June 25, 2018

Opportunity Equity Update for Week Ended 6/22/18

StitchFix Advances on Oprah Investment Speculation While Valeant Falls on FDA Pushback

Last week, the Opportunity Equity strategy declined -0.93%, underperforming the S&P 500’s -0.87% fall (Exhibit 1). The strategy ended the week up 14.78% YTD, or 1,077 basis points ahead of the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 6/22/181

Time Period Opportunity Equity S&P 500
Last Week (6/15 -6/22) -0.93% -0.87%
MTD 9.54% 1.95%
QTD 17.69% 4.80%
YTD 14.78% 4.01%
Inception (annualized since 6/26/00) 7.79% 5.66%

Source: Bloomberg, Miller Value Partners

StitchFix Inc (SFIX) continued its climb on speculation that Oprah Winfrey has taken a stake in the company, a rumor that was later refuted by her team. Endo Pharmaceuticals (ENDP) formed a golden cross as the stock’s 50-day moving average rose above the 100-day moving average. Alexion Pharmaceuticals (ALXN) submitted a biologics license application to the FDA for its long-acting C5 complement inhibitor, ALXN-1210, which treats paroxysmal nocturnal hemoglobinuria. The company received an expedited review of eight months, versus the standard twelve, which is likely to lead to an early 2019 product launch, ahead of street expectations. The stock closed the week above its 200-day moving average and formed a golden cross. Flexion Therapeutics (FLXN) rose on news that competitor Anika Therapeutics’ (ANIK) treatment for osteoarthritis-related knee pain, Cignal, failed to show superior pain relief after six-months, a positive for Flexion’s Zilretta which received FDA approval in October 2017. There was no news on OneMain Holdings (OMF).

Exhibit 2: Significant Contributors to Performance, 6/15/18 – 6/22/18

Name Type Return
Stitch Fix, Inc. Equity 16.6%
Endo Pharmaceuticals Hldgs Inc Equity 6.8%
Alexion Pharmaceuticals Equity 5.0%
Flexion Therapeutics Equity 4.1%
OneMain Holdings Equity 2.2%

Source: Miller Value Partners

Valeant Pharmaceuticals (VRX) fell as the company received a Complete Response Letter from the FDA on DUOBRII, a topical treatment for plaque-psoriasis, questioning the product’s pharmacokinetic data. While no deficiencies on the clinical efficacy or safety were found, the decision pushes back the product’s launch to later than expected. Further, Amphastar Pharmaceuticals (AMPH) received FDA approval for its isoproterenol hydrochloride injection, a generic form of Valeant’s Isuprel. TD Securities downgraded VRX to “Hold” from “Buy”. RH (RH) fell as insiders, including Officers Eri Chaya & Demonty Price and Board Member Keith Belling, sold approximately 19,200 shares for a total of $2.95M. Ziopharm Oncology (ZIOP) declined on news that the FDA placed its Phase 1 trial for CD-19 specific CAR-T therapies for leukemia and lymphoma on hold. The stock closed below its 100-day moving average. Delta Air Lines (DAL) fell below the 50 and 100-day moving average. Pulte Group (PHM) fell despite being upgraded at Citi to “Neutral” from “Sell” with a $30 price-target, 6% above where it currently trades.

 Exhibit 3: Significant Detractors from Performance, 6/15/18 – 6/22/18

Name Type Return
Valeant Pharmaceuticals Intl Inc Equity -9.6%
RH Equity -5.9%
Ziopharm Oncology Inc Equity -25.8%
Delta Air Lines Inc Equity -4.5%
Pulte Group Inc Equity -5.2%

Source: Miller Value Partners

1The performance figures reflect the results of a representative account net of management fee and certain other expenses. For important additional information about Opportunity Equity performance, please click on the Opportunity Equity Composite Performance Disclosure. The performance returns shown in this report are preliminary and are subject to revision. Past performance is no guarantee of future results.

Significant Contributors and Significant Detractors are the Strategy holdings that had the greatest effect on Strategy performance for the week. Holdings that have been in the Strategy since the end of the most recent calendar quarter are identified by name. For information on how Contributor/Detractor data were calculated and a list showing the contribution to the Strategy’s weekly performance of each investment held at such quarter end, contact us.

Any views expressed are subject to change at any time, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results, and there is no guarantee dividends will be paid or continued.

©2018 Miller Value Partners, LLC

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