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    Stock Market - What stocks are on your radar for next week?

    June 12, 2020

    Stock Market - What stocks are on your radar for next week?

    What stocks are on your radar for next week?

    Posted: 12 Jun 2020 03:42 AM PDT

    Bankrupt Hertz Seeks Permission To Raise $1 Billion In Preposterous New Stock Sale

    Posted: 12 Jun 2020 06:50 AM PDT

    I know this has been plastered all over /r/investing and /r/stocks already but it only feels right to share it here too. TLDR: Hertz still has almost 250 million shares authorized (but not outstanding) and they want to sell them to raise $1 billion to fund their bankruptcy.

    I thought I had seen everything in this market but this just shows you that nothing is off the table. Before you buy HTZ, please realize that if you participate in this offering (if it even ends up being allowed, which is questionable), all you're doing is paying off HTZ debt and throwing money at Jeffries for underwriting it.

    On the flip side, given the current market conditions, it's not the worst idea and while IMO it's disgustingly predatory I can't say I blame HTZ for trying to take advantage of this market nonsense. If they do manage to convince a court to allow this, it actually does give equity holders a chance to get something which they certainly won't get if it just goes the pure bankruptcy route. I suppose if you just have blind faith that HTZ can come out of bankruptcy and be a better company then it makes sense to gamble on it, as long as you realize you're buying something for $4 a share that is literally worth zero. This is truly the greater fool theory in action. What a time to be alive lol

    I'm really curious to hear your opinions on this, especially younger people.

    Link: https://www.forbes.com/sites/christopherhelman/2020/06/12/bankrupt-hertz-seeks-permission-to-raise-1-billion-in-preposterous-new-stock-sale/#5ec31dce5483

    EDIT: It's approved! You can buy $1B of worthless equity now! Hooray! Thanks /u/newredditerman

    submitted by /u/ghostofgbt
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    Markets could rally another 47%, according to JP Morgan

    Posted: 12 Jun 2020 07:19 PM PDT

    Be careful out there

    Posted: 12 Jun 2020 07:39 AM PDT

    If there's anything that points to over-optimism in the stock market, it's the sheer amount of people making investment decisions without doing proper research.

    If you invested without taking one look at all 3 financial statements, without calculating key financial ratios and their trends over time, and without calculating a true value of the stock, you've only gotten lucky if you've done well. And the problem with that is, you'll eventually be unlucky.

    A KEY component of doing well in the stock market for a long period of time is humility. If you dont stay humble, the market WILL put you in your place. Be careful out there guys.

    As a side note, lots of investors are suffering from price anchoring right now, which is basically assuming the stock price will reach a certain price based on historical prices.

    From Investopedia (changed the last 3 words to all caps for emphasis): "Historical values, such as acquisition prices or high-water marks, are common anchors. This holds for values necessary to accomplish a certain objective, such as achieving a target return or generating a particular amount of net proceeds. These values are unrelated to market pricing and cause market participants to REJECT RATIONAL DECISIONS."

    submitted by /u/alpha_investor
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    Is wall street currently playing game with amateur traders?

    Posted: 12 Jun 2020 04:58 PM PDT

    Cramer thinks Wall Street pros may be playing a game with amateur Robinhood traders

    https://www.cnbc.com/2020/06/12/cramer-thinks-wall-street-pros-may-be-playing-a-game-with-amateur-robinhood-traders.html

    What do you think?

    submitted by /u/livinginahologram
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    Bloody Monday DD

    Posted: 12 Jun 2020 05:36 PM PDT

    This year, there were 4 times with -5% or more. All 4 days had green days next day. But all 4 times, brutal bloody days followed. I cant say if this apply for next Monday but you guys should be careful.

    https://www.investing.com/indices/us-spx-500-historical-data

    https://www.marketwatch.com/story/heres-how-the-stock-market-tends-to-trade-after-brutal-selloffs-like-thursdays-2020-06-11?mod=mw_latestnews

    submitted by /u/Greenland610
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    How do you guys control emotions when trading.

    Posted: 12 Jun 2020 10:26 AM PDT

    I have always been an investor vs a trader but after wiping out most of my gains in March, I have started to look into trading to make the money back.

    But after 4 attempts I decided it isn't for me, I get too stressed too quickly. I had bought TVIX at 126 but then it started dropping and fear took over, I went out with a small loss. Now I look at TVIX and it's at 210+, and I think back saying " I shouldn't have taken out" or even more so "Why didnt I go back in".

    I fear the loss so much that I don't think I can trade, so wanted to get some tips on how you guys do it. Do you set fix rules and do you only day trade or also swing trade?

    Thanks!

    submitted by /u/Manjal
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    An Exercise in Insanity: Understanding a Secondary Offering (IZEA in the Spotlight)

    Posted: 12 Jun 2020 01:26 PM PDT

    This post is inspired by this question by /u/rjbblu and started as a simple comment but turned into something I felt deserved its own post. TLDR at the bottom, and read the original question before reading this for some context. The basic question here is "bruh, WTF does this SEC filing even mean?" and I thought it would be beneficial to see how they all connect, so here ya go:

    Let's start with the filing in question, the one in the OP. Notice it says:

    AMENDMENT NO. 1 DATED JUNE 12, 2020

    To Prospectus Supplement dated June 4, 2020

    (To Prospectus dated June 2, 2020)

    So, we should start w/ the June 2 prospectus to really understand what's going on. That filing is a 424B3, a prospectus statement to a previous securities registration agreement (i.e. a plan to sell a bunch of shares in a secondary offering, like a second IPO to raise more money): https://www.bamsec.com/filing/149523120000072?cik=1495231

    That filing in itself, if you start reading it, is actually a followup to an even earlier filing, the S3, which is where all this begins: https://www.bamsec.com/filing/149523120000063?cik=1495231

    The S-3 is the preliminary registration agreement, basically a "fill in the blank" version letting the SEC and the market know that they plan to register some securities to be sold, and they will give you any missing details in a future prospectus, hence the quote right at the top of it:

    The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

    PROSPECTUS Subject to completion, dated May 22, 2020

    So ok, let's start with the S3:

    Basically, they want to sell a maximum of $75 million in shares "from time to time" which is known as a shelf registration. In simple terms, they are "pre-registering" these shares (putting them on the shelf) to allow them to quickly register and sell them later on:

    This prospectus relates to common stock, par value $0.0001 per share, of IZEA Worldwide, Inc. that we may sell from time to time on a continuous or delayed basis directly by us, through agents, dealers or underwriters as designated from time to time, or through a combination of these methods up to a total dollar amount of $75,000,000 on terms to be determined at the time of sale.

    In this document is a bunch of information such as info about the types of securities they may offer (stocks, warrants, bonds, whatever), their plan of distribution (how they will be sold) and so on. You can read through the S3 to get a big picture view of the plan.

    Now diving into the 424B3 filed on 6/2/2020, this is the actual prospectus to the S3, which contains all the missing details that weren't in the that filing. In this case, most of the info was in the shelf registration, so the 424B3 pretty much just specifies the date and is a technicality that must be filed. It does contain one crucial piece of info though:

    By means of this prospectus, we are offering $75,000,000 of our common stock pursuant to General Instruction I.B.6 of Form S-3. As of May 14, 2020, the aggregate market value of our outstanding shares of common stock held by non-affiliates, or the public float, was $22,985,171, which was calculated based on 32,630,851 shares of outstanding common stock held by non-affiliates and on a price per share of $0.70, the closing price of our common stock on May 14, 2020. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell our common stock in a public primary offering with a value exceeding more than one-third of our public float in any 12-month period so long as our public float remains below $75,000,000. We have not offered any securities pursuant to General Instruction I.B.6 of Form S-3 during the 12-calendar months prior to and including the date of this prospectus.

    Um. wat. Ok it's a lot easier than it sounds. Basically what this means is that until the value of their public float rises above $75,000,000 (float is kinda like their market cap, but it excludes insider holdings, locked up shares and stuff like that - it's a better measure of shares that can be traded by the average joe investor), they are not allowed to sell more than 1/3 the float (i.e. more than $22,985,171 / 3) in any 12 month period. If their float goes above $75M, then they can sell more. That's a standard regulation that is applied to all small companies, so that they don't just dump a huge offering on the market and dilute existing shareholders too much.

    There's also one other filing that comes into play at this point: the EFFECT This filing is filed after the SEC gets everything organized and checks all the paperwork, and basically makes the S3 and the 424B3 legally effective, so now they can sell some of the registered shares on the shelf.

    Ok, we're almost to the filing in question...stick with me here, I promise it'll be worth it. Now let's look at the 424B5 filed on 6/4 as a supplement to the 424B3 just discussed. This filing is slightly different in that it is an actual offering. Specifically, it's an offering for up to $10 million in shares of the $75 million that they previously registered with form S3, described in detail on form 424B3, and then effected with the EFFECT. You'll see that same key piece of info from above in this filing as well, updated to change a couple dates and stuff, and with one key extra sentence:

    As of May 31, 2020, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $22,985,171, based on 32,630,851 shares of outstanding common stock held by non-affiliates, at a price of $0.7044 per share, which was the last reported sale price of our common stock on The Nasdaq Capital Market on May 14, 2020. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell securities registered on the registration statement of which this prospectus supplement is a part in a primary offering with a value exceeding more than one-third of our public float in any 12-month period so long as our public float remains below $75.0 million. During the 12 calendar-month period that ends on, and includes, the date of this prospectus supplement, we have not sold any amounts pursuant to General Instruction I.B.6. of Form S-3. As a result, we are eligible to offer and sell up to an aggregate of $7,661,724 of shares of our common stock pursuant to such instruction.

    Easy right? Just some simple math: $22,985,171 / 3 = $7,661,724 ... one third their public float.

    Finally we get to the filing in question, the supplement to the supplement to the prospectus to the S3 which was effected by the EFFECT (lol): This is another 424B5.

    This one is similar to the last 424B5, but this time it's an offering for up to $40 million in shares. "But /u/ghostofgbt, what about the public float thing? I thought no more than one third their public float could be sold?! WTF mate?" Ok, it's simple:

    In accordance with the terms of the ATM sales agreement, we may offer and sell shares of our common stock, $0.0001 par value per share, having an aggregate offering price of up to $40,000,000 (which amount includes shares we have already sold pursuant to the sales agreement prior to the date of this amendment) from time to time through the sales agent. As of June 11, 2020, we have sold an aggregate of 4,451,901 shares of our common stock pursuant to the sales agreement for gross proceeds of $10,000,000.

    So they have completed the offering from June 4th (I believe the reason they were able to go above the original $7.66 million in that and go up to $10M is that selling shares actually increases the public float, so there's a bit of a "we can now sell more cause the float is higher cause we sold more shares" thing going on there, but someone can correct me if I'm wrong ... I'm not a securities lawyer). Anyway - now we get to the real reason for this supplement: they're allowed to sell more shares from the shelf now!

    As of the date of the prospectus supplement on June 4, 2020, we were subject to General Instruction I.B.6 of Form S-3 as a result of our public float being less than $75.0 million, which limited the amount of securities we could sell under the registration statement of which the prospectus supplement forms a part during any 12-month period. The aggregate market value of our common stock held by non-affiliates has subsequently increased above $75.0 million. As of June 11, 2020, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was $104,573,361, based on 37,082,752 shares of outstanding common stock held by non-affiliates as of June 11, 2020 and the last reported sale price of our common stock on June 11, 2020 of $2.82.

    So, after a very long journey, we arrive at the TLDR:

    IZEA filed a $75 million shelf registration statement back in May, then filed the prospectus for it on June 2. Subsequently it was EFFECTed on June 3, and on June 4 they actually used it. At the time they were only able to sell $7.66M of stock due to their public float being below $75M. Since completing that offering though, the public float has increased to $104M, (through a combination of selling shares in the previous offering and also a ridiculous upward move in the stock price), putting them above the threshold which was limiting them to only selling 1/3 the float in a 12 month period, so now they're offering to sell up to $40 million of their $75M shelf, which includes the $10 million they've already sold (so, $30M more).

    I don't know why I wrote all that, but I hope it helps. Thanks for coming to my ted talk.

    submitted by /u/ghostofgbt
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    Price anchoring effect

    Posted: 12 Jun 2020 09:00 AM PDT

    So yesterday there a was a post on this group that said something along the line "How are you going to take advantage of the current market discounts?", which was later removed by its author..

    I am not a financial or investing expert, but the way I see the market going up or down, I have a feeling that people have short memory and adjust to the "new reality" too quickly. Let me explain what I mean.

    If a stock was priced at $10 two weeks ago, and then 2 weeks later it is priced at $100 because the company achieved something revolutionary that makes it more competitive, or unique on the market in the face of its competitors - then yes, a subsequent drop of 6% could be considered as a discount and a bargain that can be taken profit of. The way I see this stock, its price has raised because the company has increased its intrinsic value.

    Now, if another company's stock was $10 two weeks ago, and then 2 weeks later it is priced at $100 because it was simply caught in a wave of excitement and people blindly bought it for no underlying reason - then in this case, I personally don't consider a subsequent drop of 6% a discount. The stock is still overvalued, for its increase from $10 to $100 is not justified by a fundamental metric. (spare me the talk about how currently fundamentals don't work).

    ​

    Let me give you another two analogies, maybe this will strike home better to some people.

    ​

    Analogy 1: You favorite chocolate, which cost $1 two weeks ago, suddenly became priced at $10. It is the same chocolate, nothing changed about it's ingredients, weight... ok, maybe its packaging became fancier, but that's all. Now, one day you see the price is now $5. Will you consider this a bargain, 50% discount holly s**t, and buy the product, or maybe buy it in bulk to stock up in case the price goes up again? Or, are you simply going to realize that the price increase from $1 to $10 was unjustified to begin with, and even at $5 it still remains unjustified? Maybe you buy a different chocolate from a different brand? Or maybe you don't buy the chocolate altogether, and save your money to boycott them (the chocolate company)?

    Analogy 2 (this might be a bit extra, but I think it does convey the idea that I mean in an unorthodox way, pun not intended): So your spouse, who has been good to you, suddenly starts being aggressive and beats the crap out of you. You don't understand why, and you don't question it. Then one day, the spouse stops beating you, but they continue to be aggressive by verbally attacking you. Now, do you think that this is still better than being physically abused, so you settle for this? Or, do you call this BS and get a divorce because you know you deserve better?

    ​

    All in all, I am not against the market going up, if the growth is justified. Personally, I think it's been a while since we have seen justified growth through technical innovation and progress, instead of artificial growth due to stock buyback and the FED injecting money in the system. But regardless of that, I wonder if there is anything to what I just wrote and whether that makes sense to anyone. Thanks for reading

    PS: I should mention that this is targeted at people who invest and want to keep the stock for the long term. This shouldn't apply to traders, since traders are expected to take advantage of fluctuations like these.

    submitted by /u/truniqid
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    question... who is actually gonna buy the additional 250 mm shares of hertz and at what price?

    Posted: 12 Jun 2020 05:20 PM PDT

    doesn't jeffries have to find 1 Billion dollars of qualified investor (people with net worth over 500k) money.

    ​

    after those people buy the stock at a discount to current trading price.

    ​

    i assume there will be a "lock-up" period of 60 days

    ​

    and then the qualified investors can drop the shares on the robinhood saps.

    ​

    However, the stock will be delisted by then. So why would a qualified investor buy this dog.

    ​

    I think that's why the judge allowed it.

    ​

    there is no way any investor with any sophistication would touch this stock.

    submitted by /u/business2690
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    Help

    Posted: 12 Jun 2020 05:06 PM PDT

    Anyone see a huge TSLA jump over about 5-10 mins just before 8. Its after hours and I'm so confused. It took 5 minutes to jump up to above where it started at like 30 hours ago before a huge decline. I'm pretty sure the price was something like $930 and it went up to $990...

    Anyone know why??????

    submitted by /u/michaeltcm
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    The psychology of WHEN to buy for longterm holding

    Posted: 12 Jun 2020 07:00 PM PDT

    Howdy!

    I recently started an investment portfolio. I'm going long-term, and I am preparing to make monthly contributions.

    I'm looking for wisdom and/or input on the psychology/mindset of WHEN to buy. Considering I'm looking at a 10-15 year timeline, I can't imagine that waiting 2-3 weeks matters too much (save a major crash), and clearly waiting could hurt. However, I can't convince myself to "go in," as I keep telling myself that waiting until another dip would probably let me scoop up a few extra shares.

    The best I've got is to just wait until a red day and JUMP. Is it really that simple? Would love some input on how you all approach this and get yourself moving.

    submitted by /u/okay_dee_kay
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    Livestream This Sunday, 6/14/2020 at 7PM Eastern in the Official /r/StockMarket Discord: Coding the Markets with Python

    Posted: 12 Jun 2020 01:45 PM PDT

    Hi /r/StockMarket!

    This Sunday evening, 6/14/2020 at 7PM ET I'm going to do something a little different for a livestream. For those who don't know, outside of trading I also build financial webapps and tools. Primarily I code in Python and Django and I use React for front end development. So this week one of the ideas that came up in our discord channel was the idea of live-coding something to show how I use market data APIs and Python to build really cool stuff that I use in my trading.

    It won't be super advanced since we will only have about 30-45 minutes of coding time, and I don't know exactly what I'll be building yet, but it will most likely be something that grabs some stock information from a free API and tinkers around with it. To be honest even though I've been a developer for a while at this point, I'm self taught in that field and I've never done a live coding stream before so this might be a total disaster, but if that's the case it will be even more entertaining to watch!

    If you're a developer or even just interested in seeing how I use market data and Python to build things that I use in my trading, you won't want to miss it. I'm really excited to get out of my comfort zone a bit and do something different. And on that note, if anyone wants to share ideas of something you'd like to see me (attempt to) build, comment here and maybe I'll do one of your ideas!

    As always I'll share my screen, stream it live on Twitch in the #twitch_stream channel and record it and upload it to YouTube afterwards in the #archived_streams channel in case you can't make it.

    Here are the details and relevant links:

    DATE: Sunday, 6/14/2020 (this weekend!)

    TIME: 7PM Eastern sharp!

    LOCATION: Official /r/StockMarket Discord - Live Chat Channel

    Note: If the above link doesn't go directly to the channel, click here to go to the main Discord server and look for the "#live_chat" channel under "Weekly Analysis Chat". The Twitch stream will be in the #twitch_stream channel or accessible directly via this link.

    See you all Sunday evening at 7PM ET sharp!

    submitted by /u/ghostofgbt
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    End of day rally

    Posted: 12 Jun 2020 01:16 PM PDT

    This makes me bullish next week. Bulls defended that SPY 3000 line like it was nothing. Then at the end it was takeoff. After the big dip on Thursday I'd expect the fee to start pumping again over the weekend.

    submitted by /u/Team_player444
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    I use CashApp for trading because it’s simple and easy for me. Are there any better ways for me to invest as a beginner? Any tips would be helpful.

    Posted: 12 Jun 2020 06:07 PM PDT

    I just got into stocks and was amazed by my profit through $HTZ but as I've come to learn from other people on Reddit I'm a moron for even investing into it. I'm 20 years old and I just put 5 grand into amazon hoping for interest to build up for the holidays and I put $2,000 into Microsoft hoping that the new Xbox launch helps it out a good bit. Tips would help tremendously.

    submitted by /u/EnderJah
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    Way to track upcoming IPOs?

    Posted: 12 Jun 2020 02:03 PM PDT

    There are a couple of very promising IPOs coming up for solid (if somewhat unethical companies) specifically:

    • Palantir

    • Snowflake

    and couple others I won't name.

    Is there a good way to track when the IPO is happening to buy in as soon as feasible?

    submitted by /u/ThenIJizzedInMyPants
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    Does pre- market always determine if it is gonna be a green or red day?

    Posted: 12 Jun 2020 02:34 PM PDT

    I only have been dabbling a in the market for a few days but I noticed that when the pre-market is green, it's been a green day and same for red. Is this the case more times than not?

    submitted by /u/DaInfamousWon
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    Confused about this IZEA amendment. Help?

    Posted: 12 Jun 2020 08:18 AM PDT

    Hey so i was doing some more DD about izea, and i stumbled upon this website

    https://www.bamsec.com/filing/149523120000078?cik=1495231

    Can anyone explain to me what this anendment is saying? I dont understand what it means at all.

    submitted by /u/rjbblu
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    Robinhood or Fidelity ?

    Posted: 12 Jun 2020 10:10 AM PDT

    Does anyone know if the order execution on fidelity is better than robinhood? I've been struggling with selling and buying options on robinhood as well as stocks and i've heard fidelity is great at order execution. I also heard Fidelity has fractional shares that you dont have to wait for. So which brokerage is better?

    submitted by /u/RCROBINSON2000
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    Question about margin Accounts?

    Posted: 12 Jun 2020 06:11 PM PDT

    I'm struggling to find a T+1 account and I've been taught to trade a certain way that works for me. Cash account is what I prefer but the way I trade it simply isn't effective. So I'm considering margin.

    My question is, if I put 30k in a margin account and never use the debt they allow me to have. Will I paying anything back to them for using the margin account? Basically, if I only use my money is it my profit?

    submitted by /u/td-moses
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    How influential are “RobinHood investors”?

    Posted: 12 Jun 2020 05:58 PM PDT

    I'm reading a lot on Yahoo Finance and on a couple other subreddits on how RobinHood investors are just buying up stocks and being overly bullish despite the economic conditions. How much power and money do they actually have, and is there a statistic or way to tell how much money/stocks are being traded on RobinHood? I know there's a percentage held by institutions and stuff on yahoo finance for each company but I'm not sure where they get that, do companies put that stat on their 10-K's?

    Thanks in advance

    submitted by /u/WilierRuby
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    Urban Tea

    Posted: 12 Jun 2020 05:48 AM PDT

    Urban Tea ($MYT) Still a young company formed in late 2018 seems to have their finger on the pulse. Distribution deals in Canada and stores opening up in New York City. 2 days ago they received approval to open franchises in China and already received 200 orders in 24 hours. More stores opening up in NYC. They have a clean open financial statement with no fraud. I like this brand. Convince me otherwise.

    submitted by /u/measy718
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    Taxes with Stock

    Posted: 12 Jun 2020 09:45 AM PDT

    So I recently turned 18 and started investing into the stock market. I never had a job or did my taxes. So what I'm trying to say is that do I have to do taxes now because I'm investing in stock? Or is there a minimum amount made per year that well eventually make me do taxes on because of the stocks I own? I might sound a bit confusing but maybe someone can get the general idea of what I'm trying to say. Hallpppp!

    submitted by /u/Chappy997
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    Arvinas’ Protein Degradation Platform Shows Proof-of-Concept, Buy on Weakness for ~60% Upside

    Posted: 12 Jun 2020 03:18 PM PDT

    Summary: Arvinas (NASDAQ: ARVN) is a clinical stage biotech company developing therapies for oncology and neurology based on a novel protein degradation platform that has the potential to support an exciting new class of therapeutics. The company has two clinical stage drugs, ARV-110 and ARV-471, for prostate cancer and breast cancer. Recent Phase 1 data from ARV-110 was received negatively and drove a ~40% drop in the stock, but we believe the data actually shows proof-of-concept for Arvinas' platform and the recent weakness in the stock presents a significant buying opportunity. Our valuation yields a per share value of $50, implying close to 60% upside from ~$30 today.

    Key Takeaways

    • Arvinas' PROTAC protein degradation technology is a unique, highly differentiated drug platform with therapeutic potential in numerous protein-driven disease areas including oncology and neurology. The PROTAC platform has the potential to quickly develop drugs that hit existing protein targets harder than traditional inhibitors do as well as address previously undruggable proteins.
    • Arvinas has two drugs in the clinic: ARV-110 for the treatment of metastatic castration resistant prostate cancer (mCRPC), and ARV-471 for metastatic ER+/HER2- breast cancer; both are in Phase 1 development and have the potential to change the treatment paradigm for their respective diseases.
    • As of 1Q20, Arvinas had $260M of cash as of 1Q20, expected to be sufficient to fund operations into 2022.
    • Though the stock has now dropped close to 40% since initial ARV-110 Phase 1 data was first released in mid-May, we believe this was a knee-jerk reaction that ignores the proof-of-concept demonstrated by the data. The data showed evidence of PROTAC-directed degradation of AR, signals of clinical efficacy, as well as a generally favorable safety profile that we believe should be viewed as encouraging signs.
    • With the stock now at $33, we are positive on Arvinas' risk-reward heading into additional data readouts in 2H20. These include additional ARV-110 Phase 1 data and first-in-human data from ARV-471, both of which should be major stock-moving events. Based on our valuation (described in detail further down) of $50/share using conservative estimates, we see the recent weakness in the stock as an attractive entry point to potentially capture 60% upside.

    Details

    Arvinas' PROTAC technology is a differentiated protein degradation platform with therapeutic potential in multiple disease areas.

    • PROTAC, short for proteolysis targeting chimeras, takes advantage of the body's natural protein disposal system to selectively degrade proteins involved in disease. A key player in this process is the E3 ligase, an enzyme that naturally identifies mutated/misfolded proteins and tags them with a protein called ubiquitin. Ubiquitin-tagged proteins are then naturally recognized by a complex called the proteasome that degrades them into their constituent peptides.
    • Arvinas' PROTAC molecules are designed to recruit a specific E3 ligase (there are over 600 types) to a specified target protein and tag it for degradation. After degradation, the ubiquitin and PROTAC are recycled and can continue to recruit and tag target proteins. This focus on matching ligands to proteins could also confer advantages in development speed, as Arvinas could potentially target different proteins with the same ligase, eliminating the need to design a completely new molecule. The general process is visually outlined below (diagram from Arvinas poster publication).
    • Compared to typical drugs that only inhibit the activity of mutated proteins, a protein degradation approach could have several advantages. First, completely eliminating mutated proteins through degradation could confer greater therapeutic benefit versus inhibition alone. Moreover, in preclinical testing, PROTACs have shown the ability to distinguish between wild-type (unmutated) protein and proteins with single point mutations (e.g. WT BRAF vs. BRAF V600E), suggesting a high degree of selectivity. Finally, PROTACs do not need to bind as strongly to target proteins as much as inhibitors do in order to take effect, so they can potentially interact with and tag previously "undruggable" proteins. As up to ~80% of known proteins are considered "undruggable" by traditional inhibitory drugs, PROTAC could be a paradigm-shifting technology in cancer and beyond.
    • Arvinas is exploring PROTAC's therapeutic potential in multiple disease areas, starting with oncology. Moreover, preclinical data has suggested that PROTACs can cross the blood-brain barrier, which if true, would make them ideal for targeting all sorts of proteins involved in neurodegenerative disease including Parkinson's and Alzheimer's.
    • Arvinas has signed collaboration agreements with Bayer, Genentech, and Pfizer to develop drugs based on PROTAC.

    Arvinas is testing ARV-110 in metastatic castration resistant prostate cancer (mCRPC), a patient population with a dire need for improved treatment options.

    • Prostate cancer is the second most prevalent cancer and second leading cause of death for men in the US (an estimated 33,000 deaths are expected in 2020), with an estimated 1 in 9 men experiencing prostate cancer in their lifetime.
    • The overexpression of androgen receptor (AR) is a known driver of prostate cancer, and current standard of care targets AR using drugs including enzalutamide and abiraterone in combination with chemotherapy. However, up to 25% of patients never respond to these treatments, and the vast majority of patients will eventually progress to a castration-resistant state, necessitating the need for a new treatment modality.
    • ARV-110 is designed to facilitate the degradation of AR and has shown the ability to inhibit tumor growth 70-100% in enzalutamide-resistant mouse models. Initial in-human safety data released in October also showed promise, with no dose-limiting toxicities or treatment-related adverse events in 10 patients who had been on treatment for a month. Expanded Phase 1 data is discussed below.

    ARV-471 has shown potential in metastatic ER+ breast cancer.

    • ARV-471 is a selective estrogen receptor degrader (SERD) that uses the PROTAC platform to, as the name suggests, selectively target estrogen receptors for degradation. ARV-471 is currently in a Phase 1 dose escalation trial for ER+ breast cancer, and initial results reported in October 2019 showed that patients had drug exposure levels in the predicted efficacious range with no dose limiting toxicities. Expanded results on safety/efficacy are expected by YE20.

    Phase 1 ARV-110 data was viewed as underwhelming but still showed proof-of-concept, and the stock overreaction creates an attractive entry point.

    • Arvinas' Phase 1 trial for ARV-110 is a dose escalation study testing doses of 35mg up to 420mg in third-line mCRPC patients with the primary endpoint of identifying a Phase 2 dose and secondary endpoint of assessing early safety/efficacy data.
    • Arvinas disclosed first-in-human data for ARV-110 at ASCO on May 29. The data was perceived as disappointing, driving the stock down as much as 30%, with only 2/12 patients (17%) at the 140mg dose showing responses (no responses were observed at the lower doses).
    • However, we don't think the data is quite as bad as the market's reaction suggests. Of the 12 patients dosed at 140mg, 5 had mutations that made them unlikely to respond to ARV-110; excluding these patients bumps up the response rate to 2/7 (29%). Arvinas could (and should) screen for these mutations in future trials to enroll a more selective patient population more likely to respond to the drug. Importantly, both responders had mutations known to drive resistance to mCRPC standard of care, an encouraging sign for ARV-110's potential in 3L patients.
    • Nevertheless, despite our optimistic take on the data, it is too early to make meaningful conclusions about ARV-110's efficacy, and there are still outstanding questions about ARV-110 that place increased emphasis on the expanded Phase 1 data readout (expected by YE20). These include whether ARV-110 can show a dose dependent response at the higher 240mg and 480mg doses, as well as if additional responses will occur and if current responses will deepen or be sustained.

    Valuation

    • We arrive at a $50/share value for Arvinas using a sum-of-the-parts analysis. Our valuation assumes a launch year of 2024 for ARV-110 (35% Probability of Success or POS) and 2025 for ARV-471 (20% POS), with each respectively reaching unadjusted peak sales of ~$900M and ~$1.4B four years post-launch. We use a 6.5x peak sales multiple for both assets and a discount rate of 12%.
    • We did not assign value to Arvinas' undisclosed preclinical oncology assets or its early-stage neurology pipeline, but they represent possible upside.

    Key Risks

    • Clinical/regulatory failure. Arvinas is exposed to the same set of clinical and regulatory risks as many of its biotech peers. This risk is particularly relevant for Arvinas and its novel PROTAC platform, and Phase 1 data from ARV-110 and ARV-471 will be crucial in legitimizing PROTAC's mechanism of action, both for Arvinas' commercial prospects in oncology as well as future drugs based on PROTAC. Future risks include negative regulatory feedback from the FDA or problems in the execution of manufacturing/commercialization activities.
    • Competitive risk. Protein degradation is not an approach unique to Arvina; there are multiple companies pursuing protein degradation such as private companies C4 Therapeutics and Kymera Therapeutics as well as larger biopharmas including Roche, Amgen, and Novartis. However, it is too early to draw any conclusions about any company's technology as Arvinas is the first of these companies with in-human data and remains the tone setter for the entire field as its trials progress. Beyond protein degradation, there is also the risk that ARV-110/ARV-471, if approved, do not experience the commercial success that we expect due to competing therapies on the market.

    Disclosure:

    We, WX Capital, a team of ex-biotech consultants, currently own shares of Arvinas. This article expresses our own opinions, not Arvinas' or any other party's opinion. We are not receiving compensation for this report. We do not have a business relationship with the company mentioned in this report.

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