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TFF Pharma (TFFP) is a small cap pharmaceutical company with an extraordinary amount of irons in the fire. With a novel drug-formulation technology, they believe they could potentially improve the solubility and delivery of an incredibly wide range of medications with poor water solubility. So far, management have done everything right and prospects for the company appear incredibly encouraging.


TFF stands for Thin Film Freezing. This is TFF Pharma’s patented method for “generating dry powder particles with properties targeted for inhalation delivery, especially to the deep lung, an area of extreme interest in respiratory medicine”, as stated on the TFF Pharma website. Developed by researchers at the University of Texas and licensed to TFF Pharma, the process reformulates drugs into an inhalable dry powder that can have many advantages over the original form.

A key, easily understandable benefit is in lung conditions. Delivering a drug orally means only a fraction actually reaches the lungs, with the remainder being delivered to other parts of the body, potentially causing adverse systematic effects. A high dose must be used, to ensure the required amount actually reaches the lungs.

An inhalable version turns this predicament on its head, with the vast majority (up to 75%) being delivered directly to the lungs, greatly reducing delivery to unwanted parts of the body and the related side effects. A much lower dose can be used which enhances the safety profile further. Such targeted delivery can also reduce the potential for drug interactions.

While creating an inhalable formulation of relevant drugs is an obvious choice, the difficulty is in actually achieving this without destroying the structure of the drug. TFF Pharma believe their Thin Film Freezing technology achieves this in a markedly better way than other techniques:

(Source: TFF Pharma Website)

The benefits are not restricted to lung-targeted drugs, however. Combination drugs, vaccines and biologics are all difficult to formulate for inhalation using current technology. TFF Pharma believe their method can solve this problem.

Clearly, the potential market for this technology is enormous, and the benefit for patients immeasurable if it comes to fruition.

TFF Pharma’s Approach

The above claims are meaningless if not validated through laboratory work and clinical trials, and concurrently shareholders need to see a roadmap to commercialisation. TFF Pharma have taken an interesting approach that I think makes a lot of sense, provides multiple shots on goal and promises an exciting outlook for investors.

At the heart of their strategy are two in-house drug reformulations that I will discuss below. The company expects the development cost of these two drugs to be just $27m, (Source: TFF Pharma presentation), and they plan to utilize the 505-B(2) FDA pathway to approval. This is an abbreviated approval process for non-novel drug that is applicable, for example, when existing drugs are reformulated for a different route of administration. As the base drug has already passed through the stringent approval process and associated studies, the pathway offers a lower-cost development opportunity with fewer studies.

The two drugs in development are targeting multi-billion dollar markets and the company believe they can offer real improvements upon current options with their TFF technology.

Alongside this core development, the company intends on working in partnership with large pharmaceutical companies to reformulate their drugs. I will cover their first major partnership below, but the important outcome is that TFF will generally receive milestone payments should projects progress from development to approval, as well as royalties on product sales. This income can be pumped back into further in-house development.

I love this dual-pronged approach utilising partnerships that simultaneously provides lump sums and long-term cash-flow to TFF while increasing their exposure and reputation in the industry. They have only secured one such partnership so far, but management have stated they are constantly speaking to various big-pharma companies regarding possible partnerships and I look forward to seeing them ‘stack’ these deals over the coming months and years.

Union Partnership

To provide an example of such a partnership, I will look at the deal with Union Therapeutics announced in August 2020. The deal relates to the drug Niclosamide, which is actually mostly known as an antihelminthic. However, there is promising potential in its use in the fight against COVID-19 and other viral infections. Being poorly absorbed, with low aqueous solubility, it is a perfect candidate for TFF’s technology. An inhalable version may be doubly useful against COVID-19 with its direct delivery to the lungs.

The deal came after TFF demonstrated “improvements to the solubility of oral forms of niclosamide as well as to dry powder forms of the drug for delivery directly to the lungs”, and the fact that Union wanted to press ahead with a partnership is a great validation of TFF’s technology.

Financially, the partnership could be worth up to $210m in milestone payments to TFF, as well as ongoing single-digit royalties on eventual sales. With a current market cap of $330m, each partnership of this type bought on by TFF is potentially transformational. These milestone payments will be gradually released if the development plan proceeds successfully. Details are generally not made public but I would foresee that, should TFF be successful in the early stages of development, they would unlock an initial milestone payment within the next 3-6 months, likely in the low tens of millions. Further, with this being a drug targeted for COVID-19 treatment, the regulatory process will likely be accelerated compared to a more standard drug development. This could mean future milestone payments are unlocked faster.

One thing to note regarding the Union partnership is the recent Press Release by Irisys, who TFF contract for manufacturing and production services. They announced they had been contracted to produce a third medication for TFF, for “an inhalable lung medication with the potential to treat COVID-19”. While the medication wasn’t named as Niclosamide, I personally believe it is a fair assumption that this is the drug in question. This suggests to me that development is going as planned.

In House Development


TFF’s first in-house development is an inhablable version of Voriconazole, an established antifungal drug used in Invasive Pulmonary Aspergillosis (IPA) and Allergic Bronchopulmonary Aspergillosis (ABPA). This is a textbook example of a drug that could be improved by TFF’s technology; an inhalable version will be delivered direct to the site of infection, increasing efficacy and greatly diminishing systematic adverse effects. If TFF can deliver what they intend to deliver, it’s difficult to see why the ‘traditional’ formulation would ever be used.

TFF predict a total market opportunity over a billion dollars for these two indications.

(Source: TFF Pharma Presentation)

While I generally take such predictions with a pinch of salt, in this case I wouldn’t call them unreasonable given the potential medical benefit delivered by an inhalable antifungal. At the very least this seems to be a multi-hundred million dollar peak-sales opportunity. A reminder – again – that the current market cap of the company is just $330m.

The company recently announced positive Phase 1 trial results and are looking to move forward into Phase 2 trials shortly.

An interesting sidenote, as pointed out by Dan Carlson of Tailwinds Research in his excellent coverage, is that cases of IPA are greatly increasing in the wake of the Covid-19 pandemic as a consequence of the increasing use of corticosteroids. This could lead to an expanded market for the drug, as well as the potential for faster approval under an emergency use application or compassionate use.


Tacrolimus is an immunosuppressive drug used to lower the risk of organ rejection. TFF are initially looking into reformulating the drug into an inhalable powder to provide this protection in lung transplant patients. Again, the benefits of an inhalable drug are clear in such a case: fewer side effects and drug interactions, and better delivery to the lungs.

The company recently reported positive Phase 1 results and are looking to press ahead to Phase 2. I feel the CEO Glenn Mattes provides a succinct summary in the release, along with an intriguing snippet (emphasis is mine):

“We are pleased to report this important progress in our second clinical development program and are excited to see that the dosing completed to date suggests that Tacrolimus Inhalation Powder can be safely administered and provide substantial systemic blood levels, from just a single dose, that approach those levels associated with effective immunosuppression in heart, lung, kidney and liver transplant patients,” stated Glenn Mattes, President and CEO of TFF Pharmaceuticals. “The ability to safely delivery tacrolimus by a route that bypasses the gastrointestinal tract could provide for fewer drug-to-drug interactions and could provide for more predictable drug levels, because poor bioavailability and differential metabolism can lead to highly variable drug levels with orally delivered tacrolimus.”

“We believe these data indicate that TFF Tacrolimus has strong potential in not only the current lung transplant indication, but also potential efficacy, safety and survival benefits for heart, liver and kidney transplant patients,” concluded Mattes.’

(Source: Press Release)

The company predict a market opportunity over $1b for lung transplants, but expanding into other transplants would multiply this figure.

The peak sales estimates of these projects, made by the company before the above developments, were as follows:

[TFF Presentation]

Considering the rise in IPA post-Covid, and the potential for expansion of TAC into other organ transplants, I believe these estimates could be conservative.

Further Opportunities

I believe the above two examples show how TFF can, relatively simply, identify approved drugs in indications where there would be great benefit to patients in having an inhalable version. This inhalable version would compare very favourably with the traditional drug and should be able to capture significant market share and revenues. The company already have more than a dozen finished formulations of high value drugs [TFF presentation].

The abbreviated regulatory pathway gives the opportunity to progress through the approval process relatively quickly and cost-efficiently. This can be financed by taking on partnerships with larger pharmaceutical companies and reaping milestone payments and, in the future, royalties.

Through this process, the company can then reinvest into new in-house programs:

In this way I believe the company can build significant, diversified revenue streams and build great shareholder value.

Other Developments

The nature of the company’s approach makes it difficult to cover everything in just one article. For instance, the company has announced it successfully formulated high potent Remdesivir for inhalation. Remdesivir is Gilead Science’s well-known anti-viral used in the fight against Covid-19. If anything came of this it would surely have an immense positive impact on the company’s share price.

Further, in April the company announced an agreement with the United States Army Medical Research Institute of Infectious Diseases, to formulate dry powder neutralizing antibodies and vaccines against national priority biodefense threats. It is difficult to predict the outcome of this partnership, but it is yet another potential catalyst.

Another hugely exciting avenue of development could be with vaccines; TFF’s dry powder technology could eliminate the need for cold-chain handling of vaccines, which is estimated to account for up to 80% of vaccination cost [TFF presentation]. The TFF dry powder could then either be inhaled or reconstituted for injection. The potential for improving the transportation of vaccines globally is monumental, especially in the current Covid environment, but the market will need to see some evidence before ascribing any significant value.

(Source: TFF Investor Presentation)

And beyond even all that, investors await further information on TFF’s cannabis market opportunity. Value here is not immediately clear and I have not built it into my valuation framework, but it is at the very least an interesting sidenote:

(Source: TFF Investor Presentation)


Clearly, the catalysts should come thick and fast over the next year. New partnerships could be announced at any time, milestone payments could be received, new in house projects could commence.

I would like to see some sector hedge-funds take an interest and I believe this would be a significant catalyst in raising investor awareness.

In terms of TFF’s in-house projects, they are targeting NDA filings in Q1 and Q2 2022 for VORI and TAC respectively.

Overall, I expect news-flow to be consistent, with high potential for surprises.


As previously mentioned, the company hope to file NDAs for their two in-house drugs for around $27mm clinical cost. This may seem surprisingly low, but remember they are utilizing the 505-B(2) regulatory pathway.

As of June 30th 2020, in their quarterly report, the company reported cash of $21,924,119. In August 2020 the company closed a $25.9m private financing with biotechnology investors.

Financially, therefore, they have sufficient capital to move forward with their immediate goals. The partnership approach will hopefully bring in fresh capital allowing the company to expand without needing to dilute shareholders – though, this being a small cap biotech stock, never say never.

Valuation and Risks

I have researched many companies over the years, but I have found TFF Pharma one of the most difficult to pin a price target on. It is clear to me that their technology, assuming it works as described (and all indications point to this being the case), is a potential gold mine and is worth many multiples of the current market capitalisation.

Skeptics may point to the fact that their in-house trials have only just passed Phase 1 stage, but these are low risk drug developments that really should work and should not have any problem gaining regulatory approval. Further, as long as the company are choosing their markets correctly, the end-product should be a markedly better treatment option than the status quo drugs and therefore should sell well.

IP seems solid and there are no signs of issues there.

So, put this all together and it appears to be a low-risk, capital-efficient, under-the-radar business endeavour that offers the potential both for investment returns for shareholders, and better treatments for patients. Catalysts and news-flow promise to be frequent and impactful. Funding does not appear to be a problem and management have executed very well to date.

If I were to place a one-year target on it, mainly bringing into consideration their two major in-house developments and their respective peak sales forecasts, discounting for risks, I would opt for a one billion dollar market cap, which coincidentally is roughly triple current levels, or ~$45 per share.

I feel this is justifiable considering my conservative peak sales estimates of $400m for the two indications ($160m less than the company’s projections shown in the above slide), the high chance of success, the potential for expansion, and the focus on partnerships for funding.

A rule of thumb I like to use is to value a small cap biotech company at 3-5 times peak revenues, as this is a level frequently seen in the event of a buy-out. A $1 billion price target is therefore slightly less than the low end of this metric, reflecting the early stage of progress and associated risks. However, it isn’t that simple in this case as much of the value is in the thin film freezing technology itself, which is can be leveraged any number of times on different drug targets.

Longer term I believe this could be a multi-billion dollar company if the process is proven, several drugs are bought to market successfully, and if the markets (and/or Big Pharma) start to understand and appreciate the value more.

Right now, the name of the game for management is to stay focused and execute.


In considering a bear case, one could argue that their process may simply not work, or there may be, for example, manufacturing problems. This is clearly a risk, though one I believe is low. The process and its results have been tested in early-stage clinical settings and peer-reviewed in medical publications. Indeed, the inventor of the thin film freezing technique was recently named a Fellow of the National Academy of Inventors. I also feel the Union partnership is the result of, and testament to, impressive initial lab results. A company of Union’s size would have conducted thorough due diligence.

There is a also a financing risk – will they be able to generate enough through activities such as partnerships and other revenue streams to avoid having to undertake dilutive financing? This is worth consideration, but I feel the first partnership validates the approach and feel confident they will be able to follow up with another over the next 3-6 months.

Finally, as ever, there is regulatory risk. But, as previously mentioned, I feel the company’s projects are low risk and provide significant benefits to patients. I would hope the regulatory process will be kind to TFF, as long as their clinical results are sound.


While I am mindful of these risks, I would not be surprised in the least if the company continued to execute well and surprised with new developments that propelled the company much further. VORI and TAC could also sell a lot better than predicted above – though it is difficult to tell at this early stage.

Overall I believe the chances of success here are markedly higher than with other small cap biotech stocks, due to the approach of reformulating existing approved drugs, and the more cost-efficient and streamlined regulatory pathway used. The science seems sound and the sheer amount of shots on goal for the company should be a significant tailwind. I am excited to see it play out in the coming months and years.


Disclosure: I am/we are long TFFP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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