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Since the last Newsletter, we closed three positions; two for gains and one for a loss.
GALACTIN THERAPEUTICS (12/20/12). Closed position 2/8/13 at $3.00 for a 60% GAIN.
PROPHASE LABS (10/5/10). Closed position 2/4/13 at $1.78 for a 54% GAIN.
GREAT BASIN GOLD (1/5/11). Closed position 2/5/13 at 9 cents for a 97% LOSS.
Ever since picking it a few months ago, Galactin Therapeutics had gone steadily upward, and, for no obvious reason, broke through our 50%-plus ceiling for a decent gain. And after what seemed like forever, ProPhase Labs, which had been climbing over the last several months, finally pierced our 50%-plus target. And, after much torture, we closed Great Basin Gold for a terrible loss.
With the Fed’s additional $85 billion a month fueling it, the market seems unstoppable, which should be cause for alarm, but the attitude now is if you can’t beat them, then join them. We think the markets are starting to top for the simple reason that the small investor is piling back into the action, but tops can last for some time. The next hurdle for the markets is the sequestration issue facing Congress on March 1. At the moment, it appears to the markets that a deal will be cut, similar to the last-minute tax deal on December 31. What happens if there is no deal by then? Things could get nasty.
Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be significant.
TransSwitch (TXCC)(2/5/13). Earnings news about what was expected; balance sheet still looks okay. Selected by Kramer Electronics for several video projects; and by Edge I&D for new HD interactive LED-LCD display whiteboards.
Gevo, Inc. (GEVO)(1/20/13). Slates earnings call for March 5.
EnteroMedics (ETRM)(1/20/13). OUCH!! Sometimes this happens. Soon after picking a stock, bad news hits it, as was the case when this company’s obesity therapy system hit a snag in the way of a technical failure. Was the stock oversold? We think so, since there are still positive aspects to the study. Recent balance sheet still looks healthy, so, maybe company can overcome adversity? Wait and see.
Unilife Corporation (UNIS)(1/5/13). Balance sheet still looks good. Recent completion of a $10 million secondary offering seems to have put pressure on stock price.
Codexis (CDXS)(1/5/13). Sets earnings call for February 27. Enters into a SmartSourcing partnership with AMRI.
Horizon Pharma (HZNP)(12/20/12). Recent numbers not bad; balance sheet still looks strong. Receives additional patent allowance for DUEXIS.
Palatin Technologies (PTN)(12/5/12). Recent balance sheet still looks healthy.
Limelight Networks (LLNW)(11/20/12). Schedules earnings call for February 19, the day after we post this Newsletter.
TeleCommunication Systems (TSYS)(11/5/12). Expands into Middle East as it teams with Dubai-based company.
Lionbridge Technologies (LIOX)(11/5/12). Recent numbers in line with expectations; balance sheet still looks good.
Delcath Systems (DCTH)(10/20/12). Trims Queensbury workforce as it awaits FDA approval.
Anthera Pharmaceuticals (ANTH)(10/5/12). Law firm investigating executive compensation.
Zynga, Inc. (ZNGA)(10/5/12). Beats guidance on 4thQT numbers; balance sheet still looks good. The usual several dozen news stories and other articles. We still think the play here could be in online gaming.
Meru Networks (MERU)(8/20/12). Genesis Hospitality Group and Communitech deploy company’s networks.
pSivida Corporation (PSDV)(8/5/12). Balance sheet still looks good.
Overland Storage (OVRL)(7/20/12). Recent numbers are so-so; balance sheet could look better as company announces financing of $14.25 million of convertible notes and common stock.
Aviat Networks (AVNW)(7/20/12). Awarded $10 million microwave backhaul contract for large metropolitan area. METCO integrates same system for Zain Kuwait’s LTE network. Increases its role with MTN Ghana.
Athersys (ATHX)(7/5/12). To present at the New York Stem Cell Summit ’13 on February 19, the day after we post this Newsletter.
Vermillion, Inc. (VRML)(6/20/12). Sets earnings call for February 20.
Rare Element Resources (REE)(6/20/12). Announces 2013 priorities.
Avanir Pharmaceuticals (AVNR)(6/5/12). Posts some decent revenue numbers; balance sheet still looks pretty good. Announces positive interim data from Pharmacokinetic study with next generation compound AVP-786. To present at RBC healthcare conference on February 26.
Capstone Turbine (CPST)(5/20/12). Has record quarterly revenue; balance sheet still looks pretty good. Receives 5MW follow-on order for Global Upstream Oil & Gas and another follow-order for 30 C65s from another oil company.
Axcelis Technologies (ACLS)(4/5/12). Numbers not great as company laments ‘challenging times”; balance sheet still looks pretty good.
Echo Therapeutics (ECTE)(3/20/12). Stock faces downward pressure as company closes 13.33 million shares offering at 75 cents.
Ballard Power Systems (BLDP)(3/20/12). Slates earnings call for February 21.
ANADIGICS, Inc. (ANAD)(11/20/11). Slates earnings call for February 19, the day after we post this Newsletter.
ECOtality (ECTY)(11/5/11). Blink DC Fast chargers installed on San Diego University’s campus.
Synthesis Energy Systems (SYMX)(8/20/11). Balance sheet still looks pretty good. Yima joint venture plant advances toward full scale operation and methanol production.
ThermoGenesis (KOOL)(4/5/11). Recent numbers are so-so; balance sheet still looks good.
Oculus Innovative Sciences (OCLS)(3/5/11). Recent numbers not bad and no great; balance sheet still looks good. Company is spinning off its novel drug RUT58-60 into as separate company to be called Ruthigen.
Real Goods Solar (RSOL)(1/20/11). Selected by leading production homebuilder to bring solar to new communities, and this news really sent the stock out of its recent doldrums.
Pixelworks (PXLW)(11/20/10). Stock is downgraded to a “sell” by TheStreet.com and we don’t agree with the call.
RELM Wireless (RWC)(11/5/10). Awarded Maryland state contract.
Qualstar, Inc. (QBAK)(10/20/09). Recent numbers not anything to crow about; balance sheet still looks good. BKF terminates takeover bid.
GlobalScape (GSB)(5/20/08). Says that Tappln is now available through the Rackspace Cloud tools marketplace.
Our picks for this Newsletter are a maker of surgical implants and another biotech, both NASDAQ-listed.
ALPHATEC HOLDINGS, INC. (NASDAQ: ATEC) – $1.63. Twelve-month hi-low has been $2.42 – $1.67. Based in Carlsbad, CA, with about 460 employees, this maker of surgical implants/instruments has 90.9 million shares outstanding, $121.77 million in total current assets, $365.66 million in total assets ($168.49 million is “goodwill”), and $104.1 million in total liabilities, of which $36.03 million is long-term debt. Institutional ownership is around 69%. Three analysts rate the stock a “strong buy”, two as a “buy”, and three as a “hold”. www.alphatecspine.com
Yes, the amount of debt disturbs us, but Alphatec Holdings, Inc. seems to have a lot going for it even though revenues have drifted down a little. It has a pretty healthy cash position, nearly ten analysts following it, and its products are aimed at the aging Baby Boomers.
Founded in 1990, and public since 2006, Alphatec makes and markets spinal implants and surgical instruments, which address the cervical thoracolumbar, and intervertebral regions of the spine; and spinal disorders and procedures, such as vertebral compression fractures, bone disorders, spinal stenosis, and minimally invasive access techniques. Its products include Trestle Luxe Anterior Cervical Plate system to have graft site and end plate visualization; Solanus Posterior Cervico/Thoracic Fixation system for posterior cervico/thoracic fusion procedures and occipito-cervico-thoracic fixation; Zodiac Degenerative fixation system offering polyaxial pedicle screws, connectors, and advanced instruments; Zodiac Smart Set Deformity fixation system to address spinal deformity procedures; and Aspida Anterior Lumbar Interbody Fusion Plate system to provide the option of performing a single anterior procedure.
Alphatec also provides Novel PEEK spinal spacers for lumbar and cervical regions of the spine; Alphatec Solus locking spinal spacer for stability; Illico Minimally Invasive Surgery system, a cannulated pedicle screw and rod system; and Guided Lumbar Interbody Fusion technique and ARC Portal Access System to perform a minimally invasive procedure from multiple surgical planes. In addition, the company offers a wide assortment of aging spine products.
In early January, Alphatec received FDA 510(K) market clearance for two new products and received Japanese Shonin approval to begin marketing its Novel PEEK lumbar spinal spacers.
For FY2011, ending 12/30/11, revenue was $197.71 million with $22.18 million in losses. During the first nine months of FY2012, ending 9/30/12, revenue was $143.53 million with $10.1 million in losses.
We suspect that much of the stock’s recent doldrums can be attributed to a patent infringement suit that it lost, and also due to other issues that the company has disclosed. However, our thinking here is that Alphatec should be able to turn things around, thanks to all those Boomers.
Our 24-month target for the stock is $2.75 to $3.00.
For more information, contact ATEC’s Marc Francois at 760-494-6610; mrfrancois@AlphatecSpine.com
VENTRUS BIOSCIENCES, INC. (NASDAQ: VTUS) – $2.60. Twelve-month hi-low has been $13.53 – $1.99. Based in New York City, with less than fifteen employees, this biotech has 12.9 million shares outstanding, $23.67 million in both total current assets and total assets, little debt, and $2.68 million in total liabilities. Institutional ownership is around 40%. Three analysts rate the stock a “strong buy” and two as a “buy” www.ventrusbio.com
We sat up and took notice when we read that Ventrus Biosciences, Inc. had three late-stage drugs aimed at gastro disorders. It also helps that the company has a half-decent balance sheet and that it is followed by nearly half dozen analysts.
Founded in 2005 as South Island Biosciences, and public for just over two years, Ventrus Biosciences focuses on developing drugs for gastrointestinal disorders, specifically hemorrhoids, anal fissures, and fecal incontinence. Its product portfolio consists of three late-stage drugs intended to treat these conditions: one NCE (new chemical entity) and two previously approved molecules that will have market exclusivity for new and patentable topical gastrointestinal indications. The drug candidates are lferanserin, or VEN 309, for treating hemorrhoids; diltiazem cream, or VEN 307, for treating pain associated with anal fissures for which a second Phase III trial began enrollment at the end of last year; and phenylephrine gel, or VEN 308, for relieving pain of fetal incontinence associated with ileal pouch and anastomosis (IPAA) and is ready to enter Phase IIB studies.
Of comfort to many investors is that at the end of last month, the company reaffirmed funding through key milestones and said it had sufficient cash for completing the VEN 307 development program. At the end of January, the company launched a $20 million secondary offering.
Ventrus is similar to many small R&Ds in that in makes little money and runs up big debts. For example, for the quarter ending 9/30/12, revenue was zilch and losses totaled $5.36 million.
The company appears well financed for the future and its product candidates, if any or all are successful, should have wide appeal.
Our 24-month target for the stock is $4.50 to $5.00.
For more information, contact VTUS’s David Barrett at 646-706-5208; dbarrett@vetrusbio.com
Look for the March 5, 2013 Newsletter to be posted on 3/1 or 3/4.
Thank you,
George