and this is not one, but three of those. The company itself doesn't matter so much in that it has no role other than a front office for 3 formidable programs that are ready to cash in and get bought by big pharma. The only thing unclear to me is if the company is looking to package all three as one and get acquired by one big pharma, or if this is going to become a branching company, where they can sell pipelines as a "plug and play" if you will. Either way, the company is set to dominate some headlines and have an exciting summer.
180 Life Sciences merged with a SPAC in November last year, and have been chugging along since. The team is impressive, consisting of some legendary scientists, legendary biotech drug leads, IPO/Acquisition specialists, and friends/former partners. The CEO was Chairman of another biotech, does venture capital, was President of Roche, CSO of Centocor (who made Infliximab which was bought by J&J, currently among most profitable drugs, also worked with one of program leads on that project). The Science Director is an immunologist herself, with a strong resume from NVO, academic-industry consortium KIR/SGC, publishing for Bayer, Celgene & GSK. CFO has history of acquisitions, serving as CFO for 2 of the "companies" that merged into this current iteration. Strong history in biotechs as CFO, venture capitalist, and former lead banker on M&A deals. This guy has one purpose, and that is to sell. CSO has a 34 year history with biotech startups, making a few of his own before heading back into academia.
The presentation doesn't give much of an insight into the long term plans of ATNF, but there is no mention of ramping up manufacturing, or even exploring manufacturing parameters, nor attempts to go to market. The company also doesn't make a single mention of planning into phase 4, which gives me the sense they never plan on it and aren't thinking of it at all. They either aren't thinking of it because they are in talks to be acquired or are just uninterested in wasting time thinking or talking about something when they are so sure of being acquired. That doesn't mean they are going to be acquired, just that they have some notions of it.
The books are clean, fundamentals don't much matter as most of the work is paid via grants and a $10M private debt offering, which has been mostly paid off already (316k left). There isn't much to say here to the books. The only important thing is that management owns over 50% of the shares, and growing via insider buys direct from market.
www.nasdaq.com/marke...tnf/insider-activity
Science/Pipeline
This is the part where I try and break down "sciencey" stuff to more edible pieces. Science is a lot like every other specialty field, including Finance, where there is a special language with a lot of words not found anywhere else, that are more slight modifications than something completely novel. I genuinely believe that everyone can learn this stuff, so I want to take some time to teach it. Plus, you should always know what you are investing in, knowledge is the ultimate weapon.
This is in no way, shape or form, fluid and function, an analytical, qualitative or intelligent compte rendu. There is absolutely no financial advice here because the only financial advice I can give is to research, research, and research. The purpose of this analysis is to serve as an example of an investigation into a company's background, fundamentals, and assets through various lenses to determine if it is a good potential investment for you. The function of this write up is to serve as an educational resource for investors looking to understand how to find good investments. So read and learn some things about a company that might just revolutionize the world of Inflammation.
180 Life Sciences
ir.180lifesciences.c.../company-information
In the simplest terms, 180 Life Sciences is a holdings company for 3 drug pipelines and a ton of patents. Three labs are running research, and in turn clinical programs for 3 separate drugs targeting pathways of inflammation. A method of selling research is to make a company holding a patent then sell said company, and this is not one, but three of those. The company itself doesn't matter so much in that it has no role other than a front office for 3 formidable programs that are ready to cash in and get bought by big pharma. The only thing unclear to me is if the company is looking to package all three as one and get acquired by one big pharma, or if this is going to become a branching company, where they can sell pipelines as a "plug and play" if you will. Either way, the company is set to dominate some headlines and have an exciting summer.
180 Life Sciences merged with a SPAC in November last year, and have been chugging along since. The team is impressive, consisting of some legendary scientists, legendary biotech drug leads, IPO/Acquisition specialists, and friends/former partners. The CEO was Chairman of another biotech, does venture capital, was President of Roche, CSO of Centocor (who made Infliximab which was bought by J&J, currently among most profitable drugs, also worked with one of program leads on that project). The Science Director is an immunologist herself, with a strong resume from NVO, academic-industry consortium KIR/SGC, publishing for Bayer, Celgene & GSK. CFO has history of acquisitions, serving as CFO for 2 of the "companies" that merged into this current iteration. Strong history in biotechs as CFO, venture capitalist, and former lead banker on M&A deals. This guy has one purpose, and that is to sell. CSO has a 34 year history with biotech startups, making a few of his own before heading back into academia.
The presentation doesn't give much of an insight into the long term plans of ATNF, but there is no mention of ramping up manufacturing, or even exploring manufacturing parameters, nor attempts to go to market. The company also doesn't make a single mention of planning into phase 4, which gives me the sense they never plan on it and aren't thinking of it at all. They either aren't thinking of it because they are in talks to be acquired or are just uninterested in wasting time thinking or talking about something when they are so sure of being acquired. That doesn't mean they are going to be acquired, just that they have some notions of it.
The books are clean, fundamentals don't much matter as most of the work is paid via grants and a $10M private debt offering, which has been mostly paid off already (316k left). There isn't much to say here to the books. The only important thing is that management owns over 50% of the shares, and growing via insider buys direct from market.
www.nasdaq.com/marke...tnf/insider-activity
Science/Pipeline
This is the part where I try and break down "sciencey" stuff to more edible pieces. Science is a lot like every other specialty field, including Finance, where there is a special language with a lot of words not found anywhere else, that are more slight modifications than something completely novel. I genuinely believe that everyone can learn this stuff, so I want to take some time to teach it. Plus, you should always know what you are investing in, knowledge is the ultimate weapon.
- Synthetic CBD Analogs (SCA)
180lifesciences.com/scas/
I want to start with this one as I think it is the best program they have in the short term. First, I want to break down the title so no one gets thrown.
Synthetic means human made, with the connotation of being made in the lab in an easier process than by growing and taking from plants.
CBD being cannabinol, which is one of the compounds in marijuana and hemp thought to act as an anti-inflammatory, but not as the psychoactive (meaning doesn't get you high).
Analog is something that is very similar, but with small changes. In the drug discovery process, hundreds of thousands of chemicals are tested to look for something that works. From there, the "hit" compounds are taken and modified in every possible way to look for something that does the job better. These are analogs of that original compound.
The major idea here is to modify the base CBD to enhance its function as an anti-inflammatory. This can be done in a few ways: Finding a modification that enhances the "binding capacity" to the target receptor for the pathway - meaning it does a better job of activating its specific target. Increasing the half-life of the compound - preventing the degradation of the drug so that it can do its job more and more, for longer and longer. Increasing Bioavailability- everything you eat doesn't get taken up by your body, finding a way to get more of the drug into your body and to the targeted area increases the effect of the drug, reduces manufacturing costs, etc. There are major considerations that go into all of these decisions, reasons to not want to do one but to do the other, etc.
The awesome thing about this program is that it is being led by the legend who discovered THC and its affected system. If there was a lab to carry this work out and succeed, its this one! Dr. Raphael Mechoulam runs the lab, but is not the lead on the program, especially as it has transitioned to clinical. I won't go into him or his work, check out www.healtheuropa.eu/...abis-research/93049/ if you want to know more. I think this is the best program at ATNF currently, with the most potential to get acquired, funding this venture and shareholders.
SCA isn't just a way to make money off of CBD, there is a serious need here. CBD is awesome, revolutionary for health, cannot wait for more scientific and medical studies on long term CBD use until the eventual "CBD is a vitamin now" articles. However, it has serious drawbacks. While I love nature, green stuff, etc., CBD through growth is unsustainable. Finding a way to make it in the lab would make it actually viable for a large market. Furthermore, CBD isn't terribly effective. It hasn't shown much effect in scientific trials for humans looking at specific things. By enhancing its abilities as an anti-inflammatory, it could work in a safe and effective way to ease pain and reduce inflammation. Inflammation is a really interesting systemic issue that I will not go into a diatribe on, but basically your body is inflamed all the time and its killing us all extremely slowly. I can totally see a safe and effective CBD be considered a panacea for humanity. Making a more effective CBD could be huge, not just commercially, but medically.
Please see the pdf link on the page! This is the part where I wish I could in-line pictures to explain the figures in detail more effectively. The first figure on the bottom right is showing that the SCA ATNF has, has a 3x bioavailability as normal CBD. The figure on slide 3 shows my hypothesis pretty cleanly. The arthritis is caused by a special drug, so it is artificial arthritis, but the effects are amazing. This is with normal CBD at a pretty high dose (25milligrams/kilogram which translates roughly to .003 pounds of CBD for a 150 pound person, and that is IF that’s the same dose for humans, which it would probably need to be much higher due to the nature of our metabolism, tissue specificity, etc.). I am sure they are keeping their SCA close to the chest.
The short term market is huge, and the long term is even bigger. I know there are a lot of competitive programs out there, and the crowd is feeling a little heavy, but I wouldn't undervalue this program.
- Fibrosis & Anti-TNF
180lifesciences.com/...brosis-and-anti-tnf/
TNF is Tumour Necrosis Factor, and while you think its name is important, its not. The naming schema of proteins is genuinely abstract and is based on their discoveries, which rarely turn out to be their true functional discoveries. TNF is in the inflammation pathway, a ton of research that shows it does a bunch of things, rather confusing mechanism over all, but the basic functional output being inflammation. Going after TNF for inflammation isn't new or special, in fact its been done and is at market. In fact, the scientist who brought the last one to market is the one bringing this one forward. Enter Professor Sir Doctor Marc Feldmann, very important in infliximab development (expected to have $7.5 billion market in 2023), one of the leads of this program.
Browsing the Phase 2a paper from 2018 (found www.sciencedirect.co...ii/S2352396418302299), I am curious why they started after this disease, and not going after the underlying condition, unless its to go after an orphan drug status that can cut into the main market much quicker. If that is true, and they are doing this because infliximab is unable to produce a response in DD (the random disease), and theirs can, then how much better is Adalimumab (ATNF anti-TNF monoclonal antibody)?
If CBD is going after one pathway of inflammation, this one is something all together different. I have no idea how widespread the marketability for any of these drugs is, but if Adalimumab is better than Infliximab, I am sure it is going to be a smash. The fact the drug made it through Phase 2a with some speed, and Phase 2b/3 is projected to be out by Q4 2021, I can only imagine a really exciting Winter season for ATNF, good or bad I don't know.
- a7nAChR
180lifesciences.com/a7nachr/
This is a protein, the Alpha-7 nicotinic receptor. Ignore the nicotinic part, smoking nicotine is not going to act like this drug. The Wikipedia page is pretty good for this, see en.wikipedia.org/wik..._nicotinic_receptor. The medical relevance section is interesting, PubMed (science google) search pops up primarily with cancer stuff. The primary market target for FDA clearance is in ulcerative colitis in ex-smokers. Essentially, one of the effects of smoking nicotine is an odd anti-inflammatory pathway that kind of protects the body from some of the rather unpleasant effects of smoking. As smokers stop smoking, some of these changes result in ulcerative colitis, which won't kill you like smoking does, but it hurts.
ATNF makes note that major pharmaceuticals tried, and failed, to use a7nAChR drugs for Alzheimer's, but they were safe. I don't know if this is them suggesting that their drugs were safe, and thus so will ATNF's, or if it isn't a little foreshadowy hint that theirs is so much better that it may have the efficacy to meet clinical endpoints? If other companies already have a7nAChR drugs, why would this be exciting. Maybe they get a few months lead time for ulcerative colitis treatment, but then they are in a crowded field if they try to bring to market themselves, and few others would look to acquire. Their pdf says there is a $6.6 billion market for this, and I could definitely see ATNF having commercial success, providing them the runway for a longer out pipeline, but compared to the others, this lacks a certain spark to me. However, this is probably the one with the most significant near term attributes if they get clearance to fly through early phases by the FDA.
180lifesciences.com/pipeline/
The pipeline is super important to keep an eye on and mark your calendars if you want to look for solid times to hop in and out for catalysts. The one thing I will mention for those of you focused on NASH (a liver fibrosis), anti-TNF therapies are cool, but there are a few others closer to the trigger than this one and have much cooler mechanisms, and safer, than this one. I would not put much weight in the NASH segment for now, unless their results are something stellar.
Share Float & Investors
There is a bit of confusion and misinformation over ATNF's true share volume and float. To that end there is some confusion to ownership percentages. I did what any prospective investor should do: I contacted 180 Life Science's Investor Relations officer Justin. We had a very pleasant, and brief, chat about this, concluding that the true volume is around 29-30 million shares (he forgets the specific decimal on hand), with insider ownership more than 50% and a significant majority of shares locked until November, he approximated the float between 7-9 million shares depending on latest institutional numbers. Furthermore he clarified that the large short interest could be a product of miscalculation of the actual float, but I do not agree with his guess. The run in February was impressively high volume for such a tiny stock float, and it looks like the shorts did not cover during, and haven't been able to cover since. It looks like every buyer is holding, with shorts only about to cover 500k shares and 2.5million left as of May 14th. There hasn't been sufficient volume since then to cover the short interest, and watching FINY and ARCX light up during the past 2 days, my guess is that short interest is growing, rather than shrinking.
With the recent news of directors taking a cash pay decrease for increased shares, and a constantly touted >50% insider ownership, there is very little to worry about. That is until the recent increase in shares held, calls & puts. This is a telltale sign of malicious behaviour by Citadel, essentially they are using the shares they own on book to use as the leverage for more and more call and put writing. Next, they use the calls and puts to sell phantom shares via ARCX, their private dark pool exchange, and then they sell phantom short shares via FINY. Each call/put is 100 or 200 phantom shares, depending on if they are double dipping on both of the phantom share sides for calls and puts and nut just leveraging them. That means that May 21st 13F from Citadel means they could have around 14.6 million phantom shares circulating, meaning they could easily control the entire "price discovery" process. This is, of course, my own hypothetical speculation, as well as how I would abuse the system and my role as Market Maker, Associated Partner of ETFs, Broker, Dealer, Buyer, Seller, and probably something else too.
If the float is 7-9 million shares, Institutions own ~5.2 million shares, mutual funds own about ~1M shares, I own about 2000, so that just about means the float is taken. And with a serious fundamental background with 3 distinguished and proven scientists working on 3 critical pathways targeting a seriously unmet need in medical care, an acquisition is imminent with a high price tag given the extensive market capitalization each drug brings; shorts are screwed. Given the current atmosphere and the investor shift, as well as my own shift in investor mentality, I can see a squeeze happening extremely painfully for bears. If there is only 2-3 million shares in the float, ~2.5M +/-.5M shorts, possibly equal number of phantom longs, I cannot imagine anyone getting out of this one unscathed.
finance.yahoo.com/ne...p-ceo-123000731.html
whalewisdom.com/stock/kblm
www.cnbc.com/quotes/ATNF?tab=owners...
shortsqueeze.com/?symbol=atn...
www.nasdaq.com/marke.../atnf/short-interest
fintel.io/somf/us/atnf
Bear Theory
The bear theory can cover a lot of ground. For starters, the company is 4-6 months out from getting any serious clinical data, and of that, who knows how good it really is. If it isn't stellar, investor confidence will break and the shorts can walk away with a massive gain. Furthermore, the company doesn't have a clear follow up plan, nor back up plan, so any major hindrance is going to result in more than just bad press; it will set back any company plans extensively, cutting them off at the knee caps. Throw on top the current competitors for any particular program, and the growing list of "breakthrough" biotechs with attractive drug pipelines and possible market capitalizations, maybe ATNF et al. don't deserve the $10+ billion acquisition costs they have gotten in the past. If everyone is special, then no one is special. These companies don't care who they are curing, just that they are curing for money, so any disease pledge is bullshit. I have personally been affected by big pharma's walking away from their pledge in treating specific diseases, despite getting funding for it. Don't trust them.
The extensive timeline any acquisition will require to build up as an explosive catalyst is going to be greater than the average retail holder stays in any given investment, and if retail is holding ~5 million shares, how long can they really do that? Especially if we can expect a flood of shares possibly hitting the market in November. Does retail have the "diamond hands" to hold until acquisition or positive phase 2b news? History, and internal analytics, would suggest no, but with the recent shifts in market dynamics, this might prove to be a false thesis. Either way, its important to remember that short sellers don't lose money until they cover, meaning if they have the margin, they can hold far longer than you'd like them to.
Bull Theory
The bull theory is fairly obvious given my financial erotica so far; three amazing professors from three top tier labs led by a top tier CEO who served as the lead for the most profitable drug of all time, all doing sensational work expected to fly through clinical trials, until an obvious acquisition carrying a price tag, of not one successful multi-billion dollar yearly market capitalization, but three. Skipping the long term acquisition price tag, there is a good chance that ATNF sees some greater volume with any positive catalyst, especially as it gets built up with greater returns, social media presence and technical traders.
Disclaimer
Thank you for reading this analysis. The sole purpose of these are to serve as an educational resource for any one to gain an understanding of what to research when deciding to make an investment. If there is any material in this analysis that you feel could be explained better, or in more detail, or even if you have just a little question, let me know! As I develop this skill, my aim is to expand the reach of these articles to cover more topics to a wider audience. Feedback helps me grow, so I am happy to read the comments.
For legal reasons, this is not financial advice, I really really really cannot stress that enough. Furthermore, I do own 2058 shares at a price of $7.993 per share. This information is given due to European financial regulations, not as financial guidance. This information is only accurate as of the date of publication, June 2nd, 2021. The original, and only version published by me is on Tradingview.com.