Weekend Update #172

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The S&P 500 ended the shortened trading week at a new all-time high, which solidified the index’s best Q1 performance since 2019. Strong economic growth, resilient consumer spending, and eager anticipation of rate cuts are all driving strength as earnings estimates continue to be broadly revised up. 91 of the S&P 500’s members hit new 52-week highs this week, with no companies hitting new 52-week lows. This week, the tragic collapse of the Francis Scott Key Bridge in Baltimore also threatens to further disrupt supply chains, especially Asian coal markets and potentially agricultural markets.

Company-specific news this week included Boeing shares seeing a rebound following a rough trading period, caused by regulatory and quality control concerns, as CEO Dave Calhoun announced his resignation. Truth Social agreed to merge with Digital World Acquisition Corp. and DJT shares have risen 24% since the acquisition completion. EV maker Fisker ran into further troubles after deal talks fell through and the company cut vehicle prices by as much as 39% to avoid bankruptcy. Walgreens beat a low bar for earnings but cut the top end of their earnings guidance range due to worsening consumer spending challenges and an uncertain year-ahead outlook. Apple’s iPhone sales in China fell 33% in February in a continuation of international challenges while Apple suppliers ramped up production for the new iPad launch and investors look to its WWDC conference to ignite excitement around new AI features. Restoration Hardware shares jumped 17% on Friday as mixed earnings results were overshadowed by positive guidance as high-income consumers continue to show spending strength, which brightens the outlook for the home furnishing distributor.

Economic data this week included new home sales at 662,000 in February that fell below economists’ expectation of 677,000. Durable goods orders topped expectations at 1.4% for the preliminary February reading vs. the consensus expectation for 1.0%, however, the prior month’s reading was also revised down from -6.2% to -6.9%. Consumer confidence in March fell slightly below consensus expectations at 104.7, due to a pullback in consumer’s 6-month outlook on future economic activity. In a positive read on consumer strength, the University of Michigan’s consumer sentiment report showed a month-over-month improvement in sentiment as consumers gain further confidence about inflation’s decline and personal finance and employment outlooks remain intact. Initial jobless claims for the week ended March 23rd at 210,000 also came in below expectations and pointed to a still-resilient labor market. Q4 2023 QoQ annualized GDP was upwardly revised to 3.4% from the prior 3.2% report, driven by strong consumer spending, and points to very healthy U.S. economic growth seen throughout 2023.

Friday’s Close (Weekly Performance)

S&P 500 5,254.35 (+0.39%)
Nasdaq 16,379.46 (-0.30%)
Dow Jones 39,807.37 (+0.84%)

Thank you Blue Room Analyst JARED FENLEY

Fund One ended the week and the month in positive territory and ahead of the S&P 500. In fact, March was the best performing month on an absolute and a relative basis since the Fund’s inception. Performance was aided by biopharmaceutical company Atai Life Sciences, which was up 21% for the week on the back of strong earnings and a highly promising pipeline outlook.

The largest detractor for the week was video-hosting platform company Vimeo, which fell 25% on news that a potential bidder was dropping its plans for a buyout after the parties could not agree on a price. We are maintaining our position and will be watching developments carefully. Overall, we are excited by Fund One’s recent performance and we look forward to sharing more color on the portfolio at our upcoming investor quarterly call.

Thank you Blue Room Investing President JOHN FENLEY

Geoff Porges — Chief Financial Officer

I'll run through a few slides just to set some context about Schrödinger and then we'll revert to Q&A.

So let me advance. I will make some forward-looking statements. Please refer to our SEC filings for a full understanding of all of the risks associated with those statements and with our future outlook.

I'll run through a few slides just to set some context about Schrödinger and then we'll revert to Q&A.

So let me advance. I will make some forward-looking statements. Please refer to our SEC filings for a full understanding of all of the risks associated with those statements and with our future outlook.

IN

Moderna’s cancer program has advanced markedly since the company announced robust Phase II data in December 2022. The Phase 2 data demonstrated that mRNA-4157 in combination with Merck’s KEYTRUDA demonstrated a statistically significant and clinically meaningful improvement in the primary endpoint of recurrence free survival (RFS) versus KEYTRUDA alone for the adjuvant treatment of patients with stage III/IV melanoma following complete resection. Specifically, adjuvant treatment with mRNA-4157 in combination with KEYTRUDA reduced the risk of recurrence or death by 44% compared with KEYTRUDA alone. Recent data has only enforced the strength of mRNA-4157 as an adjuvant treatment in this setting, showing a more robust RFS rate as duration of follow-up lengthened.

Given the strength of the Phase 2 melanoma data, Moderna and its partner Merck have begun to advance the individualized neoantigen therapy (INT) program with alacrity. Following the announcement of a Phase 3 trial for melanoma, the companies rapidly expanded to other tumor types that have proven particularly responsive to immunotherapies. In December 2023, it was announced that the companies would explore the efficacy of mRNA-4157 in combination with KEYTRUDA in non-small cell lung cancer (NSCLC) in a Phase 3 trial. In their Vaccine Day investor presentation in March 2024, Moderna announced – with little fanfare – the additions of Phase 2/3 studies assessing INT in cutaneous squamous cell carcinoma, adjuvant bladder and adjuvant renal cell carcinoma.

While some analysts in the past have remained skeptical about Moderna’s cancer franchise due to underwhelming data released in 2019, a careful review of that Phase 1 data – that looked at mRNA-4157 across a broad spectrum of cancers – would show that drawing any conclusions from the Phase 1 and using them as a lens with which to view the potential efficacy of the recently announced late-stage studies would be inappropriate. This is largely due to the fact that:

Moderna increased the number of neoantigens encoded in the vaccine from 20 to 24;
Moderna increased the dose level to 1 mg – the highest in the study, whose dose levels ranged from .04 mg, 0.13 mg, .39 mg and 1.0 mg;
and the data presented to the public at the 1.0 mg dose level included only one patient and had a follow-up time of only 27 weeks – a data point from which one can draw no statistically significant conclusions.

Looking ahead, Moderna’s INT program continues to advance at great speed. Demand for its melanoma product is seen through the fact that the Phase 3 study has almost completely enrolled in less than a year. The breadth of late-stage clinical trials that are starting demonstrates both companies’ belief in this program, which has shown incredible promise thus far.

IN

Consumer sentiment recorded an incremental increase of less than three index points from February to 79.4 in March, well within the margin of error and stable since January.

Critically, consumers exhibited confidence that inflation will continue to soften.

Assessments and expectations of personal finances improved modestly from last month, as the perceived negative effects of high prices and expenses on living standards eased. Strong stock market performance this month supported sentiment gains only for those with the largest holdings, with little impact on the index.

Overall, sentiment is essentially unchanged throughout the first quarter of 2024, remaining just shy of the midpoint between the prepandemic level of sentiment and the historic trough from June 2022. This stability reflects a perception among consumers that the economy has been holding steady in its current state.

As the election season progresses and debates over economic policy become more salient for consumers, their outlook for the economy could become more volatile in the months ahead.

IN

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Weekend Update #172

Weekend Update #173

Weekend Update #171