September 3, 2019

Opportunity Equity Update for Week Ended 8/30/19

Flexion Up on Continued Zilretta Acceleration While Alexion Down on Soliris Patent Challenge

Last week, the Opportunity Equity strategy gained 1.35%, underperforming the S&P 500’s 2.83% rise (Exhibit 1). The strategy ended the week up 8.96% YTD, or 938 basis points behind the S&P 500.

Exhibit 1: Preliminary Performance of Opportunity Equity Strategy Versus S&P 500, Through 8/30/191

Time Period Opportunity Equity S&P 500
Last Week (8/23 – 8/30) 1.35% 2.83%
MTD -7.80% -1.58%
QTD -5.34% -0.17%
YTD 8.96% 18.34%
Inception (annualized since 6/26/00) 6.44% 5.76%

Source: Bloomberg, Miller Value Partners

Flexion Therapeutics (FLXN) crossed above the 100 and 200-day moving average. Raymond James noted that July sales for Zilretta from IQVIA show continued acceleration in use. Facebook Inc. (FB) is reportedly testing a messaging app called ‘Threads’ which aims to be an extension of Instagram’s existing “close friends” list functionality. Micron Technology Inc. (MU) gained as NAND prices increasing 4% QoQ while DRAM price declines slowed to -16% QoQ. Taiwan government also confirmed MU’s new fab investment at ~$2B with the investment appearing to be used for old fab upgrades rather than expanding wafer capacity. NXP Semiconductors (NXPI) crossed above the 50-day moving average as the company announced a 50% quarterly dividend increase from $0.25/share to $0.375/share, representing a 1.5% dividend yield. Avon Products Inc. (AVP) crossed above the 50-day moving average.

Exhibit 2: Significant Contributors to Performance, 8/23/19 – 8/30/19

Name Type Return
Flexion Therapeutics Equity 19.0%
Facebook Inc. Equity 4.5%
Micron Technology Inc. Equity 5.4%
NXP Semiconductors Equity 4.2%
Avon Products Inc. Equity 9.9%

Source: Miller Value Partners

Alexion Pharmaceuticals (ALXN) declined over the week after the US Patent and Trademark Office said it would review three patents on its top-selling Soliris drug following a challenge filed by Amgen. Mallinckrodt plc (MNK) fell after the company lost an appeals court bid to revive patent-infringement claims over Praxair’s generic version of INOmax. The company’s stock fell further after announcing that it had borrowed what was left of its revolving credit line. Endo International (ENDP) declined on increased fears of opioid liabilities. The Oklahoma judge ruled against JNJ in the first Opioid trial but the judge ordered them to pay a much lower than expected fine of $572M versus $17B the state was seeking in damages. This was followed by Purdue offering to settle more than 2k lawsuits against the company for $10-12B by declaring Chapter 11 bankruptcy and then restructuring into a for-profit “public benefit trust”. Ziopharm Oncology Inc. (ZIOP) and Eventbrite Inc. (EB) crossed below the 100-day moving average.

Exhibit 3: Significant Detractors from Performance, 8/23/19 – 8/30/19

Name Type Return
Alexion Pharmaceuticals Equity -12.6%
Mallinckrodt plc Equity -39.3%
Endo International Equity -18.1%
Ziopharm Oncology Inc. Equity -4.6%
Eventbrite Inc. Equity -4.7%

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. Content may not be reprinted, republished or used in any manner without written consent from Miller Value Partners.

©2019 Miller Value Partners, LLC

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