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Hello Readers,
The markets are currently trading at the upper end of that trading range everyone’s been talking about, despite even more bad economic numbers. Two forces appear to be helping, for now. First is that the Fed keeps signaling that it will keep pumping funny money into the system regardless of future consequences. The second factor is the prospect of a big Republican victory next month, which, presumably would slow Congress’s massive spending spree. Remember 2001 to 2007 when the GOP controlled everything? They did pretty much what the Democrats are now doing. October’s market action should be all about earnings news, but who knows? We haven’t closed any positions over the last few weeks, but much of our Current Portfolio is looking less bad, to paraphrase the “new normal”.
Here are the headlines since the last Newsletter about companies in our 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 highly significant.
Advanced Analogic (AATI)(9/20/10). Says new LED backlight drivers with CABC save power and smooth brightness transitions in handheld devices.
Orbcomm (ORBC)(9/5/10). Partners with OHB and its affiliate LuxSpace to build and launch two AIS enabled satellites.
Rexahn Pharmaceuticals (RNN)(7/20/10). Announces publication of study on neuroprotective effects of clavulanic acid.
NAPCO Security (NSSC)(7/5/10). Posts pretty good quarterly numbers; balance sheet still seems okay.
Aeterna Zentaris (AEZS)(6/20/10). To present poster on diagnostic use of oral synthetic growth hormone Secretagogue/Ghrelin receptor Agonist, AEZS-130.
PHC INC (PHC)(5/20/10). Releases upbeat end of FY and quarterly revenue and profit numbers; balance sheet still looks good.
Zalicus (ZLCS)(5/5/10). To present corporate updates in October. Presents data on oncology programs at targeted cancer therapies.
NovaBay Pharmaceuticals (NBY)(4/20/10). Spotlights positive results for new class of anti-infectives.
China Direct Industries (CDII)(4/5/10). Garners magnesium contracts valued at $6.5 million. Receives additional contract for its basic materials segment valued at over $30 million.
Novavax (NVAX)(4/5/10). To present at BIO Investor Forum on October 6.
Cerus (CERS)(3/20/10). Awarded $1.4 million to advance development of pathogen inactivation for red blood cells. INTERCEPT Platelet system succeeds in three-year French study.
Achillion Pharmaceuticals (ACHN)(3/5/10). Doses first patient in Phase II trial of ACH-1625 for treating hepatitis-C.
Microtune (TUNE)(2/5/10). More lawsuits over acquisition plans.
Cytokinetics (CYTK)(2/5/10). Provides update on Mecarbil clinical development program.
Qualstar (QBAK)(10/20/09). Posts better quarterly revenue numbers than a year ago; balance sheet still looks good.
Solta Medical (SLTM)(10/5/09). Launches social media campaign for Isolaz brand. FDA approves clearance of dual laser system for treating actinic keratosis.
BioSante Pharmaceuticals (BPAX)(9/20/09). To present at the BIO Investor Forum on October 5.
BioClinica (BIOC)(8/5/09). Nicusa Capital calls for management changes at company.
USA Technologies (USAT)(6/5/09). Stock got a huge pop on some good quarterly numbers, but, for now, we are still keeping this on the “Endangered List”.
Ligand Pharmaceuticals (LGND)(2/20/09). Licenses drug candidates to Proximagen.
Oilsands Quest (BQI)(10/20/08). To pursue sale of non-core assets. Usually not a good sign, but let’s wait and see.
Identive Group (INVE)(10/5/08). Further expands its Multicard brand; RockWest changes its name to Multicard.
U.S. Geothermal (HTM)(8/5/08). Updates status of development projects; new wells drilled at Neal Hot Springs.
Bridgeline Digital (BLIN)(6/5/08). Shaw Floors selects iAPPs product suite. Releases iAPPS V4.5.
Microvision (MVIS)(5/20/08). Raises $12.37 million through equity financing. Northland Securities initiates coverage on company.
GlobalScape (GSB)(5/20/08). Teams with McLane Advanced Technologies for U.S. Army contract.
Biolase Technology (BLTI)(4/5/08). Here’s another one on the “Endangered List” that had some mega news that caused its stock to rocket as the company received a $9 million order from Benco Dental. Also, hires new CEO and increases sales force 30%. Wait and see.
Move, Inc (MOVE)(1/5/08). Redesigns Realtor.com. Releases advanced search engine for professionals. Buys ListHub operator Threewide for $13 million. Updates operating agreement with NAR.
LRAD Corp (LRAD)(10/5/07). Gets $17.6 million contract from a foreign government. Receives $1.5 million-plus in new LRAD systems orders from U.S. military.
XATA Corp (XATA)(9/20/07). XATA Turnpike offers RouteTracker to Canadian customers. Signs value-added reseller pact with GLENTEL.
Endologix (ELGX)(1/20/07). Announces publication of positive outcomes data that conclude Powerlink may allow for less invasive long-term follow-up imaging.
YM BioSciences (YMI)(11/5/06). YMI licensee Pulmokine awarded NIH funding to develop small molecule drugs for pulmonary hypertension. Recent balance sheet looks pretty good.
8×8 (EGHT)(1/20/06). After four years do we dare hope as the stock finally seems to get back to our recommended price? Sets earnings call for October 20. Inks agreement with Equinix for data services in the Washington DC area.
Our picks for this Newsletter are two NASDAQ-listed biotechs, one of which is our second time around.
AMICUS THERAPEUTICS, INC. (NASDAQ: FOLD) – $3.85. Twelve-month hi-low has been $10.33 – $1.88. Located in Cranbury, NJ, with about 95 employees, this biotech has 27.6 million shares outstanding, $71.14 million in total current assets, $74.88 million in total assets, and $10.52 million in total liabilities, of which $1.67 million is long-term debt. Institutional ownership is around 42%. One analyst gives the stock a “strong buy”, four have it as a “hold”, and one as a “strong sell”. amicustherapeutics.com
Yes, we are overweight small biotechs, but it is difficult to overlook Amicus Therapeutics, Inc., which appears to have some promising drug candidates along with a very healthy-looking balance sheet.
Founded in 2002, and trading on NASDAQ for a little over three years, Amicus is developing orally-administered, small molecule drugs for treating various human genetic diseases, known as pharmacological chaperones. These “chaperones” selectively bind to the target protein, increase the stability of the protein, help it fold (hence the company’s stock symbol) into the three-dimensional shape, and allow proper trafficking of the protein, thereby increasing protein activity, enhance cellular function, and reduce cell stress. Amicus is mainly focused on lysosomal storage diseases and diseases of neurodegeneration, including Parkinson’s and Alzheimer’s.
The company’s lead product candidate includes Amigal, which is in Phase 3 development for treating Fabry disease. Amicus expects to complete enrollment by the end of this year and to have preliminary results from this study in mid-2011. It expects to start a separate Phase 3 study intended to support approval in the EU before year end. The company also develops AT2220, which is in Phase 1 testing for treating Pompe disease. In addition, it develops Plicera for treating Gaucher disease.
Amicus is another one of those small biotechs that have little revenues and mega losses. For example, during the first six months of the current FY, ending 6/30/10, sales were nil and loses were nearly $24.5 million.
Yes, one analyst gives the stock a “strong sell”, but five others feel there is something to this company. And, it seems to have it enough money, for now, to bring testing of its main candidate to fruition.
Our 24-month target for the stock is $6.00 to $6.50.
For more information, contact FOLD at 609-662-2000.
PROPHASE LABS, INC. (NASDAQ: PRPH) – $1.16. Twelve-month hi-low has been $2.56 – 49 cents. Based in Doylestown, PA with about 50 employees, this biotech of sorts, has 14.7 million shares outstanding, $13.73 million in total assets, $19.84 million in total assets, little debt, and $6.36 million in total liabilities. Institutional ownership is around 6%. www.quigleyco.com
Sometime around the end of the last century, we picked a company called Quigley & Co., which, after a year or two hit our 50%-plus gain target. Well, the company is still around, recently changing its name to ProPhase Labs, Inc. and seemingly expanding its focus. Over the years, the company has maintained its balance sheet, for the most part, and the stock seems to be in a nice trading range, and, currently, at the low end of that range. So, why not try walking down the same road again.
Founded in 1989, and publicly-traded since 1994, ProPhase develops and markets over-the-counter (OTC) cold remedy and consumer products, natural base health products, and other supplements and cosmeceuticals for human and veterinary use. It products include Cold-EEZE, an OTC zinc gluconate glycine formulation available in lozenge and sugar-free tablet form, which is used to reduce the duration and severity of the common cold; clinical studies have shown that it may cut the misery time in half. The company also focuses on the R&D of natural base health products, including compounds QR-333 for the topical symptomatic relief of diabetic peripheral neuropathy; QR-440 for relief of inflammation and joint pain; and QR-448 for the relief of infectious bronchitis in poultry.
ProPhase distributes its products through food, multi-outlet pharmacy, and chain drug stores; large wholesalers and mass merchandisers; and national broker, distributor, and representative agreements. It has a joint venture with Phosphagenics, Inc. to develop and commercialize a range of non-prescription remedies using TPM technology.
For FY2009, ending 12/31/09, revenue was $19.8 million with $3.84 million in losses. During the first six months of the current FY, ending 6/30/10, revenue was $3.1 million with $3.3 million in losses. Yes, the company took a major hit over the last year due to a variety of reasons, but management seems to believe the worse should be behind them.
As we alluded above, this is more a “channeling” play than a play on the fundamentals.
Our 24-month target for the stock is $1.80 to $2.10.
For more information, contact PRPH’s Ted Karkus at 215-345-0919.
Look for the October 20, 2010 Newsletter to be posted on 10/18 or 10/19.
Thank you,
George