October 27, 2020 - 8:40pm EST by
2020 2021
Price: 15.50 EPS 0 0
Shares Out. (in M): 16 P/E 0 0
Market Cap (in $M): 245 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 245 TEV/EBIT 0 0

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We have assumed that RFL’s Market Cap is equal to its Enterprise Value for simplicity as its cash balance and Real Estate will likely be monetized to invest in its pharma assets.



Rafael Holdings (RFL) is a holding company of primarily biotech assets that was spun-off from IDT Corp. (IDT) in March 2018. Its primary assets include:


·        An ~50% interest in Rafael Pharma, a private, clinical stage, oncology-focused pharma company that’s focused on commercializing therapies that treat the most deadly cancers and diseases by exploiting the metabolic differences compared to normal cells

·        A 58%interest in Lipomedix, a private, development-stage, Israeli company focused on the development of an innovative, safe and effective cancer therapy based on liposome delivery

·        The Barer Institute, a wholly-owned early stage venture focused on developing a pipeline of therapeutic compounds, including compounds to regulate cancer metabolism that’s pursuing collaborative research agreements with leading scientists from top academic institutions

·        Wholly-owned, unencumbered real estate:

o   IDT HQ at 520 Broad Street in Newark, New Jersey as well as an associated ~800-car public garage

o   A portion of a building in Israel



We believe an investment in RFL represents a relatively low-risk, extremely high-reward opportunity to own an asset with 50+ bagger potential from current levels. While we acknowledge that an investment in RFL is effectively a bet on Rafael Pharma and its lead compound, CPI-613, our comfort in the investment comes from:


1.          Rafael focuses its efforts on the most deadly cancers and diseases where there are few or no alternatives meaning unfortunately that those with these ailments are expected to die so anything that’s better than this outcome should get FDA approval; said another way we believe there’s an incredibly low bar here as a standing start with strong Phase I data that should be re-confirmed with its current Phase III trial

a.         CPI-613 is very safe, well tolerated, has limited side effects vs. the current standard of care FOLFIRINOX alone, etc.

b.         CPI-613 has broad applicability and works best in the most aggressive and deadly cancers so success in one indication would likely lead to success in other indications

2.         For those familiar with Howard Jonas and IDT, we believe that RFL has a somewhat similar setup with more upside than Straight Path Communications (STRP) which ended up being an ~35 bagger

a.         Jonas is known for being incredibly frugal, yet has invested more of his own money in this personally both through Rafael Pharma privately and through RFL stock (and via debt that converted into stock) than any other prior investment and he’s now spending effectively all of his time (Jonas is already a billionaire but he’d like his legacy to go down as having left a mark on the world by helping cure cancer)

3.         Rafael Holdings and Rafael Pharma are each adequately capitalized to support its own investments and benefit from future upside

a.         Holdings has ~$50 million of Real Estate on its books that are in the process of being monetized; our diligence suggests is worth over $100 million and can be used to increase its investment in Pharma

b.         While Pharma doesn’t disclose its financials, our diligence suggests that the Company has enough capital to finance its initiatives and get through Phase III trials; we believe the $150 million plus of Ono milestone payments will finance Pharma’s U.S. trials and should that not be adequate, we believe that Holdings and / or Pharma’s investors would be there to provide an additional backstop


We believe there are multiple ways to win here, but here’s how we’re thinking about RFL’s valuation. It’s clearly a big if, but if Pharma’s Phase III trials receive approval, we would expect CPI-613 to be commercialized and become standard of care. There are more than 350k Panc patients globally each year with more than 50k in the U.S. alone. Our diligence suggests that an average treatment would cost ~$100k per patient implying U.S. Revenue potential of over $5b. For simplicity we double this to arrive at a global number to get $10b in Revenue. These businesses tend to be valued at 3x – 5x Revenue give their extremely high margin profiles implying a potential value of $30 - $50b just for the Panc franchise. RFL owns ~50% of Pharma which would imply $15 - $25b / ~$900 - $1,600 per RFL share. If we were to take an 80% haircut to these numbers to account for potential trial failures, delays, only getting a modest share of the patient population, etc. then we arrive at $188 - $313 per RFL share or ~12x – 20x upside from current levels – solely from the Panc franchise alone.


One could adjust the probability of success, patient share, and multiple used to come up with your own values, but we think there’s a bias to the upside here if the drug succeeds because it would become standard of care which we think would translate into at least 80% of the patient population receiving this drug – as a point of reference, this would value the Panc business on the low end at $775 per share or a 50-bagger from current levels.


CPI-613 has the potential to treat other very deadly diseases which we estimate could more double the Revenue potential described above. For simplicity, you could double the figures above and arrive at an RFL price of $375 - $625 per share or 24 – 40x upside from current levels using the 80% haircut assumption or apply a more aggressive assumption which would result in an RFL stock price over $3,100 per share, a 200-bagger from here. Again, we see upside to this figure should RFL buy-in the ~50% of Pharma’s shares sooner, if Lipomedix ends up having any success, and / or the Barer Institute finds some compelling compounds that have a shot to be the next “it” drug which would diversify the risk away from Pharma (as an aside Pharma is also working on additional uses for CPI-613 as well as additional compounds as well).


While some of you may point to these assumptions as being too pollyannish, there were similar arguments made for STRP in that it had little to no value and Jonas proved them wrong there. We think that the market has failed to appreciate RFL’s true value for a number of reasons including being very small (~$250m Market Cap), shows up as a Real Estate company rather than biotech, was spun-out of a telecom business, had been a controlled company, etc. We believe that the first leg of value creation will come in or around late Q120 / early Q220 when Pharma releases its Phase III Panc results. Should the results be successful then, we think that Pharma either sells the Panc franchise or itself in its entirety to Big Pharma, sells a minority stake, or goes public through an IPO – the end result is that RFL will receive immediate value and get rewarded like a biotech company driving the price materially higher.


What if we’re wrong and the trial fails? There are multiple shots on goal here. If the Phase III Panc trial fails then, Pharma will go back to the FDA again until it succeeds – there are no other alternatives and the FDA wants them to succeed. The trials could fail in the U.S. but pass in Japan (Ono trials) or vice-versa and there are several other markets such as China, Europe, and LatAm where Pharma could commercialize the product. As a point of reference, similar late-stage oncological companies would already be worth $1b+ (~50% of which = $30+ per RFL share) which we’re comfortable in underwriting for this asset today before giving credit to any of RFL’s other assets. We believe that if there wasn’t a high probability of success then Pharma wouldn’t push ahead with its trials, Ono wouldn’t start its own trials, Holdings wouldn’t have invested more into Pharma, and / or Howard Jonas would not have continued his investment and dedicated his time to this asset.


We believe that there are a number of additional catalyst that can also drive the stock higher in coming months beyond the upcoming Phase III Panc trial including the monetization of RFL’s real estate, strategic partnerships / additional out-licensing deals (like the one entered into last year with Ono), and a collapse / simplification of Holdings’ / Pharma’s complicated ownership structure.


Background: Howard Jonas / IDT

Our investment in RFL stems from our focus on investing in owner/manager run companies. As such, it is essential to first and foremost know who Howard Jonas is, what he has accomplished in his business career, and understand how he thinks about capital allocation.


Over the past 25 years, Howard Jonas has mastered the art of capital allocation, transforming IDT Corporation from a telecommunications company into a diversified conglomerate. He has opportunistically grown IDT organically and through acquisition, and when appropriate, he has monetized various unrelated business assets through sales and spinoffs. In the past decade alone, IDT has spun-off 5 public companies. Had you invested in IDT Corporation in January 2010 and kept each of the spin-offs, an investment in IDT + SpinCo has generated a 40%+ CAGR vs. ~10% for the S&P 500.  As evidenced, IDT has masterfully used its prodigious cash flows from its legacy telecom business to fund a wide array of investment initiatives. Below are just a few examples of some of Jonas’ more notable capital allocation decisions that have resulted in value creation for him and his shareholders:


  • In 2001, realizing that the telecommunications industry was highly commoditized, Jonas made his first foray into the media business. IDT made several small acquisitions with the goal of controlling content and formed a new company called IDT Entertainment.  In May 2006, IDT Entertainment was sold to John Malone’s Liberty Media for roughly $500 million.
  • In November 2004, IDT launched a retail energy business, IDT Energy. IDT energy grew into one of the largest independent suppliers of electricity and natural gas to those who live in the Eastern United States. On October 31, 2011, IDT spun off its energy-related businesses to its shareholders as Genie Energy (GNE), which today trades on the NYSE with a $223 million market cap.
  • In 2001, Jonas bought a hodgepodge of U.S. airwave licenses for $56 million from bankrupt Winstar Communications, and that business was spun off into a public company called Straight Path Communications (STRP) in 2013. After a bidding war with AT&T, Verizon acquired Straight Path for its 5G spectrum assets for $3.1 billion, a 700%-plus premium to its previous day’s trading price.  Howard Jonas owned 20% of STRP.


We’re currently invested in several IDT spinoffs, one of which is our stake in Rafael Holdings (RFL). Rafael Holdings (RFL) was spun out of IDT Corporation in March 2018 with three primary assets; majority interests in two promising pharmaceutical companies (Rafael Pharmaceuticals and Lipomedix), cash, and a portfolio of commercial real estate properties that will be used to fund the biopharma assets. The most exciting asset is Rafael Holdings majority stake in Rafael Pharmaceutical, a clinical-stage oncology therapeutics company developing altered metabolism directed therapies. Rafael Pharma has launched pivotal Phase III clinical trials of its lead compound, CPI-613, after achieving exciting early stage clinical results.


Rafael Pharmaceutical Corporate History

Cornerstone Pharmaceuticals (renamed Rafael Pharmaceutical in 2018) was founded in 2001 based upon a premise known as Altered Metabolism of cancer cells, or the scientific study that cancer cells produce energy differently than healthy cells. Based on this groundbreaking scientific work, Dr. Paul Bingham, Dr. Zuzana Zachar, and Dr. Robert Shorr set off to dedicate their careers to studying the ways that cancer cells produce energy.


Around the year 2012, Howard Jonas was introduced to a Rafael Pharma executive, and after learning more about the company and its groundbreaking science, Howard expressed interest in helping the company as a Board Member.   Howard joined Rafael’s Board in 2013, and through his involvement witnessed first-hand the scientific and medical clinical trials being conducted at Wake Forest University by prominent clinical researchers, Dr. Tim Pardee and Dr. Angie Alistair.  The results of those studies led IDT to invest in Rafael in 2015 and 2016, and ultimately purchase the right to buy a majority 56% interest in Rafael pharma.


Rafael Pharmaceuticals

Rafael Pharmaceutical’s first-in-class clinical lead compound, CPI-613 (devimistat), targets enzymes that are involved in cancer cell energy metabolism and are located in the mitochondria of cancer cells. Cancer metabolism targets specific properties of cancer cells that make them very different from healthy cells, so the company is able to treat patients without the usual side effects of chemotherapy. CPI-613 is currently undergoing numerous clinical trials, including: A Phase 3 trial for pancreatic cancer, a Phase 3 trial for acute myeloid leukemia (AML), a Phase 2 trial for relapsed Burkitt’s lymphoma, five additional Phase 1/2 trials, and several preclinical studies.  In these trials, CPI-613 is being conducted as a single agent, as well as in combination with standard drug therapies, in patients diagnosed with advanced solid tumors or blood cancers.  Over 300 subjects have received one or more doses of CPI-613, and the drug has exhibited excellent response rates in several tumor types. Rafael has initiated phase III trials in both Pancreatic Cancer and AML, and these trials are expected to be completed by 2020 - 2021. Rafael’s primary target is to successfully complete these 2 pivotal trials and launch CPI-613 in market by 2021.


Phase III Trials – Metastatic Pancreatic Cancer

Rafael Pharmaceutical’s immediate goal is to improve the quality of life of patients with Pancreatic Cancer, which is the deadliest cancer worldwide and has limited treatment options.  The average life expectancy of a patient diagnosed with Stage 4 Pancreatic Cancer is 2-6 months.


In Phase I clinical trials at Wake Forest Baptist Medical Center, Rafael dosed 18 patients with CPI-613 in combination with a common chemotherapy regimen, Folfirinox, for patients with pancreatic cancer.  Of the 18 patients dosed, 3 experienced Complete Remission and 8 others had radiographic responses, so an objective response (complete remission or partial remission) rate of 61%.   As a comparison, Folfirinox by itself has a complete remission (CR) rate of less than 1% and an objective response rate of 31.6%. Due to the immensely promising results, Rafael has initiated Phase III trials to examine CPI-613 in 500 stage IV pancreatic cancer patients.


Rafael Holdings rang the opening bell at the NYSE in late 2018.  The picture of the ringing shows Howard Jonas in the middle, and he is flogged on each side by two of the Stage 4 Pancreatic Cancer survivors, Earl Grocce and David Wingo.  Both have been very public about their remissions.  A quick Google search will uncover both of their stories.


In October 2019, Rafael announced the 100 patient enrollment milestone for its Phase 3 Trial (Avenger 500).  The global study is active and still open for patient enrollment in sites across the United States, France, Israel and South Korea. 


“More than half of the patients who were treated with that combination had an objective radiographic response, which is just not anything that has been seen before to my knowledge in pancreatic cancer,” ~Timothy Pardee, MD, Director of Research, Cancer Center of Wake Forest Baptist


Phase III Trials – Relapsed/Refractory AML

In October 2018, Rafael Pharmaceutical launched a Phase III Randomized Trial of 500 Patients at 87 sites in 12 countries with Relapsed/Refractory Acute Myeloid Leukemia.


Acute Myeloid Leukemia (AML) in elderly patients is more aggressive and less responsive to therapy than in younger patients, and most elderly patients who achieve a complete remission (CR) eventually relapse and die from AML.  With more than 50% of elderly AML patients experiencing relapse, they require second-line therapy.  Today, there is no consensus regarding optimal treatment.


In Phase I and Phase II trials of elderly patients with Relapsed or Refractory Acute Myeloid Leukemia (AML), Rafael Pharma found that CPI-613 in combination with a Cytarabine and Mitoxantrone or HAM (a popular chemotherapy for patients with high risk AML) exhibited 48% complete remission (CR).  CPI-613 + HAM exhibited substantially higher efficacy compared to elderly patients treated with HAM alone.  This group exhibited CR of 27%.


In October 2019, Rafael announced the milestone of 25 active sites for the Phase III Trial (ARMADA 2000).  The global study is now active at sites in the United States, Austria, Spain and South Korea, with more openings to come.


“These data are very encouraging especially for patients 60 years of age or older who have historically done very poorly with this disease. We look forward to the opening of our randomized study to further investigate this promising approach. ~Timothy Pardee, MD, Director of Leukemia Translational Research, Comprehensive Cancer Center of Wake Forest Baptist Medical Center


Phase II Trials – Relapsed/Refractory Burkitt Lymphoma

In July 2018, CPI-613 was granted Orphan Drug designation for the treatment of Burkitt’s Lymphoma, an aggressive blood cancer.   Patients are usually treated with aggressive chemotherapy and immunotherapy as first-line therapies, but no approved treatments exist for patients who fail to respond to these approaches.


In Phase 1 trials, CPI-613 showed promising signs of efficacy. In a Burkitt’s lymphoma patient who had relapsed twice after prior therapy (chemotherapy and immunotherapy, followed by a stem cell transplant), the patient, a 19-year-old woman, received 17 cycles of CPI-613.  Researchers detected partial reduction of her tumor, and the patient discontinued treatment to have the tumor surgically removed. A tumor sample revealed extensive cell death, thought to be a result of CPI-613 treatment. Clinical follow-up continued to show no evidence of the disease more than 36 months later.


The company is now is now conducting a Phase 2 trial to evaluate CPI-613 in relapsed /refractory Burkitt’s lymphoma/leukemia.


“We look forward to launching this study with CPI-613 for patients with relapsed/refractory Burkitt Lymphoma who do not have any viable treatment options. This could be a potentially life-saving therapy.” ~ Ariela Noy, MD, Medical Oncologist for Lymphoma at Memorial Sloan-Kettering Cancer Center


Ono Pharmaceutical Out-Licensing Agreement

In June 2019, Rafael Pharma announced an Out-Licensing Agreement with Ono Pharmaceutical to accelerate clinical development and commercialization of CPI-613 in Japan and other Asian countries.


Under the terms of the agreement, Rafael received a one-time upfront payment of approximately $12.9 million USD and up to an additional approximately $150.3 million USD if certain development and commercial milestones are achieved (we believe that this month’s announcement of Ono entering a Phase I Pancreatic Study met one such milestone and provided Rafael Pharma with a portion of this $150 million – all of which will be sufficient to fully finance Rafael Pharma’s U.S. trials). Rafael will also receive low-double digit royalties based on net sales in Japan, South Korea, Taiwan and ASEAN (Association of Southeast Asian Nations) countries. Ono will have exclusive rights to develop and commercialize the Products for all indications in Ono’s territory. Rafael continuously retains all exclusive rights to develop and commercialize the Products outside of Ono’s territory.


World Class Medical Team and a Commitment to Building

Some of the greatest minds in the field of medicine, several of which are mentioned above, are working for and with Raphael, and the company has developed several external collaborations with academic institutions such as Memorial Sloan Kettering Cancer Center for Lymphoma, New York University and Jefferson University for Pancreatic Cancer.

Below is info on new hires and announcements within the past year;


·        In October 2019, Rafael Pharma announced that José Octávio Costa Filho, M.D., will join the company as Chief Medical Officer. He will work alongside Timothy Pardee, M.D., Ph.D., who will continue in his role as Co-Chief Medical Officer.  Dr. Costa Filho will oversee the solid tumor programs, while Dr. Pardee will remain focused on hematologic malignancies.  Dr. Costa Filho joins Rafael from Servier Pharmaceuticals and has previously held executive positions at Merck & Co., Celgene and Novartis. He brings more than 30 years of combined physician practice, pharmaceutical experience in medical policy and strategy, global clinical research, oncology product development and global medical affairs. He also has expertise in oncology clinical development, clinical operations and global medical affairs. 


·        In October 2019, Gregg L. Semenza, M.D., Ph.D., scientific advisory board member at Rafael and Director of Vascular Program at the Institute for Cell Engineering at the John Hopkins School of Medicine was awarded the 2019 Nobel Prize in Medicine.


·        In October 2019, Rafael announced the appointment of Wendy McDermott as Chief People Officer. McDermott joined Rafael from Sanofi, where she served as Vice President of Human Resources. The newly created position is indicative of the Company’s dedication to growth and further development of talent and company culture.


·        In May 2019, Rafael announced the appointment of Mona M. Wahba, MD, MSM, as Senior Vice President for Clinical Development and Clinical Operations.  Prior to joining Rafael Pharmaceuticals, Dr. Wahba held executive positions in the pharmaceutical industry at both large and small companies, including Pfizer, Bristol-Myers Squibb, Novartis, Bayer, Taiho and Ipsen. She created and led large teams and franchises for maximum performance, including joint ventures and alliances with different organizations.


Barer Institute

In December 2019, Rafael Holdings, Inc. launched an initiative to identify and develop or in-license promising pre-clinical compounds targeting the unique cellular metabolism of cancers with high levels of unmet needs. 


The Rafael Holdings' initiative is named the Barer Institute for Dr. Sol J. Barer, Chairman of the Board of Teva Pharmaceuticals.  Dr. Barer is a co-founder of Celgene Corporation and served as Celgene's Executive Chairman, President, CEO, and COO. Previously, he was the founder of the biotechnology group at Celanese Corporation, which was subsequently spun off as Celgene.


In addition to a distinguished Board of Directors and management, the Barer Institute has assembled a renowned scientific leadership team including:


Chief Scientific Advisor:  Chi Van Dang, M.D., Ph.D., Scientific Director of the Ludwig Institute for Cancer Research, Professor of the Molecular & Cellular Oncogenesis Program at Wistar, and Editor-in Chief of the American Association for Cancer Research (AACR)'s flagship journal, Cancer Research.


Board of Directors and Scientific Advisory Board Member:  Richard Axel, M.D., recipient of the 2004 Nobel Prize in Physiology or Medicine, Howard Hughes Medical Institute (HHMI) professor, and professor of biochemistry and molecular biophysics, neuroscience, and pathology at Columbia University College of Physicians and Surgeons.


Scientific Advisory Board Member: Josh Rabinowitz, M.D., Ph.D.: Professor of Chemistry at the Lewis-Sigler Institute for Integrative Genomics at Princeton University and leader in 1-carbon metabolism research.


Scientific Advisory Board Member: Joseph M. Salvino, Ph.D.: Medicinal chemist and Professor at the Molecular & Cellular Oncogenesis Program at the Wistar Institute and Scientific Director of the Wistar's Molecular Screening & Protein Expression Facility. The Salvino Laboratory at Wistar focuses on early drug discovery and small molecule tool compounds for in vivo target validation.


Dr. Dang said, "The Barer Institute, motivated by clinical responses of Rafael Pharma's CPI-613® (devimistat), will drive pre-clinical development of new chemical modifiers of cancer immunometabolism. Our work to develop a new class of broadly applicable cancer therapies will be informed by our distinguished Scientific Advisory Board including Professors Richard Axel at Columbia, Josh Rabinowitz at Princeton and Joseph Salvino at the Wistar Institute."


Howard Jonas, Chairman and CEO of Rafael Holdings, will serve as Chairman of the Barer Institute.

The Barer Institute also will be led by its Director, Ari Landon, Ph.D., previously Director of Innovation at Rafael Holdings. Ari Landon earned his doctorate from the University of Maryland identifying translational strategies in lymphoma and was a post-doctoral fellow at the Yale School of Medicine developing methods to study mitochondria in lymphoma.


"We are excited to launch the Barer Institute," Dr. Landon said. "We have assembled top-flight scientific advisory and hands-on operational teams to develop novel strategies targeting cancer utilizing intellectual property developed internally or obtained through in-licensing agreements with academic institutions. Our streamlined and innovative approach enables scientists to focus entirely on collaborative development."


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise do not hold a material investment in the issuer's securities.


·        Phase III Panc trials

·        Rafael Pharma monetization / value unlock

·        Real Estate monetization

·        Additional trials

·        Strategic partnerships / additional out-licensing deals

·        Ownership simplification / collapse

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