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Hello Readers,
After what had been the longest drought in our eight years of publishing this Newsletter, we closed one position for a very nifty gain.
NUANCE COMMUNICATIONS (4/20/05). Closed position 5/10/05 at $4.65 for a 75% GAIN.
Once again, we must stress that this is a rarity and not the norm as Nuance was in the Current Portfolio for less than a month before the stock rocketed on news that NUAN is being acquired by ScanSoft. The deal is for $221 million and values NUAN’s stock at around $5.60. So, why close it now? Take the money and run; bad things have been known to happen.
Our feelings about the market are pretty much the same as they have been for the last few months. The bull market is in suspended animation until we get a better picture of what impact $50 oil has had, and will have, on P&L statements, and those conclusions could take a while. Of course, if crude drops below $50 and holds there for some time, we could get a nice summer rally. Most of the last several weeks have been on the upside and the Russell 2000 is hovering at around 600 again. And, our Current Portfolio, which has taken it on the chin since February, has started showing signs of life.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Arotech (ARTX) (6/5/01). Reports good revenue growth and confirms 2005 guidance.
ViroLogic (VLGC) (7/20/01). Slates earnings report for Monday, May 2, the day we post this Newsletter.
Generex (GNBT) (8/5/02). Scripps Research Institute will gauge the strength of company’s modified DNA vaccine vectors. Remember, this is on “Endangered List”.
Art Technology (ARTG) (8/5/03). Will present at AeA Micro Cap conference on Tuesday, May 17. Ingenico and Viking Range deploy ATG platforms.
Targeted Genetics (TGEN) (10/5/03). Issued new patent for Hyperlipidemia. This, too, is on the “Endangered List”.
ViroLogic (VLGC) (7/20/01). Presents its eTag technology at ASCO annual meeting. Reports record revenues and balance sheet looks pretty good.
Trio-Tech (TRT) (10/20/03). Quarterly results look promising and balance sheet is still okay.
Insmed (INSM) (11/5/03). Quarterly statement about as expected; balance sheet still appears to be holding up.
AVANT Immuno (AVAN) (12/5/03). Stock downgraded by Caris & Co. as 1st QT results show perhaps a wider than expected loss; balance sheet still appears healthy.
Actuate (ACTU) (1/5/04). Announces Enterprise Reporting Application design services. Says it’ll get more aggressive on stock repurchase program.
Crossroads Systems (CRDS) (2/5/04). Earnings release slated for May 25.
Somera Communications (SMRA) (2/20/04). Expands repair capabilities in South America.
Open TV (OPTV) (3/20/04). Releases upbeat quarterly report; balance sheet still appears very strong.
Socket Communications (SCKT) (3/20/04). To present at AeA Micro Cap confab on May 16, the same day this Newsletter is posted. Announces support for Microsoft Windows Mobile 5.0 platform. Launches feature-rich Bluetooth development kit for next generation KwikBlue modules. Releases Wi-Fi companion software for pocket PCs with built-in 802.11WLAN.
NexMed (NEXM) (4/5/04). Releases quarterly numbers. Completes Phase 1 study for its topical treatment for Onychomycosis.
Palatin (PTN) (4/5/04). Quarterly results not bad; cash/cash equivalents look good.
AVI BioPharma (AVII) (4/20/04). Quarterly results a mixed bag; balance sheet still looking good.
Management Network (TMNG) (4/20/04). Stock gets a nice bounce thanks to a pretty good quarterly report; balance sheet still appears strong.
Glenayre (GEMS) (5/5/04). Usually a company’s stock goes down when it announces an acquisition, but GEMS went up on news that it is buying some Universal CD and DVD operations for $122 million.
GoRemote (GRIC) (5/5/04). Expands Endpoint Security to enterprises through agreement with OPSWAT. Says preliminary quarterly results show narrowing of losses.
EMCORE (EMKR) (5/20/04). Stock gets a boost as quarterly report shows nice revenue growth; balance sheet still looks viable.
GlowPoint (GLOW) (5/20/04). Release upbeat quarterly report; balance sheet shows improvement.
BindView (BVEW) (6/5/04). Issues RapidFire update for new MSFT vulnerability. Selected by CIITE to drive IT security compliance training.
AIXTRON (AIXG) (7/5/04). First quarter numbers not good and not bad; balance sheet looks good.
Tripath (TRPH) (8/5/04). To release earnings news May 16, the day we post this Newsletter.
Chordiant (CHRD) (9/20/04). Selected by Boston Globe for multi-channel marketing campaigns. Announces management changes.
Trikon (TRKN) (10/5/04). Quarterly results disappointing; balance sheet still looks okay.
IGATE (IGTE or IGTEE) (10/20/04). Posts 1st QT profit; balance sheet still appears to be amazingly strong.
Nova Measuring (NVMI) (11/5/04). Post 1st QT loss due to industry slowdown; balance sheet still appears fair.
Net2Phone (NTOP) (11/5/04). Cable & Wireless of Cayman Islands launches residential broadband telephony with NTOP.
Zhone Technologies (ZHNE) (12/5/04). Stratford Mutual Telephone, of Iowa, selects Zhone’s FiberSLAM. Reaffirms number one market leadership in broadband loop carrier access category. Czech telecomm picks Zhone for delivery of VoIP data services.
Advancis Pharma (AVNC) (12/20/04). Closes $27.25 million private placement.
Brillian (BRLC) (1/5/04). Gets a good plug from a stock picker on Forbes.com.
InsWeb (INSW) (1/20/05). Reports third quarter of sequential revenue growth; balance sheet still appears okay.
Savient Pharma (SVNT) (2/5/05). Reports positive top-line results for Puricase Phase 2 trial. First quarter results a little disappointing; balance sheet still seems very healthy.
Three-Five Systems (TFS) (2/5/05). Selling its display systems division to Video Display; terms not yet disclosed.
Centra Software (CTRA) (2/20/05). Quarterly numbers not too bad, but not what was expected. Stock takes a hit as CEO resigns.
Tumbleweed (TMWD) (3/5/05). Selected by MedReview to protect highly sensitive emails. Another one that will present at the AeA Micro Cap confab on May 17.
E-LOAN (EELN) (3/5/04). Reports 1st QT profit; balance sheet still looks very strong. Names new CFO. Launches new advertising/branding campaign.
Repligen (RGEN) (3/20/05). Will receive a $750,000 lawsuit settlement payment from ScreFlo arbitration.
Loudeye (LOUD) (4/5/04). To present at Thomas Weisel Internet conference on May 17. Launches digital music store for CD WOW! Stock takes a hit as 1st QT net loss widens; balance sheet still looks good.
Verticalnet (VERT) (4/5/05). Leading life sciences manufacturers renew VERT subscriptions. VERT enables transportation sourcing at Cargill. Gets a positive mention at Motley Fool.
InfoSonics (IFO) (5/5/05). Achieves record revenues during first quarter; balance sheet still seems okay.
Therma-Wave(TWAV) (5/5/05). Will present at AeA Micro Cap confab on May 17.
Our picks for this issue are two more biotechs, both NASDAQ-listed.
EXACT SCIENCES CORPORATION (NASDAQ: EXAS) – $2.26. Twelve-month hi-low has been $7.19 – $2.26. Located in Marlborough, MA, with about 70 employees, this biotech has 26.6 million shares outstanding, $44.3 million in total current assets, $49.85 million in total assets, little debt, and $16.2 million in total liabilities. Institutional ownership is around 49%. Two analysts rate the stock as a “strong buy” and two as a “hold”. http://www.exactsciences.com
Here’s another small biotech with a good-looking balance sheet and intriguing technology that appears to be slightly oversold. And, so we add Exact Sciences Corporation to the Current Portfolio.
Founded in 1995, and trading on NASDAQ for nearly five years, Exact Sciences is an applied genomics company that develops and commercializes proprietary DNA-based tests for early cancer detection. The company has selected colorectal cancer as the first application of its technology platform and has devoted its efforts on R&D relating to what it calls its PreGen technologies, including several large multi-center clinical studies. EXAS has also been marketing PreGen-Plus, its proprietary, non-invasive DNA-based technology for the early detection of colorectal cancer in the average-risk population. This assay is offered commercially by Laboratory Corp. of America, or LabCorp.
The PreGen-Plus technologies isolate and analyze the trace amounts of human DNA that are shed into a stool every day from the exfoliation of cells that line the colon. Once the human DNA is isolated PreGen-Plus can identify specific mutations and other abnormalities in that DNA associated with colorectal cancer and pre-cancerous lesions. The company has conducted several clinical studies supporting the performance of PreGen-Plus, including a recent 5500-patient multi-center study that showed the assay’s ability to detect colorectal cancer in 57% of the cases that were in the earliest stages.
In early March, Blue Shield’s California Technology Assessment Forum (CTAF) unanimously agreed that colorectal cancer screening with PreGen-Plus meets all five of CTAF’s assessment criteria for new medical technologies.
The numbers are pretty typical for a small biotech with the losses greatly out-weighing the revenues. For FY2004, ending 12/31/04, revenues were $4.9 million with $18.52 million in net losses. During the 1stQT of FY2005, ending 3/31/05, revenue was $1.24 million with $4.6 million in losses.
The aging Baby Boomers are demanding better ways to screen for colon cancer other than with the usual invasive colonoscopy. Exact Sciences seems well-positioned to take advantage of this.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact EXAS’ Amy Hedison at 508-683-1252; ahedison@exactsciences.com
VION PHARMACEUTICALS, INC. (NASDAQ: VION) – $2.61. Twelve-month hi-low has been $5.18 – $2.43. Based in New Haven, CT, with about 30 employees, this biotech has 65.9 million shares outstanding, $68 million in cash/cash equivalents, $68.76 million in total assets, little debt, and $7 million in total liabilities. Institutional ownership is around 47%. Three analysts rate the stock a “strong buy”. http://www.vionpharma.com
And we add another biotech to the Current Portfolio for pretty much the same reasons as EXAS above. Vion Pharmaceuticals, Inc. has a very healthy-looking balance sheet that should help it develop its novel technologies.
Founded in 1992 and publicly-traded for over ten years, Vion develops therapeutics for treating cancer. The company’s portfolio of potential products consists of two distinct small-molecule anti-cancer agents in clinical development. The two agents are: CLORETAZINE (VNP40101M) that is being evaluated in a Phase 3 trial in combinations with Ara-C in relapsed acute myeloid leukemia (AML) and two additional Phase 2 single agent trials in AML and high-risk myelodysplasia and (ii) recurrent gliomas (brain cancers). The drug is also in a Phase I trial in combination with temozolomide in patients with hemotologic malignancies; and Triapine, which is designed to prevent the replication of tumor cells by blocking critical steps in the synthesis of DNA, is in a Phase 2 combination study with gemcitabine in pancreatic cancer.
Products in preclinical development include KS119, a hypoxia-selective anticancer agent; heterocyclic hydrazones, which are anti-tumor agents; and TAPET, a technology that use genetically-altered Salmonella bacteria to deliver cancer-fighting drugs preferentially to solid tumors.
Last month, Vion announced completion of accrual to its Phase 2 clinical trial of CLORETAZINE in AML and high-risk MDS. At around the same time, the company presented what appears to be some positive preclinical data on KS119 and KS119W. Also in April, Vion licensed Melasyn rights to B&P Company in Dayton, OH.
Vion is still in the early R&D stages, so, don’t expect profits, or decent revenues for that matter, any time, soon. For example, during the first quarter of FY2005, there was about $5,000 in revenue and $4.55 million in net losses.
VION seems to have some very promising drug candidates and, since the company raised $32.5 million earlier this year, it appears to have the capacity to bring some of them to fruition, if they are viable.
Our 24-month target for the stock is $4.75 to $5.25.
For more information, contact VION at 203-498-4210; info@vionpharm.com
Look for the June 5, 2005 Newsletter to be posted on 6/1 or 6/2.
Have a safe holiday,
Thank you,
George