Bullfrog AI (BFRG) AI Drug Discover

First off, I’d like to thank my recent new followers for following me on Substack. I started the Substack in early 2023 and I now have 311 followers. Thank you all for your support.

If you have read my articles on pharma companies or follow my X account here ,you know I have been researching stocks involved in the AI (Artificial Intelligence) theme.

I believe we are still early in the theme. Big techs continued and accelerating CapEx into infrastructure supports this as well as Oracle's ORCL two most recent quarters. Companies from agriculture to Walmart are now using AI to drive results.

I’ve been an early adopter of LLMs (Large Language Models) for research and as a search engine. I’ve almost entirely replaced my Google search use by about 80-90%. I have been very open-minded to the positive future uses of these neural nets.

If you are skeptical of AI or already have a strong negative opinion on it, that’s fine. You can rest assured, for the sake of the company analysis in this article, that machine learning and AI have already been around for over a decade in computational biology and the pharmacutical industry and it has only been positive. There are plenty of articles written explaining the uses of AI and machine learning if you are curious about the uses in the pharma industry. One such article is Revolutionizing clinical trials: the role of AI in accelerating medical breakthroughs

I just watched a recent interview with Nvidia (NVDA) CEO Jensen Huang. He mentioned the industries he sees most impacted by AI in the near future. One he mentioned was digital biology. Nvidia has already invested directly into clinical biotechnology company Recursion Pharmaceuticals (RXRX). Recursions mission statement is exactly like Bullfrog AI’s (BFRG).

Recursion was founded to harness the power of accelerating technological innovations to improve the efficiency of drug discovery and development. Bullfrog AI has the same technology focused approach to drug discovery.

I knew for sure I was onto something when one of the value stocks I covered on the Substack SomaLogic got bought out by Standard Biotools (LAB) only a few months after my write-up on it. SomaLogic is a protein biomarker discovery and clinical diagnostic company. They have the SomaScan Platform. It is a tool that helps scientists study proteins in a much faster and more detailed way. It lets researchers understand how proteins work and interact with each other.

Bullfrog AI Bullfrog AI (BFRG) calls itself “an emerging digital biopharma company. Using our proprietary AI/ML analytics platform, we aim to improve drug development and clinical trials through identification of high-value data niches and patient subgroups.”

One of the most interesting things about Bullfrog is they truly are on the cutting edge of technology. They have been working with Johns Hopkins Applied Physics Lab since atleast 2017 and also collaborating with George Washington University. Both Johns Hopkins Hospital and University are some of the most renowned institutions in the nation.

In 2017 Bullfrog AI was granted licenses to a data analysis tool from Johns Hopkins. In March of 2023 they were granted additional licenses to two machine learning tools from Johns Hopkins. Their names are Prometheus and Seagull.

They also have a relationship with the Lieber Institute for Brain Development (LIBD). The collaboration between BullFrog AI and LIBD, announced in September 2023, uses the bfLEAP™ platform to mine LIBD’s comprehensive brain data. This data includes transcriptomic, genomic, DNA methylation, cell-line, clinical, and imaging data from over 2,800 brain samples. Early results announced in January 2024 highlighted the ability to stratify brain expression data, revealing biological subtypes within psychiatric disorders.

Some recent developments came for Bullfrog AI just days ago with the prospects of Bullfrogs drug candidate BF-114. There was a publication of new research in the peer-reviewed journal Cell Reports supporting the potential of BF-114 (SPTBN1 siRNA), in treating a range of liver diseases, including metabolic dysfunction-associated steatotic liver disease (MASLD), metabolic dysfunction-associated steatohepatitis (MASH), and hepatocellular carcinoma (HCC). BF-114 is being developed for the treatment of obesity and liver diseases and this research appears to be promising.

They have acquired the rights to a series of preclinical and early clinical drug assets from universities and entered into a strategic collaboration with a world-renowned research institution to create a HSV1 viral therapeutic platform to engineer immunotherapies for colorectal cancer.

They have signed exclusive worldwide license agreements with Johns Hopkins University for a cancer drug that targets glioblastoma (brain cancer), pancreatic cancer, and other cancers. They have also signed an exclusive worldwide license with George Washington University for another cancer drug that targets hepatocellular carcinoma (liver cancer), and other liver diseases.

Business Strategy

One of their business goals is to “rescue” drugs that have failed in phase 3 clinical trials by using their technology to analyze all available data with the goal of designing a precision medicine clinical trial that will have a better chance of being successful. They see this servicable market as a $47 billion market.

The Company has a unique strategy designed to reduce risk and increase the frequency of cash flow. The first part of the strategy is to generate revenues through strategic relationships with biopharma companies. These relationships will be structured as a combination of fees and intellectual property based on the specific scope of the engagement.

In the future, the second part of our strategy involves acquiring the rights to clinical stage drugs, using our bfLEAP technology to design a precision medicine trial, conduct the trial with a partner, and sell the asset. This approach may also apply to earlier phases in the drug development process such as discovery and preclinical.

The company has two main platforms.

The bfLEAP™- an AI/ML platform for analysis of preclinical and/or clinical data. This is how the company describes bfLEAP in their annual report.

"The analytics industry and application of AI in healthcare is growing rapidly. Competition exists along the entire continuum of the drug development process from discovery to commercialization and beyond.

We believe the weakness of the industry is the quality of the data and we believe bfLEAP provides several competitive advantages, that will position the Company for success.

"First, bfLEAP is highly scalable and can process data from small to extremely large complex data sets without the need for additional code being developed. Second, it is adept at processing and analyzing incomplete data and making predictions that we do not believe other technologies are capable of doing.

Finally, bfLEAP has the ability to extract the most important features for analysis out of extremely large complex data sets using unsupervised machine learning algorithms, thereby greatly simplifying complex problems. Since data quality is a problem that exists in the healthcare industry, we see these as major differentiators." -company annual 10-K

The ability to make predictions, find relationships and patterns and anomalies in extremely large complex data sets has been demonstrated by the Applied Physics Lab in other applications and sectors. Finally, the algorithms used by bfLEAP are proprietary and protected, having been developed at Johns Hopkins University Applied Physics Lab.

We believe most of the competitors rely on open-source algorithms and we also believe that we have already demonstrated our superiority via the August 2021 publication in DeepAI.org."

siRNA -for targeting Beta2-spectrin in the treatment of human diseases developed at George Washington University and licensed by the company.

Valuation Bullfrog AI has a market capitalization of $21.2 million. NCAV (net current asset value) is $5.3 mil. The company didn’t have any revenue in the most recent quarter and revenue has been very sporatic. They generated their first revenues in late 2022 from services provided to a pharmaceutical customer. In the third quarter of 2023 they completed their first commercial service contract and recognized revenue in the amount of $65,000.

For the full year in 2022 the company used $911,000 in cash. They said they expect that to increase going forward. As of the last quarter they have $7 million in cash and a very strong current ratio of 9. There is an accumulated deficit of $11.6 million.

I looked up the company address listed in their annual report at 325 Ellington Blvd, Unit 317, Gaithersburg, MD 20878. It's at what appears to be a retail shopping building. There is a UPS store on one side of it and a ZAGG on the other and a sit-down restaurant at the end of the building. There isn't a business marking on their front. Maybe the Google image is old or they just moved. I don't know.

What explains this is they also say all of the company's employees work virtually and they own no properties. Unless I am mistaken of what I am looking at on Google Maps this is unusual to me though. I was expecting to see an office building.

Technical Analysis The technicals are holding as it is on a major support level that goes way back. This last consolidation looks like a bullish flag on that level. The stock is incredibly volatile.

Full Disclosure: I am long shares of BFRG

Jones Soda JSDA Turning Around

I've covered a lot of small and micro-cap value stocks over the years. Some would be deep values for many years and never manage to attain steady growth and profitability. I try and keep track of ones that I always felt had a chance if management improved the business. One stock that has been depressed for many years is Jones Soda (JSDA). It trades on the OTC exchange, however, it is different than the majority of stocks trading OTC or pink sheet. The major exchanges in the U.S. are the Nasdaq, New York Stock Exchange and Amex.

Companies listed on the OTC/pink sheets can often be shell corporations and companies just frankly not worth owning. The listing requirements are different than the major exchanges. Jones Soda is a real company with substantial operations. They are headquartered in Seattle, WA but sell nationwide in grocery stores. I have seen their soda products on the shelf in my local grocery store here in North Carolina.

The company has always sold bottled soda drinks. They now have a fountain soda business for restaurants and customers. The more interesting developments lately have been their move into cannabis infused drinks in 2022 and craft alcohol mixers. The cannabis is under the Mary Jones brand in California and Washington. These products include 10mg and 100mg cannabis-infused soda.

There has been a push on the national level to get closer to decriminalizing marijuana just in the past year. A new federal rule announced in May will reclassify marijuana as a less-dangerous, Schedule III drug.

The trend also has been for more states to legalize marijuana and cannabis. The Florida Supreme Court made a ballot initiative earlier this year to legalize recreational marijuana in Florida. It could be on the ballot in November.

Cannabis is legal in some form, for either recreational or medical use, in more than 40 states. The fact Jones Soda is only selling their cannabis drinks in two states and Canada leaves a lot of opportunity for growth.

They say in the annual report they are planning to expand into other states. The cannabis drinks are a highly competitive market but the outlook is sure a lot better than the soda product line which they have had for years. The U.S. is 81% of their sales and Canada 19%. As of March this year they had 27 employees,15 are employed in sales and marketing.

Valuations

The company has a market cap of $40 million as of today June 12th. Trailing twelve month sales are $17 million.

The company is trading for roughly 2.3 times sales. Sales in the most recent quarter were up 29% year over year. This is a fair price for a company like this. Small companies can really grow sales fast. I think this valuation is more undervalued considering the new markets they are now in.

Gross margin improved by a nice 8% from proactive pricing adjustments, supply chain optimization, and increased sales of Mary Jones brand revenue which generally have higher margins. The company hasn't had positive free cash flow or positive earnings for a long time if ever. I see the entry into the cannabis and craft mixer drinks as a big turning point that will bring much more positive developments than prior years.

They also made some great new hires in key roles. A new CEO David Knight is joining at the end of this month! The current CEO is retiring. Mr. Knight worked at Pepsi as a vice president of marketing Gatorade and was vice president of marketing at Quaker Oats.

In March Eric Bittner joined Jones as its new Chief Operating Officer, bringing 20 years of leadership in the beverage industry to lead the company's operations. He most recently led turnarounds at Roar Organic's and Fever Tree, where he served as the SVP of North American Manufacturing. Additionally, he has held supply chain leadership positions at Keurig Dr. Pepper, Niagara Bottling, and PepsiCo.

Mary Money was named Director of New Product Development and Commercialization at Jones. Money is a highly experienced R&D scientist, with over 30 years of experience in Food and Beverage. She has worked for PepsiCo and ConAgra Foods. These are some amazing hires for a company this size and they look very lucky to have grabbed these from Pepsico together.

Final Thoughts

Usually when I look at companies this small they are at a deep value to assets on the balance sheet. Jones, however is not a deep value but the balance sheet sports a 2.36 current ratio which is an adequate ratio. Current ratio of 2 or higher shows a high likelihood of a company in general being able to pay it's short-term bills. The Company believes its cash on hand, projected cash generated from product sales and funds received from the committed revolving credit facility are sufficient to fund the Company's operations for a period of at least 12 months. The company in my opinion is in one of the best positions it's been in as long as I've known about it.

Technically, the price action has gotten momentum and the stock is up significantly this year and after their most recent quarter. It's currently in a bullish triangle pattern. I'd like to see the stock hit $.41 a share to make sure the momentum is still going to continue before buying the next couple months.

I don't currently own any shares. I may buy JSDA shares in the future. Stocks trading for less than $1 a share can be incredibly volatile and the prices can drop significantly without news or any events. If I buy it I will use limit buy orders and not a market order.

EV Charging Stocks Short Thesis

I've been looking at a lot of potential sectors and stocks for short opportunities the past few months. I've been trading in and out of EV charging companies put options on stocks like Chargepoint CHPT, Blink BLNK and EVgo EVGO. The big picture on it is the EV market sentiment has readjusted to reality and peak EV hype is down now.

Another major factor is Tesla has a position in the EV charging space with their own charging stations and continue to get more major car manufacturers to sign on. This I believe was a big blow to these much smaller EV charging stocks that I mentioned. I don't see how these companies will compete with Tesla chargers if Tesla decides to try and corner the market. The stock prices continue to fall monthly making equity raises less and less helpful. Evgo EVGO was able to raise some capital recently. The cash burn is significant with them and BLNK. I recently added more BLNK puts and now have put options of various strikes as far out as January 21st.

The cracks are now starting to emerge in the industry as Chargepoint's CHPT CEO and CFO both announced their resignation on the same day as revenue forecast was slashed! Here is an article. Apparently, Chargepoint is "the leader" in this space which is sure something telling.

I got this graph from another account on Twitter that highlights cash burn at Chargepoint and EVgo. The recent overall stock market rally has caused minor rallies in BLNK and EVGO stocks that I see as better prices for long dated puts. There has been a turn in the press and I'm seeing negative press on these chargers. The Wallstreet Journal had an article a week ago on how the stations are not working.

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Disclosure: I am long put options in CHPT BLNK EVGO and will continue to add more.

Global Equity Indices Now All Weaking

I've been tracking a few countries that have had very resiliant stock markets in the second half of this year. We all know the U.S. equity market has had a major pull-back. Well, up until a month or so ago for Vietnam or just this week in some there has been relative strength. Others include Turkey and UAE even with a declining U.S. market. Vietnam finally had a technical correction in the end of September and UAE and Turkey yesterday. Turkey is still near it's highs on the year however.

Vietnam is still one of my favorite long-term investment prospects with their superior GDP growth and forecasts. Below are the respective charts of these countries equity indices. First is the iShares MSCI Emerging Markets ETF (EEM) that is near lows on the year.

The Vietnam (VNM) pull-back was pretty forcefull off the highs in September.

UAE just had a big red day coinciding with the geopolitical events and conflict. I expect to see more short-term downside here.

Lastly, beginning to weaken Turkey (TUR). I see an opportunity for a short on this market with uptrend levels being broken and the fact it hasn't had a significant pull-back yet. Also, there is the proximity to the conflict that just started in the region that may be bringing some uncertainty to the market there.

I see a short setup or a long put options setup in Teva Pharma (TEVA) based in Israel. I noticed the IZRL ETF that is the Israel Pharma ETF took a large downside move and has downside momentum going off a big gap down.

There is also a very good short setup in (TKC) Turkcell a Turkey company that has just come off a clear bear flag and is making new lows.

Defensive Opportunities In A Continued Risk Off Quarter

I continue to see a risk off environment in equities that has spilled over to emerging markets. The consensus from American conglomerates on China demand and now Chinese data itself is pointing to significant economic contraction in China. The markets in Turkey (TUR), Vietnam (VNM) are holding strong. Vietnam continues to be my favorite opportunity in emerging markets over the long-term.

Last week Bitcoin saw increased selling and volatility. This just adds to the risk off sentiment as Bitcoin, one of the best performing assets this year is joining in on the selling. Below is the breakdown of the trend support currently in the works on Bitcoin. I alerted on the recent top for Bitcoin here on the blog in early 2022.

In light of this overall market weakness I see opportunity in pharmaceuticals with ETF's like VanEck Pharmaceutical ETF (PPH) and I-Shares Pharma ETF (IHE). The ETF's have recently broken out to new 52 week highs and shown relative strength in the market. I'm particularly bullish on the sector because breakthroughs in AI machine learning should improve drug development costs and increase speed of discovery and research.

I've done extensive research on the newest AI via large LLM's(large language models) and the promise of smaller ones. Drugs and biotech are some of the industries they will transform initially. They are the perfect fit for industries where scanning large language databases is key and processing large amounts of data is needed.

The pharma ETF PPH is coming up on a key support level.

Merger Arb Opportunities

There are opportunites in merger arbitrage with Spirit Airlines (SAVE) and I-Robot (IRBT). Spirit is trying to get an all cash deal done with Jetblue for $33.50 a share. Amazon has been in the works and shareholder approved to buy I-Robot for all cash or $51 a share too.

Oil and Gas Energy

Apart from pharma I have seen relative strength in energy stocks. I have particularly been looking at oil and gas stocks as natural gas has pretty much been written off. I'm not particularly bullish on natural gas but the contrarian trade now is nat gas as harsh winter weather is likely not priced in. The best gas ETF is US 12 month Fund (UNL) at it holds long dated contracts and thus has less decay than ETF (UNG). Nobody is bullish on natural gas prices as the technicals have shown a bottom formation forming.

Some of the energy stocks I added to my watchlists were VAALCO (EGY),Helix Energy (HLX), Nextier Oilfield (NEX), KLX Energy (KLXE).

Solar Weakness Continues

Another industry that caught my attention was Solar. It caught my attention as a short opportunity as the weakness in solar continues as evidenced by the Invesco ETF (TAN). I noticed short selling technical setups in stocks like JKS and MAXN too.

I'm bullish on the prospects of breakthrough technology like quantum computing with the help of AI. The quantum computer ETF is Defiance Quantum ETF (QTUM). I also particulary like the quantum computing stock Rigetti Computing (RGTI) as they have one on the cloud.

I continue to believe the investment of our lifetimes going forward will be in artificial intelligence. The best plays on this are the actively managed Roundhill ETF (CHAT) and long established Global X AI ETF (BOTZ) and Robo Global ETF (ROBO).

One good speculative investment opportunity I saw was in the Nigeria country specific Nigeria ETF (NGE). Nigeria NGE has a trailing twelve month 16% dividend yield. 0.83% expense ratio. Politics might be a partial driver of the 28% YTD performance of Nigerian stocks.

"The Tinubu admin also formed a committee on fiscal policy and tax reforms headed by Taiwo Oyedele, signalling the possibility of critical tax reforms"... " Banking and oil gas stocks have been very strong drivers of market performance. Oil and Gas stocks have been on the rise since they took out fuel subsidy from the sector. Added with banking, they are the top two sectors.”

On specific stocks on the long side I see a buy setup in Payments Holdings (PAY) as it saw large buying volume after earnings and is consolidating in a flag now. It needs to hit 14.05 for a long trade. The company has strong revenue and earnings growth. They recently revised quarterly earnings forecasts to the upside. Next years earnings guidance has been raised to $.24 EPS vs previous $.14.

Full disclosure: I have been actively trading the PPH ETF, RGTI. I have puts on JKS, long BOTZ, CHAT. May long NGE in future.