A highly bearish case is presented for Inmune Therapeutics (INMB) following the complete failure of its Alzheimer's drug trial. The drug failed its primary endpoint, and the company's positive spin on subgroup data is a common tactic with a historically low chance of success. With significant safety issues and a weak financial position, the analysis suggests the stock is a strong sell or short candidate. A price target of $0.50 to $1.00 is proposed for INMB. It is expected that the stock will trade below its cash per share, a common outcome for failed biotech companies.

Inmune Therapeutics (INMB)

• The central topic of the podcast is the failure of Inmune Therapeutics' drug trial for Alzheimer's disease. The speaker, Martin Shkreli, presents a highly bearish case for the stock.
• Primary Endpoint Failure: The most critical takeaway is that the drug failed to meet its primary endpoint. In fact, the placebo group performed slightly better than the drug group, which is described as a "really, really remarkable failure."
• Misleading "Spin": The company's presentation is characterized as a "spin job" that attempts to find positive signals in the data by focusing on subgroup analysis.
  • The speaker argues that this subgroup analysis is not statistically significant and is a common tactic used by companies to "save face" after a trial failure.
  • He notes that even in the "best" subgroup the company could find, the effect size (measured by Cohen's D) is so small it would be "imperceptible to patients."
  • Historically, such post-hoc (after the fact) subgroup analyses in biopharma have a 99% failure rate when companies try to replicate them in new trials.
• Safety & Tolerability Issues: The drug appears to have significant side effects.
  • There was an 80% rate of injection site reactions in the drug group, compared to none in the placebo group.
  • There was also a 30% rate of hypersensitivity.
  • The speaker notes these are not minor issues and suggest the body is having an immune response to the drug.
• Financial Position: The company's financial health is weak.
  • They have roughly $19 million in cash but burn $6 million per quarter.
  • This equates to about $0.75 cash per share.
  • The speaker predicts the stock will trade below its cash value, which is common for failed biotech companies.
• Price Target: A specific price target of $0.50 to $1.00 is mentioned, implying a catastrophic drop in the stock's value.

Takeaways

• The analysis presents an extremely negative outlook for INMB. The speaker's core argument is that the company's lead drug is a complete failure, and there is nothing of value left.
• The speaker explicitly states, "if you could sell it or short it right now I mean, I would," indicating a strong conviction that the stock price will fall significantly.
• Investors should be highly skeptical of any positive spin from the company regarding subgroup data, as the primary goal of the trial was not achieved.
• The company is unlikely to continue developing this drug due to the "horrible data" and lack of cash, leaving it with little to no pipeline value from this asset.
• The company may not go out of business entirely but could become a shell company for a reverse merger.

Biotech Sector Investing

• The discussion provides several broader lessons for investing in clinical-stage biotechnology companies.
• Primacy of the Primary Endpoint: In a clinical trial, the primary endpoint is the main goal that the trial was designed to measure. The speaker emphasizes that this is "everything" and the "only thing that any serious person would consider." All other data, like subgroup analysis, is a "sideshow."
• Skepticism of Subgroup Analysis: Investors should be extremely cautious when a company's trial fails its primary endpoint but they highlight positive results in a small subgroup of patients. This is often referred to as "data dredging."
  • These findings are often random statistical noise and are very rarely replicated in future, larger studies.
• Binary Events: Clinical trial readouts are binary events that can lead to massive gains or, as in this case, massive losses. The speaker warns listeners to be wary of "promoters" who give false hope and to do their own deep analysis.
• Valuation of Failed Biotechs: It is common for biotech companies to trade below their cash on hand after a major clinical trial failure, as the market loses confidence in management's ability to create value with that cash.