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Hello Readers,
Finally! The President-elect stepped up and it worked, at least for a while. If the “Obama Spurt” is indicative of the future, then maybe better days are ahead. We can only hope. Anything has to be better than this. A little over three months ago, the Russell 2000 small cap index was at 754; it is now hovering around 450. You do the math. Rarely have we seen an index lose that much value in so short of a time. And, of course, most of the picks in our Current Portfolio are still reflective of the total carnage. Don’t expect a major Santa Claus rally, unless the heavens open and the skies rain gold dust and oil. We are going to need a little, or a lot, more patience.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Acadia Pharmaceuticals (ACAD) (11/20/08). To present at the annual Piper Jaffrey health care conference on December 3.
Orchard Enterprises (ORCD) (11/20/08). Company artists win top honors at MTV Africa Awards.
Vimicro (VIMC) (11/5/08). To hold annual general meeting on December 11.
SCM Microsystems (SCMM) (10/5/08). SCM and Reiner SCT agree to technology exchange to enhance product portfolios. Introduces NFC-enabled multiprotocol contactless reader.
Lexicon Pharmaceuticals (LXRX) (9/20/08). To hold its annual R&D day on December 2 via live webcast. Will present at Piper Jaffray health care confab on December 3 and at RBC Capital health care conference on December 10. Accepted offer from UBS for repurchase of auction rate securities.
Planar Systems (PLNR) (9/20/08). Quarterly numbers disappointing; balance sheet still looks good. Announces sales of digital signage business for the gaming industry.
Hythiam (HYTM) (7/20/08). Research provides further evidence for the mechanism of action underlying the PROMETA treatment program.
Energy Focus (EFOI) (6/5/08). Chosen for DARPA SBIR to develop “explosion-proof” lighting.
Microvision (MVIS) (5/20/08). Recognized with Frost & Sullivan’s 2008 North American Technology Innovation of the Year Award.
GlobalScape (GSB) (5/20/08). Society of crime lab directors validates GSB product for crime scene investigations.
Ziopharm Oncology (ZIOP) (5/5/08). Presents positive data from studies of Palifosfamide.
ActivIdentity (ACTI) (3/5/08). Quarterly numbers show an ugly loss despite revenue pop; balance sheet still looks very good.
Amicas (AMCS) (1/20/08). Showcases Image and Information Management Solution Suite at RSNA. Unveils next generation PACS at RSNA 2008.
Move, Inc (MOVE) (1/5/08). Prevails in summary judgment in Keithley patent case.
DigitalFX (DXN) (12/5/07). Reports quarterly results. This is on the “Endangered List”.
Linktone (LTON) (11/5/07). To announce 3rdQT results on December 1, the day we post this Newsletter. Terminates exclusive advertising partnership with Tianjin Satellite Television.
Sunesis (SNSS) (11/5/07). To present at the Piper Jaffray health care confab on December 2 and at the RBC confab on December 10.
Orsus (ORS) (10/20/07). Releases quarterly numbers. On “Endangered List”.
Radcom (RDCM) (7/20/07). European cable operator selects RDCM’s Omni-Q to monitor IMS network.
Heska (HSKA) (7/5/07). To present at the New York Society of Security Analysts biotech confab on December 2, the day after we post this Newsletter.
Pharmacyclics (PCYC) (6/20/07). Completes Phase 1 clinical trial of Factor Vlla inhibitor PCI-27483.
Oncolytics (ONCY) (6/5/07). Is issued 30th U.S. patent.
Encorium (ENCO) (5/20/07). Recent numbers released; balance sheet looks okay. Signs $6.5 million of new business contracts mainly consisting of oncology clinical trials with a U.S. biopharmaceutical.
Hana Biosciences (HNAB) (5/5/07). Several news releases. This is on the “Endangered List”.
VocalTec (VOCL) (4/20/07). Releases 3rdQT results. On “Endangered List”.
Endologix (ELGX) (1/20/07). Posts positive data in Powerlink XL test.
Proxim Wireless (PRXM) (11/5/06). Over 1000 new 802.11n access points ordered from company in first week. Claims it is first to break the 300 Mbps speed barrier for 802.11n solutions, enabling WLAN networks at half the cost. Sounds like stuff, but stock doesn’t move, and this is still on the “Endangered List”.
TVI Corp (TVIN) (9/5/06). Releases quarterly numbers. This is on the “Endangered List”.
Pharmos (PARS) (4/20/06). Announces clinical results on topical cream trial. On the “Endangered List”.
Digital Angel (DIGA) (12/20/05). Several news items. This is on the “Endangered List”.
EntreMed (ENMD) (9/5/05). To present at the New York Society of Security Analysts confab on December 3. On the “Endangered List”.
Zi Corp (ZICA) (8/5/05). Nuance halves Zi buyout offer to $20 million. TCT Mobile licenses text input solutions from ZICA.
B.O.S (BOSC) (1/5/05). Revenues increase 144% year-over-year; balance sheet still seems okay though cash position could be better. Names new president. Signs a supply deal with a North American aircraft company valued at about $8 million. There was once a time, not long ago, when news of this nature would send a company’s stock to the stratosphere.
Network Engines (NENG) (6/5/04). NEI appliance platform chosen by TimeSight Systems to address high-growth video surveillance market.
TMNG Global (TMNG) (4/20/04). Virgin Media deploys company’s and Cartesian’s Ascertain inter-operator provisioning platform.
Our picks for this Newsletter are a satellite communications company and another biotech, both trade on NASDAQ.
ORBCOMM, INC. (NASDAQ: ORBC) – $1.77. Twelve-month hi-low has been $7.87 – $1.67. Based in Fort Lee, NJ, with about 90 employees, this communication services company has 42.1 million shares outstanding, $95.63 million in total current assets, $195.65 million in total assets, and $34.12 million in total liabilities, of which $1.25 million is long term debt. Institutional ownership is around 69%. One analyst gives the stock a “strong buy” and three have it on “hold”. www.orbcomm.com
When it comes to hi-tech companies ORBCOMM, Inc. is probably as hi-tech as they come. Besides an interesting “product line”, the company has a pretty strong balance sheet, and, for the most part, has had steadily increasing revenues.
Found in 2001, and public for over two years, ORBCOMM is a satellite-based data communications company that operates a two-way wireless data messaging system optimized for narrowband data worldwide. The company’s system consist of a network of 29 low-Earth orbit satellites and accompanying ground infrastructure. It two-way communications system allows customers and end-users to track, monitor, control, and communicate with fixed and mobile assets located worldwide. ORBCOMM offers satellite-based data communications services, as well as ground-based cellular services, which are used by businesses and government agencies (i.e. the Coast Guard) that are engaged in tracking, monitoring, controlling, and communicating with fixed or mobile assets. ORBCOMM’s products are installed on trucks, trailers, railcars, containers, heavy equipment, fluid tanks, utility meters, pipelines, marine vessels, oil wells, and other assets. The system can send and receive short messages between six bytes and several kilobytes, in near real-time.
ORBCOMM started its ground-based cellular communications services last year, and these consist of reselling airtime using a cellular provider’s wireless technology network and product sales from cellular wireless subscriber identity modules. At the end of 2007, the company had about 350,000 billable subscriber communicators activated on its system.
For FY2007, ending 12/31/07, revenue was $28.15 million with $3.6 million in losses versus 2006 revenues of $24.52 million with $11.22 million in losses. During the first nine months of the current FY, ending 9/30/08, revenue has been $21.57 million with $2.52 million in net losses.
ORBCOMM certainly is in a niche industry and we like the revenue growth and the dwindling losses.
Our 24-month target for the stock is $3.25 to $3.50.
For more information, contact ORBC’s Lucas Binder at 703-433-6505; binder.lucas@orbcomm.com
ARQULE, INC. (NASDAQ: ARQL) – $3.05 Twelve-month hi-low has been $7.47 – $1.75. Located in Woburn, MA, with about 110 employees, this biotech has 44.2 million shares outstanding, $75.55 million in total current assets, $144.92 million in total assets, little debt, and $96.5 million in total liabilities. Institutional ownership is around 63%. Six analysts rates the stock a “strong buy” and two as a “moderate buy”. www.arqule.comWhen nearly ten analysts get behind a small biotech like ArQule, Inc. we take notice. It also helps that the company has a healthy balance sheet and what appear to be some good cancer therapeutics in its pipeline.
Founded in 1993, and public for nearly a dozen years, ArQule, as we mentioned, is a clinical-stage biotech that researches and develops cancer therapeutics. Its clinical-stage testing products include ARQ 197, an orally administered inhibitor of the c-Met receptor tyrosine kinase; ARQ 501, an intravenously administered novel activator of the cell’s DNA damage response mechanism mediated by the E2F-1 transcription factor; and ARQ 171, an intravenously administered second generation activator of E2F-1. The company also provides ARQ 761, a second generation E2F-1 compound to kill cancer cells while sparing normal cells through the direct activation of DNA damage response/checkpoint pathways; and has a preclinical and research pipeline, which includes Eg5 kinesin spindle protein and the B-RAF Kinase.
ArQule has an exclusive license agreement with Kyowa Hakko Kogyo Co. to develop and commercialize ARQ 197 in Japan and parts of Asia. It also has an alliance with Hoffman-La Roche to discover and develop drug candidates targeting the E2F biological pathway.
Early in November, ArGule entered into a strategic R&D partnership with Daiichi-Sankyo to progress novel compounds targeting cancer. The development pact is focused on ARQ 197 and comes with a total upfront cash payment to the company of about $75 million.
The company is another of those small biotechs with limited revenue and mega losses. For example, during the quarter ending 9/30/08, revenue was $2.66 million with $11.28 million in losses.
Something seems to be happening here. Eight analysts have “buys” of some sort on the stock, and a leading global pharmaceutical is upfronting $75 million to the company.
Our 24-month target for the stock is $5.25 to $5.75.
For more information, contact ARQL’s William Boni at 781-994-0300.
Look for the December 20, 2008 Newsletter to be posted on 12/16 or 12/17.
Thank you,
George