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Hello Readers,
We did not close any positions since the last Newsletter, but, as we have said over the years, these things usually come in bunches. Our current Portfolio still looks a lot healthier than it did about four to five months ago.
Investors appeared to have taken an early holiday during the first half of December, but mid-month showed some signs of renewal thanks to the Fed’s non-actions and good CPI numbers. We, like many, have been pleasantly surprised – make that stunned – at the sustainability of the markets over the last three-plus years. Much of this has been led by small stocks, evidenced by the Russell 2000 making even newer highs as it tries to crack the 800 mark.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Lantronix (LTRX) (12/5/06). Newest high density evolution device servers provide secure network access for up to 32 devices.
WJ Communications (WJCI) (12/5/06). Ouch! Not something we like to see right after picking a stock. Company lowers its 4th QT sales outlook. Introduces next generation RFID reader module with 1 watt Gen2 dense reader (DRM), UHF near field coverage, and worldwide coverage.
Alfacell (ACEL) (11/20/06). Announces company succession plan.
Terabeam (TRBM) (11/5/06). Arlington County, VA, deploys Proxim wireless network to support emergency management and event response teams. Bulgaria’s Max Telecom selects Proxim wireless WIMAX products as platform for subscribers offerings.
Immunogen (IMGN) (10/20/06). Presents first clinical data for Genetech’s Trastuzumab-MCC-DM1. Also, presents encouraging finds with HuN901-DM1 for treating multiple myeloma.
Autobytel (ABTL) (10/5/06). CEO/president of Web.com joins board of directors. That’s sort of interesting.
Hyrdrogenics (HYGS) (9/20/06). Names new CEO.
TVI Corp (TVIN) (9/20/06). Stock takes a hit as company announces restatement of last quarter’s results, about $550,000 of revenue will be eliminated. Stock downgraded by Feltl & Co. Actually, this could have been a lot worse on the stock.
SCO Group (SCOX) (8/20/06). We are placing this on the “Endangered List” since the company lost the case over the Linux code. The stock got clobbered a lot more than we expected.
Advanced Life Sciences (ADLS) (7/20/06). Future drug development call slated for December 18, the day we post this Newsletter.
BSQUARE (BSQR) (6/20/06). Announces embedded server solutions for OEMs utilizing the new dual-core Intel Xeon processor and Windows Embedded Server 2003 R2.
02Diesel (OTD) (5/20/06). Dutton Associates gives the stock a “speculative buy” rating.
Kintera (KNTA) (5/5/06). Announces private common stock financing of $5 million.
Tri-S Security (TRIS) (5/5/06). Subsidiary awarded $800,000 contract from Florida Memorial University.
Pharmos (PARS) (4/20/06). Completes preclincal toxicology and safety pharmacology studies in Oral Cannabinor. Cytogen (CYTO) (3/20/06). Presents data from Phase 1 dose escalation study of QUADRAMET and Bortezomib in patients with relapsed multiple myeloma.
Lipid Sciences (LIPD) (2/20/06). HDL selective delipidation procedures well tolerated in “first in man” clinical trial.
Gateway (GTW) (2/5/06). For a while, GTW gave us heart pangs as the stock dropped to about $1.40 in August. However, of late, it has made a mild comeback thanks to insider stock buybacks, some nice multi-million contracts and several other pieces of upbeat news.
MIND C.T.I (MNDO) (2/5/06). Announces improved cash liquidity.
8X8 (EGHT) (1/20/06). New Packets8 Virtual Office PLUS plans eliminate upfront equipment costs for business subscribers. CEO named to Gov. Schwarzenegger’s broadband task force.
Castelle (CSTL) (1/5/06). Industry report says company ranks fourth worldwide in fax server market.
Digital Angel (DOC) (12/20/05). To acquire assets of McMurdo, a maker of marine beacons, for a least $6.2 million. To develop new submarine beacon for Royal Netherlands Navy.
Fusion Telecom (FSN) (12/5/05). Closes private placement. Launches “revolutionary” Mobilink service.
Memory Pharma (MEMY) (11/5/05). FDA lifts clinical hold on Alzheimer’s drug trial. Presents data for MEM 3454 and MEM 1003.
Cognitronics (CGN) (10/20/05). A+ Conferencing chooses subsidiary’s enhanced voice series router to provide VoIP conferencing solutions.
RAE Systems (RAE) (10/5/05). Enters joint venture to address coal mine safety market in China.
Nephros (NEP) (9/20/05). Italian clinical study demonstrates NEP’s mid-dilution HDF therapy as optimal treatment for patients with limited vascular access.
EntreMed (ENMD) (9/5/03). Stock slides on news that company will sell 10.7 million shares in hopes of raising $17.2 million; lousy Christmas gift for shareholders. Presents data on the combination of Panzem and Velcade in multiple myeloma.
Zi Corp (ZICA) (8/5/05). Several pieces of good news about eZiText usage. To hold shareholder’s meeting on December 22. This is on “Endangered List”.
Commerce Energy (EGR) (6/5/05). Announces pretty decent quarterly results; balance sheet still looks good.
Vion Pharma (VION) (5/20/05). Enters into manufacturing pact for CLORETAZINE with Ben Vue Labs. Presents data on drug candidate at annual hematology meeting.
B.O.S (BOSC) (1/5/05). Files registration for proposed equity financing.
Applied Micro Circuits (AMCC) (11/20/04). To present at Needham & Co. confab on January 9. Accelerates delivery of industry’s high-density CES offering. Several other items on product news.
Nova Measuring (NVMI) (11/5/04). Nanometrics gets favorable Markman ruling in patent case. NVMI expands offering by introducing Crystalx II, a wide angle x-ray diffraction metrology system.
Aviza (AVZA) (10/5/04). Receives order for Celsior single wafer ALD system from leading DRAM manufacturer.
Chordiant (CHRD) (9/20/04). Sees a wider 4th QT loss. Projects 2007 revenues to be 18% to 23% higher than 2006. Proposes 2.5 to 1 reverse stock split, which, in this case, may not be too harmful.
Network Engines (NENG) (6/5/04). Named appliance provider for Newbury Networks.
Socket Communications (SCKT) (3/20/04). Faces NASDAQ delisting. We have put this on the “Endangered List”.
Insmed (INSM) (11/5/03). Stock drops like a rock after company loses patent fight to Tercica. Despite great-looking balance sheet, we are placing this on “Endangered List”, for now.
Our picks for this Newsletter are another biotech listed on NASDAQ, and a AMEX-listed medical products supplier.
NEOSE TECHNOLOGIES, INC. (NASDAQ: NTEC) – $2.30. Twelve-month hi-low has been $4.34 – $1.78. Based in Horsham, PA, with about 105 employees, this biotech has 33 million shares outstanding, $25.21 million in total current assets, $37 million in total assets, little long-term debt, and $12.61 million in total liabilities. Institutional ownership is around 64%. One analyst rates the stock a “strong buy”. www.neose.com
Over the years, we have driven ourselves nuts with small biotechs because, all too often, the industry group has had long periods of stagnation; however, lately, the group seems to have come back to life, as have about a dozen of our biotech picks. So, with its decent-looking balance sheet, and promising technologies, we add Neose Technologies, Inc. to the Current Portfolio.
Founded in 1989, and public for about a dozen years, Neose is a biopharmaceutical using its enzymatic technologies to develop primarily therapeutic proteins. It believes that its core technologies, GlycoPEGylation and GlycoAdvance, improve the drug properties of therapeutic proteins by building out, and attaching polyethylene glycol (PEG) to carbohydrate structures on the proteins. The company’s drug portfolio consists of: GlycoPEG-EPO (NE-180) is a long-acting version of erythropoietin (EPO) produced in insect cells. EPO is prescribed to stimulate red blood cell production, and is approved in several global markets for treating chemotherapy-induced anemia and anemia associated with chronic renal failure. GlycoPEG-GCSF is a long-acting version of granulocyte colony stimulating factor, which stimulates the production of neutrophils (a type of white blood cells) and is used for treating neutropenia associated with myelosuppressive chemotherapy.
Neose has licensing collaborations with BioGeneriX, Novo Nordisk A/S, and MacroGenics for the R&D of GlycoAdvance and GlycoPEGlation technologies. It also has a licensing agreement with GlaxoSmithKline to develop and make certain human vaccines.
At the end of November, Neose received a milestone payment from Novo Nordisk for the use of GlycoPEGlation technology to develop a next-generation of Factor Vlla, which is used in treating bleeding episodes, such as during surgery on patients with congenital hemophilia. Earlier that month, the company announced initiation of the Phase 1 trial of GlycoPEG-GCSF.
For FY2005, ending 12/31/05, revenue was $6.13 million with $51.84 million in losses (remember, huge losses are typical of many small biotechs). During the first nine months of the current FY, ending 9/30/06, revenue has been $5.58 million with $17.58 million in net losses.
Neose has a pretty nice looking balance sheet and some heavyweight biotech partners, which should give the company some boosts down the road.
Our 24-month target for the stock is $3.50 to $4.00.
For more information, contact NTEC’s Barbara Krauter at 215-315-9000; bkrauter@neose.com
CARDIOTECH INTERNATIONAL, INC. (NASDAQ: CTE) – $2.01. Twelve-month hi-low has been $3.60 – $1.01. Located in Wilmington, MA, with about 190 employees, this medical device supplier has 19.8 million shares outstanding, $13.67 million in total current assets, $18.68 million in total assets, little debt, and $2.68 million in total liabilities. Institutional ownership is around 7%. Two analysts rate the stock a “moderate buy”. www.cardiotech-inc.com
Sometimes we look at companies that have recently stubbed their toe due to lower-than-expected revenues, but still have a half-decent looking balance sheet along with promising products. So, we add CardioTech International, Inc. to the Current Portfolio.
Founded in 1996, and public since that time when it was spun off from Polymedica, CTE basically manufactures and sells advanced products for treating cardiovascular and other diseases. Operating through four divisions, and marketing its products worldwide to around 300 hospitals, CardioTech offers cardiovascular tubing systems, arterial filters, cardiotomy reservoirs, oxygenators, venous reservoirs, cardioplegia units, oxygen saturation monitors, critical care central venous access catheters and ports, orthofuser, private label devices, and herapin-coated products that are used during open heart surgery. Its products are sold under such trade names as ChronoFlex, ChronoThane, HydroThane, ChronoFilm, HydroMed, and Hydroslip and are used by customers in both acute and chronically implanted devices, such as stents, artificial hearts, and vascular ports.
CardioTech is also developing CardioPass, which is a synthetic coronary artery bypass graft to treat the impairment of blood flow to the heart. This is currently undergoing a clinical feasibility study in Brazil on patients suffering from coronary heart disease. In addition, the company is focusing on developing a next-generation drug-eluting stent.
In October, CardioTech signed an exclusive supply and royalty agreement with a leading maker of orthopedic devices, marking entry into that market. Also, in that month, the company received approval from the ethics committee of the European medical center that is planning a clinical trial for CardioPass.
For the FY ending 3/31/06, revenue was $22.38 million with $5.07 million in losses. During the first six months of the current FY, ending 9/30/06, revenue has been $9.67 million with $1.56 million in losses.
The company is “refining” its business, which usually means consolidation, and that should be a good thing in this case.
Our 24-month target for the stock is $3.50 to $3.75.
For more information, contact CTE’s Eric Walters at 978-657-0075; general-info@cardiotech-inc.com
Look for the January 5, 2007 Newsletter to be posted on 1/2 or 1/3.
HAPPY HOLIDAYS!!
George